Chapters
Annual Report 2019

7. Cost of Sales, Directly Related Costs and Other Operating expenses

Accounting Policy

Cost of sales, directly related costs and other operating expenses are recognized in the consolidated Income Statement when occurred.

Short-term employee benefits such as wages, salaries, social security contributions, bonuses, annual and sick leave are recognized in the year in which the related services are rendered by employees.

For accounting policies related to share-based payments and pensions please refer to notes 26 and 25, respectively. For accounting policies related to depreciation, amortization and impairments please refer to notes 11, 12, 14 and 13, respectively.

Accounting policy applied until 31 December 2018

Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor and lease receipts from subleases) are charged to the consolidated Income Statement on a straight-line basis over the period of the lease.

Accounting policy applied from 1 January 2019

Payments relating to lease contracts with a duration of less than 12 months, lease contracts for which the underlying asset, when new, has a value of below €5,000 and variable payments not included in lease liabilities are expensed to the consolidated Income Statement when incurred. In addition, the following items are recognized in the consolidated Income Statement within occupancy costs:

  • a difference between changes in a lease liability and a right-of-use asset as a result of reassessment/modification;
  • a difference between changes in a lease liability and a lease receivable as a result of reassessment/modification;
  • a difference between an amount of derecognized right-of-use asset and an amount of lease receivable on initial recognition of finance subleases;

The following costs have been included in the operating result:

in thousands of EUR

Notes

2019

2018

Direct materials

951,159

848,533

Employee costs

1,407,018

1,278,302

Occupancy costs

176,813

515,335

Marketing & publicity costs

203,510

190,818

Depreciation and impairments

11, 12

488,833

124,195

Amortization and impairments

13, 14

143,272

101,611

Distribution costs

79,180

81,020

Other costs

264,881

243,136

3,714,666

3,382,950

In 2019, the decrease in occupancy costs is a result of the IFRS 16 implementation as lease costs are now split between depreciation and impairments category (depreciation of right-of-use assets) and interest expenses. Please refer to notes 12 and 8 for more details.

In 2019, items relating to leases, which were recognized in the consolidated Income Statement mainly within occupancy costs are as follows:

in thousands of EUR

2019

Variable leases

99,145

Short-term leases

2,332

Low value leases

2,522

Result on initial recognition of finance subleases

274

The employee costs can be specified as follows:

in thousands of EUR

Notes

2019

2018

Salaries & wages

1,010,934

919,713

Social security

197,444

184,928

Pension costs - Defined benefit plans

25

6,359

7,624

Pension costs - Defined contribution plans

21,742

20,247

Share-based payments

26

5,027

3,770

Other employee-related costs

165,512

142,020

1,407,018

1,278,302