none 01.01.16 Disclosure Initiative IAS 1 none none 01.01.16 Intangible Assets - "Clarification of acceptable deprecication methods"
IAS 16/ IAS 38
none none
01.01.16 Agriculture: Fruit-bearing plants
IAS 16/ IAS 41
none none
01.07.14 Employee Benefits -"Changes in defined benefit plans: Employee contribu-
tions" IAS 19
none yes
01.01.16 Application of equity methode in singel-entity fincial statements
IAS 27 no major impact none 01.01.18 Financial instruments IFRS 9 none none 01.01.16 Investment companies: Appplication of consolidation exception
IFRS 10, IFRS 12/ IAS 28 none none 01.01.16 Disposal and contribution of assets between an investor and an associated
company or joint venture IFRS 10/
IAS 28
none none
01.01.16 Accounting for acquisitions of shares abount combined business operations
IFRS 11
none none
01.07.16 Regulatory deferral accounts
IFRS 14
no major impact none
01.07.17 Revenues from contracts with customers
IFRS 15 no major impact yes 17.06.14 Fees IFRIC 21
Group of consolidated companies
The group of consolidated companies comprises Delticom AG as controlling company, seven domestic and seven foreign subsidiaries, all fully consolidated in the anual financial accounts.
The group of fully consolidated companies has changed in the reporting period by the following entries since 01.01.2014:
•
Deltiparts GmbH i.G., Hanover (Germany)•
Reife tausend1 GmbH i.G., Hanover (Germany)•
Tyrepac Pte. Ltd., SingapurDue to its negligible impact on Delticom's net assets, financial position and results of operations, the following companies are not consolidated, but instead recognized as a financial instrument pursuant to IAS 39.
•
OOO Delticom Shina, Moscow (Russia) of which Delticom owns 100-% of the shares•
Tirendo France SAS, Paris (France)•
Tirendo Netherlands B.V., Den Haag (Netherlands)•
Tirendo AT GmbH, Vienna (Austria)•
Tirendo Poland Sp.z.o.o., Warsaw (Poland)In addition, following the capital increases at Delticom North America Inc., Delticom AG now holds an interest of just 75-% in the company.
Consolidation methods
Subsidiaries comprise all material shareholding in companies where the parent company exercises financial and business policy control, regularly accompanied by a more than 50-% voting right share. Such subsidiaries are included at the date when the possibility of control exists, and such inclusion is discontinued when this possibility no longer exists.
Acquired subsidiaries are accounted for using the purchase method. Acquisition costs correspond to the fair value of the assets paid, the equity instruments issued and the debts resulting or taken over on the date of exchange plus the costs that can be directly allocated to the acquisition. Assets, liabil- ities and contingent liabilities that can be identified as part of a business combination are valued at their fair value on the date of exchange during initial consolidation, irrespective of the scope of the minority interests.
The amount by which the acquisition costs exceed the Group's share of the net assets measured at their fair value is carried as goodwill. If the acquisition costs are lower than the fair value of the net assets of the acquired subsidiary, the difference is taken directly to the income statement.
The consolidated financial statements are based on the financial statements prepared according to uniform accounting and valuation methods for the companies included in the consolidated financial statements. The balance sheet date for the single-entity financial statements for the companies in- cluded in the consolidated financial statements is the same as the balance sheet date for the consol- idated financial statements.
All intra-group receivables and liabilities or provisions were eliminated during the consolidation of debts netting. Revenues from deliveries and services as well as interest payments and other income between the consolidated companies are offset against the expenses due in this regard (consolidation of income and expenses). Inter-company profits arising from deliveries and services within the Group are adjusted through profit or loss to reflect deferred tax. There were no minority interests in equity and the earnings of subsidiaries that are controlled by the parent company.
Business combinations in accordance with IFRS 3
Identifiable and recognisable assets, liabilities and contingent liabilities of an acquired business are always reported at their fair value at the transaction date. Any remaining differences between the ac- quisition costs and the acquired net assets are recognized as goodwill.
No new business combinations in the meaning of IFRS 3 have arisen following the acquisition of the Tirendo Group in 2013. The provisional purchase price allocation that was applied in 2013 was finalized in 2014 without modifications.
Tirendo complements Delticom’s existing shop portfolio with another strong brand. The acqusition will allow Delticom to target additional consumer groups. As part of the Delticom Group, Tirendo has access to the extensive industry and logistical network of the Delticom Group in Hanover. As a result, European car drivers will benefit even more from the advantages and simplicity of a purchase in the Group's online shops. Over the coming years the Management we will make use of the complementary strengths of Delticom and Tirendo throughout the entire value chain to achieve a good balance between growth and profitability.
The following fair values of the identifiable assets and liabilities were recognized:
Fair Vaues at acquisition date in € thousand
20,769
Non-current assets
3,050
there of deferred taxes
1,400
Accounts receivable
556
Other current assets
1,257
Cash and cash equivalents
23,982
Assets total
5,299
Deferred tax liabilities
135
Other current provisions
3,062
Accounts payable
7,225
Other current liabilities
6,629
there of shareholder loans
15,721 Liabilities total 8,262 Net assets 35,338 Goodwill 43,600
Total purchase price
The intangible assets identified as part of the purchase price allocation with a total value of €-17.5-million and their expected useful lives are listed in the following table:
Useful life years Fair Value in € thousand 5 615 Customer Relationships 5 8,223 Trademarks 2 6,539 Rights of sale 5 2,167 Software
Following the full integration of the Tirendo Group, the Delticom Group forms the value-determining cash-generating unit. This goodwill cannot be amortized for tax purposes.
Segment reporting
In contrast to the Annual Report 2013, no differentiation has been made between the reporting of the previous E-Commerce and Wholesale segments in the period under review.
Delticom is a one-segment company: The company focuses on selling tyres online. In the E-Commerce division, tyres are sold to dealers, workshops and end users via 163 shops (previous year: 137) in 42 countries. There are no other divisions that could constitute segments with a separate reporting re- quirement.
Currency translation
Transactions denominated in foreign currency are converted in the individual statements of Delticom AG and its subsidiaries at the exchange rates prevailing on the date of the transaction. Monetary items in the balance sheet denominated in foreign currency are carried using the exchange rate on the balance sheet date, with any gains or losses recognised in income.
The items included in the financial statements of each company of the Group are measured based on the currency which is the currency of the primary economic environment in which the company op- erates (functional currency). The foreign companies which form part of the Delticom Group are, as a rule, independent sub-units, whose financial statements are translated to euros using the functional currency concept.
All assets and liabilities are translated using the exchange rate on the balance sheet date. Equity is carried at historical exchange rates. The items on the income statement are translated to euros using the weighted average annual rate of exchange. The resulting currency translation differences are taken directly to equity and carried under the reserve for currency translation differences, where they remain until the corresponding subsidiary exits the consolidated Group.
Weighted yearly average rate € 1 = Mid rate on 31.12.2014 € 1 = Country 0.8062 GBP 0.7818 GBP UK 1.3290 USD 1.2166 USD USA 4.4397 RON 4.4845 RON Romania
Estimates and assumptions
Assumptions have been made and estimates used in the preparation of these consolidated financial statements that impact the disclosure and amount of the assets and liabilities, income and expenses and contingent liabilities carried in these statements. The assumptions and estimates are for the most part related to the stipulation of useful life, accounting and valuation of provisions, as well as the certainty of realising future tax relief. The assumptions on which the respective estimates are based are discussed for the individual items of the income statement and balance sheet. Actual values may vary in individual cases from the assumptions and estimates made. Any such deviations are recognised in income when they come to light.
Accounting and valuation principles Accounting treatment of acquisitions
As a potential consequence of acquisitions, goodwill is reported in the consolidated balance sheet, When an acquisition is first consolidated, all identifiable assets, liabilities and contingent liabilities are recognized at their respective fair values on the acquisition date. One of the most significant as- sumptions in this context relates to the determination of the respective fair values of these assets and liabilities on the acquisition date. Land, buildings and operating equipment are generally measured on the basis of independent valuation surveys, while marketable securities are recognized at their stock market price. If intangible assets are identified, recourse is made to external valuers' independent surveys depending on the type of intangible asset and the complexity of determining fair value. Such valuations are closely connected with assumptions that the management has made relating to the future value trend of the respective assets, and imputed changes to the applicable discounting rate. Goodwill
A discount rate of 7.24-% and a growth rate discount of 1-% are applied to measure acquire goodwill. The Group conducts annual impairment tests to gauge whether recognized goodwill has been impaired, or more frequently if an event occurs that might cause such impairment. The recoverable amount (net sales proceeds) of the cash-generating unit is then estimated. This corresponds to the higher of fair value less costs to sell, and value in use. Determining value in use requires adjustments and estimates relating to the forecasting and discounting future cash flows.
Within the Delticom Group, the cash-generating unit is the whole Delticom Group, so that, based on the business model, legal units are aggregated into one group. The management assumes that the assumptions utilized to calculate the recoverable amount are appropriate. Changes to these assump- tions could result in impairment charge that would negatively affect net assets, the financial position and results of operations.
The planning for the Delticom core business as prepared by the management forms the basis to measure fair value less costs of disposal. This planning is based on the assumption that e-commerce in tyre trading will gain further importance over the coming years. The possibility of a further increase in competition was also taken into consideration for the expectations in relation to revenues and earnings growth.
The planning is also based on the assumptions that Delticom will continue to defend its position as Europe's leading online tyre retailer, and that the cost structure will remain streamlined as a result of further automation and outsourcing. The planning spans a 5-year period. Please refer to the forecast report, which forms part of the management report, for information about the assumptions reflected in the detailed planning period. Plausible assumptions about future trends have been made for the subsequent years. All planning assumptions are adapted to reflect current status of knowledge. A re- alistically possible change to the parameters results in no need for the application of an impairment loss.
Intangible assets acquired for a fee are capitalised at cost plus the costs required to make these usable and are, to the extent that they have a definite useful life, written down over their useful life
using the straight-line method on a pro rata basis. Internally generated intangible assets are recognized at production cost. They are also amortized straight-line over their useful lives. Borrowing costs are not capitalized, but are instead expensed in the period in which they are incurred. Costs that are as- sociated with the maintenance of software are recognised as expenses when these are incurred. The scheduled straight-line depreciation is mostly based on the following useful lives:
Useful life in years
20 Internet domains
3–5 Software
To these are added the aforementioned useful lives for assets identified as part of the purchase price allocation.
Property, plant and equipment is carried at cost less accumulated scheduled depreciation and impairment costs. Cost includes the purchase price including directly attributable incidental acquisition costs that are incurred to render the asset usable. Discounts, bonuses and rebates are deducted from the purchase price. Assets are depreciated using the straight-line method on a pro rata basis. Subsequent costs are only recorded as part of the costs of the asset if it is probable that the future economic benefits will flow to the Group and the costs of the asset can be reliably identified. All other repairs and maintenance are recognised in income in the income statement in the fiscal year in which they are incurred.
The remaining book values and economic useful lives are reviewed on each balance sheet date and adjusted accordingly. If the book value of an asset exceeds its estimated recoverable amount, it is written down to the latter immediately. If the reasons for non-scheduled depreciation performed in previous years no longer apply, the asset is written up accordingly.
Gains and losses from the disposal of assets are calculated as the difference between the income from the sale and the book value and recognised in income.
The scheduled straight-line depreciation is mostly based on the following useful lives:
Useful life years
12–33 Leasehold improvements 4–15 Machinery 3–15 Equipment 3–15 Office fittings
Leases are classified as finance leases if the major risks and opportunities associated with the ownership of the leased asset from use of the leased asset are transferred to Delticom.
Assets from finance leases are capitalised at the lower of the fair value of the leased asset and the cash value of the minimum lease payments. The lease instalments are broken down into an interest component and a repayment component to give constant interest for the liabilities from the lease. Lease liabilities are carried as non-current liabilities without considering interest.
The property, plant and equipment to be carried under finance leases is written down over the shorter of the asset's useful life or the term of the lease. If assets in a finance lease are transferred to a lessee, the cash value of the lease payments is carried as a receivable. Leasing income is recognised over the term of the lease using the annuity method. Delticom did not enter into any such leases in 2014.
All leases that do not meet the criteria of a finance lease are classified as operating leases, with the assets accounted for by the lessor.
The financial instruments carried on the balance sheet (financial assets and financial liabilities) within the meaning of IAS-32 and IAS-39 comprise specific financial investments, trade accounts re- ceivable, cash and cash equivalents, trade accounts payable and certain other assets and liabilities resulting from contractual agreements.
Financial assets are broken down into the following categories: Financial assets at fair value through profit or loss, loans and receivables, held-to-maturity financial assets and available-for-sale financial assets recognised. The classification depends on the purpose for which the respective financial assets were acquired. Management determines the classification of the financial assets upon initial recognition. A financial asset is allocated to the category financial assets at fair value through profit or loss if it was, in principle, acquired with the intention to sell it over the short term, or if the financial asset was designated accordingly by the management. Derivatives also fall in this category, to the extent that these are not hedges. The category has two sub-categories: financial assets that have been held for
trading from the outset, and financial assets that have been classified at fair value through profit or loss from the outset.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not listed on an active market. They arise when the Group directly provides money, goods or services to a debtor without the intention of negotiating these receivables.
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments
and fixed maturities, for which the Group's management has the intention and ability to hold these to maturity.
Available-for-sale financial assets are non-derivative financial assets that are classified as being available
for sale and are not allocated to another category.
These financial instruments are carried under non-current assets to the extent that management does not intend to sell these within 12 months of the balance sheet date.
As a rule, sales and purchases of financial assets are accounted for on the date of the transaction – this is the date on which the company becomes a contracting party.
When these financial assets or liabilities are accounted for the first time, they are carried at cost which corresponds to the fair value of consideration taking into account transaction costs.
Financial assets that do not belong to the category at fair value through profit or loss are initially carried at their fair value plus transaction costs. They are booked out when the rights to payments from the investment have expired or been transferred, and the Group has mostly transferred all of the opportu- nities and risks that are associated with ownership.
Financial assets in the categories available-for-sale and fair value through profit or loss are measured at their fair value after initial recognition. Loans and receivables and held-to-maturity financial investments are carried at amortised cost using the effective interest method.
Realised and non-realised gains and losses from changes to the fair value of assets in the category
fair value through profit or loss are recognised in income in the period in which they arise. Non-realised
gains or losses from changes to the fair value of non-monetary securities in the available-for-sale cat- egory are taken to equity, to the extent that there is no impairment. If assets in this category are sold, the accumulated adjustments to the fair value included in equity are to be recorded in income in the income statement as gains or losses from financial assets.
An impairment test is performed on each balance sheet date to review whether there are objective reasons for impairment of a financial asset or a group of financial assets. For equity instruments