Notes
General information
1 Information about the company
The consolidated financial statements were prepared by MLP AG, Wiesloch, Germany; the ultimate parent company of the MLP Group. MLP AG is listed in the Mannheim Commercial Register under the number HRB 332697 at the address Alte Heerstraße 40, 69168 Wiesloch, Germany.
Since it was founded in 1971, the MLP Group (MLP) has been operating as a broker and adviser for academics and other discerning clients in the fields of old-age provision including occupational pension provision, healthcare provision, non-life insurance, financing, wealth management and banking services.
2 Principles governing the preparation of the financial statements
The consolidated financial statements of MLP AG have been prepared in accordance with International Financial Reporting Standards (IFRS) promulgated by the International Accounting Standard Board (IASB), taking into account the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as they apply in the European Union (EU). In addition, the commercial law regulations to be observed pursuant to § 315a (1) of the German Commercial Code (HGB) were also taken into account. The financial year corresponds to the calendar year.
The consolidated financial statements have been prepared on the basis of the historical cost convention with the exception that certain financial instruments are measured at fair value. MLP prepares its consolidated balance sheet based on liquidity. This form of presentation offers information that is more relevant than if it were based on the time-to-maturity factor.
The income statement is prepared in accordance with the nature of expense method.
The consolidated financial statements are drawn up in euros (€), which is the functional currency of the parent company. Unless otherwise specified, all amounts are stated in thousands of euros (€’000). Both single and cumulative figures are values with the smallest rounding difference. As a result, differences to reported total amounts may arise when adding up the individual values.
Due to acquisition of the DOMCURA Group in the financial year, direct comparison with previous year’s figures is only possible to a limited extent. Please refer to Note 6 for details on the acquisition.
3 Amendments to the accounting policies, as well as new standards and interpretations
The accounting policies applied are the same as those used in the previous year, with the following exceptions.
In the financial year 2015 the following new or amended standards and interpretations were to be applied for the first time.
In November 2013, the IASB published its amendments to IAS 19 “Employee Benefits”, and then in December 2013 its Revisions to the IFRS 2010–2012 and Revisions to the IFRS 2011–2013. The changes have no significant effect on the consolidated financial statements.
Adoption of the following new or revised standards and interpretations was not yet binding for the financial year commencing on January 1, 2015. The standards were not adopted early:
EU endorsement has already taken place:
In May 2014, the IASB published amendments to IFRS 11 “Acquisition of an Interest in a Joint Operation”. This clarifies that acquisitions of shares and additional shares in joint operations that represent business operations in the sense of IFRS 3 “Business Combinations” are to be recorded based on the principles for recognising business combinations pursuant to IFRS 3 and other IFRS standards, insofar as these are not in conflict with the provisions of IFRS 11.
In December 2014, the IASB published amendments to IAS 1 “Presentation of Financial Statements”. The amendments are intended to improve the way information is presented in financial statements. In future, disclosures are to be more relevant and company-specific. The amendments could result in revised explanatory notes to the consolidated financial statements for MLP.
In August 2014, the IASB published amendments to IAS 27 “Separate Financial Statements (Equity Method)”. As a result of the amendments, investments in subsidiaries, joint ventures and associates will in future also be recognised in the balance sheet using the equity method for IFRS separate financial statements.
In May 2014, the IASB published amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortisation”. The objective of these amendments is to clarify the correct methods with regard to amortisation of tangible and intangible assets.
The lASB published its improvements to IFRS 2012–2014 in September 2014. The amendments concern the standards IFRS 5, IFRS 7, IAS 19 and IAS 34. They eliminate inconsistencies and clarify certain formulations.
The amendments are to be applied for the first time for reporting periods starting on January 1, 2016. MLP does not expect the amendments to have any significant impact on its consolidated financial statements.
EU endorsement still pending:
In July 2014, the IASB completed its project to replace IAS 39 “Financial Instruments: Recognition and Measurement” with publication of the final version of IFRS 9 “Financial Instruments”. IFRS 9 introduces a uniform approach to classification and measurement of financial assets. The standard refers to the cash flow characteristics and the business model that is used to control them as its basis. In addition to this, it prescribes a new impairment model that is based on anticipated credit defaults. IFRS 9 also contains new regulations regarding application of hedge accounting to present a company’s risk management activities more clearly, in particular with regard to managing non-financial risks. The new standard is to be applied to financial years beginning on or after January 1, 2018. Early adoption is also permitted. The company is currently reviewing what effects adoption of IFRS 9 would have on its consolidated financial statements.
In May 2014, the IASB published the new standard IFRS 15 “Revenue from Contracts with Customers”. Based on the new standard, the revenue recorded is to include transfer of goods and services promised to the customer at the amount that corresponds to what the company is likely to receive in exchange for these goods or services. Revenue is generated when the customer receives control of the goods or services. IFRS 15 also contains stipulations regarding disclosure of performance surpluses or obligations in place at contractual level. These are assets and liabilities resulting from customer contracts that are based on the relationship between the service performed by the company and the payment made by the customer. In addition to this, the new standard requires disclosure of a whole host of quantitative and qualitative information to allow readers of the consolidated financial statements to understand the type, level and timing of revenue and cash flows from contracts with customers, as well as the uncertainty associated with these. IFRS 15 replaces IAS 11 “Construction Contracts” and IAS 18 “Revenue”, as well as the accompanying interpretations. The standard is to be applied to financial years beginning on or after January 1, 2018. Early adoption is also permitted. The company is currently reviewing what effects adoption of IFRS 15 would have on the Group’s consolidated financial statements and will then stipulate the timing of the initial application, as well as the transmission methods.
The IASB published its new IFRS 16 “Leases” standard in January 2016. IFRS 16 replaces IAS 17 and the accompanying interpretation (IFRIC 4, SIC-15, SIC-27). For lessees, the new standard requires a completely new approach for reporting leasing agreements. While with IAS 17 the transfer of key opportunities and risks relating to the lease object was the overriding factor when reporting leases, in future all leases must generally be recorded in the balance sheet by the lessee as a financing transaction. The accounting regulations for lessors have remained largely unchanged. The standard is to be applied to financial years beginning on or after January 1, 2019. Early adoption is possible, provided IFRS 15 is also being applied. The company is currently reviewing what effects adoption of IFRS 16 would have on its consolidated financial statements.
In September 2014, the IASB published amendments to IFRS 10 and IAS 28 “Sales or Contributions of Assets between an Investor and its Associate/Joint Venture”. This eliminates an inconsistency that has previously existed between the two standards. The IASB has postponed the timing for initial adoption of this standard indefinitely.
In December 2014, the IASB published amendments to IFRS 10, IFRS 12 and IAS 28 “Consolidation Exception”. These amendments serve to clarify various issues relating to application of the exception from the consolidation obligation pursuant to IFRS 10 if the parent company fulfils the definition of an “investment company”. The standard is to be applied to financial years beginning on or after January 1, 2016. MLP does not expect the amendments to have any significant impact on its consolidated financial statements.
MLP did not adopt any standards or interpretations ahead of time that have already been issued but have not yet come into force. The Group will apply the new/revised standards and interpretations at the latest when their adoption becomes binding following endorsement by the EU.
4 Scope of consolidation, as well as shares in associates and disclosures on non-consolidated structured entities
MLP AG and all significant subsidiaries that are controlled by MLP AG are included in the consolidated financial statements. Associates are accounted for using the equity method.
In the financial year, parts of the FERI business segment were restructured. The Hedge Funds and Private Equity Management business segments were spun off from FEREAL AG, and the Economics business segment was spun off from FERI EuroRating Services AG. These business segments were then transferred to FERI Trust GmbH. In addition, FERI Institutional & Family Office GmbH was merged with FERI Trust GmbH.
Alongside MLP AG as the parent company, 16 (previous year: nine) fully consolidated domestic subsidiaries and, as was already the case in the previous year, one fully consolidated foreign subsidiary and one associated company were incorporated in the consolidated financial statements of December 31, 2015.
Listing of shareholdings for the consolidated financial statements as per § 313 of the German Commercial Code (HGB)
| As of December 31, 2015 | Share of capital in % | Shareholders' equity (€'000) | Net profit (€'000) |
| Fully consolidated subsidiaries | |||
| MLP Finanzdienstleistungen AG, Wiesloch ¹ | 100.00 | 109,548 | 26,025 |
| TPC GmbH, Hamburg 100) | 100.00 | 314 | 271 |
| ZSH GmbH Finanzdienstleistungen, Heidelberg 100) (Wholly-owned subsidiary of MLP Finanzdienstleistungen AG) | 100.00 | 1,190 | 1,019 |
| FERI AG, Bad Homburg v.d. Höhe ¹ | 100.00 | 19,862 | 10,276 |
| FERI Trust GmbH, Bad Homburg v.d. Höhe 100) (Wholly-owned subsidiary of FERI AG) | 100.00 | 5,386 | 2,072 |
| FERI EuroRating Services AG, Bad Homburg v.d. Höhe 100) (Wholly-owned subsidiary of FERI AG) | 100.00 | 958 | -854 |
| FEREAL AG, Bad Homburg v.d. Höhe100) (Wholly-owned subsidiary of FERI AG) | 100.00 | 1,949 | 531 |
| FERI Trust (Luxembourg) S.A., Luxembourg (Wholly-owned subsidiary of FERI AG) | 100.00 | 15,596 | 13,217 |
| Schwarzer Familienholding GmbH, Kiel | 75.00 | 2,215 | 174 |
| DOMCURA AG, Kiel100) (Wholly-owned subsidiary of Schwarzer Familienholding GmbH) | 75.00 | 2,380 | 2,850 |
| Nordvers GmbH, Kiel100) (Wholly-owned subsidiary of DOMCURA AG) | 75.00 | 26 | 224 |
| F&F Makler AG, Hamburg100) (Wholly-owned subsidiary of Schwarzer Familienholding GmbH) | 75.00 | 383 | -2,316 |
| nordias GmbH Versicherungsmakler, Kiel100) (Wholly-owned subsidiary of F&F Makler AG) | 75.00 | 26 | 512 |
| Ralf W. Barth GmbH, Hamburg100) (Wholly-owned subsidiary of F&F Makler AG) | 75.00 | 26 | 89 |
| Willy F.O. Köster GmbH, Hamburg100) (Wholly-owned subsidiary of F&F Makler AG) | 75.00 | 2,025 | 46 |
| Siebert GmbH Versicherungmakler, Jens/Arnstadt100) (Wholly-owned subsidiary of F&F Makler AG) | 75.00 | 26 | 198 |
| MLPdialog GmbH, Wiesloch (Wholly-owned subsidiary of MLP Finanzdienstleistungen AG) | 100.00 | 495 | 195 |
| Associates consolidated at equity | |||
| MLP Hyp GmbH, Wiesloch (49.8 % subsidiary of MLP Finanzdienstleistungen AG) | 49.80 | 5,825 | 2,825 |
| Companies not consolidated due to immateriality | |||
| MLP Consult GmbH, Wiesloch | 100.00 | 2,328 | 19 |
| Michel & Cortesi Asset Management AG, Zurich (Switzerland) ⁴ ⁵ (Wholly-owned subsidiary of FERI AG) | 100.00 | – | – |
| FERI Corp. (USA), New York ³ ⁴ (Wholly-owned subsidiary of FERI EuroRating Service AG) | 100.00 | USD 87 thsd | USD -24 thsd |
| CORESIS Management GmbH, Bad Homburg v.d. Höhe ² (25 % held by FERI AG) | 25.00 | 254 | 70 |
| FPE Private Equity Beteiligungs-Treuhand GmbH, Munich 100) (Wholly-owned subsidiary of FERI Trust GmbH) | 100.00 | 187 | 134 |
| FPE Private Equity Koordinations GmbH, Munich 100) (Wholly-owned subsidiary of FERI Trust GmbH) | 100.00 | 82 | 56 |
| FPE Direct Coordination GmbH, Munich 100) (Wholly-owned subsidiary of FERI Trust GmbH) | 100.00 | 42 | 14 |
| FERI Private Equity GmbH & Co. KG, Munich 100) (Wholly-owned subsidiary of FERI Trust GmbH) | 100.00 | 36 | -3 |
| FERI Private Equity Nr. 100 GmbH & Co. KG, Munich 100) (Wholly-owned subsidiary of FERI Trust GmbH) | 100.00 | 5 | -6 |
| US Treuhand Vertriebsgesellschaft mbH (formerly: UST Immobilien GmbH), Bad Homburg v.d. Höhe ² (32.5 % held by FERI AG) | 32.50 | 269 | -99 |
| AIF Komplementär GmbH, Munich² (25 % held by FERI AG, 50 % held by US Treuhand Vertriebsgesellschaft mbH) | 41.25 | 3 | -21 |
| AIF Register-Treuhand GmbH, Munich100) (Wholly-owned subsidiary of FERI AG) | 100.00 | 18 | -7 |
| DIEASS GmbH, Kiel100) (Wholly-owned subsidiary of DOMCURA AG) | 75.00 | 26 | -5 |
| Portus Assekuranz Vermittlungsgesellschaft mbH, Kiel100) (Wholly-owned subsidiary of DOMCURA AG) | 75.00 | 25 | -15 |
| Nordische Informations-Technologie AG, Kiel100) (Wholly-owned subsidiary of DOMCURA AG) | 75.00 | 50 | 11 |
| Walther Versicherungsmakler GmbH100) (Wholly-owned subsidiary of F&F Makler AG) | 75.00 | 25 | -24 |
Disclosures on non-consolidated structured entities
Non-consolidated structured entities of the MLP Group are private equity companies. Due to the fact that they engage in similar activities, disclosures on non-consolidated structured entities are bundled.
The activities of the companies focus on establishing, maintaining and managing a portfolio of passive investments (target companies), in particular by acquiring shareholdings. The investments primarily comprise shareholdings and are regularly financed by shareholders’ equity. The business model prescribes utilisation of potential returns for equity suppliers through investments in shareholdings via an umbrella fund concept. The objective is to generate income for the equity suppliers via two different approaches; firstly via regular dividend payouts from profitable target companies, and secondly by selling participations for a profit towards the end of the shareholding. The companies generally do not have any business operations of their own or employ any staff.
The carrying amounts of non-consolidated structured entities in the MLP Group are € 521 thsd as of December 31, 2015 (previous year: € 755 thsd). In the financial year 2015, MLP AG recorded an income of € 216 thsd from non-consolidated structured entities (previous year: € 160 thsd).
The MLP Group’s maximum risks of loss from non-consolidated structured entities corresponds to the investment carrying amount.
5 Principles of consolidating subsidiaries and associates
Subsidiaries are companies that are controlled either directly or indirectly by MLP AG, since MLP AG has the decision-making authority to control their relevant activities, as well as an entitlement to the significant variable returns from the companies in which it holds an interest, and can use this decision-making authority to influence the level of these significant variable returns. Other factors can also lead to MLP AG gaining control of a company, for example when a principal agent relationship is in place. In cases such as this, another party with decision-making rights acts as an agent for MLP AG. However, this other party does not itself control the company in question, since it only exercises decision-making rights delegated by MLP AG, the principal.
Subsidiaries material to the consolidated financial statements are fully consolidated from the date of acquisition, i.e. from the date on which MLP AG gains control. They are deconsolidated as soon as the parent company loses control. For subsidiaries included in the consolidated financial statements for the first time, equity consolidation is performed using the acquisition method of accounting in line with IFRS 3 “Business Combinations”. Here, the acquisition costs for the shares acquired are offset against the proportionate share of equity in subsidiaries. The assets, debts and contingent liabilities acquired are fully incorporated into the consolidated balance sheet at the time of acquisition, whereby hidden reserves and liabilities are also taken into account. Any remaining positive differences are then disclosed as goodwill. In the event of deconsolidation, this goodwill is released to income. Any negative differences are recognised in the income statement immediately. For business combinations in which fewer than 100% of the shares are acquired, IFRS 3 provides the option of using either the purchased goodwill method or the full goodwill method. This option can be exercised each time a new company is acquired. The consolidated financial statements contain no effects of intra-group transactions. No intra-group income and expenses or receivables and liabilities between consolidated companies are offset against each other. Profits between consolidated companies (inter-company profits) are eliminated. Deferred taxes are recognised by MLP to accommodate any unrecognised differences between the IFRS carrying amounts and the tax values resulting from the consolidation.
Associates are companies where MLP AG has significant influence on financial and operating policy, but which are neither subsidiaries nor joint ventures. A significant influence can generally be exerted when holding a 20% to 50% share of the voting rights. Associates are accounted for using the equity method. The equity method is also used for joint ventures. The shares in associates accounted for using the equity method are recorded at the date of addition based on their historical costs. The goodwill corresponds to the positive difference between the historical costs of the interest and the pro rata net fair value of the associate’s assets. When applying the equity method, the goodwill is not amortised, but in the case of indications it is tested for an impairment of the shares. Existing goodwill is disclosed under investments accounted for using the equity method.
Structured entities are companies at which the voting rights or comparable rights are not the dominant factor when determining control, such as when voting rights refer exclusively to administrative duties and the relevant activities are governed by contractual agreements. Examples of structured companies include securitisation companies, asset-backed finance companies and private equity companies. As is also the case with subsidiaries, the structured entities need to be consolidated whenever MLP AG controls them.
6 Business combinations
With a view to establishing a new business segment, MLP signed a purchase agreement for Schwarzer Familienholding GmbH, the parent company of the DOMCURA Group, on June 16, 2015.
As an underwriting agency and a key business segment, the DOMCURA Group examines all offers in the market when designing, developing and implementing its extensive coverage concepts in the field of non-life insurance. It is also active as a broker.
The cartel authorities approved the transaction on July 9, 2015. The transaction was then concluded on July 29, 2015 (acquisition date).
The purchase price for 100% of the shares in Schwarzer Familienholding GmbH is € 18.0 million. € 12.0 million of this price was paid in cash. The remaining € 6.0 million was paid by issuing new MLP shares as a capital increase in exchange for non-cash contributions.
In the first step, MLP acquired 41.7% of the shares. A further 33.3% was transferred to MLP with entry of the capital increase in exchange for non-cash contributions in the Commercial Register. This was performed on August 10, 2015. A quarter, i.e. 25%, of the shares are initially to remain with the company founder of DOMCURA. These shares, which do not carry any voting rights or dividend entitlements, are to be transferred by no later than January 1, 2017 without further consideration becoming payable. Minority interests are not disclosed.
The increase in capital stock was performed within the scope of the capital authorised by the 2014 Annual General Meeting under exclusion of subscription rights. Based on this, the share capital of MLP AG increased by 1.35% from € 107,877,738 to € 109,334,686. The new shares are subject to a vesting period of six months from issue. The fair value of the ordinary shares issued was based on the company’s share price on July 29, 2015. This was € 4.14 per share.
The following section presents the method for determining goodwill on the basis of the purchase price allocation performed:
Acquired net assets of the DOMCURA Group
| All figures in €'000 | Carrying amount before purchase | Adjustment | Fair value |
| Intangible assets | 3,107 | 9,924 | 13,031 |
| Property, plant and equipment | 1,143 | – | 1,143 |
| Financial assets | 73 | – | 73 |
| Other receivables and assets | 9,010 | – | 9,010 |
| Cash and cash equivalents | 14,127 | – | 14,127 |
| Provisions | -4,551 | – | -4,551 |
| Liabilities | -16,676 | – | -16,676 |
| Deferred tax liabilities | – | -3,787 | -3,787 |
| Net assets | 6,233 | 6,137 | 12,370 |
| Pro rata share of net assets | 100% | 12,370 | |
| Goodwill | 5,663 | ||
| Purchase price | 18,032 | ||
| Cash outflow from the acquisition | 12,000 | ||
Goodwill essentially comprises anticipated synergies from the business combination and the staff base of the DOMCURA Group. None of the goodwill recognised is likely to be deductible for tax purposes.
As at December 31, 2015, the DOMCURA Group contributed to Group net profit with its net profit of € -1,069 thsd and revenue of € 20,007 thsd. If the company acquisition had been made at the start of the year, this would have resulted in Group net profit of € 23,269 thsd and revenue for 12 months of € 583,002 thsd as of December 31, 2015.
7 Significant discretionary decisions, estimates and changes in estimates
On occasions, the preparation of the financial statements included in IFRS consolidated financial statements requires discretionary decisions, assumptions and estimates, which influence the level of the disclosed assets and debts, the disclosures of contingent liabilities and receivables, the income and expenses of the reporting period and the other disclosures in the consolidated financial statements.
The estimates include complex and subjective measurements, as well as assumptions, some of which are uncertain due to their very nature and can be subject to changes. The actual values may deviate from the estimates.
Information on significant discretionary decisions, assumptions and estimation uncertainties that have the greatest impact on the amounts disclosed in the consolidated financial statements when applying the accounting policies is provided in the following notes:
- Note 4 – aggregation principles for structured entities
- Note 6 – purchase price allocation
- Notes 7 and 20 – impairment test (discounted cash flow forecasts and significant assumptions applied)
- Notes 7 and 23 – valuation of investment property / non-current assets held for sale
- Notes 7, 24 to 27 and 37 – classification and measurement of financial instruments, as well as fair value disclosures.
- Notes 7, 24 and 27 – allowances for bad debts
- Notes 7, 30 and 36 – provisions and corresponding refund claims as well as contingent assets and liabilities
- Notes 7 and 30 – measurement of defined benefit obligations
- Notes 7 and 35 – classification of leases
- Note 19 – recognition of tax receivables/tax reserves
8 Accounting policies
Revenue recognition
Revenue is generally recognised if it is probable that MLP will derive definable economic benefit from it.
MLP generates revenue from commission. This commission is in turn generated in the areas of old-age provision, wealth management, health insurance, non-life insurance, financing and other consulting services.
Commission income from the brokerage of insurance policies is recognised independently of the inflow of funds if the Group is entitled to receive payment. The entitlement to payment automatically arises when the first premium of the policy holder has been collected by the insurance company, but at the earliest upon conclusion of the insurance contract. Obligations to consultants and office managers also arise at this point in time. MLP is entitled to time-limited trail commissions for the brokerage of certain contracts (especially pertaining to old-age provision). They are realised according to the same principles as acquisition commissions. MLP receives partially recurrent trailer fees for brokered old-age provision and health insurance contracts. The company is usually entitled to these as long as premiums are payable for underlying contracts.
For the obligation to return portions of commission received when brokered insurance policies are prematurely terminated, MLP establishes provisions for cancellation risks on the basis of empirical values and capitalises the refund claims associated with this for consultants and office managers under “Other receivables and assets” as refund claims resulting from recourse claims. The change in provisions is disclosed under revenues, while the change in the refund claim associated with this is disclosed under commission expenses.
In the field of old-age provision, only commission income from the brokering of life insurance products is included. In the areas of non-life and health insurance, commission income comes from the brokering and management of corresponding insurance products. Revenue from wealth management includes issuing premiums, custody and account maintenance charges, fund management/brokerage fees, as well as brokerage and trailer commission from wealth management mandates. Further wealth management revenue comes from research and rating services. Revenue is generated after service provision.
Commission income from the brokering of loans (credit brokering commission) is attributed to the sales revenue from financing. MLP realises brokerage commissions for loan brokerage after concluding the respective loan agreement.
Other commission and fees are generated at the level to which consulting services are performed. They are paid in particular for consulting services to companies when setting up occupational pension provision schemes, for consulting services offered in connection with medical practice financing and business start-ups, as well as for real estate brokerage.
In addition to this, revenue is generated from the interest rate business. Revenue from the interest rate business also includes interest income from the investment of funds of MLP Finanzdienstleistungen AG.
Interest income is earned by MLP for the duration of the capital investment in line with the effective interest method. Commissions that are part of the effective interest return of a receivable are treated as interest income and recorded in those periods in which they are actually earned. They include commitment interest for giving loan commitments or taking over an existing liability. The company realises fees for other current handling and processing services (for example prematurity compensation) after providing these services.
Interest income from the investment of money from other Group companies is a constituent of the finance cost and is earned for the duration of the capital investment in line with the effective interest method, while dividends are recognised the moment an entitlement to payment arises.
Currency translation
The euro is the functional currency of all companies consolidated in MLP’s consolidated financial statements. Therefore, there are no significant effects from currency translation. No subsidiaries of the MLP Group operate in hyper-inflationary economies.
Fair value
A range of accounting policies and Group disclosures require determination of the fair value for financial and non-financial assets and liabilities. For the determination of the fair value of an asset or liability, MLP uses data observed in the market insofar as possible. If there is no active market on the closing date, the fair value is determined using recognised valuation models. Based on the input factors used in the valuation models, the fair values are classified in various tiers within the fair value hierarchy as per IFRS 13:
- Fair values at hierarchy level 1 are determined using prices available in active markets for the identical financial instrument (quoted market prices).
- The fair values at hierarchy level 2 are either determined using prices on active markets for comparable but not identical financial instruments or using valuation techniques based primarily on data from observable markets.
- When using valuation techniques, which incorporate a key parameter that cannot be observed in the market, fair values are assigned to hierarchy level 3.
If the input factors used to calculate the fair value of an asset or liability can be assigned to various tiers in the fair value hierarchy, the entire measurement of fair value is assigned to the tier in the fair value hierarchy that corresponds to the lowest input factor of overriding importance for the valuation.
The Group recognises re-assignments between the various tiers in the fair value hierarchy at the end of the reporting period in which the respective amendment was implemented.
You can find further information on the assumptions made when determining fair values in the following notes:
- Note 23 – investment property/non-current assets held for sale
- Note 37 – additional information on financial instruments
Intangible assets
Intangible assets that have been acquired or created by the company itself are recognised as assets in accordance with the requirements of IAS 38 “Intangible Assets”. Alongside other criteria, use of the asset must provide a probable future economic advantage. It must also be possible to reliably determine the costs of the asset.
Intangible assets are disclosed at their acquisition or manufacturing costs minus all accumulated amortisation charges and all accumulated impairment losses. MLP does not apply the revaluation method. Goodwill is valued at the excess of the business combination’s acquisition cost over the acquired net assets on the date of addition.
Definite-lived intangible assets need to be estimated with regard to the depreciation methods and duration. The respective useful life periods are defined on the basis of empirical values. Due to changed overall economic circumstances, the amortisation period may need to be adjusted, which can have significant effects on the level of amortisation expenses. At MLP this mainly concerns client relations and software. Definite-lived intangible assets are usually written down on a straight-line basis over their economic life. Amortisation begins once the intangible asset becomes ready for use and ends as soon as the asset is derecognised or if the asset is no longer classified as “held for sale”. The residual value, useful life and amortisation method for a definite-lived intangible asset are reviewed at the end of each financial year. If the expected useful life or the expected pattern of an asset’s usage has changed, MLP caters to this by adjusting the amortisation period or selecting a different amortisation method. MLP recognises changes in estimates of this nature prospectively in the balance sheet in accordance with IAS 8. The carrying amount of definite-lived intangible assets is checked whenever there is an indication that their value may have been reduced (impairment).
Intangible assets generated internally are only capitalised at their cost of conversion if the conditions required pursuant to IAS 38 are fulfilled. The cost of conversion includes all costs directly attributable to the development process and appropriate portions of development-related overheads. If the capitalisation conditions for internally generated intangible assets are not met, MLP recognises the development costs as expenses in the period in which they were incurred.
Goodwill and other indefinite-lived intangible assets are not amortised. The indefinite-lived intangible assets are subjected to an impairment test once a year or when there are indications of an impairment. These tests are either performed individually or at the level of a cash-generating unit. At MLP, this in particular affects the brands acquired within the scope of business combinations. They are also reviewed once a year to establish whether their classification as an indefinite-lived asset is still justified. If this is not the case, the asset is handled according to the principles for definite-lived intangible assets from then on. The change in useful life from indefinite to finite is recognised prospectively in the balance sheet as a change in estimate in accordance with IAS 8. For further details, please refer to Note 21.
Business combinations require estimates of the fair value of the assets acquired, assumed debts and contingent liabilities purchased. Property, plant and equipment are usually valued by independent experts, while marketable securities are shown at their stock market price. If intangible assets are to be valued, MLP either consults an independent external expert or calculates the fair value based on a suitable valuation method, generally discounted cash flows, depending on the type of asset and the complexity involved in calculating the value. Depending on the type of asset and the availability of information, various valuation techniques are applied (market-price-oriented, capital-value-oriented and cost-oriented methods). For instance, when valuing trademarks and licences, the relief-from-royalty method may be appropriate, whereby the value of intangible assets is assessed on the basis of royalties saved for trademarks and licences held by the company itself.
Insofar as cash-generating units are restructured, a re-allocation of the goodwill assigned to these units is performed on the basis of the relative revenue values. Brands are re-allocated on the basis of sustainable sales revenues or relative revenue values.
MLP tests goodwill from business combinations for impairment at least once a year. For the purpose of the impairment test, goodwill is allocated to cash-generating units at the acquisition date. The impairment test compares the carrying amount of the cash-generating units with their recoverable amount. The recoverable amount is the higher amount of either the fair value less costs of sale or the value in use of the cash-generating unit. This requires an estimate of the value in use of the cash-generating unit, to which the goodwill is allocated. To this end, corporate management must estimate the likely future cash flow of the cash-generating units. The calculation of the present value of anticipated future cash flows is based on assumptions on the development of funds under management, future sales volumes and expenses. The cash flow estimate is based on detailed planning periods with a planning horizon of four years. In addition to this, an appropriate discount rate must be selected to determine the present value of this cash flow.
Intangible assets generated internally are only capitalised at their cost of conversion if the conditions required pursuant to IAS 38 are fulfilled. The cost of conversion includes all costs directly attributable to the development process and appropriate portions of development-related overheads. If the capitalisation conditions for internally generated intangible assets are not met, MLP recognises the development costs as expenses in the period in which they were incurred.
Property, plant and equipment
Items of property, plant and equipment are measured at cost and, if applicable, less straight-line depreciation and impairment losses. MLP does not apply the revaluation method. Depreciation of the property, plant and equipment or components begins when an asset is ready for use. Probable physical wear and tear, technical obsolescence and legal/contractual limitations are taken into account in determining expected useful lives.
The procurement and manufacturing costs for property, plant and equipment contain greater expenses for initial procurements that extend the average useful life or increase the capacity. In the case of assets that have been sold or scrapped, the historic procurement or manufacturing costs and the cumulative depreciation charges are derecognised. The profits or losses resulting from the disposal of the assets are determined as the difference between the net disposal proceeds and the carrying amount and are recognised in the income statement as other revenue or other operating expenses in the period in which the item is derecognised. Maintenance and minor repairs are recognised in the income statement immediately.
Investment property
Investment property pursuant to IAS 40 consists of all property that is held to earn rental income and/or for capital appreciation, rather than for use in the supply of services or for administrative purposes or sale in the company’s ordinary course of business. MLP measures investment property at amortised procurement and manufacturing costs, including incidental costs. Investment property is written off in accordance with the principles detailed for property, plant and equipment. Investment property is derecognised if it is sold or no longer used on a permanent basis or if no future economic benefit is expected when selling it. Gains or losses from the closure or the disposal of an investment property are recognised under other revenue or other operating expenses at the time of their closure or sale. Rental income from investment property is realised by the Group on a straight-line basis over the duration of the tenancy agreement.
Non-current assets held for sale
Non-current assets or disposal groups are classified as “held for sale” if it is highly likely that they will predominantly be realised through sale and not through continued utilisation. They are measured at the lower value of their carrying amount or fair value less selling costs. Impairment losses for initial classification as “held for sale” and subsequent profits/losses based on revaluation are recognised as profit or loss. Intangible assets and “property, plant and equipment” are no longer amortised.
Impairment test
The carrying amount of all indefinite-lived intangible assets, intangible assets that are not yet ready for use and goodwill is tested at the end of each financial year. For further intangible assets and “property, plant and equipment”, MLP reviews at each balance sheet date whether there are any indications of impairment. If the recoverable amount for the individual asset cannot be determined, the estimate is made for the smallest cash-generating unit to which the asset belongs. An asset’s recoverable amount is the higher of either the fair value of an asset less selling costs or the value in use. If an asset’s carrying amount exceeds its recoverable amount, the asset is regarded as impaired and is written down to its recoverable amount.
For the purposes of determining value in use, estimated future cash flows are discounted to their present value on the basis of a pre-tax discount rate reflecting current market assessments of the time value of money and the risks specific to the asset. If necessary, impairment losses are shown in the income statement under “Depreciation/amortisation and impairments”.
Goodwill acquired within the scope of business combinations is tested for impairment losses at least once a year and also at any time when there is indication of potential impairment losses on assets. For the purposes of impairment tests, the goodwill must be allocated from the date of acquisition onwards to those of the Group’s cash-generating units or groups of cash-generating units that are to benefit from the synergies from the combination. This applies irrespective of whether other assets or liabilities of the acquired company have been allocated to these units or groups of units. Each unit or group of units to which goodwill is allocated represents the lowest level within the Group at which goodwill is monitored for internal management purposes and is no larger than one business segment in the sense of IFRS 8. The carrying amount is tested by determining the recoverable amount of the cash-generating unit to which the goodwill refers. If the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. If the Group sells part of a cash-generating unit to which goodwill is allocated, the goodwill is regularly divided in proportion to the values of the sold and retained portion of the unit. The proportional goodwill allocated to the part that has been sold is included in the calculation of the profit from sale of discontinued operations.
At each closing date, MLP checks whether there are any indications that an impairment loss recognised in prior reporting periods no longer exists or may have decreased. If there is any such indication, it measures the recoverable amount. An impairment loss recognised previously is reversed if, since the last impairment loss was recognised and due to a change in the estimates, the recoverable amount is higher than the asset’s carrying amount. The reversal may not exceed what the amortised cost would have been if an impairment had not been recognised in the previous years. Such a reversal must be recognised directly in the net income for the period. Once impairment losses have been reversed, an adjustment may need to be made in future reporting periods so as to systematically distribute the asset’s adjusted carrying amount less any residual value over its remaining useful life. No reversal of impairment losses may be made to goodwill.
The significant assumptions that are used when calculating the recoverable amount are the discount rates, terminal value growth rates and growth rate of earnings before tax. The discount rate is based on a risk-free basic interest rate plus a company-specific risk premium, which is derived from the systematic market risk (beta factor) and the current market risk premium. The discounted cash flow model is based on future cash flows over a period of four years. Cash flows after this time period are extrapolated using a growth rate, which is based on the management’s estimate of the long-term average annual growth rate in earnings before tax. For further details, please refer to Note 21.
Leasing
MLP operates as both a lessee and lessor to third parties. MLP determines whether a contractual agreement constitutes or contains a lease on the basis of the economic substance of the agreement concluded. This requires an assessment of whether performance of the agreement is dependent upon the use of a particular asset or particular assets and whether the agreement confers the right to use the asset. Leases where all risks and rewards incident to ownership of the leased asset remain substantially with the Group as lessor are classified as operating leases. MLP has not signed any agreements that essentially transfer all risks and rewards associated with the ownership of the leased asset to the lessee (finance leases). The further notes are therefore limited to operating leases.
MLP signed one leasing agreement as lessor of a commercial property in Heidelberg. This agreement is classified as an operating lease, as MLP continues to bear the key opportunities and risks associated with ownership of the property. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and expensed over the term of the lease, just as rental income is recognised as expenses over the term of the lease. For further details, please refer to Note 23.
MLP signed multiple leasing agreements as lessee of rental properties, motor vehicles and office machines. The agreements are also classified as operating leases, as the lessors bear the key risks and opportunities associated with ownership of the property. Rental payments under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. The same principle applies to benefits received and receivable that serve as an incentive to enter into an operating lease. For further details, please refer to Note 35.
Investments accounted for using the equity method
The acquisition costs are annually updated by taking into account the equity changes of the associates corresponding to MLP’s equity share. Unrealised gains and losses from transactions with associates are eliminated based on the percentage of shares held. The changes of the pro rata shareholders’ equity are shown in the company’s income statement under earnings from investments accounted for using the equity method. Dividends received reduce the carrying amount. For further details, please refer to Note 17.
Financial instruments
A financial instrument is a contract that simultaneously gives rise to a financial asset at one entity and a financial liability or equity instrument at the other entity. In the case of regular-way purchases and sales, financial instruments are recognised or derecognised in the balance sheet on the trade date. Regular-way purchases or sales are purchases or sales of financial assets requiring delivery of the assets within a period dictated by market regulations or conventions.
Pursuant to IAS 39, financial instruments are divided into the following categories:
- Financial assets at fair value through profit and loss,
- Held-to-maturity investments,
- Loans and receivables,
- Available-for-sale financial assets,
- Financial liabilities at amortised cost, and
- Financial liabilities at fair value through profit and loss
MLP defines the classification of its financial assets and liabilities upon initial recognition. They are initially recognised at their fair value. The fair value of a financial instrument is defined as the price paid for the sale of an asset or transfer of a liability in a standard business transaction between market actors on the cut-off date for valuation. Financial assets or liabilities that are not measured at fair value through profit and loss within the scope of the subsequent measurement are initially recognised plus transaction costs that are directly attributable to the acquisition of the financial asset or issue of the financial liability.
Financial assets at fair value through profit and loss comprise the subcategories “Held for trading” and “Designated at fair value through profit and loss”. MLP’s financial instruments are “designated at fair value through profit and loss” when incongruences would otherwise arise in their valuation or recognition. Subsequent to initial recognition, these assets are measured at their fair value. Profits or losses from the change in fair value are recognised through profit or loss.
MLP tests the carrying amounts of the financial instruments that are not measured at fair value through profit and loss individually at each closing date to determine whether there is objective and material evidence of impairment. A financial asset is impaired and impairment losses are incurred if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset than can be reliably estimated.
The following are classed as objective evidence that impairment losses have occurred to financial assets:
- Default or delay in payments on the part of the debtor
- Indications that a debtor or issuer is falling into insolvency
- Adverse changes in the payment status of borrowers or issuers
- Economic framework conditions that correlate with defaults
- The disappearance of an active market for a security.
In addition to this, when an equity instrument held suffers a significant or extended decline in fair value to a level below its acquisition costs, this is considered an objective evidence of impairment. MLP classes a decrease in value of 20% to be “significant” and a time period of nine months as an “extended” decline.
MLP has classified financial assets as held-to-maturity investments. Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and a fixed term that MLP wishes to and is capable of retaining until maturity. So far MLP has not prematurely sold any financial assets that were classified as held-to-maturity financial investments. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. If held-to-maturity investments are likely to be subject to an impairment, this will be recognised through profit or loss. An impairment that was previously recognised as an expense is reversed to income if a recovery in value can be attributed objectively to facts that have arisen since the original impairment charge. An increase in value is only recognised to the extent that it does not exceed the value of the amortised costs that would have resulted without impairment. The recoverable amount of securities held to maturity which is required for impairment testing corresponds to the present value of the expected future cash flow, discounted using the original effective interest rate of the financial asset. The fair value of held-to-maturity investments can temporarily drop below their carrying amount. Insofar as this drop is not due to credit risks, no impairment is recognised.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not listed on an active market. Subsequent to initial recognition, they are valued at amortised cost using the effective interest method. For receivables from banking business and for other receivables and other assets, impairment losses on portfolio basis are recognised for receivables for which no specific allowances have been made.
Any impairment losses are recognised in profit or loss on the corresponding impairment account. If a receivable is uncollectable (i.e. payment is almost certainly impossible), it will be written off. Allowances for bad debt on a portfolio basis in connection with loan loss provision in the banking business are established on the basis of historical loss rates and dunning levels. Specific allowances for bad debts are recognised if receivables are likely to be uncollectable. The allowances for other receivables and other assets essentially relate to receivables from branch office managers and consultants. Alongside the allowances formed for losses on individual accounts receivable that are in default, portfolio-based impairment losses are recorded for the remaining accounts receivable. As is also the case with loan loss provisions in the banking business, the allowances are based on historical loss rates. These are set separately for consultants and office managers and applied to the respective accounts receivable. For further details, please refer to Notes 24 and 27.
Available-for-sale financial assets represent non-derivative financial assets which, subsequent to initial recognition, are measured at their fair value. Profits or losses that result from a change in fair value are recognised outside the income statement as other comprehensive income until the respective asset is derecognised. However, allowances for bad debts and profits or losses from currency translations are excluded from this. They are recognised directly in profit or loss. The reversal of profits/losses recorded under other comprehensive income in the income statement is performed either when the respective asset is derecognised or in the event of an impairment.
If a decline in the fair value of an available-for-sale financial asset has been recognised under other comprehensive income and an objective reference to impairment of this asset is in place, this loss recognised previously directly in shareholders’ equity is to be transferred from shareholders’ equity to the income statement up to the level of the determined impairment.
Impairment losses of an available for sale equity instrument recognised in profit or loss cannot be reversed. MLP records any further increase of the fair value under shareholders’ equity with no effect on the operating result.
If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and this increase can be related objectively to events occurring after the impairment was recognised, the impairment loss is reversed to equity at the appropriate level.
MLP measures equity instruments for which no listed price exists on an active market, and whose fair value cannot be reliably established, at acquisition cost. If objective indicators suggest there is an impairment to a non-listed equity instrument measured at acquisition costs, the amount of impairment is calculated as the difference between the carrying amount and the present value of the estimated future cash flow, which are discounted at the current market rate of return of a comparable asset.
Subsequent to their initial recognition, financial liabilities are to be recognised at their amortised costs using the effective interest method. Profits or losses are recognised in the income statement on derecognition, as well as within the scope of amortisation charges. Subsequent to their initial recognition, financial liabilities at fair value through profit and loss are measured at their fair value. Profits or losses from the change in fair value are recognised through profit or loss.
Other receivables and assets
Non-financial assets included in other receivable and assets are measured at amortised costs.
Pension provisions
Old-age provision in the Group is performed on the basis of the defined-benefit and defined contribution old-age provision plans.
In the defined contribution plans, MLP pays premiums to statutory or private pension insurance institutions based on legal or contractual provisions or on a voluntary basis. After payment of the premiums, MLP has no further benefit obligations.
Commitments to pay premiums into defined contribution schemes are recognised as expenses as soon as the related service has been rendered. Pre-paid premiums are recognised as assets insofar as a right to reimbursement or reduction of future payments arises.
In accordance with IAS 19 “Employee Benefits”, the provisions for pension obligations from defined benefit plans are measured using the projected-unit credit method.
The benefit obligations are partly covered by reinsurance. Virtually all reinsurance policies fulfil the conditions of pension scheme assets. For this reason the claims from reinsurance policies are netted against corresponding pension provisions in the balance sheet as per IAS 19.
The Group’s net obligation with regard to defined benefit plans is calculated separately for each plan by estimating future benefits that the employees have earned in the current period and in earlier periods. This amount is discounted and the fair value of any pension scheme assets subtracted from this.
For the measurement of pension obligations, MLP uses actuarial calculations to estimate future events for the calculation of the expenses, obligations and entitlements in connection with these plans. These calculations are based on assumptions with regard to the discount rate, mortality and future salary, as well as pension increases. The interest rate used to discount post-employment benefit obligations is derived from the interest rates of senior, fixed-rate corporate bonds.
Revaluations of net liabilities from defined benefit plans are recognised directly under other comprehensive income. The revaluation encompasses actuarial gains and losses, income from pension scheme assets (without interest) and the effects of any upper asset limit (without interest). The Group calculates net interest expenses (income) on net liabilities (assets) from defined benefit plans for the reporting period through application of the discount rate used for valuation of the defined benefit obligations at the start of the annual reporting period. This discount rate is applied to net liabilities (assets) from defined benefit plans at this time. Any changes to net liabilities (assets) from defined benefit plans that occur as a result of premium and benefit payments over the course of the reporting period are taken into account. Net interest expenses and other expenses for defined benefit plans are recognised as profit or loss.
If the benefits of a plan are changed or the scope of a plan is reduced, the resulting change to the benefit or profit/loss affecting years of service already earned is recognised directly as profit or loss when reducing the scope of said plan. The Group recognises profit and loss resulting from a defined benefit plan at the time of occurrence.
Further details of pension provisions are given in Note 30.
Other provisions
In accordance with IAS 37 “Provisions, contingent liabilities and contingent assets” other provisions are recognised when the Group has a present obligation (legal or constructive) resulting from a past event, settlement is expected to result in an outflow of resources and the obligation’s amount can be estimated reliably. They represent uncertain obligations that are measured at the amount that represents the best possible estimate of the expenditure required to fulfil the obligations.
Insofar as the level of the provision can only be determined within a range, the most likely value is used. If the probability of occurrence is equal, the weighted average is taken.
Where the effect of the time value of money is material, provisions with a time of more than one year remaining to maturity are discounted at market interest rates that correspond to the risk and the time remaining to maturity.
Reversals of provisions are recognised under other revenue.
If the Group expects to receive a reimbursement of at least part of a practically certain provision from an identifiable third party (e.g. in case of an existing insurance policy), MLP recognises the reimbursement as a separate asset. The expenditure required to set up the provision is recognised in the income statement after deduction of the reimbursement.
For the liability arising due to the premature loss of brokered insurance policies whereby commission that has been earned must be refunded in part, MLP sets up provisions for cancellation risks. MLP estimates the cancellation rate by product group and the period of the underlying policy that has already run on the basis of empirical values. The period in which MLP is obliged to refund portions of the commissions due to the premature loss of a policy is determined either by the statutory provisions of the German Insurance Act or the distribution agreements that have been concluded with the product providers.
Other liabilities
Other liabilitiesNon-financial liabilities disclosed under “Other liabilities” are recognised in the balance sheet at their settlement value.
Share-based payments
Share-based payments in line with IFRS 2 “Share-Based Payment” comprise remuneration systems paid for in cash.
The proportion of the fair value of share-based payments settled in cash attributable to services provided up to the valuation date is recognised as personnel expenses or as commission expenses and at the same time as a provision. The fair value determined based on the Monte-Carlo simulation or another suitable valuation model is recalculated on each balance sheet date and on the payment date. The recognition of the anticipated expenditure arising from this system demands that assumptions be made about turnover and exercise rates. Any change to the fair value is to be recognised in profit or loss. At the payment date, the fair value of the liability corresponds to the amount which is to be paid to the eligible employee.
You can find further details on the share-based payments in Note 34.
Income taxes
Uncertainties exist with regard to the interpretation of complex tax regulations and the amount and the date of occurrence of taxable income. Based on reasonable estimates, MLP establishes tax liabilities for potential effects of field tax audits. Actual tax refund claims and tax liabilities for both the current period and earlier periods are measured at the amount expected to be refunded by or paid to the tax authorities. The amount is determined on the basis of the tax rates and tax legislation that apply on the respective balance sheet date.
In accordance with IAS 12 “Income taxes”, deferred taxes are recognised on the basis of the balance sheet liability method for all taxable unrecognised differences existing on the balance sheet date between the values of the IFRS consolidated balance sheet and the taxable values of the individual companies. The respective national income tax rates expected at the time of implementation due to applicable tax law or tax law amendments deemed to be certain are taken into account when measuring deferred taxes. Deferred taxes are recognised in the income statement as tax income or expenses, unless they relate to items recognised directly in equity. In this case, the deferred taxes are also recorded under shareholders’ equity, but with no effect on the operating result. Deferred taxes are not recognised if the temporary difference results from the initial recognition of goodwill or from the initial recognition of other assets/debts in a transaction (insofar as this is not a business combination) and their recognition has no effect either on the tax result or on IFRS earnings. Besides tax advantages from deductible temporary differences, deferred tax assets are also recognised for future benefits expected to arise from tax loss carryforwards.
Deferred tax assets are recognised if it is probable that there will be offsettable taxable income available at the time of reversing the deductible temporary differences or that loss carryforwards can be used within a limited timeframe. Deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that there will be sufficient taxable profit against which the deferred tax assets can be used.
Deferred tax assets that have not been recognised are reviewed at each balance sheet date and recognised to the extent that it has become probable that future taxable profit will make realisation possible. Deferred tax assets and deferred tax liabilities are netted against one another if there is an enforceable right to offset tax refund claims against tax liabilities and if the deferred tax assets and deferred tax liabilities relate to the same income taxes levied by the same taxable entity and the same tax authority.
Contingent liabilities
Contingent liabilities are potential commitments resulting from past events and whose existence depends on the occurrence or non-occurrence of one or multiple uncertain future events that are not completely in the company’s control. Contingent liabilities can also arise due to a current commitment that is based on past events but which was not recognised because it is not probable that an outflow of resources will bring economic benefit or a sufficiently reliable estimate of the amount of the obligation cannot be made. Contingent liabilities are not recognised in the balance sheet. If the outflow of resources is unlikely to provide any economic benefit for the company, no contingent liability is disclosed.
9 Reportable business segments
The division of MLP into business segments follows the structure in place for internal reporting. The MLP Group is subdivided into the following reportable business segments:
- Financial services
- FERI
- DOMCURA
- Holding
Due to the similarity of the products and services offered, as well as reliance on the same client base and identical sales channels, MLP pooled the “financial services” and “occupational pension provision” business segments under the reportable “financial services” business segment in accordance with IFRS 8.12. The reportable Financial services business segment consists of consulting services for academics and other discerning clients, particularly with regard to insurance, investments, occupational pension provision schemes and loans of all kinds, as well as the brokering of contracts concerning these financial services. This segment also includes finance portfolio management, the trustee credit business and the loan and credit card business. The financial services segment incorporates the divisions focused on the brokerage business of MLP Finanzdienstleistungen AG, TPC GmbH, ZSH GmbH Finanzdienstleistungen, MLPdialog GmbH and the associate MLP Hyp GmbH.
The business operations of the reportable FERI business segment cover wealth and investment consulting. This segment comprises FERI AG, FERI Trust GmbH, FERI Trust (Luxembourg) S.A., FERI EuroRating Services AG and FEREAL AG.
The business operations of the reportable DOMCURA business segment encompass the design, development and implementation of comprehensive coverage concepts in the field of non-life insurance as a so-called underwriting agency. The segment also engages in brokerage activities. It comprises Schwarzer Familienholding GmbH, DOMCURA AG, Nordvers GmbH, F&F Makler AG, nordias GmbH insurance brokers, Ralf W. Barth GmbH, Willy F.O. Köster GmbH and Siebert GmbH insurance brokers.
The Holding business segment consists of MLP AG. The main internal services and activities are combined in this segment.
Intrasegment supplies and services are settled in principle at normal market prices. In the case of intra-group allocations, an appropriate general overhead surcharge is levied on the direct costs actually incurred.
The management makes decisions on the allocation of resources and determines segment performance on the basis of the income statement for that segment. MLP employs the accounting policies applied in the consolidated financial statements to determine financial information on the segments.
The Finanzdienstleistungen and DOMCURA segments perform their economic activities predominantly in Germany. The FERI segment conducts its business activities in Germany and in Luxembourg.
In the financial year, revenue of € 179,988 thsd was generated with two product partners in the financial services, FERI and DOMCURA business segments. In the previous year, revenue of € 168,838 thsd was generated in the financial services and FERI business segments.
Information regarding reportable business segments
| All figures in €'000 | Financial services | FERI | DOMCURA | Holding | Consolidation | Total | ||||||
| 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Revenue | 395,515 | 403,705 | 123,885 | 109,229 | 20,007 | – | – | – | -3,757 | -3,208 | 535,651 | 509,727 |
| of which total inter-segment revenue | 3,242 | 2,895 | 515 | 313 | – | – | – | – | -3,757 | -3,208 | – | – |
| Other revenue | 13,016 | 12,224 | 6,235 | 4,698 | 2,182 | – | 10,995 | 15,443 | -10,900 | -10,987 | 21,529 | 21,378 |
| of which total inter-segment revenue | 2,017 | 2,022 | 8 | 8 | – | – | 8,875 | 8,957 | -10,900 | -10,987 | – | – |
| Total revenue | 408,531 | 415,929 | 130,120 | 113,927 | 22,190 | – | 10,995 | 15,443 | -14,656 | -14,195 | 557,180 | 531,105 |
| Commission expenses | -172,542 | -176,026 | -70,693 | -60,253 | -13,454 | – | – | – | 3,105 | 2,647 | -253,584 | -233,633 |
| Interest expenses | -1,923 | -2,841 | – | – | – | – | – | – | 2 | 2 | -1,921 | -2,838 |
| Personnel expenses | -74,187 | -72,842 | -30,361 | -27,575 | -5,144 | – | -3,765 | -5,547 | – | – | -113,457 | -105,964 |
| Depreciation | -9,473 | -9,180 | -1,762 | -2,110 | -686 | – | -3,193 | -2,127 | – | – | -15,113 | -13,417 |
| Other operating expenses | -126,672 | -126,586 | -13,575 | -11,611 | -4,745 | – | -10,723 | -10,468 | 11,482 | 11,272 | -144,234 | -137,394 |
| Earnings from investments accounted for using the equity method | 1,836 | 1,127 | – | – | – | – | – | – | – | – | 1,836 | 1,127 |
| Segment earnings before interest and tax (EBIT) | 25,569 | 29,582 | 13,729 | 12,377 | -1,839 | – | -6,686 | -2,699 | -67 | -274 | 30,706 | 38,986 |
| Other interest and similar income | 178 | 238 | 50 | 19 | 21 | – | 286 | 429 | -26 | -17 | 509 | 669 |
| Other interest and similar expenses | -468 | -779 | -370 | -673 | -3 | – | -2,598 | -757 | 176 | 202 | -3,263 | -2,007 |
| Finance cost | -290 | -540 | -319 | -653 | 19 | – | -2,312 | -329 | 149 | 185 | -2,753 | -1,337 |
| Earnings before tax (EBT) | 25,279 | 29,041 | 13,409 | 11,724 | -1,820 | – | -8,998 | -3,027 | 82 | -89 | 27,953 | 37,649 |
| Income taxes | -8,170 | -8,694 | ||||||||||
| Net profit | 19,783 | 28,955 | ||||||||||
| Investments accounted for using the equity method | 3,481 | 2,772 | – | – | – | – | – | – | – | – | 3,481 | 2,772 |
| Investments in intangible assets and property, plant and equipment | 11,208 | 13,622 | 768 | 1,081 | 454 | – | 346 | 715 | – | – | 12,776 | 15,418 |
| Major non-cash expenses: | ||||||||||||
| Increase/decrease of provisions/accrued liabilities | 42,961 | 38,331 | 9,624 | 9,332 | 1,239 | – | 2,612 | 2,925 | – | – | 56,435 | 50,587 |
