(43) Information on fair value measurement
Accounting and measurement policies
Information on fair value measurement
The measurement techniques and main input factors used to determine the fair value of financial instruments are as follows:
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Financial instruments concerned |
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Description of the measurement technique |
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Main input factors used to determine fair values |
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Financial assets |
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Subsequent measurement at fair value through other comprehensive income |
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Equity instruments |
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Shares |
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Derived from active market |
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Quoted prices in an active market |
Other debt instruments |
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Bonds |
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Other (short-term) cash investments |
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Subsequent measurement at fair value through profit or loss |
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Equity instruments |
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Shares |
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Derived from active market |
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Quoted prices in an active market |
Other debt instruments |
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Publicly-traded funds |
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Other (short-term) cash investments |
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Cash and Cash equivalents |
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Money market funds |
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Financial liabilities |
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Subsequent measurement at amortized cost |
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Financial debt |
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Bonds |
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Derived from active market |
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Quoted prices in an active market |
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Financial instruments concerned |
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Description of the measurement technique |
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Main input factors used to determine fair values |
---|---|---|---|---|---|---|
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Financial assets |
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Subsequent measurement at fair value through profit or loss |
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Derivatives (without a hedging relationship) |
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Forward exchange contracts and currency options |
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Use of recognized financial methods |
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Spot and forward rates observable on the market as well as exchange rate volatilities |
Derivatives (with a hedging relationship) |
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Forward exchange contracts and currency options |
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Use of recognized financial methods |
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Spot and forward rates observable on the market as well as exchange rate volatilities |
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Financial liabilities |
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Subsequent measurement at fair value through profit or loss |
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Derivatives (without a hedging relationship) |
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Forward exchange contracts and currency options |
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Use of recognized financial methods |
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Spot and forward rates observable on the market as well as exchange rate volatilities |
Derivatives (with a hedging relationship) |
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Forward exchange contracts and currency options |
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Use of recognized financial methods |
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Spot and forward rates observable on the market as well as exchange rate volatilities |
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Subsequent measurement at amortized cost |
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Financial liabilities |
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Liabilities to banks and other loan liabilities |
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Discounting of future cash flows |
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Interest rates observable on the market |
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Financial instruments concerned |
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Description of the measurement technique |
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Main input factors used to determine fair values |
---|---|---|---|---|---|---|
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Financial assets |
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Subsequent measurement at fair value through other comprehensive income |
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Equity instruments |
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Equity investments in unlisted companies |
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Discounting of expected future cash flows |
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Expected cash flows from recent business planning, average cost of capital, expected long-term growth rate |
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Derived from observable prices within the scope of equity refinancing sufficiently close to the balance sheet date, considered risk allowances |
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Observable prices derived from equity refinancing |
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Cost-based determination |
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Acquisition cost |
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Trade and other receivables |
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Trade accounts receivable that are intended for sale due to a factoring agreement |
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Nominal value less factoring fees |
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Nominal value of potentially sold trade accounts receivable, average fees for sales of trade accounts receivable |
Subsequent measurement at fair value through profit or loss |
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Derivatives (without a hedging relationship) |
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Virtual power purchase agreements |
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Discounting of expected future cash flows |
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Electricity future price curves, expected electricity production volumes, discount factors |
Contingent consideration |
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Contingent considerations from the sale of businesses or shares in corporations |
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Discounting of probability-weighted future milestone payments and license fees |
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Sales planning, milestone payments, probabilities of regulatory and commercial events, discount rates |
Other debt instruments |
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Loans with variable repayments |
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Discounting of expected future cash flows |
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Expected cash flows from recent business planning, discount rates |
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Interests in unlisted funds |
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Consideration of the fair value of companies in which the funds are invested |
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Net asset values of the fund interests |
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Units with cancellation or redemption options |
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Derived from observable prices in the context of refinancing sufficiently close to the reporting date, considered risk allowances |
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Derived observable prices from similar refinancing transactions |
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Bonds with embedded settlement option for equity in an unlisted company |
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Use of recognized financial methods |
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Interest rates observable on the market |
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Financial liabilities |
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Subsequent measurement at fair value through profit or loss |
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Derivatives (without a hedging relationship) |
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Virtual power purchase agreements and their hedging transaction |
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Discounting of expected future cash flows |
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Electricity future price curves, expected electricity production volumes, discount factors |
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Use of recognized financial methods |
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Contingent consideration |
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Contingent considerations from the purchase of businesses |
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Discounting of probability-weighted future milestone payments and license fees |
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Sales planning, milestone payments, probabilities of regulatory and commercial events, discount rates |
Counterparty credit risk is taken into consideration for measurements of financial instruments at fair value. In the case of non-derivative financial instruments, such as other liabilities or interest-bearing securities, this is reflected using risk premiums on the discount rate, while discounts on market value (credit valuation adjustments and debit valuation adjustments) are used for derivatives. Transfers between the individual hierarchy levels at fair value are made at the end of the month in which the triggering event – e.g. an initial public offering – took place.
Assets and liabilities from contingent considerations (Level 3)
The fair values of assets and liabilities from contingent considerations are calculated by weighting the expected future cash flows in connection with milestone payments and royalties using their probability of occurrence and discounting them. The main parameters when determining contingent considerations are:
- The estimated probability of reaching the individual milestone events.
- The underlying sales planning used to derive royalties.
- The discount factor used.
When determining the probability of occurrence of the individual milestone events in connection with the development of drug candidates, the focus is on empirically available probabilities of success of development programs in comparable phases of clinical development in the relevant therapeutic areas. Internal sales plans and sales plans of external industry services are used to determine the sales plan. The discount rate (after tax) of 6.0% as of December 31, 2024 (December 31, 2023: 6.6%) was calculated using the weighted average cost of capital.
Income and expenses from the discounting of probability-weighted future milestone payments and royalties and from changes in discount rates are reported in the financial result.
Significant discretionary decisions and sources of estimation uncertainty
Equity investments in unlisted companies
Determining the parameters that are to be included in discounted cash flow methods and deriving the fair value from observable prices within the scope of equity refinancing are both subject to discretionary decisions and estimation uncertainty.
Assets from contingent consideration
The calculation of the fair value of assets from contingent considerations is subject to significant discretionary judgment.
The most significant contingent consideration was the future purchase price claim from the disposal of the biosimilars business to a subsidiary of Fresenius SE & Co. KGaA, Bad Homburg vor der Höhe, on August 31, 2017. It was calculated by an external valuation expert upon initial recognition in 2017 and was subsequently recognized on this basis. As of December 31, 2024, the carrying amount was € 126 million (December 31, 2023: € 118 million).
Following the achievement of the last regulatory milestone in connection with the disposal of the biosimilars business in fiscal 2024, the probability of approval is no longer a factor in determining the fair value of the contingent consideration; instead, this is based solely on the entitlement to sales-based royalties and the discount factor. If, in the context of determining the fair value of this contingent consideration at the balance sheet date, the discount factor had been estimated to be lower or higher, this would have led to the following changes in the measurement and the corresponding effects on the profit before income tax:
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Change in probability of regulatory approval |
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€ million |
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|
|
-10% |
|
unchanged |
|
10% |
Change of discount rate |
|
5.5% |
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|
|
3 |
|
|
|
6.0% (unchanged) |
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|
|
– |
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|
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6.5% |
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|
-3 |
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|
|
|
|
|
Change in probability of regulatory approval |
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€ million |
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|
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-10% |
|
unchanged |
|
10% |
Change of discount rate |
|
6.1% |
|
-3 |
|
3 |
|
9 |
|
6.6% (unchanged) |
|
-6 |
|
– |
|
6 |
|
|
7.1% |
|
-8 |
|
-3 |
|
3 |
The following table presents the carrying amounts and fair values of the individual financial assets and liabilities as of December 31, 2024, for each individual financial instrument class pursuant to IFRS 9:
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|
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|
Carrying amount |
|
Fair value1 |
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
€ million |
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Consolidated |
|
Current |
|
Non-current |
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Total |
|
Fair value determined by official prices and quoted market values (Level 1) |
|
Fair value determined using input factors observable in the market (Level 2) |
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Fair value determined using input factors not observable in the market (Level 3) |
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Total |
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Financial assets |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Subsequent measurement at amortized cost |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and cash equivalents |
|
|
859 |
|
– |
|
859 |
|
|
|
|
|
|
|
|
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Trade and other receivables (excluding leasing receivables) |
|
|
3.916 |
|
25 |
|
3.940 |
|
|
|
|
|
|
|
|
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Other debt instruments |
|
|
559 |
|
3 |
|
562 |
|
|
|
|
|
|
|
|
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Subsequent measurement at fair value through other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Equity instruments |
|
|
– |
|
798 |
|
798 |
|
243 |
|
– |
|
555 |
|
798 |
|||||||
Trade and other receivables |
|
|
24 |
|
– |
|
24 |
|
– |
|
– |
|
24 |
|
24 |
|||||||
Other debt instruments |
|
|
– |
|
1 |
|
1 |
|
1 |
|
– |
|
– |
|
1 |
|||||||
Subsequent measurement at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cash and cash equivalents |
|
|
1.658 |
|
– |
|
1.658 |
|
1.658 |
|
– |
|
– |
|
1.658 |
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Contingent considerations |
|
|
– |
|
151 |
|
151 |
|
– |
|
– |
|
151 |
|
151 |
|||||||
Other debt instruments |
|
|
– |
|
162 |
|
162 |
|
68 |
|
– |
|
94 |
|
162 |
|||||||
Derivatives without a hedging relationship |
|
|
75 |
|
57 |
|
131 |
|
– |
|
70 |
|
61 |
|
131 |
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Derivatives with a hedging relationship |
|
|
8 |
|
– |
|
8 |
|
– |
|
8 |
|
– |
|
8 |
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Lease receivables (measured in accordance with IFRS 16)2 |
|
|
6 |
|
3 |
|
9 |
|
|
|
|
|
|
|
|
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Total |
|
|
|
7.105 |
|
1.200 |
|
8.305 |
|
1.970 |
|
78 |
|
885 |
|
2.933 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Subsequent measurement at amortized cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trade payables and other liabilities |
|
|
2.275 |
|
– |
|
2.275 |
|
|
|
|
|
|
|
|
|||||||
Financial debt |
|
|
3.136 |
|
6.373 |
|
9.508 |
|
7.469 |
|
1.823 |
|
– |
|
9.292 |
|||||||
Other financial liabilities |
|
|
977 |
|
112 |
|
1.089 |
|
|
|
|
|
|
|
|
|||||||
Subsequent measurement at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Contingent considerations |
|
|
15 |
|
5 |
|
20 |
|
– |
|
– |
|
20 |
|
20 |
|||||||
Derivatives without a hedging relationship |
|
|
34 |
|
18 |
|
52 |
|
– |
|
31 |
|
21 |
|
52 |
|||||||
Derivatives with a hedging relationship |
|
|
36 |
|
– |
|
36 |
|
– |
|
36 |
|
– |
|
36 |
|||||||
Refund liabilities |
|
|
869 |
|
– |
|
869 |
|
|
|
|
|
|
|
|
|||||||
Lease liabilities (measured in accordance with IFRS 16)2 |
|
|
137 |
|
625 |
|
761 |
|
|
|
|
|
|
|
|
|||||||
Total |
|
|
|
7.478 |
|
7.132 |
|
14.610 |
|
7.469 |
|
1.890 |
|
41 |
|
9.400 |
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|
The following table presents the carrying amounts and fair values of the individual financial assets and liabilities as of December 31, 2023, for each individual financial instrument class pursuant to IFRS 9:
|
|
|
|
Carrying amount |
|
Fair value1 |
|
|
||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
€ million |
|
Consolidated |
|
Current |
|
Non-current |
|
Total |
|
Fair value determined by official prices and quoted market values (Level 1) |
|
Fair value determined using input factors observable in the market (Level 2) |
|
Fair value determined using input factors not observable in the market (Level 3) |
|
Total |
||||||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Subsequent measurement at amortized cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents |
|
|
1.017 |
|
– |
|
1.017 |
|
|
|
|
|
|
|
|
|||||||||
Trade accounts receivable and other receivable (excluding leasing receivables) |
|
|
3.973 |
|
25 |
|
3.998 |
|
|
|
|
|
|
|
|
|||||||||
Other debt instruments |
|
|
201 |
|
4 |
|
204 |
|
|
|
|
|
|
|
|
|||||||||
Subsequent measurement at fair value through other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Equity instruments |
|
|
– |
|
643 |
|
643 |
|
207 |
|
– |
|
436 |
|
643 |
|||||||||
Trade accounts receivable and other receivable |
|
|
25 |
|
– |
|
25 |
|
– |
|
– |
|
25 |
|
25 |
|||||||||
Debt instruments |
|
|
198 |
|
1 |
|
199 |
|
199 |
|
– |
|
– |
|
199 |
|||||||||
Subsequent measurement at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents3 |
|
|
965 |
|
– |
|
965 |
|
965 |
|
– |
|
– |
|
965 |
|||||||||
Contingent consideration |
|
|
– |
|
125 |
|
125 |
|
– |
|
– |
|
125 |
|
125 |
|||||||||
Other debt instruments |
|
|
33 |
|
161 |
|
194 |
|
98 |
|
– |
|
95 |
|
194 |
|||||||||
Derivatives without a hedging relationship |
|
|
30 |
|
47 |
|
77 |
|
– |
|
27 |
|
50 |
|
77 |
|||||||||
Derivatives with a hedging relationship |
|
|
37 |
|
– |
|
37 |
|
– |
|
37 |
|
– |
|
37 |
|||||||||
Finance lease receivables (to be measured in accordance with IFRS 16)2 |
|
|
6 |
|
3 |
|
9 |
|
|
|
|
|
|
|
|
|||||||||
Total |
|
|
|
6.485 |
|
1.008 |
|
7.493 |
|
505 |
|
65 |
|
731 |
|
2.265 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Subsequent measurement at amortized cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Trade accounts payable |
|
|
2.545 |
|
– |
|
2.545 |
|
|
|
|
|
|
|
|
|||||||||
Financial debt |
|
|
503 |
|
8.846 |
|
9.349 |
|
7.367 |
|
2.665 |
|
– |
|
10.032 |
|||||||||
Other financial liabilities |
|
|
998 |
|
127 |
|
1.125 |
|
|
|
|
|
|
|
|
|||||||||
Subsequent measurement at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Contingent consideration |
|
|
– |
|
2 |
|
2 |
|
– |
|
– |
|
2 |
|
2 |
|||||||||
Derivatives without a hedging relationship |
|
|
79 |
|
18 |
|
96 |
|
– |
|
77 |
|
20 |
|
96 |
|||||||||
Derivatives with a hedging relationship |
|
|
5 |
|
– |
|
5 |
|
– |
|
5 |
|
– |
|
5 |
|||||||||
Refund liabilities |
|
|
877 |
|
– |
|
877 |
|
|
|
|
|
|
|
|
|||||||||
Finance lease liabilities (to be measured in accordance with IFRS 16)2 |
|
|
122 |
|
393 |
|
515 |
|
|
|
|
|
|
|
|
|||||||||
Total |
|
|
|
5.129 |
|
9.387 |
|
14.515 |
|
7.367 |
|
2.747 |
|
22 |
|
10.136 |
||||||||
|
The changes in financial assets and liabilities for each of the individual classes of financial instruments allocated to Level 3 and measured at fair value were as follows in the previous year:
|
|
Financial assets |
|
Financial liabilities |
|
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Subsequent measurement at fair value through profit or loss |
|
Subsequent measurement at fair value through other comprehensive income |
|
Subsequent measurement at fair value through profit or loss |
|
|
||||||||
€ million |
|
Other debt instruments |
|
Contingent consideration |
|
Derivatives without a hedging relationship |
|
Equity instruments |
|
Trade and other receivables |
|
Contingent consideration |
|
Derivatives without a hedging relationship |
|
Total |
Net carrying amounts |
|
93 |
|
250 |
|
53 |
|
415 |
|
22 |
|
-4 |
|
-23 |
|
806 |
Additions |
|
21 |
|
– |
|
– |
|
59 |
|
72 |
|
– |
|
– |
|
152 |
Transfers into Level 3 from Level 1/Level 2 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
Fair value changes |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
Gains (+)/losses (-) recognized in the consolidated income statement (other operating result) |
|
10 |
|
56 |
|
2 |
|
|
|
– |
|
– |
|
1 |
|
69 |
thereof: attributable to assets/liabilities held as of the balance sheet date |
|
10 |
|
6 |
|
-2 |
|
|
|
– |
|
– |
|
1 |
|
16 |
Gains (+)/losses (-) recognized in the consolidated income statement (financial income and expenses) |
|
5 |
|
10 |
|
– |
|
|
|
– |
|
– |
|
– |
|
14 |
thereof: attributable to assets/liabilities held as of the balance sheet date |
|
5 |
|
10 |
|
– |
|
|
|
– |
|
– |
|
– |
|
14 |
Gains (+)/losses (-) recognized in other comprehensive income |
|
|
|
|
|
|
|
47 |
|
– |
|
|
|
|
|
47 |
Currency translation difference |
|
-2 |
|
– |
|
-3 |
|
-1 |
|
– |
|
– |
|
– |
|
-5 |
Disposals |
|
-21 |
|
-190 |
|
-2 |
|
-29 |
|
-69 |
|
2 |
|
3 |
|
-307 |
Transfers out of Level 3 into Level 1/Level 2 |
|
– |
|
– |
|
– |
|
-3 |
|
– |
|
– |
|
– |
|
-3 |
Other |
|
-11 |
|
– |
|
– |
|
-51 |
|
– |
|
– |
|
– |
|
-62 |
Net carrying amounts |
|
95 |
|
125 |
|
50 |
|
436 |
|
25 |
|
-2 |
|
-20 |
|
710 |
The changes in financial assets and liabilities for each of the individual classes of financial instruments allocated to Level 3 and measured at fair value were as follows in fiscal 2024:
|
|
Financial assets |
|
Financial liabilities |
|
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Subsequent measurement at fair value through profit or loss |
|
Subsequent measurement at fair value through other comprehensive income |
|
Subsequent measurement at fair value through profit or loss |
|
|
||||||||
€ million |
|
Other debt instruments |
|
Contingent consideration |
|
Derivatives without a hedging relationship |
|
Equity instruments |
|
Trade and other receivables |
|
Contingent consideration |
|
Derivatives without a hedging relationship |
|
Total |
Net carrying amounts |
|
95 |
|
125 |
|
50 |
|
436 |
|
25 |
|
-2 |
|
-20 |
|
710 |
Additions |
|
30 |
|
10 |
|
– |
|
107 |
|
44 |
|
-18 |
|
– |
|
173 |
Transfers into Level 3 from Level 1/Level 2 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
Fair value changes |
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (+)/losses (-) recognized in the consolidated income statement (other operating result) |
|
– |
|
46 |
|
8 |
|
|
|
– |
|
1 |
|
-3 |
|
52 |
thereof: attributable to assets/liabilities held as of the balance sheet date |
|
– |
|
7 |
|
8 |
|
|
|
– |
|
1 |
|
-3 |
|
13 |
Gains (+)/losses (-) recognized in the consolidated income statement (financial income and expenses) |
|
3 |
|
12 |
|
1 |
|
|
|
– |
|
– |
|
– |
|
16 |
thereof: attributable to assets/liabilities held as of the balance sheet date |
|
3 |
|
12 |
|
1 |
|
|
|
– |
|
– |
|
– |
|
16 |
Gains (+)/losses (-) recognized in other comprehensive income |
|
|
|
|
|
|
|
-3 |
|
– |
|
|
|
|
|
-2 |
Currency translation difference |
|
3 |
|
– |
|
3 |
|
– |
|
– |
|
– |
|
– |
|
6 |
Disposals |
|
-19 |
|
-42 |
|
– |
|
-4 |
|
-44 |
|
– |
|
2 |
|
-108 |
Transfers out of Level 3 into Level 1/Level 2 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
Other |
|
-19 |
|
– |
|
– |
|
19 |
|
– |
|
– |
|
– |
|
– |
Net carrying amounts |
|
94 |
|
151 |
|
61 |
|
555 |
|
24 |
|
-20 |
|
-21 |
|
845 |
Disposals during the reporting period related in particular to payments received in connection with the contingent consideration arising from the disposal of the biosimilars business to a subsidiary of Fresenius SE & Co. KGaA, Bad Homburg vor der Höhe, as well as trade accounts receivable under factoring agreements. The “Other” line item primarily contains loans that were converted into equity instruments in the year under review. In the previous year, the reclassification of the fair value of the equity investment in Calypso Biotech B.V., Netherlands (Calypso), to assets held for sale was also included in the “Other” line item. The Calypso equity instruments were sold for a mid-double-digit million-euro amount effective January 8, 2024. The cumulative income of € 48 million recognized in other comprehensive income was reclassified to retained earnings. Further information on the disposal group can be found in Note (6) “Acquisitions and divestments”. The gains and losses from Level 3 assets recognized in other comprehensive income were reported in the consolidated statement of comprehensive income item “Fair value adjustments”.