10 Notes to the consolidated financial statements

Preparation and adoption of the financial statements
The 2021 financial statements were prepared by the Executive Board on 3 March 2022. The financial statements as prepared will be submitted for adoption to the General Meeting of Shareholders to be held on 29 March 2022.

Reporting entity
N.V. Nederlandse Gasunie (hereafter also: ‘Gasunie’ or ‘the company’) is a European energy infrastructure company.

Domiciled in Groningen, the Netherlands, the company’s primary activity is to provide regulated transport services in the Netherlands and Germany. Gasunie is increasingly making its infrastructure and knowledge available for the further development and integration of alternative energy sources and carriers, such as hydrogen, heat and green gas, as well as the development of CCS. Gasunie is moreover involved in joint arrangements for pipelines that connect the Gasunie transport network with markets outside the Netherlands. Gasunie also provides other energy infrastructure services, including gas storage and the certification of green gas.

The company is a public limited company and has its registered and actual office at Concourslaan 17, Groningen, the Netherlands, and is registered with the Chamber of Commerce under number 02029700. N.V. Nederlandse Gasunie is the ultimate parent of the group. All shares in N.V. Nederlandse Gasunie issued as at the balance sheet date are held by the Dutch State.

Reporting period
These financial statements relate to the 2021 financial year, which ended on the balance sheet date of 31 December 2021.

Presentation and functional currency
The financial statements are presented in euros, which is also the functional currency of the company. Unless otherwise specified, all amounts are in millions of euros.

Going concern
These financial statements have been prepared on the basis of the going-concern assumption. Management believes that there is no uncertainty about using the going-concern assumption.

Elements of the directors’ report and the financial statements
The directors’ report, as defined in Article 2:391 of the Dutch Civil Code, consists of the following sections of the annual report and the financial statements:

• About this annual report
• Our story in 2021
• Gasunie’s profile
• Our external economic value creation
• Our external social value creation
• Our internal economic value creation
• Our internal social value creation
• Governance (except the ‘Report of the Supervisory Board’)
• Information on financial instruments (note 24 ‘Financial instruments’ to the consolidated financial statements)
• Annexes (except the ‘Report of the Works Council’)

The consolidated financial statements comprise the consolidated statement of financial position, the consolidated statement of profit and loss, the consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement. The above statements include references to the notes to the financial statements. The notes to the financial statements in the consolidated financial statements are an integral part of the consolidated financial statements. The consolidated financial statements and the company financial statements jointly form the company’s statutory financial statements.

Statement of compliance
Under Regulation (EC) no. 1606/2002 of the European Parliament, the company’s consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union and in line with the provisions of Part 9 of Book 2 of the Dutch Civil Code.

In this context, IFRS comprises both the International Financial Reporting Standards (IFRS) and the International Accounting Standards (IAS) published by the International Accounting Standards Board and the interpretations of IFRS and IAS standards published by the IFRS Interpretations Committee (IFRIC) and Standing Interpretations Committee (SIC) respectively.

New and amended standards for financial reporting
Unless stated otherwise, the following amendments to standards became effective at the start of the 2021 financial year:

• Amendments to IFRS  9, IAS 39 and IFRS 17: Interest Rate Benchmark Reform
• Amendment to IFRS 16 Leases COVID-19-Related Rent Concessions
• Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2
• IFRS 17 Insurance Contracts; including Amendments to IFRS 17 (from the 2023 financial year)

• Amendments to IFRS 3 Business Combinations, IAS 16 Property, Plant and Equipment and IAS 37 Provisions, Contingent Liabilities and Contingent Assets (from the 2022 financial year)
• Annual Improvements 2018-2021 (from the 2022 financial year)

Furthermore, the standards or amendments to them listed below are expected to become effective in the near future. EU endorsement has not yet been given for these standards.

• Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current - Deferral of Effective Date (vanaf boekjaar 2023)
• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (vanaf boekjaar 2023)
• Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (vanaf boekjaar 2023)
• Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (vanaf boekjaar 2023)
• Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information (vanaf boekjaar 2023)

An analysis by the company revealed that the already adopted standards and those still to be endorsed have or will have no material impact on the company’s equity, cash flow and result and that there are no significant additional disclosures required. For that reason, the consequences of these amendments for the company have not been described in detail in these financial statements.

Management judgements and estimates
In preparing the financial statements, management has used estimates and assessments that could affect the assets and liabilities presented as at the balance sheet date and the result for the financial year. The actual results may differ from these estimates. The estimates and underlying assumptions are reviewed at regular intervals. Revisions to estimates are recognised in the period in which the estimate is revised and in future periods that are affected by the review.

The nature of the judgements and estimates, including the assumptions that accompany the uncertainties, are included in the note to the relevant items in the financial statements if they are deemed necessary for providing the information required in Article 2:362, paragraph 1 of the Dutch Civil Code.

The effect of management’s judgements and estimates is significant for the:

• measurement and determination of the useful life of the fixed assets (as included in note 4 ‘Impairment tests’ and note 5 ‘Tangible fixed assets’);
• measurement of other participating interests (as included in note 9 ‘Other participating interests’);
• measurement and determination of the provision for abandonment costs and redevelopment (note 21 ‘Other provisions’);
• measurement of deferred tax assets (note 10 ‘Deferred tax assets’);
• measurement of pension obligations (as included in note 20 ‘Employee benefits’);
• classification of the equity interests (as included in note 6 ‘Investments in joint operations’ and note 7 ‘Investments in joint ventures’).

In certain cases, the aforementioned judgements and estimates are also affected by developments in the area of the energy transition and tightened environmental and climate targets. Management takes these developments into account in its judgements and estimates.

Determination of fair value
The determination of fair value is required for a number of accounting policies and disclosures. The fair value of a financial instrument is the amount for which an asset could be traded or a liability settled between parties knowledgeable about the matter who are willing to enter into a transaction and are independent of each other.

• The fair value of listed financial instruments is determined on the basis of the exit price.
• The fair value of non-listed financial instruments is determined by calculating the present value of the expected cash flows at a discount rate equal to the applicable risk-free market rate for the remaining term, plus credit and liquidity surcharges.
• The fair value of derivatives for which no collateral is exchanged is determined by calculating the present value of the cash flows by means of the relevant swap curve plus credit and liquidity surcharges.

When determining the fair value of an asset or a liability, the company makes as much use as possible of market-observable data. Fair values are classified according to various levels on the basis of a fair value hierarchy, depending on the information used to apply valuation methods. The various levels are defined as follows:

• Level 1: Based on quoted prices on active markets for the same instrument.
• Level 2: Based on prices on active markets for comparable instruments, or based on other valuation methods, with all required key data being derived directly or indirectly from publicly available market information.
• Level 3: Based on valuation methods, with all the required key data not being derived from publicly available market information.

If the information to be used for determining the fair value of an asset or liability can be classified at different levels of the fair value hierarchy, the fair value determined will be classified in its entirety at the lowest applicable level.

The company recognises reclassifications between levels of the fair value hierarchy at the end of the reporting period in which the change has taken place. The company continually assesses changes to significant information it uses and where necessary, adjusts the fair value determination accordingly.

Consolidation principles
General
The consolidated financial statements include the financial data of the parent entity N.V. Nederlandse Gasunie and its group companies. Group companies are companies over which the company can exercise control.

The company exercises control if, directly or indirectly:

• it has power over the relevant activities of the group company in question, is exposed to or entitled to variable returns from its involvement with the company; and
• has the ability to use its power over the group company to influence the amount of the investor’s returns.

Generally, it is presumed that if the company has more than 50% of voting rights, it exercises control. However, all facts and circumstances are considered when assessing each participating interest. When circumstances change, the company reassesses whether or not it exercises control.

Group companies are fully consolidated from the date on which dominant control of the group company is obtained until the date that dominant control no longer exists. The items in the consolidated financial statements are measured in accordance with the company’s accounting policies.

Intra-group balances and transactions are eliminated, as are any unrealised profit and losses from intra-group transactions.

Consolidation scope
Note 55 ‘List of group companies and participating interests’ contains a list of all the group companies included in the consolidation.

Business combinations and goodwill
Business combinations, such as mergers or acquisitions, are recognised in accordance with the acquisition method as described in IFRS 3 ‘Business Combinations’. The acquisition price is calculated as the sum of the assets transferred, liabilities entered into or acquired, and, where relevant, equity instruments issued by the acquiring party. Costs relating to the business combination are taken directly to profit and loss. The identifiable assets, liabilities and contingent liabilities acquired as part of the business combinations are recognised by company, as the acquiring party, at fair value on the date of acquisition. Conditional payments are initially measured at fair value on the date of acquisition. A conditional payment that qualifies as a financial instrument is measured at fair value with changes in fair value being recognised in profit and loss at the time these changes occur.

The surplus of the acquisition price above the share in the fair value of the net identifiable assets, liabilities and contingent liabilities is designated as goodwill and this is recognised under intangible fixed assets. After initial recognition, goodwill is measured at cost less any accumulated impairments.

Principles for the translation of foreign currencies
Transactions denominated in foreign currencies are measured in the functional currency in their initial recognition by translating them at the foreign exchange rate between the functional currency and foreign currency applicable on the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into the functional currency at the exchange rate applicable on that date. Exchange differences arising from the settlement of monetary items are recognised in profit and loss in the period in which they arise. Exchange differences arising from the translation of monetary items into foreign currency are recognised in profit and loss in the period in which they arise, unless hedge accounting is applied to these transactions.

Non-monetary assets and liabilities denominated in foreign currencies measured at historical cost are translated into the functional currency at the exchange rate applicable on the transaction date.

Exchange rate differences that occur when converting eligible cash flow hedges, to the extent that the hedge is effective, are recognised in other comprehensive income.

General
The principles adopted for measuring assets and liabilities and determining the results are based on historical costs, unless otherwise specified. The accounting policies used for the measurement of assets and liabilities and the determination of the results were unchanged compared to the previous financial year.

The comparative figures for 2020 have been adjusted. As of 2021, the book profit or loss on disposals is recognised under depreciation costs instead of under other costs. This is explained in note 28 ‘Depreciation costs’.

Fixed assets
Tangible fixed assets
Tangible fixed assets are measured at cost, less any accumulated depreciation and accumulated impairments. When initially measured, the costs of periodic major repairs are recognised in the carrying amount of the asset on the basis of the component approach. Interest expenses are capitalised if they relate to the purchase, construction or production of qualifying assets, provided the assets need a substantial period (more than one year) before being ready for their intended use.

Depreciation is determined by writing off the costs of the tangible fixed assets, less their estimated residual value, on a straight-line basis over their estimated useful life. Depreciation is not calculated on land, sites or gas in the pipes.

EA substantial part of the assets is intended for regulated business operations. Regulation of future cash flows by the regulatory authority will determine the recoverable amount of the regulated assets. Management is required to make significant estimates and judgements, in particular with regard to the useful life, residual value and future cash flows from gas transportation. The residual value of the asset, the useful life and the depreciation methods are reviewed annually. Note 5 ‘Tangible fixed assets’ contains a more detailed explanation of the expected useful life of the assets.

Tangible fixed assets are divided into categories. The useful life and associated depreciation period is determined for each category. Note 5 ‘Tangible fixed assets’ contains a description of the categories and gives the depreciation period for each category.

Third-party contributions to the cost of construction of the energy infrastructure are deducted from the investments, insofar as such contributions are either government-sourced (including grants) or not related to transport capacity. Customer contributions to investments which are related to transport capacity are recognised in the balance sheet as contract liabilities in line with the provisions of IFRS 15 and are credited to profit and loss at regular intervals in accordance with the term of the contract with the customer. If there is a significant financing component in the customer contributions, the finance expenses are recognised under financial expenses. This recognition is described in more detail under ‘Net revenue’ in these principles.

Tangible fixed assets not yet in operation as at the balance sheet date are recognised as ‘Fixed operating assets under construction’. Upon commissioning, the relevant assets are classified according to their type in one of the main categories. The volumes of gas and nitrogen permanently present in the pipelines and caverns which are needed for gas transportation and storage and related services are included under ‘Other fixed operating assets’. If any changes occur in the permanent gas stocks, the average gas price for the period in which the change took place is used as the cost price.

Any profit or loss on disposal of a tangible fixed asset is recognised under depreciation costs in profit and loss at the time of decommissioning.

Tangible fixed assets for which the company has the right of use under the terms of a lease agreement are also included in the balance sheet. See also the accounting principles under the heading ‘Leasing’.

Investments in joint operations
Investments in joint operations are participating interests in which the company exercises joint control and in which the company has the rights to assets and liabilities with respect to the participating interest’s debts.

The rights to the assets and liabilities with respect to the participating interest’s debts, and the associated rights relating to the joint operations’ revenues and expenses are included in the financial statements.

Investments in joint ventures
Investments in joint ventures are participating interests in which the company exercises joint control with other parties and has rights to the participating interests’ net assets.

These participating interests are measured using the equity method. In accordance with this method, the participating interests are measured at cost (including goodwill) plus the share in the result and the share in other comprehensive income from the moment of acquisition less the share in dividend payments. The company’s share in the result of joint ventures is recognised in the statement of profit and loss and in the consolidated statement of other comprehensive income.

Investments in associates
Investments in associates are participating interests in which the company exercises significant influence on operating and financial principles, but has no control.

These participating interests are measured using the equity method. In accordance with this method, the participating interests are measured at cost (including goodwill) plus the share in the result and the share in other comprehensive income from the moment of acquisition less the share in dividend payments. The company’s share in the result of associates is recognised in the statement of profit and loss.

Elimination of transactions with participating interests
Unrealised profit from transactions with participating interests measured using the equity method are eliminated in proportion to the company’s share in the participating interest.

Other participating interests
On the basis of IFRS 9, other participating interests are measured at fair value after initial recognition, with unrealised gains or losses taken to other comprehensive income. No recycling takes place through the profit and loss account.

When determining the fair value of the other participating interests, management makes assumptions and estimates, including relating to expected cash flows and the discount rate. Note 9 ‘Other participating interests’ describes the most important assumptions.

If the fair value cannot be reliably determined based on these assumptions, the cost or net asset value is used as the basis for fair value and this is mentioned in the notes to the financial statements.

The share in the result of other participating interests is taken to profit and loss as soon as the formal decision has been made that these participating interests will pay dividends or as soon as the dividend has been made available for payment.

Impairment of fixed assets
At the end of every reporting period, the company investigates whether there is any impairment of fixed assets, including tangible and financial fixed assets. Management determines the recoverable amount of the assets. The recoverable amount is the higher of its fair value less costs of disposal and its value in use. If the recoverable amount is less than the carrying amount, the difference is taken to profit and loss. Due to the nature of the tangible fixed assets, it is often not possible to determine the recoverable amount of an individual asset. In such cases, the recoverable amount of the cash-generating unit to which the asset belongs is determined.

The company also investigates whether an impairment loss recognised in previous periods no longer exists or has decreased. If an impairment loss recognised in the past is found to no longer exist or to have decreased, the increased carrying amount of the relevant asset or cash-generating unit will not be set higher than the carrying amount which would have been determined if no impairment for the asset or cash-generating unit had been recognised. Any reversal is recognised in profit and loss.

Current assets

Inventories
Inventories are recognised at cost based on the lower of average cost and recoverable amount. Cost comprises the acquisition price or the cost of manufacture plus any other costs involved in taking inventories to their current place and keeping them in their current condition. The net realisable value is based on the most reliable estimate of the amount that the inventories will generate less any costs to be incurred.

Trade and other receivables
At initial recognition, trade and other receivables are measured at fair value. After initial recognition, trade and other receivables are recognised at amortised cost because the company’s business model concerns the collection of contractual cash flows under the aforementioned receivables and the cash flows relate solely to the payment of principal and interest.

Owing to the short term of the trade and other receivables, the company uses the simplified IFRS 9 method to measure trade and other receivables (based on the lifetime expected losses). In this context, a provision is created to cover the expected credit losses, based on amounts yet to be received and the probability of non-payment. Any securities provided that may mitigate the credit loss are also taken into account.

Trade receivables also include the amounts that have not yet been invoiced as at the balance sheet date for services rendered during the financial year. A provision for bad debts is also recognised if there is an objective reason to do so.

Cash and cash equivalents
Cash and cash equivalents include the available financial resources in the form of balances at banks and other third parties, such as bank accounts, deposits or call funds. A deposit is only recognised as a cash equivalent if it can be readily converted into a known cash amount within 90 days and is not subject to a significant risk of changes in value.

Cash equivalents are held with the aim of meeting current liabilities and are not normally used for investments or other purposes.

Derivative financial instruments

Cash flow hedge accounting
The company makes use of derivative financial instruments in a limited number of cases in order to manage financial risks arising from future transactions (cash flow). These include forward foreign exchange contracts used to hedge exchange rate risks arising from future transactions in foreign currencies. These instruments are initially recognised at fair value on the date on which the contract is entered into (the value is generally zero at inception). The fair value is subsequently remeasured at the end of every reporting period. Gains or losses on the effective part of the hedging instrument are recognised in the cash flow hedge reserve in equity, net of deferred taxation. Any ineffective parts are taken directly to profit and loss.

When a hedging instrument is wound up, gains or losses on the effective part continue to be recognised in equity for as long as the underlying cash flow is expected to occur. If it is no longer expected to occur, the gains or losses on the effective part, which are recognised in equity, are taken directly to profit and loss.

Effective derivative financial instruments designated for hedge accounting are recognised in the same way as the hedged position. Depending on the nature and the term of the hedged position, the instruments are classified as either non-current or current.

Commodity contracts
In accordance with IFRS 9.2.4, contracts entered into for the procurement of commodities, such as energy for the company’s operating activities, are not included in the balance sheet.

Other derivative financial instruments
Changes in the fair value of other derivative financial instruments for which no cash flow hedge accounting is used are immediately recognised in profit and loss from initial recognition onwards.

If the fair value of a derivative is positive, the instrument is included under ‘other receivables’. If the fair value of a derivative is negative, the instrument is included under ‘other liabilities’. Depending on the nature and the term of the underlying contract, the instruments are classified as either non-current or current.

Non-current liabilities
These are liabilities with a remaining nominal term of more than one year. Repayment obligations that are due within a year are included under current liabilities.

Interest-bearing loans are initially recognised at fair value less transaction costs and discount applicable. After initial recognition, interest-bearing loans are measured at amortised cost on the basis of the effective interest method, with the transaction costs and the discount recognised in profit and loss in the period to which they relate. Discount and transaction costs not yet taken to profit and loss are recognised as a reduction in the non-current liabilities to which they relate.

For certain loans, the coupon interest payable is based partly on whether future sustainability targets are met. If these sustainability targets are not met, the coupon interest rate is increased. At the end of every reporting period, the company evaluates whether it expects to meet the sustainability targets. If the company expects that the sustainability targets will not be met, the effective interest rate will be adjusted accordingly from that moment, and the additional interest expenses will be taken to profit and loss based on the effective interest method.

When the contractual obligation has lapsed or expired, loans are no longer recognised in the balance sheet.

Employee benefits
Employee benefits are recognised as an expense in profit and loss in the period in which the work is performed and, until paid out, as a liability in the balance sheet. Personnel expenses include all costs related to employee benefits during and after employment. In addition to the liabilities that are legally enforceable, the company’s liabilities with respect to employee benefits also include any liabilities involving a situation where the company has no realistic alternative other than to comply with the obligation (‘constructive obligations’).

Liabilities for employee benefits concern pension obligations, long-service awards and the costs of post-employment fringe benefits for non-active and retired employees.

Personnel-related provisions
Personnel-related provisions comprise the provision for pension obligations and other personnel-related provisions.

Pension plans
The company has entered into pension plans entitling its employees to a number of benefits, including a retirement pension and a dependants’ pension.

The pension plan for employees of Gasunie in the Netherlands is a defined contribution pension plan, which means that the company has committed to paying a fixed, predetermined contribution. This plan ended on 31 December 2021. This contribution is based on a conditional average-salary pension plan in line with prevailing tax and pension legislation. Pension accrual in a conditional average-salary pension plan has been capped at 1.875% per annum of average pensionable earnings up to the statutory maximum pensionable salary. Pension entitlements are not guaranteed. The premiums payable in respect of employees’ pension entitlements are paid to Stichting Pensioenfonds Gasunie, which administers the pension plan. For 2022 and beyond, a new defined contribution plan has been agreed on.

Employees of Gasunie Deutschland who joined the company in or after 2012 are enrolled in a pension plan reinsured with a pension fund. This pension plan also qualifies as a defined contribution plan. Set on an annual basis, the employer’s contribution for 2021 is 4% of the pensionable salary up to the threshold and 15% of the pensionable salary above the threshold.

The basic principle for recognition of the aforementioned plans is that the pension expense to be recognised in the reporting period equals the pension premiums payable to the pension provider for that same period. To the extent that the payable premiums have not yet been paid by the balance sheet date, a liability is recognised for these premiums. If premiums prepaid by the balance sheet date exceed the total premiums payable, an accrued income item will be included to the extent that the funds will refund the excess premiums paid or offset this amount against future premiums.

The present value of the provision for pension obligations for employees of Gasunie Deutschland who joined before 2012 is calculated as per the projected unit credit method. Significant assumptions have been made in the calculation about the market interest rate on high-quality corporate bonds for the purpose of determining the discount rate, expected future increases in salary, expected future increases in pensions and average life expectancy. For more information on these variables, see note 20 ‘Employee benefits’ to the consolidated financial statements.

Actuarial gains and losses and experience adjustments are recognised in the statement of other comprehensive income and subsequently taken to equity in the period in which they occur, net of deferred taxation. The relevant actuarial calculations are drawn up and assessed by external actuaries every year.

Other personnel-related provisions are described below.

Provision for long-service awards
This provision relates to long-service awards paid by the company to its employees. Account is taken of the likelihood that the award will be made and of a pre-tax discount rate that incorporates the prevailing market assessments of the time value of money and the risks inherent in the obligation.

Provision for costs of post-employment fringe benefits for non-active and retired employees
This provision relates to the allowance that the company pays to its employees after they retire. It represents the present value of the benefits already committed to non-active and retired employees. Account is taken of life expectancy and a pre-tax discount rate that incorporates the prevailing market assessments of the time value of money and the risks inherent in the obligation.

At the end of every reporting period, the assumptions on which the personnel-related provisions are based are assessed and adjusted based on mortality tables and interest and cost developments.

Other provisions
A provision is included in the balance sheet if:

• there is a legally enforceable or factual liability resulting from a past event;
• a reliable estimate of the above can be made; and
• it is probable that an outflow of resources is required to settle that liability.

The amount recognised as a provision is the best possible estimate as at the balance sheet date of the expenditure required to meet the existing liability, taking into account the probability of the event.

Other provisions comprise the provision for certain abandonment costs and redevelopment.

Provision for abandonment costs and redevelopment
This provision is recognised due to the company’s decisions to decommission, remove or redevelop specific identifiable assets within the foreseeable future as required under legislation where applicable. The size of the provision is partially determined on the basis of experience figures derived from previous abandonments and redevelopments.

The provision is measured based on the present value of the expenditure deemed necessary to settle the liability. The discount rate is determined before taxation and takes into account the prevailing market assessments of the time value of money and the risks inherent in the liability.

Leases
Initial recognition and measurement of leases is as follows:

• The company breaks down lease liabilities into lease and non-lease components. The non-lease components are not considered to fall within the scope of IFRS 16. The costs resulting from these non-lease components are recognised in profit and loss in the period to which they refer.
• The expected term of the lease liability is determined on the basis of the contractual term of the agreement, taking into account any potential optional extensions, in the event that the company may reasonably be expected to use them.
• If applicable, account is taken of residual value guarantees, significant variable lease payments and penalty clauses when measuring the lease liabilities.
• In principle, the present value of the lease liabilities is calculated at the implicit interest rate. Where the implicit interest rate cannot be directly derived from the leases, the company’s incremental borrowing rate will be used. A borrowing rate representative of the portfolio as a whole is used for portfolios of leases with similar conditions.
• The right-of-use asset connected with the lease is initially included in the balance sheet at the present value of the lease liability, plus any directly attributable costs.
• Leases with a term of less than one year or with a contract value of less than € 5,000 are not included in the balance sheet, in accordance with the provisions of IFRS 16.

The assets associated with the lease liability are recognised under tangible fixed assets in the main category right-of-use assets.

The subsequent measurement of the leases as follows:

• Right-of-use assets are measured at cost, less straight-line depreciation calculated over the expected term of the lease agreement and with possible impairment losses. An explanation of how the cost price is determined is given above under ‘initial recognition and measurement of leases’.
• After initial recognition, the lease liabilities are measured at amortised cost based on the effective interest method.
• If the principles in the lease change (e.g. due to indexation or other modifications), the carrying amount of the lease liability and the right-of-use asset is remeasured and recognised in the balance sheet.

Trade and other current liabilities
After initial recognition, current liabilities and other financial obligations are measured at amortised cost based on the effective interest method. The effective interest is recognised directly in profit and loss.

Net revenue
Net revenue is the sum of revenues from gas transport, gas storage and related services provided to third parties, after deduction of discounts (for non-regulated services) and taxation on these revenues, such as VAT. Revenues are subject to the company’s estimates of the risk of loss of credit due to non-payment and, in the case of contract liabilities by virtue of customer contributions, the relevant interest rate.

If the result of a transaction involving the rendering of a service can be estimated reliably, the revenues relating to the service are recognised in proportion to the services rendered in the financial year. The company provides services in the field of gas transport, storage and related activities. These services are offered as capacity services. This gives customers the right to use pre-agreed capacities for a pre-contracted period (hour, day, month, etc.). The company regards the service as delivered over the period concerned and recognises the revenue accordingly. The realisation of net revenues can be reliably determined. The company is compensated by customers solely on the basis of the pre-agreed amounts.

The tariffs for regulated activities are determined by independent regulatory authorities in the Netherlands and Germany. No discounts are applied to regulated revenues. Customer contributions to the cost of construction or improvement of the transport infrastructure or discounts/prepayments in the non-regulated sector are a possibility, however. These are considered to be contract liabilities under IFRS 15 and are recognised in the balance sheet. They are periodically credited to profit and loss over the expected useful life of the asset. In the event that a prepayment or discount contains a significant financing component, the value of this component is determined based on an estimate of the relevant interest rate. The financing component is recognised in the financial income and expenses in the period to which it relates.

Capitalised expenses
Capitalised expenses include operating expenses incurred by the company in connection with the construction of tangible fixed assets. These costs mainly comprise the cost of the company’s own employees and hired workers, plus part of the overhead expenses of support departments.

Government grants
Operating grants are credited to profit and loss in the year to which the subsidised spending is allocated. Any pre-payments are included under current liabilities.

Pre-paid investment grants are initially presented under the other liabilities. As soon as investment spending starts and meets the conditions for capitalisation, the investment grants are then deducted from the tangible fixed assets for which the grant is intended.

Other costs
These costs are determined on a historical basis, taking into account the accounting policies set out above, and are allocated to the reporting period to which they relate.

Financial income and expenses
Included in this item are income and expenses relating to financing and similar income and expenses. Interest income and similar income is recognised in the period to which it relates, taking into account the effective interest rate for the asset concerned, provided the income can be measured and is likely to be received. Interest expenses and similar expenses are recognised in the period to which they relate. Financial expenses also include the amortisation of discount and transaction costs and premiums paid on the accelerated buy-back of bond loans.

The recognition of capitalised interest expenses is described under the heading ‘Tangible fixed assets’.

Income taxes
Taxes on the result include income tax and deferred taxation due over the reporting period and previous periods. These taxes are taken to profit and loss, except when they relate to items recognised directly in equity, in which case the tax effect is also recognised directly in equity.

The tax owed for the financial year is the tax expected to be payable on the taxable profit for that financial year, calculated on the basis of tax rates determined on the reporting date or materially decided upon on the reporting date, plus any corrections to the tax owed for previous years. The tax owed is calculated taking into account tax-exempt items and costs that are either non-deductible or only partly deductible.

If the carrying amount of assets and liabilities for financial reporting purposes differs from their carrying amounts for tax purposes, these are classed as temporary differences. A deferred tax liability is recognised for all taxable temporary differences. A deferred tax asset is recognised for all deductible temporary differences, to the extent that it is likely that sufficient taxable profit will be available for future set-off. For this purpose, the company makes assumptions about the future taxable profits and the point at which the temporary differences are realised.

Deferred tax liabilities and assets are measured at the nominal value. The tax rates used for the measurement are those that are expected to apply in the period in which the deferred tax items will be realised based on the tax rates and tax legislation in force or materially decided upon as at the balance sheet date. The movements in corporate income tax arising from possible rate changes are recognised in profit and loss, with the exception of the movements that were originally taken directly to equity. These movements are taken directly to equity.

Tax assets and liabilities, whether deferred or not, are presented as a net amount if:

• there is a legally enforceable right to set off tax assets and liabilities, and the assets and liabilities relate to income tax imposed by the same tax authority on the same taxable entity; and/or;
• taxable entities intend to set off the tax assets and liabilities, or the tax assets and liabilities are realised simultaneously on different types of tax.

N.V. Nederlandse Gasunie and its wholly-owned Dutch group companies constitute a fiscal unity for Dutch corporate income tax purposes. Gasunie Deutschland GmbH & Co. KG (Gasunie Deutschland) and its wholly-owned German group companies constitute a fiscal unity for German corporate income tax.

Financial information by operating segment
Information on operations about which separate financial information is available and whose operating results are regularly assessed by management should be described per segment. The company has defined the following operational segments:

• Gasunie Transport Services
• Gasunie Deutschland
• Participations

For more detailed financial information by operating segment, see note 3 ‘Financial information by operating segment’ of the additional notes to the consolidated financial statements.

Cash flow statement
The cash flow from operating activities is determined using the indirect method, based on the net revenues presented in the consolidated statement of profit and loss. The cash in the cash flow statement consists of cash and cash equivalents that can be converted into a known cash amount without restrictions and without significant risk of impairments as a consequence of the transaction.

The company recognises interest received and paid, dividends received from joint ventures, associates and other participating interests and corporate income tax paid under ‘cash flow from operating activities’.

The acquisition price of acquisitions is included under ‘cash flow from investment activities’ insofar as payment was made in cash. The cash available in the acquired participating interest or operations is deducted from the purchase price.

Cash flows from derivative financial instruments recognised as cash flow hedges are allocated to the same category as the cash flows from the hedged positions.

Events after the balance sheet date
Events that provide further information about the actual situation at the balance sheet date and that appear before the date on which the financial statements are prepared are recognised in the financial statements.

Events that do not provide further information about the actual situation on the balance sheet date are not recognised in the financial statements. If such events are important for users to form an opinion of the financial statements, the nature and estimated financial effects are explained in the financial statements.