Changes in accounting policies

IFRS 15 Revenue from Contracts with Customers has been applied in the voestalpine Group since April 1, 2018, using the modified retrospective method of initial application. Hence there was no need to adjust the previous year’s figures. This Standard combines the guidance on revenue recognition and replaces both IAS 18 and IAS 11 as well as the associated Interpretations. IFRS 15 has shifted the focus from the transfer of material opportunities and risks to the time at which control over the goods and services is transferred, thus making it possible to obtain related benefits. The newly introduced five-step model serves to determine both the scope and the timing of the recognition of revenue.

In contrast to IAS 11, the new rules under IFRS 15.35c regarding customer-specific series production lead to early revenue recognition, because control is already transferred during production. As regards these customer-specific products for which there are no alternative uses, revenue must be recognized in the given period, because voestalpine has an enforceable claim to payment against the customer at the given time. The resulting effect on equity after taxes mainly in the Aerospace and Automotive segments is about EUR 7.0 million.

The second material effect on equity after taxes in the amount of approx. EUR –15.0 million stems from the reversal of previously activated pre-series losses in the Automotive segment which, in the future, must be recognized as income pursuant to the rules of IFRS 15 in the period in which they are incurred.

Aside from the initial application effect after taxes in the amount of EUR –7.4 million, these changes also result in reclassifications, among other things, of inventories and existing PoC receivables into contract assets.

The Group’s remaining segments are not affected by the changes in IFRS 15 at all or only to an immaterial extent.

IFRS 9 Financial Instruments has been applied in the voestalpine Group since April 1, 2018, based on the option to elect simplified initial application. Hence there was no need to adjust the previous year’s figures. As regards both classification and measurement, the initial application did not give rise to any changes in the carrying amounts. The accounting requirements for hedging transactions are applied prospectively. The Standard leads to changes in connection with financial instruments and largely replaces IAS 39.

A valuation model has been put in place in the voestalpine Group for the purpose of taking the requirements under IFRS 9 regarding the impairment model into account. Historical data derived from actual historical credit losses in the past five years were used as the basis for the estimated expected credit losses. There is no significant concentration of default risks, given the existing credit default swaps and a diversified customer portfolio that is dominated by very good to good credit ratings. Due to the low historical and expected loss of receivables, application of the new impairment method will not lead to material effects in loss allowances.

For further information on the first-time adoption of IFRS 9, please see the disclosures in the Notes on financial instruments. In keeping with these disclosures, the initial application of IFRS 9 in the voestalpine Group has not led to any effects.

The table below thus merely presents the effects of the initial application of IFRS 15 Revenue from Contracts with Customers on the opening statement of financial position as of April 1, 2018:

The following tables present the effects of the application of IFRS 15 on the Interim Financial Statements as of September 30, 2018. The effects of the Consolidated Statement of Cash Flows are immaterial as of September 30, 2018.