Notes to the consolidated financial statements
Financial assets and liabilities
Under IAS 39, “Financial Instruments: Recognition and Measurement,” financial assets are classified and measured as either “Financial assets at fair value through profit or loss,” as “Loans and receivables” or as “Available-for-sale financial assets.” With the exception of derivative financial instruments, all financial liabilities are classified as “Financial liabilities measured at amortized cost.” A financial asset/financial liability is recognized when the reporting entity becomes party to the contractual provisions of the instrument (settlement date). Financial assets not at fair value through profit or loss are measured at the transaction costs that are incremental costs directly attributable to the acquisition.
The other investments reported under financial assets are designated as “Available-for-sale financial assets.” Other investments exclusively relate to shares in German limited companies and comparable non-German legal forms. They are carried at cost as their fair value cannot be reliably measured.
Trade receivables and the financial receivables disclosed under financial receivables and other assets are designated as “Loans and receivables,” and are initially measured at fair value, which represents the cost on the date of acquisition. In subsequent periods, these items are measured at amortized cost. Non-interest and low-interest-bearing non-current receivables are carried at the present value of estimated future cash flows where the effect of the time value of money is material. The effective interest method is used for the calculation. Assets are classified as non-current if they are not due to be settled within 12 months after the reporting date.
Derivative financial instruments that are not part of a hedging relationship are designated as “Financial assets at fair value through profit or loss” and “Financial liabilities at fair value through profit or loss.” They are measured at fair value and a gain or loss arising from a change in the fair value is recognized in profit or loss.
Financial liabilities and trade payables are included under “Financial liabilities measured at amortized cost.” They are measured at fair value upon initial recognition and at amortized cost subsequently using the effective interest method. The fair value is calculated by discounting the estimated future cash flows at prevailing market value. Current liabilities are stated at the redemption amount or settlement amount. Trans action costs are deducted from cost if they are directly attributable. Non-interest and low-interest- bearing non-current financial liabilities are carried at the present value of estimated future cash flows discounted at the current market rate where the effect of the time value of money is material. Liabilities are classified as non-current if they are not due to be settled within 12 months after the reporting date.
Changes in the fair value of derivatives hedged by a cash flow hedge are recognized directly in equity in accordance with IAS 39, “Financial Instruments: Recognition and Measurement,” provided the hedge is effective. The amounts recognized in equity are recognized in the income statement in the period in which the hedged transaction affects profit or loss, e.g., when hedged finance income or expenses are recognized. If the forecast transaction is no longer expected to occur, the amounts previously recorded under equity are reclassified to profit or loss. The fair value of derivatives is calculated by discounting the estimated future cash flows at prevailing market value.
If there are indications of impairment for financial assets carried at cost, a write-down to the lower expected realizable value is made. When determining whether there are indications of impairment, information on the creditworthiness of the counterparty is analyzed. Uncollectible receivables are written off. If the reasons for an impairment loss cease to apply, the impairment loss is reversed as appropriate. If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in profit or loss, is transferred from equity to the income statement. Reversals of impairment losses on equity instruments classified as available for sale are not recognized in profit or loss. A financial asset is derecognized when the contractual rights to receive cash flows expire, i.e., when the asset was realized or expired or when the asset is no longer controlled by the reporting entity. A financial liability is derecognized if the contractual obligation underlying the liability is discharged or canceled or if it expires.
Inventories
Inventories are carried at acquisition cost. Cost is calculated on the basis of the weighted average method. Inventories are measured at the lower of cost or net realizable value as of the reporting date.
Deferred taxes
Deferred taxes are calculated in accordance with IAS 12, “Income Taxes.” They are recognized on temporary differences between the carrying amounts of assets and liabilities in the IFRS statement of financial position and their tax base as well as on consolidation entries and on potentially realizable unused losses. Deferred taxes on items recognized directly in equity according to the relevant standards are also recognized directly in equity. The accumulated amounts of deferred taxes recognized directly in equity as of the reporting date are presented in the consolidated statement of comprehensive income.
Deferred tax assets are recognized on deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and unused losses can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available against which the deferred tax assets can be utilized. Unrecognized deferred tax assets are reviewed at each reporting date and recognized to the extent to which it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
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