B. Summary of accounting policies

      EFFECTS OF NEW AND REVISED IFRS

      The accounting policies applied to the Consolidated Financial Statements are consistent with those of the previous year with the exceptions listed below.

      The following new and revised Standards and Interpretations were adopted for the first time in the business year 2023/24:

      Standard

       

      Content

       

      Effective date1

       

       

       

       

       

      IFRS 17

       

      Insurance Contracts

       

      January 1, 2023

      IAS 1, amendments

       

      Disclosure of Accounting Policies

       

      January 1, 2023

      IAS 8, amendments

       

      Definition of Accounting Estimates

       

      January 1, 2023

      IAS 12, amendments

       

      Deferred Tax related to Assets and Liabilities arising from a Single Transaction

       

      January 1, 2023

      IFRS 17, amendments

       

      Initial Application of IFRS 17 and IFRS 9 – Comparative Information

       

      January 1, 2023

      IAS 12, amendments

       

      International Tax Reform – Pillar-Two-Model

       

      January 1, 2023

       

       

       

       

       

      1

      In accordance with EU endorsements, these Standards are applicable to reporting periods beginning on or after the effective date.

      The application of the aforementioned revisions did not have any material effects on the Consolidated Financial Statements.

      Further amendments to IAS 12 were published in May 2023. The amendments introduced a temporary exemption from the requirement to recognize and disclose information about deferred tax assets and liabilities arising from the global minimum taxation (Pillar II). Regarding the expected effects on the Consolidated Financial Statements, see B. Summary of Accounting Policies (section entitled “Income taxes”).

      The following new and revised Standards and Interpretations had already been published as of the reporting date, but their application was not yet mandatory for the business year 2023/24 or they have not yet been adopted by the European Union:

      Standard

       

      Content

       

      Effective date according to IASB1

       

       

       

       

       

      IFRS 16, amendments

       

      Lease Liability in a Sale and Leaseback

       

      January 1, 2024

      IAS 1, amendments

       

      Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants

       

      January 1, 2024

      IAS 7/IFRS 7, amendments

       

      Disclosures: Supplier Finance Arrangements

       

      January 1, 2024

      IAS 21, amendments

       

      Lack of Exchangeability

       

      January 1, 2025

      IFRS 18

       

      Presentation and Disclosure in Financial Statements

       

      January 1, 2027

      IFRS 19

       

      Subsidiaries without Public Accountability: Disclosures

       

      January 1, 2027

       

       

       

       

       

      1

      These Standards are applicable to reporting periods beginning on or after the effective date.

      These Standards—to the extent they have been adopted by the European Union—will not be adopted early by the Group. For the voestalpine Group, only the application of IFRS 18 is expected to result in a material change to the presentation of the Group’s earnings position due to an adjustment to the structure of the Consolidated Income Statement. There will also be changes to the presentation of the Consolidated Statement of Cash Flows and the disclosures in the Notes. From today’s perspective, the other new and revised Standards and Interpretations are not expected to have any material effects on the voestalpine Group’s net assets, financial position, and results of operations.

      Towards the end of the fourth quarter of the business year 2023/24 it was discovered within a company of the Metal Forming Division that intentional journal entries had been made in the recognition and measurement of assets and liabilities to improve reported profits. Specifically, regarding advance payments within inventories and other receivables (including contract assets), assets were overstated or derecognitions were omitted in the context of accounting for tools and development services, as well as price adjustments for serial production.

      During extensive analyses conducted in the preparation period, the necessary corrections were identified. The determined adjustments were allocated to and retrospectively adjusted for the previously reported periods in accordance with IAS 8.42. Tax-related counter-effects were not recognized due to significant uncertainties.

      The table below shows the effects of the error correction on the opening balance sheet as of April 1, 2022:

      Change in consolidated statement of financial position

       

       

      03/31/2022

       

      Adjustments according to IAS 8

       

      04/01/2022

       

       

       

       

       

       

       

      Assets

       

       

       

       

       

       

      Property, plant and equipment

       

      5,635.9

       

      –1.6

       

      5,634.3

      Inventories

       

      4,935.1

       

      –30.8

       

      4,904.3

      Trade and other receivables

       

      2,293.1

       

      –42.6

       

      2,250.5

      Total assets

       

      17,024.7

       

      –75.0

       

      16,949.7

       

       

       

       

       

       

       

      Equity and Liabilities

       

       

       

       

       

       

      Retained earnings

       

      5,953.2

       

      –81.6

       

      5,871.6

      Trade and other payables

       

      2,862.4

       

      6.6

       

      2,869.0

      Total equity and liabilities

       

      17,024.7

       

      –75.0

       

      16,949.7

       

       

       

       

       

       

       

      In millions of euros

      The table below shows the effects of the error correction on the affected items of the Consolidated Statement of Financial Position as of March 31, 2023, and the Consolidated Income Statement for the business year 2022/23. All adjustments are allocated to cash flows from operating activities and have no net effect.

      Change in consolidated statement of financial position

      03/31/2023

       

      Values as originally reported

       

      Adjustments according to IAS 8

       

      Retroactively adjusted

       

       

       

       

       

       

       

      Assets

       

       

       

       

       

       

      Property, plant and equipment

       

      5,664.8

       

      –2.3

       

      5,662.5

      Inventories

       

      5,724.6

       

      –23.3

       

      5,701.3

      Trade and other receivables

       

      2,156.3

       

      –45.5

       

      2,110.8

      Total assets

       

      17,092.8

       

      –71.1

       

      17,021.7

       

       

       

       

       

       

       

      Equity and Liabilities

       

       

       

       

       

       

      Retained earnings

       

      6,877.7

       

      –83.0

       

      6,794.7

      Trade and other payables

       

      2,797.3

       

      11.9

       

      2,809.2

      Total equity and liabilities

       

      17,092.8

       

      –71.1

       

      17,021.7

       

       

       

       

       

       

       

      In millions of euros

      Change in consolidated income statement

      2022/23

       

      Values as originally reported

       

      Adjustments according to IAS 8

       

      Retroactively adjusted

       

       

       

       

       

       

       

      Revenue

       

      18,225.1

       

      0.0

       

      18,225.1

      Cost of sales

       

      –14,589.4

       

      –1.4

       

      –14,590.8

      Gross profit

       

      3,635.7

       

      –1.4

       

      3,634.3

       

       

       

       

       

       

       

      EBIT

       

      1,624.2

       

      –1.4

       

      1,622.8

       

       

       

       

       

       

       

      Profit before tax

       

      1,490.8

       

      –1.4

       

      1,489.4

       

       

       

       

       

       

       

      Profit after tax from continuing operations

       

      1,085.3

       

      –1.4

       

      1,083.9

      Profit after tax from discontinued operations

       

      93.4

       

      0.0

       

      93.4

      Profit after tax

       

      1,178.7

       

      –1.4

       

      1,177.3

       

       

       

       

       

       

       

      Equity holders of the parent

       

      1,066.0

       

      –1.4

       

      1,064.6

       

       

       

       

       

       

       

      Diluted and basic earnings per share (euros) from continuing operations

       

      5.48

       

      0.00

       

      5.48

      Diluted and basic earnings per share (euros) from discontinued operations

       

      0.53

       

      0.00

       

      0.53

      Diluted and basic earnings per share (euros)

       

      6.01

       

      0.00

       

      6.01

       

       

       

       

       

       

       

      In millions of euros

      BASIS OF CONSOLIDATION

      The annual financial statements of all fully consolidated entities are prepared based on uniform accounting policies. For entities included using the equity method (associates and joint ventures), local accounting policies and different reporting dates (see “Investments” appendix to the Notes) were maintained for time reasons and cost/benefit considerations if the relevant amounts were immaterial.

      Upon initial consolidation, assets, liabilities, and contingent liabilities are measured at their fair value as of the acquisition date. Any excess of the cost over the net of the assets acquired and liabilities assumed is recognized as goodwill. If the net of the assets acquired and liabilities assumed exceeds the cost, the difference is recognized in profit or loss in the acquisition period. The hidden reserves and/or hidden losses attributed to the non-controlling interests are also accounted for.

      All intra-Group profits, receivables, and payables as well as income and expenses are eliminated.

      NON-CURRENT ASSETS HELD FOR SALE, DISPOSAL GROUPS, AND DISCONTINUED OPERATIONS

      The Group classifies non-current assets or disposal groups as held for sale if the carrying amount of the assets or disposal groups will be recovered principally through a sale transaction rather than through continuing use. A disposal group is classified as discontinued operations as soon as the business unit is classified as available for sale or as soon as it has already been disposed of and if the business unit represents a separate, material division.

      Assets held for sale are measured at the lower of the carrying amount and fair value less costs to sell. To the extent that any impairment requirement exceeds the non-current assets, other assets within the disposal group are also written down. The determination of the fair value less costs to sell is subject to estimates and assumptions that may be beset by uncertainties.

      Upon consolidation, the assets are shown separately in the line items, “assets held for salee” and “liabilities held for sale,” of the statement of financial position. In the consolidated income statement, discontinued operations are shown separately from continuing operations, and the entries for the previous year are adjusted accordingly. In the consolidated statement of cash flows, discontinued operations are shown in an item labeled “thereof.”

      For further explanations, see item C. Scope of Consolidation – Discontinued operations and disposal groups. All other Notes disclosures contain amounts related to operations to be continued, unless otherwise stated.

      FOREIGN CURRENCY TRANSLATION

      Pursuant to IAS 21, annual financial statements prepared in foreign currencies that are included in the Consolidated Financial Statements are translated into euros using the functional currency method. Except for of a few companies, the relevant national currency is the functional currency because—in financial, economic, and organizational terms—these entities run their businesses independently. Assets and liabilities are translated using the exchange rate on the reporting date. Income and expenses are translated using the average exchange rate for the business year.

      Equity is translated using the historical exchange rate. Currency translation differences are recognized directly in equity in the currency translation reserve.

      In the individual financial statements of consolidated entities, foreign currency transactions are translated into the functional currency of the given entity using the exchange rate on the transaction date. Foreign exchange gains and losses resulting from translation as of the transaction date and reporting date are recognized in the consolidated income statement.

      Currency exchange rates (ECB fixing) of key currencies have changed as follows:

       

       

      USD

       

      GBP

       

      BRL

       

      SEK

       

      SGD

       

      CNY

       

      PLN

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      Closing exchange rate

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      03/31/2023

       

      1.0875

       

      0.8792

       

      5.5158

       

      11.2805

       

      1.4464

       

      7.4763

       

      4.6700

      03/31/2024

       

      1.0811

       

      0.8551

       

      5.4032

       

      11.5250

       

      1.4587

       

      7.8144

       

      4.3123

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      Average annual rate

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      2022/23

       

      1.0411

       

      0.8645

       

      5.3674

       

      10.8110

       

      1.4296

       

      7.1346

       

      4.7073

      2023/24

       

      1.0845

       

      0.8630

       

      5.3499

       

      11.4999

       

      1.4587

       

      7.7778

       

      4.4473

      UNCERTAINTIES IN ACCOUNTING ESTIMATES AND ASSUMPTIONS

      The preparation of the Consolidated Financial Statements in accordance with IFRS requires management to make accounting estimates and assumptions that may significantly affect the recognition and measurement of assets and liabilities, the recognition of other obligations as of the reporting date, and the recognition of income and expenses during the business year.

      Ramifications of the Ukraine war and geopolitical developments

      The company has been and is continuously monitoring the Ukraine war and geopolitical developments so that it can counteract any effects thereof on the voestalpine Group as effectively as possible in the future, too. For example, alternative suppliers and transport routes were identified and activated to secure supplies of relevant raw materials (e.g., iron ore, iron ore pellets, pulverized coal injection (PCI) coal, alloys) to the Group’s production plants (particularly its steelworks in Austria). Moreover, raw material stockpiles (especially iron ore and coal) are also held to bridge short-term supply bottlenecks.

      To ensure natural gas supplies (especially at its Austrian facilities), in May 2022 the voestalpine Group also contractually secured natural gas storage facilities for its own use. In an emergency involving the complete loss of external supplies, existing natural gas storage supply of 1.5 TWh would enable the Group to maintain full operations for a period of three months or limited operations for a longer period, depending on the production process. The Group has also been working with both existing and new suppliers on expanding its natural gas sources. In addition, a potential natural gas bottleneck would trigger existing emergency plans, whereby production could be incrementally adjusted to the energy supplies available.

      Rapid adjustments to the supply and logistics processes in light of the new challenges presented made it possible to avoid bottlenecks. Developments regarding supplies of energy (particularly natural gas) and raw materials are monitored on an ongoing basis and evaluated in regular exchanges between experts and the Management Board.

      The following assumptions entail significant risks of triggering material adjustments of assets and liabilities in future periods:

      • Recoverability of assets
        The assessment of the recoverability of intangible assets, goodwill as well as property, plant and equipment is based on assumptions concerning the future. The determination of the recoverable amounts or the impairment amounts during the impairment tests is based on several assumptions. These include, for example, future cash flows from continuing use, cash flows from the planned disposal of assets, the discount rate, or the fair values less costs to sell of the individual assets. A sensitivity analysis of both the discount rate and the cash flows is shown (see Note 11. Impairment losses and reversal of impairment losses). The cash flows correspond to the figures in the most current business plan at the time the Consolidated Financial Statements are prepared. In addition, uncertain assumptions—regarding the development of CO2 allowance prices, the development of sales prices (in particular the price premium on greentec steel), changes in the raw material mix (availability and price development), scope of investments required for the further replacement of fossil pig iron production and CO2 capture technologies (CCUS)—flowed into the determination of the recoverable amounts for the cash generating units affected by decarbonization and associated technology transfers. See the item, Effects of sustainability strategy—decarbonization and green transformation; B. Summary of Accounting Policies (the section entitled “Impairment testing of goodwill, other intangible assets, and property, plant and equipment”); as well as Note 9. Property, plant and equipment; Note 10. Goodwill and other intangible assets; and Note 11. Impairment losses and reversal of impairment losses.
      • Recoverability of financial instruments
        Alternative actuarial models are used to measure the recoverability of financial instruments for which there is no active market. The parameters used to determine the fair values are based partially on assumptions concerning the future. See B. Summary of Accounting Policies (the section entitled “Financial instruments”) as well as Note 24. Financial instruments.
      • Determining lease terms and discount rates
        An assessment of the terms of every lease and the discount rate to be applied is made to determine lease liabilities. The estimated term of a lease is based on the lease’s non-cancelable term. Lease periods comprising options to terminate or renew are included in the assessment if the non-exercise of termination options or the exercise of renewal options is deemed to be reasonably certain. This requires management to make a judgment. All facts and circumstances that represent an economic incentive to exercise or not to exercise a given option must be considered. Following initial recognition, the lease term shall be reassessed if there is a significant event or a significant change in circumstances that the company can control and that influences its decision whether to exercise or not to exercise the given option.

        The incremental borrowing rate in its capacity as a maturity-dependent, risk-free interest rate is used as the discount rate for measuring the lease liabilities, taking into account the respective currency and the company’s credit rating. This requires making an assessment when no observable interest rates are available (e.g., subsidiaries that do not engage in financial transactions) or when the interest rates must be adjusted to reflect the terms and conditions of the given lease (e.g., consideration of the repayment structure).
      • Pensions and other employee obligations
        The measurement of existent severance payment and pension obligations is based on assumptions regarding interest rates, the retirement age, life expectancy, and future salary/wage increases. See B. Summary of Accounting Policies (section entitled “Pensions and other employee obligations”) as well as Note 18. Pensions and other employee obligations
      • Assets and liabilities associated with acquisitions
        Acquisitions require making estimates in connection with the determination of the fair value of identified assets, liabilities, and contingent consideration. All available information on the circumstances of the acquisition date is applied. The fair values of buildings and land are typically determined by external experts or intra-Group experts. Intangible assets are measured using appropriate valuation methods depending on the type of asset and the availability of information. These measurements are closely connected to assumptions about the future development of the estimated cash flows as well as the applied discount rates.

        Information on acquisitions made during the reporting period is reported under D. Acquisitions and other additions to the scope of consolidation.
      • Other provisions
        Other provisions for present obligations arising from past events, which lead to an outflow of resources embodying economic benefits, are stated at the amount that reflects the most probable value based on reliable estimates. Provisions are discounted if the effect is material. Details concerning provisions follow from B. Summary of Accounting Policies (section entitled “Other provisions”) as well as Note 19. Provisions.
      • Income taxes
        Income tax expense represents the total of current tax expenses and deferred taxes. The current tax expense is determined based on the taxable income using the currently applicable tax rates. Deferred taxes are determined based on the respective local income tax rates. Future fixed tax rates are also considered in the deferral. The recognition and measurement of actual and deferred taxes is subject to numerous uncertainties.

        Given its international activities, the voestalpine Group is subject to different tax regulations in the respective tax jurisdictions. The tax items presented in the Consolidated Financial Statements are determined based on the relevant tax regulations and, because of their complexity, may be subject to different interpretations by taxpayers, for one, and local finance authorities, for another. Because varying interpretations of tax laws may lead to additional tax payments for past years as a result of comprehensive tax audits, they are included in the analysis based on management’s assessment.

        Deferred tax assets are recognized to the extent that it is probable that taxable income will be available against which deductible differences and/or tax losses carried forward but not yet applied may be utilized. This assessment requires making assumptions regarding future taxable income and thus is subject to uncertainties. It is made based on the planning for a five-year period. Changes in future taxable income may result in lower or higher deferred tax assets.

        Further information follows from B. Summary of Accounting Policies (section entitled “Income taxes”) as well as Note 8. Income taxes and Note 13. Deferred taxes.
      • Legal risks
        As an internationally active company, the voestalpine Group is exposed to legal risks. The outcome of present or future legal disputes is generally not predictable and may have a material effect on the Group’s net assets, financial position, and results of operations. To reliably assess potential obligations, management continually reviews the underlying information and assumptions; both internal and external legal counsel is used for further evaluation. Provisions are recognized to cover probable present obligations, including a reliable estimate of legal costs. The option to record a contingent liability is considered if the future outflow of resources is not probable or if the company has no control over the confirmation of actual events.

        Both the estimates and the underlying assumptions are reviewed on an ongoing basis. The actual figures may differ from these assumptions and estimates if the stated parameters differ from reporting date expectations. Revisions are recognized through profit or loss in the period in which the estimates are revised, and the assumptions are adjusted accordingly.
      • Effects of sustainability strategy—decarbonization and green transformation
        The voestalpine Group is committed to the Paris Climate Agreement, which aims to keep the increase in the average global temperature well below 2°C above pre-industrial levels and to make efforts to limit the temperature increase to 1.5°C above pre-industrial levels. Building on this, the European Union has set itself the binding target of achieving climate neutrality by 2050 as part of the European Green Deal with the European Climate Law. This will require a significant reduction in current greenhouse gas emissions over the next few decades. With greentec steel, the voestalpine Group is gradually implementing an ambitious step-by-step plan. greentec steel encompasses all voestalpine’s activities and innovations on the path to steel production with net zero emissions. As part of the Science Based Targets initiative (SBTi), the voestalpine Group is committed to reducing the sum of Scope 1 and Scope 2 emissions by 30% and Scope 3 emissions by 25% by 2029 compared to the reference year 2019. The achievement of the 2029 target is also subject to external factors and influencing variables such as raw materials, energy and the economy.

        voestalpine’s long-term concept for achieving net zero production by 2050 at the latest, in line with the EU emissions trading target pathway, consists of several modular technology steps and options. These focus equally on the greatest possible CO2 reduction effect, taking into account the actual feasibility (e.g., regarding the respective political and legal framework, the availability of raw and input materials and renewable energies, as well as corresponding infrastructures) and economic feasibility. The most important elements of the greentec steel climate protection program (reference year 2019 for Scope 1 and Scope 2) is:

        By 2029: Phase 1 with a target of minus 30%
      • The first phase of greentec steel comprises an investment volume of about EUR 1.5 billion, which was approved by the Supervisory Board in March 2023. This will initially involve the installation of two electric arc furnaces, at the Linz and Donawitz sites, that will run on green electricity. Commissioning is planned for 2027, along with the decommissioning of two coal-based blast furnace units. Depending on the quality requirements, a mix of input materials consisting of scrap, liquid pig iron and HBI (hot briquetted iron) will be used. voestalpine sources most of the HBI it requires from the direct reduction plant in Texas, USA; this plant has been majority-owned by a global steel manufacturer since 2022. voestalpine holds a 20% stake, with corresponding long-term purchase agreements.
      • Following receipt of the funding commitment of EUR 90 million from the Austrian federal government as part of the “Transformation of Industry” program, financed from environmental subsidies in Austria, and the plant and supplier decisions, construction has now begun. The environmental impact assessment procedure for the necessary upgrading of the electricity grid has been completed at the Donawitz site and is imminent at the Linz site at the time of preparing this report. After the planned completion in 2027 and following a successful ramp-up, 2.5 million tons of CO2-reduced steel will be produced annually.

        From 2030 to 2035: Phase 2 with a target of minus 50%
      • Focus on direct CO2 avoidance through further replacement of fossil pig iron production as well as the expected additional use of CO2 capture and utilization technologies (Carbon Capture Utilization and Storage, CCUS).

        By 2050 at the latest: Phase 3 with net zero emissions target
      • Focus on replacing the remaining fossil pig iron capacities by using fossil-free energy sources, such as “green” hydrogen and bioenergy, and capturing CO2 (CCUS) with the aim of achieving the greatest possible flexibility while ensuring that the net zero strategy is economically feasible. The final decisions on these options will not be made until a later date and they will be in line with investment cycles and in accordance with the foreseeable conditions.

      The decarbonization activities also result in changes to the company’s energy needs. In addition to the systematic expansion of our own renewable energy capacities and the purchase of renewable energy based on long-term PPAs (Power Purchase Agreements), which are intended to improve the security of supply of green electricity, the focus here remains on numerous research and demonstration projects in the areas of hydrogen, biogas and biomass as well as projects in alternative iron and steel production technologies, such as, for example, “H2FUTURE” (hydrogen pilot plant) in Linz, Austria; “HYFOR” (Hydrogen-Based Fine-Ore Reduction) and smelter as well as “SuSteel” (Sustainable Steelmaking) in Donawitz, Austria. The further optimization of energy efficiency in production processes is also being investigated and driven forward on an ongoing basis. Research regarding the capture and utilization of CO2 (CCUS) supplements the overall approach.

      The green transformation is also leading to changes in raw material requirements. As a result, the existing volatility in the raw materials markets is becoming increasingly important. Long-term supply relationships, the further expansion of the supplier portfolio, and the expansion of in-house supply and the circular economy form the core elements of a diversified procurement strategy.

      The budgetary accounting for the plants affected by the technological shift (chiefly Linz and Donawitz (both in Austria)) take the resulting consequences into consideration, to the extent that they can be estimated at this time. These assumptions are subject to material uncertainties in accounting estimates. This includes investments of about EUR 1.5 billion for the two green electricity-based electric arc furnaces in the medium-term business plan, as well as investments for the further replacement of fossil pig iron production and CCUS technologies in the rough planning stage. CO2 allowance price increases as well as the incremental reduction and elimination of no-cost allowances by calendar year 2034, the raw material mix required due to the change in technology including effects from the CBAM (Carbon Border Adjustment Mechanism), and a price premium for greentec steel are included in the planning. As far as the CO2 allowance price increases are concerned—which were derived from the forecasts of the emission volumes and allowance prices prepared by internal experts and external analysts, as well as from estimates of consequences prepared by the EU Commission—our planning accounts for an incremental increase of up to a near tripling of the current price level, and considers effects from the CBAM. A price premium on greentec steel is to be expected at the start of the marketing phase; it can already be derived from market developments at this time. The assumptions regarding the development of the sales prices are also based on the assumption that mitigating actions (in particular the CBAM) will be introduced to offset the elimination of no-cost allowances. As a result of the revision of the EU ETS and the simultaneous introduction of the Carbon Border Adjustment Mechanism (CBAM), the steel industry is undergoing a paradigm shift (a reduction in the total number of allowances as well as the gradual elimination up to calendar year 2034 of no-cost allowance allocations, thus substantially increasing the EU steel industry’s need to purchase allowances).

      In light of the changed raw material mix (scrap, liquid pig iron and HBI), corresponding price adjustments have been made in the planning calculations. On the one hand, voestalpine is countering the associated uncertainties by expanding or establishing supply relationships with suppliers, customers and process partners in order to intensify the opportunities for a circular economy along the entire value chain, and on the other, long-term purchase agreements exist in the area of HBI supply.

      At this time, key political decisions are still being debated, both at the national and at the European level, regarding the topics described above. By definition, therefore, voestalpine is exposed to several risks—especially and also against the backdrop of divergent energy and transformation policies in EU member states.

      The short and medium-term physical risks associated with climate change from natural hazards (such as fire, flooding or low water as well as fluctuating water levels, snow load, drought, strong winds and storms, temperature fluctuations) were analyzed on the basis of detailed climate risk and vulnerability analyses for relevant operating locations. Heavy rainfall, flooding and mudslides are significant physical climate risks for the voestalpine Group. Based on this, appropriate precautionary measures have been initiated or have already been implemented. Necessary future measures are, to a subordinate extent, included in the planning calculations.

      There was no need to recognize impairment losses on account of climate-related risks in the business year 2023/24. The assumptions in this connection were considered in both the medium-term business plan and a rough planning stage based on the insights available as of the reporting date using best possible estimates.

      REVENUE RECOGNITION

      In the voestalpine Group, revenue is realized when a customer obtains control over goods or services. See the disclosures in Note 2. Operating Segments regarding the type of goods and services offered by the individual business segments.

      As a rule, revenue is recognized at the time the goods or services are delivered, taking into account the stipulated terms and conditions. This is generally the time at which risks and opportunities are transferred in accordance with the stipulated Incoterms. The payment terms typically are between 30 and 90 days.

      The transaction price corresponds to the contractually stipulated consideration, taking into account any variable components. Variable consideration is recognized only if it is highly probable that there will be no material revenue reversals in the future.

      Revenue from series products that satisfy the revenue recognition criteria of IFRS 15.35 (c) is recognized over time. This mainly concerns products of the automotive and aerospace segments for which there are no alternative uses because they are developed and produced specifically for a customer based on the latter’s specific requirements and thus may generally not be used for any other purpose or where any alternative use would result in significant losses. Furthermore, a legally or contractually enforceable claim to payment of consideration, including a reasonable margin, applies to any components under construction as well as to finished goods, provided the company is not responsible for any termination of the contract.

      Where revenue is recognized over time, such recognition must be prorated based on the ratio of the costs incurred to the estimated total costs. This method is the most reliable way to reflect progress in performance. Expected losses under a contract are recognized immediately. The cash flows are obtained in accordance with the contractual arrangements. The payment terms typically are between 30 and 90 days.

      The claims of the voestalpine Group to consideration for completed performance not yet billed as of the reporting date are recognized as contract assets in trade and other receivables. The contract liabilities presented in trade and other payables concern primarily consideration received from customers in advance for performance not yet delivered.

      Investment grants are treated as deferred items and recognized as income over the useful life of the asset. Cost subsidies are recognized on an accrual basis, in line with the associated expenses. Government grants of EUR 123.1 million (2022/23: EUR 48.0 million) for capital expenditures, research and development, and promotion of job opportunities were recognized as income in the reporting period.

      RECOGNITION OF EXPENSES

      Operating expenses are recognized when goods or services are used or when the expense is incurred. In the business year 2023/24, expenses for research and development were EUR 213.9 million (2022/23: EUR 191.2 million).

      PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment are measured at cost less accumulated depreciation and any impairment losses.

      The cost of self-constructed property, plant and equipment includes direct costs and appropriate portions of materials and indirect labor costs required for production as well as borrowing costs in case of qualifying assets. The capitalization date is the date from which expenditures for the asset and borrowing costs are incurred and activities necessary to prepare the asset for its intended use or sale are undertaken.

      Depreciation is recognized on a straight-line basis over the expected useful life. Land is not subject to depreciation. The expected depreciation for each asset category is as follows:

      Buildings

       

      2.0 – 20.0%

      Plant and equipment

       

      3.3 – 25.0%

      Fixtures and fittings

       

      5.0 – 20.0%

      LEASES

      The Group determines at lease inception whether a given lease satisfies the definition of a lease as per IFRS 16. As of the commencement date, the Group recognizes an asset for the right of use granted as well as a lease liability. The right of use is depreciated over the lease term on a straight-line basis. However, the right of use is depreciated over the asset’s economic life if a transfer of title is stipulated or if it is reasonably certain that a purchase option will be exercised. The right of use must also be tested for impairment.

      For the most part, the following depreciation/amortization periods are applied to right-of-use assets:

      Right-of-use assets related to land, land rights, and buildings

       

      1 – 50 years

      Right-of-use assets related to plant and equipment

       

      1 – 6 years

      Right-of-use assets related to fixtures and fittings

       

      1 – 8 years

      The lease liability is measured using the incremental borrowing rate, provided the interest rate underlying the lease cannot be readily determined.

      In subsequent measurements, the lease liability is measured using the effective interest method and adjusted. The associated interest expense is included in finance costs. The lease liability is remeasured if, for example, future lease payments will change due to changes in an index or interest rate or if there is a change in the assessment regarding the exercise of a purchase, renewal, or termination option. The carrying amount of the right-of-use asset is generally adjusted directly in equity after such remeasurement.

      In the statement of financial position, the Group recognizes right-of-use assets (that do not satisfy the definition of investment property) in property, plant and equipment, and lease liabilities in financial liabilities.

      The Group has elected the option not to determine a right-of-use asset or lease liability for leases with terms of up to 12 months (short-term leases) and for leases where the underlying asset is of low value. In the voestalpine Group, leased assets whose cost does not exceed EUR 5,000 are considered low-value assets.

      No separation is made with respect to contracts containing both lease and non-lease components; this does not apply to land and buildings, however.

      IFRS 16 is not applied to intangible asset leases.

      The Group does not act as a lessor.

      GOODWILL

      All acquisitions are accounted for using the purchase method. Goodwill arises from the acquisition of subsidiaries and equity investments in associates and joint ventures.

      Goodwill is allocated to cash generating units (CGUs) or groups of cash generating units and, pursuant to IFRS 3, is not amortized but tested for impairment at least annually as well as additionally if circumstances indicate possible impairment. The carrying amount of investments in associates and joint ventures also includes the carrying amount of goodwill.

      Negative goodwill arising from an acquisition is immediately recognized as income.

      On disposal of a subsidiary, the goodwill associated with the subsidiary is included in the determination of the profit or loss on disposal based on the relative value pursuant to IAS 36.86.

      OTHER INTANGIBLE ASSETS

      Expenses for research activities that are undertaken with the prospect of gaining new scientific or technical insights are immediately recognized as an expense. Pursuant to IAS 38.57, development expenditure is capitalized from the date on which the relevant criteria are satisfied. This means that the expenses incurred are not capitalized subsequently if all the above conditions are met only at a later date. Expenditures for internally generated goodwill and brands are immediately recognized as an expense.

      Other intangible assets are stated at cost less accumulated amortization and impairment losses. In the case of a business combination, the fair value as of the acquisition date is the acquisition cost. Amortization is recognized on a straight-line basis over the expected useful life of the asset. The maximum useful life based on previous transactions is as follows:

      Backlog of orders

       

      1 year

      Customer relations

       

      15 years

      Technology

       

      10 years

      Software

       

      10 years

      IMPAIRMENT TESTING OF CASH GENERATING UNITS WITH AND WITHOUT GOODWILL AND OF OTHER ASSETS

      CGUs or groups of CGUs to which goodwill has been allocated and other intangible assets with an indefinite useful life are tested for impairment at least annually as well as additionally if circumstances indicate possible impairment. All other assets and CGUs are tested for impairment if there are any indications of impairment. Impairment testing is generally based on the value in use approach.

      For impairment testing, assets are grouped at the lowest levels at which cash flows are independently generated (CGUs). Goodwill is allocated to those CGUs or groups of CGUs that are expected to benefit from synergies of the related acquisition, and this must be on the lowest level at which the goodwill in question is monitored for internal management purposes.

      An impairment loss is recognized at the amount by which the carrying amount of the asset or CGU exceeds the recoverable amount. The recoverable amount is the higher of the fair value less costs to sell and the value in use. Impairment losses recognized for CGUs or groups of CGUs to which goodwill has been allocated are applied first against the carrying amount of the goodwill. Any remaining impairment loss reduces the carrying amounts of the assets of the CGU or groups of CGUs on a pro rata basis, with the fair values less costs to sell of the individual assets representing the lower limit. If the goodwill impairment test is conducted for a group of CGUs and if this results in an impairment loss, the individual CGUs included in this group are also tested for impairment and any resulting impairment of assets is recognized at this level first. Subsequently, this is followed by another impairment test for the CGUs at the Group level.

      If there is any indication that an impairment loss recognized for an asset, a CGU, or a group of CGUs (excluding goodwill) in earlier periods no longer exists or may have declined, the recoverable amount must be estimated and then recognized (reversal of impairment). In this respect, see Note 11. Impairment losses and reversal of impairment losses.

      FINANCIAL INSTRUMENTS

      IFRS 9 contains three measurement categories which—apart from a few measurement choices—must always be considered mandatory:

      • Measured at amortized cost (Amortized Cost, AC);
      • Measured at fair value through other comprehensive income (Fair Value through Other Comprehensive Income, FVOCI); and
      • Measured at fair value through profit or loss (Fair Value through Profit or Loss, FVTPL).

      Currently, measurement at FVOCI is not applied in the voestalpine Group.

      Other financial assets

      The other financial assets include non-current receivables and loans that are measured at amortized cost. Equity instruments held (especially equity investments) are measured at FVTPL, because the option to elect measurement at FVOCI was not utilized.

      All other current and non-current financial assets (particularly securities) must be measured at FVTPL, because they are either allocated to a business model oriented toward active purchases and sales or do not satisfy the cash flow requirement (cash flows at specified dates comprising solely payments of interest and principal).

      Trade and other receivables

      Trade and other receivables are always recognized at amortized cost. Identifiable risks are mainly covered by buying credit insurance. Interest-free or low-interest receivables with a remaining term of more than one year are recognized at their discounted present value. Sold receivables are derecognized in accordance with the provisions of IFRS 9 (see Note 29. Disclosures of transactions not recognized in the statement of financial position).

      Trade receivables held for sale under an existent factoring agreement are measured at FVTPL, because they are allocated to the “sale” business model.

      Cash and cash equivalents

      Cash and cash equivalents include cash on hand, cash at banks, and checks and are carried at amortized cost.

      Loss allowance

      The voestalpine Group recognizes loss allowances for expected credit losses on financial assets measured at amortized cost and on contract assets (portfolio loss allowance, stage 1 and stage 2). The Group applies the simplified approach to trade receivables and contract assets, pursuant to which any impairment determined with respect to such financial assets must, under certain conditions, equal the lifetime expected credit losses.

      Historical data derived from actual historical credit losses in the past five years are used as the basis for the estimated expected credit losses. Differences between the economic conditions at the time the historical data were collected, the current conditions, and the Group’s view of the economic conditions over the expected maturities of the receivables must be considered. There is no significant concentration of default risks, given the existent credit insurances and a diversified customer portfolio that is dominated by very good to good credit ratings. Loss allowances on an individual basis are recognized for receivables with impaired credit ratings (stage 3). Note 24. Financial instruments contains additional information on impairment.

      Derivative financial instruments

      The voestalpine Group uses derivative financial instruments exclusively for the purpose of hedging the interest rate, foreign currency, and raw materials price risks. Derivative financial instruments are carried at fair value through profit or loss. Hedge accounting as defined in IFRS 9 is used for some of the Group’s derivative financial instruments. Consequently, gains or losses resulting from changes in the value of derivative financial instruments are recognized either in profit or loss or in other comprehensive income (for the effective portion of a cash flow hedge). Positive fair values from derivative financial instruments are shown in trade and other receivables. Negative fair values from derivative financial instruments are shown in trade and other payables.

      The derivative transactions are marked to market daily by determining the value that would be realized if the hedging position were closed out (liquidation method). Observable currency exchange rates and raw materials prices as well as interest rates are the inputs for determining the fair values. The fair values are calculated based on the inputs using generally accepted actuarial formulas.

      Unrealized profits or losses from hedged transactions are treated as follows:

      • If the hedged asset or liability has already been recognized in the statement of financial position, or if an obligation not recognized in the statement of financial position is hedged, the unrealized profits and losses from the hedged transaction are recognized through profit or loss. At the same time, the hedged item is also measured at fair value, regardless of the initial valuation method used. Any resulting unrealized profits and losses are offset against the unrealized results of the hedged transaction in the income statement so that, in sum, only the ineffective portion of the hedged transaction is recognized in profit or loss for the period (fair value hedges).
      • If a future transaction is hedged, the effective portion of the unrealized profits and losses accumulated up to the reporting date is recognized in other comprehensive income. Ineffective portions are recognized through profit or loss. If the transaction results in the recognition of a non-financial asset or a liability in the statement of financial position, the amount recognized in other comprehensive income is considered in the determination of the carrying amount of this item. Otherwise, the amount reported in other comprehensive income is recognized through profit or loss in keeping with the effectiveness of the future transaction or existent obligation (cash flow hedges).

      Trade and other liabilities

      Liabilities (except liabilities from derivative financial instruments) are recognized at amortized cost.

      Convertible Bond

      The convertible bond issued is divided into a liability component and an equity component. For this purpose, the fair value of the liability component was determined at the time of issue by applying a market interest rate of a similar non-convertible bond. This amount is reported as a financial liability and recognized at amortized cost using the effective interest method until the maturity or conversion date. If the conversion right is exercised, the liability component is reclassified to equity with no effect on profit or loss. The equity component is recognized in the amount of the difference between the nominal value of the entire convertible bond and the fair value of the liability component. As part of equity, the carrying amount of this conversion option is not remeasured in subsequent years.

      OTHER EQUITY INVESTMENTS

      Subsidiaries, joint ventures, and associates that are not included in these Consolidated Financial Statements by way of full consolidation or the equity method are recognized in other financial assets and other equity investments. These other assets are measured at amortized cost.

      INCOME TAXES

      Income tax expense represents the total of current tax expenses and deferred taxes. The current tax expense is determined based on the taxable income using the currently applicable tax rates.

      Pursuant to IAS 12, all temporary differences between the income tax base and the Consolidated Financial Statements are included in deferred taxes. Deferred tax assets on unused tax loss carryforwards are recognized to the extent that sufficient taxable (deferred) temporary differences between carrying amounts are available or to the extent that, based on the planning, sufficient taxable profit will be available against which the tax loss carryforwards can be offset.

      In accordance with IAS 12.39 and IAS 12.44, deferred taxes arising on differences resulting from investments in subsidiaries, associates, and joint ventures are generally not recognized. Deferred tax liabilities are recognized for planned dividend payments subject to withholding tax.

      Deferred taxes are determined based on the respective local income tax rates. Future fixed tax rates are also considered in the deferral. Deferred tax assets and deferred tax liabilities are offset when they relate to the same tax authority and when there is a claim to offsetting.

      The Group has applied for the temporary exemption from the accounting requirements for deferred taxes in IAS 12 published by the IASB in May 2023. Accordingly, no deferred taxes are recognized in relation to income taxes under the Pillar 2 rules and no related information is disclosed.

      On December 30, 2023, the Austrian legislator, where the parent company is domiciled, transformed the Pillar 2 rules into national tax law with effect from January 1, 2024 (Mindestbesteuerungsreformgesetz). If the effective tax rate in a tax jurisdiction is less than 15%, the application of the Pillar 2 rules may result in an additional tax burden.

      As of March 31, 2024, the Pillar 2 rules are not expected to have a material impact on the Group profit. This information is based on the results of the country-by-country safe harbor calculations based on historical and planning data on the one hand and on trial calculations for countries that are not expected to reach the safe harbor provisions on the other. As not all adjustments that would have been required by the legislation have been made, the actual impact that the legislation would have had on the consolidated result if it had already been in force for the business year ending March 31, 2024 may differ.

      The impact of the Pillar 2 legislation on the Group’s future profitability is reviewed on an ongoing basis.

      INVENTORIES

      Inventories are measured at the lower of cost and the net realizable value. The net realizable value is the estimated selling price less estimated costs of completion and sale. In exceptional cases, the replacement cost of raw materials and supplies may serve as the basis of measurement in accordance with IAS 2.32.

      The cost of inventories of the same type is determined using the weighted average price method or a similar method. The cost includes directly attributable costs and all prorated material and production overheads based on normal capacity utilization. Borrowing costs, general administrative expenses, and distribution costs are not capitalized.

      EMISSION ALLOWANCES

      Free allowances are measured at zero cost over the entire holding period, as the rights have been allocated free of charge. Purchased emission allowances are recognized in current assets at their actual cost and written down to a possible lower fair value as of the reporting date.

      Amounts for CO2 emissions allowances are included in other provisions. The measurement is based on the fair value for the part of the under-allocation and the carrying amount for the allowances already acquired.

      PENSIONS AND OTHER EMPLOYEE OBLIGATIONS

      Pensions and other employee obligations include provisions for severance payments, pensions, and long-service bonuses and are recognized in accordance with IAS 19 using the projected unit credit method.

      Actuarial gains and losses from severance and pension provisions are recognized directly in other comprehensive income in the year in which they are incurred. Actuarial gains and losses from provisions for long-service bonuses are recognized immediately in profit or loss.

      Severance obligations

      Employees of Austrian entities whose employment started before January 1, 2003, are entitled to severance payment if their employment contract is terminated by the employer or if they retire. The amount to be paid depends on the number of years of service and on the employee’s salary or wage at the time employment ends. A contribution-based system is provided for employees whose employment started after December 31, 2002. The contributions to external employee pension funds are recognized as expenses.

      Defined contribution plans

      Defined contribution plans do not entail further obligations on the company’s part once the premiums have been paid to the managing pension fund or insurance company.

      Defined benefit plans

      Under defined benefit plans, the company promises a given employee that they will be paid a pension in a specified amount. The pension payments begin upon retirement (or disability or death) and end upon the death of the former employee (or that of their survivors). Widow’s and widower’s pensions (equivalent to between 50% and 75% of the old age pension) are paid to the surviving spouse until their death or remarriage. Orphan’s pensions (equivalent to between 10% and 20% of the old age pension) are paid to dependent children until the completion of their education, but at most up to the age of 27.

      Longevity thus is the central risk to the Group under the defined benefit pension plans. All measurements are based on the most recent mortality tables. Given a relative decrease or increase of 10% in mortality, the defined benefit obligation (DBO) of pensions changes by +3.6% or –3.2% as of the reporting date. Other risks such as the risk of rising medical costs do not materially affect the scope of the obligation.

      Almost all the Group’s pension obligations concern claims that have already vested.

      Austria

      The amount of the pension is based either on a certain percentage of the final salary depending on the years of service or on a fixed, valorized amount per year of service. Most of the obligations under defined benefit plans is transferred to a pension fund, but the liability for any shortfall rests with the company.

      Germany

      There are different pension schemes in Germany, whose benefit rules may be described as follows:

      • A certain percentage of the final salary depending on the years of service;
      • A rising percentage of a fixed target pension depending on the years of service;
      • A stipulated, fixed pension amount;
      • A fixed, valorized amount per year of service that is linked to the average salary in the company;
      • A fixed, valorized amount per year of service.

      A small portion of the pensions are financed by insurance companies, but liability for the obligations themselves rests with the given companies.

      In all countries with significant defined benefit plan obligations, the employee benefits are determined based on the following parameters:

       

       

      2022/23

       

      2023/24

       

       

       

       

       

      Interest rate (%)

       

      3.80

       

      3.60

      Salary/wage increases (%)1

       

      4.00

       

      4.00

      Pension benefit increases (%)1

       

      2.50

       

      2.50

       

       

       

       

       

      Retirement age – men/women

       

       

       

       

      Austria

       

      max. 62 years

       

      max. 62 years

      Germany

       

      63 – 67 years

       

      63 – 67 years

       

       

       

       

       

      Mortality tables

       

       

       

       

      Austria

       

      AVÖ 2018-P

       

      AVÖ 2018-P

      Germany

       

      Heubeck- Richttafeln 2018 G

       

      Heubeck- Richttafeln 2018 G

       

       

       

       

       

      1

      Only salary-dependent and/or value-guaranteed commitments are recognized.

      Net interest expenses resulting from employee benefits are included under finance costs in the consolidated income statement.

      Long-service bonus obligations

      In most of the Group’s Austrian companies, employees are entitled to payment of a long-service bonus, which is based either on a collective agreement or on a provision in a works agreement. This is a one-time payment that is made when the respective service anniversary has been reached; depending on the length of service, the bonus generally equates to between one and three monthly salaries.

      OTHER PROVISIONS

      Other provisions related to present obligations arising from past events, which lead to an outflow of resources embodying economic benefits, are stated at the amount that reflects the most probable value based on a reliable estimate. Provisions are discounted where the effect is material.

      The assumptions underlying the provisions are reviewed on an ongoing basis. The actual figures may deviate from the assumptions if the underlying parameters as of the reporting date have not developed as expected. As soon as better information is available, changes are recognized through profit or loss and the assumptions are adjusted accordingly.

      Note that we are invoking the safeguard clause under IAS 37.92, pursuant to which information on provisions is not disclosed if doing so could seriously and adversely impact the company’s interests.

      CONTINGENT LIABILITIES

      Contingent liabilities are present obligations arising from past events (where it is not probable that an outflow of resources will be required to settle the obligation) or possible obligations arising from past events (whose existence or non-existence depends on less certain future events that the company cannot control in full). A contingent liability must also be recognized if, in extremely rare cases, an existent liability cannot be recognized in the statement of financial position as a provision because the liability cannot be reliably estimated.

      As regards possible obligations, note that pursuant to IAS 37.92 information on contingent liabilities is not disclosed if doing so could seriously and adversely impact the company’s interests.

      EMPLOYEE SHAREHOLDING SCHEME

      The employee shareholding scheme of the Group’s Austrian companies is based on the appropriation of a portion of employees’ salary and wage increases under collective bargaining agreements over several business years. The business year 2000/01 was the first time employees were granted voestalpine AG shares in return for a reduction by 1% of their salary or wage increase.

      In each of the business years 2002/03, 2003/04, 2005/06, 2007/08, 2008/09, 2014/15, and 2018/19, between 0.3 percentage points and 0.5 percentage points of the increases under collective agreements were used to provide voestalpine AG shares to employees in addition to the amounts agreed until the given date. The actual amounts follow from the contributions—which are determined on the basis of the collective agreements as of November 1 in each of the years 2002, 2003, 2005, 2007, 2008, 2014, and 2018—as well as from application of the annual increase in the contributions by 3.5%. In the business years 2012/13, 2013/14, 2016/17, 2017/18, 2021/22, and 2022/23, additional contributions of between 0.27 percentage points and 0.50 percentage points of the pay increases under collective agreements for 2012, 2013, 2016, 2017, 2021, and 2022, respectively, were used for the shareholding scheme for those Austrian Group companies that participated in the employee shareholding scheme from a later date.

      The Works Council and each company enter into an agreement to implement the Austrian employee shareholding scheme. Shares are acquired by voestalpine Mitarbeiterbeteiligung Privatstiftung (a private foundation that manages the company’s employee shareholding scheme), which transfers the shares to employees according to the wages and salaries they have waived. The value of the consideration provided is independent of share price fluctuations. Therefore, IFRS 2 does not apply to the allocation of shares based on collective bargaining agreements that stipulate lower salary or wage increases.

      An international participation model that was developed for Group companies outside Austria was initially implemented in the business year 2009/10 in several companies in Great Britain and Germany. Due to the highly positive experience gained in these pilot projects, the model was expanded in these two countries and introduced step by step in the Netherlands, in Poland, in Belgium, in the Czech Republic, in Italy, in Switzerland, in Romania, in Sweden, and in Spain in subsequent business years. In the business year 2023/24, a total of 93 companies in these 11 countries participated in the international employee shareholding scheme.

      As of March 31, 2024, the voestalpine Mitarbeiterbeteiligung Privatstiftung held approximately 14.3% (March 31, 2023: 14.3%) of voestalpine AG’s shares for employees. In addition, active and former employees of voestalpine hold approximately 0.5% (March 31, 2023: 0.5%) of the shares of voestalpine AG, the voting rights of which are exercised by the foundation. On the whole, therefore, as of March 31, 2024, the voting rights of approximately 14.8% (March 31, 2023: 14.8%) of the share capital of voestalpine AG are bundled in the foundation.

      Acquisition
      Takeover or purchase of companies or of interests in companies.
      Cash flow
      • From investing activities: outflow/inflow of liquid assets from investments/disinvestments;
      • From operating activities: outflow/inflow of liquid assets not affected by investment, disinvestment, or financing activities.
      • From financing activities: outflow/inflow of liquid assets from capital expenditures and capital contributions.
      Equity
      Assets made available to a corporation by the owners through deposits and/or contributions or from retained profits.
      IFRS (International Financial Reporting Standards)
      Accounting regulations developed to guarantee comparable accounting and disclosure.
      Rating
      An evaluation of the credit quality of a company recognized on international capital markets.
      Volatility
      The degree of fluctuation in stock prices and currency exchange rates or in prices of consumer goods in comparison to the market.