The financial statements have been prepared under the historical cost convention. If not stated otherwise below, this general policy has been applied.
The euro is the functional and reporting currency of the company. The consolidated financial statements have been prepared in euros.
Transactions in foreign currencies are recognised at the rate of exchange of the functional currency on the transaction date.
Monetary assets and liabilities denominated in foreign currencies are converted at the exchange rate as at the balance sheet date. Any translation differences and differences arising on settlement are recognised in the profit and loss account.
Business combinations (acquisitions)
Business combinations 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 by the acquiree, liabilities entered into or acquired, and equity instruments issued by the acquirer. Costs relating to the acquisition are taken directly to the profit and loss account. The identifiable assets, liabilities and contingent liabilities acquired as part of the business combinations are recognised by the acquiring party at fair value on the date of acquisition.
Goodwill is the surplus of the acquisition price above the Gasunie share in the fair value of the net identifiable assets, liabilities and contingent liabilities. Goodwill is recognised as intangible fixed assets. After initial recognition, goodwill is stated at cost less any accumulated impairments.
Tangible fixed assets
Tangible fixed assets are valued at cost less straight-line depreciation based on their expected useful life, taking into account the residual value and impairments. The residual value of the asset, the useful life and the depreciation methods are reviewed and adjusted if necessary at the end of the financial year.
Third-party contributions to the cost of construction of the gas transport network are deducted from the investments.
Tangible fixed assets not yet completed as at the balance sheet date are recognised as ‘fixed assets under construction’. On commissioning, the relevant assets are classified according to their nature in one of the main categories. The volumes of gas and nitrogen permanently present in the pipelines and caverns needed for gas transportation and related services are included under ‘other fixed operating assets’.
Tangible fixed assets are classified in the following categories:
- Land and buildings
- Compressor stations
- Main transmission lines and related plant and equipment
- Regional transmission lines and related plant and equipment
- Underground gas storage
- Other fixed operating assets
- Fixed assets under construction
Subsidies for investment projects are deducted from the carrying amount of the asset in question. The subsidy is recognised in the profit and loss account as a reduction of depreciation costs over the duration of the asset.
Investments in joint operations
Investments in joint operations are equity interests over which the company exercises joint control and has the rights to the assets and obligations with respect to the liabilities of the equity interests.
The rights to the assets and obligations with respect to the liabilities and the associated rights to the revenues and expenses of the joint operations are included in the financial statements.
Investments in joint ventures
Investments in joint ventures are equity interests over which the company exercises joint control and has the rights to the net assets of the equity interests.
These equity interests are valued using the equity method. In accordance with this method, the equity interests are valued at cost (including goodwill) plus the share in result and other comprehensive income from the moment of acquisition minus the share in dividends. The company's share in the result of joint ventures is recognised in the profit and loss account and in the consolidated statement of comprehensive income.
Investments in associates
Investments in associates are equity interests over which the company exercises significant influence on operating and financial policies.
These equity interests are valued using the equity method. In accordance with this method, the equity interests are valued at cost (including goodwill) plus the share in result and other comprehensive income from the moment of acquisition minus the share in dividends. The company's share in the result of associates is recognised in the profit and loss account.
Other equity interests
After initial recognition and based upon IAS 39 (based on IFRS 9 as of 2018), other equity interests are stated at fair value with unrealised gains or losses taken to equity until the other equity interests are no longer recognised or are subject to impairment. The accumulated gains or losses are then taken to the profit and loss account.
To the extent that the fair value cannot be determined reliably, the other equity interests are stated at cost.
Dividend received on investments in other equity interests is recognised in the profit and loss account.
Impairments of fixed assets
The company investigates at regular intervals, and whenever there is reason to do so, whether there is any impairment of fixed assets, including tangible, intangible and financial fixed assets. This involves determining 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 current carrying amount, the difference is taken to the profit and loss account. Due to the nature of the assets, it is often not possible to determine the recoverable amount of each asset. In such cases, the recoverable amount of the cash-generating unit to which the asset belongs is determined.
If there is reason to do so, the company investigates whether the impairment recognised in previous periods no longer exists or has decreased. Any reversal is taken to the profit and loss account. Impairments of goodwill are not reversed in future periods.
Stocks of maintenance materials and parts are stated at the lower of average cost and recoverable amount.
At initial recognition, receivables are stated at fair value. After initial recognition, receivables are stated at amortised cost based on the effective interest method less a provision for bad debts. A provision for bad debts is recognised if there is an objective reason to do so. Receivables also include the amounts that have not yet been invoiced for services rendered during the financial year.
Cash and cash equivalents
Cash includes available cash in hand and credit balances at banks. Cash equivalents are held with the aim of meeting current liabilities in cash, and are not normally used for investments or other purposes. An investment is only recognised as cash equivalent if it can be immediately converted into a known cash amount and is not subject to a material risk of fluctuation in value.
These are liabilities with a remaining term to maturity of more than one year. Repayment obligations on long-term liabilities falling due within one year are presented under current liabilities.
Interest-bearing loans are initially recognised at the fair value of the proceeds less transaction costs. After initial recognition, interest-bearing loans are subsequently carried at amortised cost based on the effective interest method. When the contractual obligation has lapsed or expired, loans are no longer recognised.
Long-term liabilities for employee benefits concern pension liabilities, jubilee benefits and the costs of post-employment fringe benefits for non-active and retired employees.
N.V. Nederlandse Gasunie and the group companies included in the consolidation have several pension schemes in place entitling their employees to a number of benefits, including a retirement pension and a dependants’ pension.
As of 1 July 2013, the pension scheme of employees of N.V. Nederlandse Gasunie was changed. In the new pension scheme, the company has committed itself to paying a fixed, predetermined premium. This premium is based on a conditional average-salary scheme, which aims to achieve an annual accrual of 2% of the pension base. The Pension Savings Agreement for the Executive Board (based on a conditional average-salary scheme) has also been replaced by the new pension scheme.
On 1 January 2015, new legislation came into force concerning the fiscally allowable pension premium. The pension premium in a conditional average-salary scheme has been capped at 1.875% per annum of the average pension base, and the maximum pensionable salary has been set at € 100,000. On 1 January 2015, the pension scheme was changed in accordance with this legislation. The pension agreement with regard to paying a fixed, predetermined premium has not changed.
In IFRS terms, the pension scheme qualifies as a ‘defined contribution plan’.
The premiums payable in respect of the pension entitlements of the employees of N.V. Nederlandse Gasunie are paid to Stichting Pensioenfonds Gasunie, which administers the pension scheme. The fund manages the assets for all pension schemes administered by Stichting Pensioenfonds Gasunie.
For employees of Gasunie Deutschland who joined the company in or after 2012, a new pension scheme was implemented, which came into force on 1 January 2013. This pension scheme, which has been reinsured one-on-one with a pension fund, is treated as a defined contribution plan. The employer’s contribution is determined every year on the basis of the gross pension income and can be as high as 4% of the contribution base.
The pension scheme of employees of Gasunie Deutschland who joined the company before 2012 qualifies as a defined benefit pension plan based on a final salary scheme. The entitlements of these employees have not been funded.
The provision for pension liabilities is calculated in accordance with the ‘projected unit credit method of actuarial cost allocation’. According to this method, the present value of the pension entitlements is calculated on the basis of the number of active service years until the balance sheet date, the estimated salary as at the expected retirement date, and the discount rate.
Actuarial gains and losses are fully and directly recognised in equity in the period in which they occur, net of deferred taxation.
Actuarial calculations are drawn up by external actuaries every year.
Provision for jubilee benefits
This provision relates to jubilee benefits paid by N.V. Nederlandse Gasunie to its employees. Account is taken of the likelihood that the allowance will be paid and of a pre-tax discount rate, which incorporates the prevailing market assessments of the time value of money and the risks inherent in the commitment.
Provision for costs of post-employment fringe benefits for non-active and retired employees
This provision relates to the allowance which N.V. Nederlandse Gasunie pays to its employees after their retirement. The provision represents the cash value of the activated liabilities for non-active and retired employees. Account is taken of the mortality rate and a pre-tax discount rate, which incorporates the prevailing market assessments of the time value of money and the risks inherent in the commitment.
The assumptions on which this provision is based are tested periodically against mortality, interest and cost developments, and adjusted if necessary.
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 commitment, taking into account the probability of the possible outcome of the event.
If the time value of money is material, a provision is recognised based on the present value of the expenditure deemed necessary to settle the commitment.
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 commitment.
Provision for abandonment costs and redevelopment
This provision is recognised due to management decisions to decommission, remove or redevelop specific assets within the foreseeable future, for instance due to new legislation.
These are liabilities with a term of one year or less.
Revenues are defined as the revenues from gas transport and related services to third parties, net of discounts and taxes, such as VAT.
If the result of a transaction involving the provision of a service can be estimated reliably, the revenues relating to the service are recognised in proportion to the services performed in the financial year.
Services relating to the provision of transport capacity are separate from actual use. They are deemed to have been supplied if the capacity was at the customer’s disposal for the duration of the agreed period.
Capitalised costs includes operating costs incurred by the company in connection with the production of tangible fixed assets. These costs mainly comprise the costs of own and hired employees plus a part of the overhead of support departments.
Other operating expenses
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. Losses are recognised in the reporting period in which they are foreseen.
The staff costs item includes all employee benefits during and after termination of employment. The company’s liabilities with respect to employee benefits not only concern liabilities that are enforceable at law, but also liabilities involving a situation where the company has no realistic alternative other than to comply with the obligation (“constructive obligation”).
A lease is classified as a finance lease if it transfers virtually all ownership-related risks and rewards to the Group. Finance leases are capitalised as investment as part of tangible fixed assets, for which a non-current lease liability is recognised. An operating lease is a lease other than a finance lease. Operating lease payments are recognised as an operating expense in the profit and loss account on a straight-line basis over the lease term.
Finance income and expenses
Included in this item are income and expenses relating to financing.
Interest income is recognised on a pro rata time basis in the profit and loss account, 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 are capitalised if they relate to the purchase, construction or production of qualifying assets, provided the assets need a substantial period before being ready for their intended use.
Other interest expenses are recognised on a pro rata time basis in the profit and loss account, taking into account the effective interest rate for the liability concerned.
Corporate income tax
A deferred tax liability is recognised for all taxable temporary differences. A deferred tax asset is recognised for all deductible temporary differences and available carry-forward losses, to the extent that it is likely that taxable profit will be available for set-off.
Deferred tax liabilities and assets are stated at the undiscounted value. The tax rates used for the valuation 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 as at the balance sheet date. The movements arising from tax rate changes are taken to the profit and loss account, except for movements relating to the revaluation of the tangible fixed assets as at 1 January 2004, the tax treatment of the purchase price paid by the Dutch State, actuarial gains and losses and the cash flow hedge reserve. These movements are recognised directly in equity.
(Deferred) tax assets and (deferred) tax liabilities are offset if a legally enforceable right exists to set off tax assets against tax liabilities and the taxes relate to the same tax authority on either the same taxable entity or different taxable entities which intend either to settle tax liabilities and tax assets or realise the assets and settle the liabilities simultaneously.
N.V. Nederlandse Gasunie and its wholly owned Dutch group companies form a fiscal unity. No corporate income tax is assigned to these group companies, with the exception of Gasunie Transport Services B.V. and Gasunie Grid Services B.V. The tax expense included in the company profit and loss account relates to all the companies in the fiscal unity, with the exception of Gasunie Transport Services B.V. and Gasunie Grid Services B.V.
Gasunie Deutschland GmbH & Co. KG and its wholly owned German group companies form a fiscal unity in Germany for the purposes of trade tax and corporate income tax, including the reunification surcharge.
Tax is calculated based on the recognised result, taking into account tax-exempt items and costs that are either non-deductible or only partly deductible.
Cash flow statement
This statement shows the cash flows generated by N.V. Nederlandse Gasunie. The cash flow from operating activities is determined using the indirect method, based on the revenues presented in the consolidated profit and loss account. The company recognises corporate income tax paid and income and expenses relating to interest and dividends received from joint ventures, associates and other equity interests under ‘cash flow from operating activities’.
Financial information by segment
The information relating to the operating activities for which separate financial information is available, and of which the operating results are regularly reviewed by the chief operating decision-maker, covers gas transport activities in the Netherlands and Germany as well as new business activities.
The operating segments identified within Gasunie based on IFRS 8 Operating Segments are:
- Gasunie Transport Services
- Gasunie Deutschland
- Participations & Business Development
Derivative financial instruments
Cash flow hedge accounting
Cash flow hedge accounting is applied to derivative financial instruments that have been specifically designated for this purpose by management, and are used to hedge a highly probable cash flow, while satisfying all other conditions.
They are initially recognised at fair value on the date on which the contract is entered into, and the fair value is subsequently periodically reassessed. The fair value is determined by discounting future cash flows to the current yield curve.
Gains or losses on the effective part of the hedging instrument are recognised in the cash flow hedge reserve in equity, net of taxation. Any ineffective parts are recognised directly in the profit and loss account.
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 not expected to occur, the gains or losses on the effective part, which are recognised in equity, are taken directly to the profit and loss account.
Effective derivative financial instruments designated for hedge accounting are recognised in the same way as the underlying contract. Depending on the nature and the term of the underlying contract, the instruments are classified as either long-term or short-term instruments.
Other derivative financial instruments
Other derivative financial instruments used for hedging existing risks, such as interest-rate swaps and forward foreign exchange contracts, are initially recognised at fair value. Changes in value are recognised in the profit and loss account.
If the fair value is positive, the instrument is included under ‘other receivables’; if the fair value 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 long-term or short-term instruments.