Explanatory Notes

Accounting policies

The Consolidated Interim Financial Statements as of June 30, 2026, were prepared in condensed form in compliance with IAS 34 according to the International Financial Reporting Standards (IFRS^®) of the International Accounting Standards Board (IASB), London, which are endorsed by the European Union, and the Interpretations of the IFRS^® Interpretations Committee in effect at the closing date.

Reference should be made as appropriate to the Notes to the Consolidated Financial Statements for the 2025 fiscal year, particularly with regard to the main recognition and valuation principles. As regards those Notes’ listed standards, amendments and interpretations to be applied for the first time in fiscal 2026, none have had any material impact on the Bayer Group this fiscal year.

Effects of new financial reporting standards

IFRS 18 (Presentation and Disclosure in Financial Statements) will replace IAS 1 (Presentation of Financial Statements) and applies to reporting periods beginning on or after January 1, 2027.

The new IFRS 18 standard introduces the following material requirements. Entities must classify all income and expenses in the income statement into specific categories and present newly defined subtotals. Management-defined performance measures (MPMs) must be disclosed in the financial statements in a single note. Enhanced guidance is also provided for grouping (aggregation and disaggregation) of information in the financial statements. In addition, all entities that apply the indirect method for reporting cash flows from operating activities are required to use the operating profit or loss subtotal as the single starting point.

The assessment of the effects of the new IFRS 18 standard is largely complete, particularly as regards the presentation of the Bayer Group’s income statement, statement of cash flows and additional disclosures required for the MPMs. The Bayer Group does not have a specified main business activity according to IFRS 18. In addition to the mandatory subtotal “operating profit or loss,” which will replace the EBIT subtotal, the mandatory subtotal “profit or loss before financing and income taxes” will also be reported in the income statement.

The standard will also involve the introduction of classification rules that will result in income and expenses being presented in new specified categories within the income statement: operating, investing and financing. The most significant adjustments are expected to concern, for example, foreign exchange differences, which will largely have to be reclassified from the financial result to the operating category, and effects from changes in interest rates for noncurrent provisions, which will need to be reclassified from the operating category (EBIT) to the financing category. The most significant reclassifications of effects from the financial result to the investing category pertain to interest effects from cash and cash equivalents and effects from debt and equity instruments. With regard to foreign exchange differences resulting from intra-Group transactions, the Bayer Group will exercise the option of applying the original classification used prior to consolidation. As these changes only concern the presentation of the financial statements, there will be no change to the way net income and income after income taxes are calculated. Since it applies the cost-of-sales method for reporting operating expenditures within the income statement, Bayer will face additional disclosure requirements and will therefore need to provide specific quantitative and qualitative information on five predefined types of expenses.

With regard to the expanded guidelines on grouping information in financial statements, no extensive changes are expected with respect to disaggregation since material items are already currently presented in disaggregated form in the Notes. The company expects to add an additional line item for impairment losses on goodwill in the income statement if any material effects should arise.

In addition, the company will use the operating profit or loss subtotal as the single starting point for reporting cash flows due to it applying the indirect method for reporting operating cash flow within the statement of cash flows. Changing the starting point from EBIT to the operating profit or loss subtotal will have implications for cash flows that largely arise from the inclusion of foreign exchange differences in operating profit or loss. No other material changes are expected.

Impact of the macroeconomic situation

We continuously evaluate the impact of current geopolitical developments. This mainly pertains to trade, research and economic policy-related measures undertaken by governments worldwide, particularly in the United States and China, as well as to Russia’s war in Ukraine and the conflict in Iran and the Middle East.

We do not currently see any material impact on our business operations and thus the Group’s financial position or results of operations.

We are continually analyzing the future direct and indirect effects of economic and political developments on the valuation of assets and liabilities, such as possible impacts on supply chains and energy supplies, and are initiating potential countermeasures.

Impact of climate-related matters

We are continuing to monitor the risks from climate-related matters and are committed to using innovative and sustainable methods to minimize these risks. Taking the latest information and assumptions into account, we do not currently see any fundamental change in expectations with regard to the Group’s financial position or results of operations.

Changes in underlying parameters

Changes in the underlying parameters relate primarily to currency exchange rates and the interest rates used to calculate pension obligations. The exchange rates for major currencies against the euro varied as follows:

The effects in initial and ongoing accounting have so far been immaterial for the Group.

In Argentina, hyperinflation is based on the index “IPC Nacional Empalme IPIM” (2017 = 100) with an index value of 11,826 as of June 30, 2026 (December 31, 2025: 10,121), and an annual inflation rate of 17% since December 31, 2025 (prior-year period: 15%). Since January 1, 2026, hyperinflation in Turkey has been based on the updated “Consumer price index” (2025 = 100) with an index value of 130 as of June 30, 2026 (December 31, 2025: 110), and an annual inflation rate of 18% since December 31, 2025 (prior-year period: 17%).

The most important interest rates used to calculate the present value of pension obligations are given below. Provisions for pensions and other post-employment benefits declined by €351 million to €1,739 million compared with December 31, 2025. This was mainly the result of changes in discount rates and the development of plan assets.

The procedure employed for determining the discount rate to be applied in the relevant currency areas EUR, GBP and USD was updated as of June 30, 2026. The refined methodology involves determining zero coupon rates, and thus specific interest rates for various maturities, along with updated regression analysis. This enables the yield curve to be more closely aligned to the maturity profile of the expected pension payments. As of June 30, 2026, this did not result in any changes to the discount rates determined for the EUR and GBP currency areas compared with the previous methodology. In the USD currency area, the discount rate would have been 10 basis points higher under the previous methodology than under the refined methodology. The pension obligation would therefore have been €28 million lower.

Segment reporting

As of June 30, 2026, the Bayer Group comprised the three reportable segments Crop Science, Pharmaceuticals and Consumer Health.

To simplify the consolidation process, leases between fully consolidated companies continue to be recognized as operating leases under IAS 17 within the segment data in the Consolidated Financial Statements of the Bayer Group even after the first-time application of IFRS 16 as of January 1, 2019. This does not have any relevant impact on the respective key data used in the steering of the company and internal reporting to the Board of Management as the chief operating decision maker.

The following table shows the reconciliation of EBITDA before special items of the above-mentioned segments and the reconciliation to income before income taxes of the Group from continuing operations:

The special items in the second quarter of 2026 were mainly attributable to the PCB and glyphosate litigations, which led to expenses totaling €139 million.

In the second quarter of 2025, special items resulted in net expense of €981 million that was primarily due to the glyphosate and PCB litigations, as well as restructuring programs. These effects were partially offset by net impairment loss reversals.

Scope of consolidation

Changes in the scope of consolidation

The Consolidated Financial Statements as of June 30, 2026, included 260 companies (December 31, 2025: 272 companies). Four joint ventures (December 31, 2025: four) and 46 associates (December 31, 2025: 43) were accounted for in the Consolidated Financial Statements using the equity method according to IAS 28 (Investments in Associates and Joint Ventures).

Acquisitions, divestments and discontinued operations

Acquisitions

On June 12, 2026, Bayer acquired 100% of the shares in Perfuse Therapeutics, Inc., United States. Perfuse is a biopharmaceutical company pioneering transformational research into the treatment of ischemia-induced ocular diseases. With the acquisition, Bayer will hold the full rights pertaining to PER-001, a small molecule endothelin receptor antagonist currently in Phase II clinical development for the treatment of glaucoma and diabetic retinopathy. The transaction falls within the scope of IFRS 3 Business Combinations. Perfuse is part of the Pharmaceuticals segment and has been fully consolidated since June 12, 2026.

Bayer paid an upfront consideration of around €260 million. A holdback amount of €1 million will be kept by Bayer until the final closing statement. Further amounts totaling up to around €1,863 million are payable upon the achievement of pre-defined R&D and sales-based milestones. A liability of €334 million, weighted according to the probability that the payments will have to be made, was recognized for this purpose.

The purchase price mainly pertains to R&D projects of around €635 million, goodwill of €109 million, deferred tax liabilities of €151 million as well as other net assets of €2 million. The goodwill mainly reflects the potential use of PER-001 in further indications. The goodwill recognized is not tax-deductible.

The purchase price allocation has not yet been completed, mainly because the final valuation and purchase price have not yet been determined. As such, the allocation of the purchase price to individual assets and liabilities may still be subject to change.

Sales and after-tax income of around €0 million were recorded for the acquired business since the date of first-time consolidation. Had the above-mentioned acquisition already been made as of January 1, 2026, this would have had an additional effect on sales of €0 million and on after-tax income of minus €5 million for the Pharmaceuticals segment.

Acquisitions in 2025

On January 22, 2025, Bayer acquired the remaining 70% of the shares in Natsana GmbH, Germany. Natsana has been fully consolidated since January 2025, and is assigned to the Consumer Health segment. Natsana is an online provider focused on the sale and development of natural supplements such as vitamins, minerals, nutrients and probiotics. The acquisition is aimed at strengthening and extending Bayer’s position in the Nutritionals category, particularly in the online business. Its portfolio comprises over 100 products under its three main brands: Feel Natural, Nature Love and Natural Elements. The final purchase price paid for the 70% interest was around €209 million.

The acquired assets mainly pertain to trademarks (some €43 million) and goodwill (around €337 million). The goodwill mainly reflects Natsana’s strong position in the online nutritional supplements business. Moreover, Bayer acquired additional assets with a value of approximately €58 million that mainly comprise inventories and deferred tax assets. In addition, financial liabilities of around €103 million were assumed in connection with the acquisition. Bayer also assumed additional liabilities and provisions totaling around €36 million that mainly relate to trade accounts payable, miscellaneous provisions and future lease payments. The goodwill recognized is not tax-deductible. The purchase price allocation was completed in the fourth quarter of 2025.

Divestments

On February 2, 2026, we completed the divestment of the anti-infective brand Avelox™ to Ascenda Pte. Ltd., Singapore. The selling price for the global Avelox™ business, for which China is the main market, was €250 million, resulting in other operating income of the same amount that was recognized as a special item within the Pharmaceuticals Division. The intangible assets transferred had a net carrying amount of zero.

We also made additional divestments in the first half of 2026, with the most noteworthy transactions outlined below. On February 16, 2026, Bayer sold its global Ventavis™ business. In addition, Bayer sold its business with Actron™ and Actron™ Plus in Mexico on February 24, 2026. These transactions achieved sales prices totaling around €125 million, which is assigned to the Pharmaceuticals segment.

Divestments in 2025

On June 16, 2025, the Pharmaceuticals segment transferred its global Testoviron™ business, with Mexico as the primary market, to Mercury Pharma Group Limited, United Kingdom. The sales price was around €68 million and led to other operating income from the sale of intangible assets in an equal amount. The intangible assets transferred had a net carrying amount of zero.

Assets held for sale and discontinued operations

There were no discontinued operations to report in 2026 or 2025.

The assets held for sale, net of directly related liabilities, totaled around €25 million as of June 30, 2026 (June 30, 2025: around €20 million), and mainly pertained to the planned sale of property, plant and equipment at the research and development site in Creve Coeur, United States.

Financial instruments

The following tables show the carrying amounts and fair values of the individual financial assets and liabilities by category of financial instrument under IFRS 9 and a reconciliation to the corresponding line items in the statements of financial position. Since the line items “Trade accounts receivable,” “Other receivables,” “Financial liabilities” and “Other liabilities” contain both financial instruments and nonfinancial assets or liabilities (such as other tax receivables), the reconciliation is shown in the column headed “Nonfinancial assets/liabilities.”

Due to the short maturities of most trade accounts receivable and payable, other financial receivables and liabilities, and cash and cash equivalents, their carrying amounts at the closing date do not significantly differ from the fair values. Trade accounts receivable are measured at fair value through other comprehensive income if they can potentially be transferred as part of factoring agreements. In the case of a transfer, all of the risks and opportunities contained in these agreements are transferred, resulting in complete derecognition of the receivables.

The fair values of financial assets and liabilities measured at amortized cost that are given for information are the present values of the respective future cash flows based on observable market data. The present values are determined by discounting the cash flows at a closing-date interest rate, taking into account the term of the assets or liabilities and also the creditworthiness of the counterparty in certain cases. Where a market price is available, however, this is deemed to be the fair value.

The fair values of financial assets measured at fair value correspond to quoted prices in active markets (Level 1), or are determined using valuation techniques based on observable market data as of the end of the reporting period (Level 2), or are the present values of the respective future cash flows, determined on the basis of unobservable inputs (Level 3).

The fair values of derivatives for which no publicly quoted prices exist in active markets (Level 1) are determined using valuation techniques based on observable market data as of the end of the reporting period (Level 2). In applying valuation techniques, credit or debt value adjustments are determined to account for the credit risk of the contractual party or Bayer.

Currency and commodity forward contracts are measured individually at their forward rates or forward prices on the closing date. These depend on spot rates or prices, including time spreads. The fair values of interest-rate hedging instruments and cross-currency interest-rate swaps were determined by discounting future cash flows over the remaining terms of the instruments at market rates of interest, taking into account any foreign currency translation as of the closing date in certain cases.

Fair values measured using unobservable inputs are categorized within Level 3 of the fair value hierarchy. This essentially applies to certain debt or equity instruments, in some cases to the fair values of embedded derivatives, and to obligations for contingent consideration in business combinations. Credit risk is frequently the principal unobservable input used to determine the fair values of debt instruments classified as “FVTPL – at fair value through profit or loss” by the discounted cash flow method. Here the credit spreads of comparable issuers are applied. A significant increase in credit risk could result in a lower fair value, whereas a significant decrease could result in a higher fair value. However, a relative change of 10% in the credit spread does not materially affect the fair value.

When determining the fair values of contingent consideration within the “FVTPL (nonderivative) – at fair value through profit or loss” category, the principal unobservable inputs are the estimation of the probability of achievement (such as the attainment of milestones for research and development projects or the attainment of sales targets), as well as the estimation of the timing of the payments. Changes in these estimates may lead to significant increases or decreases in fair value.

Embedded derivatives are separated from their respective host contracts if the contracts do not represent financial assets and the embedded derivatives are not closely related to them. Such host contracts are generally sale or purchase agreements relating to the operational business. The embedded derivatives cause the cash flows from the contracts to vary with exchange-rate or price fluctuations, for example. The internal measurement of embedded derivatives is performed using appropriate valuation models, such as discounted cash flow models, which are based on unobservable inputs. The relevant models include planned sales and purchase volumes, and prices derived from market data. Regular monitoring is carried out based on these fair values as part of quarterly reporting.

Changes in the fair value of an embedded derivative from a long-term structured renewable energy credit (REC) purchase agreement in the United States are recognized in other operating income/expenses. As of June 30, 2026, the fair value was minus €4 million (June 30, 2025: minus €20 million). This was mainly affected by future energy prices, while also reflecting the probability of contract fulfillment. This resulted in other operating income of €89 million in the second quarter of 2026.

The changes in the amount of financial assets and liabilities recognized at fair value based on unobservable inputs (Level 3) for each financial instrument category were as follows:

The changes recognized in profit or loss were included in other operating income/expenses, as well as in the financial result in interest income, exchange gains or losses, and other financial income and expenses.

Financial liabilities

In June 2026, Bayer Capital Corporation B.V., Netherlands, repaid a bond with a volume of €1.75 billion, and Bayer AG repaid a “Panda” bond with a volume of CNY 2.0 billion (€265 million).

In addition, commercial paper with a total nominal volume of €951 million was issued in the second quarter by Bayer Corporation, United States, and Bayer AG.

To find out more about the maturities of financial liabilities, please see the table on maturities in Note [24] to the Consolidated Financial Statements in the Bayer Annual Report 2025.