(36) Other financial assets
Accounting and measurement policies
Other financial assets
This section does not cover the accounting and measurement policies for derivative financial instruments. They are presented in Note (39) “Derivative financial instruments”.
Recognition and initial measurement
Financial assets are initially measured at fair value and recognized as of the settlement date. For financial assets not subsequently measured at fair value through profit or loss in subsequent periods, initial measurement also includes directly attributable transaction costs.
Detailed information on the measurement methods for financial assets measured at fair value are presented in Note (43) “Information on fair value measurement”.
Classification and subsequent measurement
At initial recognition, financial assets are assigned to one of the following measurement categories which also correspond to the financial instrument classes as defined in IFRS 9:
- Subsequent measurement at amortized cost
- Subsequent measurement at fair value through other comprehensive income
- Subsequent measurement at fair value through profit or loss.
This classification is based on the business model and the structure of contractual payment flows. Financial assets subsequently measured at amortized cost are accounted for using the effective interest method and considering any impairment losses. The procedure for calculating impairment losses is described in Note (42) “Management of financial risks”. Financial assets of this class are held in order to collect their contractual cash flows, which are exclusively principal repayments and interest payments on the outstanding capital amount.
Except for derivative financial instruments with positive market value, the Group only applies subsequent measurement at fair value through profit or loss for debt instruments with contractual properties resulting in cash flows that do not exclusively represent principal repayments and interest payments on the outstanding capital amount. In particular, this includes contingent consideration that was contractually agreed with the acquirer within the context of the disposal of businesses within the meaning of IFRS 3 (see Note (43) “Information on fair value measurement”). The Group does not utilize the option of the subsequent measurement of debt instruments at fair value through profit or loss.
Equity instruments not subject to mandatory subsequent measurement at fair value through profit or loss are measured at fair value through other comprehensive income in subsequent periods if they are intended to be held for the longer term. Further details on the measurement of financial assets at fair value are presented in Note (43) “Information on fair value measurement”.
Financial assets are only reclassified in rare cases in which the Group changes its business model in managing financial assets.
Derecognition
Financial assets are derecognized if there is no reasonable expectation that the contract party will fulfill its contractual obligations or if the Group transfers the contractual rights including all material risks and rewards of the financial asset to a contract partner.
Recognition
The following table provides details on the measurement effects of debt instruments on the consolidated balance sheet and the consolidated income statement:
Category |
|
Asset type |
|
Impairment losses/reversals of impairment losses |
|
Net gain and net loss on disposal/value adjustments |
|
Foreign currency gains or losses |
|
Interest income or expenses |
|---|---|---|---|---|---|---|---|---|---|---|
Subsequent measurement at amortized cost |
|
Operational |
|
Impairment losses, and reversals of impairment losses on financial assets (net) |
|
Other operating income or other operating expenses |
|
Other operating income or other operating expenses |
|
Financial income and expenses (applying the effective interest method) |
|
Financial |
|
Financial income and expenses |
|
Financial income and expenses |
|
Financial income and expenses |
|
||
Subsequent measurement at fair value through other comprehensive income |
|
Operational |
|
Impairment losses, and reversals of impairment losses on financial assets (net) |
|
Group equity (upon derecognition: reclassification to other operating income or other operating expenses) |
|
Other operating income or other operating expenses |
|
Financial income and expenses |
|
Financial |
|
Financial income and expenses |
|
Group equity (upon derecognition: reclassification to financial income and expenses) |
|
Financial income and expenses |
|
||
Subsequent measurement at fair value through profit or loss |
|
Operational |
|
|
|
Other operating income or other operating expenses |
|
Other operating income or other operating expenses |
|
Financial income and expenses |
|
Financial |
|
|
Financial income and expenses |
|
Financial income and expenses |
|
The following table provides details on the measurement effects of equity instruments on the consolidated balance sheet and the consolidated income statement:
Category |
|
Asset type |
|
Value adjustments |
|
Foreign currency gains or losses |
|
Dividend income |
|---|---|---|---|---|---|---|---|---|
Subsequent measurement at fair value through other comprehensive income |
|
Operational |
|
Results recognized directly in equity (value adjustments) |
|
Foreign currency gains and losses recognized directly in equity |
|
Other operating income |
|
|
Reclass of the cumulative results previously recognized directly in equity in the retained earnings when asset is disposed |
|
|
||||
|
Financial |
|
Results recognized directly in equity (value adjustments) |
|
Foreign currency gains and losses recognized directly in equity |
|
Financial income |
|
|
|
Reclass of the cumulative results previously recognized directly in equity in the retained earnings when asset is disposed |
|
|
||||
Subsequent measurement at fair value through profit or loss |
|
Operational |
|
Other operating income or other operating expenses |
|
Other operating income or other operating expenses |
|
Other operating income |
|
Financial |
|
Financial income and expenses |
|
Financial income and expenses |
|
Financial income |
Other financial assets were composed as follows:
|
|
Dec. 31, 2020 |
|
Dec. 31, 2019 |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
€ million |
|
current |
|
non-current |
|
Total |
|
current |
|
non-current |
|
Total |
Subsequent measurement at amortized cost |
|
1 |
|
7 |
|
7 |
|
1 |
|
8 |
|
9 |
Loans against third parties |
|
– |
|
7 |
|
7 |
|
1 |
|
8 |
|
9 |
Other |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
Subsequent measurement at fair value through other comprehensive income |
|
5 |
|
504 |
|
509 |
|
29 |
|
408 |
|
438 |
Equity instruments |
|
– |
|
499 |
|
499 |
|
– |
|
399 |
|
399 |
Debt instruments |
|
5 |
|
4 |
|
9 |
|
29 |
|
9 |
|
39 |
Subsequent measurement at fair value through profit and loss |
|
23 |
|
312 |
|
335 |
|
20 |
|
322 |
|
342 |
Equity instruments |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
Contingent consideration |
|
– |
|
260 |
|
260 |
|
– |
|
258 |
|
258 |
Other debt instruments |
|
7 |
|
34 |
|
41 |
|
– |
|
50 |
|
50 |
Derivatives without a hedging relationship (financial transactions) |
|
16 |
|
10 |
|
26 |
|
20 |
|
14 |
|
33 |
Derivatives without a hedging relationship (operational) |
|
– |
|
8 |
|
8 |
|
– |
|
– |
|
– |
Derivatives with a hedging relationship (operational) |
|
96 |
|
– |
|
96 |
|
7 |
|
– |
|
7 |
Financial assets |
|
125 |
|
822 |
|
947 |
|
57 |
|
738 |
|
795 |
As in the previous year, contingent consideration included claims arising from the divestments of the biosimilars business to Fresenius SE & Co. KGaA, Bad Homburg vor der Höhe, in 2017 and the Kuvan® business to BioMarin Pharmaceuticals Inc., United States, in 2015.
Equity instruments with subsequent measurement at fair value through other comprehensive income included the shares held in Precigen Inc., United States, and M Ventures portfolio companies in particular. Please refer to Note (50) “List of shareholdings” for a detailed list of all investments made in equity instruments with subsequent measurement at fair value through other comprehensive income.