Currency translation

Foreign currency transactions

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) due to its high rates of inflation.

METRO has reassessed the quantitative and qualitative criteria of IAS 29 (Financial Reporting in Hyperinflationary Economies) in financial year 2022/23. The cumulative inflation of the last 3 years as a quantitative criterion still exceeds the value of 100%.

IAS 29 requires the financial statements of a company whose functional currency is the currency of a hyperinflationary economy to be converted into the currently applicable purchasing power unit at the end of the reporting period. METRO has subsidiaries in Turkey whose functional currency is the Turkish lira. For these subsidiaries with the functional currency of a hyperinflationary economy, IAS 21.43 requires that the financial statements be restated in accordance with IAS 29 as of 30 September 2023 before being included in the consolidated financial statements. The adjustments were made for the full reporting period as follows:

• Increase in the carrying amounts of non-monetary assets and liabilities as well as equity based on the development of the general price index.
• The effects from the indexation of the current year were recognised in the other financial result. The adjustment in the area of non-monetary assets at METRO mainly affects property, plant and equipment and, to a lesser extent, inventories.
• As a result of the increases in the carrying amounts of property, plant and equipment (including right-of-use assets) and inventories, there are also indirect increases in scheduled depreciation and costs of sales.
• Indexation of all items in the statement of comprehensive income for financial year 2022/23 from the date at which the respective expense and income items were first recognised until the closing date, to reflect a price index that is current at the closing date.

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.

The index value applied at the closing date was 1,691.04 (30/9/2022: 1,046.89). The index change on an annual basis was 61.53%.

The exchange rate at the closing date as of 30 September 2023 was used to convert the financial statements of the Turkish companies into the reporting currency euro for all items.

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. 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.

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.