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Basis of preparation

1. General

EVN AG, as the parent company of the EVN Group (EVN), is a leading listed Austrian energy and environmental services provider. Its headquarters are located in A-2344 Maria Enzersdorf, Austria. In addition to serving its domestic market in the province of Lower Austria, EVN is operating in the Bulgarian, Macedonian and Croatian energy industry. EVN is also active in the area of environmental services through subsidiaries that provide customers in nine countries with water supply, wastewater treatment and thermal waste utilisation services.

The consolidated financial statements are prepared as of the balance sheet date of EVN AG. The financial year of EVN AG covers the period from 1 October to 30 September.

The consolidated financial statements are prepared on the basis of uniform accounting policies. In cases where the balance sheet date of a consolidated company differs from the balance sheet date of EVN AG, interim financial statements are prepared as of 30 September.

The consolidated financial statements were prepared on the basis of historical acquisition and production costs, unless indicated otherwise.

Certain items on the consolidated statement of financial position and the consolidated statement of operations are summarised to achieve a more understandable and clearly structured presentation. These positions are presented individually in the consolidated notes and explained according to the principle of materiality. In order to improve clarity and comparability, the amounts in the consolidated financial statements are generally shown in millions of euros (EURm), unless otherwise noted. Immaterial mathematical differences may arise from the rounding of individual items or percentage rates.

The consolidated statement of operations is prepared in accordance with the nature of expense method.

2. Reporting in accordance with IFRS

Pursuant to § 245a of the Austrian Commercial Code, the consolidated financial statements were prepared in accordance with the current guidelines set forth in the IFRSs issued by the International Accounting Standards Board (IASB) as well as the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) that were applicable as of the balance sheet date and had been adopted by the European Union (EU).


Standards and interpretations applied for the first time and changes in accounting policies
The following standards and interpretations were applied for the first time in the 2015/16 financial year:

2. Standards and interpretations applied for the first timeEffective1)
New Standards and Interpretations
Revised Standards and Interpretations 
IAS 19Employee Benefits – Defined Benefit Plans: Employee Contributions01.02.20152)
SeveralAnnual Improvements 2010–201201.02.20152)
SeveralAnnual Improvements 2011–201301.01.20152)

The core objective of the annual improvements of the IFRS is the improvement of the quality of the standards. This will be achieved by the change or correction of existing IFRS for the purpose of clarifying guidelines and formulations. Seven standards were changed by the Annual Improvements 2010–2012. This concerns standards IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38. In addition, the changes to the Annual Improvements 2010–2012 also have effects on the explanatory notes. By the Annual Improvements 2011–2013, changes were effected to four standards. This concerns standards IFRS 1, IFRS 3, IFRS 13 and IAS 40.

The initial application of the other revised standards and interpretations had no effect on the consolidated financial statements.

EVN regularly monitors and analyses the effects of the revised standards and interpretations on the future presentation of and disclosures in the consolidated financial statements and the notes.

2. Standards and interpretations already adopted by the EU but not yet compulsoryEffective1)
New Standards and Interpretations
Revised Standards and Interpretations 
IFRS 10, IFRS 12
IAS 28
Consolidated Financial Statements and Investments in Associates and Joint Ventures –
Investment Entities: Applying the Consolidation Exception
01.01.2016
IFRS 11Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations01.01.2016
IAS 1Presentation of Financial Statements – Disclosure Initiative01.01.2016
IAS 16, IAS 38Property, Plant and Equipment and Intangible Assets –
Clarification of Acceptable Methods of Depreciation and Amortisation
01.01.2016
IAS 16, IAS 41Property, Plant and Equipment and Agriculture – Bearer Plants01.01.2016
IAS 27Separate Financial Statements – Equity Method in Separate Financial Statements01.01.2016
SeveralAnnual Improvements 2012–201401.01.2016

The so-called “Disclosure Initiative“ implemented initial recommendations for changes to IAS 1 which can be realised in the near term and are related to the revision of the conceptual framework. These changes involve materiality as it relates to disclosures in the notes, information on the aggregation and disaggregation of positions on the balance sheet and statement of comprehensive income as well as explanations on the order of specific points in the notes which could, for example, be systemised in the future depending on the relevance of this data for an understanding of the company’s asset, financial and earnings position. EVN does not expect these changes to have any material influence on the consolidated financial statements. Possible adjustments could result from a revised reporting structure for the consolidated financial statements.

The Annual Improvements 2012–2014 inter alia clarified in respect of IAS 19 that the high value corporate bonds used for determining the discount rate for postemployment benefits should be denominated in the same currency as the benefits to be made. The effects on personnel provisions in Bulgaria and Macedonia will be reviewed in detail in the coming business year.

EVN does not expect the initial application in the next financial year of the other revised standards and interpretations as shown in the table above to have a material effect on the asset, financial or earnings position.

Standards and interpretations not yet effective
The following standards and interpretations had been issued as at the balance sheet date of the consolidated financial statements by the IASB, but have not yet been adopted by the EU.

2. Standards and interpretations not yet effectiveEffective1)
New Standards and Interpretations
IFRS 9Financial Instruments01.01.2018
IFRS 14Regulatory Deferral Accounts01.01.20162)
IFRS 15Revenue from Contracts with Customers01.01.20183)
IFRS 16Leases01.01.2019
Revised Standards and Interpretations 
IFRS 10,
IAS 28
Consolidated Financial Statements and Investments in Associates and Joint Ventures –
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
01.01.20164)
IAS 7Disclosure Initiative01.01.2017
IAS 12Recognition of Deferred Tax Assets for Unrealised Losses01.01.2017
IFRS 2Classification and Measurement of Share-based Payment Transactions01.01.2018
IFRS 4Applying IFRS 9, Financial Instruments with IFRS 4, Insurance Contracts01.01.2018
IFRS 15Revenue from Contracts with Customers01.01.2018

On 24 July 2014 the IASB issued the final version of IFRS 9, which replaces the rules defined in IAS 39 for the recognition and measurement of financial instruments. This represents the conclusion of a project started in 2008 as a reaction to the financial crisis. The new rules require mandatory application for financial years beginning on or after 1 January 2018; early application is permitted, but the adoption by the EU is still outstanding. IFRS 9 includes revised guidelines for the classification and measurement of financial assets, expanded rules for the recognition of impairment losses to financial assets and new rules for hedge accounting. The application of the new standard is expected to have an effect on the classification and measurement of financial assets in EVN’s consolidated financial statements, whereby no statements can be made at this time concerning the effects on the asset, financial or earnings position. Minor effects on the asset, financial and earnings position are also expected in the area of hedge accounting because the new rules are based more on risk management and are therefore likely to result in differences from present accounting practices. The impact of the application of IFRS 9 will be evaluated in detail when this standard is adopted into European law.

The IASB issued IFRS 14 on 30 January 2014 as a so-called interim standard. IFRS 14 permits first-time adopters (i.e. companies applying International Financial Reporting Standards for the first time) to present rate-regulated transactions in agreement with their previously applied accounting rules. As an interim standard IFRS 14 represents an interim solution that will apply until the IASB agrees on the accounting treatment of these issues within the context of its project on “rate-regulated activities“. The previously issued IFRSs do not provide any guidelines for the accounting treatment of rate-regulated transactions, but a number of countries – including Austria – have issued national rules which require the recognition of regulatory deferral accounts. According to the prevailing opinion, the recognition of a regulatory asset or a regulatory liability is currently not permitted in financial statements prepared in accordance with IFRS. EVN is not directly affected by IFRS 14 because it only applies to first-time IFRS adopters. On 30 October 2015 it was announced that the European Commission does not propose the interim standard IFRS 14 for adoption in EU law, but will wait for the final standard.

IFRS 15 was issued by the IASB on 28 May 2014 and regulates the recognition of revenue from contracts with customers. The goal of this multi-year joint standardisation process between the IASB and the FASB was to unify the widely diverse requirements under IFRS and US-GAAP and to define principle-based rules for all industries. For IFRS users, IFRS 15 replaces IAS 11 “Construction Contracts“ and IAS 18 “Revenue“ as well as a number of interpretations, including IFRIC 18 “Transfers of Assets from Customers“. IFRIC 18 covers, among others, the accounting treatment of construction subsidies received by EVN. The new standard is based on a five-step model that applies to all contracts with customers unless more specific rules are provided in other standards, e.g. for leases. With regard to the timing of revenue recognition, IFRS 15 defines whether revenue is to be recognised at a specific point in time or over time. This determination is based, above all, on the point of time the performance obligation is fulfilled, which is based on a general control model in IFRS 15. The transfer of control determines the timing of revenue recognition. IFRS 15 also provides new, more comprehensive requirements for the disclosures in the notes to the consolidated financial statements. In September 2015 the IASB postponed the date for the mandatory application of IFRS 15 by one year to financial years beginning on or after 1 January 2018. The effects of the application of IFRS 15 will be reviewed in detail in the course of a recently started project in the coming financial year.

IFRS 16 was published by the IASB in January 2016, and will replace the previous standard on leasing arrangements IAS 17 as well as the previous interpretations. IFRS 16 contains both a changed definition of the term lease as well as changed rules on the accounting by the lessee. Under the new regulations, the previous distinction between finance leases and operating leases does not apply any more. In that sense, operating leases will be recognisable in the balance sheet like finance leases in the future. Exceptions are leases with a term of twelve months or less, or if low-value assets are concerned. The simplifications are optional. EVN currently acts as lessee in operational leases, for which reason implications are to be expected by the application of IFRS 16. A quantification of the implications on the asset, financial and earnings position of EVN is not possible at this point in time, and will be reviewed in detail in the course of a recently started project in the coming financial year.

IAS 7 Disclosure Initiative on Cash Flow Statements requires additional disclosures on the changes of financial liabilities. The additional disclosures concern both cash changes as well as non-cash changes. The changes will lead to more comprehensive notes to the consolidated financial statements of EVN.

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