Valuation principles

Financial statements for individual companies are consolidated into the Group’s financial statements, and valued in accordance with uniform principles across the Group. The most important valuation methods for the individual balance sheet positions are as follows:

Liquid assets

Liquid assets include cash, current account balances at banks and other financial institutions, as well as fixed-term deposits with maturity of no more than 90 days from the balance-sheet date. Liquid assets are valued at their nominal rate.

Marketable securities

Short-term securities recognised on the balance sheet include marketable and easily realisable securities investments and term deposits with a maturity of three to twelve months. Securities are valued at market prices. Term deposits are valued at their nominal rate.

Receivables

Receivables are valued at their nominal rate. Value adjustments are carried out for identifiable individual risks. Country-specific general value adjustments (2% to 10%) are applied to other risks.

Inventories

Inventories are valued at either their acquisition or manufacturing costs. However, if the market price is lower, this figure is applied instead. Manufacturing costs include the cost of raw materials, individual production costs and a portion of allocated general overhead costs. All identifiable risks of loss for goods or articles with insufficient inventory turnover are taken into account by appropriate value adjustments. Inventories from intercompany deliveries do not include intermediate profits. Discounts are recorded as reductions in the cost of goods.

Tangible assets

Tangible assets are valued at their acquisition or manufacturing cost less any applicable depreciation. Depreciation is linear over the expected useful life of the asset, taking residual values into account. The relevant depreciation periods are as follows:

Assets of insubstantial value are directly expensed in the income statement upon acquisition. Intermediate profits arising from intra-Group asset transfers are eliminated.

Leasing

Leased assets (financial leases) are reported as assets in the balance sheet. At the beginning of the contract, leasing payments are established by applying either the leased goods’ purchase value or market value respectively, alternatively, the cash value is applied if lower. The corresponding liability toward the leasing grantor is carried as a liability from financial leasing. Costs arising from rental agreements and operational leasing are recorded in the income statement.

Financial assets

Non-consolidated participations are recorded in the balance sheet at their proportionate equity ('equity method') or purchase values. Loans and marketable securities are recorded at their nominal values or purchase prices respectively, less any necessary value adjustments.

Intangible assets

Intangible assets include brands, patents, licences, software and other intangibles. Acquired intangible assets are reported in the balance sheet at acquisition cost and are subject to linear amortisation over their estimated useful life. If it is impossible to determine the useful life of an intangible asset accurately, it is generally amortised over a period of five years.

Assets of insubstantial value are directly expensed in the income statement upon acquisition.

Asset impairment

If there is evidence that the value of an asset may be impaired, an impairment test is conducted. If the impairment test suggests an impairment, the book value is reduced to the recoverable amount (higher value of fair value less cost to sale and value in use).

Liabilities

Short-term liabilities (also referred to as 'current liabilities') are debts that are repayable within 12 months. Long-term financial liabilities refer to financing with a term of more than one year. Liabilities (including financial debts) are recorded in the balance sheet at nominal value.

Provisions

Provisions are formed when a legal or de facto obligation has arisen from past events, the outflow of funds to meet this obligation is likely, and it is possible to estimate its amount reliably. The future outflow of funds is reported in the balance sheet at nominal value. If material, it is discounted as per the balance sheet date.

Taxes

All tax obligations, irrespective of their due dates, are set aside. Ongoing income taxes are calculated on the basis of taxable income and reported in the balance sheet under 'Accrued expenses and deferred income'. Deferred taxes are calculated based on all temporary differences between the values from the tax statement and the operating values. Tax-relevant losses carried forward are only taken into account if it seems possible to offset them against income. The country-specific tax rates are applied when calculating deferred taxes. Deferred tax assets are recorded in the balance sheet as financial assets and deferred tax liabilities as long-term provisions.

Derivative financial instruments

Derivative financial instruments for hedging purposes are disclosed in the notes and recognized at fair value through profit or loss when the underlying transaction occurs.