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July 5, 2007
For its annual audit, the Claims Conference accounting policy, as previously recommended by independent auditors Ernst & Young, has been that the value of restituted property received by the Claims Conference and intended for sale is generally not readily determinable due to many uncertainties, and no entries have been recorded on the Financial Statements when such restituted property is received.
However, the estimated value of these properties has always appeared in a Note to the Financial Statements. The text of the Note for 2005 is below.
On June 21, 2007 Ernst & Young recommended that the Claims Conference accounting policy should be changed so that unsold restituted property is recorded in the 2006 Balance Sheet and Statement of Activities rather than in a Note. The firm is now in the process of implementing its new audit procedures.
Up to now, revenue was recognized when there was a notarized sales contract for the restituted property, sales proceeds were placed in escrow, and the purchaser could take possession of the property. Additionally, if the Claims Conference had recovered compensation in lieu of receiving the property itself, such compensation was recognized when it has been certified as to its value by the German Regional Tax Authorities. This policy was clearly stated in the Financial Statements.
The previous policy stated above has been reflected in the Financial Statements of the Claims Conference since 1994 when the Claims Conference initially had unsold inventory as part of its assets. This policy was based on the recommendation of Ernst & Young, which stated that it was in accord with accepted accounting principles.
In addition, Note 11 of the 2005 Financial Statements states:
“Amounts for restituted properties awaiting sale have not been recorded in the accompanying financial statements due to many uncertainties involved with establishing a value. At December 31, 2005 and 2004, respectively, the number of unsold restituted properties was 453 and 495 different parcels of property (excluding properties where title has passed and which are included in the financial statements). Based generally on the original appraisals obtained when the property was recovered coupled with subsequent evaluations, the estimated value of these properties was approximately $49,990,000 (€42,207,000) (unaudited) at December 31, 2005 and $81,691,000 (€59,873,000) (unaudited) at December 31, 2004. The actual value depends on changing market conditions and cannot be established with reliability. Potential Goodwill Fund grants to former Jewish property owners and their heirs may require recognition upon the sale of such restituted properties.”