Basis of preparation

As a listed company, Deutsche Post AG prepared its consolidated financial statements in accordance with Section 315e Handelsgesetzbuch (HGB – German Commercial Code) (“consolidated financial statements in accordance with International Financial Reporting Standards”) in compliance with International Financial Reporting Standards (IFRS) and related Interpretations of the International Accounting Standards Board (IASB) as adopted in the European Union in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the European Council on the application of international accounting standards.

1 Basis of accounting

The requirements of the standards applied have been satisfied in full, and the consolidated financial statements therefore provide a true and fair view of the Group’s net assets, financial position and results of operations.

The consolidated financial statements consist of the income statement and the statement of comprehensive income, the balance sheet, the cash flow statement, the statement of changes in equity and the notes. In order to improve the clarity of presentation, various items in the balance sheet and in the income statement have been combined. These items are disclosed and explained separately in the notes. The income statement has been classified in accordance with the nature-of-expense method.

The accounting policies and the explanations and disclosures in the notes to the IFRS consolidated financial statements for the 2023 fiscal year are generally based on the same accounting policies used in the 2022 consolidated financial statements. Exceptions to this are the changes in international financial reporting under the IFRS described in note 5 that have been required to be applied by the Group since January 1, 2023. The accounting policies are explained in note 7.

These consolidated financial statements were authorized for issue by a resolution of the Board of Management of Deutsche Post AG dated February 16, 2024.

The consolidated financial statements are prepared in euros (€). Unless otherwise stated, all amounts are given in millions of euros (€ million, €m).

2 Consolidated group

The consolidated group includes all companies controlled by Deutsche Post AG. Control exists if Deutsche Post AG has decision-making powers, is exposed, and has rights, to variable returns and is able to use its decision-making powers to affect the amount of the variable returns. The Group companies are consolidated from the date on which DHL Group is able to exercise control.

When DHL Group holds less than the majority of voting rights, other contractual arrangements may result in the Group controlling the investee.

DHL Sinotrans International Air Courier Ltd. (Sinotrans), China, is a significant company that has been consolidated despite DHL Group not having a majority of voting rights. Sinotrans provides domestic and international express delivery and transport services and has been assigned to the Express segment. The company is fully integrated into the global DHL network and operates exclusively for DHL Group. Due to the arrangements in the Network Agreement, DHL Group is able to prevail in decisions concerning Sinotrans’ relevant activities. Sinotrans has therefore been consolidated although DHL Group holds no more than 50% of the company’s share capital.

The complete list of the Group’s shareholdings in accordance with Section 313(2), Nos. 1 to 6, and (3) HGB may be viewed in the list of shareholdings.

The number of companies consolidated with Deutsche Post AG is shown in the following table:

CONSOLIDATED GROUP
  2022 2023
Number of fully consolidated companies (subsidiaries)    
German 83 81
Foreign 711 690
Number of joint operations    
German 1 1
Foreign 0 0
Number of investments accounted for using the equity method    
German 1 1
Foreign 16 17
 

The changes are primarily the result of mergers and liquidations of immaterial companies.

Significant acquisitions can be found in note 2.1.

2.1 Acquisitions in 2023

The following significant acquisitions occurred in the 2023 fiscal year:

ACQUISITIONS
Name Country Segment

Equity

interest
%

Acquisition date
MNG Kargo (MNG KARGO) Yurtici ve Yurtdisi Tasimacilik A.S. Turkey eCommerce 100 Q4 2023
Danzas AEI Emirates LLC (renamed DHL Logistics LLG – SO) United Arab Emirates Global Forwarding, Freight 100 Q4 2023
 

MNG KARGO

At the end of July 2023, DHL Group signed an agreement to acquire 100% of shares in the Turkish company MNG Kargo and its subsidiary. The purchase was completed on October 5, 2023, following approval by the Turkish antitrust authorities. MNG Kargo is one of the leading parcel carriers in Turkey and has a strong presence in the e-commerce segment. The acquisition complements the business portfolio of DHL Group and is to contribute to the company being able to benefit from growth potential in the Turkish market and continuing to strengthen its position in Turkey and in European markets. MNG Kargo will be allocated to the eCommerce segment. The measurement of the assets acquired and liabilities and provisions assumed has not yet been completed due to time restrictions. The acquisition resulted in preliminary goodwill, which currently amounts to €267 million and cannot be deducted from tax. Current assets include trade receivables of €24 million. There was a difference of €1 million between the gross amount and the carrying amount. The final purchase price allocation will be presented at a later date.

PRELIMINARY OPENING BALANCE AS OF OCTOBER 5, 2023
MNG KARGO
€m Preliminary fair value
Noncurrent assets 35
Current assets 28
Cash and cash equivalents 15
Assets 78
Noncurrent provisions and liabilities –36
Current provisions and liabilities –50
Equity and liabilities –86
Net assets –8
Purchase price paid in cash 259
Goodwill 267
 

DHL LOGISTICS LLC – SO

On December 7, 2023, DHL Global Forwarding acquired the remaining 60% of shares in Danzas AEI Emirates. The company had previously been managed together with the Investment Trading Group and recognized as a joint venture to which the equity method is applied. The company is now fully consolidated with 100% ownership of shares and has been renamed DHL Logistics LLC – SO (DHL Logistics). DHL Logistics is a specialist in logistics and transport services in Dubai and the northern Emirates. Thanks to this acquisition, the Global Forwarding, Freight division can continue driving its strategic goal and accelerate profitable growth in the Middle East and Africa region. The measurement of the assets acquired and liabilities and provisions assumed has not yet been completed due to time restrictions. The acquisition resulted in preliminary goodwill, which currently amounts to €259 million and cannot be deducted from tax. It is mainly attributable to the synergies and network effects expected in Dubai and the northern Emirates. Current assets include trade receivables of €41 million. There was a difference of €2 million between the gross amount and the carrying amount. The final purchase price allocation will be presented at a later date.

PRELIMINARY OPENING BALANCE AS OF DECEMBER 7, 2023
DHL LOGISTICS
€m Preliminary fair value
Noncurrent assets 72
Current assets 48
Cash and cash equivalents 9
Assets 129
Noncurrent provisions and liabilities –41
Current provisions and liabilities –35
Equity and liabilities –76
Net assets 53
Purchase price paid in cash 187
Fair value of the existing equity interest1 125
Goodwill 259
1 Also includes the gain from change in consolidation method in the amount of €114 million, which is recognized under net income from investments accounted for using the equity method.

Final purchase price allocation for Monta Group

DHL Supply Chain acquired a majority holding of 51% in the Netherlands-based e-commerce specialist Monta Group and its around 20 companies on October 31, 2022. The companies are consolidated in consideration of noncontrolling interests. Due to this partnership, DHL Group can better respond to the specific needs of SMEs and smaller web shops, see 2022 Annual Report, note 2 to the consolidated financial statements. The purchase price allocation was finalized on June 30, 2023, and resulted in non-tax-deductible goodwill of €76 million, which is allocated to the Supply Chain segment. It is mainly attributable to the synergies and network effects expected from the e-commerce market in the Netherlands. There is also a call option to purchase the remaining 49% of shares that can be exercised at any time. The option is measured as a derivative at fair value through profit or loss. The customer relationships are amortized over a period of ten years and the brand name over a period of five years. The software has a useful life of five years. Current assets include trade receivables of €16 million. There was no difference between the gross amount and the carrying amount.

FINAL OPENING BALANCE AS OF OCTOBER 31, 2022
MONTA GROUP
€m Carrying amount Adjustment Fair value
Noncurrent assets 62 41 103
Software   18  
Customer relationships   17  
Brand name   6  
Current assets 18 18
Cash and cash equivalents 3 3
ASSETS 83 41 124
Noncurrent provisions and liabilities –51 –10 –61
Deferred taxes   –10  
Current provisions and liabilities –31 –31
EQUITY AND LIABILITIES –82 –10 –92
Net assets 1 31 32
Purchase price paid in cash 103 0 103
Difference 102 –31 71
Less fair value of the option 10 10
Noncontrolling interests 0 15 15
Goodwill 92 –16 76
 
€m MNG Kargo DHL Logistics
Group revenue since consolidation 66 18
Group EBIT since consolidation 8 2
Transaction costs (reported in other operating expenses) 01 01
1 Rounded below €1 million.

If the companies had already been fully consolidated as of January 1, 2023, MNG Kargo would have additionally generated revenue of €198 million and EBIT of €23 million and DHL Logistics revenue of €223 million and EBIT of €22 million.

In the 2023 fiscal year, a total of €452 million was paid for the subsidiaries acquired during the fiscal year. The purchase prices of the acquired companies were paid by transferring cash and cash equivalents.

Investments in companies accounted for using the equity method amounted to €34 million in the 2023 fiscal year.

2.2 Disposal and deconsolidation effects

There were no material disposals of shareholdings in the 2023 fiscal year.

2.3 Joint operations

Joint operations are consolidated on a pro rata basis in accordance with IFRS 11.

Aerologic GmbH (Aerologic), Germany, a cargo airline based in Schkeuditz, is the only joint operation in this regard. Aerologic has been assigned to the Express segment. It was jointly established by Lufthansa Cargo AG and Deutsche Post Beteiligungen Holding GmbH, which each hold 50% of its capital and voting rights. Aerologic’s shareholders are simultaneously its customers, giving them access to its freight aircraft capacity. Aerologic mainly serves the DHL Express network from Monday to Friday and flies for the Lufthansa Cargo network on weekends. Individual aircraft are also used exclusively by the two respective shareholders. In contrast to its capital and voting rights, the company’s assets and liabilities, as well as its income and expenses, are allocated based on this user relationship.

3 Significant transactions

In addition to the business combinations mentioned under note 2, the following significant transactions occurred in the 2023 fiscal year:

Issue of a new bond

On June 26, 2023, Deutsche Post AG placed its first sustainability-linked bond with an issue volume of €500 million and a term through 2033. The interest rate of the bond is coupled with the medium-term target of significantly reducing greenhouse gas (GHG) emissions by 2030. The cash inflow and the liability were recognized on July 3, 2023. The ten-year term ends on July 3, 2033. The bond has a fixed interest rate of 3.375% per year. However, if one of the targets set for the reduction of greenhouse gas emissions for 2030 is not reached, the coupon to be paid increases beginning in the year 2031.The proceeds will primarily be used for general company purposes, including the refinancing of existing financial liabilities, note 39.

Share buyback of up to €4 billion

By a Board of Management resolution dated February 14, 2023, the current share buyback program was expanded so that a total of up to 105 million treasury shares can be purchased at a price of now up to €3 billion through to the end of 2024. The purposes remain unaffected, which means the repurchased shares will either be retired, used to service long-term executive remuneration plans and any future employee participation programs or used to meet potential obligations if rights accruing under the 2017/2025 convertible bond are exercised. The repurchase via the stock exchange started on April 8, 2022, and will end no later than in December 2024. For the first two tranches, the share buyback program was based on the authorization resolved by the company’s Annual General Meeting on May 6, 2021. The third and fourth tranches were carried out based on the authorization resolved by the company’s Annual General Meeting on May 4, 2023, note 33 and 34.

On February 12, 2024, the Board of Management resolved to expand the current share buyback program so that a total of up to 130 million treasury shares are to be purchased at a price of now up to €4 billion through the end of 2025. The intended uses remain unaffected.

4 Adjustment of prior-year figures

The following adjustments of prior-year figures were made in the 2023 fiscal year. With the final purchase price allocation (PPA) for Monta Group, adjustments were made to the balance sheet items specified below, which were accounted for in the opening balance and led to a corresponding adjusted presentation in the balance sheet as of December 31, 2022.

Moreover, for improved presentation in the balance sheet, accounts of a financial nature were reclassified from other assets and other liabilities to financial assets and financial liabilities, respectively (IFRS 7). This enables the amounts presented in the table titled “Reconciliation to carrying amounts in accordance with IFRS 9” to be allocated to the carrying amounts, note 43.

BALANCE SHEET
€m Reason Amount Adjustment Adjusted amount
December 31, 2022        
Intangible assets PPA 14,096 25 14,121
Current financial assets IFRS 7 1,355 444 1,799
Other current assets IFRS 7 3,551 –444 3,107
Current income tax assets   283 173 456
Noncontrolling interests PPA 467 15 482
Deferred tax liabilities PPA 336 10 346
Noncurrent financial liabilities IFRS 7 17,659 24 17,683
Other noncurrent liabilities IFRS 7 321 –24 297
Noncurrent income tax liabilities   0 331 331
Current financial liabilities IFRS 7 4,159 324 4,483
Other current liabilities IFRS 7 6,512 –324 6,188
Current income tax liabilities   659 –158 501
 

5 New developments in international accounting under IFRS

New accounting standards effective in the 2023 fiscal year

The following standards, changes to standards and interpretations must be applied from January 1, 2023:

 
Standard Subject matter and significance
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of accounting policies The amendments assist entities with deciding which accounting policies to disclose in their financial statements. The amendment of IAS 1 explains and requires that a disclosure of “material” rather than “significant” accounting policies must be made. To support this approach, the amendments to IFRS Practice Statement 2 demonstrate the application of the concept of materiality to accounting policy disclosures. The consolidated financial statements were not affected.
Amendments to IAS 8, Definition of Accounting Estimates The amendments introduced a new definition of accounting estimates and explain how entities should distinguish changes in accounting estimates from changes in accounting policies. The consolidated financial statements were not affected.
Amendments to IAS 12, Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction The amendment limits the exemption from the (initial) recognition of deferred tax in that it no longer applies to transactions for which entities recognize both an asset and a liability (e.g., leases and decommissioning obligations). Going forward, deferred tax assets and liabilities must be recognized for such transactions to the extent that equal amounts of deductible and taxable temporary differences arise. The consolidated financial statements were not affected.
Amendments to IAS 12, International Tax Reform – Pillar Two Model Rules The amendments to IAS 12 are carried out in conjunction with the regulations for a global minimum tax. DHL Group falls under the scope of application of the OECD model provisions for pillar two. The legal provisions for pillar two had only been implemented in some jurisdictions, so the regulations for the global minimum tax were not yet applicable throughout the Group in the year under review. Beginning with the 2024 fiscal year, the Group expects an increase in current taxes by an amount in the low double-digit millions of euros.
IFRS 17, Insurance Contracts, including amendments to IFRS 17 The standard replaces IFRS 4, Insurance Contracts, and outlines the principles governing the recognition, measurement, presentation and disclosure of insurance contracts. The objective of the standard is to ensure that the reporting entity provides relevant information that faithfully represents the effect that insurance contracts have on an entity’s net assets, financial position, results of operations and cash flows. IFRS 17 was not applied for reasons of materiality.
Amendments to IFRS 17, First-Time Adoption of IFRS 17, and IFRS 9, Comparative Information The narrow-scope amendment to IFRS 17 permits entities to apply an optional classification overlay, if certain conditions are met, with the aim of providing useful comparative information on financial instruments for 2022. The amendment was issued because the initial application of IFRS 9 is not required to be retroactive, whereas this is the case for IFRS 17. This can result in accounting mismatches for financial instruments. There were no effects.
 

New accounting standards adopted by the EU but only effective in future periods

The following standards, changes to standards and interpretations have already been endorsed by the EU. However, they will only be required to be applied in future periods.

 
Standard Subject matter and significance
Amendments to IFRS 16, Lease Liability in a Sale and Leaseback (issued on September 22, 2022, and applicable for fiscal years beginning on or after January 1, 2024) This amendment adds provisions governing the subsequent measurement of a lease liability in the case of a sale-and-leaseback transaction to the standard. The lease liability is to be measured so that no profit or loss on the right-of-use asset retained results from subsequent measurement. Application is not expected to have a material effect on the consolidated financial statements.
Amendments to IAS 1, Classification of Liabilities as Current or Noncurrent (issued on January 23, 2020, and applicable for fiscal years beginning on or after January 1, 2024) and Deferral of the Effective Date. The amendments to IAS 1 relate solely to the presentation of debt and other liabilities in the statement of financial position. They clarify that a liability must be classified as noncurrent if the entity has a substantial right as of the reporting date to defer settlement of the liability for at least 12 months after the reporting date. The determining factor is that such a substantial right exists; no intention to exercise that right is required. No material effects on the consolidated financial statements are expected. The effective date was deferred to January 1, 2024, due to the
COVID-19 pandemic.
Amendments to IAS 1, Noncurrent Liabilities with Covenants (issued on October 31, 2022, and applicable for fiscal years beginning on or after January 1, 2024) The supplementary amendment to IAS 1 clarifies that, if the right to defer payment is subject to compliance with conditions to be met within 12 months of the reporting date, these conditions do not affect the presentation as either current or noncurrent. Further information on liabilities classified as noncurrent with covenants is required for risk assessment. No material effects on the consolidated financial statements are expected.
 

New accounting standards not yet adopted by the EU (endorsement procedure)

The IASB and the IFRIC issued further standards, amendments to standards and interpretations in the 2023 fiscal year and in previous years whose application is not yet mandatory for the 2023 fiscal year. The application of these IFRS is dependent on their adoption by the EU.

 
Standard Subject matter and significance
Amendments to IAS 21, Lack of Exchangeability (issued on August 15, 2023, and applicable for fiscal years beginning on or after January 1, 2025) The official statement contains guidelines that specify when a currency is exchangeable and how the exchange rate is to be determined if it is not. The effects on the consolidated financial statements are being assessed.
Amendments to IAS 7 and IFRS 7, Supplier Finance Arrangements (issued on May 25, 2023, and applicable for fiscal years beginning on or after January 1, 2024) The amendments involve further disclosure requirements and explanations of existing disclosure requirements that obligate companies to provide qualitative and quantitative information about finance arrangements with suppliers. The effects on the consolidated financial statements are being assessed.
 

6 Currency translation

The financial statements of consolidated companies prepared in foreign currencies are translated into euros (€) in accordance with IAS 21 using the functional currency method. The functional currency of foreign companies is determined by the primary economic environment in which they mainly generate and use cash. Within the Group, the functional currency is predominantly the local currency. In the consolidated financial statements, assets and liabilities are therefore translated at the closing rates, while periodic income and expenses are generally translated at an average price that results from the monthly prices. The resulting currency translation differences are recognized in other comprehensive income. In the 2023 fiscal year, currency translation differences amounting to €⁠–⁠586 million (previous year: €153 million) were recognized in other comprehensive income, see the statement of comprehensive income.

Goodwill arising from business combinations after January 1, 2005, is treated as an asset of the acquired company and therefore carried in the functional currency of the acquired company. Goodwill that arose for foreign subsidiaries as part of acquisition accounting prior to 2005 is carried in euros at historical cost less the accumulated amortization through to the end of 2004.

The exchange rates for the currencies that are significant for the Group were as follows:

CURRENCY
    Closing rates Average rates
    2022 2023 2022 2023
  Country EUR 1 = EUR 1 = EUR 1 = EUR 1 =
AUD Australia 1.5723 1.6294 1.5157 1.6351
CNY China 7.3823 7.8843 7.0875 7.6960
GBP United Kingdom 0.8866 0.8697 0.8549 0.8689
HKD Hong Kong 8.3317 8.6475 8.2241 8.4813
INR India 88.2947 92.0797 82.7138 89.4486
JPY Japan 140.8789 156.6571 138.1186 153.2537
SEK Sweden 11.1005 11.0919 10.6552 11.4828
USD United States 1.0686 1.1070 1.0502 1.0830
 

The carrying amounts of nonmonetary assets recognized at significant consolidated companies operating in hyperinflationary economies are generally indexed in accordance with IAS 29 and thus reflect the current purchasing power as of the reporting date. Turkey has met the criteria regarding a cumulative inflation rate of more than 100% over a period of three years since the beginning of 2022. Accounting pursuant to IAS 29 was applied for the relevant companies. Upon application, the adjustments to the carrying amounts of nonmonetary assets and liabilities based on the general price index were recognized in the financial result, note 18. The consumer price index of the Turkish Statistical Institute was used for the adjustment of the purchasing power effects. As of January 1, 2023, this figure was 1,128 basis points and had increased to 1,859 basis points as of December 31, 2023.

In accordance with IAS 21, the monetary values such as receivables and liabilities in the financial statements of consolidated companies that have been prepared in local currencies are translated at the closing rate as of the reporting date. Currency translation differences are recognized in other operating income and expenses in the income statement. In the 2023 fiscal year, income of €452 million (previous year: €696 million) and expenses of €433 million (previous year: €673 million) resulted from currency translation differences. In contrast, currency translation differences relating to net investments in a foreign operation are recognized in other comprehensive income.

7 Accounting policies

Uniform accounting policies are applied to the annual financial statements of the entities included in the consolidated financial statements. The consolidated financial statements are prepared under the historical cost convention, except for items that are required to be recognized at their fair value.

Revenue and expense recognition

DHL Group’s normal business operations consist of the provision of logistics services comprising express delivery, freight transport, supply chain management, e-commerce solutions and letter and parcel dispatch in Germany. All income relating to normal business operations is recognized as revenue in the income statement. All other income is reported as other operating income.

Revenue is recognized when control over the goods or services transfers to the customer, i.e., when the customer has the ability to control the use of the transferred goods or services provided and generally derive their remaining benefits. There must be a contract with enforceable rights and obligations and, among other things, the receipt of consideration must be likely, taking into account the customer’s credit quality. Revenue corresponds to the transaction price to which the Group is expected to be entitled. Variable consideration is included in the transaction price when it is highly probable that a significant reversal in the amount of revenue recognized will not occur. Generally, the Group does not have contracts where the period between the transfer of the promised goods and/or services to the customer and payment by the customer exceeds one year. Accordingly, the promised consideration is not adjusted for the time value of money. For each performance obligation, revenue is either recognized at a point in time or over time. Performance progress is generally determined on the basis of the ratio of completed to still-outstanding transport duration.

The revenue generated by providing other logistics services is recognized in the reporting period in which the service was rendered.

Whenever third parties are involved in the performance of a service, a distinction must be drawn between the principal and agent. If DHL Group serves as the principal, then the gross amount of revenue is recognized. If the Group acts as the agent, the net amount is recognized. The transaction price for this specific service is limited to the amount of the commission to be received. DHL Group is generally the principal when transport services are provided.

Operating expenses are recognized in profit or loss when the service is utilized or when the expenses are incurred.

Intangible assets

Intangible assets, which comprise internally generated and purchased intangible assets and purchased goodwill, are measured at amortized cost.

Internally generated intangible assets are recognized at cost if it is probable that their production will generate an inflow of future economic benefits and the costs can be reliably measured. In the Group, this concerns internally developed software. If the criteria for capitalization are not met, the expenses are recognized immediately in income in the year in which they are incurred. In addition to direct costs, the production cost of internally developed software includes an appropriate share of allocable production overhead costs. Any borrowing costs incurred for qualifying assets are included in the production cost. Value-added tax arising in conjunction with the acquisition or production of intangible assets is included in the cost to the extent that it cannot be deducted as input tax.

Intangible assets (excluding goodwill) are amortized using the straight-line method over their useful lives. Impairment losses are recognized in accordance with the principles described in the impairment section. The useful lives of significant intangible assets are as follows:

USEFUL LIVES
  Years1
Software 5 to 15
Licenses up to 5
Customer relationships up to 20
1 The useful lives indicated represent maximum amounts specified by the Group. The actual useful lives may be shorter due to contractual arrangements or other specific factors such as time and location.

Intangible assets with indefinite useful lives are not amortized but are tested for impairment annually or whenever there are indications of impairment. This includes goodwill almost exclusively. Impairment testing is carried out in accordance with the principles described in the impairment section.

Emissions certificates

CO2 emissions certificates and certificates and/or proof of generation for electricity from renewable energies are recognized as intangible assets and reported under other assets. Both purchased as well as freely allocated rights are recognized at cost; no depreciation is carried out.

A provision for the obligation to submit CO2 emissions certificates to the responsible authorities in the EU and the United Kingdom is recognized at the carrying amount of the CO2 emissions certificates capitalized for this purpose. If a portion of the obligation is not covered by existing certificates, the provision for this is recognized at the market price of the emissions certificates on the reporting date.

Property, plant and equipment

Property, plant and equipment is carried at cost, reduced by accumulated depreciation and impairment losses. In addition to direct costs, production cost includes an appropriate share of allocable production overhead costs. Borrowing costs that can be allocated directly to the purchase, construction or manufacture of property, plant and equipment are capitalized. Value-added tax arising in conjunction with the acquisition or production of items of property, plant or equipment is included in the cost to the extent that it cannot be deducted as input tax. Depreciation is charged using the straight-line method. Significant portions of property, plant and equipment that have different useful lives are recognized and depreciated separately. If costs are incurred in conjunction with regular comprehensive maintenance work (e.g., refurbishment of aircraft and major repairs of engines), these costs are recognized as a separate component, provided that they meet the criteria for this recognition. The estimated useful lives applied to the major asset classes are presented in the table below:

USEFUL LIVES
  Years1
Buildings 20 to 50
Technical equipment and machinery 10 to 20
Aircraft 15 to 25
IT equipment 4 to 10
Transport equipment and vehicle fleet 5 to 20
Other operating and office equipment 7 to 10
1 The useful lives indicated represent maximum amounts specified by the Group. The actual useful lives may be shorter due to contractual arrangements or other specific factors such as time and location.

If there are indications of impairment, an impairment test must be carried out; see the impairment section.

Impairment losses

As of each reporting date, the carrying amounts of intangible assets, property, plant and equipment, right-of-use assets and investment property are reviewed for indications of impairment. If there are any such indications, an impairment test is carried out. This is done by determining the recoverable amount of the relevant asset and comparing it with the carrying amount.

In accordance with IAS 36, the recoverable amount is the asset’s fair value less costs to sell or its value in use (present value of the pretax free cash flows expected to be derived from the asset in the future), whichever is higher. The discount rate used for the value in use is a pretax rate of interest reflecting current market conditions. If the recoverable amount cannot be determined for an individual asset, the recoverable amount is determined for the smallest identifiable group of assets to which the asset in question can be allocated and that independently generates cash flows (cash generating unit – CGU). If the recoverable amount of an asset is lower than its carrying amount, an impairment loss is recognized immediately in respect of the asset. If it can be determined, the fair value or value in use of the individual assets represents their minimum carrying amount. If, after an impairment loss has been recognized, a higher recoverable amount is determined for the asset or the CGU at a later date, the impairment loss is reversed up to a carrying amount that does not exceed the recoverable amount. The increased carrying amount attributable to the reversal of the impairment loss is limited to the carrying amount that would have been determined (net of amortization or depreciation) if no impairment loss had been recognized in the past. The reversal of the impairment loss is recognized in the income statement. Impairment losses recognized in respect of goodwill may not be reversed. Goodwill is subsequently measured at cost, less any cumulative adjustments from impairment losses. Purchased goodwill is therefore not amortized and instead is tested for impairment annually in accordance with IAS 36, regardless of whether any indication of possible impairment exists, as in the case of intangible assets with an indefinite useful life. In addition, the obligation remains to conduct an impairment test if there is any indication of impairment. Goodwill resulting from company acquisitions is allocated to the CGUs or groups of CGUs that are expected to benefit from the synergies of the acquisition. These groups represent the lowest reporting level at which the goodwill is monitored for internal management purposes. The carrying amount of a CGU to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the unit may be impaired. Where impairment losses are recognized in connection with a CGU to which goodwill has been allocated, the existing carrying amount of the goodwill is reduced first. If the amount of the impairment loss exceeds the carrying amount of the goodwill, the difference is generally allocated proportionally to the remaining assets in the CGU.

Leases

A lease is a contract in which the right to use an asset (the leased asset) is granted for an agreed-upon period in return for compensation.

Lessee

In accordance with IFRS 16, the Group as lessee has recognized at present value assets for the right of use received and liabilities for the payment obligations entered into for all leases in the balance sheet. Lease liabilities include the following lease payments:

  • fixed payments, less lease incentives offered by the lessor;
  • variable payments linked to an index or interest rate;
  • expected residual payments from residual-value guarantees;
  • the exercise price of call options when exercise is estimated to be sufficiently likely; and
  • contractual penalties for the termination of a lease if the lease term reflects the exercise of a termination option.

Lease payments are discounted at the interest rate implicit in the lease to the extent that this can be determined. Otherwise, they are discounted at the incremental borrowing rate of the respective lessee.

Right-of-use assets are measured at cost, which comprises the following:

  • lease liability;
  • lease payments made at or prior to delivery, less lease incentives received;
  • initial direct costs and restoration obligations.

Right-of-use assets are subsequently measured at amortized cost. They are depreciated over the term of the lease using the straight-line method.

The Group makes use of the relief options provided for leases of low-value assets and short-term leases (shorter than 12 months) and expenses the payments in the income statement using the straight-line method. Additionally, the requirements do not apply to leases of intangible assets. The Group also exercises the option available for contracts comprising both lease and nonlease components to not separate these components, except in the case of real estate and aircraft leases. In addition, under IFRS 8, intra-Group leases – in line with internal management – are generally presented as operating leases in segment reporting.

Extension and termination options exist for a number of leases, particularly for real estate. Such contract terms offer the Group the greatest possible flexibility in doing business. In determining lease terms, all facts and circumstances offering economic incentives for exercising extension options or not exercising termination options are taken into account. Changes due to the exercise or nonexercise of such options are considered in determining the lease term only if they are sufficiently probable.

Lessor

For operating leases, the Group reports the leased asset at amortized cost as an asset under property, plant and equipment where it is the lessor. The lease payments received in the period are recognized under other operating income or revenue if they belong to ordinary business activities.

Where the Group is the lessor in a finance lease, it recognizes the assets as lease receivables in the amount of the net investment in the balance sheet. Certain subleases embedded in customer contracts are still reported as finance leases at the lessor.

Investments accounted for using the equity method

Investments accounted for using the equity method cover associates and joint ventures. These are recognized using the equity method in accordance with IAS 28, Investments in Associates and Joint Ventures. Based on the cost of acquisition at the time of purchase of the investments, the carrying amount of the investment is increased or reduced annually to reflect the share of earnings, dividends distributed and other changes in the equity of the associates and joint ventures attributable to the investments of Deutsche Post AG or its consolidated subsidiaries. An impairment loss is recognized on investments accounted for using the equity method, including the goodwill in the carrying amount of the investment, if the recoverable amount falls below the carrying amount. Gains and losses from the disposal of investments accounted for using the equity method are recognized in net income/expenses from investments accounted for using the equity method, as are impairments and reversals of impairments.

Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets include, in particular, cash and cash equivalents, trade receivables, originated loans and other financial receivables, as well as derivative financial assets. Financial liabilities include contractual obligations to deliver cash or another financial asset to another entity. These mainly comprise trade payables, liabilities to banks, liabilities arising from bonds and leases, and derivative financial liabilities.

Measurement

The Group measures financial assets and financial liabilities at fair value plus the transaction costs directly attributable to the acquisition of these financial assets and financial liabilities on initial recognition if the financial assets and financial liabilities are not subsequently measured at fair value through profit or loss. The transaction costs of assets and liabilities measured at fair value through profit or loss are recognized as expenses. For financial liabilities measured according to the fair value option, the part of the change in fair value resulting from changes in the Group’s own credit risk is recognized in other comprehensive income rather than in the income statement.

Classification

Financial assets are classified in the measurement categories below. The classification of debt instruments depends on the business model used to manage the financial assets and their contractual cash flows.

Debt instruments at amortized cost

Debt instruments that are assigned to the “hold to collect contractual cash flows” business model and whose cash flows exclusively comprise interest and principal are measured and recognized at amortized cost. Interest income from these financial assets is reported in financial income using the effective interest method.

Debt instruments at fair value through other comprehensive income (FVTOCI)

Debt instruments assigned to the “hold to collect and sell” business model must be measured at fair value plus transaction costs. As a result, changes in the carrying amount due to exchange rate gains and losses, impairment gains and losses, and interest income calculated using the effective interest method are recognized in the income statement. These amounts correspond to the amounts that would have been recognized in the income statement if they had been measured at amortized cost. All other changes of the carrying amount are recognized in other comprehensive income. When the debt instruments are derecognized, the amounts recognized in other comprehensive income are to be reclassified to the income statement.

Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)

Debt instruments, derivatives and equity instruments acquired to maximize their cash flows by selling them in the short to medium term are assigned to the “sell” business model. They are measured at fair value. The resulting measurement gains and losses are reported in the income statement.

Equity instruments classified as FVTOCI

Pursuant to IFRS 9, equity instruments are to be recognized at their fair value and can be assigned to the FVTOCI or FVTPL measurement categories. For strategic reasons, most of the equity instruments that the Group invests in are then assigned to the FVTOCI category. The effects of any change in the fair value of equity instruments of the FVTOCI category are recognized in other comprehensive income. Dividends are recognized in other operating income in the income statement. If the equity instruments of the FVTOCI category are sold, the fair value changes recognized in equity are to be transferred to other reserves. For equity instruments assigned to the FVTPL category, the fair value changes are to be reported immediately in the income statement. Dividends are also recognized in other income in the income statement.

Impairment losses

The Group makes a forward-looking assessment of the expected credit losses associated with its debt instruments (expected-credit-loss model).

Expected credit loss (ECL) within the meaning of IFRS 9 is an estimate of credit loss over the expected lifetime of a financial asset accounted for at amortized cost or at fair value through other comprehensive income (FVTOCI), weighted for the probability of default. A credit loss is the difference between the contractual cash flows to which the Group is entitled and the cash flows expected by the Group. The expected credit loss takes into account the amount and timing of payments. Accordingly, a credit loss may also occur if the Group expects payment to be made in full, but later than the contractually agreed-upon date.

The Group distinguishes between the following types of financial assets that are subject to the ECL model: debt instruments measured at amortized cost and debt instruments measured at fair value through other comprehensive income, on the one hand, and trade receivables and contract assets, on the other. Cash and cash equivalents are also subject to the IFRS 9 impairment rules. The identified impairment loss for the latter is immaterial.

ECL is generally measured at the level of individual items; in exceptional cases, such as groups of receivables with the same credit risk characteristics, it is measured collectively at portfolio level. The standard stipulates the three-stage general approach to determining credit loss for this process.

In accordance with the three-stage model, debt instruments measured at amortized cost and at fair value through other comprehensive income are initially recognized in Stage 1. The expected credit loss is equal to the loss that may occur due to possible default events in the 12 months following the reporting date. Financial assets that have experienced a significant increase in counterparty credit risk since initial recognition are transferred from Stage 1 to Stage 2. A significant increase includes situations in which debtors are no longer able to meet their payment obligations at short notice or when it appears that the debtor has experienced an actual or expected deterioration in business performance. The credit risk can then be measured using the probability of default (PD) over the instrument’s lifetime (lifetime PD). The impairment loss is equivalent to the loss that may occur due to possible default events during the remaining term of the financial asset. Assets must be transferred from Stage 1 to Stage 2 when the contractual payments are more than 30 days past due. In cases where contractual payments from a debt instrument are more than 90 days past due, there is revocable reason to believe that there is objective evidence of a credit loss because the debtor is experiencing significant financial difficulties. The debt instrument is then to be transferred to Stage 3.

Listed debt instruments measured at amortized cost are assigned to Stage 1 of the three-stage model if an investment-grade rating exists from at least one major rating agency. The impairment loss recognized in the period is equal to the loss that may occur due to possible default events in the twelve months following the reporting date.

Trade receivables and contract assets are generally short term in nature and contain no significant financing components. According to the simplified impairment approach in IFRS 9, a loss allowance in an amount equal to the lifetime expected credit losses must be recognized for all instruments, regardless of their credit quality. The Group calculates the expected credit loss using impairment tables for the individual divisions. The loss estimate, documented by way of loss rates, encompasses all of the available information, including historical data, current economic conditions and reliable forecasts of future economic conditions (macroeconomic factors).

Impairment losses are offset against gains on the reversal of impairment losses. Further details are presented in note 43.

Derivatives and hedges

The Group began to apply the IFRS 9 hedge accounting requirements as of January 1, 2020. Derivative hedging instruments are used to minimize variations in earnings due to payments in foreign currencies, variable-rate borrowing and for planned commodity purchases. The gains and losses from the underlying and hedging transactions are recognized simultaneously in total comprehensive income (hedge accounting). The Group has designated cash flow hedges due to the existing risks.

A cash flow hedge hedges the fluctuations in future cash flows from recognized assets and liabilities (in the case of interest rate risks), highly probable forecast transactions as well as unrecognized firm commitments that entail a currency risk. The effective portion of a cash flow hedge designated as a hedge is recognized in the cash flow hedge reserve in other comprehensive income. If the option (forward element and currency basis spreads) is applied to the cost of hedging recognition, or the fair value of an option has not been designated, effective changes in value from the nondesignated portions are recognized in the cost of hedging reserve as a component of the hedging reserve in other comprehensive income. IFRS 9 allows the alternative of designating either the full or the intrinsic value of an option as a hedging instrument. The fair value of an option is considered the cost of the hedge. If only the intrinsic value of an option is designated as a hedging instrument, changes to the fair value of the option must be recognized in other comprehensive income as cost of hedging in the cost of hedging reserve and reclassified on a reasonable basis when the hedged item occurs. Similar to the intrinsic value of an option, it is permissible to only designate the spot component of a forward transaction as a hedging instrument. In this case, there is an option to also recognize the effective and cumulative fair value changes of the forward component and the foreign-currency spread in the cost of hedging reserve. Ineffective portions resulting from changes in the fair value of the hedging instrument are recognized directly in income. The gains and losses generated by the hedging transactions are initially recognized in equity and are then reclassified to profit or loss in the period in which the financial asset acquired or financial liability assumed affects profit or loss. If a hedge of a firm commitment subsequently results in the recognition of a nonfinancial asset, the gains and losses recognized directly in equity are included in the initial carrying amount of the asset (basis adjustment).

Net investment hedges in foreign entities are treated in the same way as cash flow hedges. The gain or loss from the effective portion of the hedge is recognized in other comprehensive income, while the gain or loss attributable to the ineffective portion is recognized directly in the income statement. The gains or losses recognized in other comprehensive income remain there until the disposal or partial disposal, or an impairment loss, of the net investment.

Recognition and derecognition

Regular-way purchases and sales of financial assets are recognized as of the settlement date, with the exception of derivatives, in particular. A financial asset is derecognized when the rights to receive the cash flows from the asset have expired or have been transferred, and the Group has transferred essentially all risks and opportunities of ownership. Financial liabilities are derecognized if the payment obligations arising from them have expired.

Power purchase agreements

DHL Group concludes long-term contracts for the provision of electricity from renewable sources (e.g., wind and solar power) to reduce its carbon footprint (power purchase agreements) and to hedge against fluctuating prices. If the contracts are concluded for the company’s own use, they are treated as executory contracts (own-use exemption) and not accounted for as derivatives.

Offsetting

Financial assets and liabilities are offset on the basis of netting agreements (master netting arrangements) only if there is an enforceable right of offset and settlement on a net basis is intended as of the reporting date.

If the right of offset is not enforceable in the normal course of business, the financial assets and liabilities are recognized in the balance sheet at their gross amounts as of the reporting date. The master netting arrangement then creates only a conditional right of offset.

Investment property

In accordance with IAS 40, investment property is property held to earn rental income or for capital appreciation or both, rather than for use in the supply of services, for administrative purposes or for sale in the normal course of the company’s business. It is measured in accordance with the cost model. Depreciable investment property is depreciated over a period of between 20 and 50 years using the straight-line method. The fair value is determined on the basis of expert opinions. Impairment losses are recognized in accordance with the principles described in the impairment section.

Inventories

Inventories are assets that are held for sale in the ordinary course of business, are in the process of production or are consumed in the production process or in the rendering of services. They are measured at the lower of cost or net realizable value. Impairment losses are charged for obsolete inventories and slow-moving goods.

Government grants

In accordance with IAS 20, government grants are recognized at their fair value only when there is reasonable assurance that the conditions attached to them will be complied with and that the grants will be received. The grants are reported in the income statement and are generally recognized as income over the periods in which the costs they are intended to compensate for are incurred. Where the grants relate to the purchase or production of assets, they are reported as deferred income and recognized in the income statement over the useful lives of the assets. Such deferred income is presented in other operating income.

Assets held for sale and liabilities associated with assets held for sale

Assets held for sale are assets available for sale in their present condition and whose sale is highly probable. The sale must be expected to qualify for recognition as a completed sale within one year of the date of classification. Assets held for sale may consist of individual noncurrent assets, groups of assets (disposal groups), components of an entity or a subsidiary acquired exclusively for resale (discontinued operations). Liabilities intended to be disposed of together with the assets in a single transaction form part of the disposal group or discontinued operation and are also reported separately as liabilities associated with assets held for sale. Assets held for sale are no longer depreciated or amortized, but are recognized at the lower of their fair value less costs to sell and the carrying amount. Gains and losses arising from the remeasurement of individual noncurrent assets or disposal groups classified as held for sale are reported in profit or loss from continuing operations until the final date of disposal. Gains and losses arising from the measurement at fair value less costs to sell of discontinued operations classified as held for sale are reported in profit or loss from discontinued operations. This also applies to the profit or loss from operations and the gain or loss on disposal of these components of an entity.

Cash and cash equivalents

Cash and cash equivalents comprise cash, demand deposits and other short-term liquid financial assets with an original maturity of up to three months; they are measured at amortized cost. Overdraft facilities used are recognized in the balance sheet as amounts due to banks.

Noncontrolling interests

Noncontrolling interests are the proportionate minority interests in the equity of subsidiaries and are recognized at their carrying amount. If an interest is acquired from, or sold to, other shareholders without affecting the existing control relationship, this is presented as an equity transaction. The difference between the proportionate net assets acquired from, or sold to, other shareholders and the purchase price is recognized in other comprehensive income. If noncontrolling interests are increased by the proportionate net assets, no goodwill is allocated to the proportionate net assets.

Share-based payments to executives

Equity-settled share-based payment transactions are measured at fair value as of the grant date. The fair value of the obligation is recognized in staff costs over the vesting period. The fair value of equity-settled share-based payment transactions is determined using internationally recognized valuation techniques.

Cash-settled share-based payments (stock appreciation rights, SARs) are measured on the basis of an option pricing model in accordance with IFRS 2. The stock appreciation rights are measured on each reporting date and on the settlement date. The amount determined for stock appreciation rights that will probably be exercised is recognized pro rata in income under staff costs, to reflect the services rendered as consideration during the vesting period (lockup period). A provision is recognized for the same amount. Changes in value due to share price movements occurring after the grant date are recognized as other finance costs in net finance costs.

Retirement benefit plans

There are arrangements (plans) in many countries under which the Group grants post-employment benefits to its employees. These benefits include pensions, lump-sum payments on retirement and other post-employment benefits and are referred to in these disclosures as retirement benefits, pensions and similar benefits, or pensions. A distinction must be made between defined benefit and defined contribution plans.

The Group’s defined benefit retirement plan

Defined benefit obligations are measured using the projected unit credit method prescribed by IAS 19. This involves making certain actuarial assumptions. Most of the defined benefit retirement plans are at least partly funded via external plan assets. The remaining net liabilities are funded by provisions for pensions and similar obligations; net assets are presented separately as pension assets. Where necessary, an asset ceiling must be applied when recognizing pension assets. With regard to the cost components, the service cost is recognized in staff costs, net interest cost in net finance costs and the remeasurements outside the income statement in other comprehensive income. Any rights to reimbursement are reported separately in financial assets.

Defined contribution retirement plans for civil-servant employees in Germany

In accordance with statutory provisions, Deutsche Post AG pays contributions for civil-servant employees in Germany to retirement plans that are defined contribution retirement plans for the company. These contributions are recognized in staff costs.

Under the provisions of the Gesetz zum Personalrecht der Beschäftigten der früheren Deutschen Bundespost (PostPersRG – Former Deutsche Bundespost Employees Act), Deutsche Post AG provides retirement benefits and assistance benefits through the Postbeamtenversorgungskasse (PVK – Postal civil-servant pension fund) at the Bundesanstalt für Post und Telekommunikation (BAnst PT – German federal post and telecommunications agency) to retired employees or their surviving dependents who are entitled to benefits on the basis of a civil-service appointment. The amount of Deutsche Post AG’s payment obligations is governed by Section 16 PostPersRG. This act obliges Deutsche Post AG to pay into the PVK an annual contribution of 33% of the gross compensation of its active civil servants and the notional gross compensation of civil servants on leave of absence who are eligible for a pension.

Under Section 16 PostPersRG, the federal government makes good the difference between the current payment obligations of the PVK, on the one hand, and the funding companies’ current contributions or other return on assets, on the other, and guarantees that the PVK is able to meet the obligations it has assumed in respect of its funding companies at all time. Insofar as the federal government makes payments to the PVK under the terms of this guarantee, it cannot claim reimbursement from Deutsche Post AG.

Defined contribution retirement plans for the Group’s hourly workers and salaried employees

Defined contribution retirement plans are in place for the Group’s hourly workers and salaried employees, particularly in the United Kingdom, the United States and the Netherlands. The contributions to these plans are also reported in staff costs.

This also includes contributions to certain multiemployer plans that are basically defined benefit plans, especially in the United States and the Netherlands. However, the relevant institutions do not provide the participating companies with sufficient information to use defined benefit accounting. The plans are therefore accounted for as if they were defined contribution plans.

Regarding these multiemployer plans in the United States, contributions are made based on collective agreements between the employer and the local union, with the involvement of the pension fund. There is no employer liability to any of the plans beyond the bargained contribution rates except in the event of a withdrawal meeting specified criteria, which could then include a liability for other entities’ obligations as governed by US federal law. The expected employer contributions to the funds for 2024 are €79 million (actual employer contributions in the reporting period: €81 million, in the previous year: €81 million). Some of the plans in which DHL Group participates are underfunded according to information provided by the funds. No information is available to the Group that would indicate any change from the contribution rates set by current collective agreements. In addition, the potential financial risks in conjunction with underfunded joint plans were implicitly reduced through measures taken by the US government. DHL Group does not represent a significant level to any fund in terms of contributions, with the exception of one fund where the Group represents the largest employer in terms of contributions.

Contribution rates for one multiemployer retirement plan in the Netherlands are determined each year by the management body of the pension fund with the involvement of the central bank of the Netherlands, based on cost coverage. These contribution rates are the same for all employers and employees involved. There is no liability for the employer toward the fund beyond the contributions set, even in the case of withdrawal or obligations not met by other entities. Any subsequent underfunding ultimately results in the rights of members being cut and/or no indexation of their rights. The expected employer contributions to the fund for 2024 are €36 million (actual employer contributions in the reporting period: €33 million, in the previous year: €31 million). As of December 31, 2023, the coverage degree of plan funding was above a required minimum of approximately 105%, according to information provided by the fund. DHL Group does not represent a significant portion of the fund in terms of contributions.

Other provisions

Other provisions are recognized for all legal or constructive obligations to third parties existing as of the reporting date that have arisen as a result of past events, that are expected to result in an outflow of future economic benefits and whose amount can be measured reliably. They represent uncertain obligations that are carried at the best estimate of the expenditure required to settle the obligation. Provisions with more than one year to maturity are discounted at market rates of interest that reflect the region and time to settlement of the obligation. The discount rates used in the fiscal year were between 0.25% and 10.50% (previous year: 0.00% to 10.75%). The effects arising from changes in interest rates are recognized under other operating income or expenses.

Provisions for restructuring are only established in accordance with the aforementioned criteria for recognition if a detailed, formal restructuring plan has been drawn up and communicated to those affected.

Technical reserves (insurance) consist mainly of outstanding-loss reserves and IBNR (incurred but not reported) reserves. Outstanding-loss reserves represent estimates of obligations in respect of actual claims or known incidents expected to give rise to claims that have been reported to the company but have yet to be finalized and presented for payment. Outstanding-loss reserves are based on individual claim valuations carried out by the company or its ceding insurers. IBNR reserves represent estimates of obligations in respect of incidents taking place on or before the reporting date that have not been reported to the company. Such reserves also include provisions for potential errors in settling outstanding-loss reserves. The company carries out its own assessment of ultimate loss liabilities using actuarial methods and also commissions an independent actuarial study of these each year in order to verify the reasonableness of its estimates.

Financial liabilities

Financial liabilities are carried at fair value less transaction costs on initial recognition. The price determined in an efficient and liquid market or a fair value determined using the treasury risk management system deployed within the Group is taken as the fair value. Financial liabilities are measured at amortized cost in subsequent periods. Any differences between the amount received and the amount repayable are recognized in the income statement over the term of the loan using the effective interest method. Disclosures on financial liabilities under leases can be found in the leases section.

Convertible bond on Deutsche Post AG shares

The convertible bond on Deutsche Post AG shares is split into an equity and a debt component, in line with the contractual arrangements. The debt component, less the transaction costs, is reported under financial liabilities (bonds), with interest added back up to the issue amount over the term of the bond using the effective interest method (unwinding of the discount). The value of the call option, which allows Deutsche Post AG to redeem the bond early if a specified share price is reached, is attributed to the debt component in accordance with IAS 32.31. The conversion right is classified as an equity component and is reported in capital reserves. The carrying amount is calculated by assigning to the conversion right the residual value that results from deducting the amount calculated separately for the debt component from the fair value of the instrument as a whole. The transaction costs are deducted on a proportionate basis.

Liabilities

Trade payables are carried at amortized cost. Most of the trade payables have a maturity of less than one year. The fair value of the liabilities corresponds more or less to their carrying amount. Group companies use reverse-factoring programs for supplier financing. As part of this, suppliers conclude financing agreements with financial institutions without the involvement of DHL Group. If they wish, suppliers can receive invoice amounts less an interest component prior to the original due date on the basis of these agreements. DHL Group pays the invoice amounts to the respective financial institutions when they come due. Because the programs do not lead to any substantial modification of the conditions of payment between DHL Group and the suppliers, and payment terms are within the normal industry range, the corresponding accounts payable are still reported under trade payables. The payments to the financial institutions are reported in the operating cash flow.

Deferred taxes

In accordance with IAS 12, deferred taxes are recognized for temporary differences between the carrying amounts in the IFRS financial statements and the tax basis of the individual entities. Deferred tax assets also include tax reduction claims that arise from the expected future utilization of existing tax loss carryforwards and that are likely to be realized. The recoverability of the tax reduction claims is assessed on the basis of each entity’s earnings projections, which are derived from the Group projections and take any tax adjustments and effects on earnings from the reversal of taxable temporary differences into account. The planning horizon is five years.

In compliance with IAS 12.24(b) and IAS 12.15(b), deferred tax assets or liabilities were only recognized for temporary differences between the carrying amounts in the IFRS balance sheet and in the tax basis of Deutsche Post AG where the differences arose after January 1, 1995. No deferred tax assets or liabilities are recognized for temporary differences resulting from initial differences in the opening tax accounts of Deutsche Post AG as of January 1, 1995.

In accordance with IAS 12, deferred tax assets and liabilities are calculated using the tax rates applicable in the individual countries as of the reporting date or announced for the time when the deferred tax assets and liabilities are realized. The tax rate applied to German Group companies is unchanged at 30.5%. It comprises the corporation tax rate plus the solidarity surcharge, as well as a municipal trade tax rate that is calculated as the average of the different municipal trade tax rates. Foreign Group companies use their individual income tax rates to calculate deferred tax items. The income tax rates applied for foreign companies amount to up to 38% (previous year: 38%).

The Group applies the exception to the recognition and disclosure of information regarding deferred tax assets and liabilities in conjunction with income taxes for pillar two, as provided for in the amendments to IAS 12 published in May 2023.

Income taxes

Income tax assets and liabilities are recognized when they are probable. They are measured at the amounts for which repayments from, or payments to, the tax authorities are expected to be received or made. If uncertain tax items are recognized because they are probable, they are measured at their most likely amount. Tax-related fines are recognized in income taxes if they are included in the calculation of income tax liabilities, due to their inclusion in the tax base and/or tax rate.

Contingent liabilities

Contingent liabilities represent possible obligations whose existence will be confirmed only by the occurrence, or nonoccurrence, of one or more uncertain future events not wholly within the control of the enterprise. Contingent liabilities also include certain obligations that will probably not lead to an outflow of resources embodying economic benefits, or where the amount of the outflow of resources embodying economic benefits cannot be measured with sufficient reliability. In accordance with IAS 37, contingent liabilities are not recognized in the balance sheet.

8 Exercise of judgment in applying the accounting policies

The preparation of IFRS-compliant consolidated financial statements requires the exercise of judgment by management. All estimates are reassessed on an ongoing basis and are based on historical experience and expectations with regard to future events that appear reasonable under the given circumstances. For example, this applies to assets held for sale. In this case, management must determine whether the assets are available for sale in their present condition and whether their sale is highly probable. If that is the case, the assets and associated liabilities must be measured and recognized as assets held for sale or liabilities associated with assets held for sale.

Estimates and assessments made by management

The preparation of the consolidated financial statements in accordance with IFRS requires management to make certain assumptions and estimates that may affect the amounts of the assets and liabilities included in the balance sheet, the amounts of income and expenses, and the disclosures relating to contingent liabilities. Examples of the main areas where assumptions, estimates and the exercise of management judgment occur are the recognition of provisions for pensions and similar obligations, the calculation of discounted cash flows for impairment testing and purchase price allocations, taxes and legal proceedings.

The Group has operating activities around the globe and is subject to local tax laws. Management can exercise judgment when calculating the amounts of current and deferred taxes in the relevant countries. Although management believes that it has made a reasonable estimate relating to tax matters that are inherently uncertain, there can be no guarantee that the actual outcome of these uncertain tax matters will correspond exactly to the original estimate made. Any difference between actual events and the estimate made could have an effect on tax balance sheet items in the period in which the matter is finally decided. The amount recognized for deferred tax assets could be reduced if the estimates of planned taxable income or changes to current tax laws restrict the extent to which future tax benefits can be realized.

Goodwill is regularly reported in the Group’s balance sheet as a consequence of business combinations. When an acquisition is initially recognized in the consolidated financial statements, all identifiable assets, liabilities and contingent liabilities are generally measured at their fair values as of the date of acquisition. One of the important estimates this requires is the determination of the fair values of these assets and liabilities as of the date of acquisition. Land, buildings and office equipment are generally valued by independent experts, while securities for which there is an active market are recognized at the quoted exchange price. If intangible assets are identified in the course of an acquisition, their measurement can be based on the opinion of an independent external expert valuer, depending on the type of intangible asset and the complexity involved in determining its fair value. The independent expert determines the fair value using appropriate valuation techniques, normally based on expected future cash flows. In addition to the assumptions about the development of future cash flows, these valuations are also significantly affected by the discount rates used.

Climate change could give rise to uncertainties and risks for the net assets, financial position and results of operations of the Group. Extreme weather events could potentially lead to damage to property, plant and equipment. Increased restrictions imposed by law to combat climate change are expected in the coming years, including limits on air transport or access to city centers. In certain cases, this may also affect our existing business models and our ability to operate optimally. Climate-related risks can influence the useful lives of assets in different ways:

  • Physical changes in the climate such as the increased frequency and intensity of acute weather events (storms, fires and floods) as well as long-term trends such as rising temperatures can have an impact on assets.
  • Transitory changes in conjunction with decarbonization – including political, legal, technological and market-related changes – can influence the useful lives and the values of our assets.

In particular, there are uncertainties with regard to the extent to which regulatory efforts in connection with the debate surrounding climate action will lead to higher costs. The current focus as part of the public debate and the climate action measures of DHL Group relate to CO2 emissions. DHL Group plans to reduce its logistics-related greenhouse gas (GHG) emissions to below 29 million metric tons of CO2e by the year 2030. DHL Group wants to reduce the GHG emissions to net zero by 2050. To this end, additional costs – for emissions trading and sustainable fuels, among other things – were accounted for in the company’s projections and thus included in the application of IAS 36 as well as in the impairment considerations for deferred tax assets. Other central elements of the planned reduction in CO2 emissions are the planned fleet modernization as well as the option for DHL Group customers to acquire CO2 offsets during the booking process.

DHL Group does not currently see any climate-related indications for the adjustment of useful lives and residual values of aircraft and other items of property, plant and equipment. As part of determining the impairment loss on assets of property, plant and equipment, of intangible assets and of right-of-use assets, estimates are also made that relate to, among other factors, the cause, time and amount of the impairment. An impairment loss is based upon a number of factors. Management has to make significant estimates with regard to the identification and review of indications for an impairment, the estimate of future cash flows, the determination of fair values of assets (or groups of assets), the relevant discount rates, the respective useful lives and the residual values of the affected assets. Moreover, a loss allowance for financial assets has been established to account for expected credit losses resulting from customers’ credit quality. Detailed information can be found under note 7 on expected credit loss and trade receivables. Assessment of the appropriateness of the loss allowance is based on historical data and future macroeconomic key figures or the credit rating estimate for the respective customers on the basis of an external rating from the respective industry and the country in which the customer operates, note 43. In the event of a deterioration of the credit quality of the customer, the scope of the derecognition (specific valuation allowances on receivables) actually carried out may exceed that of the loss allowance recognized.

Impairment testing for goodwill is based on assumptions about the future. The Group carries out these tests annually and also whenever there are indications that goodwill has become impaired. The recoverable amount of the CGU must then be calculated. This amount is the higher of fair value less costs to sell and value in use. Determining value in use requires assumptions and estimates to be made with respect to forecast future cash flows and the discount rate applied. Although management believes that the assumptions made for the purpose of calculating the recoverable amount are appropriate, possible unforeseeable changes in these assumptions – e.g., a reduction in the EBIT margin, an increase in the asset charge or a decline in the long-term growth rate – could result in an impairment loss that could negatively affect the Group’s net assets, financial position and results of operations, note 22.

For the actuarial valuation of defined benefit retirement plans of the Group, actuarial assumptions are required that relate to, in particular, discount rates, expected rates of salary and pension increases and biometric probabilities. Generally accepted valuation methods are used to determine the fair value of plan assets – in particular, for assets without a market price quotation (e.g., real estate) – that require separate assumptions. If changes to these assumptions are necessary, this could have a material impact on the results of actuarial valuations, recognized carrying amounts and the future amount of retirement benefit expenses. Disclosures regarding the assumptions made in connection with the Group’s defined benefit retirement plans can be found in note 37.

Pending legal proceedings in which the Group is involved are disclosed in note 45. The outcome of these proceedings could have a significant effect on the net assets, financial position and results of operations of the Group. Management regularly analyzes the information currently available about these proceedings and recognizes provisions for probable obligations including estimated legal costs. Internal and external legal advisers participate in making this assessment. In deciding on the necessity for a provision, management takes into account the probability of an unfavorable outcome and whether the amount of the obligation can be estimated with sufficient reliability. The fact that an action has been launched or a claim asserted against the Group, or that a legal dispute has been disclosed in the notes, does not necessarily mean that a provision is recognized for the associated risk.

DHL Group considers itself to be exposed to an increasingly complex and uncertain macroeconomic and geopolitical environment. This includes potential increases in fuel, energy and gas prices, which can be at least partially compensated for or passed on to customers through strict cost management and the established levers such as price increases and price surcharge mechanisms. In addition, strong volatility is still expected on the goods and financial markets and in exchange rates, driven by rising interest and inflation rates. Moreover, the risk of a potential decline in global economic growth can be observed, which could lead to an increased number of customer bankruptcies.

All assumptions and estimates are based on the circumstances prevailing and assessments made as of the reporting date. For the purpose of estimating the future development of the business, a realistic assessment was also made at that date of the economic environment likely to apply in the future to the different sectors and regions in which the Group operates. In the event of developments in these economic parameters that diverge from the assumptions made, the actual amounts may differ from the estimated amounts. In such cases, the assumptions made and, where necessary, the carrying amounts of the relevant assets and liabilities are adjusted accordingly.

As of the date of preparation of the consolidated financial statements, there is no indication that any significant change in the assumptions and estimates made will be required, so that on the basis of the information currently available, it is not expected that there will be significant adjustments in the 2024 fiscal year to the carrying amounts of the assets and liabilities recognized in the financial statements.

9 Consolidation methods

The consolidated financial statements are based on the IFRS financial statements of Deutsche Post AG and the subsidiaries, joint operations and investments accounted for using the equity method included in the consolidated financial statements and prepared in accordance with uniform accounting policies as of December 31, 2023.

Acquisition accounting for subsidiaries included in the consolidated financial statements uses the purchase method of accounting. The cost of the acquisition corresponds to the fair value of the assets given up, the equity instruments issued and the liabilities assumed at the transaction date. Acquisition-related costs are recognized as expenses. Contingent consideration is recognized at fair value as of the date of initial consolidation.

The assets and liabilities, as well as income and expenses, of joint operations are included in the consolidated financial statements in proportion to the interest held in these operations, in accordance with IFRS 11. Accounting for the joint operators’ share of the assets and liabilities, as well as recognition and measurement of goodwill, use the same methods as applied to the consolidation of subsidiaries.

In accordance with IAS 28, joint ventures and companies on which the parent can exercise significant influence (associates) are accounted for in accordance with the equity method. Any goodwill is recognized under investments accounted for using the equity method.

In the case of step acquisitions, the equity portion previously held is remeasured at the fair value applicable as of the acquisition date, and the resulting gain or loss is recognized in the income statement.

Intra-Group revenue, other operating income and expenses, as well as receivables, liabilities and provisions between companies that are consolidated or proportionately consolidated, are eliminated. Intercompany profits or losses from intra-Group deliveries and services not realized by sale to third parties are eliminated. Unrealized gains and losses from business transactions with investments accounted for using the equity method are eliminated on a proportionate basis.

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