Main estimates and assumptions
Accounting and measurement in the consolidated financial statements are influenced by a large number of estimates and assumptions, which are based on past experience as well as additional factors, including expectations about future events. All estimates and assessments are subject to continuous review and re-evaluation. The use of estimates and assumptions is especially necessary in the following areas:
Impairment of goodwill
Goodwill is tested for impairment at least annually in line with the accounting and measurement methods. In this context, the recoverable amount is calculated on the basis of the value in use (Note 15). The calculation of the value in use requires estimates of the future cash flow in particular, on the basis of calculations made for planning purposes. The impairment test of the Aurubis Hamburg Copper Products cash-generating unit (CGU) resulted in no impairment of goodwill either in the current or past fiscal year. A 10 % reduction in the predicted cash flow or an increase of 0.5 percentage points in the WACC after taxes from 6.5 % to 7.0 % would also not result in the need to recognize any impairment losses.
Fair values in conjunction with business combinations
Acquired assets, liabilities and contingent liabilities are recognized with their fair values when accounting for business combinations. DCF-based procedures, whose results depend on assumed future cash flows and other assumptions, are often used in this context. The measurement of contingent liabilities depends significantly on the assumptions with respect to the future resource outflows and the probability of their occurrence.
Fair values of derivatives and other financial instruments
The fair values of financial instruments for which there are no quoted prices in an active market are determined on the basis of mathematical procedures and are influenced by assumptions specific to the instrument. Estimates have a significant influence when the fair value is to be determined for financial instruments for which at least one significant parameter is not based on observable market data (Level 3 of the fair value hierarchy). The selection and application of suitable parameters and assumptions require an assessment by management. Extrapolation and interpolation procedures have to be applied in particular when data are derived from uncommon market transactions.
Detailed information can be found in the section entitled “Additional disclosures on financial instruments”.
Accounting for inventories
Various estimates have to be made in connection with the accounting for inventories. For example, individual estimation procedures are applied when counting inventories as well as in the determination of the metal yield content. Due to the use of increasingly complex input materials, a re-estimation of the metal yield quantities was made and used as a basis for determining acquisition costs. The resulting reduction in the carrying amount of inventories is € 40 million.
Pension provisions and other provisions
The employees’ company pension scheme in the Aurubis Group includes both defined benefit and defined contribution commitments.
Obligations deriving from defined benefit pension plans are measured in accordance with actuarial procedures. These procedures are based on several actuarial assumptions, such as, for example, the assumed interest rate, expected remuneration and pension developments, employee fluctuations and life expectancy. For the purposes of determining the assumed interest rate, high-quality corporate bonds with commensurate terms and currencies are used as a source of reference. Deviations of the actual development from the assumptions at the beginning of the reporting period lead to remeasurement of the net liability.
When recognizing other provisions, assumptions are made with regard to the probability of the occurrence and the amount and timing of the outflow of resources, which by their nature are subject to uncertainty.
Other significant estimates relate to the determination of the useful lives of intangible assets and property, plant and equipment, the collectability of receivables and the measurement of inventory risks within inventories.