(3) Discretionary decisions and sources of estimation uncertainty
Dealing with discretionary decisions and sources of estimation uncertainty
The preparation of the consolidated financial statements requires the Group to make discretionary decisions and assumptions as well as estimates to a certain extent. The discretionary scope and estimation uncertainty are assessed in a Group-specific manner. Discretion describes the need to make assumptions concerning recognition or measurement. Estimation uncertainty is determined by the degree of availability and reliability of historical experience and external data for future developments.
Increased uncertainty due to the Covid-19 pandemic
The Group is continuously examining the impact of the Covid-19 pandemic on its business and the resulting effects for the Group’s accounting. Despite a temporary downturn in net sales in 2020, the Group’s diversified business model has proven to be largely robust during the pandemic to date. Most notably, the high level of demand for the products and services of the Life Science business sector – and the Process Solutions business unit in particular – resulted in significant sales and earnings growth in the reporting period. Business development in the Electronics business sector is also benefiting from the acceleration of the digitalization trend as a result of the Covid-19 pandemic and the consequent growth in demand for semiconductor materials. As in the previous year, the positive course of business and current business planning gave no grounds to suggest that the going concern assumption should not have been applied in preparing the consolidated financial statements.
Although the degree of estimation uncertainty has decreased compared with the previous year, it remains greater than usual because the pandemic situation is still developing dynamically and having a corresponding impact on global macroeconomic performance.
Increased uncertainty due to climate risks
As a globally active science and technology group, the Group is subject to transition-related and physical climate risks that could have a potentially negative impact on its net assets, financial position, and results of operations and lead to increased estimation uncertainty in its accounting. Physical climate risks describe the risks of longer-term changes in the general climatic conditions, while transition-related climate risks describe the consequences for companies as a result of the transition to a sustainable economic system.
The Group has set itself the goal of reducing its direct (Scope 1) and indirect (Scope 2) greenhouse gas emissions by 50% in the period from 2020 to 2030. This will be achieved by lowering process-related emissions, implementing energy efficiency measures, and increasingly purchasing electricity from renewable sources. The Group also plans to reduce the indirect emissions along the entire value chain (Scope 3) by 1,500 metric kilotons of CO2 equivalents by 2030 and to achieve climate-neutral business operations along the entire value chain by 2040. In November 2021, the Group also decided to sign up to the Science Based Targets Initiative, meaning it has committed to contribute to the achievement of the Paris Agreement goals through specific actions.
The most significant transition-related climate risks to the net assets, financial position, and results of operations are in the Electronics business sector, which is responsible for well in excess of half of the Group’s direct (Scope 1) and indirect (Scope 2) greenhouse gas emissions. The majority of the greenhouse gas emissions in this business sector take the form of process-related emissions resulting from the production of specialty gases for the semiconductor and electronics industries. In order to achieve the climate goals it has adopted, the Group intends to reduce the emissions in its business with these specialty gases by making technological improvements to the production process in particular. Based on the information currently available, the implementation of the Group’s sustainability strategy is not expected to result in a significant decline in net sales in this business. There have been no indications of impairment of the assets concerned to date, nor has it been necessary to adjust their remaining useful lives.
Overview of significant discretionary decisions and sources of estimation uncertainty
The accounting matters with the most significant discretionary decisions as well as the most comprehensive assumptions relating to the future and sources of estimation uncertainty are described below:
Accounting matter |
|
Carrying amount as of Dec. 31, 2021 |
|
IFRS |
|
Discretionary scope/ estimation uncertainty |
|
Sensitivity analysis |
|
Note |
---|---|---|---|---|---|---|---|---|---|---|
Goodwill |
|
17,004 |
|
|
|
|
|
yes |
|
|
Determination of recoverable amount |
|
|
|
IAS 36 |
|
high |
|
|
|
|
Other intangible assets |
|
7,612 |
|
|
|
|
|
yes |
|
|
Identification and measurement of intangible assets within the scope of business combinations |
|
|
|
IFRS 3 |
|
high |
|
|
|
|
In-licensing of intangible assets |
|
|
IAS 38 |
|
medium |
|
|
|
||
Determination of amortization |
|
|
IAS 38 |
|
medium |
|
|
|
||
Identification of impairments or reversal of impairments |
|
|
IAS 36 |
|
high |
|
|
|
||
Property, plant, and equipment |
|
7,217 |
|
|
|
|
|
no |
|
|
Determination of depreciation |
|
|
|
IAS 16 |
|
medium |
|
|
|
|
Identification of impairments or reversal of impairments |
|
|
IAS 36 |
|
medium |
|
|
|
||
Leases |
|
447 |
|
|
|
|
|
yes |
|
|
Recognition and measurement of lease arrangements |
|
|
|
IFRS 16 |
|
medium |
|
|
|
|
Inventories |
|
3,900 |
|
|
|
|
|
no |
|
|
Identification of impairments or reversal of impairments |
|
|
|
IAS 2 |
|
medium |
|
|
|
|
Trade and other receivables |
|
3,646 |
|
|
|
|
|
no |
|
|
Determination of loss allowance |
|
|
|
IFRS 9 |
|
medium |
|
|
|
|
Other financial assets |
|
|
|
|
|
|
yes |
|
||
Determination of fair values of contingent considerations |
|
271 |
|
IFRS 13 |
|
high |
|
|
|
|
Determination of fair values of equity instruments |
|
462 |
|
IFRS 9, IFRS 13 |
|
medium |
|
|
|
|
Provisions for employee benefits |
|
|
|
|
|
|
|
yes |
|
|
Determination of present value of defined-benefit obligations |
|
5,995 |
|
IAS 19 |
|
medium |
|
|
|
|
Determination of parameters for the valuation of fair values of share-based payment programs |
|
348 |
|
IFRS 2 |
|
medium |
|
|
|
|
Other provisions and contingent liabilities |
|
647 |
|
|
|
|
|
no |
|
|
Recognition and measurement of other provisions and contingent liabilities |
|
|
|
IAS 37 |
|
high |
|
|
|
|
Revenue recognition |
|
|
|
|
|
|
yes |
|
||
Measurement of sales deductions and refund liabilities |
|
839 |
|
IFRS 15 |
|
high |
|
|
|
|
Income tax |
|
|
|
|
|
|
|
no |
|
|
Recognition and measurement of income tax liabilities |
|
1,462 |
|
IAS 12 |
|
high |
|
|
|
|
Recognition and measurement of deferred taxes from temporary differences |
|
|
|
IAS 12 |
|
medium |
|
|
|
|
Recognition of deferred tax assets from tax loss carryforwards |
|
11 |
|
IAS 12 |
|
high |
|
|
|
|