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Estimates and assumptions, discretionary judgements

Covid-19 and the war in Ukraine

Financial year 2021/22 continued to be impacted by government measures associated with the Covid-19 pandemic, albeit to a significantly lesser extent, with each of METRO’s individual segments being affected to varying degrees. In addition, the war in Ukraine and the resulting consequences, such as the energy crisis and inflation, also have a particularly significant impact on the consolidated financial statements. METRO is represented in both Ukraine and Russia.

Estimates and assumptions

The preparation of these consolidated financial statements was based on estimates and assumptions, taking into account the changes in the business environment described above, which affected the disclosure and amount of assets and liabilities, income and expenses and contingent liabilities. Estimates and underlying assumptions with major effects were particularly made in connection with the war in Ukraine and the Covid-19 pandemic with respect to the following situations:

  • Impairment testing of assets with and without a definite useful life, including goodwill, brand rights with indefinite useful lives, and customer bases, if necessary including a sensitivity analysis. Meanwhile, short-term declines in earnings have no impact on the existing carrying amounts of goodwill.
  • Recoverability of receivables – in particular trade receivables and receivables due from suppliers. Increased specific bad debt allowances were provided for when measuring receivables, particularly in units with longer payment terms and a high exposure to the HoReCa sector.
  • Measurement of inventories, particularly with regard to write-downs to lower net realisable values.

In the ad hoc goodwill impairment test, the cumulative carrying amount of the group of cash-generating units is compared with the recoverable amount. The recoverable amount of a cash-generating unit is the higher of itsvalue in use or its fair value less costs of disposal. It is calculated from discounted future cash flows and the level 3 input parameters of the fair value hierarchy.

For METRO Russia and METRO Ukraine, goodwill was already fully impaired as of 31 March 2022.

Additionally, impairment losses between 50% and 100% were recognised on tangible assets in stores that are geographically close to the crisis areas and whose sales and earnings expectations have collapsed significantly. After impairment, the carrying amount corresponds to the recoverable amount.

The valuation of inventories considered risk provisions that were in line with the current business environment.

In addition to the issues resulting from the war in Ukraine, valuation adjustments may especially arise for the following items within the next financial year:

Judgemental decisions

Information on the key judgemental decisions that materially affected the amounts reported in these consolidated financial statements relates to the following circumstances or note disclosures:

  • Determination of lease terms, taking into account relevant facts and circumstances relating to economic incentives affecting the likelihood of tenants exercising renewal options or not exercising termination options, as well as determination of the incremental borrowing rate (no. 47 – leases)
Fair value
Recognised fair value that would be received in return for the disposal of an asset or paid for the assignment of a debt in an ordinary transaction conducted between market participants on the assessment date.
Short for hotel, restaurant and catering businesses. The HoReCa sector is one of METRO’s core customer groups and is one of the strategic customers under the sCore growth strategy.
IFRS (International Financial Reporting Standards)
Internationally applicable rules for financial reporting developed by the IASB.

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