1. General information  

tonies SE (the “Company” or “tonies”) was incorporated in Luxembourg on 18 March 2021 and was registered with the   Luxembourg Trade and Companies Register under number B252939 on 29 March 2021. The registered office of the  Company is in rue de Bitbourg 9, L-1273, Luxembourg . These consolidated financial statements comprise the Company  and its subsidiaries (together referred to as the “Group” or “tonies”).  

tonies is a Societas Europaea , formed on 18 March 2021 under the laws of Luxembourg. The Company was formed as a special purpose acquisition company to engage in a merger or acquisition with an unidentified company or companies   or other entity or person. The Company was formed for the purpose of acquiring one operating business with principalbusiness operations in a member state of the European Economic Area or in the United Kingdom or Switzerland in thetechnology or technology-enabled sector with a focus on the sub-sectors marketplaces, direct-to-consumer, and soft-ware & artificial intelligence through a merger, capital stock exchange, share purchase, asset acquisition, reorganizationor similar transaction.  

tonies SE started trading on the regulated market of the Frankfurt Stock Exchange on 29 November 2021 under the Inter-   national Securities Identification Number (“ISIN”) LU2333563281.  

Per 31 December 2023, the Group structure of tonies SE is as follows:  

tonies, through its subsidiaries, is the producer of the innovative audio system “Tonies”, consisting of a speaker box called   Toniebox and of various figures marketed under the name Tonies, enabling children to listen to stories and music of their  choice by placing a Tonie atop of the Toniebox.  

2. Basis of preparation  

2.1. Statement of compliance  

The consolidated financial statements of tonies have been prepared in accordance with the International Financial   Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) as endorsed by the European Union  as of 31 December 2023. The term IFRS also includes all valid International Accounting Standards (IAS) as well as the  interpretations of the IFRS Interpretations Committee (IFRIC).  

The financial statements were authorised by the management board on 09 April 2024.  

The assets and liabilities in the consolidated statement of financial position were classified in accordance with IAS 1 as   current / non-current with the criteria defined by IAS 1.54 et seqq.  

tonies has decided to prepare a consolidated statement of profit or loss and other comprehensive income using the   nature of expense method.  

tonies has elected to present consolidated comprehensive income using a “one-statement” approach. The consolidated   statement of financial position complies with the classification requirements of IAS 1 “Presentation of Financial State-  ments”. When presenting items of other comprehensive income, items reclassified to profit or loss are presented separately  from items that are never reclassified. Assets and liabilities are classified by maturity. tonies presents consolidated cash  flows from operating activities using the indirect method. Individual items of the consolidated statement of profit or loss  and other comprehensive income and the consolidated statement of financial position are combined in order to improve  the clarity of presentation. These items are explained in the notes to the consolidated financial statements.  

All amounts have been rounded to the nearest thousand, unless otherwise indicated. As amounts are disclosed in thousands   of euros, standard commercial rounding may result in rounding differences. In some cases, such rounded amounts and  percentages may not correspond 100% to the stated sums when added together and subtotals in tables may differ slightly  from non-rounded figures.  

2.2. Going concern  

The consolidated financial statements were prepared on a going concern basis according to IAS 1.25.  

2.3. Measurement basis  

The consolidated financial statements have been prepared on historical cost basis. This does generally not apply to derivative   financial instruments, as they are recognised at fair value as of the balance sheet date. A corresponding explanation is  provided in the context of the respective accounting policies.  

2.4. Functional currency and presentation currency  

These consolidated financial statements are presented in euro, which is tonies’ presentation currency. All amounts have   been rounded to the nearest thousand, unless otherwise indicated.  

2.5. Current / non-current classification  

An asset is classified as current if it is expected to be realised or consumed within tonies’ normal operating cycle of one   year. All other assets are classified as non-current.  

A liability is classified as current if it is expected to be settled within tonies’ normal operating cycle of one year. All other   liabilities are classified as non-current.  

3. Significant accounting policies  

tonies has consistently applied the following accounting policies to all periods presented in these consolidated financial   statements.  

No major Impact from current external factors like climate crisis, supply chain risks or Ukraine crisis on tonies’ accounting   policies and practices has been noted.  

3.1. Consolidation  

3.1.1. Business combinations  

The Group accounts for business combinations using the acquisition method when the acquired set of activities and   assets meet the definition of a business and control is transferred to the Group. In determining whether a particular set  of activities and assets is a business, the Group assesses whether the set of assets and activities acquired include, at a  minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.  

The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.  Any goodwill that arises is tested annually for impairment and on ad hoc basis in case of triggering events. Any gain on  a bargain purchase is recognised in profit or loss after further verification. Transaction costs are expensed as incurred,  except if related to the issue of debt or equity securities.  

3.1.2. Subsidiaries  

Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has rights to,   variable returns from its involvement with the entity and has the ability to affect those returns through its power over the  entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on  which control commences until the date on which control ceases.  

3.1.3. Transactions eliminated on consolidation  

Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction   gains or losses) arising from intra-group transactions, are eliminated.  

3.2. Foreign currency  

3.2.1. Foreign currency transactions  

Transactions in foreign currencies are translated into the respective functional currency of the Group companies at the   exchange rates prevailing at the dates of the transactions.  

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange   rate prevailing at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign  currency are translated into the functional currency at the exchange rate prevailing at the date when the fair value was  determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the  exchange rate at prevailing the date of the transaction. Foreign currency differences are recognised in profit or loss and  presented within other income or other expenses.  

3.2.2. Foreign currency operations  

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are   translated into euro at the exchange rate prevailing at the reporting date. The income and expenses of foreign operations  are translated into euro at the exchange rate prevailing at the date of the transaction. Throughout the year month end  and monthly average rates are used for the translation of balance sheet or profit and loss statements from foreign sub-  sidiaries.  

Foreign currency differences are recognised in Other Comprehensive Income (OCI) and accumulated in the translation   reserve, except to the extent that the translation difference is allocated to NCI.  

3.3. Property, plant and equipment  

3.3.1. Recognition and measurement  

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated   impairment losses.  

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as   separate items (major components) of property, plant and equipment.  

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.  

3.3.2. Subsequent expenditure  

Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure   will flow to tonies. All other expenditure for property, plant and equipment is recognised immediately as an expense.  

3.3.3. Depreciation  

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual   values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss.  

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:  

Right-of-Use Assets	2–10 years
Land and building	Up to 10 years; depending on rental agreement
Technical equipment and Machinery	3–10 years
Tooling	3–5 years
Other operating and office equipment	3–10 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.   This specifically applied to tooling assets.  

3.3.4. Derecognition  

Property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from   the continued use of the asset. The gain or loss arising from the sale or retirement of a property, plant and equipment is  determined as the difference between the proceeds from the sale and the carrying amount of the asset and is recognised  in profit or loss under other income or other expenses.  

3.4. Intangible assets  

3.4.1. Goodwill  

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.  

When the amount of aggregate consideration transferred is in excess of the fair value of the net assets acquired a goodwill   is recognised. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred  and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets  acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration  transferred, the Group reassesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed  and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment  still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain  is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment  losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,  allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of  whether other assets or liabilities of the acquiree are assigned to those units.  

3.4.2. Other intangible assets  

Other intangible assets, including patents and trademark, customer relationships, software and order backlog that are   acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any  accumulated impairment losses.  

Research and development costs  

During 2023 tonies has fulfilled the requirements of IAS 38 for the capitalization of self-developed assets for the first time.   Capitalization includes hours spent on dedicated projects considering relevant remuneration and applicable surpluses.  

Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an   intangible asset when the Group can demonstrate:  

◼ The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.    Its intention to complete and its ability and intention to use or sell the asset.  

 How the asset will generate future economic benefits.  

 The availability of resources to complete the asset.  

 The ability to measure reliably the expenditure during development.  

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated   amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete, and  the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost  of sales. During the period of development, the asset is tested for impairment annually.  

3.4.3. Subsequent expenditure  

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific   asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is  recognised in profit or loss as incurred.  

3.4.4. Amortisation  

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-   line method over their estimated useful lives and is generally recognised in profit or loss. Goodwill is not amortised.  

The estimated useful lives for current and comparative periods are as follows:  

Brand	15 years
Technology	15 years
Customer relationship	10–15 years
Order backlog	1 year
Patents, licenses and similar rights and values	3–7 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.  

Goodwill is not systematically amortised over a period. It is subject to impairment testing at least annually. Refer to note   3.7.2 for more details.  

3.4.5. Derecognition  

An intangible asset shall be derecognised on disposal or when no further economic benefits are expected from its use   or disposal. The gain or loss arising from derecognition of an intangible asset, measured as the difference between the  net disposal proceeds and the carrying amount of the asset, is recognised in the income statement when the asset is  derecognised. This is recognised under other income or other expenses.  

3.5. Leases  

At inception of a contract, tonies assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if   the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.  tonies solely acts as a lessee.  

At commencement or on modification of a contract that contains a lease component, tonies allocates the consideration   in the contract to each lease component on the basis of its relative stand-alone prices.  

tonies recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is   initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made  at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and  remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives  received.  

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the   end of the lease term, unless the lease transfers ownership of the underlying asset to tonies by the end of the lease term  or the cost of the right-of-use asset reflects that tonies will exercise a purchase option. In that case the right-of-use asset  will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of prop-  erty, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and  adjusted for certain remeasurements of the lease liability.  

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement   date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, tonies’ incremen-  tal borrowing rate. Generally, tonies uses its incremental borrowing rate as the discount rate.  

tonies determines its incremental borrowing rate by obtaining interest rates from various external financing sources and   makes certain adjustments to reflect the terms of the lease and type of the asset leased.  

Lease payments included in the measurement of the lease liability comprise the following:  

 fixed payments, including in-substance fixed payments;  



variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commence-   ment date;  

 amounts expected to be payable under a residual value guarantee; and  

 the exercise price under a purchase option that tonies is reasonably certain to exercise, lease payments in an optional  

renewal period if tonies is reasonably certain to exercise an extension option, and penalties for early termination of a   lease unless tonies is reasonably certain not to terminate early.  

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a   change in future lease payments arising from a change in an index or rate, if there is a change in tonies’ estimate of the  amount expected to be payable under a residual value guarantee, if tonies changes its assessment of whether it will  exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment. When the  lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use  asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.  

To assess whether a contract conveys the right to control the use of an identified asset for a period of time, tonies as-   sesses whether:  

 the contract involves the use of an identified asset – this may be specified explicitly or implicitly and should be physi-  

cally distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive   substitution right, then the asset is not identified.  

 tonies has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of  

use; and  

 tonies has the right to direct the use of the asset. tonies has the right when it has the decision-making rights that are  

most relevant to changing how and for what purpose the asset is used throughout the period of use. When all the   decisions about how and for what purpose the asset is used are predetermined, tonies has the right to direct the use  of the asset if either:  

– tonies has the right to operate the asset; or  

– tonies designed the asset in a way that predetermines how and for what purpose it will be used. tonies presents its  

leases under ‘right-of-use assets’ in the statement of financial position.  

tonies has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term   leases, including IT equipment. tonies recognises the lease payments associated with these leases as an expense on a  straight-line basis over the lease term.  

3.6. Inventories  

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the simple   weighted average price. In the case of manufactured inventories, cost includes an appropriate share of production over-  heads based on normal operating capacity. Impairment due to limited marketability of items is taken into account by  means of write-downs.  

The change in unfinished and finished goods is presented in the line change in inventory within the income statement.   Raw material and trading goods are not included in the change in inventory line.  

3.7. Impairment  

3.7.1. Non-derivative financial assets  

Financial instruments  

The Group generally measures loss allowances at an amount equal to:  

 12-month expected credit losses (ECLs) (general approach) for bank balances for which credit risk (i.e. the risk of default  

occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.  



lifetime ECLs (general approach) for bank balances for which credit risk has increased significantly since initial recognition.  

 lifetime ECLs (simplified approach) for trade receivables.  

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and   when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available with-  out undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s  historical experience and informed credit assessment, that includes forward-looking information.  

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.   The Group considers a financial asset to be in default when:  

 the debtor is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as  

realising security (if any is held); or  

 the financial asset is more than 180 days past due.  

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.  

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the   reporting date (or a shorter period if the expected life of the instrument is less than 12 months).  

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is   exposed to credit risk.  

Measurement of ECLs  

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash   shortfalls (i. e. the difference between the cash flows due to the entity in accordance with the contract and the cash  flows that tonies expects to receive). ECLs are discounted at the effective interest rate of the financial asset.  

Credit-impaired financial assets  

At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial   asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of  the financial asset have occurred.  

Evidence that a financial asset is credit-impaired includes the following observable data:  

 significant financial difficulty of the debtor.  

 a breach of contract such as a default or being more than 90 days past due.  

 the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise.    it is probable that the debtor will enter bankruptcy or other financial reorganisation; or   the disappearance of an active market for a security because of financial difficulties.  

Presentation of allowance for ECL in the statement of financial position  

Loss allowances for cash at bank and trade receivables are deducted from the gross carrying amount of the corresponding   assets.  

Write-off  

The gross carrying amount of a financial asset is written off when tonies has no reasonable expectations of recovering   a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of writing off the  gross carrying amount when the financial asset is 180 days past due based on historical experience of recoveries of  similar assets. For corporate customers, the Group individually makes an assessment with respect to the timing and  amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant  recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement  activities in order to comply with the Group’s procedures for recovery of amounts due.  

3.7.2. Non-financial assets  

At each reporting date, tonies reviews the carrying amounts of its non-financial assets (other than inventories and   deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the  asset’s recoverable amount is estimated. Goodwill is tested annually for impairment and on adhoc basis in case of  triggering events.  

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from   continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGU). Goodwill  arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the  synergies of the combination.  

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use   is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects  current market assessment of the time value of money and the risks specific to the asset or CGU.  

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.  

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill   allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.  

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the   extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of  depreciation or amortisation, if no impairment loss had been recognised.  

3.8. Cash  

Cash is determined as petty cash and cash at banks. Cash at bank includes payment providers with banking licenses in   the respective geographical regions.  

Funds held at service providers and retail platforms without banking licenses are not included in cash but in other assets   as these funds cannot be transferred in any case without limitations on a short notice. Short term bank liabilities are not  included in cash for presentation or cash and cash equivalents for the cash flow statement.  

3.9. Share capital  

3.9.1. Ordinary shares  

Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income   tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12.  

3.9.2. Repurchase and reissue of ordinary shares (treasury shares)  

When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attribut-   able costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are  presented in deduction of share capital. When treasury shares are sold or reissued subsequently, the amount received is  recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented within share  premium.  

3.10. Provisions  

A provision is a liability of uncertain timing or amount. Provisions are recognised if tonies has a present obligation to a   third party based on a past event, an outflow of resources to settle the obligation is probable and the amount of the  obligation can be reliably estimated. Provisions are discounted if the effect is material.  

Provisions where the outflow of resources is likely to occur within the next year are classified as current, and all other   provisions as non-current.  

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market   assessment of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised  as finance cost.  

A provision for warranties is recognised when the underlying products or services are sold, based on historical warranty   data and a weighting of possible outcomes against their associated probabilities.  

3.11. Financial instruments  

3.11.1. Recognition and initial measurement  

Trade receivables are initially recognised when they are originated. Financial assets and financial liabilities are initially   recognised when tonies becomes a party to the contractual provisions of the instrument.  

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially   measured at fair value plus or minus, for an item not at Fair Value through Profit or Loss (FVTPL), transaction costs that  are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially  measured at the transaction price.  

3.11.2. Classification and subsequent measurement  

Financial assets  

On initial recognition, a financial asset is classified as measured at amortised cost; Fair Value through Other Comprehensive   Income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL.  

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model   for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting  period following the change in the business model.  

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at   FVTPL:  

principal amount outstanding.  

All financial assets not classified as measured at amortised cost or FVOCI are measured at FVTPL. This includes all derivative   financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the  requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces  an accounting mismatch that would otherwise arise.  

Financial assets – Subsequent measurement and gains and losses  

Financial assets at FVTPL  

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income,   are recognised in profit or loss.  

Financial assets at amortised cost  

These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is   reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in  profit or loss. Any gain or loss on derecognition is recognised in profit or loss.  

Financial liabilities – Classification, subsequent measurement and gains and losses  

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it   is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition to eliminate or significantly  reduce an accounting mismatch that would otherwise arise. Financial liabilities at FVTPL are measured at fair value and  net gains and losses, including any interest expense, are recognised in profit or loss, except for the “own credit risk” portion  of the fair value adjustment that is recorded in OCI except if doing so would create or enlarge an accounting mismatch.  Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest  expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also  recognised in profit or loss.  

3.11.3. Derecognition  

Financial assets  

tonies derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it   transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards  of ownership of the financial asset are transferred or in which tonies neither transfers nor retains substantially all of the  risks and rewards of ownership and it does not retain control of the financial asset.  

Financial liabilities  

tonies derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. tonies also   derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially  different, in which case a new financial liability based on the modified terms is recognised at fair value.  

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration   paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.  

3.11.4. Derivative financial instruments  

The Group holds derivative financial instruments to economically hedge part of its foreign currency risk exposure.   Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a  financial asset and certain criteria are met.  

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value,   and changes therein are generally recognised in profit or loss.  

Compound financial instruments issued by the Group comprises convertible bonds denominated in EUR that can be   converted to share capital at the option of the holder.  

The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability  that does not have an equity conversion option. The equity component is recognised initially at the difference between  the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly  attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying   amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at  amortized cost using the effective interest method. The equity component of a compound financial instrument is not  re-measured subsequent to initial recognition.  

Interest related to the financial liability is recognised in profit or loss. On conversion, the financial liability is reclassified to   equity and no gain or loss is recognised.  

3.12. Revenue  

Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected   on behalf of third parties at one point of time. tonies recognises revenue when it transfers control over a good to a  customer. Potential returns are deducted from revenue resulting in a return liability and a related return asset.  

Further information on the nature and timing of the settlement of performance obligations arising from contracts with   customers, including significant terms and conditions of payment, and the related revenue recognition principles are  described in note 20.  

3.13. Share-based payments  

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally   recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount  recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market  performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of  the awards that meet the related service and non-market performance conditions at the vesting date. For share-based  payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect  such conditions and there is no true-up for differences between expected and actual outcomes. The fair value of the  amount payable to employees in respect of share appreciation rights (SARs), which are settled in cash, is recognised as  an expense with a corresponding increase in liabilities, over the period during which the employees become uncondi-  tionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair  value of the SARs. Any changes in the liability are recognised in profit or loss.  

3.14. Personnel expenses  

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount   expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past  service provided by the employee and the obligation can be estimated reliably.  

3.15. Finance income and finance costs  

Finance cost of tonies includes interest expense from loans and borrowings as well as interest expenses from leasing and   from factoring. For details in relation to the factoring program we refer to note 11. Interest expense is recognised in the  statement of profit or loss in the period in which it is incurred using the effective interest method.  

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the   expected life of the financial instrument to:  

 the gross carrying amount of the financial asset; or  

 the amortised cost of the financial liability.  

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset   (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have  become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest  rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest  income reverts to the gross basis.  

3.16. Income taxes  

Income tax expense comprises current and deferred taxes. It is recognised in profit or loss except to the extent that it   relates to a business combination, or items are recognised directly in equity or in OCI.  

3.16.1. Current tax  

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjust-   ment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the  best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any.  It is measured using tax rates enacted or substantively enacted at the reporting date.  

Current tax assets and liabilities are offset only if certain criteria are met.  

3.16.2. Deferred tax  

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for   financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:  



temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination   and that affects neither accounting nor taxable profit or loss;  

 temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the  

Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not   reverse in the foreseeable future; and  

 taxable temporary differences arising on the initial recognition of goodwill.