The internal reporting framework used for reporting on revenueThe amount of money a company earns through the sale of goods and services. and expenses to the Executive Leadership Team and the Board of Directors has been established to reflect and report on the global functional responsibility setup at Novozymes. This setup consolidates functions by type, and Management reviews the results of the Group as a whole to assess performance. Thus, there is only one operating segment.
The Group operates in four geographical regions: Europe, Middle East & Africa (including Denmark), North America, Asia Pacific Australia, Bangladesh, Cambodia, Hong Kong, India, Indonesia, Iran, Japan, Kazakhstan, Kyrgyzstan, Laos, Malaysia, Myanmar, Nepal, New Zealand, P.R. China, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Turkmenistan, Uzbekistan, Vietnam. and Latin America. From a revenue perspective, the US is the single largest market, contributing ~32% of the Group's revenue (2016: ~31%).
The geographical distribution of revenue is based on the country in which the goods are delivered. With a number of customers, central deliveries are made to specified locations and the final destination is unknown.
The stated geographical distribution of revenue may therefore vary from year to year if the delivery destination for these customers changes.
Most of the Group's intangible assets and property, plant and equipment are located in Denmark, the US and China at ~50%, ~30% and ~13% respectively (2016: ~47%, ~33% and ~14%).
In 2017, Novozymes launched eight new products (2016: eight new products). New products comprises products with new or improved characteristics.
In 2017, Novozymes had 1,049 active patent families (2016: 1,123). Active patent families comprises the number of inventions for which there are one or more active patent applications or active patents at year-end.
Reference is made to the Innovation pipeline update in the business model for an overview of significant market-expanding opportunities that are currently being pursued in Research & Development.
Novozymes operates in many markets via sales companies and distributors, while production takes place in a small number of countries. This leads to transactions between Group companies. Novozymes follows the OECD principles in setting internal transfer prices for these transactions, but this is a complicated area and entails a tax risk, partly because the area is subject to political judgment in every country. Novozymes regularly enters into dialogue with the tax authorities to reduce this risk, and has entered into advance pricing agreements with the tax authorities in the countries where internal transactions are most significant.
For Novozymes, such agreements create predictability in relation to taxation and reduce the risk of Novozymes becoming part of the ongoing transfer-pricing debate around the world. A major part of internal transactions in the Group is covered by advance pricing agreements. See Novozymes' Position on Tax on Novozymes.com.
Novozymes A/S and its Danish subsidiaries are jointly taxed with the Danish companies in the Novo Holdings A/S Group. The joint taxation also covers withholding taxes in the form of dividend tax, royalty tax and interest tax. The Danish companies are jointly and individually liable for the joint taxation liability. Any subsequent adjustments to income taxes and withholding taxes may lead to a larger liability. The tax for the individual companies is allocated in full on the basis of the expected taxable income.
In 2017 Novozymes transferred intellectual property (IP) from Switzerland to Denmark. This had a positive impact on the 2017 effective tax rate of roughly 2 percentage points, included in “Difference in foreign tax rates”. The one-time impact of adjusting deferred tax to the new US tax rate is shown as “Revaluation of deferred tax due to changes in corporate tax rate”.
The tax value of the unrecognized share of tax loss carry-forwards, tax credits, etc. that do not expire amounted to DKK 26 million (2016: DKK 13 million).