Page 33 - Annual Report 2019

Supervisory Board Report
Group Management Report
Consolidated Financial Statements
Annexes

Long-term financial assets are generally carried at cost or, in the event of permanent value
impairment, at the lower of cost and fair value on the balance sheet date.
Equity interests in non-consolidated affiliates and other equity interests are carried at cost or, in the
event of permanent value impairment, at the lower of cost and fair value. If the reasons for retaining
the lower value no longer apply, the write-downs are reversed pursuant to Section 253(5) HGB.
The entitlement of the exemption outlined in Section 313 (3) sentence 4 HGB is exercised here.

Loans are carried at face value or, where appropriate, at the lower of cost and fair value.
Raw materials, consumables and supplies are recognised under inventories using the average cost
method or at the current market value on the purchase or sales market, whichever is lower.
Finished and unfinished goods are carried at cost pursuant to Section 255(2) HGB. Production costs
include direct material costs, direct production costs, extraordinary direct production costs and
a reasonable portion of material overheads, production overheads and impairment charges for fixed
assets provided they are production-related. They also include a reasonable share of the other
general and administrative expenses. Borrowing costs are not included in the production cost.
When replacement costs or realisable prices are the lower of cost or market on the balance sheet
date, write-downs are taken on the lowest value. Reasonable and adequate write-downs are
recognised to cover resale risk.

Accounts receivable and other assets are generally carried at face value. Specific valuation
allowances are made for accounts receivable based on the likelihood of default. General valuation
allowances are made for overall credit risk, generally based on past experience.

Cash and cash equivalents are recognised at their nominal value.
Prepaid expenses relate to expenditures prior to the balance sheet date that pertain to a
determinable period after this date; amortisation is recognised on a straight-line basis over
the specified period of time.

Taxes are deferred on the basis of the temporary concept. The single-entity financial statements of
the companies included in consolidation recognise deferred tax liabilities where differences arise
between the book value and the tax base of assets, liabilities, prepaid expenses and deferred income,
and these differences are likely to diminish in subsequent fiscal years and result in a tax charge.
If the differences result in a tax savings in subsequent fiscal years, it is only recognised up a maximum
of the deferred tax liabilities from other temporary differences. Where there is an excess of deferred
tax assets over deferred tax liabilities, the resulting net deferred tax assets are not recognised.
Deferred tax assets are not recognised for tax loss carry-forwards. Deferred tax assets for domestic
Group companies are calculated using an income tax rate of 29% (corporate tax rate 15%,
trade tax 14%). The relevant income tax rate in the country in question is used for subsidiaries
outside Germany and ranges between 16% and 30%.

If consolidation rules (Sections 300 to 307 HGB) result in additional differences between the book
value and the tax base of assets, liabilities, prepaid expenses and deferred income, and these
differences are likely to diminish in subsequent financial years, the net tax charge must be
recognised as a deferred tax liability and the net tax saving must be recognised as a deferred tax
asset, which are both calculated with the flat tax rate of 29%. Deferred tax assets and liabilities
are netted in accordance with the option provided in Section 306 HGB.

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