General principles

The Group financial statements of Beiersdorf AG have been prepared in accordance with the standards issued by the International Accounting Standards Board (IASB), London, effective at the balance sheet date, and reflect the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). They comply with the European Union Group Accounts Directive (Directive 83/349/EEC) as interpreted by the Deutscher Standardisierungsrat (German Accounting Standards Board – GASB). The criteria set out in § 292a of the Handelsgesetzbuch (HGB – German Commercial Code) for the Company’s exemption from the requirement to prepare consolidated financial statements in accordance with German law have been satisfied.

The Group financial statements contain the following departures from the accounting policies and valuation methods as applicable under German law:

• Pension provisions are measured using the projected unit credit method reflecting future compensation trends in accordance with IAS 19 (Employee Benefits)

• Deferred tax assets and liabilities are accounted for and measured using the balance sheet liability method as defined by IAS 12 (Income Taxes), and deferred taxes are capitalized where loss carryforwards are considered to be realizable

• Securities and financial instruments are accounted for and measured at fair value in accordance with IAS 39 (Financial Instruments: Recognition and Measurement)

• Provisions in connection with the acquisition of own shares by Beiersdorf AG were not included in the Group financial statements under IFRS

New standards issued by the IASB are applied from their effective date. Their application and any changes in accounting policies are detailed in the notes to the financial statements under the respective item.

Individual line items have been summarized in the income statement and the balance sheet to aid clarity of presentation. These items are disclosed and explained separately in the notes.

Preparation of the consolidated financial statements requires management to make estimates and assumptions to a limited extent that affect the amount and presentation of recognized assets and liabilities, income and expenses, and contingent liabilities. Actual amounts may differ from those estimates.

Consolidated Group

In addition to Beiersdorf AG, the Group financial statements include 16 German and 117 foreign companies in which Beiersdorf AG holds a majority of the voting rights, either directly or indirectly, and which fall under Beiersdorf AG’s uniform management. The number of companies consolidated increased by 26 year-on-year. 18 of these companies were formed in the course of transforming the tesa division into a separate Aktiengesellschaft (German stock corporation), and do not represent an economic change in the consolidated group. The remaining eight companies relate to the first-time consolidation of newly formed or existing Beiersdorf companies. Three companies in which Beiersdorf holds an interest of 50 % and which it manages as joint ventures together with the other venturers are proportionately consolidated in accordance with IAS 31 (Financial Reporting of Interests in Joint Ventures).

The three joint ventures account for €315 million of the income and €287 million of the expenses reported in the income statement, and thus €28 million of the operating result. €48 million of fixed assets and €129 million of current assets are attributable to the proportionately consolidated companies, as well as €88 million of liabilities and provisions.

10 German and 15 foreign companies are not included in consolidation as, both individually and taken together, they are not material for the presentation of a true and fair view of the net assets, financial position and results of operations of the Group.

Consolidation principles

The financial statements of the companies included in the Group financial statements are prepared uniformly as of the reporting date of December 31, in accordance with the accounting policies applied by the Beiersdorf Group. The financial statements included in consolidation are audited by independent auditors.

Capital consolidation uses the purchase method of accounting. The cost of acquisition of the purchased interests is eliminated against the proportionate equity attributable to the parent company at the date of acquisition. Any excess is partly or wholly allocated to the assets of the affiliate and amortized over the useful life of the respective assets. The remaining excess of cost of acquisition over net assets acquired is recognized as goodwill and amortized over its useful life. Amortization of goodwill is reported under other operating expenses.

Any write-downs of intragroup receivables and of interests in consolidated companies in the individual single-entity financial statements are reversed.

Intercompany profits and losses, income and expenses, as well as receivables and liabilities, are eliminated. Deferred taxes on consolidation adjustments are recognized as necessary.

The same consolidation principles apply to proportionately consolidated joint ventures. Any necessary consolidation adjustments arising from relations with proportionately consolidated companies are recognized in proportion to the interests held.

Currency translation

The financial statements of foreign affiliates are translated using the functional currency method. As these companies operate as financially, economically and organizationally independent entities, their assets and liabilities are translated at the middle rates prevailing at the balance sheet date, while income and expenses are translated at average rates for the year. Exchange differences from the translation of asset and liability items compared with currency translation in the previous year and exchange differences between the balance sheet and the income statement are taken directly to equity.

In the single-entity financial statements of these foreign companies, receivables and liabilities in foreign currencies that are not hedged are measured at the rate prevailing at the balance sheet date. The following tables show the development of the exchange rates of the major currencies used in the Group financial statements: