Currency translation

Foreign currency transactions

In the separate financial statements of the subsidiaries and the parent company, transactions in foreign currency are recognised at the rate prevailing on the transaction date. Monetary assets and liabilities in foreign currency are measured at the closing date exchange rate. Non-monetary assets and liabilities that are measured at fair value in foreign currency are translated at the rate prevailing at the time the fair value was determined. Non-monetary items measured at historical acquisition or production costs in foreign currency are translated at the rate of the transaction date.

In principle, gains and losses incurred by exchange rate fluctuations until the closing date are recognised in profit or loss. However, the currency translation differences resulting from the subsequent measurement of the following assets and liabilities are reported under reserves retained from earnings outside of profit or loss:

• Receivables and liabilities in foreign currency, which must be regarded as (part of) a net investment in a foreign operation
• Equity instruments measured at fair value through other comprehensive income
• Hedging instruments qualifying for cash flow hedges

Hyperinflation

As of June 2022, Turkey is classified as a hyperinflationary economy in accordance with IAS 29 (Financial Reporting in Hyperinflationary Economies). As a result, the activities of METRO companies in Turkey will no longer be retroactively based on historical acquisition and production costs for the entire financial year 2021/22; instead, they are presented with the purchasing power ratios as of the closing date.

For this purpose, the carrying amounts of the non-monetary assets and liabilities as well as the statement of comprehensive income are converted into the purchasing power valid at the closing date using the cumulative consumer goods price index of the Turkish Statistical Institute. No adjustment is required for monetary assets and liabilities as they are already measured in the applicable measuring unit (for example in the fair value) at the closing date.

The index value applied at the closing date was 1,046.89 (30/9/2021: 570.66), while the index stood at 1.8345 on an annual basis in 2022.

The exchange rate at the closing date as of 30 September 2022 was used to convert the financial statements of the Turkish companies into the reporting currency euro for all items. According to IAS 21.42 (The Effects of Changes in Foreign Exchange Rates), comparative amounts from previous periods do not have to be converted.

Foreign operations

The annual financial statements of foreign subsidiaries are prepared according to the functional currency concept of IAS 21 (The Effects of Changes in Foreign Exchange Rates) and translated into euros for consolidation purposes in case their functional currency is a currency other than the euro. The functional currency is defined as the currency of the primary economic environment in which the subsidiary operates. Since all companies included in the consolidated financial statements operate as financially, economically and organisationally autonomous entities, their respective local currency is the functional currency. Necessary translations of assets and liabilities are made at the exchange rate at the closing date. As a general rule, income statement items are translated at the average exchange rate during the financial year. Exchange rate differences arising from the translation of the financial statements of foreign subsidiaries are recognised directly in equity and are reported separately under reserves retained from earnings in other comprehensive income. To the extent that the parent company does not own all equity interests in foreign subsidiaries, the relevant share of currency differences is allocated to the non-controlling interests.

Currency differences are recognised through profit or loss in the net financial result in the year in which the operations of a foreign subsidiary whose functional currency is not the euro are deconsolidated or terminated. In a partial disposal in which a controlling interest in such a foreign subsidiary is retained, the relevant share of cumulated currency differences is allocated to the non-controlling interests. Should associates or jointly controlled entities whose functional currency is not the euro be partially sold without the loss of significant influence or joint control, the relevant share of the cumulated currency differences is recognised in profit or loss.

The following exchange rates being of major significance for METRO were applied in the translation of key currencies outside the European Monetary Union. The rates are generally based on ECB information. In the absence of a rate provided by the ECB, the quotation of the Russian Central Bank was used for conversion of the Russian rouble.