Explanatory Notes

Changes in Underlying Parameters

Changes in the underlying parameters relate primarily to currency exchange rates and the interest rates used to calculate pension obligations. The exchange rates for major currencies against the euro varied as follows:

Exchange Rates for Major Currencies

 

 

 

Closing rate

 

Average rate

€1

 

 

Dec. 31, 2017

Sep. 30, 2017

Sep. 30, 2018

 

9M 2017

9M 2018

BRL

Brazil

 

3.98

3.77

4.68

 

3.52

4.27

CAD

Canada

 

1.51

1.47

1.51

 

1.45

1.54

CHF

Switzerland

 

1.17

1.15

1.13

 

1.09

1.16

CNY

China

 

7.81

7.85

7.96

 

7.55

7.77

GBP

United Kingdom

 

0.89

0.88

0.89

 

0.87

0.88

JPY

Japan

 

135.01

132.89

131.31

 

124.36

130.92

MXN

Mexico

 

23.66

21.45

21.82

 

20.97

22.73

RUB

Russia

 

69.41

68.28

76.20

 

64.74

73.21

USD

United States

 

1.20

1.18

1.16

 

1.11

1.19

Argentina’s economy has been classed as hyperinflationary since July 1, 2018, which is why we have applied IAS 29 (Financial Reporting in Hyperinflationary Economies) for Bayer S.A. in Argentina. The resulting effects in ongoing accounting have so far been immaterial for the Group.

The most important interest rates used to calculate the present value of pension obligations are given below:

Discount Rate for Pension Obligations

 

 

Dec. 31, 2017

 

June 30, 2018

 

Sep. 30, 2018

 

 

%

 

%

 

%

Germany

 

1.90

 

1.90

 

2.10

United Kingdom

 

2.50

 

2.80

 

2.85

United States

 

3.40

 

4.10

 

4.10

Bayer uses the Heubeck mortality tables to calculate pension obligations in Germany. The RT 2005 G tables were used in recent years. However, we have now switched to the RT 2018 G tables, as we believe that basing calculations on these new tables provides a more appropriate presentation of the actual economic impact on the respective closing date. If we had not switched to the Heubeck RT 2018 G tables, provisions would have been €0.3 billion lower.

When determining the discount rate for measuring pension obligations, we previously applied the Macauley Duration method as part of our calculations. However, Bayer decided to switch to the uniform discount rate method, which is used more frequently in the market and is mathematically superior. Without this modification, the discount rate as of September 30, 2018, would have been 10 basis points lower. Provisions would therefore have been €0.3 billion higher.

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