You are Annika Reuter, group financial controller of Rheinwerk Systeme AG, a listed maker of industrial-automation equipment based in Mannheim. A EUR 24 million contract signed eight days before year-end sits in the draft accounts, the auditor wants your analysis within a week, and you must decide how much of it belongs in 2026.
The situation
It is Thursday, 14 January 2027. Rheinwerk builds automation equipment for car makers and process plants across German-speaking Europe: 2,100 people, draft 2026 revenue of EUR 540 million, accounts under IFRS. It no longer sells machines on their own. Its "outcome contracts" bundle the hardware, a licensed software platform, commissioning on site and a thirty-six-month service subscription, all for one negotiated price.
Project Adler, with a large automotive client, was signed on 22 December. The hardware left the works on 29 December. The client has access to the software, but the custom integration that makes it usable is unfinished, and commissioning and the service term start in the first quarter of 2027. The commercial team booked the whole EUR 24 million into 2026 the day the contract was countersigned. Rheinwerk's internal pricing file splits it into about EUR 14 million of hardware, EUR 6 million of software and integration and EUR 4 million of service; the contract itself states one price.
Two things outside the accounts move with the earnings figure. A EUR 200 million syndicated loan caps net debt at 3.00 times EBIT on the audited numbers; the draft, with all of Adler in, sits at 2.94. And a EUR 3.8 million bonus pool for the senior team, yours included, vests only if reported earnings clear a threshold the board set last February. Finance estimates that taking out the parts of Adler not yet delivered would move EBIT from EUR 51.0 million to EUR 46.8 million.
The auditor's written query arrived this morning: the Adler contract file, the analysis of which promises had been delivered by 31 December, and a view on a separate overdue balance. The engagement partner, who has signed Rheinwerk's accounts for nine years, wants it by 21 January. The audited accounts go to the supervisory board on 18 February, and your name is on the memoranda behind them.