03 » Discontinued Operations
On February 11, 2021, the company decided to initiate a formal process aimed at divesting Reebok, which was completed with signing of a sales agreement with Authentic Brands Group LLC on August 12, 2021. Due to the concrete plans to divest Reebok and the approval by the relevant committees, the Reebok operating business has been reported as discontinued operations and classified as a disposal group held for sale since the resolution. The fair value was calculated based on the existing purchase price agreement. The majority of the purchase price will be paid in cash upon completion of the transaction, with the remainder comprising deferred and contingent consideration. The fair value of earn-out components was determined using the discontinued cash flow method and Monte Carlo method, respectively. The transaction is expected to be completed in the first quarter of 2022.
The prior-year figures of the consolidated income statement and the consolidated statement of cashflows have been restated in accordance with IFRS 5 to report the discontinued operations separately from continuing operations.
|
|
Full year 2021 |
|
Full year 2020 |
|---|---|---|---|---|
|
|
|
|
|
Operational business |
|
|
|
|
Net sales |
|
1,767 |
|
1,409 |
Expenses |
|
(1,467) |
|
(1,371) |
Gain/(loss) from reversal/impairment of Reebok trademark |
|
549 |
|
(41) |
Gain/(loss) from operating activities before taxes |
|
849 |
|
(3) |
Income taxes |
|
(171) |
|
(29) |
Gain/(loss) from operating activities, net of tax |
|
678 |
|
(32) |
Transaction costs |
|
(30) |
|
– |
Income taxes |
|
6 |
|
– |
Transaction costs, net of tax |
|
(24) |
|
– |
Gain/(loss) from discontinued operations, net of tax |
|
654 |
|
(32) |
Gains from discontinued operations for the financial year 2021 include a write-up of the previously impaired Reebok trademark in the amount of € 549 million. The related deferred tax expense amounts to € 143 million. The calculated fair value of the Reebok disposal group, derived from the purchase price agreement, is higher than its carrying amount, including the carrying amount of the Rebook trademark, and higher than the impairment losses in previous years, so that the previously impaired trademark was written up.
As of December 31, 2021, the disposal group Reebok was recognized at the lower of its carrying amount and fair value less costs to sell, and comprising the following main categories of assets and liabilities:
Assets classified as held-for-sale € in millions |
|
Dec 31, 2021 |
|---|---|---|
Accounts receivable |
|
82 |
Inventories |
|
300 |
Other current financial assets |
|
14 |
Other current assets |
|
15 |
Total current assets |
|
411 |
Long-term financial assets |
|
11 |
Property, plant, and equipment |
|
84 |
Right-of-use assets |
|
102 |
Goodwill |
|
28 |
Trademark Reebok |
|
1,368 |
Deferred tax assets |
|
26 |
Other non-current financial assets |
|
3 |
Total non-current assets |
|
1,622 |
Total assets |
|
2,033 |
|
|
|
Liabilities classified as held for sale € in millions |
|
Dec 31, 2021 |
Accounts payable |
|
35 |
Current lease liabilities |
|
33 |
Other current provisions |
|
33 |
Current accrued liabilities |
|
55 |
Other current financial liabilities |
|
7 |
Other current liabilities |
|
6 |
Total current liabilities |
|
169 |
Non-current lease liabilities |
|
114 |
Pensions and similar obligations |
|
2 |
Deferred tax liabilities |
|
304 |
Other non-current provisions |
|
4 |
Non-current accrued liabilities |
|
0 |
Other non-current financial liablilities |
|
0 |
Other non-current liablilities |
|
1 |
Total non-current liabilities |
|
425 |
Total liabilities |
|
594 |
In addition, effects related to the divestiture of the former TaylorMade and CCM Hockey operations that were sold in previous periods, are shown as discontinued operations in the consolidated income statement. This relates mainly to the valuation and payment of earn-out components. In the course of 2021, the last claims were settled and thus these sales transactions are completely finalized.
Gains from discontinued operations for the year 2021 in an amount of € 666 million (2020: loss of € 19 million) are entirely attributable to the shareholders of adidas AG. The tax expense in respect of discontinued operations amounts to € 168 million (2020: tax expense of € 43 million).