basic principles and business performance of DEUTZ AG

DEUTZ AG is the parent company of the DEUTZ Group. At home and abroad, DEUTZ AG has various direct and indirect subsidiaries and equity investments. The subsidiaries include a production facility in Spain, a production company in China and several companies that perform sales and service functions. The Chinese production company DEUTZ Engine (China) Co., Ltd. in Linyi, China, was wound up at the end of 2015. DEUTZ AG has a direct or indirect stake in a total of 27 companies (2014: 29 companies). It is also by far the largest production company of the DEUTZ Group and provides the head-office functions for the Group.

Because the business performance and financial situation of DEUTZ AG are essentially the same as for the DEUTZ Group, we make reference here to the ‘Business performance in the DEUTZ Group’ section.

Because of the significance of DEUTZ AG within the Group, and its heavy interdependencies with other Group companies, the Group is managed at the level of DEUTZ AG. In addition to the key performance indicators used for management at Group level, the net income of DEUTZ AG, as the relevant variable in the payment of dividends, is also an element of the management system of the Company. The DEUTZ Group’s net income in accordance with IFRS is reconciled to DEUTZ AG’s net income in accordance with the German Commercial Code (HGB):

DEUTZ AG: Reconciliation  
€ million  
DEUTZ Group net income (IFRS) 3.5
Consolidation of equity investments 10.7
DEUTZ AG income (IFRS) 14.2
Material differences due to different financial reporting standards  
Recognition of development expenditure 34.4
Measurement of provisions for pensions and other post-retirement benefits –16.4
Other differences relating to the financial reporting standards –5.4
DEUTZ AG net income (HGB) 26.8