(2) Reporting principles
These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) effective at the end of the reporting period and adopted by the European Union and the additional provisions of section 315e of the German Commercial Code (HGB). The fiscal year is the calendar year. These consolidated financial statements have been prepared in euros, the reporting currency. The values presented in the consolidated financial statements have been rounded. This may lead to individual values not adding up to the totals presented.
The Executive Board of Merck KGaA, Darmstadt, Germany, prepared these consolidated financial statements on February 14, 2023, and approved them to be forwarded to the Supervisory Board. The Supervisory Board is responsible for examining the consolidated financial statements and declaring whether it approves them.
The German Corporate Governance Code declaration (declaration of conformity) in accordance with section 161 of the German Stock Corporation Act (Aktiengesetz) was issued and can be viewed at https://www.emdgroup.com/en/investors/corporate-governance/reports.html.
The accounting and measurement policies used in the consolidated financial statements are presented in the following Notes and are indicated there.
Amendments to standards effective for the first time in fiscal 2022
Standard/Interpretation |
|
Title |
|
Date of publication |
|
Date of endorsement by EU law |
|
Impact on the consolidated financial statements |
|---|---|---|---|---|---|---|---|---|
Amendments to IAS 16 |
|
Property, Plant and Equipment — Proceeds before Intended Use |
|
May 14, 2020 |
|
June 28, 2021 |
|
No material impact |
Amendments to IAS 37 |
|
Onerous Contracts — Cost of Fulfilling a Contract |
|
May 14, 2020 |
|
June 28, 2021 |
|
No material impact |
Amendments to IFRS 3 |
|
Reference to the Conceptual Framework |
|
May 14, 2020 |
|
June 28, 2021 |
|
No material impact |
Amendments to IFRS 16 |
|
Covid-19-Related Rent Concessions beyond 30 June 2021 |
|
March 31, 2021 |
|
August 30, 2021 |
|
No material impact |
Annual Improvements to IFRS |
|
Annual Improvements to IFRS Standards 2018 – 2020 |
|
May 14, 2020 |
|
June 28, 2021 |
|
No material impact |
Standards and amendments to standards effective for the first time from fiscal 2023
Standard/Interpretation |
|
Title |
|
Date of publication |
|
Date of endorsement by EU law |
|
Required date of first-time application1 |
|
Expected impact on the consolidated financial statements |
||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amendments to IAS 1 |
|
Disclosure of Accounting Policies |
|
February 12, 2021 |
|
March 2, 2022 |
|
January 1, 2023 |
|
No material impact |
||||
Amendments to IAS 8 |
|
Definition of Accounting Estimates |
|
February 12, 2021 |
|
March 2, 2022 |
|
January 1, 2023 |
|
No material impact |
||||
Amendments to IAS 12 |
|
Deferred Tax related to Assets and Liabilities arising from a Single Transaction |
|
May 7, 2021 |
|
August 11, 2022 |
|
January 1, 2023 |
|
No material impact |
||||
IFRS 17; Amendments to IFRS 17 |
|
IFRS 17 Insurance Contracts; Amendments to IFRS 17; Initial Application of IFRS 17 and IFRS 9 — Comparative Information |
|
May 18, 2017 June 25, 2020 December 9, 2021 |
|
November 19, 2021 November 19, 2021 September 8, 2022 |
|
January 1, 2023 |
|
No material impact |
||||
|
||||||||||||||
Regulations published but not yet endorsed by the European Union
Standard/Interpretation |
|
Title |
|
Date of publication |
|
Expected date of first-time application |
|
Expected impact on the consolidated financial statements |
|---|---|---|---|---|---|---|---|---|
Amendments to IAS 1 |
|
Classification of Liabilities as Current or Non-current; Classification of Liabilities as Current or Non-Current — Deferral of Effective Date |
|
January 23, 2020 July 15, 2020 |
|
January 1, 2024 |
|
No material impact |
Amendments to IAS 1 |
|
Non-current Liabilities with Covenants |
|
October 31, 2022 |
|
January 1, 2024 |
|
No material impact |
Amendments to IFRS 16 |
|
Lease Liability in a Sale and Leaseback |
|
September 22, 2022 |
|
January 1, 2024 |
|
No material impact |
Impact of the introduction of a global minimum tax rate by the OECD (Pillar Two)
On December 22, 2022, the European Commission published a directive on the implementation of the internationally agreed minimum tax rate in the member states. The directive has yet to be translated into local law in the countries in which the Group is active. The Group is continuously analyzing the latest legislative developments and their impact on the countries affected. As the details of the implementation have yet to be finalized, it is not possible to reliably quantify the financial impact at present.
Accounting and measurement policies
Currency translation
Functional currency
To a predominant extent, the subsidiaries of Merck KGaA, Darmstadt, Germany, conduct their business independently so that the functional currency is normally the respective local currency.
However, some subsidiaries, particularly in the Electronics business sector, use the U.S. dollar as their functional currency rather than the local currency.
Transactions in non-functional currency
When the financial statements of consolidated companies are prepared, business transactions that are conducted in currencies other than the functional currency are translated using the exchange rate on the date of the transaction.
Translation of financial statements into the reporting currency (euro)
The financial statements of consolidated companies not using the euro as their functional currency are translated into the reporting currency, the euro. Assets and liabilities are measured at the closing rate while income and expenses are translated at average monthly rates. Any currency translation differences arising during consolidation of Group companies are recognized in equity.
Hyperinflation
Argentina (since 2018) and Turkey (since April 2022) are classified as hyperinflationary economies in accordance with IAS 29 “Financial Reporting in Hyperinflationary Economies”. Accordingly, business activities in Argentina are no longer reported at historical cost but are presented adjusted for inflation. In Argentina, the Group uses a combination of the wholesale index IPIM (Índice de precios internos al por mayor) and the consumer price index IPC (Índice de precios al consumidor). The index applied stood at 14,227.3 as of the balance sheet date (December 31, 2021: 7,396.8/January 1, 2021: 4,896.2). In Turkey, the Consumer Price Index (CPI) published by the Turkish Statistical Institute is applied retrospectively with effect from January 1, 2022. The index applied stood at 1,128.5 as of the balance sheet date (December 31, 2021: 687.0). In accordance with the requirements of IAS 21 “The Effects of Changes in Foreign Exchange Rates” for financial statements in non-hyperinflationary reporting currencies, the prior-year amounts have not been restated.
The respective loss on the net monetary position is reported under remaining other operating expenses in other operating expenses; see Note (14) “Other operating expenses”.
After adjusting the amounts for inflation, the balance sheet items and income and expenses are translated into the reporting currency, the euro, at the closing rate in accordance with IAS 21.42. Prior-year comparative figures are not restated.
Exchange rates of most significant currencies
The exchange rates of the most significant currencies in these consolidated financial statements were as follows:
|
|
Average rate |
|
Closing rate |
||||
|---|---|---|---|---|---|---|---|---|
€ 1 = |
|
2022 |
|
2021 |
|
Dec. 31, 2022 |
|
Dec. 31, 2021 |
Chinese renminbi (CNY) |
|
7.088 |
|
7.634 |
|
7.420 |
|
7.206 |
Japanese yen (JPY) |
|
137.989 |
|
129.848 |
|
140.716 |
|
130.189 |
Swiss franc (CHF) |
|
1.005 |
|
1.081 |
|
0.985 |
|
1.034 |
South Korean won (KRW) |
|
1,357.642 |
|
1,353.475 |
|
1,342.189 |
|
1,345.493 |
Taiwan dollar (TWD) |
|
31.336 |
|
33.062 |
|
32.728 |
|
31.285 |
U.S. dollar (USD) |
|
1.054 |
|
1.183 |
|
1.065 |
|
1.131 |