Results for the year

12 Months Ended

Dec. 31, 2019

Analysis of income and expense [abstract]

Net sales and rebates

Accounting policies

Revenue from sale of goods is recognised when Novo Nordisk has transferred control of products sold to the buyer and it is probable that Novo Nordisk will collect the consideration to which it is entitled for transferring the products. Control of the products is transferred at a point in time, typically on delivery.

The amount of sales to be recognised is based on the consideration Novo Nordisk expects to receive in exchange for its goods. When sales are recognised, Novo Nordisk also records estimates for a variety of sales deductions, including product returns as well as rebates and discounts to government agencies, wholesalers, health insurance companies, managed healthcare organisations and retail customers. Sales deductions are recognised as a reduction of gross sales to arrive at net sales, by assessing the expected value of the sales deductions (variable consideration). Where contracts contain customer acceptance criteria, Novo Nordisk recognises sales when the acceptance criteria are satisfied.

In some markets, Novo Nordisk sells products on a sale-or-return basis.

Where there is historical experience or a reasonably accurate estimate of future returns, estimated product returns are recorded as a reduction in sales.

Where shipments of new products are made on a sale-or-return basis, without sufficient historical experience for estimating sales returns, revenue is recorded based on estimated demand and acceptance rates for well-established products with similar market characteristics. If similar market characteristics do not exist, revenue is recorded when there is evidence of consumption or when the right of return has expired.

Key accounting estimates of sales deductions and provisions for sales rebates

Sales deductions are estimated and provided for at the time the related sales are recorded. These estimates of unsettled rebate, discount and product return obligations require use of significant judgement, as not all conditions are known at the time of sale, for example total sales volume to a given customer.

The estimates are based on analyses of existing contractual obligations and historical experience. Provisions are calculated on the basis of a percentage of sales for each product as defined by the contracts with the various customer groups. Provisions for sales rebates are adjusted to actual amounts as rebates, discounts and returns are processed.

Novo Nordisk considers the provisions established for sales rebates to be reasonable and appropriate based on currently available information. However, the actual amount of rebates and discounts may differ from the amounts estimated by Management as more detailed information becomes available.



Gross-to-net sales reconciliation
DKK million	2019		2018		2017

Gross sales	270,431		230,701		216,174

US Managed Care and Medicare	(84,202	)	(65,207	)	(53,077	)
US wholesaler charge-backs	(33,772	)	(29,469	)	(28,324	)
US Medicaid rebates	(14,365	)	(11,950	)	(12,491	)
Other US discounts and sales returns	(8,280	)	(6,606	)	(5,771	)
Non-US rebates, discounts and sales returns	(7,791	)	(5,638	)	(4,815	)

Total gross-to-net sales adjustments	(148,410	)	(118,870	)	(104,478	)

Net sales	122,021		111,831		111,696

Sales discounts and sales rebates are predominantly issued in the US. As such, rebates amount to 71% of gross sales in the US (68% in 2018 and 64% in 2017). Novo Nordisk sales are impacted by exchange rate changes. For developments in key currencies refer to note 4.3.

Pricing mechanisms in the US market

In the US, sales rebates are paid in connection with public healthcare insurance programmes, namely Medicare and Medicaid, as well as rebates to pharmacy benefit managers (PBMs) and managed healthcare plans. Key customers in the US include private payers, PBMs and government payers. PBMs and managed healthcare plans play a role in negotiating price concessions with drug manufacturers for both the commercial and government channels, and determine which drugs are covered on their formularies (or 'preferred drug lists').

US Managed Care and Medicare

For Managed Care and Medicare, rebates are offered to a number of PBMs and managed healthcare plans. These rebate programmes allow the customer to receive a rebate after attaining certain performance parameters relating to formulary status or pre-established market shares thresholds. Rebates are estimated according to the specific terms in each agreement, historical experience, anticipated channel mix, growth rates and market share information. Novo Nordisk adjusts the provision periodically to reflect actual sales performance. Managed Care and Medicare rebates are generally settled around 100 days from the transaction date.

US wholesaler charge-backs

Wholesaler charge-backs relate to contractual arrangements between Novo Nordisk and indirect customers in the US whereby products are sold at contract prices lower than the list price originally charged to wholesalers. A wholesaler charge-back represents the difference between the invoice price to the wholesaler and the indirect customer’s contract price. Accruals are calculated for estimated charge-backs using a combination of factors such as historical experience, current wholesaler inventory levels, contract terms and the value of claims received but not yet processed. Wholesaler charge-backs are generally settled within 30 days of the liability being incurred.

US Medicaid rebates

Medicaid is a government insurance programme. Medicaid rebates have been estimated using a combination of historical experience, product and population growth, price increases, and the impact of contracting strategies. The calculation also involves interpretation of relevant regulations that are subject to changes in interpretative guidance from government authorities. Novo Nordisk adjusts the provision periodically to reflect actual sales performance. Medicaid rebates are generally settled around 150 days from the transaction date.

Other US discounts and sales returns

Other discounts are provided to wholesalers, hospitals, pharmacies, etc. They are usually linked to sales volume or provided as cash discounts. Accruals are calculated based on historical data and recorded as a reduction in gross sales at the time the related sales are recorded. Sales returns are related to damaged or expired products.

Arrangements with certain healthcare providers may require Novo Nordisk to make refunds to the healthcare providers if anticipated treatment outcomes do not meet predefined targets.



Provisions for sales rebates
DKK million	2019		2018		2017

At the beginning of the year	25,760		20,374		20,063
Additional provisions, including increases to existing provisions	102,782		82,631		63,880
Amount paid during the year	(98,655	)	(78,647	)	(61,059	)
Adjustments, including unused amounts reversed during the year	381		386		(117	)
Effect of exchange rate adjustment	610		1,016		(2,393	)

At the end of the year	30,878		25,760		20,374

Unsettled rebates are recognised as Provisions when the timing or amount is uncertain (note 3.7). Where absolute amounts are known, the rebates are recognised as other liabilities. Wholesaler charge-backs are netted against trade receivable balances. Provisions for sales rebates thus includes US Managed Care, Medicare, Medicaid and other minor US rebate types, as well as rebates in a number of European countries and Canada.

Segment information

Accounting policies

Operating segments are reported in a manner consistent with the internal reporting provided to Executive Management and the Board of Directors. We consider Executive Management to be the operating decision-making body, as all significant decisions regarding business development and direction are taken in this forum.

Business segments

Novo Nordisk operates in two business segments based on therapies: Diabetes and Obesity care and Biopharm, representing the entirety of the Group's operations.

The segments include research, development, manufacturing and marketing of products within the following areas:

- Diabetes and Obesity care: insulin, GLP-1 and related delivery systems, oral antidiabetic products (OAD), obesity and other serious chronic diseases.

- Biopharm: haemophilia, growth disorders and hormone replacement therapy.

Segment performance is evaluated on the basis of operating profit consistent with the Consolidated financial statements. Financial income and expenses and income taxes are managed at Group level and are not allocated to business segments.

There are no sales or other transactions between the business segments. Costs have been split between business segments according to a specific allocation. In addition, a small number of corporate overhead costs are allocated systematically between the segments. Other operating income has been allocated to the two segments based on the same principle. Segment assets comprise the assets that are applied directly to the activities of the segment, including intangible assets, property, plant and equipment, inventories, trade receivables and other receivables and prepayments.



Business segments
DKK million	2019		2018		2017		2019		2018		2017		2019		2018		2017

Segment sales	Diabetes and Obesity care						Biopharm						Total

Long-acting insulin	20,776		20,844		22,174
- of which Tresiba^®	9,259		8,035		7,327
- of which Xultophy^®	2,210		1,614		729
- of which Levemir^®	9,307		11,195		14,118
Premix insulin	10,578		10,194		10,749
- of which Ryzodeg^®	993		714		492
- of which NovoMix^®/NovoLog Mix^®	9,585		9,480		10,257
Fast-acting insulin	19,303		19,353		20,124
- of which Fiasp^®	1,243		590		99
- of which NovoRapid^®/NovoLog^®	18,060		18,763		20,025
Human insulin	9,036		9,265		9,793

Total insulin	59,693		59,656		62,840
Victoza^®	21,934		24,333		23,173
Ozempic^®	11,237		1,796		—
Rybelsus^®	50		—		—

Total GLP-1	33,221		26,129		23,173
Other Diabetes care	4,247		4,250		4,302

Total Diabetes care	97,161		90,035		90,315
Obesity care (Saxenda^®)	5,679		3,869		2,562

Diabetes and Obesity care total sales	102,840		93,904		92,877

Haemophilia							10,281		9,576		10,469
- of which NovoSeven^®							8,119		7,881		9,206
- of which NovoEight^®							1,525		1,354		1,103
Growth disorders (Norditropin^®)							7,275		6,834		6,655
Other Biopharm							1,625		1,517		1,695

Biopharm total sales							19,181		17,927		18,819

Segment key figures
Total net sales	102,840		93,904		92,877		19,181		17,927		18,819		122,021		111,831		111,696
Cost of goods sold	16,309		14,716		15,014		3,779		2,901		2,618		20,088		17,617		17,632
Sales and distribution costs	28,729		26,396		25,475		3,094		3,001		2,865		31,823		29,397		28,340
Research and development costs	12,128		12,222		11,358		2,092		2,583		2,656		14,220		14,805		14,014
Administrative costs	3,346		3,266		3,143		661		650		641		4,007		3,916		3,784
Other operating income, net	309		538		466		291		614		575		600		1,152		1,041

Operating profit	42,637		37,842		38,353		9,846		9,406		10,614		52,483		47,248		48,967
Operating margin	41.5	%	40.3	%	41.3	%	51.3	%	52.5	%	56.4	%	43.0	%	42.2	%	43.8	%
Depreciation, amortisation and impairment losses expensed	3,916		3,210		2,536		1,745		715		646		5,661		3,925		3,182
Additions to Intangible assets and Property, plant and equipment	9,644		9,219		7,565		1,518		3,107		2,226		11,162		12,326		9,791
Assets allocated to business segments	86,700		71,706		61,542		16,514		17,542		14,994		103,214		89,248		76,536
Non-allocated assets¹													22,398		21,521		25,819
Total assets													125,612		110,769		102,355


1.	The part of total assets that remains unallocated to either of the two business segments includes investments in associated companies, deferred income tax assets, other financial assets, tax receivables, derivative financial instruments and cash at bank.

2.2 Segment information (continued)

Geographical areas

Novo Nordisk operates in two main commercial units:


•	International Operations


◦	Region Europe: the EU, EFTA, Albania, Bosnia-Herzegovina, Macedonia, Serbia, Montenegro and Kosovo


◦	Region AAMEO: countries in Africa, Asia, Middle East & Oceania


◦	Region China: Mainland China, Taiwan and Hong Kong


◦	Region Japan & Korea: Japan and South Korea


◦	Region Latin America: countries in South America, Central America and Mexico


•	North America Operations (the US and Canada)

Sales are attributed to geographical regions according to the location of the customer. Allocation of property, plant and equipment, trade receivables, allowance for trade receivables and total assets is based on the location of the assets.

The country of domicile is Denmark, which is part of Region Europe. Denmark is immaterial to Novo Nordisk’s activities in terms of geographical size and the operational business segments. 99.7% of total sales are realised outside Denmark. Of total property, plant and equipment, DKK 25,175 million is located in Denmark, where the Group's main production, filling, packaging, moulding and assembly facilities are located.

Net sales disclosures

Sales to external customers attributed to the US are collectively the most material to the Group. The US and Mainland China are the only territories where sales contribute 10% or more of total net sales.

In 2019, Novo Nordisk had three major wholesalers distributing products, representing 19%, 14% and 12% respectively of total net sales (20%, 13% and 13% in 2018 and 21%, 13% and 12% in 2017). Sales to these three wholesalers are within both Diabetes and Obesity care and Biopharm.

Net sales to be recognised from fulfilling existing customer contracts containing fixed or minimum sales volumes, with an original term greater than 12 months, is expected to be DKK 544 million within 12 months (2018: DKK 767 million) and DKK 32 million thereafter (2018: DKK 742 million).

Net sales will be impacted by exchange rate fluctuations. Novo Nordisk has an accounting policy to recognise the income statement impact of foreign currency hedging within financial items. Please refer to notes 4.3, 4.4 and 4.9 for more details on hedging.



Geographical areas
	2019		2018		2017		2019		2018		2017		2019		2018		2017		2019		2018		2017

	International Operations

DKK million	Total International Operations						Region Europe						Region AAMEO						Region China

Sales by business segment:
Long-acting insulin	9,035		7,942		7,416		4,720		4,282		3,895		1,526		1,281		1,229		1,059		814		694
- of which Tresiba^®	3,477		2,764		2,345		1,685		1,246		966		406		337		261		87		16		2
- of which Xultophy^®	1,493		1,085		567		1,266		1,007		560		146		58		7		—		—		—
- of which Levemir^®	4,065		4,093		4,504		1,769		2,029		2,369		974		886		961		972		798		692
Premix insulin	9,707		8,862		8,959		1,595		1,701		1,878		2,961		2,606		2,686		4,306		3,783		3,555
- of which Ryzodeg^®	993		714		492		68		56		26		429		275		183		4		—		—
- of which NovoMix^®/NovoLog Mix^®	8,714		8,148		8,467		1,527		1,645		1,852		2,532		2,331		2,503		4,302		3,783		3,555
Fast-acting insulin	10,304		9,332		9,156		4,732		4,558		4,366		2,622		2,194		2,261		1,753		1,450		1,253
- of which Fiasp^®	617		357		91		585		357		91		27		—		—		—		—		—
- of which NovoRapid^®/NovoLog^®	9,687		8,975		9,065		4,147		4,201		4,275		2,595		2,194		2,261		1,753		1,450		1,253
Human insulin	7,361		7,348		7,856		1,380		1,580		1,770		2,230		2,065		1,922		2,847		2,821		3,096

Total insulin	36,407		33,484		33,387		12,427		12,121		11,909		9,339		8,146		8,098		9,965		8,868		8,598
Victoza^®	7,249		6,240		5,708		3,967		3,720		3,451		1,005		841		858		898		521		309
Ozempic^®	1,143		39		—		965		39		—		4		—		—		—		—		—
Rybelsus^®	—		—		—		—		—		—		—		—		—		—		—		—

Total GLP-1	8,392		6,279		5,708		4,932		3,759		3,451		1,009		841		858		898		521		309
Other Diabetes care	3,389		3,360		3,359		562		579		605		691		675		754		1,647		1,672		1,566

Total Diabetes care	48,188		43,123		42,454		17,921		16,459		15,965		11,039		9,662		9,710		12,510		11,061		10,473
Obesity care (Saxenda^®)	2,083		1,211		569		334		207		102		802		418		190		9		1		—

Diabetes and Obesity care total	50,271		44,334		43,023		18,255		16,666		16,067		11,841		10,080		9,900		12,519		11,062		10,473

Haemophilia	5,946		5,572		5,446		2,762		2,781		2,828		1,305		1,177		1,163		284		199		216
- of which NovoSeven^®	4,502		4,424		4,597		1,767		1,944		2,245		1,130		1,049		1,097		269		194		215
- of which NovoEight^®	1,143		1,046		788		790		776		551		146		109		52		15		5		1
Growth disorders	4,225		4,000		4,105		1,466		1,511		1,572		691		680		676		36		20		15
Other Biopharm	1,122		1,017		1,113		779		721		722		252		216		279		5		4		5

Biopharm total	11,293		10,589		10,664		5,007		5,013		5,122		2,248		2,073		2,118		325		223		236

Total sales by business and geographical segment	61,564		54,923		53,687		23,262		21,679		21,189		14,089		12,153		12,018		12,844		11,285		10,709

Total sales growth as reported	12.1	%	2.3	%	2.2	%	7.3	%	2.3	%	2.5	%	15.9	%	1.1	%	3.8	%	13.8	%	5.4	%	2.4	%

Property, plant and equipment	30,972		28,851		27,929		26,730		25,500		24,665		1,003		723		566		2,101		1,812		1,884
Trade receivables, net	10,508		9,884		9,423		3,611		3,388		3,273		3,595		3,237		3,468		1,760		1,841		1,541
Allowance for doubtful trade receivables	(1,471	)	(1,358	)	(1,262	)	(196	)	(241	)	(223	)	(967	)	(866	)	(823	)	—		—		—
Total assets	85,541		80,420		81,743		67,007		64,327		65,600		6,729		5,635		5,876		6,820		6,003		5,927



Geographical areas (continued)
	2019		2018		2017		2019		2018		2017		2019		2018		2017		2019		2018		2017

	International Operations (continued)												North America Operations

DKK million	Region Japan & Korea						Region Latin America						Total						Of which the US

Sales by business segment:
Long-acting insulin	930		857		872		800		708		726		11,741		12,902		14,758		11,271		12,600		14,466
- of which Tresiba^®	821		751		739		478		414		377		5,782		5,271		4,982		5,500		5,192		4,970
- of which Xultophy^®	11		—		—		70		20		—		717		529		162		708		528		162
- of which Levemir^®	98		106		133		252		274		349		5,242		7,102		9,614		5,063		6,880		9,334
Premix insulin	722		650		697		123		122		143		871		1,332		1,790		839		1,294		1,743
- of which Ryzodeg^®	457		351		253		35		32		30		—		—		—		—		—		—
- of which NovoMix^®/NovoLog Mix^®	265		299		444		88		90		113		871		1,332		1,790		839		1,294		1,743
Fast-acting insulin	790		779		941		407		351		335		8,999		10,021		10,968		8,592		9,634		10,574
- of which Fiasp^®	5		—		—		—		—		—		626		233		8		597		211		—
- of which NovoRapid^®/NovoLog^®	785		779		941		407		351		335		8,373		9,788		10,960		7,995		9,423		10,574
Human insulin	170		187		232		734		695		836		1,675		1,917		1,937		1,552		1,778		1,766

Total insulin	2,612		2,473		2,742		2,064		1,876		2,040		23,286		26,172		29,453		22,254		25,306		28,549
Victoza^®	748		614		590		631		544		500		14,685		18,093		17,465		14,217		17,561		16,929
Ozempic^®	—		—		—		174		—		—		10,094		1,757		—		9,599		1,634		—
Rybelsus^®	—		—		—		—		—		—		50		—		—		50		—		—

Total GLP-1	748		614		590		805		544		500		24,829		19,850		17,465		23,866		19,195		16,929
Other Diabetes care	421		368		376		68		66		58		858		890		943		705		733		782

Total Diabetes care	3,781		3,455		3,708		2,937		2,486		2,598		48,973		46,912		47,861		46,825		45,234		46,260
Obesity care (Saxenda^®)	282		175		—		656		410		277		3,596		2,658		1,993		3,348		2,446		1,828

Diabetes and Obesity care total	4,063		3,630		3,708		3,593		2,896		2,875		52,569		49,570		49,854		50,173		47,680		48,088

Haemophilia	560		557		681		1,035		858		558		4,335		4,004		5,023		4,031		3,723		4,852
- of which NovoSeven^®	377		400		497		959		837		543		3,617		3,457		4,609		3,454		3,278		4,451
- of which NovoEight^®	116		135		169		76		21		15		382		308		315		358		291		315
Growth disorders	1,746		1,538		1,579		286		251		263		3,050		2,834		2,550		3,035		2,823		2,543
Other Biopharm	84		72		104		2		4		3		503		500		582		247		262		348

Biopharm total	2,390		2,167		2,364		1,323		1,113		824		7,888		7,338		8,155		7,313		6,808		7,743

Total sales by business and geographical segment	6,453		5,797		6,072		4,916		4,009		3,699		60,457		56,908		58,009		57,486		54,488		55,831

Total sales growth as reported	11.3	%	(4.5	%)	(2.5	%)	22.6	%	8.4	%	3.0	%	6.2	%	(1.9	%)	(2.1	%)	5.5	%	(2.4	%)	(2.4	%)

Property, plant and equipment	436		201		146		702		615		668		19,579		13,040		7,318		19,531		13,023		7,298
Trade receivables, net	495		504		279		1,047		914		862		14,404		12,902		10,742		13,999		12,643		10,517
Allowance for doubtful trade receivables	(7	)	(5	)	(5	)	(301	)	(246	)	(211	)	(13	)	(12	)	(32	)	(13	)	(12	)	(32	)
Total assets	1,543		1,503		1,304		3,442		2,952		3,036		40,071		30,349		20,612		39,460		29,732		20,180

Research and development costs

Accounting policies

Novo Nordisk’s research and development is mainly focused on:

•Insulins, GLP-1s and other therapeutic new antidiabetic drugs for diabetes treatment.

•GLP-1s, combinations and new modes of action for Obesity care.

•Blood-clotting factors and new modes of action for haemophilia treatment.

•Human growth hormone for treatment of growth disorders.

•New modes of action including GLP-1 and stem cells for treatment of NASH, cardiovascular disease, chronic kidney disease and Parkinson's disease, among others.

The research activities mainly utilise biotechnological methods based on advanced protein chemistry and protein engineering. These methods have played a key role in the development of the production technology used to manufacture insulin, GLP-1, recombinant blood-clotting factors and human growth hormone.

Novo Nordisk expenses all research costs. In line with industry practice, internal and subcontracted development costs are also expensed as they are incurred, due to significant regulatory uncertainties and other uncertainties inherent in the development of new products. This means that they do not qualify for capitalisation as intangible assets until marketing approval by a regulatory authority is obtained or considered highly probable. Costs for post-approval activities that are required by authorities as a condition for obtaining regulatory approval are recognised as research and development costs.

Research and development activities are carried out by Novo Nordisk’s research and development centres, mainly in Denmark, the US, the UK and China. Research and development trials are carried out all over the world. Novo Nordisk also enters into partnerships and licence agreements.

Research and development costs primarily comprise employee costs, and internal and external costs related to execution of studies, including manufacturing costs and facility costs of the research centres. The costs also comprise amortisation, depreciation and impairment losses related to software and property, plant and equipment used in the research and development activities. Impairment losses recognised on intangible assets not yet available for use related to research and development projects are presented in research and development costs.

2.3 Research and development costs (continued)

Certain research and development activities are recognised outside research and development costs:


•	Royalty expenses paid to partners after regulatory approval are expensed as cost of goods sold.


•	Royalty income received from partners is recognised as part of other operating income, net.


•	Contractual research and development obligations to be paid in the future are disclosed separately as commitments in note 5.2.



Research and development costs by business segment (note 2.2)
DKK million	2019	2018	2017

Diabetes and Obesity care	12,128	12,222	11,358
Biopharm	2,092	2,583	2,656

Total	14,220	14,805	14,014



Research and development costs
DKK million	2019		2018		2017

Employee costs (note 2.4)	5,968		6,288		5,848
Amortisation and impairment losses, intangible assets (note 3.1)	522		769		211
Depreciation and impairment losses, property, plant and equipment	783		468		525
(note 3.2)
Other research and development costs	6,947		7,280		7,430

Total research and development costs	14,220		14,805		14,014

As percentage of net sales	11.7	%	13.2	%	12.5	%

Employee costs

Accounting policies

Wages, salaries, social security contributions, annual leave and sick leave, bonuses and non-monetary benefits are recognised in the year in which the associated services are rendered by employees of Novo Nordisk. Where Novo Nordisk provides long-term employee benefits, the costs are accrued to match the rendering of the services by the employees concerned.



Employee costs
DKK million	2019		2018		2017

Wages and salaries	25,335		25,259		23,869
Share-based payment costs (note 5.1)	363		414		292
Pensions – defined contribution plans	1,910		1,791		1,800
Pensions – defined benefit plans (note 3.6)	151		73		165
Other social security contributions	1,963		1,901		1,910
Other employee costs	2,203		2,087		2,102

Total employee costs for the year	31,925		31,525		30,138
Employee costs capitalised as intangible assets and property, plant and equipment	(1,314	)	(1,500	)	(1,435	)
Change in employee costs capitalised as inventories	(139	)	(105	)	(91	)

Total employee costs in the income statement	30,472		29,920		28,612

Included in the income statement:
Cost of goods sold	8,134		8,164		7,854
Sales and distribution costs	13,463		12,214		11,994
Research and development costs	5,968		6,288		5,848
Administrative costs	2,679		2,755		2,505
Other operating income, net	228		499		411

Total employee costs in the income statement	30,472		29,920		28,612





Average number of full-time employees	42,218	42,881	41,665
Year-end number of full-time employees	42,703	42,672	42,076
Employees (total)	43,258	43,202	42,682



Remuneration to Executive Management and Board of Directors
DKK million	2019	2018	2017

Salary and short-term incentive	120	102	74
Pension	26	22	18
Benefits	14	4	6
Long-term incentive³	40	22	7
Severance payments	—	28	—

Executive Management in total¹^,²	200	178	105

Fee to Board of Directors²	19	17	16

Total	219	195	121


1.	Jesper Brandgaard retired from Novo Nordisk in April 2019. Until April 2020 Jesper Brandgaard will continue to provide certain services for Novo Nordisk. Remuneration of Jesper Brandgaard from January to April 2019 is included in the above table. A severance payment of DKK 27.7 million is included in the 2018 amounts.


2.	Total remuneration for registered members of Executive Management amounts to DKK 135 million (DKK 142 million in 2018 and DKK 74 million in 2017). All members of the Board of Directors are registered.


3.	Please refer to note 5.1 for further information.

Other operating income, net

Accounting policies

Other operating income, net, comprises licence income and income of a secondary nature in relation to the main activities of Novo Nordisk. Licence income from royalties on future net sales is recognised as the underlying customers' sale occurs and from sales milestones once the contingent sale milestone is achieved in accordance with the terms of the relevant agreement. Income from the transfer of the right to use intellectual property may contain development or regulatory milestones (variable consideration) on which the income is recognised when the significant uncertainties in achieving the milestones are resolved, due to the significant uncertainties inherent in the development of pharmaceutical products.

Operating profit from the wholly owned subsidiary NNE A/S, not related to Novo Nordisk’s main activities, is recognised as other operating income. Other operating income also includes income from sale of intellectual property rights.

Income taxes and deferred income taxes

Income taxes

Accounting policies

The tax expense for the period comprises current and deferred tax as well as interest on tax cases ongoing or settled during the year. It also includes adjustments to previous years and changes in provisions for uncertain tax positions. Tax is recognised in the income statement except to the extent that it relates to items recognised in equity or other comprehensive income.

Provisions for ongoing tax disputes are included as part of deferred tax assets, tax receivables and tax payables.

Management judgement regarding recognition of deferred income tax assets and provisions for uncertain tax positions

Novo Nordisk is subject to income taxes around the world. Significant judgement and estimates are required in determining the worldwide accrual for income taxes, deferred income tax assets and liabilities and provisions for uncertain tax positions.

Novo Nordisk recognises deferred income tax assets if it is probable that sufficient taxable income will be available in the future, against which the temporary differences and unused tax losses can be utilised.

Management has considered future taxable income and applied its judgement in assessing whether deferred income tax assets should be recognised.

In the course of conducting business globally, tax and transfer pricing disputes with tax authorities may occur. Management judgement is applied to assess the possible outcome of such disputes. The 'most probable outcome' method is applied when making provisions for uncertain tax positions, and Novo Nordisk considers the provisions made to be adequate. However, the actual obligation may deviate and depends on the result of litigation and settlements with the relevant tax authorities.

Swiss tax reform

In 2019, a tax reform was passed in Switzerland. The tax reform has a minor positive impact on the effective tax rate in 2019, driven by a non-recurring increase to deferred tax assets.



Income taxes expensed
DKK million	2019		2018		2017

Current tax on profit for the year	11,275		10,469		10,562
Deferred tax on profit for the year	(1,559	)	(1,007	)	182

Tax on profit for the year	9,716		9,462		10,744
Current tax adjustments recognised for prior years	(191	)	(522	)	(425	)
Deferred tax adjustments recognised for prior years	77		47		231

Income taxes in the income statement	9,602		8,987		10,550

Tax on other comprehensive income for the year, (income)/expense	231		(755	)	1,041



DKK million	2019		2018		2017

Computation of effective tax rate:
Statutory corporate income tax rate in Denmark	22.0	%	22.0	%	22.0	%
Deviation in foreign subsidiaries’ tax rates compared to the Danish tax rate (net)	(2.1	%)	(1.9	%)	0.0	%
Non-taxable income less non-tax-deductible expenses (net)	0.1	%	(0.2	%)	0.1	%
Others, including adjustment of prior years	(0.2	%)	(1.0	%)	(0.4	%)

Effective tax rate	19.8	%	18.9	%	21.7	%

The impact of the deviation in foreign subsidiaries’ tax rates compared to the Danish tax rate is mainly driven by Swiss business activities.



Income taxes paid
DKK million	2019	2018	2017

Income taxes paid in Denmark for current year	7,774	6,640	6,798
Income taxes paid outside Denmark for current year	2,258	2,376	2,639
Income taxes paid/repayments relating to prior years	904	598	(336	)

Total income taxes paid	10,936	9,614	9,101

2.6 Income taxes and deferred income taxes (continued)

Deferred income taxes

Accounting policies

Deferred income taxes arise from temporary differences between the accounting and tax values of the individual consolidated companies and from realisable tax loss carry-forwards. The tax value of tax loss carry-forwards is included in deferred tax assets to the extent that these are expected to be utilised in future taxable income. The deferred income taxes are measured according to current tax rules and at the tax rates assumed in the year in which the assets are expected to be utilised.

In general, the Danish tax rules related to dividends from group companies provide exemption from tax for most repatriated profits. A provision for withholding tax is only recognised if a concrete distribution of dividends is planned. The unrecognised potential withholding tax amounts to DKK 315 million for 2019 (DKK 367 million in 2018).

The value of future tax deductions in relation to share programmes is recognised as deferred tax, until the shares are paid out to the employees. Any estimated excess tax deduction compared to the costs realised in the income statement is charged to equity.



Development in deferred income tax assets and liabilities
DKK million	Property, plant and equipment		Intangible assets		Inventories		Liabilities		Other		Offset within countries		Total

2019
Net deferred tax asset/(liability) at 1 January	(703	)	(564	)	973		2,402		667		—		2,775
Change in accounting policy, leases	(865	)	—		—		865		—				—
Income/(charge) to the income statement	(5	)	(155	)	820		133		689				1,482
Income/(charge) to other comprehensive income	—		—		18		47		(296	)			(231	)
Income/(charge) to equity	—		—		—		—		18				18
Disposal of subsidiaries	—		—		—		(18	)	—				(18	)
Effect of exchange rate adjustment	(18	)	1		—		23		9				15

Net deferred tax asset/(liability) at 31 December	(1,591	)	(718	)	1,811		3,452		1,087		—		4,041

Classified as follows:
Deferred tax asset at 31 December	769		58		3,428		3,580		1,843		(5,557	)	4,121
Deferred tax liability at 31 December	(2,360	)	(776	)	(1,617	)	(128	)	(756	)	5,557		(80	)


2018
Net deferred tax asset/(liability) at 1 January	(868	)	(500	)	833		1,658		(28	)	—		1,095
Income/(charge) to the income statement	199		(67	)	177		763		(112	)			960
Income/(charge) to other comprehensive income	—		—		(37	)	(22	)	814				755
Income/(charge) to equity	—		—		—		—		(15	)			(15	)
Effect of exchange rate adjustment	(34	)	3		—		3		8				(20	)

Net deferred tax asset/(liability) at 31 December	(703	)	(564	)	973		2,402		667		—		2,775

Classified as follows:
Deferred tax asset at 31 December	694		52		2,490		2,403		833		(3,579	)	2,893
Deferred tax liability at 31 December	(1,397	)	(616	)	(1,517	)	(1	)	(166	)	3,579		(118	)

The total tax value of unrecognised tax loss carry-forwards amounts to DKK 144 million in 2019 (DKK 90 million in 2018).