28. Impairments of financial assets

Since 1 October 2018, METRO has applied the new accounting and measurement methods in accordance with the impairment requirements of 9.

The following disclosures on impairment losses under IFRS 9 are not comparable to the ’s disclosures under IFRS 7 or IAS 39, which are explained at the end of this chapter. In the previous year, impairment losses of €100 million were recognised for financial assets. As of 30 September 2019, impairment losses recognised in the balance sheet amounted to €104 million. The impact of the first-time application of 9 is insignificant.

The following explanations relate to the financial assets to which the impairment requirements of IFRS 9 are applied.

For trade receivables, METRO makes use of the simplified procedure to determine expected credit losses provided for in IFRS 9. METRO records the expected credit losses over the entire term of the financial instruments on the basis of a provision matrix. Trade receivables are combined in different portfolios with similar credit risk characteristics for this purpose. This is based on the regions used for METRO’s segment reporting.

The loss default rates per past-due category of these portfolios are estimated on the basis of previous experience with credit losses from such financial assets. The loss default rates determined in this way are adjusted by including a projected global corporate insolvency index.

The table below shows the expected credit losses on trade receivables for each maturity band as of 30 September 2019, calculated on the basis of the provision matrix:

€ million

Total

thereof not past-due

thereof up to 90 days past-due

thereof 91 to 180 days past-due

thereof 181 to 270 days past-due

thereof 271 to 360 days past-due

thereof more than 360 days past-due

Gross carrying amount

454

353

86

7

3

3

3

Bandwidth of calculated default rates

 

+0.21% to +1.12%

1.00% to 6.97%

3.40% to 26.00%

6.62% to 28.18%

10.72% to 47.34%

11.91% to 86.49%

Risk provisions

7

2

2

1

0

1

1

 

 

 

 

 

 

 

 

Loss allowances on trade receivables are reconciled according to the simplified calculation as follows:

€ million

Trade receivables

Loss allowances in accordance with IAS 39 as of 30 September 2018

43

Retrospective adjustment (recognised in reserves retained from earnings)

3

Loss allowances according to IFRS 9 as of 1 October 2018

47

Addition to impairment through profit or loss

23

Reversal of impairment through profit or loss

−15

Utilisation

−8

Currency effects

1

Other changes

0

Loss allowances as of 30 September 2019

47

The loss allowances as of 30 September 2019 amounted to €47 million (30/9/2018: €43 million, thereof €1 million for METRO China) and include impairments of €40 million on individual receivables for which there are objective indications of an impairment of creditworthiness.

The valuation adjustment of trade receivables resulting from the first-time application of IFRS 9 in financial year 2018/19 with regard to impairment amounted to €3 million. This effect was recognised directly in reserves retained from earnings.

The following table shows the gross carrying amounts of trade receivables that were or were not past-due as of the closing date on 30 September 2019, which were depreciated either on the basis of the respective applied provision matrix or on the basis of objective indications of default:

€ million

Trade receivables

Not past-due

367

Up to 90 days past-due

93

91 to 180 days past-due

15

181 to 270 days past-due

6

271 to 360 days past-due

6

More than 360 days past-due

31

Gross carrying amount

517

Loss allowances

−47

Maximum credit risk

470

In addition, for trade receivables of €12 million (30/9/2018: €7 million, thereof €0 million for METRO China) collaterals are available. These receivables were not impaired.

METRO applies the general impairment requirements of IFRS 9 to receivables from suppliers, credit card transactions and loans. A possible credit risk in these cases is determined on the basis of the counterparty’s creditworthiness. For this purpose, METRO uses external of well-known rating agencies as well as internal credit risk rating grades based on the risk of default of the respective financial instrument. The creditworthiness of the counterparties is continuously monitored so that METRO recognises a significant increase in the credit risk and can react promptly to any changes.

The following table shows the development of risk provisions in relation to financial assets to which the general impairment requirements of IFRS 9 are applied:

€ million

No significantly increased credit risk since recognition (stage 1)

Increased credit risk (stage 2)

Impaired credit­worthiness (stage 3)

Total

1

Other changes include currency translation differences, changes in the consolidation group and reclassifications to assets held for sale.

Risk provision as of 30 September 2018

29

Retrospective IFRS 9 adjustment (recognised in reserves retained from earnings)

0

Risk provision as of 1 October 2018

1

0

28

29

Newly originated/acquired financial assets

0

0

0

0

Other changes within one stage

0

0

9

9

Transfer to stage 1

0

0

0

0

Transfer to stage 2

0

0

0

0

Transfer to stage 3

0

0

0

0

Derecognised financial assets

0

0

−5

−5

Utilisation

0

0

−4

−4

Other changes1

0

0

−2

−2

Risk provision as of 30 September 2019

1

0

27

28

Risk provisions as of 30 September 2019 amounted to € 28 million (30/9/ 2018: € 29 million, thereof € 2 million for METRO China).

Stage 1 of the model contains financial assets that have a low credit risk or whose credit risk has not increased significantly since the initial recognition of the asset. At this stage, the risk provision is calculated as the 12-month expected credit loss. If the credit risk on the closing date is significantly higher than at the time of initial recognition, the financial asset is reclassified to stage 2. The amount of the risk provision is determined at this level as the expected losses that can arise from all possible default events over the expected entire term of the financial instrument. If there is objective evidence that a financial asset will not be collected in whole or in part, it is reclassified to stage 3. Default is defined as the failure to maintain contractually agreed cash flows.

The table below shows the gross carrying amounts as of 30 September 2019 for those financial instruments for which the impairment losses are determined according to the general approach; they are differentiated according to the external of the counterparties:

€ million

No significantly increased credit risk since recognition (stage 1)

Increased credit risk (stage 2)

Impaired credit­worthiness (stage 3)

Total

AAA, AA+, AA, AA−

7

1

1

9

A+, A, A−

16

0

0

17

BBB+, BBB, BBB−

10

0

0

10

BB+, BB, BB−

2

0

0

2

B+ or lower

44

0

0

44

Gross carrying amount

80

1

2

82

Risk provision

0

0

−1

−1

Maximum credit risk

80

1

1

82

METRO minimises credit risk by exclusively investing in first-class debt capital instruments from counterparties with a good to very good external rating (investment grade). Therefore, a significant portion of the financial assets is allocated to stage 1 of the impairment model.

For counterparties that do not have an external rating and are therefore assigned to the internal risk classes, the credit risk determined according to the general approach is as follows:

€ million

No significantly increased credit risk since recognition (stage 1)

Increased credit risk (stage 2)

Impaired credit­worthiness (stage 3)

Total

Internal risk class 1 (not past-due or up to 30 days past-due)

294

0

2

297

Internal risk class 2 (31 to 90 days past-due)

15

1

1

16

Internal risk class 3 (more than 90 days past-due)

12

0

33

46

Gross carrying amount

321

1

37

358

Risk provision

−1

0

−27

−27

Maximum credit risk

320

1

10

331

The figures for the previous year were based on the requirements of IAS 39 and IFRS 7 (Financial Instruments: Disclosures). Impairment losses on financial assets developed as follows:

€ million

Category ‘loans and receivables’

thereof loans

thereof other current receivables

As of 30/9/2017 and 1/10/2017

117

(4)

(113)

Currency translation

−5

(0)

(−5)

Additions

40

(0)

(40)

Reversal

−19

(0)

(−18)

Reclassifications in accordance with IFRS 5

−5

(0)

(−5)

Utilisation

−29

(0)

(−29)

Transfers

1

(1)

(0)

As of 30/9/2018

100

(5)

(95)

In financial year 2017/18, impairment losses in the amount of €2 million were included, which were attributable to METRO China.

The maturity structure of the financial assets recognised as of 30 September 2018 is as follows:

 

 

 

thereof past-due, no specific allowances

€ million

Total carrying amount 30/9/2018

thereof not past-due, not impaired

Up to 90 days past-due

91 to 180 days past-due

181 to 270 days past-due

271 to 360 days past-due

More than 360 days past-due

Assets

 

 

 

 

 

 

 

in the category ‘loans and receivables’

1,170

928

78

8

1

1

4

thereof loans

(33)

(33)

(0)

(0)

(0)

(0)

(0)

thereof other current receivables

(1,138)

(895)

(78)

(8)

(1)

(1)

(4)

in the category ‘held to maturity’

0

0

0

0

0

0

0

in the category ‘held for trading’

7

0

0

0

0

0

0

in the category ‘available for sale’

49

1

0

0

0

0

0

 

1,227

929

78

8

1

1

4

In financial year 2017/18, financial assets that were not past-due but also not individually impaired included €110 million, financial assets that were past-due up to 90 days but not specifically impaired included €5 million attributable to METRO China.

IFRS (International Financial Reporting Standards)
Internationally applicable rules for financial reporting developed by the IASB. Contrary to the accounting rules under the German Commercial Code, the IFRS emphasise the informational function.
Glossary
Previous year
Period of 12 months, usually cited as reference for statements in an annual report.
Glossary
IFRS (International Financial Reporting Standards)
Internationally applicable rules for financial reporting developed by the IASB. Contrary to the accounting rules under the German Commercial Code, the IFRS emphasise the informational function.
Glossary
Rating
In the financial sector, ratings represent the systematic, qualitative measurement of creditworthiness. Ratings are expressed in various grades of creditworthiness. Renowned agencies that issue ratings are Standard & Poor’s, Moody’s and Fitch.
Glossary
Rating
In the financial sector, ratings represent the systematic, qualitative measurement of creditworthiness. Ratings are expressed in various grades of creditworthiness. Renowned agencies that issue ratings are Standard & Poor’s, Moody’s and Fitch.
Glossary