Adidas : Annual Financial Statements of adidas AG as at December 31, 2023

A N N U A L F I N A N C I A L

S T A T E M E N T S

OF ADIDAS AG

AS AT DECEMBER 31 2023

Content

Information on the combined Management Report	2
Balance Sheet	3
Income Statement	4
Notes	5
Supervisory Board and Executive Board (Appendix 1 to the Notes)	29
List of Shareholdings (Appendix 2 to the Notes)	35
Independent Auditors' Report	38
Responsibility Statement	47
Supervisory Board Report	48

1

Combined Management Report

The Management Report of adidas AG has been combined with the Management Report of the adidas Group in accordance with § 315 section 5 together with § 298 section 2 of the German Commercial Code (Handelsgesetzbuch - HGB) and is published in the 2023 Annual Report of the adidas Group.

The Financial Statements and the combined Management Report for adidas AG and the adidas Group for the 2023 financial year are filed with and published in the German Company Register.

The Financial Statements of adidas AG as well as the Annual Report for the 2023 financial year are also available for download on the Internet at www.adidas-group.com/en/investors/financial-reports/.

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Annual financial statements of adidas AG

Balance Sheet

€ thousand

					Dec. 31, 2023			Dec. 31, 2022
ASSETS
FIXED ASSETS		(1)
Intangible assets		(2)			359,145		329,235
Tangible assets		(2)			675,045	684,278
Financial assets		(3)			4,426,801		4,407,451
					5,460,991			5,420,964
CURRENT ASSETS
Inventories		(4)			43,735		51,814
Receivables and other assets		(5)			2,764,992		4,719,642
Securities		(6)			670,690		0
Cash and cash equivalents	(7)			188,868	194,671
					3,668,285			4,966,127
PREPAID EXPENSES		(8)			136,023		88,217
								10,475,308
			9,265,299
EQUITY AND LIABILITIES
EQUITY
Subscribed capital 1)		(9)			180,000		180,000
Par value treasury shares		(9)			-1,451		-1,463
Capital reserves		(9)			1,364,692	1,360,819
Revenue reserves		(9)			500,611		504,041
Retained earnings		(10)			410,978		723,270
					2,454,830			2,766,667
UNTAXED RESERVE		(11)			1,912		2,046
PROVISIONS/ACCRUALS		(12)			812,775		833,188
LIABILITIES		(13)			5,988,652		6,861,515
DEFERRED INCOME	(14)			7,130	11,892
					9,265,299			10,475,308

1. Contingent Capital 2022 at Dec. 31, 2023 in the amount of € 12,500 thousand (previous year € 12,500 thousand)

3

Annual financial statements of adidas AG

Income Statement

€ thousand

				2023		2022
Sales		(16)			4,509,828	4,813,807
Reduction (prior year increase) of finished and unfinished					-3,632		1,773
goods
Total output					4,506,196			4,815,580
Other operating income		(17)			721,146	1,226,544
Cost of materials		(18)			-1,678,258		-1,878,382
Personnel expenses		(19)			-852,233		-726,321
Amortization and write-downs of intangible fixed assets and		(20)			-139,350		-139,606
depreciation and write-downs of tangible fixed assets
Other operating expenses	(21)			-2,800,913	-3,414,371
Loss/Income from operations					-243,412			-116,556
Income from investments in related companies		(22)			89,741	2,491,398
Profit received under a profit and loss transfer agreement		(23)			18,880		130,795
Impairments to financial assets					-8,563		-328,426
Interest result		(24)			3,284		-57,194
Taxes on income		(25)			-48,313		-62,911
Loss/Income after taxes					-188,383			2,057,106
Other taxes					-475	-477
NET LOSS/INCOME					-188,858			2,056,629
Retained earnings brought forward					598,294	724,433
Transfer to revenue reserves					0		-500,000
Transfer to capital reserves					0		-12,100
Utilization for share buyback/issuance of own shares					1,542		-1,545,692
RETAINED EARNINGS					410,978			723,270

4

Notes to the annual financial statements of adidas AG for the year ended December 31, 2023

adidas AG is domiciled in 91074 Herzogenaurach, Adi-Dassler-Str. 1, and is registered in the commercial register of the Local Court of Fürth, under HRB 3868.

In the interest of providing a clearer overall picture, certain items in the balance sheet and income statement have been combined as permitted pursuant to § 265 (7) German Commercial Code (Handelsgesetzbuch - HGB) and have been disclosed and explained separately under the numerical text reference indicated below. The names and domiciles of other companies of which adidas AG holds, either directly or indirectly, investments according to § 271 (1) HGB and the disclosures related to these companies can be found in the shareholdings list in Appendix 2 to these notes.

Due to rounding principles, numbers presented may not sum up exactly to totals provided.

The financial statements have been prepared in accordance with the regulations of the German Commercial Code (Handelsgesetzbuch - HGB) and the German Stock Corporation Act (Aktiengesetz - AktG) in €. The income statement has been prepared in accordance with the total cost accounting method.

The combined management report pursuant to § 315 (5) HGB in conjunction with § 298 (2) HGB is published in the 2023 Annual Report.

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Accounting policies

If only a calendar year is mentioned, this stands for the accounting period January 1, to December 31, of the respective year.

Intangible and tangible fixed assets are recognized at (acquisition or production) cost. All recognizable direct and overhead costs are included in production costs. Also internally-generated intangible assets are capitalized. These result in a restriction on the distribution of reserves in the amount of € 50,299 thousand in accordance with §268 (8) HGB. Items with a finite useful economic life are subject to straight-line depreciation over their expected useful lives. Capitalization of borrowing costs does not take place.

The estimated useful life is 50 years maximum for business premises and 2 to 23 years for technical equipment and machinery, other equipment, operating and office equipment and for software 3 to 10 years.

Low-value assets worth less than € 800 are written down to a zero net book value in the year of their acquisition.

Impairments to the lower fair-value are recognized, if the decrease in value is deemed to be permanent.

Financial assets are recognized at acquisition cost. An impairment is recognized, if the fair value is below the book value. The fair value is calculated using the discounted cash flow method based on the principles of IDW S 1. The enterprise value is derived from the present values of future cash flows discounted with an appropriate discount rate. Financial receivables towards the respective group companies are implicitly tested for impairment in the valuation model. If a financial asset needs to be impaired, the shares in affiliated companies are impaired before the financial receivables towards the respective group entity. If the reasons for the impairment cease to apply, the impairment is reversed, but only up to the value of the historical acquisition cost.

Inventories are measured at the lower of cost (acquisition or production cost) or market value. Production costs comprise direct costs that must be capitalized and appropriate portions of overhead costs. Allowances are taken for discernible fashion and technical risks, age structure, and marketability. Capitalization of borrowing costs does not take place. If the reason for the write-down no longer applies, the write-down is reversed in accordance with § 253 (5) sentence 1 HGB to no higher than the historical cost of the inventories.

Receivables and other assets are generally recognized at nominal values. Individual adjustments and general allowances for doubtful accounts are taken to cover discernible risks.

Derivative financial transactions entered into with banks by Group Treasury (primarily forward currency and currency option transactions as well as equity instruments) are generally related to underlying transactions with Group companies. Hedge accounting is applied if there is a direct hedging relationship between these transactions. The net hedge presentation method is applied. The fair values of the hedges and hedged risk within a hedge portfolio are matched and offsetting changes in value from the hedge and the hedged risk are not recognized. Unrealized losses are recognized in profit or loss only if they are not covered by unrealized gains in the hedge accounting. Financial transactions that are not recognized using hedge accounting are measured individually at fair value. Any resulting losses are recognized in the profit or loss. Prospectively, due to the common material assessment features of the transactions, the hedging relationship can be assumed to be highly effective. Retrospectively, the effectiveness is proven by means of the hypothetical derivative method. The dollar-offset method is used for calculation of the amount of ineffectiveness.

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Securities within current assets are measured at acquisition cost or fair value if lower as at the reporting date.

Cash-in-hand and bank balances are recognized at nominal value.

Prepaid expenses are recognized at nominal value.

Deferred taxes are determined for temporary differences between the carrying amounts and tax bases for assets, liabilities, prepaid expenses and deferred income. Deferred taxes are calculated based on the combined income tax rate of adidas AG, which is currently 27.37%. The combined income tax rate comprises corporate income tax, solidarity surcharge and municipal trade tax.

A net tax burden would be recognized on the balance sheet as a deferred tax liability. There is an option to recognize a deferred tax asset granted under § 274 (1) sentence 2 HGB in the event of a tax benefit but this option is not exercised. In the fiscal year, the Company had a net deferred tax asset, which it did not recognize on its balance sheet.

Subscribed capital is recognized at the nominal amount.

The Company exercised its option to maintain the special tax-allowable reserve as permitted upon the first-time adoption of the German Accounting Law Modernization Act (Bilanzrechtsmodernisierungsgesetz, "BilMoG"). Accounting policies relating to this reserve and its reversal remain the same as previously.

Pension obligations are calculated on the basis of actuarial biometric assumptions (Heubeck mortality tables RT 2018 G) in accordance with the projected unit credit (PUC) method. The defined benefit obligation (DBO) recognized under the PUC method is defined as the actuarial present value of the pension obligations earned by the employees by the balance sheet date according to the retirement benefit formula and the vested pension amount based on their service in the past. Expected future pension benefit increases are factored in using a 1.0% respectively 2.2% p.a. (prior year 1.0% respectively 2.2%) growth rate in benefits. Fluctuation is assumed - as in the prior year - to range between 5% and 20%, depending on age. The rate used to discount the pension obligations in accordance with § 253 (2) sentence 2 HGB amounts to 1.83% as at December 31, 2023 (prior year: 1.79%); this rate is the average market interest rate for the past ten fiscal years for an assumed term of 15 years. In accordance with § 253 (6) sentence 2 HGB, the difference between the application of the average market interest rate for the past seven fiscal years 1.75% (prior year: 1.45%) and the application of the average market interest rate for the past ten fiscal years 1.83% (prior year: 1.79%) is subject to a restriction on distribution. Forecasted values have been used since they only differ by 0.01% from the actual interest rate and the resulting impact is minimal. The plan assets created in 2014 through the funding of the pension trust association were measured at fair value, in accordance with § 255 (4) HGB using amongst others an official recognized method for real estate valuation, and offset against the pension obligations.

The other provisions cover all discernible risks and uncertain obligations and are recognized at the settlement amount dictated by prudent business judgment in order to cover future payment obligations. Future price and cost increases are factored in, to the extent that there is sufficient objective evidence that they will occur. Provisions with terms in excess of one year are discounted in accordance with § 253 (2) sentence 1 HGB at the average market interest rate for their respective maturity over the past seven years, as published by the German Federal Bank (Deutsche Bundesbank). Provisions with terms of less than one year are not discounted. The effect from the annual adjustment of the discount rate applied to the provisions in accordance with § 253 (2) HGB is recognized immediately in the income statement.

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Net income from the discounting of retirement pension obligations is shown in the income statement as part of the financial result under the item "other interest and similar income" and net expenses under the item "interest and similar expenses".

The provision for early retirement is recognized at the settlement amount.

Liabilities are recognized at their settlement amount.

Revenues are recognized once the risk of loss or damage of the goods has been transferred to the purchaser.

Licensing revenues are recognized in accordance with the underlying contractual agreements. Rights and revenues generally arise whenever the licensee generates sales revenue with adidas products.

Assets and liabilities denominated in a foreign currency are recorded at the mean spot rate as at the respective transaction date. Currency translation losses arising as at the balance sheet date due to the measurement of foreign-denominated assets and liabilities are reported in the income statement. Currency translation gains from the measurement of current assets and liabilities falling due within less than one year are recorded in the income statement in accordance with § 256a HGB. Currency translation gains are reported under "other operating income" and currency translation losses are reported under "other operating expenses".

Income from long-term equity investments is generally recognized during the period in which a claim to such income arises and it can be reasonably expected that the amounts due will be collected.

Profits resulting from a profit transfer agreement are recognized if the amounts to be transferred or absorbed can be determined with reasonable certainty, even if the annual financial statements of the subsidiary have not yet been adopted.

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01 Fixed Assets

Development of fixed assets in the 2023 fiscal year

Acquisition and production costs

Amounts in € thousand

Jan. 1, 2023

Additions

Disposals

Reclassifications

Dec. 31, 2023

1. Intangible assets
2. 1. Internally generated intangible assets
   2. Internally generated software under construction
   3. Purchased concessions, trademarks and similar rights and licences to such rights
   4. Prepayments and assets under construction

1. Tangible assets

18,564	20,048	-534	4,583	42,661
7,435	11,614	0	-4,583	14,466
977,672	41,261	-23,636	5,286	1,000,583
80,432	58,871	0	-5,286	134,017
1,084,103		131,794		-24,170		0		1,191,727

1.		Land, land rights and buildings	825,328	5,910	-102	3,006	834,142
2.		Technical equipment and machinery	83,797	2,958	-2,950	1,316	85,121
3.		Other equipment, operating and office equipment	300,306	12,367	-5,389	702	307,986
4.		Prepayments and assets under construction	14,093	16,965	-549	-5,024	25,485
				1,223,524		38,200		-8,990		0		1,252,734

1. Financial assets

1.			Shares in affiliated companies	4,525,048	7,258	-28	0	4,532,278
2.			Loans to affiliated companies	93,160	92,270	-78,160	0	107,270
3.			Equity investments	78,841	0	0	0	78,841
4.			Loans to non-affiliated companies	200	0	-200	0	0
5.			Investment security	82,958	19,251	-12,478	0	89,731
										4,780,207			118,779			-90,866			0				4,808,120
Fixed		Assets					7,087,834			288,773			-124,026			0				7,252,581

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