Detailed analysis of the balance sheets of the Federal Gazette
All corporations in Germany are required to submit their annual financial statements to the Federal Gazette. The financial statements are then uniformly processed and promptly published by the Federal Gazette. Each year over a million financial statements are disclosed.
In cooperation with the data service of the Federal Gazette Publisher, S&N AG provides the option of making these financial statements immediately available to the balance analysis system BARS.
In addition to importing individual balance sheets or balance sheet pools, such as for all companies in a particular industry, BARS includes a feature unique in Germany: the BIK Report.
A large part of the available financial statements include only balance sheet information, but no profit and loss account (P&L). In order to derive information about the financial situation of a corporation which is as reliable as possible, S&N has developed the BIK Report. BIK is an acronym for industry integrating condensed balance sheet (German:BranchenIntegrierende Kurzbilanz). The BIK Report uses the powerful industry comparison function provided by BARS. The report compares in real time the company in question with an industry average of all companies in its class.
This industry comparison always involves two consecutive reporting years and is formed as the average of all companies in the database of the Federal Gazette. The comparison data is selected on the basis of industry code and total assets. Both the absolute balance sheet figures, such as assets and working capital, equity and debt, as well as derived key figures such as leverage, liquidity and investment ratio, are calculated and compared with the industry average.
The BIK Report is rounded off by the sections ‘Abnormalities’ and ‘Rating Indication’. Irregularities are detected and highlighted by a distinctively coloured marker. For example, all indicators that place the company in the "worst" quartile of its industry are marked in red. If the company is in the "best" quartile, the corresponding indicator is highlighted in green.
S&N has set up a variety of criteria which the user is informed about. There are for example warnings which indicate that the customer in question could face liquidity problems. The trigger for this is a first degree liquidity which can be fully derived from the balance sheet values. BARS checks here both absolute liquidity as well as the difference to the prior year. In both cases, the user is warned when there are abnormalities. Discrepancies in the balance sheet may also lead to a message. A message is issued for example if earnings are identified in a fiscal year, but equity is lower than in the previous year.
In contrast to other systems, S&N is convinced that a rating based solely on data from the balance sheet is not suitable for determining a valid risk assessment. Instead, the BIK Report discloses a "rating indication". This indication is a first step to assessing a customer's probability of default, which can then be reinforced by collecting additional data.