20 – Other comprehensive income
Other comprehensive income
The income and expenses shown in other comprehensive income are divided into two categories. Items that will be recognized in the income statement in the future (known as “recycling”) and those that will not. The first category includes translation adjustments, the measurement of securities at fair value, and changes in the fair value of derivatives held to hedge future cash flows and net investments in a foreign operation. Items in other comprehensive income that will not be reclassified to the income statement in the future include effects from the remeasurement of defined benefit plans and the remeasurement of assets and liabilities due to acquisition of a majority interest.
The translation adjustments due to the use of the closing rate method are shown under currency translation adjustments as a component of other comprehensive income in equity (translation adjustments) and are recognized in the income statement only upon the disposal of a company.
Measurement of securities at fair value
For fully and proportionally consolidated companies, as well as those companies which are accounted for using the equity method, changes in value of available-for-sale securities in excess of their acquisition costs are accounted for in other comprehensive income, without impacting the income statement, until the securities are disposed of. Upon disposal, the changes accumulated in other comprehensive income are recognized in the income statement.
Cash flow hedges
Derivatives are used to hedge future cash flows. The effective portion of the change in value of these derivatives is recognized in equity. This also comprises equity effects from the hedging of future cash flows at companies accounted for using the equity method.
Hedging future cash flows at Nord Stream AG, Zug, Switzerland, a company accounted for using the equity method, resulted in a change of €30 million in 2013 and of minus €35 million in 2012.
Hedges of net investments in foreign operations
Hedge accounting can be used to hedge the translation risk from the net investment in a foreign operation. Effects recorded in equity are recognized in the income statement upon sale of the operation or return of the investment.
Remeasurement of defined benefit plans
Actuarial gains and losses from changed estimations with regard to actuarial assumptions used for calculating defined pension obligations, as well as the difference between standardized and actual returns on plan assets, are recognized directly in equity as other comprehensive income.
Remeasurement due to acquisition of majority of shares
Until 2008, effects from the revaluation of net assets were recorded in equity when they arose due to the acquisition of a majority of shares in a previously proportionally consolidated company. Additional depreciation of these revalued assets leads to a reversal of the corresponding item in equity; this does not affect income.