Accounting policies
The accounts of the domestic and foreign subsidiaries included in the consolidated financial statements were prepared in accordance with the IFRS accounting and valuation regulations, applying uniform standards.
When applying the IFRS, estimates and assumptions need to be made in certain cases which have a corresponding impact on the net assets, financial position and results of operations of the Company. The assumptions and estimates which were made could have been entirely different in the same reporting period for equally understandable reasons. The assumptions and estimates which were made are routinely reviewed and adjusted. The Company would point out that actual future results may be at variance with the estimates and assumptions made.
The International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) have approved a number of amendments to existing International Financial Reporting Standards (IFRS) as well as some new IFRS rules and interpretations, which are mandatory for the MAX Group from the financial year of 2019 onwards, and they have also adopted some further standards and interpretations as well as amendments to existing standards which are not yet mandatory in the EU. The amendments, standards and interpretations are as follows:
Announcement |
Title |
Mandatory application for the MAX Group from |
Expected effects on the presentation of the net assets, financial position and results of operations of the MAX Group |
|---|---|---|---|
|
|
|
|
New and amended standards and interpretations |
|||
IFRS 16 |
Leases |
01/01/2019 |
With regard to the effects, reference is made to the separate disclosures in the notes to IFRS 16 |
IFRIC 23 |
Uncertainty regarding the income tax treatment |
01/01/2019 |
No significant effects |
Amendments to |
Amendments to IFRS 9 Early Redemption Provisions with Negative Settlement |
01/01/2019 |
No significant effects |
Amendments to |
Amendments to IAS 28 Non-current Investments in Associates and Joint Ventures |
01/01/2019 |
No significant effects |
Amendments to |
Amendments to IFRS 19 Plan amendments, |
01/01/2019 |
No significant effects |
Diverse |
Amendments to IFRS 10 and IAS 28 Sale or contribution of assets
between an investor and an associate or joint venture |
01/01/2019 |
No effects |
New standards and interpretations to be applied in future |
|||
|---|---|---|---|
Diverse |
Changes to references to the Framework in IFRS standards |
01/01/2020 |
The Company does not currently expect any significant effects on the net assets, financial position and results of operations of the Company |
IFRS 3 |
Changes to the definition of a business operation |
01/01/2020 |
The Company does not currently expect any significant effects on the net assets, financial position and results of operations of the Company |
Diverse |
Amendments to IAS 1 and IAS 8 Definition of "material" |
01/01/2020 |
The Company does not currently expect any significant effects on the net assets, financial position and results of operations of the Company |
IFRS 9, IAS 39, IFRS 7 |
Interest Rate Benchmark Reform (IBOR) |
01/01/2020 |
The Company does not currently expect any significant effects on the net assets, financial position and results of operations of the Company |
IFRS 17 |
Insurance contracts |
01/01/2021 |
No effects |
Diverse |
Amendments to IFRS 10 and IAS 28 Sale or contribution of assets between an investor and an associate or joint venture |
tbd |
The Company does not currently expect any significant effects on the net assets, financial position and results of operations of the Company |
Assets
Acquired intangible assets
Acquired intangible assets (patent rights, licenses, IT software, know-how, technology, trademark rights, industrial property rights, websites, order backlogs, customer relationships and development projects) are carried at cost less amortization. Amortization is calculated using the straight-line method over the economic life, which is between 1 and 15 years.
Internally generated intangible assets
Internally generated intangible assets (development costs) are also recognized. The economic life is between 4 and 5 years. Development costs for new products for which technical feasibility and marketability tests have been performed are capitalized at the directly or indirectly attributable manufacturing costs, provided that a clear allocation of expenses is possible and also that the products are both technically feasible and can be marketed. The development work must also be sufficiently likely to generate future cash inflows; borrowing costs are not capitalized. Amortization is based on the expected economic life of the products. Development costs capitalized as of the date of the statement of financial position in cases where the development project has not yet been completed are tested for impairment using the license price analogy method.
Goodwill
If the acquisition costs for a business combination exceed the sum of the wholly revalued assets and liabilities including contingent liabilities, a positive difference is capitalized as goodwill. A negative difference is recognized in profit or loss after a reassessment.
The Group has identified the Process Technologies and Environmental Technologies business units as well as the individual companies of Evolving Technologies as cash-generating units. Goodwill is subjected to an impairment test in accordance with IAS 36 on each reporting date. A decline in value is recognized immediately as an expense in the statement of comprehensive income and is not reversed in subsequent periods.
The goodwill arising from acquisitions made prior to the date of transition to IFRS on 1 January 2004, was taken from the previous HGB financial statements and tested for impairment at this time. Goodwill amortized in previous periods has not been reversed.
The impairment test of goodwill is usually carried out at the level of a cash-generating unit. The impairment test is based on the calculation of the recoverable amount. The recoverable amount is either fair value less costs to sell or value in use, whichever is higher. Impairment tests in the MAX Automation Group are carried out as a rule by comparing the value in use and the carrying amount, whereby in individual cases the use of fair value less costs to sell is also possible.
If the carrying amount of the cash-generating unit to which the goodwill was allocated exceeds its recoverable amount, the goodwill allocated to this cash-generating unit is reduced by the difference. If the impairment loss exceeds the goodwill, the additional impairment loss is allocated pro rata to the assets allocated to the cash-generating unit (IAS 36.104 et seq.). The fair values or values in use (where quantifiable) of the individual assets are regarded as the lower limit.
The carrying amount of the cash-generating unit represents the so-called net assets and is composed of the assets required for business operations (operating assets) plus disclosed hidden reserves (especially goodwill) and minus liabilities resulting from the operations.
When calculating the fair value less costs to sell, the procedure is conducted primarily with reference to market prices. The value in use is calculated on the basis of the discounted cash flow (DCF) method.
The weighted average cost of capital (WACC) approach is applied here (IDW RS HFA 16 (30)). The market risk premium amount is selected with reference to the pronouncements issued by the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer - IDW). The risk-free base rate is calculated using a system recommended by the IDW (Svensson method). The beta factor, the borrowing rate and the debt-equity ratio are calculated with reference to capital market data relating to comparable companies (peer group) in the same sector.
The following input requirements must be taken into account:
Under IAS 36.50, cash flows from financing and for income taxes are not to be included in the calculation of the value in use.
The capitalization rate is a pre-tax interest rate which reflects current market estimates of the time value of money and the specific risks of the valuation object. Since the returns on risk-bearing equity securities which can be observed in the capital markets routinely include tax effects, the weighted capitalization rate must be adjusted for these tax effects.
The cost of equity is calculated on the basis of the Capital Asset Pricing Model. This calculation involves the risk-free rate, a risk premium and the beta factor of the respective business unit's peer group. The borrowing rate used similarly results from the specific peer group. The weighted average costs of capital below reflect the individual debt-equity ratio.
A value of 7% in accordance with the range of 6 – 8% recommended by IDW was used as the market risk premium.
Pre-tax cost of capital
Business Unit |
2019 |
2018 |
|---|---|---|
Process Technologies |
7.51% |
10.75% |
Environmental Technologies |
9.99% |
10.75% |
NSM Magnettechnik GmbH |
10.07% |
10.75% |
Mess und Regeltechnik Jücker GmbH |
10.11% |
10.75% |
MA micro automation GmbH |
10.08% |
10.75% |
iNDAT Robotics GmbH |
9.83% |
10.75% |
AIM Micro Systems GmbH |
9.98% |
10.75% |
The value in use is determined on the basis of the present value of the cash flow from two periods of growth. The first period is based on the five-year plan prepared by the management of the respective cash-generating unit and approved by the Supervisory Board. Any new information which has come to light in the meantime has been taken into account. A perpetuity equal to the permanently recoverable amount according to the last year of the detailed forecast period is taken as a basis for the second period, allowing for a growth rate of 1%. Based on the order backlog and the chronological completion of the orders, the chosen planning horizon mainly reflects the following assumptions for short-term to medium-term market developments: sales trend, market shares and growth rates, raw material costs, customer acquisition and retention costs, personnel development and investments. The MAX Group envisages slight increases in sales and EBIT for the period from 2020 to 2024. The assumptions are essentially determined internally and mainly reflect past experience or are compared with external market values.
A sensitivity analysis for the cash-generating units to which significant goodwill was allocated yielded the assumption that the discount rates would increase by one percentage point and that the cash flows would decrease by 10% at the same time. No need for impairment was determined in the process.
Equity accounted investments
Enterprises over which MAX Automation SE has a significant, but not controlling influence are recognized using the equity method. At the time of initial inclusion, the enterprise is valued at the cost of acquisition. In subsequent periods, the valuation of the investment is maintained. Attributable annual profits or annual losses increase or decrease the carrying value of the investment, and this value can be written down to a maximum of 0 euro. Dividends received by the enterprise are deducted from the carrying value.
Property, plant and equipment
Property, plant and equipment are capitalized at acquisition or production cost and are reduced by regular physical depreciation and – where necessary – write-downs.
For land and buildings, the MAX Group has used the revaluation model of IAS 16 since the 2019 fiscal year. The reason for the change to the revaluation model is that the MAX Automation Group intentionally makes adjustments for the effects of inflation when recognizing assets with a very long useful life. The effects of inflation can cause the replacement cost of this property, plant and equipment to be significantly higher than the historical acquisition or production cost reduced by write-downs. Therefore, the revaluation model has a capital preservation function.
Revaluation is not restricted to acquisition or production cost as an upper limit. Excesses over purchase and production cost occur above all with land since it is normally not subject to the erosion of economic life. The revaluation is done at fair value, which is performed for land and buildings by calculating their income value. Independent appraisers assess the income value. The income approach involves a model with input factors which are based on unobservable market data (level 3 according to IFRS 13). The revaluation is performed at intervals of five years.
At the time of revaluation, the cumulative depreciation is eliminated against the gross carrying amount. The remaining carrying amount is subject to revaluation. From this revaluation until the next time of revaluation, depreciation occurs over the remaining useful life on a fair value basis.
The revaluation occurs outside profit or loss through the revaluation reserve in equity via other comprehensive income.
Property, plant and equipment are depreciated on a straight-line basis over the following useful lives:
Expected useful lives |
|
|
|---|---|---|
Building |
5 to 50 years |
|
Outdoor facilities |
5 to 33 years |
|
Technical equipment and machinery |
1 to 14 years |
|
Other plant and machinery |
1 to 17 years |
The calculation of the economic life takes account of the estimated physical wear and tear, technological obsolescence and legal and contractual restrictions.
Assets under construction are carried at cost. These assets start to depreciate on their completion or when they are ready for operational use.
If there are indications pointing to impairment, the recoverable amount of the asset or the cash-generating unit is calculated on the basis of its value in use in order to determine the extent of the impairment. The impairment is recognized in profit or loss.
If the past cause of an impairment ceases to apply, the carrying amount of the asset is increased again accordingly.
The increase in the carrying amount is limited to the value which would have resulted if no impairment loss had been recognized for the asset in previous years. The reversal of the impairment loss is also recognized in profit or loss.
Investment property
Investment property consists of property held for rental income and/or for capital appreciation purposes. Given the increased significance of recognizing investment property for the MAX Automation Group, the management of MAX Automation SE has decided to make a change in accounting policies by applying the fair value model instead of the cost model to all investment property beginning in the 2019 fiscal year. In the view of management, the fair value model is the more relevant form of presenting a more accurate picture of the net assets, financial position and results of operations of the MAX Group. The calculation of fair value was done by means of the income approach, which involves a model with input factors that are based on unobservable market data (level 3 according to IFRS 13).
An investment property is derecognized upon disposal if it should no longer be permanently used or no future economic benefits are expected from the disposal. The gain or loss from the disposal is determined as the difference between the net realizable value and the carrying amount of the asset and is recognized in the statement of comprehensive income in the disposal period.
Non-current financial assets
Financial assets are measured at cost at the time of acquisition.
Loans are carried at amortized cost.
Financial assets which are not carried at fair value are regularly tested for impairment. Financial assets which are impaired are written down to the recoverable amount in profit or loss. If the reason for write-downs in earlier periods no longer applies, a write-up is recognized in profit or loss.
Inventories
Inventories are carried at acquisition or production cost or at net realizable value, whichever is lower. In addition to the materials and wages, the production costs include indirect material costs and production overheads which must be disclosed as assets. Discounts are made for lack of movement and marketability. The acquisition and production costs are allocated to the inventory types by means of specific allocation, the average cost method or the FIFO method (first in, first out).
Impairment losses are recognized when the net realizable value of an asset falls below its carrying amount.
Contractual assets
The companies of the MAX Group generate their revenue to a large extent from the creation and delivery of customer-specific equipment and machinery. For these orders, revenue and the anticipated gross margin are recognized according to the percentage-of-completion method (POC method) in line with the percentage of completion of an order over the period of performance.
The IFRS 15 criteria for this are:
The constructed asset does not indicate any alternative opportunity for use.
The Group has a legally enforceable claim to remuneration for services that have already been rendered.
If both criteria are met, the percentage of completion is determined on the basis of the costs incurred for the work carried out in relation to the total expected costs (cost-to-cost method). As a result of this accounting method, both revenue and the associated costs are recognized systematically. Consequently, the results are recognized on an accrual basis during the period in which the power of disposal, the good or the service is transferred. Customer payments are contractually agreed upon and are oriented toward progress on a project and predetermined milestones. This ensures that customer payments and performance progress do not diverge too much temporally. The Group came to the conclusion that the input-based method is most suitable for determining the percentage of completion since the individual companies use an IT-supported calculation procedure and can reliably estimate the planning costs and oversee the total costs using individualized project controlling.
Revenue from contracts with customers corresponds to the transaction price. The transaction price includes variable consideration only if there is a high probability that if a variable consideration, such as a contractual penalty, actually were to occur, revenue would not be substantially disrupted. The transaction price is not adjusted for a financing component since in particular the period between the transfer of goods and services and the payment by the customer is generally less than 12 months.
If a reliable estimate of performance progress is not possible for orders either on the basis of output factors or input factors, the zero profit method is used, provided that it can be assumed that the companies can recover the costs incurred during fulfillment of the performance obligation. In case of this method, revenue and associated costs are recognized in the same amount until a reliable estimate for measuring progress is possible. The gross margin here is at least partially retroactively adjusted in profit or loss only at a later stage of the order.
The other part of revenue from contracts with customers is generated both from the sale of standard machinery, replacement parts and other goods as well as from the rendering of services. This revenue is recognized at the time when the customer obtains control over the promised asset. This is usually the time when the machinery is delivered to the customer so that it acquires ownership or acceptance has been completed. Services rendered are recognized as sales upon their fulfillment. For standard machinery and replacement parts, the customer payment occurs after invoicing, which depending on the structure of the contract occurs following delivery or acceptance. Payments on account are also presented to customers here.
The disclosure of orders occurs under contractual assets or contractual liabilities. If the cumulative work (contract costs and contract net profit) exceed down payments, construction contracts are disclosed on the assets side under contractual assets. If a negative balance remains after deducting the down payments, it is disclosed as an obligation from construction contracts on the liabilities side under contractual liabilities. Already invoiced partial services are recognized under trade receivables. Anticipated contractual losses are considered on the basis of recognizable risks and immediately included in the contract net profit in full. Contractual revenue and contract modifications, meaning contractual changes and amendments, are recognized as contract revenue in accordance with IFRS 15. Contractual assets are usually recognized within a business cycle of the MAX Group. Therefore, they are disclosed under current assets in accordance with IAS 1, even if the recognition of the entire receivable extends over a period longer than one year.
Contractual assets are tested for impairment using the simplified procedure. For a more detailed explanation, please refer to the section “Risk management.”
Performance obligations
The Group divides its contracts with customers into performance obligations, differentiating between performance obligations that are met either at a point in time or over a period of time in accordance with the contract terms. Customer contracts are analyzed in terms of separable performance obligations. In addition to the performance obligation to construct machinery or equipment for the customer, above all spare part packages and partial reconstructions are presented in the business units as separable performance obligations.
Current financial assets
In accordance with IAS 32, financial assets include trade receivables, receivables from banks, derivative financial instruments and other miscellaneous marketable financial assets. The Company assumes that the reported values of the financial instruments are generally consistent with their fair values.
Trade receivables are tested for impairment using the simplified procedure. For a more detailed explanation, please refer to the section “Risk management.”
Cash and cash equivalents
Cash and cash equivalents are liquid assets measured at cost. They comprise cash in hand, bank deposits at call and other highly liquid current financial assets with a maximum term of three months at the time of acquisition. The underlying funds for financing purposes in the cash flow statement are consistent with the definition of cash and cash equivalents given here.
Equity and liabilities
Equity procurement costs
Equity procurement costs are deducted from the capital reserve after allowing for the taxes applicable to them.
Adjustment item for minority interests
The development of the adjustment item is based on the attributable annual results.
Pension obligations
The measurement of provisions for post-employment benefits is done in accordance with the actuarial projected unit credit method prescribed in IAS 19 "Employee benefits". Here, future obligations are measured on the basis of the pro rata benefit entitlements as of the reporting date. The measurement takes into account assumptions (e.g. regarding salary development or the pension trend) for the relevant factors that affect the amount of benefit. The calculation is based on the 2018 G life expectancy reference tables issued by K. Heubeck. Account is taken not only of the pensions and vested benefits known on the reporting date but also of expected future changes in salaries and pensions. The service cost is included in the personnel expenses in the statement of comprehensive income. Actuarial gains and losses, as well as gains and losses from the revaluation of plan assets, are recognized in "Other comprehensive income", net of retained earnings. Interest expense is reported under net interest.
Provisions for taxes
Provisions for taxes include obligations from current income taxes. Income tax provisions are offset with corresponding tax refund claims if they exist in the same tax jurisdiction and their type and due dates are the same.
Other provisions
Other provisions take into account all recognizable obligations as of the reporting date that arise from past transactions or past events and whose amount and/or due dates are uncertain. Provisions are recognized at their respective expected settlement amounts, meaning taking into account price and cost increases, and are not offset against reimbursement claims. Provisions are formed only if they are based on a legal or factual obligation to third parties. Non-current provisions are recognized at their settlement amount discounted to the reporting date and disclosed under non-current liabilities.
Provisions for a restructuring are formed provided that a detailed, formal plan has been prepared and shared with the affected parties.
Liabilities
Trade payables and other original financial liabilities are recognized at amortized cost. Other liabilities are accounted for at their settlement amount.
Liabilities from leases are recognized at the start of the lease at the present value of the minimum lease payments.
Discounts and transaction costs are accounted for using the effective interest method. Non-current non-interest-bearing liabilities are stated at their present value.
Contract liabilities
Contractual liabilities constitute an obligation to customers if partial invoices submitted and payments received from customers prior to the performance of the promised service have been collected or become due. Contractual liabilities from partial invoices submitted and payments received from customers are written down against the work in progress as soon as it has been performed. If a contract contains several separate performance obligations, however, only a contractual asset or a contractual liability is to be determined from this contract on a net basis.
Statement of comprehensive income
Revenue is recognized when the significant risks and rewards of ownership of the goods and products sold have been transferred to the customer. This is usually the case when the goods are delivered to the customer and simultaneously accepted by the customer (acceptance reports).
Production orders for specific customers are accounted for using the percentage of completion method (PoC) provided that the criteria of IFRS 15 are met for time period-based revenue recognition. For customer-specific production, in case the contract is canceled by the customer, not only must the expenses be reimbursed but also remuneration must be received in the form of a pro rata margin. Here, the costs incurred in the fiscal year and the revenue accruing to the fiscal year must be recognized in profit or loss according to the percentage of completion. The percentage of completion is calculated according to the expenses incurred (cost-to-cost method). This involves the following:
Expenses relating to the development of new products and processes, including significant improvements and refinements to existing products, are recorded as expenses as incurred, unless the criteria for capitalization as development costs are met.
Other operating income is recognized when the service is rendered or the entitlement arises. Interest income and interest expenses are recognized on an accrual basis.
Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered predominantly through a sale transaction rather than through continued use and the sale is highly probable. They are measured at their carrying amount or the fair value minus selling costs, whichever is lower, with the exception of assets like deferred tax assets, assets arising from employee benefits, financial assets and investment property carried at fair value, and contractual rights under insurance contracts which are explicitly excluded from this rule.
An impairment loss is recognized for first-time or subsequent write-downs of the asset (or of the disposal group) to the fair value minus selling costs. A gain is recognized for subsequent increases in the fair value of an asset (or of the disposal group) less selling costs, but not in excess of a cumulative impairment loss previously recognized. A gain or loss not previously recognized until the time of disposal of the non-current asset (or of the disposal group) is realized at the time of disposal.
Non-current assets (including those which are part of a disposal group) are not subject to depreciation if they are classified as held for sale. Interest and similar expenses which are attributable to the liabilities of a disposal group classified as held for sale will continue to be recognized.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are reported separately from the other assets in the statement of financial position. The liabilities of a disposal group which is classified as held for sale are also presented separately from other liabilities in the statement of financial position.
A discontinued operation is a part of the entity which was sold or is classified as held for sale and which constitutes a separate major business unit or a geographical business sector which is part of a single coordinated plan to dispose of such a business unit, or which is a business sector or constitutes a subsidiary which was acquired solely for the purpose of resale. The results from discontinued operations are shown separately in the statement of comprehensive income.
Earnings per share
The undiluted earnings per share are calculated by dividing the portion of earnings after tax attributable to the shareholders of MAX Automation SE by the weighted average number of shares in circulation during the financial year, adjusted for bonus shares issued during the financial year and excluding any treasury shares.
The diluted earnings per share are calculated on the assumption that all potentially dilutive securities are converted or exercised.
Currency translation
Transactions in foreign currencies are translated into the functional currency of the respective company at the average spot exchange rate on the day of the transaction. At the end of the reporting period, the Company values monetary assets and liabilities denominated in foreign currencies in the functional currency at the then applicable average spot exchange rate. Gains and losses from the currency valuations are recognized in the other operating income or other operating expenses in profit or loss.
The annual accounts of the foreign subsidiaries included in the consolidated financial statements whose functional currency is not the euro are translated into the Group currency, the euro, on the basis of their functional currency, which is the local currency in any given case.
The statements of financial position are translated from their functional currency into the reporting currency at the average spot exchange rate on the date of the statements of financial position using the closing rate method.
The statements of comprehensive income are translated at the average exchange rate for the reporting period.
Equity is translated at historical exchange rates.
Gains and losses from currency translation are recognized in equity outside profit or loss.
|
|
Balance sheet: reporting date rate |
Income statement: average rate |
||
|---|---|---|---|---|---|
|
EUR= |
31/12/2019 |
31/12/2018 |
31/12/2019 |
31/12/2018 |
China |
CNY |
7.82050 |
7.87510 |
7.73388 |
7.80735 |
UK |
GBP |
0.85080 |
0.89453 |
0.87730 |
0.88475 |
Hong Kong |
HKD |
8.74010 |
8.96750 |
8.67441 |
8.90259 |
Poland |
PLN |
4.25680 |
4.30140 |
4.29753 |
4.26058 |
Switzerland |
CHF |
1.08540 |
1.12690 |
1.09252 |
1.12929 |
Singapore |
SGD |
1.51110 |
1.55910 |
1.50813 |
1.55953 |
USA |
USD |
1.12340 |
1.14500 |
1.11959 |
1.18149 |
|
|
|
|
|
|
|
|
Balance sheet: reporting date rate |
Income statement: average rate |
||
|
HKD= |
31/12/2019 |
31/12/2018 |
31/12/2019 |
31/12/2018 |
China |
CNY |
0.89400 |
0.87818 |
0.89891 |
0.88062 |
Financial instruments
A financial instrument is a contract that gives rise to a financial asset at one entity and to a financial liability or equity instrument at another.
Financial assets and liabilities are divided into the categories prescribed by IFRS. Only the categories “at amortized cost” and “at fair value with changes in value in profit or loss” are currently relevant to the MAX Group in this regard.
A financial asset is measured at amortized cost if both of the following conditions are met and it has not been designated as FVTPL:
It is held as part of a business model whose purpose is to hold financial assets in order to collect contractual cash flows, and
The contractual terms of the financial asset give rise at specified dates to cash flows, which exclusively represent repayments and interest payments on the outstanding principal amount.
The Group does not make any use of the option of classifying financial assets and liabilities upon initial recognition as recognized in profit and loss at fair value (fair value option).
In determining whether the default risk of a financial asset has increased significantly since initial recognition and in estimating expected credit losses, the Group considers appropriate and reliable information that is relevant and available without an inappropriate expenditure of time and money. This includes both quantitative and qualitative information and analyses based on the Group’s past experience and well-founded assessments, including forward-looking information using CDS spreads.
A financial asset is considered to be in default if it is unlikely that the debtor will be able to pay the Group for its credit obligation in full. The asset is written down if no legitimate expectation exists that the contractual cash flows will be realized.
Derivative financial instruments and hedging transactions
Derivatives are initially recognized at their fair value at the time of entering into a derivative transaction and are subsequently reassessed at their fair value at the end of the reporting period. The recognition of subsequent changes in the fair value will depend on whether the derivative is designated as a hedging instrument and, if this is the case, on the nature of the underlying hedging relationship.
The Group's derivative instruments do not satisfy the prerequisites for recognition as hedging transactions. If derivatives do not satisfy the criteria for the recognition of hedging relationships, they are classified for accounting purposes as "held for trading" and recognized in profit or loss at fair value. They are presented as current assets and liabilities insofar as they are expected to be settled 12 months after the end of the reporting period.
Further details are provided in the section on risk management.
Income taxes
Income tax expense represents the sum of current tax expense and deferred taxes.
Current or deferred taxes are recognized in the Group income statement unless they are related to items which are recognized either in other comprehensive income or directly in equity. In this case, the current or deferred taxes are recognized in other comprehensive income or directly in equity. If current or deferred taxes result from the initial recognition of a business combination, the tax effects are reflected in the accounting for the business combination.
Current taxes
Current tax expense is calculated on the basis of taxable income for the current fiscal year. Taxable income differs from the profit for the year from the Group income statement due to expenses and revenue that are tax deductible in subsequent years or are never taxable. The Group's obligation for current taxes is calculated on the basis of the respectively valid tax rates.
Deferred taxes
Deferred taxes are recognized for differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding carrying values used in the calculation of taxable income. Deferred taxes are generally recognized for all taxable temporary differences; deferred tax assets are recognized to the extent that it is likely that taxable profits, for which deductible temporary differences can be used, are available. Deferred tax assets and deferred tax liabilities are not recognized if the temporary differences arise from goodwill or from the initial recognition (except for business combinations) of assets and liabilities which result from incidents that do not involve either taxable income or the profit for the year.
For taxable temporary differences that emerge from shares in subsidiaries, deferred tax liabilities are formed unless the Group can control the reversal of the temporary differences and it is likely that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets that arise from temporary differences in connection with shares in subsidiaries are recognized only to the extent to which it is likely that sufficient taxable income is available with which the claims from the temporary differences can be used. In addition, it must be possible to assume that these temporary differences will reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed every year on the reporting date and impaired in value if it is no longer likely that sufficient taxable income will be available in order to realize the claim in full or in part.
Deferred tax liabilities and tax claims are calculated on the basis of anticipated tax rates and tax laws, which are expected to be in effect at the time of settling the debt or realizing the asset. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequence that results from the way in which the Group expects to settle the liability or realize the asset on the reporting date.
Leases (IAS 17 until 2018)
Up to and including the 2018 fiscal year, leases were classified as finance leases if all the risks and rewards associated with their ownership were essentially transferred to the lessee through the lease agreement. All other leases were classified as operating leases. This provision continues to apply only in those cases in which the MAX Group functions as the lessor. The provisions of IAS 17 and IFRS 16 are congruent to this extent.
Assets held under finance leases were recognized by the lessee at the inception of the lease as assets at fair value or at the present value of the minimum lease payments, whichever was lower. The corresponding liability to the lessor was reported in the consolidated statement of financial position under other financial liabilities, depending on its maturity.
The lease payments were divided into financing costs and repayment of the lease liability, thereby achieving a constant periodic interest rate on the remaining liability. The financing costs were recognized as interest expense in the statement of comprehensive income. If a finance lease resulted in a depreciable asset, a depreciation charge was incurred in each period. Depreciation was calculated in accordance with the relevant provisions for the asset in any given case in IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets.
Lease payments under operating leases were recognized by the lessee as expenses on a straight-line basis over the term of the lease, unless another systematic basis was more representative of the period of use for the MAX Group. Contingent lease payments under operating leases were recognized as expenses in the period in which they were incurred.
Regarding new provisions for lease accounting, we refer to the separate section regarding the introduction of the new leasing standard IFRS 16.
Impact of the initial application of IFRS 16
The impact of the initial application of IFRS 16 is discussed and the accounting policies newly applied since 1 January 2019 are disclosed below.
The initial application of IFRS 16 occurred in accordance with the transitional provisions of IFRS 16, modified retrospectively with the simplified approach for rights of use, so that there is no impact on retained earnings as of 1 January 2019. The comparable figures for the 2018 fiscal year were not adjusted.
With the initial application of IFRS 16, the MAX Group recognized leasing liabilities for leases previously classified under IAS 17 as operating leases. These liabilities are measured as the present value of the remaining lease payments, discounted at the incremental borrowing rate of the MAX Group as of 1 January 2019. As of 1 January 2019, the incremental borrowing rate was 2.1% worldwide, with the exception of the USA, where it was 4.43%. In the case of the MAX Group, the incremental borrowing rate is derived from the syndicated loan as well as a subordinated line of credit associated with the syndicated loan in the USA. In accordance with the derivation from the syndicated loan, the incremental borrowing rate was applied to all asset classes. Beginning on 1 October 2019, the incremental borrowing rate was 3.1% as a result of an adjustment to the interest rate of the syndicated loan.
With the exception of one property, there was no lease previously classified as a finance lease as of 1 January 2019. A value of kEUR 1,666 (of this amount, kEUR 261 short-term) was recognized as of 1 January 2019 for this property classified as a finance lease. The starting point for operating lease liabilities obligations as of 31 December 2018, differs from the value reported in the previous year in the amount that accrues to IFRS 5 companies.
in kEUR |
2019 |
|---|---|
Operating lease commitments disclosed as of 31 December 2018 |
21,428 |
+ Liabilities from finance leases recognised as of 31 December 2018 |
1,666 |
|
|
Discounted using the lessee's incremental borrowing rate at the time of first-time adoption of IFRS 16 |
0 |
+ Present value of contracts classified as operating leases as of 31 December 2018 |
16,778 |
- Short-term leases recognised on a straight-line basis as expense |
-354 |
- Low-value leases recognised on a straight-line basis as expense |
0 |
- Variable leasing payments |
0 |
- Contracts reassessed as service agreements |
0 |
+ / - Adjustments as a result of a different treatment of extension and termination options |
0 |
+ / - Adjustments relating to changes in the index or rate affectingvariable payments |
0 |
|
|
Lease liabilities from operating leases recognised on 1 January 2019 |
16,424 |
Lease liabilities from finance leases recognised as of 1 January 2019 (31 December 2018) |
1,666 |
Total leasing liabilities as of January 01, 2019 |
18,090 |
Of which are: |
0 |
Current lease liabilities |
3,367 |
Non-current lease liabilities |
14,723 |
The recognized rights of use relate to the following types of assets:
in kEUR |
31/12/2019 |
01/01/2019 |
|---|---|---|
Land and buildings |
13,903 |
10,787 |
Technical equipment and machinary |
381 |
464 |
Other plant and office equipment (vehicles - passenger cars) |
1,800 |
1,564 |
Other plant and office equipment (industrial vehicles) |
117 |
215 |
Other plant and office equipment (others) |
1,030 |
794 |
Total right-of-Use Assets |
17,232 |
13,824 |
The change in accounting policy affected the following statement of financial position items as of 1 January 2019:
Right-of-Use Assets |
11,358 |
|---|---|
Lease liabilities |
16,424 |
The rights of use and lease liabilities differ due to the offsetting of a provision for impending losses of kEUR 2,600 euro formed in 2018 against the rights of use asset. At the time of the adoption of the transition, this simplification was used.
The net effect on retained earnings as of 1 January 2019, was 0 EUR.
EBITDA rose as a result of the change in accounting policy as of 31 December 2019:
in kEUR |
2019 |
|---|---|
EBITDA |
1,949 |
Adjustment impact IFRS 16 |
-3,979 |
Adjusted EBITDA |
-2,029 |
As a result of the initial application of IFRS 16, earnings per share decreased for the period from 1 January 2019, to 31 December 2019, by 0.01 euro due to the so-called front-loading effect.
Applied simplifications
During the initial application of IFRS 16, the MAX Group took advantage of the following simplifications:
The application of a single discount rate on a portfolio of similarly designed leases.
The assumption of earlier assessments regarding whether a lease is onerous.
The recognition of leases with a remaining term of less than twelve months as of 1 January 2019, as short-term leases.
The non-consideration of initial direct costs during the measurement of user rights at the time of initial application
The MAX Group has decided not to review leases that were concluded before the transition date whether a contract constitutes or includes a lease at the time of initial application, but instead to retain the previous assessment under IAS 17 and IFRIC 4.
Impact of the initial application of IFRS 16 Leases on the statement of financial position
in kEUR |
2019 |
2018 |
|---|---|---|
Additions land and buildings |
6,823 |
0 |
Additions technical equipment and machinary |
347 |
0 |
Additions other plant and office equipment (vehicles - passenger cars) |
1,698 |
0 |
Additions other plant and office equipment (industrial vehicles) |
0 |
0 |
Additions other plant and office equipment (others) |
940 |
0 |
Disposals land and buildings |
0 |
0 |
Disposals technical equipment and machinary |
0 |
0 |
Disposals other plant and office equipment (vehicles - passenger cars) |
53 |
0 |
Disposals other plant and office equipment (industrial vehicles) |
0 |
0 |
Disposals other plant and office equipment (others) |
0 |
0 |
Along with additions and disposals, a reclassification to investment property was made in the amount of kEUR 771. Disposals of rights of use assets from leases leads to an accounting loss of kEUR 33.
Impact of the initial application of IFRS 16 Leases on the statement of comprehensive income
The following table shows write-downs in connection with rights of use assets:
in kEUR |
2019 |
2018 |
|---|---|---|
Depreciation of land and buildings |
2,105 |
0 |
Depreciation of technical equipment and machinary |
167 |
0 |
Depreciation of other plant and office equipment (vehicles - passenger cars) |
1,004 |
0 |
Depreciation of other plant and office equipment (industrial vehicles) |
97 |
0 |
Depreciation of other plant and office equipment (others) |
508 |
0 |
Depreciation of right-of-use-assets |
3,880 |
0 |
The following table shows interest expense in connection with leases by category of underlying asset:
in kEUR |
2019 |
2018 |
|---|---|---|
Interest for land and buildings |
301 |
0 |
Interest for technical equipment and machinary |
8 |
0 |
Interest for other plant and office equipment (vehicles - passenger cars) |
40 |
0 |
Interest for other plant and office equipment (industrial vehicles) |
3 |
0 |
Interest for other plant and office equipment (others) |
29 |
0 |
Total interest leases |
382 |
0 |
The following table shows expenses in connection with leases:
in kEUR |
2019 |
|---|---|
2019 Leasing agreements according to IFRS 16 |
|
Interest expenses for leasing contracts |
382 |
Income from the subleasing of rights of use, shown under other sales |
0 |
Expenses for short-term leasing contracts |
370 |
Expenses for leases for an asset of low value |
206 |
Expenses for variable leasing payments |
0 |
in kEUR |
2018 |
|---|---|
2018 Leasing agreements according to IAS 17 |
|
Lease expenses |
3,064 |
Cash outflows in connection with leases
The following table shows cash outflows in connection with leases:
in kEUR |
2019 |
|---|---|
Total cash outflows for leases |
4,106 |
Extension options
Two property leases include an extension option, which has not been recognized as a lease liability to date and is exercisable by the MAX Group up to a year before expiration of the non-cancelable contract term. The MAX Group determines on the availability date whether the exercise of an extension option is sufficiently certain. The MAX Group determines again whether the exercise of an extension option is sufficiently certain if a significant event or significant change in circumstances that is under its control occurs.
The MAX Group estimates that potential future lease payments would lead to a lease liability of about kEUR 5,090 if the extension option is exercised.
Leasing activities of the MAX Group and their accounting treatment
The MAX Group leases various office and production buildings, technical equipment and machinery, vehicles as well as operating and office equipment. Leases are usually concluded for fixed time periods, but they can provide for extension options. The lease terms are negotiated individually and involve a large number of different conditions.
Up to and including 2018, leases were classified either as finance or operating leases. Payments in the context of operating leases (less any incentives received from the lessor) were recognized on a straight-line basis over the term of the lease in profit or loss.
Since 1 January 2019, leases are recognized as a right of use and a corresponding lease liability at the time when the leased object is available to be used by the MAX Group. Each lease installment is divided into repayment and interest portions. The financing costs are recognized in profit or loss over the term of the lease so that a constant periodic interest rate applies to the remaining amount of the liability for each period. The right of use is amortized on a straight-line basis over the shorter of the two time periods involving the useful life and the term of the lease.
Assets and liabilities from leases are recognized at their present value upon initial recognition. Lease liabilities include the present value of the following lease payments:
Fixed payments (including de facto fixed payments, less any lease incentives to be obtained).
Variable lease payments which are linked to an index or (interest) rate.
Expected residual payments from the residual value guarantees of the lessee.
The exercise price of a purchase option if the exercise by the lessee is sufficiently certain.
Penalty payments for the cancellation of the lease if the term considers that the lessee will take advantage of the cancellation option.
Lease payments are discounted at the implicit interest rate underlying the lease provided that it can be determined. Otherwise, discounting is done at the incremental borrowing rate of the MAX Group, i.e., the interest rate that the MAX Group would have to pay if it had to borrow in order to acquire an asset of comparable value under comparable conditions in a comparable economic environment.
Rights of use are measured at their acquisition cost, which is broken down as follows:
The amount of the initial valuation of the lease
All lease payments made prior to delivery minus any lease incentives obtained
All initial direct costs incurred by the lessee and
Estimated costs that arise for the lessee for dismantling or removing the underlying asset, for restoring the site where it was located to its previous condition or for returning the underlying asset to the condition stipulated in the lease.
Payments for short-term leases and leases whose underlying assets are of minimal value are expensed on a straight-line basis in profit or loss. Lease agreements with a term up to 12 months are regarded as short-term leases. Assets with minimal value are, for example, IT equipment and smaller operating and office equipment objects. The MAX Group considers assets with a fair value of 5,000 euro, to the extent this can be objectively determined, to be assets of minimal value, in accordance with the Basis for Conclusions of IFRS 16.
The leases of the MAX Group have the following terms:
Remaining lease term |
MAX |
MIN |
|---|---|---|
Land and buildings |
15 |
5 |
Technical equipment and machinary |
5 |
2 |
Other plant and office equipment (vehicles - passenger cars) |
5 |
3 |
Other plant and office equipment (industrial vehicles) |
5 |
4 |
Other plant and office equipment (others) |
10 |
2 |
Correction of errors
During the audit of the annual financial statements of iNDAT Robotics GmbH irregularities were discovered and confirmed regarding the valuation of inventories in 2018 and earlier years. Accordingly, the irregularities have an impact on the recognition of contractual assets and revenue in connection with projects which are realized on a time period basis in accordance with the cost-to-cost method. These irregularities are primarily attributable to deficiencies in the internal control system of iNDAT Robotics GmbH. The correction of errors was performed in accordance with the correction provisions of IAS 8. The following table shows the affected items in the statement of financial position and the statement of comprehensive income as well as the adjustments made in detail.
The errors corrected for the 2018 fiscal year have a total impact on profit or loss of kEUR 2,572 after taxes. Earnings were overstated by this amount.
Due to inadequate information, it was not possible to assign an error with an after-tax impact on profit or loss of kEUR 906 directly to any of the previous years. Accordingly, this error was corrected on 1 January 2019, via retained earnings outside profit or loss.
Furthermore, a valuation allowance in profit or loss of kEUR 650 was made in borrowing costs for a non-recoverable receivable from the purchaser of Finnah Packtec GmbH (“Finnah Packtec,” previously: NSM Packtec GmbH). In addition, a clawback claim of a drawn guarantee credit in the amount of kEUR 3,980 from a customer project of Finnah Packtec GmbH had to be value-adjusted in other operating expenses. These corrections were also performed in accordance with the provisions of IAS 8.
|
Effects of error correction |
||||
|---|---|---|---|---|---|
|
31/12/2018 as |
Adjustment |
12/31/2018 |
Adjustment |
1/1/2019 |
in kEUR |
previously reported |
affecting net income |
adjusted |
not affecting net income |
adjusted |
Assets |
|
|
|
|
|
Contract Assets |
59,730 |
-900 |
58,830 |
-351 |
58,479 |
Inventories |
88,451 |
-2,694 |
85,757 |
-915 |
84,842 |
Prepayments an accured income, and other |
13,434 |
-4,630 |
8,804 |
0 |
8,804 |
Deferred tax |
6,482 |
1,022 |
7,504 |
360 |
7,864 |
Equity |
91,584 |
-7,202 |
84,382 |
-906 |
83,476 |
thereof revenue reserve |
29,214 |
0 |
29,214 |
-906 |
28,308 |
thereof retained earnings |
17,855 |
-7,202 |
10,653 |
0 |
10,653 |
|
|
|
|
|
|
|
2018 as |
Adjustments |
2018 |
|
|
in kEUR |
previously reported |
|
adjusted |
|
|
Statement of comprehensive income |
|
|
|
|
|
Sales |
404,886 |
-900 |
403,986 |
||
Change in finished goods and work-in-progress |
1,940 |
-2,694 |
-754 |
||
Other operating expenses |
-65,017 |
-3,980 |
-68,997 |
||
Financial expenses |
-3,431 |
-650 |
-4,081 |
||
Income taxes |
2,813 |
1,022 |
3,835 |
||
Net income |
-36,353 |
-7,202 |
-43,555 |
|
|
The disclosures in the Notes regarding the respective items were presented not only as reported in the previous year, but also as adjusted in the previous year. This also applies to the affected accounts.
Adjustment of figures for the previous year
On 25 September 2018, the Supervisory Board of MAX Automation SE decided that the Group would withdraw from the construction of special-purpose machines and assembly lines for automotive customers in the Mobility Automation division. The assets and liabilities of the Group companies to be divested were reported in total as discontinued operations for 2018 in accordance with IFRS 5. This meant that the contributions to revenue and operating income of the IWM Automation Group, ELWEMA Automotive GmbH and of the 51% holding MAX Automation (Shanghai) Co., Ltd. were no longer included in the statement of comprehensive income. The earnings after tax of the companies to be sold were shown in a separate item after the earnings of continuing operations. The net profit of the Group as a whole for the period was calculated from the sum of the two results. In September 2019, the twelve-month deadline ended that IFRS 5 provides for the sales to be consummated. Accordingly, the previously discussed presentation as discontinued operation was reversed. The respective comparable figures for the previous year’s period were readjusted accordingly. The consolidated financial statements as of 31 December 2018, again include the assets and liabilities of all companies under their original items, which as discontinued operations had been disclosed in the 2018 consolidated financial statements separately in the items “assets held for sale” and “liabilities in connection with assets held for sale.” The operating business of IWM Automation Bodensee GmbH was discontinued as of 31 December 2019. The operational business activities of IWM Automation GmbH were also shut down as of 30 September 2020.
kEUR |
2018 as |
Reclassification |
Suspend depreciation 2018 |
2018 |
|---|---|---|---|---|
|
previously reported |
IFRS 5 |
|
|
Assets |
|
|
|
|
intangible assets |
3,643 |
10,085 |
420 |
14,148 |
goodwill |
42,067 |
7,346 |
0 |
49,413 |
property, plant and equipment |
25,136 |
9,550 |
154 |
34,840 |
other financial assets |
6,668 |
429 |
0 |
7,097 |
inventories |
48,955 |
39,496 |
0 |
88,451 |
trade receivables |
30,164 |
23,890 |
0 |
54,054 |
Contract assets |
19,776 |
39,954 |
0 |
59,730 |
other assets |
11,248 |
2,186 |
0 |
13,434 |
cash |
31,779 |
1,739 |
0 |
33,518 |
Total assets of discontinued operations |
134,675 |
-134,675 |
0 |
0 |
Equity and liabilities |
|
|
|
|
loans |
77,854 |
4,239 |
0 |
82,093 |
provisions |
10,318 |
4,215 |
0 |
14,533 |
Other non-current liabilities |
150 |
7,838 |
0 |
7,988 |
trade payables |
47,637 |
52,892 |
0 |
100,529 |
Contract liabilities |
23,420 |
6,773 |
0 |
30,193 |
Lease liabilities |
0 |
1,666 |
0 |
1,666 |
payables to associated companies |
0 |
137 |
0 |
137 |
other liabilities |
21,741 |
3,259 |
0 |
25,000 |
Total liabilities of discontinued operations |
81,019 |
-81,019 |
0 |
0 |
Changes in presentation
In addition, beginning in the 2019 fiscal year, the Company has reported contractual assets and liabilities separately. In 2018, disclosure was made within trade receivables or trade payables.
overview back