Notes Audited

Preliminary remarks

Application of International Financial Reporting Standards (IFRS)

The consolidated financial statements of the Merck Group have been prepared in accordance with consistent accounting policies. Pursuant to Section 315a of the German Commercial Code (HGB), the International Financial Reporting Standards (IFRS) in force on the reporting date and adopted by the European Union as issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) have been applied.

The following standard and amendments to standards as well as the following interpretations and amendment to an interpretation take effect as of fiscal 2009:

• IFRS 8 “Operating Segments”
• Revised IAS 1 “Presentation of Financial Statements”
• Revised IAS 23 “Borrowing Costs”
• Amendment to IAS 32 and IAS 1: “Puttable Financial Instruments and Obligations Arising on Liquidation”
• Amendment to IAS 39 and IFRS 7: “Reclassification of Financial Assets – Effective Date and Transition”
• Amendment to IFRS 1 and IAS 27: “Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate”
• Amendment to IFRS 2 “Share-based Payment: Vesting Conditions and Cancellations”
• Amendment to IFRS 4 “Insurance Contracts” and IFRS 7 “Financial Instruments: Disclosures”
• “Improvements to International Financial Reporting Standards”
• Amendment to IFRIC 9 “Reassessment of Embedded Derivatives” and IAS 39 “Financial Instruments: Recognition and Measurement”
• IFRIC 13 “Customer Loyalty Programmes”
• IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”

The new rules do not have any material effects on the consolidated financial statements.

The following amendments to standards and the following interpretations will take effect as of fiscal 2010:

• Amendment to IAS 27 “Consolidated and Separate Financial Statements”
• Amendment to IAS 32 “Financial Instruments: Presentation – Classification of Rights Issues”
• Amendment to IAS 39 “Financial Instruments: Recognition and Measurement: Eligible Hedged Items”
• Amendment to IFRS 1 “First-time Adoption of International Financial Reporting Standards”
• Revised IFRS 3 “Business Combinations”
• IFRIC 12 “Service Concession Arrangements”
• IFRIC 15 “Agreements for the Construction of Real Estate”
• IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”
• IFRIC 17 “Distributions of Non-cash Assets to Owners”
• IFRIC 18 “Transfers of Assets from Customers”

We currently do not expect the new rules to have any material effects on the consolidated financial statements.

In addition, the following standard and amendments to standards were published by the International Accounting Standards Board (IASB) and the following interpretations and amendment to an interpretation were published by the International Financial Reporting Interpretations Committee (IFRIC), but not yet adopted by the EU:

• IFRS 9 “Financial Instruments”
• Revised IAS 24 “Related Party Disclosures”
• Amendment to IFRS 2 “Group Cash-settled Share-based Payment Transactions”
• “Improvements to International Financial Reporting Standards”
• Revised IFRS 1 “First-time Adoption of International Financial Reporting Standards”
• IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”
• Amendment to IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”

The effects that IFRS 9, which is expected to be adopted as of 2013, will have on the consolidated financial statements are currently being examined. At the current time we do not expect the other new rules to have any material effects on the consolidated financial statements.