Financial Statements

5. Segment Reporting

At Bayer the Board of Management, as the chief operating decision maker, allocates resources to the operating segments and assesses their performance. The reportable segments and regions are identified, and the disclosures selected, in line with the internal financial reporting system (management approach) and based on the Group accounting ­policies outlined in Note [4].

As of December 31, 2013, the Bayer Group comprised three subgroups, with operations subdivided into strategic business entities known as divisions (HealthCare), business groups (CropScience) or business units (MaterialScience). Their activities are aggregated into four reportable segments according to economic characteristics, products, production processes, customer relationships, methods of distribution and regulatory environment.

The segments’ activities are as follows:

Activities of the SegmentsHealthCare
Pharmaceuticals



Development, production and marketing of prescription pharmaceuticals, such as contraceptives, hemophilia treatments, anticoagulants and medicines to treat multiple sclerosis, cancer, hypertension and infectious diseases
Consumer Health




Development, production and marketing of over-the-counter medications, dermatology products, nutritional supplements, veterinary medicines and animal grooming products; diagnostic systems such as blood glucose meters; medical products such as injection systems and contrast media for diagnostic procedures
CropScience
CropScience


Development, production and marketing of a comprehensive product portfolio in the areas of seeds and plant traits; crop protection; and for gardens, the green industry and non-agricultural pest control
MaterialScience
MaterialScience



Development, production and marketing of high-tech polymer materials in the areas of polyurethanes, polycarbonates, coating and adhesive raw materials and functional films; production and marketing of selected inorganic basic chemicals

Business activities that cannot be allocated to any other segment are reported under “All other segments.” These ­include primarily the services provided by the service areas: Business Services, Technology Services and Currenta.

Holding companies’ activities, the elimination of intersegment sales, and higher or lower expenses for Group-wide long-term stock-based compensation arising from fluctuations in the performance of Bayer stock are presented in our segment reporting as “Corporate Center and Consolidation.”

The reconciliation in the table “Key Data by Region” eliminates interregional items and transactions and reflects income, expenses, assets and liabilities not allocable to geographical areas, particularly those relating to the Corporate Center.

The segment data are calculated as follows:

  • The intersegment sales reflect intra-Group transactions effected at transfer prices fixed on an arm’s-length basis.
  • Although EBIT before special items and EBITDA before special items are not defined in the International Financial ­Reporting Standards, they represent key performance indicators for the Bayer Group. The special items comprise effects that are non-recurring or do not regularly recur or attain similar magnitudes. EBITDA is the EBIT as reported in the income statement plus amortization and impairment losses on intangible assets and depreciation and ­impairment losses on property, plant and equipment, minus impairment loss reversals.
  • The gross cash flow comprises income after taxes, plus income taxes, plus financial result, minus income taxes paid or accrued, plus depreciation, amortization and impairment losses, minus impairment loss reversals, plus/minus changes in pension provisions, minus gains/plus losses on retirements of noncurrent assets, minus gains from the remeasurement of already held assets in step acquisitions. The change in pension provisions includes the elimination of non-cash components of EBIT. It also contains benefit payments during the year.
  • The net cash flow is the cash flow from operating activities as defined in IAS 7 (Statement of Cash Flows).
  • The capital invested and the segment assets include all assets serving the respective segment that are required to yield a return on their cost of acquisition. Segment assets include, in addition, assets held for sale where the return is covered by the sale proceeds. Similarly, the segment liabilities include the liabilities directly related to assets held for sale. Also included in the capital invested and in segment assets are material participating interests of direct ­relevance to business operations. Intangible assets and property, plant and equipment are included in the capital invested at cost of acquisition or construction throughout their useful lives. Interest-free liabilities are deducted from the capital invested, which is stated as of December 31.
  • The CFROI – a measure of the return on the capital employed – is the difference between the gross cash flow and the cost of reproducing depletable assets, divided by the average capital invested for the year.
  • The equity items reflect the earnings and carrying amounts of companies accounted for using the equity method.
  • Since financial management of Group companies is carried out centrally by Bayer AG, financial liabilities are not ­directly allocated among the segments. Consequently, the liabilities shown for the individual segments do not ­include financial liabilities. These are included in the reconciliation.
  • The number of employees on either permanent or fixed-term contracts is stated in full-time equivalents (FTE), with part-time employees included on a pro-rated basis in line with their contractual working hours. The figures do not include apprentices.

Effects of the first-time application of new financial reporting standards and other changes in accounting policies on segment reporting

Segment reporting in 2013 was impacted by the first-time application of the financial reporting standards described in Note [3] and by the change in the reporting of long-term stock-based compensation. In 2013 Bayer adjusted the allocation of the stock-based compensation (long-term incentive – LTI) among the segments to increase the transparency and information value of its segment reporting and improve planning and steering processes. A normalized ­expense based on 100% target attainment is now allocated to the respective operating segments. Higher or lower expenses arising from fluctuations in the performance of Bayer stock are no longer allocated to the operating segments but instead reflected in the reconciliation under Corporate Center and Consolidation. The prior-year figures are restated accordingly.

The effects of the changes in accounting policies on the key segment data are shown in the following table.

Accounting Changes: Key Data by Segment 2012[Table 4.17]
2012
Before
accounting
changes
Accounting changes After
accounting
changes
IAS 19R
(2011)
IFRS 11 LTI
Transition to
accounting
for share in assets and
liabilities
Transition
to equity method
€ million € million € million € million € million € million
Net sales 39,760 (8) (11) 39,741
Pharmaceuticals 10,803 (5) 10,798
Consumer Health 7,809 (3) 7,806
CropScience 8,383 8,383
MaterialScience 11,503 (8) (4) 11,491
All other segments 1,259 1 1,260
Corporate Center and consolidation 3 3
EBIT 3,960 (3) (27) (2) 3,928
Pharmaceuticals 1,075 (5) 1 33 1,104
Consumer Health 1,079 (1) 23 1,101
CropScience 1,539 1 16 1,556
MaterialScience 597 2 (27) (1) 10 581
All other segments (82) (1) (1) 9 (75)
Corporate Center and consolidation (248) (91) (339)
EBIT before special items 5,671 (3) (27) (2) 5,639
Pharmaceuticals 2,298 (5) 1 33 2,327
Consumer Health 1,438 (1) 23 1,460
CropScience 1,526 1 16 1,543
MaterialScience 629 2 (27) (1) 10 613
All other segments 35 (1) (1) 9 42
Corporate Center and consolidation (255) (91) (346)
EBITDA before special items 8,284 (3) 1 (2) 8,280
Pharmaceuticals 3,203 (5) 1 33 3,232
Consumer Health 1,865 (1) 23 1,887
CropScience 2,008 1 16 2,025
MaterialScience 1,251 2 1 (1) 10 1,263
All other segments 207 (1) (1) 9 214
Corporate Center and consolidation (250) (91) (341)

Reconciliations

The reconciliations of EBITDA before special items, EBIT before special items and EBIT to Group income before income ­taxes and of the assets and liabilities of the segments to the assets and liabilities, respectively, of the Group are given in the following tables:

Reconciliation of Segments’ EBITDA Before Special Items to
Group Income Before Income Taxes [Table 4.18]
2012 2013
€ million € million
EBITDA before special items of segments 8,621 8,876
EBITDA before special items of Corporate Center (341) (475)
EBITDA before special items 8,280 8,401
Depreciation, amortization and impairment losses before special items of segments (2,636) (2,624)
Depreciation, amortization and impairment losses before special items of Corporate Center (5) (4)
Depreciation, amortization and impairment losses before special items (2,641) (2,628)
EBIT before special items of segments 5,985 6,252
EBIT before special items of Corporate Center (346) (479)
EBIT before special items 5,639 5,773
Special items of segments (1,718) (839)
Special items of Corporate Center 7
Special items (1,711) (839)
EBIT of segments 4,267 5,413
EBIT of Corporate Center (339) (479)
EBIT 3,928 4,934
Financial result (752) (727)
Income before income taxes 3,176 4,207
2012 figures restated
Reconciliation of Segments’ Assets to Group Assets[Table 4.19]
20122013
€ million€ million
Assets of the operating segments46,05046,336
Corporate Center assets 265179
Non-allocated assets5,0034,802
Group assets51,31851,317
2012 figures restated
Reconciliation of Segments’ Liabilities to Group Liabilities[Table 4.20]
20122013
€ million€ million
Liabilities of the operating segments18,67817,225
Corporate Center liabilities3,4102,842
Non-allocated liabilities10,67910,446
Group liabilities32,76730,513
2012 figures restated

The reconciliation of segment sales to Group sales is apparent from the table of key data by segment in Note [1].

Information on geographical areas

The following table provides a regional breakdown of external sales by market and of intangible assets, property, plant and equipment:

Information about Geographical Areas[Table 4.21]
Net sales (external)
– by market
Intangible assets and
property, plant and equipment
2012 2013 2012 2013
€ million € million € million € million
Germany 4,640 4,862 12,945 12,806
United States 8,244 8,351 6,097 6,836
China 3,113 3,305 2,396 2,349
Other 23,744 23,639 7,217 6,800
Total 39,741 40,157 28,655 28,791
2012 figures restated

Information on major customers

Revenues from transactions with a single customer in no case exceeded 10% of Bayer Group sales in 2013 or 2012.

Last updated: February 28, 2014  Copyright © Bayer AG
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