Notes to the statement of financial position

19 Intangible assets

Intangible assets comprise definite-lived and indefinite-lived assets. Depreciation/amortisation and impairment on intangible assets are presented in Note 13.

Useful lives of intangible assets

	Useful life as of Dec. 31, 2017	Useful life as of Dec. 31, 2016
Acquired software / licences	3-7 years	3-7 years
Software created internally	3-5 years	3-5 years
Acquired trademark rights	-	10-15 years
Client relations / contract inventories	10-25 years	10-25 years
Goodwill / brand names	undefinable	undefinable

The goodwill originating from company acquisitions was allocated by MLP at the level of the cash-generating units. The disclosures take into account the demerger of MLP Finanzdienstleistungen AG performed in the financial year within the former financial services business segment into the business segments of financial consulting and banking. You can find information on this in Note 4. The reportable financial consulting business segment contains the following groups of cash-generating units: (1) financial consulting, (2) occupational pension provision and (3) ZSH. No goodwill has been allocated to the reportable banking business segment. The reportable FERI business segment includes the cash-generating unit FERI Asset Management. The reportable DOMCURA business segment contains one DOMCURA cash-generating unit. Cash-generating units were allocated the following goodwill values arising from business combinations:

As was already the case in the previous year, there was no need for an impairment of capitalised goodwill in the financial year 2017. The significant assumptions presented in the following were based on the impairment test performed.

Reportable financial consulting business segment

Financial consulting
Weighted average (in %)	2017**	2016**
Discount rate (before tax)	9.8	10.6
Growth rate of the terminal value	1.0	1.0
Planned EBT growth rate (relative average EBT increase per year)	2.5	76.3
Occupational pension provision
Weighted average (in %)	2017	2016
Discount rate (before tax)	9.8	10.2
Growth rate of the terminal value	1.0	1.0
Planned EBT growth rate (relative average EBT increase per year)	4.6	29.0
ZSH
Weighted average (in %)	2017	2016
Discount rate (before tax)	9.8	10.1
Growth rate of the terminal value	1.0	1.0
Planned EBT growth rate (relative average EBT increase per year)	14.0	-*

Reportable FERI business segment

FERI Asset Management
Weighted average (in %)	2017	2016
Discount rate (before tax)	13.4	14.7
Growth rate of the terminal value	1.0	1.0
Planned EBT growth rate (relative average EBT increase per year)	8.0	8.1

Reportable DOMCURA business segment

DOMCURA
Weighted average (in %)	2017	2016
Discount rate (before tax)	9.9	10.4
Growth rate of the terminal value	1.0	1.0
Planned EBT growth rate (relative average EBT increase per year)	-4.0	7.9

*  Growth rates cannot be arithmetically determined due to a negative starting basis.
** The goodwill assigned to the former reportable financial services business segment was allocated in full to the reportable financial consulting business segment within the framework of the demerger.

Within the scope of its impairment testing MLP carried out sensitivity analyses. These analyses examine the effects of an increase of discount interest rates by half a percentage point and the effects of a reduction of the forecast EBT growth by 1% (previous year: 12%). The sensitivity analyses showed that, from today's perspective, there are no impairment losses for recorded goodwill at any cash-generating unit, even under these assumptions.

The items Software (in-house), software (purchased), advance payments and developments in progress contain own work performed within the context of developing and implementing software. In the financial year 2017, own services with a value of € 306 thsd were capitalised (previous year: € 876 thsd). All development and implementation costs incurred complied in full with the criteria for capitalisation pursuant to IAS 38 "Intangible assets".

Other intangible assets contain acquired trademark rights, customer relations/contract inventories with a defined term, as well as indefinite-lived brand names acquired within the scope of company acquisitions.  In view of the recognition of these brands, at present no definite end of their useful lives can be specified.

The "FERI" brand is fully attributed to the cash-generating unit of the "FERI" reportable business segment:

The “DOMCURA” brand is fully attributed to the cash-generating unit of the “DOMCURA” reportable business segment:

There are no restraints on disposal or pledges with regard to intangible assets.  Contractual obligations for the purchase of intangible assets have a net total of € 129 thsd as of December 31, 2017 (previous year: € 69 thsd).

20 Property, plant and equipment

Useful lives of property, plant and equipment

	Useful life/residual value Dec. 31, 2017	Useful life/residual value Dec. 31, 2016
Administration buildings	33 years to residual value (30 % of original cost)	33 years to residual value (30 % of original cost)
Land improvements	15-25 years	15-25 years
Leasehold improvements	10 years or duration or the respective tenancy agreement	10 years or duration or the respective tenancy agreement
Furniture and fittings	8-25 years	8-25 years
IT hardware, IT cabling	3-13 years	3-13 years
Office equipment, office machines	3-23 years	3-23 years
Cars	2-6 years	2-6 years
Works of art	15-20 years	15-20 years

Depreciation/amortisation and impairment of property, plant and equipment are disclosed in Note 13.


There are no restraints or pledges with regard to property, plant and equipment. Contractual obligations for the purchase of property, plant and equipment amount to € 1,687 thsd net as of December 31, 2017 (previous year: € 50 thsd).
 

21 Receivables from clients in the banking business

Receivables from clients in the banking business

All figures in €'000	Dec. 31, 2017	Dec. 31, 2016
Originated loan	389,613	338,859
Corporate bond debts	194,500	172,000
Receivables from credit cards	89,699	87,771
Receivables from current accounts	34,777	35,602
Receivables from wealth management	746	370
Total, gross	709,335	634,603
Impairment	-7,360	-8,124
Total, net	701,975	626,479

As of December 31, 2017, receivables (net) with a term of more than one year remaining to maturity amount to € 515,338 thsd (previous year: € 457,320 thsd).

At Receivables of € 2,455 thsd (previous year: € 2,266 thsd) for which no specific allowance has been made but which are overdue as of December 31, 2017 are secured with customary banking collaterals.

Receivables from clients due to originated loans are partly secured by mortgages (December 31, 2017: € 107,500 thsd; previous year: € 94,018 thsd), assignments (December 31, 2017: € 53,314 thsd; previous year: € 46,466  thsd) or liens (December 31, 2017: € 26,849 thsd, previous year: € 20,280 thsd). Receivables from current accounts and credit cards are generally not collateralised. With regard to receivables from the banking business which are neither impaired nor overdue, there were no signs at the closing date that debtors will not meet their payment obligations.

Receivables from banking business for which new terms were agreed and which would otherwise have been overdue or impaired were € 457 thsd on the closing date (previous year: € 0 thsd).

The Group holds forwarded loans of € 60,283 thsd (previous year: € 36,694 thsd) in the form of collateral for liabilities due to refinancing banks.

Due to defaults of debtors, financial and non-financial assets of € 784 thsd (previous year: 99 thsd) serving as collateral for originated loans and receivables, were utilised. The assets mainly concern property and receivables from claimed life insurance policies.

The loan loss provisions in the lending business cover all identifiable credit risks. Impairment losses are formed on a portfolio basis for the deferred loans risk. Risks are provided for by loan loss provisions carried under assets, and by the recognition of provisions for credit risks (see Note 27).

The disclosed loan loss provisions due to receivables from clients in the banking business developed as follows:
 

For reasons of materiality, a decision was taken not to determine the interest income from impaired receivables from clients in accordance with IAS 39.A93 (Unwinding).

Taking into account direct write-downs of € 517 thsd (previous year: € 211 thsd), income from written-off receivables of € 283 thsd (previous year: € 327 thsd), as well as income from the reversal of provisions of € 63 thsd (previous year: € 3 thsd), the total allocations and reversals recognised in income performed in the reporting year resulted in a net loan loss provision of € 432 thsd (previous year: € 633 thsd).

Receivables for which specific allowances have been made amount in total to € 4,642 thsd (previous year: € 4,299 thsd).  For € 1,935 thsd of these (previous year: € 1,415 thsd), the impairment was less than 50% of the gross receivables, while the remaining volume was written down by more than 50%. The allowance for bad debts comes to € 2,813 thsd (previous year: € 2,667 thsd). This corresponds to a percentage of 61% (previous year 62%).

Accounts receivable for which a specific allowance has been made are secured as per December 31, 2017 with customary banking collaterals of € 1,384 thsd (previous year: € 1,357 thsd).

Further information on receivables from clients in the banking business is disclosed in Note 34.
 

22 Receivables from banks in the banking business

All receivables from banks in the banking business are due from domestic credit institutions. As of December 31, 2017, receivables with a term of more than one year remaining to maturity are € 107,000 thsd (previous year: € 59,000 thsd). The receivables are not collateralised. At the closing date there are no receivables from banks which are overdue or impaired.

Further information on receivables from financial institutions in the banking business is disclosed in Note 34.

23 Financial assets

As of December 31, 2017, MLP has portfolios amounting to € 68,593 thsd (previous year: € 49,530 thsd) that are due in more than twelve months.

As per the measurement categories for financial instruments defined in IAS 39, the financial investment portfolio is structured as follows:

Valuation changes of € 227 thsd (previous year: € 477 thsd) for available-for-sale shares and other variable yield securities were recognised directly in equity, and valuation changes of € 0 thsd (previous year: € -337 thsd) for available-for-sale debentures and other fixed-income securities were recognised in the revaluation reserve.

Due to the disposal of financial assets and recording of impairments, € -252 thsd (previous year: € -591 thsd) was withdrawn from the revaluation reserve in the reporting period and recognised under net income for the period.

In the financial year 2017, impairments and disposal losses of € 288 thsd (previous year: € 598 thsd) for available-for-sale financial assets were recognised through profit or loss.

A loss of € 22 thsd (previous year: € 0 thsd) from valuation changes to financial assets that are rated at fair value through profit and loss was recorded in the reporting period under net income for the period.

Assets pledged as collateral

As at the closing date, the availability of liquidity facilities provided by Deutsche Bundesbank is collateralised by marketable securities of € 13,675 thsd (previous year: € 23,161 thsd) with a face value of € 14,500 thsd (previous year: € 24,500 thsd).

For further disclosures regarding financial assets, please refer to Note 34.
 

24 Other receivables and assets

As of December 31, 2017, receivables (net) with a term of more than one year remaining to maturity amount to € 14,638 thsd (previous year: € 13,332 thsd).

The main items included in trade accounts receivable are commission receivables from insurance companies. They are generally non-interest-bearing and have an average term of payment of 30 days.

Refund receivables from recourse claims are due to MLP consultants and office managers, as well as insurance companies.

Receivables from sales representatives concern MLP consultants and branch office managers.

Receivables from the underwriting business comprise unpaid receivables from clients, as well as receivables from insurance companies for claims settlement.

The item “Advance payments” comprises trail commissions paid to self-employed commercial agents in advance on commissions for unit-linked life insurance policies.
 

Other receivables and assets are usually not collateralised. With regard to receivables and other assets which are neither impaired nor overdue, there are no signs at the closing date that debtors will not meet their payment obligations. On the closing date there were no receivables and other assets for which new terms were agreed and which would otherwise have been overdue or written down.

The allowances for other receivables and other assets are as follows:

In cases where MLP institutes enforcement or where insolvency proceedings are imminent or have already started, receivables are written down based on empirical values. The same applies to receivables which are disputed and where legal action is pending.

Taking into account direct write-downs of € 356 thsd (previous year: € 1,529 thsd) and income from written-off receivables of € 57 thsd (previous year: € 20 thsd), the total direct allocations and reversals performed in the reporting year resulted in net loan loss provisions of € 67 thsd (previous year: € 986 thsd).

As of December 31, 2017, the total volume of accounts receivable for which a specific allowance has been made is € 4,636 thsd (previous year: € 6,243 thsd). For € 512 thsd of these (previous year: € 1,148 thsd) the allowance for bad debts was less than 50% of the gross receivable, the remaining volume was written down by more than 50%. The total allowance for bad debts is € 4,099 thsd (previous year: € 5,087 thsd). This corresponds to an average impairment rate of 88% (previous year: 81%).

Additional disclosures on other receivables and assets can be found in Note 34.
 

25 Cash and cash equivalents

As was the case in previous years, cash and cash equivalents include deposits at the Deutsche Bundesbank. In the financial year 2017, holding funds with commercial banks were transferred to the Bundesbank. This resulted in an increase in cash and cash equivalents, which can be seen within the scope of cash flow from operating activities.

Changes in cash and cash equivalents during the financial year are shown in the statement of cash flow.
 

26 Shareholders' equity

Share capital

The share capital of MLP SE comprises 109,334,686 (December 31, 2016: 109,334,686) no-par-value shares.

Authorised capital

Due to partial utilisation and the amendment resolution from July 27, 2015: a resolution passed by the Annual General Meeting on June 5, 2014 authorised the Executive Board, with the consent of the Supervisory Board, to increase the company's share capital by issuing new ordinary bearer shares on one or more occasions by up to € 20,543,052 in exchange for cash or non-cash contributions up to June 5, 2019.

Acquisition of treasury stock

The Annual General Meeting on June 29, 2017 authorised the Executive Board to buy back own shares on one or more occasions with a pro rata amount of capital stock represented by such shares of up to € 10,933,468 until June 28, 2022. So far, no use has yet been made of this authorisation.

Capital reserves

The capital reserves include increases/decreases in capital stock in MLP SE from previous years. The capital reserves are subject to the restraints on disposal as per § 150 of the German Stock Corporation Act (AktG). The change in capital reserves in the financial year is the result of recording share-based remuneration in line with IFRS 2. For further information please refer to note 31.

Other retained earnings and net profit

Other equity comprises retained earnings of the MLP Group.

Revaluation reserve

At € 967 thsd (previous year: € 1,562 thsd), provisions include unrealised gains and losses from the change in fair value of securities available for sale and deferred taxes attributable to this of € -8 thsd (previous year: € –310 thsd). In addition to this, the provision includes losses from the revaluation of defined benefit obligations of € 17,230 thsd (previous year: € 18,051 thsd) and deferred taxes attributable to this of € 5,046 thsd (previous year: € 5,299 thsd).

Proposed appropriation of profit

The Executive Board and Supervisory Board of MLP SE will propose a dividend of € 21,867 thsd (previous year: € 8,747 thsd) for the financial year 2017 at the Annual General Meeting. This corresponds to € 0.20 (previous year: € 0.08) per share.
  

27 Provisions

Pension provisions  

At MLP, executive members of staff have been granted direct pension benefits subject to individual contracts in the form of defined benefit plans which guarantee the beneficiaries the following pension payments:

• Old-age pension upon reaching 60, 62 or 65 years of age
• Disability pension
• Widow’s and widower's pension of 60% of the pension of the original recipient
• Orphan’s benefit of 10% of the pension of the original recipient

The benefit obligations are partially financed through reinsurance policies, which essentially fulfil the prerequisites of pension scheme assets.

The defined benefit obligation for retirement income, funded only by means of provisions, amounts to € 19,432 thsd (previous year: € 19,950 thsd). Pension insurance policies are in place for all other pension obligations (defined benefit obligation of € 29,708 thsd; previous year: € 30,004 thsd).

The change in net liability from defined benefit plans is summarized in the following table.

€ 959 thsd of the net liabilities recognised in the balance sheet (previous year: € 1,090 thsd) are attributable to Executive Board members active at the end of the reporting period.

With regard to net pension provisions, payments of € 1,191 thsd are anticipated for 2017 (previous year: € 1,624 thsd). € 793 thsd thereof (previous year: € 779 thsd) is attributable to direct, anticipated company pension payments, while € 398 thsd (previous year: € 845 thsd) is attributable to anticipated reinsurance policy premiums.

Actuarial calculations incorporate the following assumptions:

The assumptions made regarding future mortality are based on published statistics and mortality tables.

As of December 31, 2017, the weighted average term of defined benefit obligations was 18.7 years (previous year: 18.3).

Sensitivity analysis

If the other assumptions all remained the same, changes to one of the key actuarial assumptions which would have been realistically possible on the closing date would have influenced the defined benefit obligations by the following amounts:

In order to define the sensitivity of mortality, all mortality rates stated in the mortality table were reduced to 80%. By extending life expectancy, this leads to an increase in the scope of defined benefit obligations. Although the analysis does not take into account the full distribution of anticipated cash flow based on the plan, it does provide an approximation of the sensitivity of the assumptions presented.

Alongside defined benefit plans, defined contribution plans are also in place. With these types of plans the company pays premiums to state or private pension insurance institutions in line with legal or contractual regulations or on a voluntary basis. The regular premiums paid for employees are disclosed as personnel expenses. In the financial year 2017 they total € 9,904 thsd (previous year: € 10,412 thsd).

Other provisions are made up as follows:

Other provisions have changed as follows:

Provisions for bonus schemes are recognised as incentive agreements for self-employed commercial agents.

The provisions for cancellation risks allow for the risk of having to refund earned commissions due to a premature loss of brokered insurance policies.

Provisions for share-based payments are recognised as incentive agreements and as profit-sharing schemes for Executive Board members, employees and self-employed commercial agents.

The provisions for economic loss due to liability risks are offset by claims for reimbursement from liability insurance policies with a value of € 2,114 thsd (previous year: € 1,826 thsd).

The provisions classed as short-term are likely to be utilised within the next financial year. The payments for long-term provisions are essentially likely to be incurred within the next two to seven years.
 

28 Liabilities due to banking business

This summary includes the balance sheet items “Liabilities due to clients in the banking business” and “Liabilities due to banks in the banking business”.

The change in liabilities due to banking business from € 1,308,790 thsd to € 1,501,188 thsd is essentially attributable to the increase in short-term client deposits in current accounts.

As of December 31, 2017, liabilities due to clients from savings deposits with an agreed notice period of three months amounted to € 16,651 thsd (previous year: € 16,004 thsd).

The liabilities due to clients or due to other banks do not comprise any large individual items.

Further information on liabilities due to banking business is disclosed in Notes 34 and 35.
 

29 Other liabilities

Liabilities due to commercial agents represent unsettled commission claims. Usually they are non-interest-bearing and due on the 15th of the month following the settlement with the insurance company.

Liabilities from the underwriting business include collection liabilities due to insurance companies, open commission claims, as well as liabilities from claims settlement.

The item “Advance payments received“ concerns paid-in-advance trail commissions from unit-linked life insurance policies.

Other liabilities comprise commissions withheld from MLP consultants due to cancellations amounting to € 2,347 thsd (previous year: € 2,757 thsd). Commissions withheld are charged with interest. Their term is mainly indefinite. The item also contains liabilities for bonus and profit-sharing payments.

MLP has agreed-upon and non-utilised lines of credit of € 131,605 thsd (previous year: € 130,671 thsd).

Further disclosures on other liabilities can be found in Notes 34 and 35.