IFRS 16 ‘Leases’:

Implications for SAP’s 2019 Financials

Prof. Dr. Christoph Hütten, Chief Accounting Officer SAP
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AGENDA

How SAP transitions to IFRS 16

What’s Different under IFRS 16?

Major Differences to Previous Accounting
Estimated Impact on SAP

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How SAP transitions to IFRS 16
Transition Approach Determines Comparability Transition Approach
Modified Retrospective Approach

Financial Statements 2018 Financial Statements 2019

Statements Statements
2018 2017 2019 2018
Different transition approaches available Profits Old Old Profits New Old
Assets Old Old Assets New Old
Liabilities Old Old Liabilities New Old
Cash Flows Old Old Cash Flows New Old

SAP transitions to IFRS 16 ... Old Old ... New Old

using the Modified Retrospective Approach Notes

IFRS 16
Notes
2018 2017 2019 2018
Disclosures Old Old Disclosures New Old

Expected Impact of IFRS 16

Impact of IFRS 16
To be considered when comparing We expect the following
Explanation of January 1
differences between lease
impact in 2019: …
2019 financials commitments under old
policies and lease liabilities
with respective prior year numbers under IFRS 16

Voluntary info in earnings

communications in 2019
Old = Previous accounting / providing further insight into the
New = IFRS 16 accounting IFRS 16 impact

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 What’s New under IFRS 16?
Major Differences to Previous Accounting

Statement of Financial Position Income Statement Cash Flow Statement

Previous New IFRS 16 Previous New IFRS 16
Previous New IFRS 16 Accounting Accounting Accounting Accounting
Accounting Accounting
Operating Single Operating Depreciation Operating Single Operating Interest Portion
Profit Lease Expense Expense Cash Flow Lease Cash Flow of Lease Cash Flow
On Balance Lease Assets
Sheet Lease Liabilities Financial
Interest Expense Investing
Income, net
Cash Flow
Effect if total expense
Off Balance Operating Profit before Financing Principal Portion of
differs from previous
Sheet Leases Tax Cash Flow Lease Cash Flow
accounting

Assets é Operating Profit é Operating Cash Flow é

Liabilities é Financial Income, net ê Investing Cash Flow è
Debt/Equity Ratio é Profit before Tax é/ è/ê Financing Cash Flow ê
EPS é/ è/ê Total Cash Flow è
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 What’s New under IFRS 16?
Estimated Impact on SAP

Statement of Financial Position Income Statement Cash Flow Statement

Previous New IFRS 16 Previous New IFRS 16
Previous New IFRS 16 Accounting Accounting Accounting Accounting
Accounting Accounting
Operating Single Operating Depreciation Operating Single Operating Interest Portion
Profit Lease Expense Expense Cash Flow Lease Cash Flow of Lease Cash Flow
On Balance Lease Assets
Sheet Lease Liabilities Financial
Interest Expense Investing
Income, net
Cash Flow
Effect if total expense
Off Balance Operating Profit before Financing Principal Portion of
differs from previous
Sheet Leases Tax Cash Flow Lease Cash Flow
accounting

Estimate* Estimate** Estimate**

Assets é €1.7 to €1.9 bill. Operating Profit é <<€0.1 bill.*** Operating Cash Flow é €0.3 to €0.4 bill.
Liabilities é €1.8 to €2.0 bill. Financial Income, net ê <<€0.1 bill.*** Investing Cash Flow è no impact
Equity ê €0.1 bill. Profit before Tax Inconsequential Financing Cash Flow ê €0.3 to €0.4 bill.
EPS Inconsequential Total Cash Flow è no impact
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* Estimate of Impact on 2019 Opening Balance Sheet ** Estimate of FY 2019 impact assuming leasing volumes unchanged YoY *** ‚<<‚ stands for ‚significantly below‘
What’s New under IFRS 16?
Estimated Impact on SAP (cont.)

Under IFRS 16 the principal Starting Q1/2019 SAP will

SAP regularly reports a
portion of lease cash flows are use a modified Free Cash
Free Cash Flow measure
neither included in Operating Flow definition
currently defined as
Cash Flow nor Investing Cash
Flow SAP‘s Free Cash
Flow will not be
Operating Cash Flow
– Cash Flow from purchases
ò Operating Cash Flow
– Cash Flow from purchases of impacted by
of intangibles and PPE* Free Cash Flow as currently intangibles and PPE* IFRS 16
defined would increase
= Free Cash Flow – Principal portion of lease
cash flows
= Free Cash Flow

* Sub-item of Investing Cash Flow

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Thank You
Contact:
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