Page 22 - KELAG Annual Report 2017

Investments in associates and joint ventures, which are accounted for in accordance with IAS 28,
are precluded from the scope of application of IFRS 9. IASB clarifies that IFRS 9 only applies to
investments in associates and joint ventures if the equity method is applied, otherwise these
investments are measured pursuant to IFRS 9. This amendment to IAS 28 will have an effect in the
Group to the extent that associates not accounted for using the equity method fall within the
scope of application of IFRS 9.

The Group classifies its assets and liabilities in the statement of financial position into current and
non-current items.

The rolling once-yearly settlement of end customer transactions should be regarded as an
indication for determining the business cycle in accordance with IAS 1.68. The KELAG Group’s
normal business cycle is therefore 12 months and thus defines the classification of current and
non-current assets and liabilities.

Deferred tax assets and liabilities are not classified as current assets or liabilities.

Business combinations are accounted for by comparing the consideration paid (plus any non-
controlling interest) with the fair value of the net assets acquired to determine a potential
difference from the business combination.

If the difference is negative, the calculation of consideration paid and the purchase price
allocation must be reassessed. If the difference is still negative after the reassessment, this is
recognised in the income statement.

Any positive difference is recognised as goodwill. The goodwill is allocated to those cash-
generating units that are expected to benefit from the synergies resulting from a business
combination. These cash-generating units correspond to the lowest level at which management
monitors the goodwill for internal management purposes.

In the KELAG Group, the annual impairment test of goodwill at the level of the cash-generating
units takes place in the fourth quarter of the reporting period based on the mid-range planning,
unless an indication for impairment has been identified at an earlier point in time. In addition to
the annual impairment testing, the Group performs a quality-focused analysis to identify
indications of impairment as of the date of the interim half-yearly financial statements. If any
indications of impairment are identified, the Group performs an (additional) impairment test.

The KELAG Group defines its cash-generating units based on the fact that the cash inflows of the
corresponding asset are largely independent.