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Notes to the consolidated financial statements


1. General information

GfK SE is a listed Societas Europaea company with its registered office at Nordwestring 101, Nuremberg, Germany. Recorded under HR B 25014 in the commercial register of the Nuremberg district court, GfK SE was established from GfK Aktien­gesellschaft on February 2, 2009, as a result of a change in the firm’s legal form. GfK SE and its subsidiaries (GfK Group) are among the world’s leading market research organizations. The GfK Group provides information services to its clients in the consumer goods, retail and services industries as well as media, which they use in marketing related decision-making. 

The consolidated financial statements of GfK SE for financial year ending on December 31, 2015, include the company itself and all its consolidated subsidiaries. The statements were prepared in compliance with the International Financial Reporting Standards (IFRS) as they must be applied within the European Union (EU).

All IFRS that are mandatory for fiscal year 2016 and the announcements of the International Financial Reporting Interpretations Committee (IFRIC) adopted by the EU were applied.

Additionally, the accounting principles set forth in Section 315a (1) of the German Commercial Code (HGB) were considered when preparing the consolidated financial statements. 

The consolidated financial statements have been prepared in euro and rounded up to the nearest thousand (€  thousand) euros. All figures are specified in thousand euros (€  thousand), unless otherwise indicated.

The annual financial statements of the parent company GfK SE were prepared in line with the German Commercial Code (HGB) and are published in the online Federal Gazette (Bundesanzeiger) under HR B 25014.

Section 37 “Changes to IFRS standards and interpretations” of these Notes describes standards, interpretations and amendments to the IFRS that have already been adopted by the EU and that have been applied for the first time or not yet applied.


2. Consolidation principles

The annual financial statements of GfK SE, prepared for consolidation purposes, and all material subsidiaries, whose financial and operating policies are controlled directly or indirectly, are included in GfK SE’s consolidated financial statements. The financial statements of all companies included in the consolidated financial statements have been prepared according to uniform accounting principles.

Companies, in which the GfK Group holds a stake of at least 20 percent but no more than 50 percent and in which significant influence can be exercised, are generally accounted for at equity as associates. All other companies in the GfK Group are reported at acquisition cost.

A list of GfK SE shareholdings is provided in here.

Capital consolidation is carried out in accordance with IFRS 3, Business Combinations, on the basis of purchase accounting. Acquisition costs for the shareholdings are netted with the parent  company’s pro rata share of the subsidiary’s revalued equity as at the acquisition date. Intangible assets acquired in business combinations and identified as part of the purchase price allocation are entered on the balance sheet at fair value.

Any difference arising on the assets side after netting and purchase price allocation is reported under non-current assets as goodwill.

As part of purchase price allocations following an acquisition, identifiable assets, liabilities and contingent liabilities are stated at fair value at the time of acquisition. The calculation of fair values must therefore involves estimates. Where intangible assets have been identified as part of purchase price allocation, either a calculation by an independent external expert is used or the fair values are determined internally, depending on the type of assets, the degree of complexity in calculating the fair value and the transaction volume. If the calculation is carried out in-house, it is based on an appropriate valuation method. The relevant valuations are closely linked to assumptions and estimates made by the Management Board in relation to the future development of the assets identified and regarding the discount rate to be applied.

Any non-controlling shares are reported as minority interests.

In terms of gradual acquisitions, goodwill is determined at the time control was gained and constitutes the difference between the recalculated carrying value of the investments plus acquisition costs for buying the new shares minus the pro rata net assets attributable to GfK. Changes in the share quota without change of control are recorded solely as equity transactions.

Incidental acquisition costs in connection with business combinations are not capitalized but recognized as expenses.

All transactions and balances between entities of the GfK Group, which are included in the consolidated financial statements, are eliminated when preparing the consolidated financial statements. Differences arising from debt consolidation are reflected in the income statement. Deferred tax on debt consolidation is recorded at a rate of 30 percent, which is the expected Group tax rate excluding exceptional effects. Intercompany results and intracompany asset movements are eliminated with impact on the income statement if they are significant.

Associates are generally reported at equity (one-line consolidation). They are stated for the first time on the acquisition date. First-time valuation is in line with full consolidation. Any difference on the assets side arising from offsetting the carrying amount of the stake against the pro rata equity capital at initial valuation is included in the equity carrying value.

Profits or losses on mergers arising from the merger of two consolidated companies in the GfK Group are eliminated. Such mergers therefore have no impact on the consolidated income statement of the GfK Group. Company mergers involving external minority shareholders do not give rise to any change in the total minority interests or the consolidated total income.

Shares in the equity of subsidiaries attributable to external minority interests are shown separately under equity. Shares in the subsidiaries’ results attributable to external minority interests are listed as a separate profit or loss item in the consolidated income statement.


3. Accounting policies

3.1 Currency translation

Transactions in foreign currencies are translated into the functional currency of the reporting company at the exchange rate on the date on which they were carried out. As at the balance sheet date, monetary items are translated at the exchange rate on that date and non-monetary items are valued at the historical rate on the transaction date. Differences resulting from these conversions are, in principle, reported with an impact on the income statement.

The balance sheets of foreign subsidiaries not generated in euro as well as hidden reserves disclosed under purchase price allocation and goodwill from mergers and acquisitions are converted into euro in accordance with the concept of functional currency, based on the mean exchange rate on the reporting date. The annual average euro exchange rate, calculated as the mean of all month-end exchange rates, is applied to the income statements of these subsidiaries. 

Differences resulting from the translation of asset and liability items at the exchange rate on the current reporting date versus with the translation on the prior reporting date are stated in other comprehensive income (OCI). Exchange rate differences due to capital consolidation and differences arising from translation of the annual result in the balance sheet (reporting date rate) and the income statement (mean rate) are reported in other reserves.

The exchange rates of key currencies for the GfK Group against the euro are indicated in the table below.

Main currencies Mean euro rate on balance sheet date Average euro rate during reporting year
Country Currency unit Dec. 31, 2014 Dec. 31, 2015 2014 2015
USA 1 USD 0.82 0.92 0.76 0.91
UK 1 GBP 1.28 1.36 1.25 0.38
Switzerland 1 CHF 0.83 0.92 0.82 0.94
Singapore 1 SGD 0.62 0.65 0.60 0.66
China 1 CNY 0.13 0.14 0.12 0.14
Japan 100 JPY 0.69 0.76 0.71 0.75

Currency gains and losses, which result from similar transactions, are netted at the level of each subsidiary.

3.2 Consolidated income statement

The consolidated income statement is prepared in accordance with the cost of sales accounting method. Expenses are shown by function.

3.3 Sales

The method of recognizing sales is largely determined according to IAS 18, Revenue, and depends on the nature of the underlying transaction:

Panel business involves surveying individuals, households and companies and is characterized by the fact that the same circumstances are analyzed at the same regular intervals on the basis of the same sample and always deploying the same methods. For business involving panels, the GfK Group recognizes sales pro rata temporis according to the progress of the project. The sales for a given project are therefore distributed evenly over its duration. Each month during the term of a contract, the same amount of sales is recognized.

Ad hoc business is the systematic empirical research used as the basis of marketing decisions in all areas of the marketing mix. This includes tests and surveys on product and pricing policy, brand positioning and brand management as well as traditional and modern forms of communication with consumers and users. It is employed with the goal of optimizing distribution and enhancing customer loyalty and retention. Ad hoc research business is valued on the basis of the percentage of completion method. The progress of a project is determined as the ratio of actually accumulated costs to the overall anticipated costs of the project. The estimate of the total costs is checked on an ongoing basis over the life of the project. Changes to the estimated total costs are included in the calculation of recognizable sales at the time when they can be anticipated. The costs to be included in this calculation comprise all direct personnel expenses and other cost of sales as well as pro rata indirect costs. 

Syndicated business analyzes markets and market players without this being specifically commissioned by a client to whose requirements the survey would be tailored. The completed study is marketed without client-specific adjustments. Syndicated surveys may be conducted once or on a recurring basis without fulfilling the distinct and highly specific features of a panel. Various market participants may be questioned in repeated surveys or the studies may be published at different intervals. In terms of determining sales, syndicated business is treated like panel business if it is comparable to panel business in nature. This is because it involves repeated surveys where the cost behavior pattern is relatively evenly distributed over the term.

For other syndicated business, the method of sales recognition depends on the empirical estimate of the respective survey’s profitability: 

If a profit from the survey is probable, it is valued the same as an ad hoc research contract. 

If it is not yet sufficiently certain that enough purchasers will be found for a survey, the sale is recognized as follows, corresponding to the accumulated costs: If the value of the actual incoming orders is below that of the costs accumulated, recognizable sales are limited to the value of incoming orders. As soon as there is no doubt that the value of orders exceeds the costs, sales are recognized according to the method used for ad hoc research contracts.

In all other business transactions, sales are only recognized once the work has been completed and invoiced.

For sales recognition based on the percentage of completion method, the estimation of the completion level is significant. Estimates are also necessary in relation to the extent of payables required for the fulfillment of contractual obligations. The fundamental estimates may concern those including total contractual costs, costs to be incurred up to completion, total sales from the contract and contractual risks. Management continually reviews all estimates associated with relevant contracts and adjusts parameters where necessary. Changes to significant parameters can lead to an increase or reduction in sales for the respective reporting period. 

Provisions are set up for expected losses on orders in progress when an estimation of the obligation is sufficiently reliable.

3.4 Cost of sales, selling and general administrative expenses

In addition to personnel expenses, services rendered and scheduled amortization and depreciation of tangible and intangible assets, cost of sales, selling and general administrative expenses comprise all other costs directly linked to the GfK Group’s operations.

3.5 Research and development costs

Research and development costs are generally recorded as expenses at the time they are incurred and shown under cost of sales.

Development costs incurred within the GfK Group, particularly for setting up new panels, are reported under other intangible assets if the capitalization criteria are met.

Internally generated intangible assets are only capitalized if they resulted from the development phase and not the research phase and if further precisely defined preconditions are cumulatively fulfilled. These include the technical viability of project completion, planned completion and use, as well as the usefulness to the company or salability of the intangible asset. Future economic benefits and the availability of the necessary technical, financial and other resources to complete the project must be documented. A reliable calculation of the costs associated with the intangible asset during its development phase is also a precondition for the capitalization of internally generated intangible assets.

3.6 Other operating income and expenses

Other operating income and expenses comprise income and expenses related to operations, for which the allocation to sales or functional costs would not be appropriate. They mainly include exchange rate gains and losses from non-financial transactions, profit and loss from the disposal of fixed assets, impairment and reversal of impairment not attributable to functional costs, income and expenses in connection with reorganization and improvement projects, income and expenses in connection with share and asset deals, and expenses for legal disputes.

3.7 Operating income

Operating income in the GfK Group consists of gross income from sales less selling and general administrative expenses and net other income, constituting other operating income and other operating expenses

3.8 Adjusted operating income

Adjusted operating income is the indicator used internally to manage the GfK Group’s business. It is derived from operating income by excluding the following income and expense items from operating income:

› Goodwill impairment

› Write-ups and write-downs of additional assets identi ed on acquisitions

› Income and expenses in connection with share and asset deals

› Income and expenses in connection with reorganization and improvement projects

› Personnel expenses for share-based incentive payments

› Currency conversion differences

› Expenses from litigation, compliance cases and terminated projects

› Remaining highlighted items

3.9 Income from associates

Income from associates encompasses income and expenses result- ing from the valuation at equity of pro rata shares in associates.

3.10 Other income from participations

Other income from participations essentially contains dividends from non-consolidated affiliated companies and other participations of the GfK Group, profit and loss from the divestiture of such companies, and income and expenses from profit transfer agreements with these companies.

3.11 EBIT

The performance indicator EBIT (earnings before interest and taxes) has been included as a subtotal in the consolidated income statement. EBIT is determined by adding the income from associates and other income from participations to operating income.

3.12 Other financial income and expenses

Other financial income and expenses consist of interest income and interest expenses, income and expenses resulting from the valuation of derivative financial instruments used to hedge against interest rate risks, transaction costs for bank loans, expenses arising from the write-off of loans, currency gains and losses from financial transactions such as loans and financial liabilities in foreign currency, and other financial income. Interest expenses also include additional interest on previously discounted debt. Such additional interest relates to items such as future purchase price components from acquisitions, which are stated on the liabilities side at fair value.

Interest is recorded as income or expense at the time it is incurred. Interest is deferred on the basis of the effective interest method.

3.13 Income from ongoing business activity

The amount of income from ongoing business activity is stated as a subtotal in the consolidated income statement. The income from ongoing business activity corresponds to the consolidated total income before consideration of tax on income.

3.14 Tax on income

Tax on income from ongoing business activity comprises the current and deferred tax expense. 

GfK Group companies have operations in many different countries. The GfK Group is therefore subject to the different tax legislation of various tax authorities. The tax items included in the consolidated  nancial statements are calculated by considering the relevant tax legislation and the respective tax administration statements. In view of their complexity, certain matters may be interpreted differently by the taxpayer and the local tax authorities.

Deferred taxes are calculated based on the balance sheet liability method, whereby deferred tax assets and liabilities are entered in the balance sheet for temporary differences between the carrying amounts stated in the consolidated financial statements and the tax basis of assets and liabilities. Any effects on deferred taxes from changes in tax law are taken into account in the income statement from the date on which the tax law is passed.

Deferred tax assets are only entered on the balance sheet if it is probable that they can be realized at a future date. This is generally the case when the relevant company is sufficiently likely to achieve enough taxable income to utilize the tax benefit. To evaluate this, the planned results from operational business, effects on results from the reversal of taxable temporary differences and existing tax strategies are taken into account.

The intrinsic value of deferred tax assets is estimated by the Management Board on every reporting date. Estimating planned taxable income and tax beneFits achievable with possible tax strategies is naturally subject to some uncertainty. Furthermore, limitations regarding the extent and time frame to realize future tax bene ts can arise from changes in tax legislation. Estimates are adjusted in the period in which there is sufficient evidence that an adjustment is required.

Value adjustments for deferred tax assets are recorded when there are indications that deferred tax assets may only be realized partially or not at all. Applying its discretionary powers, the Management Board assumes a maximum period of time for the realization of deferred tax assets of five years for subsidiaries which are not suffering a sustained loss, otherwise the time period is expected to be shorter.

Tax on items recognized in other comprehensive income (OCI) is not included in the consolidated income statement. No deferred taxes are amortized in relation to currency differences from intra-Group loans in foreign currency reported under OCI, which represent a net investment in the business operations of subsidiaries, because the temporary differences are not intended to be realized in the near future.

3.15 Impairments

If an asset is impaired and therefore devalued, the impairment expense is reported in the income statement.

The value of assets with an indefinite useful life and intangible assets under development is checked once a year by means of an impairment test. An impairment test is also carried out if triggering events occur, which may significantly affect the value of the assets concerned.

An impairment on intangible assets is applied if the recoverable amount is below the amortized cost of acquisition or production. The recoverable amount is defined as the higher of the two amounts of fair value less costs of disposal or value in use of an asset whose expected future cash flows at the GfK Group is based on a minimum three-year period, planned in detail and discounted on the basis of a discount rate to be determined individually at market conditions. The growth rate of the cash flows beyond the period of detailed planning is usually taken into account by reducing the discount rate. This method is used to determine the fair value of level three.

Expenses arising from a decline in the value of goodwill and brands are reported in the consolidated income statement under other operating expenses, while the impairment of surveys, panels, customer relations, long-term contracts and software is shown under functional costs. Any impairment of goodwill that has been recognized will not be reversed.

When reviewing other intangible assets or tangible fixed assets for impairment, the process for ascertaining the recoverable amount in respect of these assets is subject to estimates and assumptions by the Management Board which involve uncertainty. Estimates and assumptions may have a significant impact on the relevant figures and ultimately on the extent of a possible impairment. In view of this, an additional impairment or write-ups may result in future from a change in assumptions or circumstances.

More detailed explanations of the impairments applied to financial assets can be found within this chapter in Section “Financial instruments” below.

3.16 Earnings per share

To determine the earnings per share (EPS) reported in the consolidated income statement, the proportion of consolidated total income attributable to equity holders of the parent is divided by the weighted average number of shares in the relevant fiscal year.

The average number of shares does not need to be adjusted by the options exercised and expired during the reporting year to calculate diluted earnings per share, since there are no longer any GfK stock options that can be exercised. Consequently, diluted earnings per share correspond to earnings per share.

3.17 Long-term incentive plans for employees and executives of the GfK Group

A new long-term incentive plan has been in place for GfK SE Management Board members since fiscal year 2010, and for selected executives of the GfK Group since fiscal year 2012. Any entitlement under the prior model was paid out for the last time in 2015. Participants in the new plan were granted an individual target bonus amount, half of which was converted into virtual shares and half into a performance-based long-term cash bonus. This was valid until 2014. Starting with the 2015 tranche of the plan, the entire individual target bonus amount for participants is converted into virtual shares.

Conversion into virtual shares of the target amount is based on the GfK share price on the 20 trading days prior to the start of the performance period. If a dividend is paid to shareholders, the number of virtual shares increases correspondingly in value.

Management Board members may exercise their virtual shares upon expiry of a four-year blocking period during certain trading windows within a two-year exercise period. Half of the virtual shares from the 2016 tranche may be exercised upon expiry of a four-year blocking period and the other half upon expiry of a six-year blocking period during certain trading windows within a two-year exercise period in each case. If the virtual shares are not exercised by the end of this period, they are paid out on the final day of the last exercise window. 

The two-year exercise period does not apply to executives. For these participants, the amount paid out is calculated upon expiry of a four-year blocking period based on the GfK share price of the last 20 trading days prior to expiry of the performance period.

The following applies to the performance-based long-term cash bonus: After expiry of a four-year performance period, the beneficiary is entitled to payment of a bonus. The amount is determined by the extent to which the specified performance target (average return on capital employed of GfK, or GfK ROCE, for the four-year period) was achieved by December 31 of the third year following the year in which the bonus was granted. Payment for the corresponding term is calculated on the basis of the audited annual financial statements.

Any bonus granted expires without compensation if employment is terminated before expiry of the performance period due to dismissal or resignation.

3.18 Intangible assets

Goodwill

Goodwill from the acquisition of companies which do not report in euros is stated in the reporting currency of the subsidiary acquired. The exchange rate on the date of first-time consolidation is used to calculate the goodwill at initial recognition. Subsequent measurements are based on the mean rate as at the reporting date.

In business combinations, goodwill represents the remaining difference in assets after offsetting the acquisition costs of the shareholding against the proportion of acquired revalued equity.

Goodwill from the acquisition of companies which do not report in euros is stated in the reporting currency of the subsidiary acquired. The exchange rate on the date of first-time consolidation is used to calculate the goodwill at initial recognition. Subsequent measurements are based on the mean rate as at the reporting date.

The GfK Group checks the value of its cash generating units, including goodwill, as part of an impairment test once a year or when triggering events or changed circumstances arise. For this purpose, goodwill is allocated to cash generating units which correspond to a structure comprising the two sectors, each with six regions, supplemented by the Other category.

The intrinsic value of goodwill is indicated when the recoverable amount is not less than the carrying amount of the cash-­generating unit.

The recoverable amount corresponds to the fair value less costs of disposal or the value in use if higher. Since the value in use usually generates a lower cash flow based on GfK’s estimate, GfK generally only calculates the fair value less costs of disposal. It is established as part of the impairment test, using a discounted cash flow method. The expected future cash  ow from the relevant five-year budget is used for the calculation. The relevant forecasts take into account past experiences and are based on the best possible Management Board estimate of future developments. Growth in the cash  ow beyond the  ve- year period (perpetuity) is taken into account by reducing the discount rate. To derive the sustained growth effects, current industry-related conditions as well as the cost-earnings ratio and GfK’s performance were taken into account. Against this back- drop, a growth deduction of 1.3 percentage points was applied (2015: 1.3 percentage points).The discount interest rate is determined by carrying out a weighted average capital costs calculation, taking into account the standard industry capital structure and standard industry financing costs. The discount interest rate takes into account the expectations of the equity investors and the relevant country risk. Depending on the cash-generating unit, the resulting discount interest rate was 6.4 percent to 12.1 percent as at December 31 (December 31, 2014: 6.5 percent to 11.8 percent). The discount interest rate before tax as at December 31 was 8.3 percent to 16.8 percent (December 31, 2014: 9.1 percent to 14.5 percent). 

Similar to the discount rate, this reduced growth rate is derived from externally available capital market data. This method is used to determine the fair value of level three.

The discount rate is determined by carrying out a weighted average cost of capital calculation, taking into account the standard industry capital structure and standard industry Financing costs. The discount rate takes into account the expectations of investors and lenders and the relevant country risk. Depending on the cash generating unit, the resulting discount rate ranged from 6.5 percent to 12.4 percent as at December 31, 2016 (December 31, 2015: 6.4 percent to 12.1 percent). The discount rate before tax as at December 31, 2016 ranged from 8.4 percent to 17.4 percent (December 31, 2015: 8.3 percent to 16.8 percent).

Estimates are involved in determining the recoverable amount of cash-generating units to which goodwill has been allocated. Primary assumptions on the basis of which the calculation of recoverable amounts is made include estimated growth rates, weighted average capital cost rates and tax rates. Estimates are required, in particular, to forecast and for the discounting of future cash flows and thus the expected economic development. Capital market volatility, interest rates and currency fluctuations also influence the valuation. Estimates made and the underlying methods may have a significant impact on the relevant figures and therefore on the extent of a possible goodwill impairment.

Other intangible assets

The GfK Group’s other intangible assets consist of internally generated intangible assets and miscellaneous intangible assets. To a very large extent, they represent software and market research panels, which have either been acquired externally or generated internally. Other key components are client relation- ships and brands capitalized as part of purchase price allocation.

Where an intangible asset has been subject to impairment, there is a reversal if a higher amount is recoverable at a later date. The carrying value after the reversal may not exceed the arithmetical carrying value, which would have resulted had the impairment not taken place in the past. The write-up is reported in the income statement in the item which previously included the impairment.

Internally generated intangible assets

At the GfK Group, internally generated intangible assets mainly comprise software and panel setup costs.

As a rule, software developed by companies in the GfK Group is used internally for analyzing and processing market research data. In some cases, the software is destined for external users and was written specifically to meet user requirements. Internal costs of software development are capitalized under non-current assets if the criteria according to IAS 38, Intangible Assets, are met. Amortization commences upon completion of the software.

Panel setup costs generally involve capitalized development costs for setting up new panels or expanding existing panels. Capitalized panel setup costs include:

› Spending on materials and services used in constructing ­panels

› Wages and salaries and other employment expenses for staff directly involved in setting up panels

› Overheads necessarily incurred in panel set-up which can reasonably and regularly be allocated to this, based on cost accounting

Costs from the preparation and application phases and maintenance costs for current panels cannot be capitalized. They are included in expenses. 

Panel set-up costs are only written down if they are directly incurred in conjunction with a specific, fixed-term current client order. As a rule, the amortization period in such cases is based on the duration of the contract or the useful life. In all other cases, the useful life of panels is indefinite and they are not subject to scheduled amortization. The value of panels is reviewed at least once a year as part of an impairment test.

Expenses for research activities are reported as expenses in the period under review. Development costs, which did not result in a capitalizable intangible asset, are also reported as expenses.

Miscellaneous intangible assets

Miscellaneous intangible assets primarily include panels acquired externally, customer relations, software and brands.

Miscellaneous intangible assets are entered on the balance sheet at amortized cost and are subject to straight-line amortization. This does not apply to customer relations, and brands are only amortized in individual cases. As a rule, the useful life of software and miscellaneous intangible assets is three to ten years.

Customer relations are generally subject to diminishing balance amortization over a period of 6 to 20 years at an individually determined customer churn rate of between 5 percent and 30 percent.

As a rule, brands are not subject to amortization and have an indefinite useful life. Where acquired brands are replaced by the GfK brand over a set period of time, they are subject to straight-line amortization. In such cases, the useful life is three years.

Intangible assets with an indefinite useful life are subject to an impairment test at least once a year. 

The interest on borrowing in terms of qualifying assets is capitalized.

3.19 Tangible assets

Tangible assets are valued at acquisition or production costs less the cumulative depreciation. The interest on borrowing is capitalized for qualifying assets. Cumulative depreciation generally involves straight-line depreciation up to the balance sheet date and any impairment. The depreciation period corresponds to the useful life. Assets in the course of preparation are not subject to depreciation.

The GfK Group generally applies the useful life periods indicated in the table below:

Asset Useful life in years
Administrative building 50
IT equipment 3 to 5
Cars and other vehicles 5
Office equipment 3 to 5
Office furniture 10 to 13

The item “Fixtures and fittings” also includes unfinished technical equipment.

Lease arrangements are entered on the balance sheet according to IAS 17, Leases, as either a finance or operating lease, depending on the type of agreement.

A finance lease is characterized by the fact that the risks and rewards of the leased asset are usually transferred to the lessee. With a finance lease, the leased asset is capitalized by the lessee, and a corresponding lease liability is reported. The lease liability is equivalent to either the present value of the minimum lease payments or the fair value of the leased asset at the start of the lease arrangement, depending on which is lower.

The capitalized leased asset is subject to straight-line depreciation. The depreciation period is the lease term or the economic useful life, whichever is shorter. Subject to fulfillment of the preconditions, an impairment is applied beyond that period.

The lease liability is amortized over the term of the lease agreement through lease payments. Discounts are written up by applying a constant interest rate to the remaining debt and reported in interest expenses under other  nancial expenses.

With regard to operating leases, the leased assets are entered on the lessor’s balance sheet. The lessee states his regular pay- ments as rental expenses.

3.20 Financial instruments

Financial instruments are contracts which result in a financial asset with one company and a financial liability or an equity instrument with another.

Financial assets comprise, in particular, cash and cash equivalents, equity instruments held in other companies (e.g. shareholdings), trade receivables, other loans granted and receivables, as well as primary financial instruments and derivatives held for trading purposes.

Financial liabilities regularly result in a return entitlement in cash or other financial liabilities. At the GfK Group, they primarily consist of liabilities to banks, trade liabilities, liabilities under finance lease agreements and derivative financial instruments.

At the GfK Group, financial instruments are entered on the balance sheet as bought or sold on the trade date, i.e. on the date on which the obligation to buy or sell a financial instrument was entered into.

With regard to interest-bearing financial instruments, interest rate changes may lead to a change in fair value and in the case of variable-rate financial instruments, in fluctuations in interest payments. In principle, current receivables and liabilities are not subject to interest rate risks. 

Financial assets and financial liabilities are recorded if the GfK Group is a contractual party in relation to a financial instrument.

Financial assets are valued at fair value when they are first recognized. With regard to financial assets which are not subsequently valued at fair value and recognized in profit and loss, the transaction costs directly attributable to the acquisition are taken into account. The fair values listed on the consolidated balance sheet regularly correspond to the market prices of financial assets. If they cannot be determined directly on the basis of an active market, they are valued using standard market procedures (valuation models). These are based on instrument-specific market parameters. The fair value of financial instruments that are entered on the balance sheet at amortized cost is calculated in the same way. Non-interest-bearing and low-interest financial assets with a term of more than one year are discounted in principle. For financial assets with a remaining term of less than one year, it is assumed that the fair value corresponds to the nominal value.

Financial assets are taken off the books if the contractual rights to payments arising from the financial assets expire or if the financial assets are transferred with all material risks and rewards.

The loans and non-current fixed-term deposits reported under other financial assets are assigned to the “loans and receivables” category. They are valued at amortized cost using the effective interest rate method.

Financial assets held for trading purposes are valued at fair value. They include derivative financial instruments which are not linked to an effective hedge agreement and whose classification as financial assets held for trading is therefore mandatory. Any gain or loss resulting from the subsequent valuation of financial assets that are held for trading is reported in the consolidated income statement.

In terms of the accounting policies applied to financial investments, the Management Board has stipulated at its discretion as the competent body that financial instruments are never classified as held to maturity but instead always as available for sale.

At the GfK Group, the category of financial assets available for sale represents the residual amount of primary financial instruments, which were not allocated to a different category. They comprise investments in affiliated companies reported under other financial assets, other participations and other available-for-sale securities.

In principle, the valuation is based on the fair value derived from the market price where a price quoted in an active market is available. Any gains and losses resulting from the valuation at fair value are recognized in other comprehensive income. This does not apply if the item relates to permanent or material impairments or exchange- rate-related changes in the value of debt instruments. These are reported in the income statement.

The accumulated gains and losses from the valuation at fair value, which can be found in other reserves, are only reported in the consolidated income statement on disposal of the financial assets. If the fair value cannot be reliably determined for equity instruments that are not quoted on the stock exchange, shareholdings are valued at acquisition cost in particular (less impairments where applicable).

Impairment expenses are provided if the carrying value of a financial asset is higher than the present value of future cash flows. An impairment test is conducted on every reporting date. In order to ascertain and objectively verify impairment, the following triggering events are considered:

› The debtor faces considerable financial difficulties.

› Observable data show that a measurable reduction in expected future cash flows has occurred since the asset was first ­recognized.

To decide if an impairment is required, the existing loans, which are allocated to the “loans and receivables” category and therefore subsequently valued at amortized cost, are analyzed. On the relevant reporting date, checks are performed to determine if there is an objective indication of impairment that should be taken into account on the balance sheet. The impairment amount is calculated on the basis of the difference between the carrying value and the recoverable value, which equals the present value of the expected future cash flows. It is discounted at the original effective interest rate of the financial instrument. To simplify matters, cash flows from current receivables are not discounted. Impairments on financial instruments in the “loans and receivables” category are supplied in separate value adjustment accounts. The relevant value adjustment is removed upon disposal of the financial instrument and no direct decrease or increase in the carrying value of financial instruments in the “loans and receivables” category takes place in principle.

Reclassifications between the levels of the valuation hierarchy of financial assets and financial liabilities, that are valued at fair value, are carried out at the end of the financial year in which they occurred.

Financial liabilities are valued at fair value when they are recognized for the first time. The directly attributable transaction costs are also listed for financial liabilities that are not subsequently valued at fair value and amortized over the term using the effective interest rate method.

In principle, primary financial liabilities are valued at amortized cost. They include financial liabilities and trade liabilities as well as financial other liabilities and deferred items. Non-interest-bearing and low-interest liabilities with a term of more than one year are discounted. With regard to liabilities with a term of less than one year, it is assumed that the fair value corresponds to the repayment value.

It is mandatory to classify any derivative financial instruments which are not linked to effective hedge agreements as “held for trading”. Accordingly, they must be included in the balance sheet at fair value through profit or loss. If the fair value is negative, a financial liability is reported.

Financial liabilities are taken off the books if the contractual obligations have been settled, extinguished or have expired.

Borrowing costs are recorded as expenses in the period in which they were incurred.

The market value of financial instruments to be assessed at fair value is generally established on the basis of stock exchange prices. If no stock exchange prices are available, the financial instruments are valued using standard market procedures (valuation models) based on instrument-specific market parameters.

The discounted cash flow method is used to calculate the fair value, taking into account individual credit ratings and other market circumstances in the form of prevailing market credit ratings and liquidity spreads for determining the present value.

There are no liquid markets for financial instruments in the “loans and receivables” category, which are valued at amortized cost. For short-term loans and receivables, the assumption is that the market value corresponds to the carrying value. Regarding all other loans and receivables, the market value is determined by discounting the expected future cash flows. The interest rates applied for loans are those which would have been used for new loans with a similar risk structure, original currency and loan term.

In terms of shares in unlisted companies, the carrying value is assumed to correspond to the market value. The market value could only be reliably established on the basis of concrete acquisition negotiations.

Trade payables and financial current other liabilities generally have a remaining term of less than one year, so the carrying value is approximately consistent with the fair value.

For financial non-current liabilities, the fair values are determined as the present values of the payments associated with the liabilities.

3.21 Derivative financial instruments, hedge accounting

The GfK Group completes transactions throughout the world in different currencies, which may result in an exchange risk. Short-term investments, investments in securities and the establishment of bank loans are also carried out in different currencies. This may result in risks from the change in exchange rates, interest rates and market prices.

More detailed information on currency and interest rate risks as well as the goals, strategies and processes of risk management is provided in the risk report, which is part of the Group Management Report.

The GfK Group uses forward currency transactions as well as interest rate swaps to hedge against currency and interest rate risks.

Derivative financial instruments are reported at acquisition cost as asset or liability at the time of the transaction and subsequently valued at fair value. The valuation of derivative financial instruments is performed using standard market procedures based on instrument-specific market parameters. Market prices are calculated on the basis of present value and option price models. Where possible, the relevant market prices and interest rates on the balance sheet date are used as input parameters for these models.

In hedge accounting, changes in the value of derivative financial instruments are recorded differently, depending on whether the instrument is a fair value hedge, cash flow hedge or net investment hedge.

If the derivative financial instrument is used to hedge against the risk of changes in the value of assets or liabilities, it represents a fair value hedge. In this case, changes in the value of both the underlying hedged item and the derivative financial instrument are taken to the income statement.

With changes in the value of cash flow hedges used to hedge underlying transactions against risks from fluctuations in future payment flows, the effective portions of the fair value fluctuations are initially listed under other comprehensive income (OCI). If the effectiveness of a hedge is not within the range of 80 percent to 125 percent, the hedge is liquidated. The ineffective parts of hedges are charged directly to the income statement. The risk regarding the amount of future cash flows applies, in particular to variable rate loans and planned transactions that are highly likely to occur.

Once the hedged transaction affects the income statement, the accumulated gains and losses recognized in other reserves are released with an impact on the income statement.

Net investment hedges can be used to secure net investments in foreign subsidiaries. This may, for example, involve a foreign currency loan in the local currency of the acquired shareholding. Any exchange gains or losses from the reporting date valuation of the foreign currency loan pertaining to the effective portion are recognized in OCI, as is the case for cash flow hedges.

If the hedge is regarded as highly effective, the exchange gains and losses from the hedging instrument are posted in OCI. The release with an impact on the income statement of this item does not occur at the end of the term of the hedging instrument but rather only upon sale or liquidation of the hedged item.

The prerequisite for any type of hedge accounting is that the correlation between the hedged item and the hedging instrument is accurately documented. In addition, the means by which the hedging instrument used compensates the risk associated with the hedged item in a highly effective manner must be documented along with the methods used to substantiate the effectiveness.

Generally, the part of the changes in value not covered by the hedged item is taken to the consolidated income statement. 

In addition, the GfK Group enters into hedge agreements which cannot be reported according to the rules of hedge accounting. From a financial point of view, these hedge agreements also comply with risk management principles. Furthermore, hedge accounting is not applied to foreign currency hedges relating to reported cash assets and liabilities. This is because the gains and losses realized on the underlying instruments as a result of currency translation are linked to the gains and losses on the derivative hedging instruments. They virtually offset each other in the consolidated income statement.

3.22 Receivables and other assets

Receivables are stated at nominal value or, in the case of identifiable specific risks, at the lower attributable value. This lower attributable value takes sufficient account of the default risk. Group-wide guidelines regulate hedging against the risk of non-payment. In calculating the required value adjustment for risky loans, a significant level of estimation and assessment is necessary. The main factors here are client credit rating, current economic development and historical default rates.

A credit check of new clients should be obtained from a recognized credit agency, if the order volume exceeds € 50 thousand. If no satisfactory information about the client is available, two-thirds of the order value is payable prior to delivery. The credit rating of existing clients must also be monitored based on the specified rules. In addition, the credit risk is minimized through issuing invoices for prepayments and on-account payments.

3.23 Inventories

Inventories are valued at the lower end of acquisition or manufacturing costs and net realizable value. Due to their lesser importance to the consolidated financial statements of the GfK Group, inventories are reported under current other assets and deferred items.

3.24 Cash and cash equivalents

Cash and cash equivalents contain cash on hand and in banks as well as liquid investments with a remaining term of less than three months.

3.25 Assets and liabilities held for sale

Assets and liabilities with an affiliated carrying value that is primarily realized through a sale transaction and not through continued usage are identified in the consolidated balance sheet separately from the other assets and debts in the balance positions “Assets held for sale” and “Liabilities held for sale”. A sale within a year must be highly probable.

Non-current assets that are classified as held for sale are assessed at the lower value from the carrying value and the fair value minus costs to sell. Their regular amortization is suspended. If there is depreciation, it will initially be assigned to the goodwill, then proportionately to the remaining assets and liabilities. The depreciation expenditures are identified in the income statement. The fair value less costs to sell is calculated based on estimations and assumptions, which are surrounded by uncertainty.

3.26 Equity

Capital reserve

GfK SE’s equity which is not part of subscribed capital attributable to the capital contributions of shareholders and which does not originate from generated income is reported under the capital reserve. Services linked to deposits for the purposes of acquiring shares or granting privileges as well as other services aimed at strengthening equity are also provided under the capital reserve.

Retained earnings

Amounts created from income in the financial year under review or prior financial years are reported as retained earnings. This includes a statutory reserve to be created from income.

Other reserves

Other reserves comprise changes in Group equity, which are initially listed in other comprehensive income and which do not involve contributions by shareholders or distributions to shareholders.

These changes result from exchange rate differences, unrealized profits and losses from available-for-sale securities, the valuation of hedging instruments (cash flow hedges and net investment hedges) and actuarial gains and losses on defined benefit plans.

Minority interests

Any non-controlling shares are reported as total minority interests.

3.27 Provisions

In principle, provisions are established when an obligation to a third party will probably result in an outflow of funds. In addition, the level of the obligation needs to be estimated reliably. Long-term interest-free or low-interest provisions are discounted.

Provisions for pensions are valued in line with the projected unit credit method, in which future compensation increases are taken into consideration. The amount shown in the balance sheet represents the present value of the obligation, adjusted by the unrecognized past-service costs after offsetting the fair value of the plan assets. The discount interest rate is based on the interest rate for prior-ranking fixed-income corporate bonds.

Based on the net defined benefit liability or the net defined benefit asset, net interest is calculated on the net liability (net asset) from a defined benefit plan by multiplying the net liability (the net asset) at the beginning of the period with the discount interest rate, on which the defined benefit obligation, i.e. the gross liability, is based at the beginning of the period.

Pensions and similar obligations are accounted for using actuarial valuation methods. Underlying factors include actuarial assumptions such as discount rates, expected salary increases, mortality rates and increased rates for healthcare costs. Changed conditions can mean that actuarial assumptions may differ greatly from actual developments and therefore lead to significant changes in obligations connected to payments to employees.

Payments for defined contribution plans are recorded as expenses when they occur.

GfK Group companies are occasionally involved in legal disputes. The Management Board regularly analyzes the latest information on legal risks. Provisions are set up for likely obligations, including estimated costs of legal consultation. The likelihood of an outcome unfavorable to the GfK Group, the extent of related liabilities and the possibility of being able to estimate the extent of the relevant obligations sufficiently are taken into account. For the purposes of legal risk assessment, the GfK Group appoints internal and external legal counsel.

Provisions are created for additional obligations to third parties, which are likely to lead to an outflow of funds in future but which are not liabilities, if there is more militating in favor of the existence of a present obligation than against and when the anticipated amount of the claim can be estimated within a certain range. The most probable amount is applied within this range.

3.28 Financial liabilities

Financial liabilities include interest-bearing liabilities related to financing, particularly loans from banks and other lenders, liabilities under finance leases and other interest-bearing liabilities.

The GfK Group reports put options held by minority shareholders and variable purchase prices in connection with buying shares as purchase price elements which depend on future events and are impacted by future sales and EBIT. The minority interests affected by this are not recorded as minority interests. The associated non-current or current financial liabilities are generally assessed at fair value. Interest added to payment obligations is reported under interest expenses.

For possible adjustments to acquisition costs, as a result of future events which are recognized as liabilities at the time of acquisition, changes in the value of liabilities from earn-outs and put options held by minority shareholders on or after January 1, 2010, are listed in other financial income in the income statement. The profit or loss resulting therefrom is corrected in the cash flow statement under the item “Other non-cash income/expenses” within the cash flow from operating activity.

3.29 Trade liabilities and other liabilities

Trade liabilities and other liabilities are stated at repayment value. Obligations under invoices outstanding are recorded under trade payables.

3.30 Liabilities on orders in progress

Liabilities on orders in progress comprise payments on account and accrued amounts from the recognition of sales. As part of this item, sales are accrued which are tied to contractually agreed invoices for prepayments or payments on account, but cannot yet be recognized as sales according to the above-described sales recognition methods.

3.31 Overview of the valuation principles applied

The following table shows the most important valuation principles that are applied in preparing the consolidated financial statements of the GfK Group.

assets
Goodwill Impairment-only approach
Other intangible assets
with limited useful life Amortized acquisition or production costs
with indefinite useful life Impairment-only approach
Tangible assets Amortized acquisition or production costs
Financial assets
Shares in affiliated companies, other participations Acquisition costs
Loans and non-current fixed-term deposits Amortized costs
Held for trading purposes Fair value through profit or loss
Other financial assets available for sale Fair value recognized directly in equity
Trade receivables and other receivables Amortized costs
Financial other assets
Derivative financial instruments used as hedges Fair value recognized directly in equity
Derivative financial instruments not used as hedges Fair value through profit or loss
Miscellaneous financial other assets Amortized costs
Non-financial current other assets Amortized costs
Current securities and fixed-term deposits Amortized costs
Cash and cash equivalents Amortized costs

liabilities
Provisions
Pension provisions Projected unit credit method
Other provisions Discounted amount most likely to be paid
Interest-bearing financial liabilities
Liabilities from finance lease Present value of minimum lease payments
Purchase price components which depend on future events Fair value through profit or loss
Other interest-bearing financial liabilities Amortized costs
Financial other liabilities
Derivative financial instruments used as hedges Fair value recognized directly in equity
Derivative financial instruments not used as hedges Fair value through profit or loss
Miscellaneous financial other liabilities Amortized costs
Trade payables Amortized costs
Liabilities on orders in progress Amortized costs
Non-financial other liabilities Amortized costs

3.32 Consolidated cash flow statement

The cash flow statement shows the changes to the balance sheet item “Cash and cash equivalents” due to cash flows from operating activity, investing activity and financing activity. 

The cash flow from operating activity is derived indirectly from changes to the balance sheet entries. They are adjusted for the effects of currency translation and changes in the scope of consolidation. Consequently, only a limited reconciliation is possible between the changes in the balance sheet items according to the consolidated cash flow statement and the arithmetical changes in the consolidated balance sheet, schedule of movements in non-current assets and other information in the Notes to the consolidated financial statements.

3.33 Estimates

The production of the GfK Group’s consolidated financial statements in compliance with IFRS requires the use of assumptions and estimates. Some of these estimates involve circumstances where uncertainty is inherent and that may be subject to change. These estimates and assumptions were made by the Management Board, taking into account all known facts to the best of their knowledge in order to gain an accurate situational picture of the net assets, financial position and results of operations. However, actual figures for assets and liabilities as well as contingencies on the balance sheet date as well as the income and expenses for the financial year can differ from this. 

Estimates are employed in the realization of sales under the percentage of completion method, in connection with the required value adjustment for risky loans and in impairment tests for goodwill as well as for other intangible or tangible assets. In addition, estimates are made in the purchase price allocation following business combinations, to assess the intrinsic value of deferred tax assets and in the recognition and valuation of conditional purchase price obligations and provisions. More precise explanations on the type of estimates necessary in these areas and on making estimates in the GfK Group can be found in the earlier clarification of the accounting and valuation methods. The parameters applied in the reporting year to the impairment test for intangible assets and for the valuation of pension provisions are listed in these Notes under Section 16 “Intangible assets” and Section 26 “Provisions”.

The most important estimates regarding the GfK Group’s future performance and its business environment are described in the Outlook section of the Group Management Report.

4. Scope of consolidation and major acquisitions

4.1 Fully consolidated companies

As at December 31, 2015, the scope of consolidation in accordance with IFRS included nine (2014: ten) domestic and 130 (2014: 127) foreign subsidiaries, in addition to the parent company. 

The table below shows the changes in fully consolidated subsidiaries between January 1, 2015, and December 31, 2015.

FULLY CONSOLIDATED SUBSODOARIES (NUMBER)
Jan. 1, 2015 Additions Disposals Dec. 31, 2015
Germany 10 0 –1 9
Abroad 127 4 –1 130
Total 137 4 –2 139

Shortly after acquisition, wholly-owned subsidiary NORM Research & Consulting AB, Stockholm, Sweden, and its affiliate Norm Research & Consulting B.V., Amsterdam, Netherlands, were consolidated for the first time on September 1, 2015. Both companies operate in the Consumer Experiences sector.

The purchase price of this acquisition amounted to € 8,044 thousand, of which € 6,839 thousand was paid in cash during the year under review. The remaining purchase price is not yet due. It involves obligations from subsequent purchase price adjustments. Goodwill of € 4,343 thousand resulted from this acquisition, which relates to the Consumer Experiences sector. The goodwill primarily represents the expertise of employees in the subsidiaries acquired, which cannot be capitalized separately.

As yet unreported intangible assets and the associated deferred taxes in the amount of € 1,391 thousand on balance were identified during the acquisition process. This mainly involves the customer relations and software.

Pre-merger At the date of acquisition
Non-current assets 599 2,367
Current assets 1,474 1,474
Cash and cash equivalents 1,656 1,656
Liabilities and provisions 1,414 1,791

These companies contributed € 1,851 thousand to the GfK Group’s consolidated sales in the 2015 financial year. The accumulated net income from these companies since they have been part of the GfK Group amounts to € –356 thousand. 

For the period from January 1, 2015, to the time of first consolidation on September 1, 2015, the two above-mentioned companies achieved sales of € 4,422 thousand and reported income of € –36 thousand.

The GfK Philippines Corporation, Makati City, Philippines, which was founded in the previous year, was consolidated for the first time with effect from January 1, 2015. Furthermore, GfK – Retail and Technology Colombia Limitada, Bogotá, Colombia, which was founded in 2009, was included in the scope of consolidation with effect from January 1, 2015. Both companies operate in the Consumer Choices sector. 

With effect from May 11, 2015, GfK nurago GmbH, Hanover, which operates in the Consumer Experiences sector, was merged with GfK SE, Nuremberg. In addition, INCOMA GfK, s.r.o., Prague, Czech Republic, which operates in the Consumer Experiences sector, was merged with GfK Czech, s.r.o., Prague, Czech Republic, with effect from September 1, 2015.

These mergers within the Group served solely to simplify the Group structure and have no immediate financial impact.

4.2 Companies of minor importance

During the year under review, the GfK Group did not include 29 (2014: 31) companies in the consolidated financial statements due to their minor significance for the net assets, financial position and results of operations of the Group.

Overall, external sales, annual income, total assets and cash flows from these companies are of minor importance, as in the previous year, compared with the corresponding figures in the consolidated financial statements.

4.3 Associated companies

In the consolidated financial statements as at December 31, 2015, shareholdings in nine (2014: 12) associated companies abroad are reported and, as in 2014, in one associated company in Germany. 

On March 5, 2015, a shareholding of around 22 percent was purchased in YouEye Inc., Mountain View, California, USA.

On July 30, 2015, MarketingScan International SAS, Suresnes, France, was merged with its subsidiary MarketingScan SAS, Suresnes, France. MarketingScan SAS, Suresnes, France, was previously a member of the subgroup valued at equity under MarketingScan International SAS, Suresnes, France, and therefore not reported as a separate associated company. On August 20, 2015, Consumer Zoom SAS, Suresnes, France, was merged with MarketingScan SAS, Suresnes, France.

The shares in Oz Toys Marketing Services Pty. Ltd., Sydney, Australia, Sports Tracking Europe B.V., Amstelveen, Netherlands, and NPD Intelect, L.L.C., Port Washington, New York, USA, were sold on November 23, 2015. These companies were assigned to the Consumer Choices sector.

4.4 Other participations

The number of other participations increased from three to four following the indirect acquisition of a minority share in ZecoByte AB, Stockholm, Sweden, as part of the acquisition of NORM Research & Consulting AB, Stockholm, Sweden.


5. Sales

Sales are broken down according to type as shown in the table below:

2014 2015
Sales to third parties 1,448,015 1,537,528
Sales to Group companies 2,635 3,206
Sales to related parties 2,273 2,692
Sales 1,452,923 1,543,426

The breakdown of sales according to sector and region is shown under Section 34 “Segment reporting”.


6. Cost of sales

The breakdown of cost of sales is shown in the table below:

2014 2015
Personnel expenses 491,960 537,941
Other cost of sales 424,257 461,125
Amortization/depreciation and impairments 48,131 39,498
Cost of sales relating to Group companies 9,042 6,252
Cost of sales (before research and development costs) 973,390 1,044,816
Research and development costs 17,196 17,118
Cost of sales (including research and development costs) 990,586 1,061,934

Other cost of sales mainly comprises services purchased.


7. Selling and general administrative expenses

The breakdown of selling and general administrative expenses is shown in the table below:

2014 2015
Personnel expenses 198,253 198,889
Other selling and general administrative expenses 80,172 81,219
Amortization/depreciation and impairments 21,634 22,118
Selling and general administrative expenses relating to Group companies 943 3
Selling and general administrative expenses 301,002 302,229

Amortization/depreciation and impairments include value adjustments on operating receivables in addition to amortization/depreciation and impairments on other intangible assets and tangible assets.

Other selling and general administrative expenses mainly consist of rental expenses, fees for consulting and other external services, travel expenses, charges for telecommunications, data transmission and processing as well as maintenance expenses.


8. Other operating income

Other operating income includes the items listed in the following table:

2014 2015
Currency exchange gains 2,950 2,306
Reversal of impairments 1,120 0
Miscellaneous 3,748 17,507
Other operating income 7,818 19,813

Currency exchange gains mainly contain profits from foreign currency transactions in U.S. dollars and pound sterling as well as from foreign currency transactions of a company with the Turkish lira as functional currency in euro and U.S. dollars.

The reversal of impairments related to write-ups on brands amounting to € 1,084 thousand in the previous year.

Miscellaneous other operating income mainly comprises income from the dissolution of the cross-shareholding with The NPD Group, Inc., USA, explained in detail in Section 25.4 “Equity change statement” as well as rental income from property.


9. Other operating expenses

Other operating expenses include the items listed in the table below, which cannot be assigned to functional costs.

2014 2015
Goodwill impairment 59,498 39,418
Personnel expenses 10,842 14,504
Currency exchange losses 4,093 4,545
Amortization/depreciation and other impairments 1,963 24,376
Miscellaneous 24,775 12,082
Other operating expenses 101,171 94,925

The goodwill impairment amounting to € 39,418 thousand (2014: € 59,498 thousand) resulted from a reassessment of growth prospects in the Consumer Experiences sector.

Personnel expenses primarily relate to severance payments in connection with positions, which were no longer filled as a result of restructuring in line with the new strategic orientation of the relevant business divisions (€ 13,897 thousand; 2014: € 10,782 thousand).

Currency exchange losses mainly comprise losses on foreign currency transactions of companies with a functional currency other than the euro, in euro, U.S. dollars, pound sterling and Swiss francs as well as on foreign currency transactions of companies with the euro as functional currency in U.S. dollars, pound sterling, Singapore dollars, Australian dollars and Japanese yen.

Amortization/depreciation and other impairments of € 20,034 thousand (2014: € 0 thousand) pertain to impairments of intangible assets which resulted from discontinued new product development (Mobile Insight/Location Insight) as well as discontinued individual modules of the existing CPIMS/NEO analysis and production platform. During the year under review, no impairments of intangible assets were stated in connection with the irregularities in 2012 at GfK Arastirma Hizmetleri A.S., Istanbul, Turkey (2014: € 1,097 thousand). However, the same situation resulted in further expenses amounting to € 1,349 thousand (2014: € 10,962 thousand), included in miscellaneous other operating expenses. These mainly comprise legal and consulting costs.

Furthermore, miscellaneous other operating expenses comprise expenses related to lease agreements and relocation (€ 4,447 thousand; 2014: € 2,713 thousand) as well as expenses in connection with share and asset deals (€ 3,164 thousand; 2014: € 215 thousand). In contrast, expenses for legal disputes (€ 84 thousand; 2014: € 3,196 thousand) and social security risks in various countries (€ 160 thousand; 2014: € 2,722 thousand) only played a subordinate role.


10. Personnel expenses

The expense items in the consolidated income statement include the personnel expenses listed in the following table.

2014 2015
Wages and salaries 590,274 646,255
Social security contributions and expenses for pensions 115,110 119,599
Personnel expenses 705,384 765,854

11. Adjusted operating income

Adjusted operating income is the internal management indicator of the GfK Group, which is explained in detail in the Group Management Report. It is derived as follows:

2014 2015
Operating income 67,982 104,151
Goodwill impairment 59,498 39,418
Write-ups and write-downs of additional assets identified on acquisitions 11,391 4,314
Income and expenses in connection with share and asset deals 1,010 –8,655
Income and expenses in connection with reorganization and improvement projects 17,058 22,772
Personnel expenses for share-based incentive payments 1,005 1,896
Currency conversion differences 1,142 2,240
Income and expenses related to one-off effects and other exceptional circumstances 19,746 21,443
Adjusted operating income 178,832 187,579

11.1 Write-ups and write-downs of additional assets identified on acquisitions

The composition of write-ups and write-downs of additional assets identified on acquisitions as well as their allocation to items in the consolidated income statement are shown in the following table.

2014 2015
Amortization
Cost of sales 3,554 1,171
Selling and general administrative expenses 3,859 3,731
Impairments
Cost of sales 6,778 919
Selling and general administrative expenses 1,622 1,208
Other operating expenses 0 1,288
Reversal of impairments
Cost of sales –1,954 –3,131
Selling and general administrative expenses –1,385 –872
Other operating income –1,083 0
Write-ups and write-downs of additional assets identified on acquisitions 11,391 4,314

Further details are provided in Section 16.6 “Amortization, impairments and reversal of impairments of intangible assets”.

11.2 Income and expenses in connection with reorganization and improvement projects

Income and expenses in connection with reorganization and improvement projects primarily relate to expenses for severance payments within the scope of reorganization projects amounting to € 13,897 thousand (2014: € 10,782 thousand). This item also includes expenses amounting to € 3,397 thousand (2014: € 4,033 thousand) for the global standardization project REACH (formerly SCOPE).

11.3 Personnel expenses for share-based incentive payments

A long-term incentive program, which is described in detail in Section 3.17 “Long-term incentive plans for employees and executives of the GfK Group”, has been in place for GfK SE Management Board members since financial year 2010 and for selected GfK Group executives since financial year 2012. The following table shows the number, term and value of the virtual shares issued under this long-term incentive program.

Tranche 1 2 3 4 5 6
Year issued 2010 2011 2012 2013 2014 2015
Year of payment 2014 2015 2016 2017 2018 2019
Number of virtual shares issued (quantity) 15,693 16,498 49,886 46,458 44,906 72,373
Fair value of a virtual share in € 30.90 30.90 30.90 30.90 30.90 30.90

Total expenses for the program during the financial year amounted to € 1,896 thousand (2014: € 1,005 thousand).

11.4 Income and expenses related to one-off effects and other exceptional circumstances

Income and expenses from one-off effects and other exceptional circumstances include impairments, which are related to the discontinuation of network-based development activities for Mobile Insight/Location Insight, as well as two modules of the digital analysis and production platform CPIMS/NEO (€ 20,034 thousand, 2014: € 0 thousand). 

The expenses resulting from irregularities at GfK Arastirma Hizmetleri A.S., Istanbul, Turkey, amounted to € 1,349 thousand in 2015 (2014: € 12,059 thousand). For other legal disputes and social security risks, total expenses of € 244 thousand (2014: € 5,918 thousand) were incurred during the financial year. 

Total income of € 1,102 thousand (2014: € 0 thousand) was reported in connection with the sale of an office building at GfK Switzerland AG, Hergiswil, Switzerland.


12. Other financial income

Other financial income breaks down as follows:

2014 2015
Interest and similar income due from banks 712 897
Other interest income 1,350 1,277
Interest income 2,062 2,174
Miscellaneous other financial income 7,995 27,993
Other financial income 10,057 30,167

Miscellaneous other financial income mainly includes currency exchange gains on financial assets, financial receivables and financial liabilities, bank balances in foreign currency, as well as income from currency hedging transactions amounting to a total of € 24,275 thousand (2014: € 7,431 thousand). These amounts and their development must be seen in connection with the corresponding currency losses in other financial expenses.

Furthermore, other financial income essentially includes income from valuation adjustments of purchase price commitments for the acquisition of participations or assets (put options or obligations) amounting to € 3,681 thousand (2014: € 564 thousand) taken to the income statement.


13. Other financial expenses

Other financial expenses are composed as follows:

2014 2015
Interest and similar expenses due to banks 7,715 5,272
Other interest expenses 13,729 13,456
Interest expenses 21,444 18,728
Miscellaneous other financial expenses 12,970 29,704
Other financial expenses 34,414 48,432

Other interest expenses include € 10,100 thousand (2014: € 10,115 thousand) in interest expenses on a bond with a volume of € 186 million issued on April 1, 2011, on which interest is fixed at 5.0 percent. In addition, this item comprises € 1,120 thousand (2014: € 1,309 thousand) in interest expenses on future purchase price liabilities for acquisitions.

Miscellaneous other financial expenses mainly comprise currency exchange losses on financial assets, financial receivables and financial liabilities as well as bank accounts held in foreign currency amounting to € 26,678 thousand (2014: € 10,975 thousand). These amounts and their development must be seen in connection with the corresponding currency gains in other financial income.

Further information about the use of derivative financial instruments is provided in Section 29 “Financial instruments” and Section 30 “Risk management relating to market, credit and liquidity risks”.


14. Tax on income from ongoing business activity

The main elements of the Group’s income tax are shown in the following table:

2014 2015
Actual tax expenses/income
Tax on income for the current year 37,123 44,760
Tax income from the utilization of previously non-utilized tax losses –5,335 –1,301
Tax on income for previous years 924 –1,139
Actual tax expenses/income 32,712 42,320
Defered tax expenses/income
from the utilization of losses carried forward and interest carried forward or tax credits 8,429 17,348
from the formation or reversal of temporary differences 7,472 4,111
from write-ups and write-downs of additional assets identified on acquisitions –3,955 –1,205
based on previously not included tax losses and interest carried forward or tax credits –2,598 –1,226
from tax rate changes/new taxes 355 –1,435
based on the reassessment of the realizability of tax losses –9,633 –2,256
based on newly incurred and recognized tax losses and interest carried forward or tax credits –5,259 –10,992
Other deferred tax expenses 689 498
Deferred tax expenses/income –4,500 4,843
Tax on income from ongoing business activity 28,212 47,163

Income taxes are divided between Germany and other countries as follows:

2014 2015
Actual tax expenses/income 32,712 42,320
of which Germany 3,106 1,147
of which abroad 29,606 41,173
Deferred tax expenses/income –4,500 4,843
of which Germany 10,089 –4,805
of which abroad –14,589 9,648

The tax rate used to calculate deferred taxes for GfK SE and its German subsidiaries that form part of a tax group is composed of a corporation tax rate of 15 percent plus a solidarity surcharge of 5.5 percent on the specified corporation tax as well as the effective trade tax rate of 15.645 percent. This results in an unchanged tax rate of 31.470 percent as at December 31, 2015. 

The deferred taxes of the remaining German companies are calculated according to the relevant municipal factor of the trade tax rate. The deferred taxes of the companies outside Germany are calculated according to the country-specific tax rates. 

The table below contains a reconciliation of the expected income tax expense on the income tax stated in financial year 2015. To calculate the expected tax expense, the tax rate valid during the year under review for the parent company, GfK SE, amounting to 31.470 percent (2014: 31.470 percent) is multiplied by the income before taxes.

2014 2015
Total tax rate in percent 31.470 31.470
Expected tax expense 14,977 27,659
Increase/decrease in income tax expense resulting from:
Tax-exempt income –4,316 –4,429
Adjustment of deferred tax due to changes in tax rates 355 –1,435
Tax from prior years 988 –976
Change in temporary differences, losses carried forward, interest carried forward and tax credits not recognized as deferred tax assets –13,773 –683
Effects from purchase price obligations 239 –541
Change in permanent differences –39 –276
Deferred tax assets on new tax credits –13 –10
Income from at-equity participations that cannot be utilized for tax purposes –21 165
Differences in tax rate 2,756 1,019
Consolidation of taxable income from participations 1,271 3,060
Deviating tax base 2,128 3,312
Non-deductible expenses 6,309 5,820
Goodwill impairment 18,724 12,405
Other –1,373 2,073
Tax expenses reported 28,212 47,163

The following actual income tax assets and liabilities are recorded in the consolidated balance sheet:

Dec. 31, 2014 Dec. 31, 2015
Non-current income tax assets 4,051 3,811
Current income tax assets 1) 17,413 15,654
Total Income tax assets 21,464 19,465
Non-current income tax liabilities 0 0
Current income tax liabilities 15,522 13,545
Total Income tax liabilities 15,522 13,545
1) Additionally, current income tax assets amounting to € 51 thousand were included in assets held for sale as at December 31, 2015.

Non-current income tax assets are reported under the balance sheet item “non-current other assets and deferred items”.

Non-current income tax liabilities are included in the balance sheet item “non-current other liabilities and deferred items”.

The deferred taxes result from the balance sheet items shown in the following table:

Dec 31, 2014 Dec 31, 2015
Goodwill 485 508
Other intangible assets 1,369 1,236
Tangible assets 2,136 1,852
Investments in affiliates 4 3
Investments in associates and other participations 25 257
Other financial investments 2,202 1,240
Non-current other assets and deferred items 1,355 804
Non-current assets 7,576 5,900
Receivables and current other assets 1,063 778
Current securities and fixed-term deposits, cash and cash equivalents 0 12
Current assets 1,063 790
Long-term provisions 9,206 9,405
Non-current other liabilities and deferred items 834 5,130
Non-current liabilities 10,040 14,535
Short-term provisions 850 1,321
Current other liabilities and deferred items 21,804 23,794
Current liabilities 22,654 25,115
Losses carried forward 42,530 43,031
Interest carried forward/tax credits 16,306 13,349
Deferred tax assets 100,169 102,720
Goodwill –37,967 –46,032
Other intangible assets –74,365 –75,628
Tangible assets –2,520 –2,190
Investments in affiliates –2,904 –4,514
Investments in associates and other participations –32 –66
Other financial investments –3,655 –2,622
Non-current other assets and deferred items –732 –1,420
Non-current assets –122,175 –132,472
Receivables and current other assets –9,813 –11,253
Current securities and fixed-term deposits, cash and cash equivalents –25 –4
Current assets –9,838 –11,257
Long-term provisions –524 –174
Non-current other liabilities and deferred items –460 –274
Non-current liabilities –984 –448
Short-term provisions –380 –201
Current other liabilities and deferred items –941 –1,137
Current liabilities –1,321 –1,338
Deferred tax liabilities –134,318 –145,515
Net deferred tax liabilities –34,149 –42,795

The change in net deferred tax liabilities is included in the consolidated income statement in the amount of € –4,843 thousand (2014: € 4,500 thousand). An amount of € 2,082 thousand (2014: € 3,662 thousand) was posted to other comprehensive income. An effect amounting to € –5,301 thousand (2014: € –4,501 thousand) resulted from the currency valuation of the balance sheet items “Deferred tax assets”, “Deferred tax liabilities” and from taxes in other comprehensive income.

Deferred taxes are reported in the consolidated balance sheet as shown in the following table:

Dec. 31, 2014 Dec. 31, 2015
Deferred tax assets 41,373 43,578
Deferred tax liabilities –75,522 –86,373
Net deferred tax liabilities –34,149 –42,795
Deferred tax assets included in assets held for sale 0 397
Deferred tax liabilities included in liabilities held for sale 0 –282
Net deferred tax liabilities including assets and liabilities held for sale –34,149 –42,680

The change in income tax amounts connected with components of other comprehensive income are shown in the following table:

2014 2015
Taxes in other reserves from currency translation 0 1,891
Taxes in the other reserves from net investment hedges 284 117
Taxes in the other reserves from actuarial gains/losses on defined benefit plans 3,314 58
Taxes in other reserves from cash flow hedges 67 12
Taxes in other reserves from securities –3 4
Taxes posted to other comprehensive income 3,662 2,082

The breakdown of domestic and foreign tax loss carryforwards is shown in the following tables:

Dec. 31, 2014 Germany Abroad Total
Total tax loss carryforwards 24,311 177,993 202,304
Tax loss carryforwards - recognized as deferred tax - 16,806 128,427 145,233
Expiry within the next 5 years 0 26,834 26,834
Expiry within 5 to 10 years 0 42,638 42,638
Expiry within 10 to 15 years 0 31,178 31,178
Expiry in more than 15 years 0 16,340 16,340
No time limit 16,806 11,437 28,243
Tax loss carryforwards - not recognized as deferred tax - 7,505 49,566 57,071
Expiry within the next 5 years 0 15,747 15,747
Expiry within 5 to 10 years 0 4,599 4,599
Expiry within 10 to 15 years 0 0 0
Expiry in more than 15 years 0 0 0
No time limit 7,505 29,220 36,725

Dec. 31, 2015 Germany Abroad Total
Total tax loss carryforwards 30,715 170,827 201,542
Tax loss carryforwards - recognized as deferred tax - 28,987 116,145 145,132
Expiry within the next 5 years 0 23,004 23,004
Expiry within 5 to 10 years 0 20,627 20,627
Expiry within 10 to 15 years 0 42,010 42,010
Expiry in more than 15 years 0 12,865 12,865
No time limit 28,987 17,639 46,626
Tax loss carryforwards - not recognized as deferred tax - 1,728 54,682 56,410
Expiry within the next 5 years 0 15,942 15,942
Expiry within 5 to 10 years 0 11,055 11,055
Expiry within 10 to 15 years 0 101 101
Expiry in more than 15 years 0 243 243
No time limit 1,728 27,341 29,069

The estimate of future realizability governs the recognition and valuation of deferred tax assets. This is dependent on the generation of future taxable profits during accounting periods in which tax valuation differences are reversed and tax loss carryforwards, interest carried forward and tax credits can be applied. 

In view of expected future performance, it is assumed probable that the relevant benefits of the recognized deferred tax assets will be realized, according to the provisions of IFRS. For companies which reported deferred tax assets for tax loss carryforwards and which were in a loss-making situation in the year under review or the previous year, a deferred tax asset surplus of € 11,691 thousand (2014: € 6,672 thousand) was stated, since there is sufficient assumption of future profits. Of this, € 327 thousand are related to companies held for sale.

To assess this profit expectation, the Management Board has drawn upon past earnings situations and forecasted future results, calculated on the basis of approved business plans. Tax planning, information on as yet unused tax losses and tax credits from previous years as well as any other significant considerations were also used to test the intrinsic value.

In addition to the unrecognized tax loss carryforwards mentioned above, there are temporary differences amounting to € 11,481 thousand (2014: € 13,234 thousand) and interest carried forward or tax credits of € 390 thousand (2014: € 350 thousand) in the Group, for which no deferred tax assets have been recognized. The interest carried forward and tax credits not recognized as deferred tax assets have no time limit on their use.

The GfK Group recognizes deferred taxes on retained profits from foreign subsidiaries, provided that these profits are distributable and are to be distributed in the foreseeable future. No tax liabilities were deferred in relation to temporary differences amounting to € 17,780 thousand (2014: € 19,864 thousand) since there is no pay-out intention.

Pay-outs to shareholders of GfK SE do not result in income tax consequences at the level of GfK SE.


15. Earnings per share

The earnings per share are derived as shown below:

2014 2015
Consolidated total income attributable to equity holders of the parent 5,859 36,773
Weighted average of shares outstanding (number) - non-diluted - 36,503,896 36,503,896
Weighted average of shares outstanding (number) - diluted - 36,503,896 36,503,896
Earnings per share in € 0.16 1.01
Earnings per share (diluted) in € 0.16 1.01

There are no circumstances that may result in dilution.


16. Intangible assets

The movement in intangible assets is shown in the table below:

Acquisition and manufacturing costs Goodwill Internally generated intangible assets Miscellaneous intangible assets Total intangible assets
As at January 1, 2014 930,097 177,326 427,216 1,534,639
Exchange rate changes 62,135 839 32,950 95,924
Additions from business combinations 5,139 0 2,542 7,681
Other changes in the scope of consolidation 0 49 –83 –34
Additions 0 45,514 5,718 51,232
Disposals –1,985 –624 –1,767 –4,376
Reclassifications 0 –2,856 2,932 76
As at December 31, 2014 995,386 220,248 469,508 1,685,142
As at January 1, 2015 995,386 220,248 469,508 1,685,142
Exchange rate changes 58,692 –1,626 31,075 88,141
Additions from business combinations 4,437 398 3,525 8,360
Other changes in the scope of consolidation 0 0 0 0
Additions 0 59,696 8,856 68,552
Disposals –1,433 –2,143 –8,437 –12,013
Reclassification as assets held for sale –6,907 –7,799 –31,981 –46,687
Reclassifications 0 458 –279 179
As at December 31, 2015 1,050,175 269,232 472,267 1,791,674
Cumulative amortization
As at January 1, 2014 151,115 63,024 295,244 509,383
Exchange rate changes 12,064 596 21,658 34,318
Additions from business combinations 0 0 27 27
Other changes in the scope of consolidation 0 0 –28 –28
Additions 0 21,281 18,203 39,484
Disposals 0 –474 –1,753 –2,227
Impairments 59,498 136 9,496 69,130
Reversal of impairments 0 0 –4,422 –4,422
Reclassifications 0 –1,254 1,303 49
As at December 31, 2014 222,677 83,309 339,728 645,714
As at January 1, 2015 222,677 83,309 339,728 645,714
Exchange rate changes 14,173 848 20,885 35,906
Additions from business combinations 0 122 1,535 1,657
Other changes in the scope of consolidation 0 0 0 0
Additions 0 20,827 16,280 37,107
Disposals –96 –2,013 –8,517 –10,626
Reclassification as assets held for sale 0 –1,990 –22,694 –24,684
Impairments 39,418 20,337 4,889 64,644
Reversal of impairments 0 0 –4,003 –4,003
Reclassifications 0 220 –54 166
As at December 31, 2015 276,172 121,660 348,049 745,881
Carrying values
As at January 1, 2014 778,982 114,302 131,972 1,025,256
As at December 31, 2014 772,709 136,939 129,780 1,039,428
As at January 1, 2015 772,709 136,939 129,780 1,039,428
As at December 31, 2015 774,003 147,572 124,218 1,045,793

Additions from business combinations into goodwill result from company acquisitions in the reporting year. Further information on this is available in Section 4 “Scope of consolidation and major acquisitions”.

16.1 Goodwill

At the beginning of 2015, the carrying value of goodwill amounted to € 772,709 thousand (2014: € 778,982 thousand). At year-end, the carrying value stood at € 774,003 thousand. This represents an increase in goodwill of € 1,294 thousand (2014: decrease of € 6,273 thousand). Exchange-rate-related changes accounted for € 44,519 thousand (2014: € 49,592 thousand). Write-downs on goodwill in the Consumer Experiences sector amounted to € 39,418 thousand (2014: € 59,498 thousand) and disposals from the revaluation of purchase price obligations for the acquisition of participations to € 1,337 thousand (2014: € 1,506 thousand). The planned sale of market research activities in the area of crop protection and animal health reduced goodwill by € 6,907 thousand, because it was reclassified as an asset held for sale. Business combinations resulted in additions of € 4,437 thousand (2014: € 5,139 thousand).

The reported reduction in goodwill in the balance sheet based on the impairment converted with the average rate on the balance sheet date amounted to € 39,820 thousand (2014: € 62,524 thousand).

16.2 Internally generated intangible assets

The breakdown of internally generated intangible assets is as follows:

Dec. 31, 2014 With limited useful life With indefinite useful life Total
Software 101,134 0 101,134
Capitalized panel set-up costs 6,766 28,328 35,094
Other 711 0 711
Internally generated intangible assets 108,611 28,328 136,939

Dec. 31,2015 With limited useful life With indefinite useful life Total
Software 95,482 0 95,482
Capitalized panel set-up costs 18,368 31,116 49,484
Other 2,606 0 2,606
Internally generated intangible assets 116,456 31,116 147,572

Capitalized panel set-up costs have only a limited useful life if the panel was created for a specific, fixed-term client contract. Otherwise, capitalized panel set-up costs have an indefinite useful life.

16.3 Miscellaneous intangible assets

The breakdown of miscellaneous intangible assets is represented in the following tables:

Dec. 31, 2014 With limited useful life With indefinite useful life Total
Acquired panels 986 63,742 64,728
Customer relations 26,583 0 26,583
Brands 176 16,862 17,038
Software 14,847 0 14,847
Studies 152 0 152
Other 6,432 0 6,432
Miscellaneous intangible assets 49,176 80,604 129,780

Dec. 31, 2015 With limited useful life With indefinite useful life Total
Acquired panels 409 64,676 65,085
Customer relations 24,547 0 24,547
Brands 0 17,357 17,357
Software 13,590 0 13,590
Studies 0 0 0
Other 3,639 0 3,639
Miscellaneous intangible assets 42,185 82,033 124,218

16.4 Intangible assets with an indefinite useful life

Details of the allocation of significant goodwill to cash generating units are provided in the table below. The goodwill of cash generating units where the goodwill amounts to more than 5 percent of the total goodwill of the GfK Group is shown separately. The impairment as a result of the impairment test amounts to € 39,418 thousand (2014: € 59,498 thousand). This decline was more than compensated for by an exchange-rate-related increase in goodwill, so that an increase of € 1,294 thousand occurred in the current financial year (2014: € –6,273 thousand).

The impairments related to the Consumer Experiences sector in the Central Eastern Europe/META and Southern and Western Europe regions.

Dec. 31, 2014 Dec. 31, 2015
Consumer Experiences 413,293 402,079
of which
Northern Europe 212,070 228,940
North America 71,307 78,477
Central Eastern Europe / META 65,854 41,690
Other 64,062 52,972
Consumer Choices 359,416 371,924
of which
Northern Europe 149,880 151,291
North America 89,309 99,560
Southern and Western Europe 58,644 58,690
Other 61,583 62,383
Goodwill 772,709 774,003

Allocation of capitalized panel set-up costs for internally generated panels with indefinite useful life to the sectors is illustrated in the table below. The increase compared with the previous year in the Consumer Choices sector resulted from the set-up of a Mobile Audience Measurement Panel in the USA as well as the expansion of the Hospital Panel in Germany.

Dec. 31, 2014 Dec. 31, 2015
Consumer Experiences 20,298 19,595
Consumer Choices 8,030 11,521
Capitalized panel set-up costs with indefinite useful life 28,328 31,116

Allocation of the acquired panels with indefinite useful life to the sectors is shown in the table below. The change compared with the previous year in the Consumer Choices sector resulted, in particular, from the planned sale of the Crop Protection and Animal Health business. The increase in the Consumer Experiences sector was due to reversal of impairment of panels which were subject to impairments in previous years as well as positive exchange rate effects.

Dec. 31, 2014 Dec. 31, 2015
Consumer Experiences 38,245 45,261
Consumer Choices 25,497 19,415
Acquired panels with indefinite useful life 63,742 64,676

Brands identified and capitalized as part of purchase price allocation generally have an indefinite useful life. These are established, well-known brands.

The allocation of brands with an indefinite useful life to the sectors is indicated in the following table.

Dec. 31, 2014 Dec. 31, 2015
Consumer Experiences 3,607 2,575
Consumer Choices 13,255 14,782
Brands with indefinite useful life 16,862 17,357

16.5 Intangible assets of major importance

Intangible assets of major importance in the GfK Group are intangible assets with an individual carrying amount of more than € 5 million. The total values of these intangible assets of major importance that represent a subset of total intangible assets are shown in the following table.

Dec. 31, 2014 Dec. 31, 2015
Goodwill 772,709 774,003
Panels 36,947 63,711
Software 60,405 41,420
Brands 13,255 14,782

Software mainly contains the internally developed StarTrack analysis and production system in the Consumer Choices sector, which is constantly adjusted to client requirements. The individual components of the analysis and production system have a useful life of five years. In addition, the Drive software is included, which is currently being developed. This is a new end-to-end system of the Consumer Experiences sector. 

The software for the measurement of television research data and the ERP software (REACH), which were included last year, are now below the materiality threshold following scheduled amortization. Development activities for the Mobile Insight/Location Insight software were stopped in the previous year, and the software was impaired accordingly.

The brands category relates to a brand from purchase price allocation in connection with the acquisition of the former NOP World. The panels of major importance partially resulted from purchase price allocation under the acquisition of Knowledge Networks Inc., Menlo Park, California, USA. For the first time, the new television research panel in Brazil and the German Hospital Panel, a retail panel in the Consumer Choices sector, are included in this category.

16.6 Amortization, impairments and reversal of impairments of intangible assets

Amortization, impairments and reversals of impairment of intangible assets are included in the consolidated income statement under the items shown below:

2014 Amortization Impairments Reversal of impairments Total
Cost of sales –26,972 –6,913 1,954 –31,931
Selling and general administrative expenses –12,512 –1,622 1,385 –12,749
Other operating income 0 0 1,083 1,083
Other operating expenses 0 –60,595 0 –60,595
Total –39,484 –69,130 4,422 –104,192

2015 Amortization Impairments Reversal of impairments Total
Cost of sales –25,484 –919 3,131 –23,272
Selling and general administrative expenses –11,623 –1,216 872 –11,967
Other operating expenses 0 –62,509 0 –62,509
Total –37,107 –64,644 4,003 –97,748

Impairments are recorded when the carrying amount of the cash generating units tested is higher than the future recoverable amount. This is determined as the higher amount of the fair value less costs to sell and the value in use. The fair value less costs to sell is the amount that could be achieved between knowledgeable, willing parties that are independent of each other after deducting the costs to sell. Due to restrictions in determining the value in use, the fair value less costs to sell usually exceeds the value in use and consequently represents the recoverable amount for the GfK Group.

Where an intangible asset has been subject to impairment, there is a reversal if a higher amount is recoverable at a later date. The carrying value after the reversal must not exceed the carrying value, which would have resulted, had the impairment not taken place in the past.

The impairments result from impairment tests, which were based on updated capital market data as well as business plans. Impairment expenses are as follows:

2014 2015
Goodwill –59,498 –39,418
Software –98 –21,091
Panels –7,473 –1,629
Brands 0 –1,288
Customer relations –1,622 –1,208
Concessions 0 –10
Studies –439 0
Total –69,130 –64,644

Compared with the previous year, impairments remained nearly constant, whereby the distribution to the individual intangible assets changed significantly. Impairments on goodwill and panels decreased further during 2015 and totaled € 41,047 thousand (2014: € 66,971 thousand). In contrast, software impairments amounted to € 21,091 thousand (2014: € 98 thousand). These mainly resulted from the termination of network-based development activities for Mobile Insight/Location Insight. In addition, some modules of the CPIMS/NEO digital analysis and production platform were written off, due to a changed assessment of the technical realizability.

To determine if and to what extent an impairment of goodwill exists, an impairment test is carried out at least once a year. 

Overall, the write-downs on goodwill in the Consumer Experiences sector included in the balance sheet were attributable to the following regions:

2014 2015
Central Eastern Europe/META –36,058 –27,911
Southern and Western Europe –6,848 –11,909
Asia and the Pacific –13,187 0
Latin America –6,431 0
Total –62,524 –39,820

The required impairment resulted primarily from adjusted growth prospects in the above-mentioned regions.

The fair values less costs to sell of the cash generating units in the Consumer Experiences sector, which were subject to impairment in the reporting year or in the previous year, are shown in the following table.

Dec. 31, 2014 Dec. 31, 2015
Central Eastern Europe/META 84,361 62,410
Southern and Western Europe 71,244 70,039
Asia and the Pacific 29,906 48,792
Latin America 19,209 19,602

The following tables provide an overview of the goodwill tested in the impairment test as well as of the significant assumptions used in the impairment test. For reasons of materiality, only the cash generating units which exceed 5 percent of the total goodwill of the GfK Group are listed individually. All other cash generating units were summarized in the following tables in the “Other CE” and “Other CC” columns.

Consumer Experiences (CE) Northern Europe North America Central Eastern Europe/ META Other CE
Tested goodwill as at December 31, 2015 before impairment 228,940 78,477 69,601 66,401
Duration of the detailed planning period 5 years 5 years 5 years 5 years
Average annual growth of external sales in the detailed planning period 2 % 1 % 3 % 2 %
Average margin (adjusted operating income/external sales) in the detailed planning period 12 % 11 % 9 % 7 %
Growth per year after the end of the detailed planning period 1.3 % 1.3 % 1.3 % 1.3 %
Discount rate as at December 31, 2015 6.4 % 6.4 % 9.4 % 7.0% - 12.1%

Consumer Choices (CC) Northern Europe North America Southern and Western Europe Other
Tested goodwill as at December 31, 2015 before impairment 151,291 99,560 58,690 62,905
Duration of the detailed planning period 5 years 5 years 5 years 5 years
Average annual growth of external sales in the detailed planning period 3 % 5 % 3 % 9 %
Average margin (adjusted operating income/external sales) in the detailed planning period 12 % 32 % 28 % 32 %
Growth per year after the end of the detailed planning period 1.3 % 1.3 % 1.3 % 1.3 %
Discount rate as at December 31, 2015 6.4 % 6.4 % 7.0 % 7.3% - 12.1%

Recoverable amounts are determined on the basis of the forecast of future cash flows. Planning figures approved by the Management Board for the next five years are used for this purpose. These are based on past experience, current results of operations and the Management Board assessment of the expected market environment. These planning figures were validated again, both on a sector-specific and regional basis. Thus, the expected average annual growth of external sales is in line with past values and expectations of the management. Due to the uncertainty about future developments, a 20 percent haircut was applied to planned cash flows in the sector Consumer Experiences.

The planned margins are based on past empirical values. Future margin increases are expected in the Consumer Experiences sector from comprehensive use of technologies, further expansion of global operations with resource optimization centers, standardized data collection, improved processes, and a focus on global products. Anticipated additional growth in income is based on measures to increase efficiency and reduce costs.

The results of sensitivity checks required by IFRS are illustrated in the following.

A decrease of future cash flows by 10 percent would lead to a further impairment of goodwill of € 22,312 thousand (2014: € 21,507 thousand) in the Consumer Experiences sector. For the cash generating units already subject to impairment, an additional € 11,693 thousand (2014: € 7,554 thousand) would apply to the Southern and Western Europe region and € 9,358 thousand (2014: € 8,719 thousand) to the Central Eastern Europe/META region. In addition, a write-down of € 1,261 thousand (2014: € 2,024 thousand) would be required for the Latin America region.

An increase of the discount rate by 1 percentage point with unchanged cash flows would lead to an increase of the impairment of goodwill of € 16,753 thousand (2014: € 32,572 thousand) for the cash generating units. For the cash generating units already subject to impairment, an additional € 10,261 thousand (2014: € 10,048 thousand) would apply to the Southern and Western Europe region and € 6,492 thousand (2014: € 10,756 thousand) to the Central Eastern Europe/META region.

Even if the perpetuity growth rate of only 1.3 percent were already applied in the detailed planning for 2019 and 2020 for regions with higher growth rates, with all other planning assumptions unchanged, an additional impairment requirement would arise of € 2,292 thousand (2014: € 8,041 thousand). Of this, € 1,976 thousand (2014: € 4,080 thousand) would apply to the Central Eastern Europe/META region and € 316 thousand (2014: € 0 thousand) to the Southern and Western Europe region.

In the Consumer Choices sector, none of the illustrated parameter changes would lead to a need for impairment.

The recoverability of the capitalized panel set-up costs and brands with an indefinite useful life was also examined within the scope of impairment tests. 

The table below provides an overview of material intangible assets with an indefinite useful life examined as at the reporting date within the scope of impairment tests and the material assumptions used in the respective impairment test.

MRI brand Knowledge Panel Hospital Panel Physician's Consulting Network Panel
Carrying value 15,267 35,212 11,183 8,525
Basis of the recoverable amount Value in use Value in use Value in use Value in use
Duration of the detailed planning period 5 years 5 years 5 years 5 years
Sector Consumer Choices Consumer Experiences Consumer Choices Consumer Experiences
Average annual growth of external sales in the detailed planning period 2 % 3 % 51 % 40 %
Growth per year after the end of the detailed plan- ning period 1.3 % 1.3 % 1.3 % 1.3 %
Discount rate 6.8 % 6.8 % 6.4 % 8.9 %

17. Tangible assets

The movement in tangible assets is shown in the following table.

Land and buildings Fixtures and fittings Total tangible assets
Acquisition and manufacturing costs
As at January 1, 2014 48,687 259,427 308,114
Exchange rate changes 415 20 435
Additions from business combinations 0 440 440
Other changes in the scope of consolidation 0 –666 –666
Additions 221 37,720 37,941
Disposals –22 –27,023 –27,045
Reclassifications –2,257 2,181 –76
As at December 31, 2014 47,044 272,099 319,143
As at January 1, 2015 47,044 272,099 319,143
Exchange rate changes 2,350 –1,383 967
Additions from business combinations 0 128 128
Other changes in the scope of consolidation 0 47 47
Additions 0 25,626 25,626
Disposals –14,123 –17,976 –32,099
Reclassification as assets held for sale 0 –4,470 –4,470
Reclassifications –124 –55 –179
As at December 31, 2015 35,147 274,016 309,163
Cumulative depreciation
As at January 1, 2014 21,374 183,142 204,516
Exchange rate changes 217 –529 –312
Additions from business combinations 0 406 406
Other changes in the scope of consolidation 0 –650 –650
Additions 1,098 23,891 24,989
Disposals –22 –26,667 –26,689
Impairments 0 1,109 1,109
Reversal of impairments 0 –36 –36
Reclassifications –2,080 2,031 –49
As at December 31, 2014 20,587 182,697 203,284
As at January 1, 2015 20,587 182,697 203,284
Exchange rate changes 1,167 1,240 2,407
Additions from business combinations 0 51 51
Other changes in the scope of consolidation 0 23 23
Additions 726 25,651 26,377
Disposals –7,601 –17,334 –24,935
Impairments 229 714 943
Reversal of impairments 0 0 0
Reclassification as assets held for sale 0 –4,062 –4,062
Reclassifications 0 –166 –166
As at December 31, 2015 15,108 188,814 203,922
Carrying values
As at January 1, 2014 27,313 76,285 103,598
As at December 31, 2014 26,457 89,402 115,859
As at January 1, 2015 26,457 89,402 115,859
As at December 31, 2015 20,039 85,202 105,241

17.1 Leasing

The GfK Group is the lessee of office space and business equipment within the scope of long-term lease agreements. The lease installments generally consist of a minimum lease payment plus a contingent lease payment, the amount of which is dependent on the scope of use of the leased asset. In cases in which the GfK Group takes over the risks and opportunities from the use of the leased asset to a substantial extent, they are capitalized (finance lease). Otherwise, the lease installments are recorded as an expense (operating lease).

Operating lease

Within the scope of operating lease agreements, the payments listed in the following table were carried as expenses:

2014 2015
Minimum lease payments 49,260 49,744
Contingent lease payments 93 110
Less sub-lease payments received –471 –548
Lease payments 48,882 49,306

Future minimum lease payments under non-terminable agreements were due as follows:

Dec. 31, 2014 Dec. 31, 2015
Within 1 year 40,437 46,996
Between 1 and 5 years 99,414 107,091
After more than 5 years 55,513 53,098
Future minimum lease payments from operating leases 195,364 207,185

The significant operating lease agreements in the GfK Group are land and building lease agreements, some with the option to extend the lease. They expire at different dates in the future.

Finance Lease

The carrying values of assets leased and capitalized as part of finance lease agreements stood at € 257 thousand as at December 31, 2015 (2014: € 320 thousand), and mainly related to fixtures and fittings.

The present value and dates on which future minimum lease payments are due were determined as shown in the tables below.

Dec. 31, 2014
Payable Minimum lease payments Less interest Present value of minimum lease payments
Within 1 year 178 9 169
Between 1 and 5 years 21 2 19
After more than 5 years 0 0 0
Future minimum lease payments 199 11 188

Dec. 31, 2015
Payable Minimum lease payments Less interest Present value of minimum lease payments
Within 1 year 41 9 32
Between 1 and 5 years 87 21 66
After more than 5 years 0 0 0
Future minimum lease payments 128 30 98

During the year under review, there were no contingent lease installments to be recognized as expenses. There are no sublease arrangements under finance lease agreements.

Finance lease liabilities amounted to € 98 thousand (2014: € 188 thousand), of which € 32 thousand (2014: € 169 thousand) have a remaining term of less than one year.


18. Financial assets

18.1 Investments in associates

The GfK Group’s investments in associates are shown in the list of shareholdings in Section 41 of these Notes, where is also stated which associated companies are not subject to at-equity valuation for reasons of materiality.

The 25 percent share in NPD Intelect, L.L.C., Port Washington, New York, USA, which was classified as material in the previous year, was sold on November 23, 2015, when the cross-shareholding with The NPD Group, Inc., USA, was terminated. In this connection, the shareholdings in non-material associates Oz Toys Marketing Services Pty. Ltd., Sydney, Australia, and Sports Tracking Europe B.V., Amstelveen, Netherlands, were also sold. Details about this transaction are provided in Section 25.4 “Equity change statement”. 

During the period under review, NPD Intelect did not distribute any dividends to the parent company, GfK US Holdings, Inc., Wilmington, Delaware, USA (2014: € 6,098 thousand).

The income amounting to € 11,219 thousand from the sale is included in other operating income.

The GfK Group holds shares in various non-material associates.

The table below provides the aggregated financial information of all non-material associates valued at equity:

2014 2015
Pro rata carrying value as at December 31 3,096 651
Pro rata total income for the peroid 782 –4,310

The interest in non-material USEEDS GmbH, Berlin, Germany, was reclassified as an asset held for sale with a carrying value of € 2,595 thousand, because the process of selling the shares had started as at the reporting date.

The pro rata carrying value and pro rata income for the period include impairments amounting to € 2,168 thousand (2014: € 0 thousand).

The pro rata total income indicated in the table above does not include any unreported shares of losses on non-material associates valued at equity. For the current year, these shares of losses amount to € 348 thousand (2014: € 2,798 thousand). The accumulated loss shares amount to € 348 thousand (2014: € 5,745 thousand).

Disclosures on associates, which are not valued at equity, and two joint operations in the GfK Group were waived for reasons of materiality.

18.2 Other financial assets

The breakdown of other financial assets is provided in the following table.

Dec. 31, 2014 Dec. 31, 2015
Shares in affiliated companies 4,734 2,930
Other participations 915 970
Loans to affiliated companies 2,020 1,001
Loans to associates 690 156
Other loans 313 551
Other available-for-sale securities 306 2
Long-term fixed deposits 10 3
Other financial assets 8,988 5,613

The shares in affiliated, non-consolidated companies and other participations are classified as available for sale and reported at amortized cost, as no market prices exist for them, other methods of realistically estimating the fair value are not practicable, and determining the market value reliably would only be possible as part of concrete acquisition negotiations. A sale of the shares is not currently intended.

Further information on the GfK Group shares in affiliated companies and other participations is provided in the list of shareholdings in Section 41 of these Notes.


19. Other assets and deferred items

The breakdown of non-current and current other assets and deferred items by financial and non-financial other assets and deferred items is shown in the following table.

Dec. 31, 2014 Dec. 31, 2015
Financial non-current other assets and deferred items 4,757 10,985
Non-financial non-current other assets and deferred items 9,281 9,844
Non-current other assets and deferred items 14,038 20,829
Financial current other assets and deferred items 10,560 14,228
Non-financial current other assets and deferred items 29,290 24,134
Current other assets and deferred items 39,850 38,362

Financial other assets and deferred items are as follows:

Dec. 31, 2014 Dec. 31, 2015
Financial non-current other assets and deferred items with a remaining term of more than 1 year
Non-derivatives:
Assets from the sale of real estate 0 3,761
Deposits 2,800 3,405
Interest receivables 359 364
Receivables from suppliers 25 25
Credit balances, refund claims 11 7
Remaining financial non-current other assets and deferred items 33 179
Subtotal: non-derivatives 3,228 7,741
Derivatives:
Derivative financial instruments not used as hedges 1,529 3,226
Derivative financial instruments used as hedges 0 18
Subtotal: derivatives 1,529 3,244
Financial non-current other assets and deferred items 4,757 10,985
Financial current other assets and deferred items with a remaining term of up to 1 year
Non-derivatives:
Receivables from suppliers 2,028 2,908
Deposits 2,978 2,514
Credit balances, refund claims 2,236 2,340
Receivables from customers 174 924
Interest receivables 185 842
Bills receivables 617 588
Remaining financial current other assets and deferred items 960 1,242
Subtotal: non-derivatives 9,178 11,358
Derivatives:
Derivative financial instruments not used as hedges 1,382 2,663
Derivative financial instruments used as hedges 0 207
Subtotal: derivatives 1,382 2,870
Financial current other assets and deferred items 10,560 14,228
Total financial other assets and deferred items 15,317 25,213
of which non-derivatives 12,406 19,099
of which derivatives 2,911 6,114

The assets from the sale of real estate are related to a payment that is not yet due from the sale of real estate by GfK Switzerland AG, Hergiswil, Switzerland.

The movement in valuation allowances on other assets and deferred items is shown in the table below.

Valuation allowances on other assets and deferred items 2014 2015
As at January 1 1,952 1,489
Additions 0 0
Releases 0 0
Utilization –453 –992
Changes in the scope of consolidation and other effects –10 –50
As at December 31 1,489 447

Non-financial other assets and deferred items are as follows:

Dec. 31, 2014 Dec. 31, 2015
Non-financial non-current other assets and deferred items with a remaining term of more than 1 year
Receivables from tax and other autorities 3,645 4,606
Receivables from income taxes 4,051 3,811
Deferred items 1,307 1,254
Miscellaneous non-financial non-current other assets and deferred items 278 173
Non-financial non-current other assets and deferred items 9,281 9,844
Non-financial current other assets and deferred items with a remaining term of up to 1 year
Deferred items 18,586 16,605
Receivables from tax and other autorities 3,990 4,812
Receivables from employees 2,473 1,577
Miscellaneous non-financial current other assets and deferred items 4,241 1,140
Non-financial current other assets and deferred items 29,290 24,134
Total non-financial other assets and deferred items 38,571 33,978

20. Trade receivables

The breakdown of trade receivables is as follows:

Dec. 31, 2014 Dec. 31, 2015
Trade receivables before valuation allowances 391,944 402,134
Less valuation allowances –7,250 –5,877
Trade receivables 384,694 396,257

The movement in valuation allowances on trade receivables is shown in the table below.

Valuation allowances on trade receivables 2014 2015
As at January 1 8,038 7,250
Additions 2,383 3,138
Releases –1,557 –2,230
Utilization –1,918 –2,347
Changes in the scope of consolidation and other effects 304 66
As at December 31 7,250 5,877

Any addition to valuation allowances is reported in the consolidated income statement under selling and general administrative expenses.


21. Short-term securities and fixed-term deposits

Short-term securities and fixed-term deposits amounting to € 1,456 thousand (2014: € 945 thousand) include money market funds amounting to € 1,435 thousand (2014: € 927 thousand).


22. Cash and cash equivalents

The composition of cash and cash equivalents is shown in the following table.

Dec. 31, 2014 Dec. 31, 2015
Credit balances with banks 80,138 120,724
Cash equivalents and fixed-term deposits with a term of less than 3 months 13,451 9,639
Checks in transit –832 –1,252
Cash on hand and checks 423 348
Cash and cash equivalents 93,180 129,459

There are no significant restrictions on the availability of cash and cash equivalents.


23. Assets and liabilities held for sale

The GfK Group plans to sell the market research business in the area of Crop Protection and Animal Health in the first half of 2016. This comprises GfK Kynetec Group Limited, St. Peter Port, Guernsey, UK, GfK Kynetec Limited, London, UK, and GfK Kynetec France SAS, Saint Aubin, France (share deals), as well as a few asset deals. The process of selling these companies and the assets and liabilities within the scope of the asset deals has started. The assets and liabilities included in the above-mentioned share and asset deals therefore fulfill the prerequisites for recognition as held for sale. The business to be sold is assigned to the Consumer Choices sector. The accumulated income in connection with this disposal group, which is included in other reserves, amounted to € 5,180 thousand on December 31, 2015.

GfK Switzerland AG, Hergiswil, Switzerland, planned to sell the Print Center, its previously in-house printing shop, as part of an asset deal in January 2016. The sale was completed on January 18, 2016. The business sold was previously assigned to Other.

The 50 percent shareholding in associate USEEDS GmbH, Berlin, Germany, is to be sold in the first half of 2016. Concrete negotiations with a potential buyer started at the end of 2015. The sale was completed on March 9, 2016. The USEEDS business is assigned to the Consumer Experiences sector.

All assets of the above-mentioned companies and the assets to be sold as part of asset deals are separately listed in the balance sheet item “Assets held for sale”. The debt of the disposal group is reported under “Liabilities held for sale”. The table below provides a breakdown of these balance sheet items.

Dec. 31, 2015 Sale of Crop Protection and Animal Health business Sale of Print Center in Switzerland Sale of USEEDS shares Total
Assets held for sale
Goodwill 6,907 0 0 6,907
Other intangible assets 15,096 0 0 15,096
Shares in associates 0 0 2,595 2,595
Other non-current assets 2,459 242 0 2,701
Trade receivables 8,966 319 0 9,285
Other current assets 2,824 0 0 2,824
Assets held for sale 36,252 561 2,595 39,408
Liabilities held for sale
Non-current liabilities 393 354 0 747
Trade payables 1,023 116 0 1,139
Liabilities on orders in progress 2,591 0 0 2,591
Other current liabilities 3,027 70 0 3,097
Liabilities held for sale 7,034 540 0 7,574

No impairment of non-current assets that were classified as assets held for sale occurred.


24. Due dates of assets

The trade receivables are due for payment as shown in the table below.

Dec. 31, 2014 Dec. 31, 2015
Trade receivables 384,694 396,257
from which: neither impaired nor overdue 258,461 278,880
from which: not impaired and overdue as follows
by up to 30 days 68,764 70,202
by between 31 and 90 days 39,051 33,006
by between 91 and 180 days 10,663 9,186
by between 181 and 360 days 5,624 3,134
by more than 360 days 1,792 1,582
from which: new terms negotiated as otherwise overdue 339 267

In the GfK Group, a considerable portion of the trade receivables is due on the billing date.

With regard to trade receivables with no impairment, there was at the reporting date no indication of circumstances that may negatively affect their value.

Current other assets and deferred items fall due for payment as shown in the table below.

Dec. 31, 2014 Dec. 31, 2015
Current other assets and deferred items (excluding inventories and receivables from employees) 37,369 36,750
from which: neither impaired nor overdue 34,580 32,713
from which: not impaired and overdue as follows
by up to 30 days 1,773 3,436
by between 31 and 90 days 578 430
by between 91 and 180 days 243 3
by between 181 and 360 days 145 16
by more than 360 days 49 152
from which: new terms negotiated as otherwise overdue 1 0

With regard to non-impaired current other assets and deferred items, there was no indication as at the reporting date that the debtors would be unable to fulfill their payment obligations.


25. Equity

25.1 Subscribed capital

GfK SE’s share capital was unchanged in financial year 2015.

The 36,503,896 no-par shares issued are fully paid in. Each shareholder is entitled to receive dividends on his shares in accordance with the respective profit distribution resolution. Each of these no-par common shares grants one vote at the Annual General Assembly.

25.2 Authorized capital

The authorized capital approved by the Annual General Assembly on May 26, 2011, was canceled by resolution of the Annual General Assembly on May 28, 2015, and the Management Board was authorized, with the consent of the Supervisory Board, to increase the share capital of GfK SE against cash and/or contributions in kind on one or more occasions until May 27, 2020, by up to a total amount of € 55,000 thousand, whereby the shareholders’ subscription rights may be excluded.

25.3 Contingent capital

The contingent capital III approved by the Annual General Assembly on May 16, 2012, was canceled by resolution of the Annual General Assembly on May 28, 2015.

Furthermore, the Annual General Assembly resolved on May 28, 2015, to increase the company’s contingent capital by up to € 21,000 thousand divided into up to 5,000,000 new no-par bearer shares which carry dividend rights as of the start of the financial year in which they are issued. The new contingent capital is used to grant shares to holders or creditors of options and/or convertible bonds.

The contingent capital of GfK SE totaled € 21,000 thousand as at December 31, 2015.

25.4 Equity change statement

The equity change statement precedes these Notes. 

The positive change in the difference from currency translation of € 66,343 thousand (2014: € 63,030 thousand) resulted mainly from the devaluation of the euro against the U.S. dollar and pound sterling. The values exclude minority interests.

The change in actuarial gains and losses amounting to € –3,066 thousand (2014: € –11,314 thousand) results mainly from the change in the Swiss franc exchange rate as well as from value adjustments based on experience in the context of the valuation of pension obligations arising from defined benefit plans.

Of the amounts reported under other reserves, no material gains or losses were transferred to the income statement in financial year 2015, as was also the case in 2014.

In the reporting year, € 23,728 thousand (2014: € 23,728 thousand) was distributed to shareholders of the GfK SE. This corresponds to € 0.65 (2014: € 0.65) per share.

A total of € 5,411 thousand (2014: € 6,213 thousand) was paid out to minority interests. Total comprehensive income attributable to minority interests amounted to € 1,436 thousand (2014: € 15,181 thousand). This mainly comprises the share of consolidated total income attributable to minority interests amounting to € 3,956 thousand (2014: € 13,519 thousand) as well as the share of the change in the translation reserve attributable to minority interests amounting to € –2,583 thousand (2014: € 1,676 thousand).

The negative change in the share of the translation reserve attributable to minority interests is due to an equity transaction, which is also reflected in changes in ownership interests in subsidiaries without a change of control.

On November 23, 2015, GfK and The NPD Group, Inc., USA, ended their cross- shareholdings and cooperation in the Consumer Choices sector, and entered into a new contractual strategic partnership. The NPD Group previously held participations in the following fully consolidated GfK subsidiaries with the respectively specified percentage:

› GfK Retail and Technology GmbH, Nuremberg, Germany (5.0 percent)

› ENCODEX International GmbH, Nuremberg, Germany (5.0 percent)

› GfK Retail and Technology Argentina S.A., Buenos Aires, Argentina (3.2 percent)

› GfK Marketing Services Japan K.K., Tokyo, Japan (10.8 percent)

› GFK LATINOAMERICA HOLDING, S.L., Valencia, Spain (32.5 percent)

› GfK Retail and Technology Asia Holding B.V., Amsterdam, Netherlands (10.5 percent)

GfK held shareholdings with significant influence in several subsidiaries of the NPD Group, classified from a GfK Group perspective as associated companies, and participated in the profits of certain business activities. The divestiture resulted in the termination of all reciprocal participations.

This transaction led to a decrease in retained earnings of € 22,610 thousand and in the corresponding minority interests of € 34,678 thousand.

25.5 Proposed appropriation of profits

In accordance with the German Stock Corporation Act (AktG), the dividend that may be distributed is determined by the retained profit reported in the annual financial statements of the parent company GfK SE. These are prepared under the provisions of the German Commercial Code (HGB). The retained earnings and retained profit of GfK SE reported under the provisions of the HGB are available for distribution to the shareholders in their entirety. The capital reserve may not be distributed to shareholders.

A proposal will be made to the Annual General Assembly to distribute a dividend of € 23,728 thousand (€ 0.65 per no-par share) to shareholders out of the retained profit for 2015 of € 49,577 thousand and to transfer € 25,849 thousand to other retained earnings.


26. Provisions

26.1 Long-term provisions

The breakdown of long-term provisions is shown in the table below:

Dec. 31, 2014 Dec. 31, 2015
Pension provisons 64,326 66,357
Other long-term provisions 14,990 14,220
Long-term provisions 79,316 80,577

Pension provisions

Pension commitments are based on statutory or contractual arrangements or are on a voluntary basis. Pension provisioning within the GfK Group is based both on defined contribution plans and defined benefit plans for each company.

For defined contribution plans, which are financed on the basis of external funds or insurance, there are no further obligations for GfK companies other than paying contributions. Expenses for defined contribution plans also include employer contributions to statutory pension plans.

The basis of assessment for contributions to defined contribution plans is mainly the length of service with the company and the wage or salary level of the employee. However, the benefits can vary depending on the legal, fiscal and economic framework conditions of the country concerned. The expenses for defined contribution plans amounted to € 24,294 thousand in 2015 (2014: € 22,770 thousand).

The pension obligations arising from defined benefit plans are reported according to the projected unit credit method. Actuarial reports are produced annually by independent actuaries for defined benefit plans. The actuaries apply actuarial calculations to determine the level of the pension obligations. The provisions to be reported are the balance from the pension obligations, the asset ceilings and the asset values. Determining the present value of defined benefit plans and pension assets is based on economic and demographic assumptions, such as future salary increases and mortality rates.

Discrepancies between the actual values and the values expected on the basis of the assumptions are expressed as actuarial gains or losses (revaluations). Actuarial gains and losses are recognized in other comprehensive income. In the year under review, actuarial losses of € 3,143 thousand (2014: € 14,620 thousand) were posted in this way. This change also comprises the effects of currency translation. The cumulative amount recognized in other reserves in this respect totaled € –40,556 thousand as at December 31, 2015 (2014: €–37,413 thousand). 

The values indicated represent the relevant figures before deferred taxes and excluding minority interests.

The calculation of obligations is based on the actuarial and statistical assumptions listed in the table below (weighted averages):

2014 2015
Discount rate 1.67% 1.51%
Rate of salery increase 1.78% 2.25%
Fluctuation rate 4.80% 5.03%
Expected growth in pension 0.74% 0.65%

Mortality rates for GfK companies in Germany were taken from the 2005 G guideline tables by Dr. Klaus Heubeck. The mortality rates for Switzerland were taken from the BVG 2010 actuarial table.

The breakdown of pension provision reported in the consolidated balance sheet is shown below:

Dec. 31, 2014 Dec. 31, 2015
Present value of overall obligations 133,125 137,239
Fair value of the plan assets –68,834 –70,903
Net present value of obligations 64,291 66,336
Pension provisions 64,326 66,357
Other assets –35 –21
Net amount reported on balance sheet 64,291 66,336

Pension arrangements for major defined benefit plans are outlined in the following:

GfK Switzerland AG, Hergiswil, Switzerland, accounted for € 80,183 thousand (2014: € 74,084 thousand) of the defined benefit obligation and € 70,207 thousand (2014: € 67,998 thousand) of the plan assets. The plan is a modified contribution plan, where benefits for retirement include a guaranteed minimum interest rate and set conversion rates. The benefits covering risks (invalidity and surviving dependents) are defined benefits. They go beyond the statutory minimum benefits in every case. The pension fund has a legal status as a foundation, which is a legal entity in its own right. The foundation is responsible for capital investments and pursues a more conservative investment strategy within prescribed margins.

GfK SE accounted for € 46,985 thousand (2014: € 48,312 thousand) of the defined benefit obligation and € 262 thousand (2014: € 248 thousand) of plan assets. The benefit obligations are largely based on individual commitments to senior executives. The form of these commitments is explained in greater detail in the remuneration report in Section 4.8 of the Group Management Report.

GfK does not see any unusual company or plan-specific risks for either case, or any significant risk concentration arising from these pension plans.

The movement in the defined benefit obligation (DBO) during the period under review is shown in the table below.

2014 2015
Present value of defined benefit obligation as at January 1 108,341 133,125
Changes in the scope of consolidation –34 0
Current service cost 3,410 5,076
Interest cost 3,033 2,291
Participants contributions 1,589 1,592
Actuarial gain and losses from demographic assumptions –97 –116
Actuarial gain and losses from financial assumptions 20,067 1,750
Actuarial gain and losses from experience-related assumptions –155 –2,037
Exchange rate changes 1,527 8,334
Benefits paid –4,549 –10,222
Reclassification into liabilities held for sale 0 –2,544
Past service costs 82 –28
Company mergers 0 194
Plan reductions –43 –202
Plan settlements –46 26
Present value of defined benefit obligations as at December 31 133,125 137,239

The following sensitivity analysis helps to approximately quantify the risk that can arise under certain assumed conditions if specific parameters change. The table gives an overview of how a change in the relevant actuarial assumptions would affect the present value of the defined benefit obligation while all other factors remain constant. The table below is based on the present value of the defined benefit obligation without taking account of the reclassification into liabilities held for sale.

2014 2015
Present value of defined benefit obligations as at December 31 133,125 139,783
Present value of defined benefit obligations, if
the discount rate was
0.5 percentage points higher 124,094 131,295
0.5 percentage points lower 142,896 149,460
the salary increase rate was
0.1 percentage points higher 133,350 139,964
0.1 percentage points lower 132,898 139,602
the pension increase rate was
0.1 percentage points higher 134,555 140,804
0.1 percentage points lower 132,233 138,772

The table below shows the development of plan assets:

2014 2015
Fair value of plan assets as at January 1 58,975 68,834
Expected return on plan assets 1,454 869
Actuarial gains and losses 5,455 –1,320
Exchange rate changes 1,289 7,554
Employer contributions 2,592 2,693
Participant contribution 1,589 1,592
Benefits paid –2,520 –7,239
Reclassification into liabilities held for sale 0 –2,080
Fair value of the plan assets as at December 31 68,834 70,903

The exchange rate changes shown in the tables mainly reflect the appreciation of the Swiss franc.

In the next two tables, the fair value of the plan assets is split into various asset classes that distinguish the nature and risks of those assets. There is a further split into assets for which there is a quoted market price in an active market and assets for which this is not the case.

2014
Market price in an active market No market price in an active market Total
Cash and cash equivalents 680 0 680
Equity instruments 19,719 0 19,719
Debt instruments 27,199 0 27,199
Real estate 3,400 11,560 14,960
Investment funds 248 0 248
Insurance contracts 0 259 259
Miscellaneous 5,440 329 5,769
Fair value of the plan assets as at December 31 56,686 12,148 68,834

2015
Market price in an active market No market price in an active market Total
Cash and cash equivalents 702 0 702
Equity instruments 20,360 0 20,360
Debt instruments 28,083 0 28,083
Real estate 3,510 11,935 15,445
Investment funds 262 0 262
Insurance contracts 0 42 42
Miscellaneous 5,617 392 6,009
Fair value of the plan assets as at December 31 58,534 12,369 70,903

The actual results from the plan assets amounted to € –391 thousand (2014: € 6,910 thousand) in the year under review.

According to GfK estimates, contributions of around € 2,526 thousand will be payable into pension plans for Germany and Switzerland over the coming year (2014: € 2,300 thousand). GfK expects pension payments of € 3,758 thousand (2014: € 3,357 thousand) for the year thereafter. The weighted duration of the defined benefit obligation is 14 years (2014: 15 years).

The amounts reported in the consolidated income statement break down as shown in the table below:

2014 2015
Service cost 3,410 5,076
Interest cost 3,032 2,291
Expected return on plan assets –1,454 –869
Past service costs 82 –28
Gains and losses from the curtailment or discontinuation of pension plans –89 –176
Interest cost from asset ceiling 2 0
Pension expenses 4,983 6,294

Long-term other provisions

The development of long-term other provisions in the period under review is shown in the table below:

Personnel Potential contractual losses Authorities and insurances companies Legal, consulting and lawsuits Other Total
As at January 1, 2015 9,123 1,855 3,164 762 86 14,990
Currency effects 68 201 –574 49 8 –248
Write-ups to discounted provisions 0 63 0 20 0 83
Additions 4,115 907 220 58 1 5,301
Reclassification –2,424 –1,111 0 –470 0 –4,005
Utilization –1,049 0 –372 –144 0 –1,565
Relese –304 0 –31 0 –1 –336
As at December 31, 2015 9,529 1,915 2,407 275 94 14,220

Personnel provisions mainly relate to long-term incentive programs of € 5,235 thousand (2014: € 4,053 thousand). They also include commitments relating to employees leaving and from provisions for anniversary expenses based on contractual agreements.

Provisions relating to authorities and insurance companies consist mainly of commitments to social insurance providers.

26.2 Short-term provisions

The development of short-term provisions in the year under review is shown in the table below:

Personnel Potential contractual losses Authorities and insurances companies Legal, consulting and lawsuits Other Total
As at January 1, 2015 9,994 1,727 9,311 15,122 488 36,642
Currency effects –81 111 –450 –959 –3 –1,382
Additions 2,767 315 1,526 1,235 720 6,563
Reclassification 2,424 1,111 0 470 0 4,005
Utilization –7,416 –1,818 –4,247 –12,661 –447 –26,589
Relese –798 –7 –308 –866 –2 –1,981
As at December 31, 2015 6,890 1,439 5,832 2,341 756 17,258

Short-term provisions include a reserve of € 3,246 thousand (2014: € 19,910 thousand) for anticipated payments in connection with irregularities at GfK Arastirma Hizmetleri A.S., Istanbul, Turkey. This reserve is divided into the categories of “Legal, consulting and lawsuits” as well as “Authorities and insurance companies”.

Personnel provisions mainly relate to long-term incentive programs of € 3,792 thousand (2014: € 3,334 thousand). They also include commitments relating to employees leaving and from provisions for anniversary expenses based on contractual agreements.


27. Interest-bearing financial liabilities

The breakdown of financial liabilities is shown in the tables below.

Dec. 31, 2014 Remaining term
Total Up to 1 year More than 1 year Of which between 1 and 5 years Of which more than 5 years
Amounts due to banks 188,278 39,287 148,991 24,339 124,652
Liabilities under finance lease 188 168 20 20 0
Liabilities from bond 199,348 0 199,348 199,348 0
Other financial liabilities 35,129 24,273 10,856 10,804 52
Interest-bearing financial liabilities 422,943 63,728 359,215 234,511 124,704

Dec. 31, 2015 Remaining term
Total Up to 1 year More than 1 year Of which between 1 and 5 years Of which more than 5 years
Amounts due to banks 250,086 1,136 248,950 188,996 59,954
Liabilities under finance lease 98 32 66 66 0
Liabilities from bond 185,970 185,970 0 0 0
Other financial liabilities 28,377 21,031 7,346 7,293 53
Interest-bearing financial liabilities 464,531 208,169 256,362 196,355 60,007

The amounts due to banks with a remaining term of more than five years relate to a € 60 million loan note, of which € 25 million is due in 2022 and € 35 million in 2023.

In March 2015, GfK SE canceled a variable note loan of € 40 million and simultaneously increased it at better conditions to € 90 million with terms of three and five years. As a result, the volume in the remaining term of more than one year increased to € 249 million.

The five-year bond with a carrying value of € 185,970 thousand (2014: € 199,348 thousand) has a remaining term of less than one year and a fixed interest rate of 5.0 percent. It was placed by GfK SE in April 2011. In May 2015, part of the bond with a nominal volume of € 13,883 thousand was bought back. To fully refinance the maturing bond, GfK SE has already concluded several bilateral forward bank loans amounting to € 70 million and note loans of € 130 million with terms of between 3 and 12 years. These funding instruments will be disbursed in February and March 2016 and are therefore not yet included in the financial liabilities.

In addition, other financial liabilities include loan liabilities amounting to € 21,395 thousand (2014: € 20,405 thousand). Other financial liabilities also comprise purchase price liabilities which depend on future events (put options and obligations from earn-out agreements) for the acquisition of participations amounting to € 6,908 thousand (2014: € 14,589 thousand).

As at December 31, 2015, the weighted average interest rate for the amounts due to banks was 1.86 percent after interest rate hedging (2014: 2.80 percent).

The financial liabilities become due in the next five years and thereafter, as shown in the table below.

Dec. 31, 2014 Dec. 31, 2015
Within 1 year 1) 63,728 208,169
1 to 2 years 202,055 5,510
2 to 3 years 6,920 43,379
3 to 4 years 141 40,491
4 to 5 years 25,395 106,975
More than 5 years 124,704 60,007
Interest-bearing financial liabilities 422,943 464,531
1) Includes current account liabilities payable on demand in the context of credit lines

As in the previous year, no collateral is in place for amounts due to banks and liabilities under leases of € 250,184 thousand (2014: € 188,466 thousand).


28. Other liabilities and deferred items

The non-current and current items relating to other liabilities and deferred items are divided into financial and non-financial other liabilities and deferred items as follows:

Dec. 31, 2014 Dec. 31, 2015
Financial non-current other liabilities and deferred items 3,609 10,016
Non-financial non-current other liabilities and deferred items 6,148 7,403
Non-current other liabilities and deferred items 9,757 17,419
Financial current other liabilities and deferred items 58,218 50,241
Non-financial current other liabilities and deferred items 116,120 126,394
Current other liabilities and deferred items 174,338 176,635

The breakdown of the item “Financial other liabilities and deferred items” is as follows:

Dec. 31, 2014 Dec. 31, 2015
Financial non-current other liabilities and deferred items with a remaining term of more than 1 year
Non-derivatives:
Liabilities relating to rent 1,105 5,867
Financial other liabilities from operating activities 1,662 1,720
Liabilities related to sale of real estate 0 1,431
Liabilities from compensation claims, legal liabilities and penalties 797 646
Liabilities to related parties 13 10
Interest liabilities 24 0
Subtotal non-derivatives 3,601 9,674
Derivatives:
Derivative financial instruments (not used as hedges) 0 170
Derivative financial instruments (used as hedges) 8 172
Sub-total derivatives 8 342
Financial non-current other liabilities and deferred items 3,609 10,016
Financial current other liabilities and deferred items with a remaining term of up to 1 year
Non-derivatives:
Financial other liabilities from operating activities 28,566 27,330
Interest liabilities 10,433 10,087
Financial other liabilities from non-operating activities 7,445 8,217
Liabilities relating to rent 5,355 3,210
Liabilities to related parties 2,202 224
Liabilities from compensation claims, legal liabilities and penalties 2,915 35
Miscellaneous financial current other liabilities and deferred items 222 70
Subtotal non-derivatives