28. September 2020

Accounting for working time accounts

The employee’s assets invested in an asset remain the economic and legal property of the employer. Only in the internal relationship does the employee have a claim to procurement under the law of obligations on the basis of a bilateral contract with the employer. Thus, security agreements (e.g. pledging agreements) are also made internally, whereby the employer grants the employee the rights to the reinsurance assets of the credit balances in the event of insolvency. As the assets do not serve either the employer’s long-term activities or the resale of assets in order to exploit positive fluctuations in value or to procure liquidity, they are neither fixed assets nor current assets in the narrower sense. Since, however, value credit balances must be capitalized in accordance with § 266 German Commercial Code ff., only “other assets” are considered as balance sheet items according to prevailing opinion. Thus, a fundamental classification into the current assets of the employer takes place. All income from the assets thus represents income under commercial and tax law for the employer and must be recorded accordingly in the income statement.

The “other assets” are a subdivision of the balance sheet item “receivables and other assets” (§ 266 Para. 2 B German Commercial Code) in the current assets of the balance sheet. According to the prevailing and leading opinion in the literature, “other assets” are a mixed and collective item for all assets that are not covered by any other balance sheet item (cf. ADS, 6th edition, § 266 para. 134). These assets include, for example, loans and advances on salaries. From this, it can be concluded that value-bound claims to credit balances by employees in external relationships are also, like advances on salaries, claims of the employer. In the case of advances on salaries, these are receivables from the respective employees; in the case of claims on credit balances, for example, receivables from an account-holding bank or a similar investment institution. As already described, in this context the employee can only make claims to the reinsurance assets of his assets formed in the internal relationship. If, on the other hand, the employee were to obtain an immediate claim within the framework of his creation of a credit balance against the aforementioned account-holding bank at which the credit balance is invested, this would result in an immediate income tax inflow of the converted remuneration components. This fact is to be excluded compellingly, since for the employee in this case a value credit formation in the context of flexible work time organization measures would make no more sense for tax reasons.

In addition, it should be pointed out that in advisory circles the allocation of value credit investments to the current assets of a company balance sheet is often incorrectly justified with the relevant BFH judgement of 25 February 2004 (I R 54/02). With this judgement, the Federal Finance Court decided that reinsurance policies in the context of direct company pension commitments must also be allocated to current assets. Thus, in the aforementioned advisory circles, reinsurance assets are equated in the balance sheet with the assets from reinsurance policies with regard to value credit balances formed. In this context, however, it is ignored that the nature and long-term nature of reinsurance policies are generally to be allocated to fixed assets (cf. Höfer, BetrAVG, Volume 2, RN 777). For this reason, the assumptions made by the Federal Court of Finance in its aforementioned ruling regarding the classification of the asset value of a reinsurance policy in the balance sheet are fundamentally ruled out. Therefore, the FCF judgement described above cannot be used as a justification for the “actually correct” classification of reinsurance investments in the balance sheet of formed assets.