Deutsche Telekom AG - The 2009 financial year

20 Other operating expenses. millions of € 2009 2008 2007 Goodwill impairment losses 2,345 289 327 Loss on disposal of non-current assets 154 170 257 Miscellaneous other operating expenses 820 773 1,177 3,319 1,232 1,761 Other operating expenses increased by EUR 2.1 billion year-on-year. This was mainly attributable to impairment losses on goodwill amounting to EUR 2.3 billion that had to be recognized in the financial year. For further details, please refer to Note 5. 21 Finance costs. millions of € 2009 2008 2007 Interest income 341 408 261 Interest expense (2,896) (2,895) (2,775) (2,555) (2,487) (2,514) Of which: from financial instruments relating to categories in accordance with IAS 39: Loans and receivables 132 162 152 Held-to-maturity investments 3 23 9 Available-for-sale financial assets 42 32 31 Financial liabilities measured at amortized cost* (2,637) (2,668) (2,612) * Interest expense calculated according to the effective interest method and adjusted for accrued interest from derivatives that were used as hedging instruments against interest rate-based changes in the fair values of financial liabilities measured at amortized cost in the reporting period for hedge accounting in accordance with IAS 39 (2009: interest income of EUR 107 million; 2008: interest income of EUR 68 million, interest expense of EUR 11 million; 2007: interest expense of EUR 42 million). Finance costs were subject to two offsetting effects. On the one hand, interest expense increased in the 2009 financial year due to the first-time full consolidation of OTE in the consolidated financial statements. On the other, the downgrade of Deutsche Telekom’s rating in the prior year and the resulting adjustments to carrying amounts for a number of bonds with rating-linked coupons had a one-time impact on interest expense in the prior year. Since January 1, 2009 Deutsche Telekom has capitalized borrowing costs as part of the cost of qualifying assets. EUR 27 million were recognized as part of acquisition costs in the financial year. The amount was calculated on the basis of an average capitalization rate of 5.9 percent applied across the Group. The figures for prior-year periods have not been adjusted. Accrued interest payments from derivatives (interest rate swaps) that were designated as hedging instruments in a fair value hedge in accordance with IAS 39 are netted per swap contract and recognized as interest income or interest expense depending on the net amount. Finance costs are assigned to the categories on the basis of the hedged item; only financial liabilities were hedged in the reporting period. 22 Share of profit/loss of associates and joint ventures accounted for using the equity method. millions of € 2009 2008 2007 Share of profit (loss) of joint ventures 9 31 25 Share of profit (loss) of associates 15 (419) 30 24 (388) 55 The share of profit or loss of associates and joint ventures accounted for using the equity method improved by EUR 0.4 billion in the financial year. This was mainly due to the impairment loss of EUR 0.5 billion that had to be recognized in the prior year on the carrying amount of the shares in OTE. OTE has been fully consolidated since the beginning of February 2009. For further details, please refer to the “Business combinations” section. 175Consolidated financial statements Notes