Special Features of Construction Companies' Financial Statements

Trends in the Provision of Securities

The past few years have shown a significant growth in the securities need of many construction companies. This need is due to the more difficult business environment and to changing business fields.

The latter now increasingly include international construction, property development and - to an increasing extent - project development. Since even major domestic construction companies are often unknown abroad, clients want to have a maximum of security for incurred liabilities. In the project and property development business, the provisions governing real estate agents and property developers play an important role for the growing securities volume. These provisions are aimed at providing as much protection as possible for private clients since these find it difficult to assess the risks of complex contracts which often involve major sums for them.

On the other hand the provision of securities for client liabilities is also assuming mounting importance for construction companies. The last few years have already shown that it was not sufficient to assess the client's credit standing directly on the basis of his readiness to invest. Instead, the client's solvency had to be checked critically in every single case. However, due to the difficult business situation of many companies, an unexpected negative development of the client's credit standing during a construction project can be observed more and more often. For these reasons, the client's request for the provision of securities is fully justified in order to avoid a growing volume of construction companies' losses due to nonpayment.