Source: https://mlp-annual-report.com/annual-report-2017/mlp-consolidated-financial-statements/notes/general-information/
Timestamp: 2019-04-21 07:11:34+00:00

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The consolidated financial statements were prepared by MLP SE (formerly MLP AG, Wiesloch), Germany, the ultimate parent company of the MLP Group. MLP SE is listed in the Mannheim Commercial Register under the number HRB 728672 (formerly HRB 332697) at the address Alte Heerstraße 40, 69168 Wiesloch, Germany.
The consolidated financial statements of MLP SE 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 § 315e (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 contractual relationships of MLP consultants and branch office managers have changed as a result of the spin-off of the brokerage branch of activity from MLP Finanzdienstleistungen AG into MLP Finanzberatung SE, as well as continuation of the banking branch of activity at MLP Finanzdienstleistungen AG and its subsequent name change to MLP Banking AG. The consultants now have a direct contractual relationship with both MLP Banking AG and MLP Finanzberatung SE. At MLP Banking AG, alongside their status as commercial agents pursuant to § 84 of the German Commercial Code (HGB), they now also have the supervisory status of tied agents pursuant to § 2 (10) of the German Banking Act (KWG). For MLP Finanzberatung SE, they operate as commercial agents pursuant to § 84 of the German Commercial Code (HGB). For the purpose of clarity, the term "MLP consultant" is used uniformly throughout the following part of the report.
The branch office managers now also have a direct contractual relationship with both MLP Banking AG and MLP Finanzberatung SE. At MLP Banking AG, they work on the basis of a sales agent contract, while at MLP Finanzberatung SE they work on the basis of a branch office manager contract. For the purpose of clarity, the term "branch office manager" is used uniformly throughout the following part of the report.
The term "commercial agent", which is used in the following report section, encompasses the sales agents at MLP Banking AG, the branch office managers at MLP Finanzberatung SE and the MLP consultants from both companies.
The amendments to IAS 7 "Disclosure Initiative" and to IAS 12 “Recognition of Deferred Tax Assets for Unrealised Losses” were to be applied in the current financial year. This application did not result in any effects for MLP.
1 To be applied for financial years beginning on or after January 1, 2018.
2 To be applied for financial years beginning on or after January 1, 2019.
4 Timing for initial adoption postponed indefinitely.
5 EU endorsement still pending.
The IASB published IFRS 9 "Financial Instruments" in July 2014. 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 future, the subsequent measurement of financial assets will be based on three categories: (1) Measurement at acquisition costs using the effective interest method ("AC"), (2) Measurement at fair value with changes in fair value recorded and recognised directly in equity under other comprehensive income ("FVTOCI") and (3) Measurement at fair value with recognition in the income statement of changes in fair value ("FVPL"). In addition to this, IFRS 9 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.
In terms of financial assets, the "hold" business model is the one predominantly used by the MLP Group. This applies both to the banking business (lending business) and proprietary trading (money market and securities transactions, promissory note bonds). MLP Banking AG has the status of a non-trading book institute, so transactions with a view to making a trading or short-term profit are not contracted, and originated loans are generally maintained over the contractually agreed term. Proprietary trading (including securities transactions and promissory note bonds) is performed in the MLP Group exclusively with the intention to hold such products to maturity. As such, the business model does not result in a reclassification of financial assets that have been measured at amortised costs in the past.
The effect resulting from the change in classification is € 220 thsd. Minus deferred taxes, this results in an equity movement of € 155 thsd. The initial adoption effect can move within a range of +/-10%.
The value adjustment model of IFRS 9 provides three stages for determining the level of impairment to be recorded. Stage I contains losses already anticipated on acquisition at the level of the present value of an anticipated 12-month loss, while Stage II contains the losses over the entire term remaining to maturity in the event of a significant increase in the default risk. In the event of an objective indication of impairment, interest collection is performed on the basis of the net book value (carrying amount less loan loss provisions – Stage III). As no changes to the definition of default resulted from IFRS 9, financial instruments that were already individually impaired pursuant to IAS 39 are to be transitioned over to IFRS 9 in Stage III. If there are no objective indications of an impairment, in future it will be necessary to investigate whether a significant deterioration of the credit risk in comparison with the credit risk when performing the transaction has occurred as of the respective balance sheet date. If this is the case, the respective financial transaction must be assigned to Stage II. Otherwise, the transaction is assigned to Stage I. As a result of recording losses from Stage I, Stage II and Stage III, MLP is anticipating additional impairments of approximately € 4,538 thsd. Net of deferred taxes, this results in an equity-reducing effect of € 3,206 thsd. The initial adoption effect can move within a range of +/-10%.
MLP is not anticipating any effects on its consolidated financial statements from the new provisions relating to the application of hedge accounting.
*The changeover effects can move within a range of +/-10%.
The IASB published its new IFRS 16 "Leases" standard in January 2016. IFRS 16 replaces IAS 17 and the accompanying interpretations (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. If endorsed in its current form by the EU, the standard is to be applied for the 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. The company currently checks which rental or leasing contracts need to be capitalised pursuant to IFRS 16.
As per the resolution of the Annual General Meeting from June 29, 2017, MLP AG was converted to a Societas Europaea (SE) with effect from September 21, 2017. The change of the stock market listing was performed on September 22, 2017. The rights of the shareholders, the company's membership in the SDAX index and the stock exchange code remained unaffected by this.
On the basis of the merger agreement dated March 24, 2017, Schwarzer Familienholding GmbH was merged with MLP SE with retroactive effect from January 1. Entry into the Commercial Register was made on May 30, 2017.
Since this time, DOMCURA AG and nordias GmbH insurance brokers are 100% subsidiaries of MLP SE alongside MLP Finanzberatung SE, MLP Banking AG and FERI AG.
Atrium 105. Europäische VV SE was acquired with effect from May 17, 2017. Atrium 105. Europäische VV SE was renamed MLP Finanzberatung SE with entry into the Commercial Register on July 6, 2017. In the financial year 2017, the brokerage branch of activity was spun off from MLP Finanzdienstleistungen AG and reassigned to MLP Finanzberatung SE in line with the spin-off and takeover agreement dated November 10, 2017, as well as the assembly decisions of the respective legal entities from November 10, 2017 and November 16, 2017. The banking branch of activity remained at MLP Finanzdienstleistungen AG. MLP Finanzdienstleistungen AG was renamed MLP Banking AG with entry into the Commercial Register on November 30, 2017. With effect from October 1, 2017 all regulated bank activities have been handled by MLP Banking AG, while the brokerage business has been managed by MLP Finanzberatung SE. With the realignment of the Group structure, MLP will leverage free regulatory equity capital. Furthermore, the new Group structure offers the potential for strategic cooperations.
Alongside MLP SE as the parent company, 13 (previous year: 13) 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 as of December 31, 2017.
With the resolution dated March 7, 2017, MLP SE, as a shareholder in Nordvers GmbH, approved an exemption pursuant to § 264 (3) of the German Commercial Code (HGB) from the need to draft a management report as per § 289 of the German Commercial Code (HGB) for the financial year 2017. The company is included in the 2017 consolidated financial statements of MLP SE with its registered office in Wiesloch. The consolidated financial statements are published in the Federal Gazette (Bundesanzeiger) within the legal deadlines. A single-entity relationship is in place between the company and MLP SE which obliges MLP SE to the assumption of losses as per § 302 of the German Stock Corporation Act (AktG), as well as to the assumption of liability.
2) Shareholders' equity and net profit from the annual financial statements 2016.
4) Founded in 2016. Statement of initial capital. Financial statements are not available yet.
Non-consolidated structured entities of the MLP Group are private equity companies. As 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 pay-outs 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 € 360 thsd as of December 31, 2017 (previous year: € 457 thsd). In the financial year 2017, MLP SE recorded an income of € 221 thsd from non-consolidated structured entities (previous year: € 68 thsd).
On occasion, 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.
Notes 6, 21 to 24 and 34 – classification and measurement of financial instruments, as well as fair value disclosures.
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, loans and mortgages 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 MLP 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 MLP 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 revenue from the loans and mortgages business. 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.
The euro is the functional currency of all companies consolidated in MLP's consolidated financial statements. The Group operates exclusively in Germany and Luxembourg.
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.
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 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.
The significant assumptions that are used when calculating the recoverable amount in the form of the use value 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 19.
MLP signed multiple leasing agreements as the 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 32.
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 15.
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.
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 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 a 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 debts on a portfolio basis in connection with loan loss provisions 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 21 and 24.
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.
Old-age provision in the Group is performed on the basis of the defined-benefit and defined contribution old-age provision plans.
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.
Further details of pension provisions are given in Note 27.
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.
Share-based payments in line with IFRS 2 "Share-Based Payment" comprise remuneration systems paid for in cash and using equity instruments.
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.
Share-based payments also include those made through equity instruments ("2017 Participation Programme” for MLP consultants and office managers). The 2017 Participation Programme applies to the calendar year 2017, as well as to MLP consultants and MLP office managers whose commercial agent or office manager contract remained unterminated and in place on December 30, 2017. The remuneration to be made in the form of MLP shares is determined on the basis of the annual commission of the MLP consultant/office manager, applying various performance parameters, and is recorded in the 2017 consolidated financial statements as an expense with a corresponding increase in shareholders' equity.
You can find further details on the share-based payments in Note 31.
As described under Note 4, the brokerage branch of activity was spun off from MLP Finanzdienstleistungen AG and assigned to MLP Finanzberatung SE in the financial year. The banking branch of activity remained at MLP Finanzdienstleistungen AG, which was then renamed MLP Banking AG in the course of the financial year. All regulated banking activities are combined in the MLP Banking AG, while the brokerage business continues to operate in the MLP Finanzberatung SE. As a result, the financial consulting and banking business segments were formed.
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 consulting" and "occupational pension provision" business segments under the reportable "financial consulting" business segment in accordance with IFRS 8.12. The object of the reportable financial consulting business segment is the provision of consulting services for academics and other discerning clients, particularly with regard to insurance, investments, occupational pension provision and the brokering of contracts in connection with these financial services. The segment comprises MLP Finanzberatung SE, TPC GmbH, ZSH GmbH Finanzdienstleistungen, MLPdialog GmbH, as well as the associate MLP Hyp GmbH.
The task of the reportable Banking business segment is to advise on and operate the banking business, including the securities custody business, the commission business, investment consulting and investment brokerage. In addition to this, the insurance brokerage business forms part of the business activities.
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 is made up of DOMCURA AG, Nordvers GmbH, nordias GmbH insurance brokers, Willy F.O. Köster GmbH and Siebert GmbH insurance brokers.
In the financial year, revenue of € 205,274 thsd was generated with two product partners in the financial consulting, banking, FERI and DOMCURA business segments. In the previous year, revenue of € 258,141 thsd was generated with three product partners in the financial services (now: financial consulting), FERI and DOMCURA business segments.
In line with IFRS 8.30, the previous year's figures have not been adjusted in the segment reporting. However, to make the figures comparable, the values of the current financial year have also been prepared in line with the previous year's segment structure in the following table.

References: § 315
 § 84
 § 2
 § 84
 § 264
 § 289
 § 302