01 » General
The consolidated financial statements of adidas AG as at December 31, 2022, comprise adidas AG and its subsidiaries and are prepared in compliance with International Financial Reporting Standards (IFRS), as endorsed by the European Union (EU) as at December 31, 2022, and the additional requirements pursuant to § 315e section 1 German Commercial Code (Handelsgesetzbuch – HGB).
The following amendments to existing standards and interpretations are effective for financial years beginning on January 1, 2022, and have been applied for the first time to these consolidated financial statements:
- Amendments to IAS 16: Property, Plant, and Equipment: Proceeds before Intended Use (effective date: January 1, 2022): The amendment prohibits entities from deducting from the cost of an item of property, plant, and equipment, any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity should recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss. In accordance with the transitional provisions, adidas applies the amendments retrospectively only to items of property, plant, and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment (the date of initial application). These amendments had no material impact on the consolidated financial statements of adidas.
- Annual Improvements to IFRS standards 2018 – 2020:
- IFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time adopter (effective date: January 1, 2022): The amendment permits a subsidiary that has measured its assets and liabilities at carrying amounts recorded in their parent’s books to also measure any cumulative translation differences using the amounts reported in the parent’s consolidated financial statements. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1 exemption. These amendments had no impact on the consolidated financial statements, as adidas is not a first-time adopter.
- IFRS 9 Financial Instruments – Fees in the ‘10 per cent’ test for derecognition of financial liabilities (effective date: January 1, 2022): The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. In accordance with the transitional provisions, adidas applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment (the date of initial application). These amendments had no material impact on the consolidated financial statements of adidas.
- IAS 41 Agriculture – Taxation in fair value measurements (effective date: January 1, 2022): The amendment removes the requirement in paragraph 22 of IAS 41 that entities exclude cash flows for taxation when measuring the fair value of assets within the scope of IAS 41. These amendments had no impact on the consolidated financial statements of adidas as it did not have assets in scope of IAS 41 as at the reporting date.
- Amendments to IFRS 3 – Reference to the Conceptual Framework (effective date: January 1, 2022): The amendments replace a reference to a previous version of the International Accounting Standards Board’s (IASB) Conceptual Framework (1989) with a reference to the current version issued in March 2018 without significantly changing its requirements. The amendments add an exception to the recognition principle of IFRS 3 ‘Business Combinations’ to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ or IFRIC 21 ‘Levies,’ if incurred separately. The exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine whether a present obligation exists at the acquisition date. The amendments also add a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for recognition at the acquisition date. In accordance with the transitional provisions, the Group applies the amendments prospectively, i.e., to business combinations occurring after the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). These amendments had no material impact on the consolidated financial statements of adidas as there were no contingent assets, liabilities, or contingent liabilities within the scope of these amendments that arose during the period.
- Amendments to – IAS 37 Onerous Contracts: Cost of Fulfilling a Contract (effective date: January 1, 2022): An onerous contract is a contract under which the unavoidable costs of meeting the obligations under the contract (i.e., the costs that adidas cannot avoid because it has signed the contract) exceed the economic benefits expected to be received under it. The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services including both incremental costs (e.g., the costs of direct labor and materials) and an allocation of costs directly related to contract activities (e.g., depreciation of equipment used to fulfill the contract and costs of contract management and supervision). General administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. This amendment had no material impact on the consolidated financial statements of adidas.
New standards and interpretations as well as amendments to existing standards and interpretations are usually not applied by adidas before the EU effective date.
The following new standards and interpretations and amendments to existing standards and interpretations issued by the IASB, endorsed by the EU, and which are effective for financial years beginning after January 1, 2022, have not been applied in preparing these consolidated financial statements:
- IFRS 17 Insurance Contracts and Amendments to IFRS 17 (effective date: January 1, 2023): The new standard covers the recognition and measurement, presentation and disclosure related to all types of insurance contracts. IFRS 17 is effective for reporting periods beginning on or after January 1, 2023, and once effective, will replace IFRS 4 Insurance Contracts. No material impact is expected on the consolidated financial statements.
- Amendments to IAS 8: Definition of Accounting Estimates (effective date: January 1, 2023): In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of ‘accounting estimates.’ The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. The amendments apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of the effective date. Earlier application is permitted as long as this fact is disclosed. The amendments are not expected to have a material impact on adidas’ consolidated financial statements.
- Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies (effective date: January 1, 2023): In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it provides guidance and examples to help entities apply materiality judgments to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments to IAS 1 are applicable for annual periods beginning on or after January 1, 2023 with earlier application permitted. Since the amendments to the Practice Statement 2 provide non-mandatory guidance on the application of the definition of ‘material’ to accounting policy information, an effective date for these amendments is not necessary. Subject to the ongoing assessment, it is expected that the amendments will result in a reduction in adidas’ accounting policy disclosures.
- Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective date: January 1, 2023): In May 2021, the Board issued amendments to IAS 12, which narrow the scope of the initial recognition exemption under IAS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences. The amendments should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, at the beginning of the earliest comparative period presented, a deferred tax asset (provided that sufficient taxable profit is available) and a deferred tax liability should also be recognized for all deductible and taxable temporary differences associated with leases and decommissioning obligations. The amendments are not expected to have a material impact on adidas, in particular since adidas did not apply the initial recognition exemption in the context of leases under IFRS 16.
The following new standards and interpretations as well as amendments to existing standards and interpretations were issued by the IASB. These are not yet endorsed by the EU and hence have not been applied in preparing these consolidated financial statements:
- Amendments to IAS 1: Classification of Liabilities as Current or Non-current (effective date: January 1, 2024): In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. Beside others, the amendments clarify what is meant by a right to defer settlement, that such a right to defer must exist at the end of the reporting period, and that the classification is unaffected by the likelihood that an entity will exercise its deferral right. The amendments are effective for annual reporting periods beginning on or after January 1, 2024 and must be applied retrospectively. The amendments are not expected to have a material impact on the consolidated financial statements of adidas.
The consolidated financial statements have in principle been prepared on the historical cost basis with the exception of certain items in the statement of financial position, such as certain originated financial instruments, derivative financial instruments, and plan assets, which are measured at fair value.
On February 11, 2021, adidas decided to begin a formal process aimed at divesting Reebok. Due to the initiation of that selling process, which led to a binding agreement with Authentic Brands Group LLC (ABG), on August 12, 2021, the Reebok operating business was reported as discontinued operations and classified as a disposal group held for sale since the resolution has been passed. As of February 28, 2022, the company has formally completed the divestiture of Reebok to ABG. The assets and liabilities, which were reported as assets/liabilities held for sale since February 2021, were consequently derecognized from the consolidated statement of financial position as of February 28, 2022.
Business operations in 2022 were impacted by the effects of the continued coronavirus pandemic and covid-19-related lockdowns in Greater China as well as by the challenging economic and market environment globally. Estimates and assumptions relevant to the consolidated financial statements were made to the best of our knowledge, based on current events and actions. Due to the ongoing uncertainties, it is still difficult to predict the impact on assets and liabilities as well as income and expenses.
On February 24, 2022 Russia launched an invasion of Ukraine. The still ongoing conflict continue to affect economic and global financial markets and increase the current economic challenges. As a result of the ongoing conflict, adidas took the decision in October 2022 to permanently wind down its business operations in Russia, after having initially introduced a temporary suspension of the business in March 2022. The impairment of Property, plant, and equipment and Right-of-use-assets recognized in this context as well as the recognition of related provisions has had a negative impact of € 120 million on net income from continuing operations.SEE NOTE 10 SEE NOTE 11 SEE NOTE 19
In October 2022, adidas terminated the Yeezy partnership with immediate effect, discontinued the distribution of Yeezy brand products, and stopped all payments to Ye and his companies. adidas is the sole owner of all design rights to existing products as well as previous and new colorways under the partnership. As of December 31, 2022, adidas intends to make use of these rights as early as 2023 and to leverage the existing inventories. As of December 31, 2022, at adidas’ discretion, there was no lower net realizable value and therefore no impairment loss was recognized on the existing inventories. Furthermore, adidas believes that there is no other present obligation related to the termination of the agreement and therefore no provision had to be recognized as of December 31, 2022.SEE NOTE 08
The consolidated financial statements are presented in euros (€), and unless otherwise stated, all values are presented in millions of euros (€ in millions). Due to rounding principles, numbers presented may not exactly sum up to totals provided. This can also lead to individual amounts rounded to zero.
