General Accounting Principles of the Combined Financial Statements

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2. Application and Effects of New or Revised Accounting Standards

The following accounting standards were adopted for the first time in the 2017 financial year:

Name of standard, amendment or interpretation
IAS 7Amendments: IAS 7 Statements of Cash Flows
IAS 12Amendments: IAS 12 Income Taxes – Recognition of Deferred Tax Assets for Unrealised Losses
MiscellaneousAmendments: Annual Improvements: 2014-2016 cycle1
  • 1 Mandatory application partially in 2017 and 2018.

    The first-time adoption of these new or revised accounting standards did not have any significant effects on the presentation of net assets, financial position or results of operations.

    New or Revised Accounting Standards Published, but not yet Applied During the 2017 Financial Year

    The new standards and interpretations listed below, as well as amendments to existing standards, were issued by the IASB, but – if adopted as European law – did not yet require application in the 2017 financial year. Any option for voluntary early application was not exercised for these accounting standards.

    New or Revised Accounting Standards Published, but not yet Applied During the 2017 Financial Year
    Mandatory application expected in financial yearName of standard, amendment or interpretationStandard has already been adopted as European law
    2018IFRS 9Financial Instruments, including amendments to this standardYes
    IFRS 15Revenue from Contracts with CustomersYes
    IFRS 152Amendments: Revenue from Contracts with CustomersYes
    IFRS 22Amendments: Classification and Measurement of Share-based PaymentYes
    IFRS 42Amendments: Delaying application of IFRS 9 Financial Instruments for insurance companiesYes
    IAS 402Amendments: Transfers of Investment PropertyYes
    IFRIC 222Foreign Currency Transactions and Advance ConsiderationNo1
    2019IFRS 92Amendments: Prepayment Features with Negative CompensationNo1
    IFRS 16LeasesYes
    IAS 282Amendments: Long-term Interests in Associates and Joint VenturesNo1
    IFRIC 232Uncertainty over Income Tax TreatmentsNo1
    IAS 192Amendments: Plan Amendment, Curtailment or SettlementNo1
    Various2Amendments: Annual Improvements: 2015-2017 cycleNo1
    2021IFRS 172Insurance ContractsNo1
    • 1 Since the standard, amendment or interpretation has not yet been adopted as European law, there is no mandatory application date within the European Union. Consequently, the date of initial application as planned by the IASB, on which the allocation to financial years is based, is subject to change.
    • 2 No material impacts are expected to result from the standard, amendment or interpretation.

    The first-time application of the new standards or amendments is expected to have the following effects on the presentation of net assets, financial position and results of operations. 

    IFRS 9: Financial Instruments, Including Amendments to this Standard

    a) Classification and Measurement

    This standard will replace the previous provisions on accounting for financial instruments set forth in IAS 39. The new standard will replace the measurement categories in IAS 39 with the two categories "at amortised cost" and "at fair value". The classification of an instrument in the "at amortised cost" category depends both on its product characteristics and on the entity's business model. If an instrument is allocated to the "at fair value" category, it can either be remeasured through profit or loss or remeasured with changes in fair value recognised in other comprehensive income and therefore in equity, similar to the way it was accounted for under IAS 39. Exceptions are in place for changes in the fair value of financial liabilities due to changes in own credit risk, which are not recognised on the income statement. Internal analyses have found that a positive adjustment effect in the low eight-figure range are likely to occur. This effect would result from the reclassification of financial assets from measurement "at amortised cost" to measurement "at fair value". For the most part, financial liabilities are classified in accordance with IFRS 9 in the same manner as currently classified under the accounting rules set out in IAS 39.

    The aforementioned amendments will be applied in accordance with the transitional provisions using the modified retrospective approach; prior-year figures will not be restated. The corresponding transitional effects are reported cumulatively in retained earnings.

    b) Impairment Model

    Furthermore, the new standard incorporates new guidance on calculating loss impairments. The previous model for accounting for losses is replaced by a multiple-stage model for accounting for expected losses. The analysis found that the amendments to the accounting rules will not have any material effects on the presentation of net assets, financial position or results of operations. 

    The aforementioned amendments will be applied in accordance with the transitional provisions using the modified retrospective approach; prior-year figures will not be restated. The corresponding transitional effects are reported cumulatively in retained earnings. 

    c) Hedge Accounting

    In addition, the rules for hedge accounting have been amended. When entities apply the standard for the first time, they have the option to continue hedge accounting in accordance with IAS 39. The groups do not intend to make use of this option. The rules for hedge accounting in accordance with IFRS 9 are designed to align operating risk management and hedge accounting to a greater degree in order to better present a true and fair view of the underlying economic reality. In the context of applying the standard, the groups will standardise their risk management strategies with the objective of achieving uniform hedging procedures. This will result in procedural and accounting changes. 

    Furthermore, the standard provides the option of excluding certain value components from designation of hedging instruments. The groups intend to make use of this option and recognise the change in the fair values of options and forward components as well as the foreign currency basis spread of forward contracts as hedging expenses. Going forward, these expenses will be reported in a separate reserve for hedging expenses under other comprehensive income. To date, the fair value of options has been presented in the financial result as the ineffective portion of existing cash flow hedges. The exclusion of the fair value component of options from designation must be recognised retrospectively and will necessitate a restatement of prior-year figures. This relates to the reclassification of unrealised valuation gains and losses on the fair value of options from the financial result to the reserve for hedging expenses.

    The groups also intend to apply the option to exclude foreign currency basis spreads from forward contracts retrospectively. The restatement of the prior-year comparative figures will be restricted to a reclassification of the measurement gains and losses on foreign currency basis spreads between the reserve for cash flow hedges and the reserve for hedging expenses. 

    The forward component will be excluded for forward transactions concluded on or after 1 January 2018. For forward transactions concluded prior to that date, the forward component will remain part of the designation; the effective portion of the measurement gains and losses will therefore continue to be reported in the reserve for cash flow hedges.

    Internal analyses indicate that the retrospective application of IFRS 9 with respect to hedge accounting will not have any material effect on the accounting. The systems-supported implementation of the standard has not yet been finalised at present, as certain software components are still being designed by the software developers. Nevertheless, it has been ensured that the group's recognised hedges will be able to meet the requirements of IFRS 9.

    In addition to the aforementioned accounting changes, the application of IFRS 9 in conjunction with IFRS 7 will necessitate a large number of new disclosures in the notes.

    IFRS 15: Revenue from Contracts with Customers

    The new standard provides uniform, principle-based guidance on the revenue recognition for all industries and all categories of transactions and replaces a number of individual provisions. The date and amount of revenue is based on a five-step model. Under this model, an entity must recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Control can still be passed either at a point in time or over time. Furthermore, the standard clarifies a number of technicalities such as how changes to contracts should be handled and how variable consideration such as rebates, rights of return and performance-based compensation should be measured. Moreover, the standard includes new guidance on principal versus agent considerations and costs of obtaining a contract. The revenue disclosure requirements in the notes were also expanded significantly. The groups intend to apply the modified retrospective transition method, under which a cumulative restatement effect will be recognised as at the transition date. Internal analyses show that the application of IFRS 15 will not have any material effects on the presentation of the net assets, financial position or results of operations of the groups. There will be changes in the balance sheet, particularly as a result of the separate presentation of contractual liabilities, e.g., due to expanded guarantees, customer loyalty programmes and coupons, as well as the presentation of reimbursement liabilities and assets from reimbursement claims in connection with customer returns. In addition to the aforementioned accounting changes, the application of IFRS 15 will necessitate expanded new disclosures in the notes.

    IFRS 16: Leases

    The new standard, IFRS 16, will replace the currently applicable standard, IAS 17, and IFRIC 4. The scope of IFRS 16 includes in general all rental and lease arrangements, sub-letting arrangements and sale-and-leaseback transactions.

    The purpose of the new standard is to account for the usually non-current financial obligations arising from all rental and lease arrangements. The principal innovation of IFRS 16 as compared to IAS 17 relates to lessee accounting. Going forward, lessees will no longer be required to classify leases as either operating or finance leases. Instead, the lessee must recognise a liability as at the date on which the lessor transfers the asset to the lessee for use as well as a corresponding right-of-use asset, which is generally equal to the present value of the future lease payments plus directly attributable costs. During the term of the lease the lease liability is adjusted using a model, while the usage right is amortised. 

    At the lessor, however, the provisions of the new standard do not differ from the previous standards of IAS 17. The criteria of IAS 17 are taken over for the classification pursuant to IFRS 16. 

    The groups expect total assets to increase significantly as at the initial application date due to the increase in fixed assets based on the addition of the right-of-use assets to be recognised and the corresponding lease liabilities. 

    It is expected that the modified retrospective approach will be applied to determine the effect of the changes as at the date of first-time application. The lease liability must be measured as at the date of first-time application using the present value of the lease payments still outstanding as at the transition date, applying the incremental borrowing rate. The right-of-use asset is recognised at the same amount less amounts recognised as provisions if the lease is an onerous contract as defined in IAS 37. The cumulative effect is recognised in retained earnings. 

    In future, additional amortisation and an additional interest expense will be recognised in the income statement in place of lease expenses (see note 14 "Other Operating Expenses" with respect to the current lease expense).

    The groups intend to apply the option of still recognising lease expenses for low-value assets and short-term leases directly in the income statement; the same is expected to apply for the option to split lease and non-lease components.

    The new standard will have significant effects on the presentation of net assets, financial position and results of operations (see also note 24 "Leases").