The Bertelsmann Consolidated Financial Statements include the financial statements of the parent company and its subsidiaries, joint ventures and associates.
Subsidiaries are companies controlled by Bertelsmann SE &
Co. KGaA in accordance with IFRS 10. Consolidation begins
on the date on which the ability to exercise control exists and
ends when Bertelsmann loses the ability to exercise control.
Profit or loss and each component of total comprehensive
income are attributed to the shareholders of the parent
company and the non-controlling interests, even if this results
in the non-controlling interests having a deficit balance.
In accordance with IFRS 3, business combinations are accounted for using the acquisition method. Non-controlling interests are measured at the proportionate fair value of the assets and liabilities. If the consideration transferred for the business combination or the fair values attributable to the identifiable assets and liabilities of the company acquired can only be provisionally identified on the date of initial accounting, the business combination is carried using these provisional values. Initial accounting is completed in accordance with IFRS 3.45, taking into account the one-year measurement period. Comparative information for reporting periods prior to the completion of initial accounting is presented as if it had already been completed on the acquisition date.
Changes in the parent’s ownership interest in a subsidiary that do not lead to a loss of control are accounted for as equity transactions. After the loss of control of a subsidiary, it is deconsolidated in accordance with the requirements of IFRS 10. Any investment retained in the former subsidiary and any amounts owed by or to the former subsidiary are accounted for in accordance with the applicable IFRSs from the date when control is lost.
Joint ventures in accordance with IFRS 11 and associates are included in the Consolidated Financial Statements using the equity method in accordance with IAS 28. Associates are companies over which Bertelsmann exercises a significant influence. This is generally the case for voting rights between 20 and 50 percent. Smaller shareholdings are accounted for using the equity method if there is a significant influence in accordance with IAS 28.6.
When changing the accounting treatment of investments to the equity method, IFRS 3 is applied correspondingly so that the fair value of the previously held interest is used in determining the cost of the investment accounted for using the equity method on the transition date. The difference between the fair value and the carrying amount of the previously held interest is recognized in profit or loss. When applying the equity method to an associate or a joint venture that is an investment entity, Bertelsmann, which is a non-investment entity, generally retains as investor the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.
The Bertelsmann Group recognizes immaterial investments in accordance with IAS 39.
Bertelsmann is the majority shareholder of RTL Group with an interest of 75.1 percent and Penguin Random House with an interest of 53 percent. Gruner + Jahr, BMG, Arvato, the Bertelsmann Printing Group, the Bertelsmann Education Group and Bertelsmann Investments are each wholly owned by Bertelsmann.
|Penguin Random House||90||95||–||–||1||1||91||96|
|Gruner + Jahr||133||131||8||8||2||3||143||142|
|Bertelsmann Printing Group||32||34||–||–||–||–||32||34|
|Bertelsmann Education Group||23||17||–||–||5||6||28||23|
|1) Including Bertelsmann SE & Co. KGaA.|
|United States||Other countries||Total|
|Consolidated as of 12/31/2015||292||113||138||201||84||126||954|
|Consolidated as of 12/31/2016||296||115||132||186||87||136||952|
A total of 227 (previous year: 224) companies without significant business operations were excluded from the scope of consolidation due to their negligible importance for the financial position and financial performance of the Bertelsmann Group. The complete list of the Bertelsmann Group’s shareholdings will be published in the “Bundesanzeiger” (“Federal Gazette”) as an annex to these Consolidated Financial Statements in accordance with section 313 (2) of the German Commercial Code and will be presented at the General Meeting.
In the financial year 2016, the cash flow from acquisition activities totaled €278 million (previous year: €166 million), of which €250 million (previous year: €151 million) related to new acquisitions during the reporting period less cash and cash equivalents acquired. The consideration transferred in accordance with IFRS 3 amounted to €354 million (previous year: €172 million) taking into account contingent consideration of €21 million (previous year: €8 million). In addition, put options in the amount of €18 million (previous year: €9 million) related to the acquisitions were accounted for.
In March 2016, RTL Group acquired an interest of 93.75 percent in Smartclip Holding AG including its five subsidiaries. Smartclip bundles the online video advertising inventory of 700 publishers worldwide and manages the integration and serving of video advertising to all Internet-connected screens. The company complements RTL Group’s investments in digital advertising sales. The German Federal Cartel Office approved the transaction in April 2016. The consideration transferred amounted to €48 million and was fully paid in cash. The purchase price allocation resulted in non-tax-deductible goodwill in the amount of €38 million resulting from the skills and market competence of Smartclip’s workforce and the synergies expected. RTL Group holds a put and call option for the remaining non-controlling interests of 6.25 percent exercisable in 2017. The exercise price of the put option is based on a variable component and capped at €200 million on a 100 percent basis. The corresponding amount has been initially recognized as a financial liability at the present value of the redemption amount totaling €4 million with a corresponding reduction in equity. The financial liability subsequently measured at amortized cost amounts to €6 million as of December 31, 2016. Remeasurements of the liability will be recognized in the income statement. Transaction-related costs amounted to less than €1 million and have been recognized in profit or loss.
In May 2016, Gruner + Jahr’s French subsidiary Prisma Media acquired an interest of 100 percent in Groupe Cerise. The company is one of France’s leading digital video providers, primarily due to its video offers. With the acquisition, Gruner + Jahr reinforces the position of Prisma Media in the areas that are strategically important for digital development: video, mobile, technology and social networks. The preliminary consideration transferred amounted to €42 million and was paid completely in cash. The purchase price allocation resulted in non-tax-deductible goodwill amounting to €32 million, mainly representing synergy potential to be realized by combining existing brands and businesses and strengthening the position in digital advertising markets. Transaction-related costs amounted to less than €1 million and have been recognized in profit or loss.
In December 2016, Bertelsmann Education Group fully acquired Advanced Practice Strategies (APS), a provider of e-learning products for clinical assessments and performance improvement for US hospitals. The product portfolio contains courses for performance improvement and hiring assessments. With the acquisition the Bertelsmann Education Group expands its product offering toward acute care in the healthcare sector and strengthens its service portfolio in terms of targeted online learning and assessment solutions. The preliminary consideration transferred in accordance with IFRS 3 amounted to €79 million including a contingent consideration of €9 million. As part of the acquisition, a potential earn-out of a maximum of US$40 million was agreed. The achievement of the earn-out is based on a defined threshold regarding newly concluded, annualized customer contracts at the end of 2016 and at the end of the first quarter 2017. The preliminary purchase price allocation resulted in non-tax-deductible goodwill of €67 million, which mainly reflects synergy potentials, which are – in addition to cost synergies – expected to be realized by better market access to acute care offerings and the expansion of the product portfolio of Relias Learning. Due to the proximity to the end of the reporting period, the purchase price allocation is preliminary. The transaction-related costs amounted to €1 million and have been recognized in profit or loss.
In addition, the Bertelsmann Group made several acquisitions in the financial year 2016, none of which was material on a stand-alone basis. Payments net of acquired cash and cash equivalents amounted to €105 million; the consideration transferred in accordance with IFRS 3 for these acquisitions amounted to €185 million taking into account contingent consideration of €12 million. The acquisitions resulted in goodwill totaling €118 million, which reflects synergy potential and is tax deductible in the amount of €46 million. The transaction- related costs amounted to €4 million and have been recognized in profit or loss.
The purchase price allocations consider all the facts and circumstances prevailing as of the respective dates of acquisition that were known prior to the preparation of the Consolidated Financial Statements. In accordance with IFRS 3, should further facts and circumstances become known within the 12-month measurement period, the purchase price allocation will be adjusted accordingly.
The following table shows the fair values of the assets and liabilities of the acquisitions on their dates of initial consolidation based on the purchase price allocations, some of which are currently preliminary:
|in € millions||Smartclip||Groupe Cerise||Advanced Practice|
|Other intangible assets||9||13||19||68||109|
|Property, plant and equipment||–||–||–||2||2|
|Trade and other receivables||–||–||–||6||6|
|Other non-current assets||1||–||–||5||6|
|Trade and other receivables||9||2||5||32||48|
|Other current assets||3||–||1||–||4|
|Cash and cash equivalents||11||1||3||31||46|
|Provisions for pensions and similar obligations||–||–||–||2||2|
|Other financial and non-financial liabilities||22||5||16||69||112|
Since initial consolidation, all acquisitions in accordance with IFRS 3 in the financial year 2016 have contributed €128 million to revenues and €3 million to Group profit or loss. If consolidated as of January 1, 2016, these would have contributed €261 million to revenues and €9 million to Group profit or loss. The fair value of the acquired receivables amounts to €54 million at the acquisition date. Thereof, €38 million is attributable to trade receivables and €16 million is attributable to other receivables. Trade receivables are impaired only to a minor extent, resulting in a gross amount of trade receivables of €38 million. The other receivables are impaired only to a minor extent as well, so that the fair value equals the gross amount.
The fair values of the identifiable assets, liabilities and contingent liabilities acquired are measured in accordance with IFRS 3, primarily using the market price-oriented method. According to this method, assets and liabilities are measured at prices observed in active markets. If measurement using the market price-oriented method is not feasible, the capital value-oriented method is to be applied. Accordingly, the fair value of an asset or a liability is the present value of the future cash inflows or outflows (cash flows).
After considering the cash and cash equivalents disposed of, the Bertelsmann Group made cash flows in the amount of €-28 million (previous year: €2 million) from disposals, which are mainly attributable to the Gruner + Jahr and Arvato divisions. The disposals led to a loss from deconsolidation of €-33 million (previous year: €-10 million), which is recognized in the item “Results from disposals of investments.” The following table shows their impact on the Bertelsmann Group’s assets and liabilities at the time of deconsolidation:
|in € millions||Total|
|Other intangible assets||7|
|Property, plant and equipment||8|
|Other non-current assets||5|
|Other current assets||49|
|Cash and cash equivalents||12|
|Provisions for pensions and similar obligations||27|
|Other financial and non-financial liabilities||72|
Earnings after taxes from discontinued operations of €1 million (previous year: €3 million) comprise follow-on effects related to the disposal of companies of the former Direct Group division.
The carrying amounts of the assets classified as held for sale and related liabilities, which are mainly attributable to the RTL Group division (“RTL City”) in the reporting period, are presented in the following table:
|in € millions||Total|
|Other intangible assets||3|
|Property, plant and equipment||87|
|Investments accounted for using the equity method||2|
|Other non-current assets||1|
|Other current assets||10|
|Cash and cash equivalents||3|
|Impairment on assets held for sale||-14|
|Assets held for sale||100|
|Equity and liabilities|
|Other current liabilities||3|
|Liabilities related to assets held for sale||8|
In October 2016, RTL Group entered into an agreement with a third party to sell Media Properties Sàrl. Media Properties Sàrl owns RTL Group’s new buildings (“RTL City”) in Luxembourg. These buildings, which RTL Group will leaseback, host the Corporate Center and the other operations of the RTL Group in Luxembourg. The disposal is expected to be completed during the second quarter of 2017. The sale proceeds of Media Properties amount to €154 million and are expected to generate an operating capital gain of €60 million.
For disposal groups, which are measured at fair value less costs to sell, impairment losses were recognized in the amount of €14 million, which are mainly attributable to a planned sale in the Arvato division. The fair values are based on level 3 of the hierarchy of non-recurring fair values. Valuations for level 3 are based on information from the contract negotiations. The impairment losses are recognized in profit or loss under “Other operating expenses.”
As of December 31, 2015, no significant amounts related to assets classified as held for sale and related liabilities in accordance with IFRS 5.
Transactions denominated in a currency other than a subsidiary’s functional currency are recorded in the functional currency at the exchange rate on the day of their initial accounting. As of the end of the reporting period, monetary assets and liabilities denominated in foreign currency are revalued in the functional currency using the applicable closing rate. Gains and losses from these currency translations are recognized in profit or loss. Non-monetary balance sheet items in foreign currency are carried at the exchange rate applicable on the date of initial recognition.
The financial statements of subsidiaries, joint ventures and associates that were prepared in foreign currencies are translated into euros using the functional currency concept set out in IAS 21 before they are included in the Consolidated Financial Statements. Assets and liabilities are translated into the reporting currency at the closing rate at the end of the reporting period, while income statement items are translated at the average rate for the financial year. Currency translation differences are recognized in other comprehensive income. Such differences arise from translating items in the balance sheet at a closing rate that differs from the previous closing rate and from using the average rate from the period and the closing rate at the end of the reporting period to translate the Group profit or loss. At the time of deconsolidation of Group companies, the respective accumulated currency translation differences recognized in other comprehensive income and accumulated in a separate component of equity are reclassified from equity to the income statement. The following euro exchange rates were used to translate the currencies that are most significant to the Bertelsmann Group:
|Average rate||Closing rate|
|Foreign currency unit per €1||2016||2015||12/31/2016||12/31/2015|