04 » First-Time Consolidation/Disposal of Subsidiaries as well as Assets and Liabilities
In 2020, no disposals of subsidiaries or first-time consolidation took place.
Effective as of December 2019, an amendment to the contractual arrangements existing between Agron, Inc. and adidas entered into force granting adidas the power to approve key financial and operational targets as well as the organizational structure of Agron, Inc. adidas has the right to, and is exposed to, the returns from its contractual business relations with Agron, Inc., which are dependent on the level of its net sales and overall profitability. As a result of the extended power, adidas has the ability to directly influence the amount of these variable returns and consequently obtained control over Agron, Inc. Therefore, a fair value of its assets and liabilities was consolidated for the first time into the company’s consolidated statement of financial position as at December 31, 2019. In addition, starting from January 1, 2020, income and expenses of Agron, Inc. will be included in the company’s consolidated income statement. As adidas holds no equity interests of Agron, Inc., both net assets as well as income and expenses are attributable entirely to the non-controlling interest. adidas has not transferred any consideration to the owners of Agron, Inc. in relation to the amendment of the contractual arrangements. The effect of the first-time consolidation was reflected entirely within the equity and neither goodwill nor a gain from a bargain purchase has been recognized.
Agron, Inc. is engaged in the design, development and distribution of sports accessories, primarily under licenses from adidas America, Inc. These products are sold directly by Agron, Inc. to retailers in the USA.
The following assets and liabilities of Agron, Inc. were recognized at the date of first-time consolidation in the company’s consolidated statement of financial position based on the fair value calculation:
|
|
Pre-control carrying amounts |
|
Fair value adjustments |
|
Recognized values due to obtaining control |
|---|---|---|---|---|---|---|
Cash and cash equivalents |
|
54 |
|
|
|
54 |
Accounts receivable |
|
54 |
|
|
|
54 |
Inventories |
|
82 |
|
21 |
|
103 |
Other current assets |
|
3 |
|
|
|
3 |
Property, plant, and equipment |
|
41 |
|
|
|
41 |
Other intangible assets |
|
– |
|
87 |
|
87 |
Accounts payable |
|
(1) |
|
|
|
(1) |
Current provisions |
|
(2) |
|
|
|
(2) |
Other current liabilities |
|
(54) |
|
|
|
(54) |
Deferred tax liabilities |
|
– |
|
(2) |
|
(2) |
Net assets |
|
178 |
|
106 |
|
284 |
|
|
|
|
|
|
|
Consideration settled in cash |
|
|
|
|
|
– |
Cash and cash equivalents acquired |
|
|
|
|
|
54 |
Net cash inflow due to obtaining control |
|
|
|
|
|
54 |
Loss allowance recognized for accounts receivable amounted to € 3 million.
An increase of the license agreement resulted from the final calculation of the fair values. As the adjustment was immaterial it was recognised in 2020.
The following valuation methods for the recognized assets were applied:
- Inventories: The fair value of inventory was measured using the cost approach. Realized margins were added to the book values to calculate the selling price. Marketing and logistics costs were then deducted from the selling price.
- Other intangible assets: The fair value of the license agreement between Agron, Inc. and adidas America, Inc. was determined by discounting future profits after taxes until the end of the contract term on December 31, 2024.
For the year ending December 31, 2019 no net sales as well as no income and expenses of Agron, Inc. were included in the company’s consolidated income statement. If the first-time consolidation had occurred on January 1, 2019, the company’s total net sales would have been € 24,055 million while net income attributable to shareholders would have remained unchanged at € 1,976 million for the year ending December 31, 2019.