Basis of consolidation

Subsidiaries

The consolidated financial statements include all subsidiaries in which Deutsche EuroShop AG directly or indirectly holds a majority of voting rights, plus those companies which are joint ventures.
As at 31 December 2010, the basis of consolidation comprised 20 (previous year: 16) fully consolidated domestic and foreign subsidiaries and four (previous year: seven) proportionately consolidated domestic and foreign joint ventures, in addition to the parent company.

On 6 January 2010, Kommanditgesellschaft PANTA Neunundneunzigste Grundstücksgesellschaft m.b.H. & Co KG, a subsidiary of Deutsche EuroShop, purchased the A 10 shopping center in Wildau near Berlin for approximately €195.7 million. The transfer of benefits and encumbrances took place on 1 February 2010. The purchase price was paid in cash. The first-time consolidation of the company revealed an excess of identified net assets acquired over cost of acquisition amounting to €8.6 million. In the period under review, the company generated revenue of €12.9 million and a profit of €11.1 million. As the operating activities of the company only commenced in February, revenue and profit would not have been materially different if the merger had taken place at the start of the year.

in € thousand Carrying amounts Fair value
Purchase price   195,750
Acquired property assets 204,381 204,381
Excess of identified net assets acquired over cost of acquisition -8,631 -8,631

With effect from 31 December 2010, Deutsche EuroShop AG acquired 9.7% of the shares in the limited partnership of DB Immobilienfonds 12 Main-Taunus-Zentrum Wieland KG, Hamburg, at a purchase price of €17.2 million, which was paid in cash. Deutsche EuroShop AG therefore holds 50.47% of the shares in this company.

As a consequence, the indirect proportion of Main-Taunus-Zentrum Wieland KG, Hamburg held has increased from 37.38% to 46.27%. Deutsche EuroShop AG owns 52.01% of shares in this company via direct and indirect holdings.

Both companies were previously included in Deutsche EuroShop AG’s consolidated financial statements on a pro-rata basis. They were fully consolidated in the consolidated financial statements for the first time on 31 December 2010. In accordance with IFRS 3, the purchase of the shares resulted in an excess of identified net assets acquired over cost of acquisition amounting to €4.6 million, which was recognised in income. In the period under review, Main-Taunus-Zentrum Wieland KG generated revenue of €23.9 million and a profit of €25.3 million. DB Immobilienfonds 12 Main-Taunus-Zentrum Wieland KG generated no revenue and a profit of €4.9 million.

in € thousand Carrying amounts Fair value
Purchase price   17,168
Fair value net assets prior to effective control 98,841 98,841
Minority interests 123,503 123,503
Total amount of consideration 239,512 239,512
Net assets acquired:
Property assets 431,141 431,141
Cash and cash equivalents 13,370 13,370
Receivables and other assets 1,866 1,866
Loan liabilities 180,213 180,213
Deferred taxes 14,639 14,639
Provisions 2,023 2,023
Other liabilities 5,378 5,378
  244,124 244,124
Excess of identified net assets acquired over cost of acquisition (bargain purchase) -4,612 -4,612

Deutsche EuroShop AG has a 50% stake in Immobilienkommanditgesellschaft FEZ Harburg, Hamburg. With effect from 31 December 2010, Deutsche EuroShop has a voting agreement with a co-shareholder and therefore “controls” this company. The company was previously included in the consolidated financial statements on a pro-rata basis. The balance sheet was fully consolidated for the first time on the balance sheet date, with the addition of property assets to the value of €95.7 million and other assets to the value of €1.9 million to Group assets. In addition, liabilities totalling €55.9 million were assumed. In the period under review, the company generated revenue of €11.9 million and a profit of €7.2 million.

in € thousand Carrying amounts Fair value
Fair value net assets prior to effective control 41,668 41,668
Minority interests 41,668 41,668
Total amount of consideration 83,336 83,336
Net assets acquired:
Property assets 191,440 191,440
Cash and cash equivalents 3,155 3,155
Receivables and other assets 604 604
Loan liabilities 111,330 111,330
Provisions 167 167
Liabilities 366 366
  83,336 83,336
Excess of identified net assets acquired over cost of acquisition 0 0

Deutsche EuroShop AG founded 1. DES Grundbesitz KG, Hamburg with an investment of €10 thousand with effect from 23 September 2010. The fair value of the identified net asset value at the acquisition date was €10 thousand. No excess of identified net assets acquired over cost of acquisition was determined in the first-time consolidation.

The fair values of the assets and liabilities of the acquisitions recognised were calculated on the basis of a property valuation and the application of a cost-model approach.

With effect from 1 July 2010, Deutsche EuroShop AG increased its shareholding in City-Arkaden Wuppertal KG from 72% to 97%. The purchase price for the shares in the limited partnership was €11.8 million, paid by means of the issue of new shares. The resulting excess of identified net assets acquired over cost of acquisition of €0.1 million was recognised directly in equity.

In addition, with effect from 1 July 2010, 3% of the shares in the limited partnership City-Arkaden Wuppertal KG were acquired within the framework of a purchase and transfer contract at a purchase price of €1.4 million, which was paid in cash. An excess of identified net assets acquired over cost of acquisition amounting to €7 thousand was included in the measurement gains. Deutsche EuroShop AG therefore holds 100% of the shares in this company.

Also with effect from 1 July 2010, Deutsche EuroShop Verwaltungs GmbH acquired 10% of the shares in the limited partnership City-Point Kassel KG within the framework of a purchase and transfer contract at a purchase price of €5.1 million, which was paid in cash. Deutsche Euro- Shop Verwaltungs GmbH therefore holds 100% of the shares in this company. The acquisition of the shares resulted in an excess of identified net assets acquired over cost of acquisition of €62 thousand, which was recognised in income.

Joint ventures

With effect from 1 July 2010, Deutsche EuroShop AG increased its shareholding in Altmarkt-Galerie Dresden KG from 50% to 67%. The purchase price for the shares in the limited partnership was €28.9 million, paid by means of the issuance of new shares. The purchase price exceeded the fair value of the assets acquired and liabilities assumed by €0.3 million, which was recognised in equity.

Although Deutsche EuroShop AG now holds more than half of the voting rights, the company is still included proportionally in the consolidated financial statements as, due to contractual arrangements, Deutsche EuroShop AG does not exercise control over it.

in € thousand Carrying amounts Fair value
Purchase price 28,943 28,943
Fair value net assets prior to effective control 71,432 71,432
Full amount of consideration 100,375 100,375
Net assets acquired:
Property assets 216,859 216,859
Cash and cash equivalents 14,839 14,839
Receivables and other assets 1,198 1,198
Loan liabilities 111,678 111,678
Deferred taxes 12,593 12,593
Provisions 4,373 4,373
Other liabilities 4,177 4,177
  100,075 100,075
Excess of identified net assets acquired over cost of acquisition 300 300

The fair values of the assets and liabilities of the acquisitions recognised were calculated on the basis of a property valuation and the application of a cost-model approach.

Investments over which Deutsche EuroShop AG has neither significant influence nor control are measured at fair value, in line with the provisions of IAS 39. This includes the investment in Ilwro Joint Venture Sp. z o.o., Warsaw.

Associates

In accordance with IAS 28, where Deutsche EuroShop AG can exercise a significant influence but not control over companies, generally holding 20% to 50% of the shares, these are measured using the equity method. Six companies fall into this category as at the balance sheet date.

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