IFRS  8 Operating Segments requires that external segment reporting must be based on internal organizational and management structure and on management and reporting indicators used internally. The Bertelsmann Group comprises eight operating reportable segments (RTL Group, Penguin Random House, Gruner + Jahr, BMG, Arvato, Bertelsmann Printing Group, Bertelsmann Education Group and Bertelsmann Investments) differentiated according to the type of products and services offered.

In early February, portions of the Arvato digital marketing business were integrated into the Bertelsmann Printing Group with retroactive effect as of January 1, 2017. In detail, these included the activities of AZ Direct in Germany, Austria and Switzerland, and of DeutschlandCard. The figures from the financial year 2016 have been adjusted accordingly.

Each of the eight segments is run by a segment manager who is responsible for results. This manager reports to the Executive Board of Bertelsmann Management SE in its role as the chief operating decision maker in accordance with IFRS 8. Corporate is mainly responsible for activities in the areas of accounting and reporting, taxes, legal, human resources, information technology, internal auditing, corporate communications and management, internal control and strategic development of the Group, financing, risk management, and the optimization of the Group’s investment portfolio.

Intersegment eliminations are carried in the column “Consolidation.“

As in the past, specific segment information is defined according to the definitions on which Group management are based. As a rule, accounting and measurement in the segment reporting use the same IFRS principles as in the Consolidated Financial Statements. Invested capital is calculated on the basis of the Group’s operating assets less non-interest-bearing operating liabilities. In addition, 66 percent of the net present value of the operating leases is considered in the calculation of invested capital. Intercompany revenues are recognized using the same arm’s-length conditions applied to transactions with third parties.

Operating EBITDA  serves as a key performance indicator for a sustainable determination of operating result. Assessment of the operating segments’ performance is also based on this performance indicator. Operating EBITDA represents the operating earnings generated by the respective segment management before interest and income taxes, as well as depreciation, amortization and Impairment , and it is adjusted for special items. Elimination of these special items allows the determination of a normalized performance indicator, thus simplifying forecasting and comparability. Segment depreciation and amortization include the depreciation of property, plant and equipment and the amortization of intangible assets as set out in notes 10 “Intangible Assets” and 11 “Property, Plant and Equipment.” The business development of Bertelsmann Investments is determined primarily on the basis of EBIT.

Each segment shows the investments accounted for using the equity method and their results, provided these companies can be clearly allocated to the segment concerned. Results from investments accounted for using the equity method are shown before impairment. In addition to the segment breakdown, revenues are broken down by customer location and revenue source. Non-current assets are also stated according to the location of the respective company.

Tabular information on the segment information is presented on „Segment Information (Continuing Operations)“.

The following table shows the reconciliation of segment information to the Consolidated Financial Statements: