Grifols has finally begun to respond to the accusations of accounting manipulation leveled by the Gotham City Research firm with another report in which it justifies the accounting practices that are the subject of controversy. Specifically, the pharmaceutical company admits that it has been accounting for five years the benefits from the consolidation of two companies that sold 100% to Scranton, the holding company of the Grifols family and former directors of the company, on December 28, 2018. However, the multinational Española emphasizes that it can do so, according to the regulations.
However, Grifols assures the CNMV that it can do so in application of the IFRS 10-B94 accounting standard on the consolidation of companies without dominant participation, because it has an irrevocable recovery option that can be executed at any time for 30 years. and has the actual management of said companies (Haema and Biotest US Corporation). Furthermore, Grifols considers that this purchase option is “substantive”, as stated in the regulations. Remember that its auditor KPMG gave support and protected this model that gives control to the non-shareholder (Grifols) instead of the actual owner of the subsidiaries (Scranton).
“The aforementioned constitutes the indicators of the power that Grifols maintains over said entities, even after their sale, considering that the repurchase options are susceptible to being exercised and Grifols would have the financial capacity to carry them out. Consequently, the sale of the entities does not give rise to a loss of control, which is why the entities continue to consolidate, recording the sale as a transaction in equity without any impact on the consolidated profit and loss account. [NIIF 10.23, B96]. The results from the sale will be attributed to the non-controlling interest, based on their actual percentage ownership. [NIIF 10-B94]”says the pharmaceutical company in a report.
The price of said operation would be that of the divestment ($538 million) plus updated costs, which is also linked to a debt of 360 million contracted by Scranton with Bank of America to undertake this operation. “The financial institution [Bank of America] used by Scranton to finance the operation imposed as a condition [a Scranton] to support the operation, the subscription of a “Vendor’s Financing”, a loan from Grifols to Scranton. Even though Scranton had enough cash and did not need this loan, the financial institution believed it was necessary to involve Grifols in the operation,” the group explains.
