Selected notes to the consolidated statement of financial position

Trade receivables

At EUR 10.6 billion, trade receivables decreased by EUR 0.3 billion against the 2019 year-end level. Receivables declined in the United States, Europe, Systems Solutions, and Group Development operating segments. In the United States operating segment, the decrease was due in particular to the falling number of new contracts concluded for Equipment Installment Plans (EIP) on account of the temporary store closures as a consequence of the coronavirus pandemic. By contrast, receivables increased in the Germany operating segment as a result of the contractual termination of a revolving factoring agreement for receivables from consumers and business customers. Exchange rate effects, primarily from the translation from U.S. dollars into euros, also increased the carrying amount.

Contract assets

At EUR 1.8 billion, the carrying amount of contract assets was down as of the reporting date from EUR 1.9 billion at December 31, 2019. Contract assets relate to receivables that have not yet legally come into existence, which arise from the earlier – as compared to billing – recognition of revenue, in particular from the sale of goods and merchandise. Furthermore, receivables from long-term construction contracts are recognized under contract assets.

Inventories

The carrying amount of inventories increased by EUR 0.3 billion compared to December 31, 2019 to EUR 1.9 billion, mainly due to the stockpiling of higher-priced smartphones in the United States operating segment and temporary store closures in the United States as a consequence of the coronavirus pandemic.

Intangible assets and property, plant and equipment

The carrying amount of intangible assets increased by EUR 0.8 billion to EUR 69.0 billion. Additions totaling EUR 1.3 billion increased the carrying amount. They mainly related to investments in the United States, Europe, and Germany operating segments, primarily for the development of network software. In the United States operating segment, they also included advance payments totaling EUR 0.2 billion for the acquisition of FCC mobile licenses in connection with the auction of mobile licenses in the 37 GHz, 39 GHz, and 47 GHz bands, which ended in March 2020. Positive exchange rate effects, primarily from the translation of U.S. dollars into euros, increased the carrying amount by EUR 0.7 billion. Amortization reduced the net carrying amount by EUR 1.2 billion.

The carrying amount of property, plant and equipment remained unchanged compared with December 31, 2019 at EUR 49.5 billion. Additions of EUR 2.1 billion – especially to upgrade and build out the network in our United States operating segment and in connection with the broadband/fiber-optic build-out, the IP transformation, and mobile infrastructure in the Germany and Europe operating segments – increased the carrying amount. Positive exchange rate effects, primarily from the translation of U.S. dollars into euros, increased the carrying amount by EUR 0.2 billion. Depreciation of EUR 2.2 billion and disposals of EUR 0.1 billion reduced the carrying amount.

Right-of-use assets

The carrying amount of right-of-use assets increased by EUR 0.1 billion compared to December 31, 2019 to EUR 18.1 billion. In the first quarter of 2020, the figure included additions of EUR 1.0 billion, mainly in the United States operating segment. Positive exchange rate effects of EUR 0.2 billion also increased the carrying amount. Depreciation, amortization and impairment losses totaling EUR 1.0 billion and disposals of EUR 0.1 billion had an offsetting effect.

Capitalized contract costs

As of March 31, 2020, the carrying amount of capitalized contract assets remained unchanged at the level of December 31, 2019 of EUR 2.1 billion. These assets mainly relate to the Germany, United States, and Europe operating segments.

Investments accounted for using the equity method

The carrying amount of investments accounted for using the equity method remained unchanged against December 31, 2019 at EUR 0.5 billion.

Other financial assets

The carrying amount of current and non-current other financial assets increased by EUR 2.2 billion compared with December 31, 2019 to EUR 9.5 billion. EUR 1.2 billion of this increase was attributable to the rise in positive fair values from interest rate swaps in fair value hedges and is primarily due to the significant decline in the interest rate level. Furthermore, EUR 0.5 billion of the increase was due to the depositing of further cash collateral in connection with forward-payer swaps concluded for borrowings at T‑Mobile US. In addition, other financial assets increased by EUR 0.2 billion in connection with the change in approach as of the start of the third quarter of 2019 of capitalizing grants receivable from funding projects for the broadband build-out in Germany upon conclusion of the contract. Negative effects from the measurement of embedded derivatives at T‑Mobile US of EUR 0.3 billion had an offsetting effect.

Trade and other payables

The carrying amount of trade and other payables decreased by EUR 0.7 billion to EUR 8.7 billion due to the reduction in the level of liabilities, mainly in the Europe, Germany, and United States operating segments. Exchange rate effects from the translation of U.S. dollars into euros had an offsetting effect.

Other liabilities

The carrying amount of current and non-current other liabilities increased by EUR 0.4 billion to EUR 5.2 billion. EUR 0.2 billion of this increase resulted from higher liabilities to the Civil Service Pension Fund in connection with early retirement arrangements for civil servants. In addition, other liabilities increased by EUR 0.1 billion due to existing build-out obligations in connection with grants receivable from funding projects for the broadband build-out in the Germany operating segment.

Financial liabilities and lease liabilities

The following table shows the composition and maturity structure of financial liabilities as of March 31, 2020:

The carrying amount of current and non-current financial liabilities increased by EUR 2.1 billion to EUR 68.4 billion compared with the end of 2019. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 0.3 billion.

The carrying amount of bonds and other securitized liabilities increased by EUR 1.2 billion. Deutsche Telekom AG issued U.S. dollar bonds of USD 1.3 billion (EUR 1.1 billion), euro bonds of EUR 0.2 billion, and bonds in Swiss francs of CHF 0.3 billion (EUR 0.3 billion) in the reporting period, which particularly increased the carrying amount. In connection with the increase in positive fair values from interest rate swaps in fair value hedges – reported under derivative financial assets – the carrying amount of bonds and other securitized liabilities also increased by EUR 1.2 billion. Scheduled repayments of U.S. dollar bonds totaling USD 1.3 billion (EUR 1.1 billion), euro bonds totaling EUR 0.7 billion, and a zero-coupon bond of EUR 0.4 billion, had an offsetting effect.

The carrying amount of liabilities to banks decreased by EUR 1.5 billion compared with December 31, 2019 to EUR 5.0 billion. This decline is mainly due to the net reduction of EUR 1.4 billion in the balance of short-term borrowings. This includes a Deutsche Bundespost treasury note (zero-coupon bond) issued in the past with a carrying amount of EUR 1.4 billion, which fell due on December 31, 2019 and was repaid on that date by a bank using its own funds. The payment by Deutsche Telekom AG to this bank was made on the following bank working day of January 2, 2020.

For further information, please refer to the section “Notes to the consolidated statement of cash flows.”

The increase of EUR 1.4 billion in the carrying amount of other interest-bearing liabilities to EUR 5.8 billion is attributable to a EUR 1.5 billion increase in liabilities arising from collaterals received for derivative financial instruments.

For further information on collateral, please refer to the section “Disclosures on financial instruments.”

The carrying amount of derivative financial liabilities increased by EUR 1.3 billion to EUR 2.9 billion. The measurement of forward-payer swaps concluded for borrowings at T‑Mobile US with a total nominal volume of EUR 8.8 billion when translated into euros gave rise to a change in the carrying amount of EUR 1.0 billion, which increased financial liabilities. EUR 0.9 billion of this resulted from a remeasurement loss recognized directly in equity.

For further information on derivative financial liabilities, please refer to the section “Disclosures on financial instruments.”

The carrying amount of current and non-current lease liabilities totaling EUR 19.7 billion decreased by EUR 0.1 billion compared with December 31, 2019. Overall, lease liabilities in the amount of EUR 4.0 billion are due within one year. Lease liabilities primarily relate to the United States operating segment.

Contract liabilities

The carrying amount of current and non-current contract liabilities is at the same level as at December 31, 2019 of EUR 2.1 billion. These mainly comprise deferred revenues.

Provisions for pensions and other employee benefits

The carrying amount of provisions for pensions and other employee benefits increased from EUR 5.8 billion as of December 31, 2019 to EUR 6.8 billion, mainly due to the current upheavals on the financial markets and the associated sharp decline in the prices of plan assets. Interest rate adjustments in the first quarter of 2020 had an offsetting effect. Overall, this resulted in an actuarial loss of EUR 1.0 billion from the remeasurement of defined benefit plans.

For further information on the Global Pension Policy and a description of the plan, please refer to the 2019 Annual Report, Note 15 “Provisions for pensions and other employee benefits.”

Shareholders’ equity

The carrying amount of shareholders’ equity decreased from EUR 46.2 billion as of December 31, 2019 to EUR 45.9 billion. The carrying amount was reduced by EUR 1.0 billion due to the remeasurement of defined benefit plans and by EUR 0.9 billion due to losses from hedging instruments – mainly in connection with forward-payer swaps concluded for borrowings at T‑Mobile US. Profit after taxes of EUR 1.1 billion, currency translation effects recognized directly in equity of EUR 0.2 billion, income taxes relating to components of other comprehensive income of EUR 0.2 billion, and capital increases from share-based payment of EUR 0.1 billion had an increasing effect on shareholders’ equity.