13 Notes to the consolidated financial statements

Reporting entity

N.V. Nederlandse Gasunie (hereinafter also called ‘Gasunie’ and ‘we’) is a European energy infrastructure company.

Our primary activity is to provide regulated transmission services in the Netherlands and Germany. We are also involved in joint arrangements for transport pipelines that connect the Gasunie transmission network with markets outside the Netherlands. In addition, we offer other services with our energy infrastructure, including storing natural gas and providing infrastructure for the import of LNG. Alongside this, we are making extensive use of our energy infrastructure and knowledge for the further development and integration of alternative energy sources and carriers, such as hydrogen, heat and biomethane, and for CCS.

Gasunie is a public limited company (Naamloze Vennootschap; N.V.) and has its registered and actual offices at  17, Groningen, the Netherlands, and is registered with the Chamber of Commerce under number 02029700. N.V. Nederlandse Gasunie is the ultimate parent of the group. All shares in Gasunie issued as at the balance sheet date are held by the Dutch State (with the Ministry of Finance acting on its behalf).

Reporting period

These financial statements relate to the 2024 financial year, which ended on the balance sheet date of 31 December 2024.

Presentation and functional currency

We present the financial statements in euros, which is also our functional currency. Unless otherwise specified, all amounts are in millions of euros.

Principles for the translation of foreign currencies

We measure transactions denominated in foreign currencies in the functional currency on initial recognition by translating them at the foreign exchange rate between the functional currency and foreign currency applicable on the date of the transaction. On the balance sheet date, we translate monetary assets and liabilities denominated in foreign currencies into the functional currency at the exchange rate applicable on that date. We recognise exchange differences arising from the translation of monetary items into foreign currency in profit and loss in the period in which they arise, unless hedge accounting is applied to these transactions.

We translate non-monetary assets and liabilities denominated in foreign currencies that we measure at historical cost into the functional currency at the exchange rate applicable on the transaction date.

We recognise exchange rate differences that occur when translating eligible cash flow hedges, to the extent that the hedge is effective, in other comprehensive income.

Going concern

These financial statements have been prepared on the basis of the going concern assumption. We believe that there is no uncertainty about using the going concern assumption.

Elements of the financial statements

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

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

New and amended standards for financial reporting

The following amendments to standards will become effective at the start of the 2024 financial year:

• Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Noncurrent including Classification of Liabilities as Current or Noncurrent – Deferral of Effective Date; and Non-current Liabilities with Covenants;
• Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures – Supplier Finance Arrangements;
• Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback.

The following amendments to standards will become effective at the start of the 2025 financial year:

• Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability.

Furthermore, we expect the standards or amendments to standards as listed below to become effective in the future. EU endorsement has not yet been given for these standards:

• IFRS 18 Presentation and Disclosure in Financial Statements
• IFRS 19 Subsidiaries without Public Accountability: Disclosures
• Annual Improvements Volume 11
• Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7)
• Contracts Referencing Nature-dependent Electricity – Amendments to IFRS 9 and IFRS 7.

Our analysis revealed that the standards already adopted have no material impact on our equity, cash flow and/or result, and that the same will apply to the standards still to be endorsed. For that reason, the consequences of amendments referred to above have not been described in detail in these financial statements. We do expect that certain main statements and disclosures will change as a result of the introduction of IFRS 18, but that the impact of this for us will be relatively limited.

Pillar Two model rules

Gasunie falls under the scope of the Pillar Two model rules introduced by the OECD in 2021. On 31 December 2023, the Minimum Tax Act 2024 came into effect in the Netherlands. The aim of this tax reform is to ensure that multinational enterprises with global revenues exceeding a € 750 million threshold pay a minimum effective tax of 15% on their global profits. The law applies to financial years that begin after 31 December 2023. Besides in the Netherlands, Pillar Two model rules apply in the other jurisdictions in which Gasunie operates, i.e. Germany and Switzerland.

For the 2024 and 2023 financial years, Gasunie has applied the mandatory exception from accounting for deferred taxes arising from Pillar Two (following the amendment of IAS 12 in May 2023). Based on the principles, the current assessment is that we can use the temporary country-by-country reporting (CbCR) safe harbour rule. Top-up tax for a particular jurisdiction does not apply if we pass one of the three tests, i.e. the de minimis test, the CbCR Effective Tax Rate test, or the routine profit test, in that jurisdiction.

Management judgements and estimates

In preparing the financial statements, we have used estimates and assessments that could affect the assets and liabilities presented as at the balance sheet date and the result for the financial year. The actual results may differ from these estimates. We review the estimates and underlying assumptions on a regular basis. We recognise revisions to estimates in the period in which the estimate is revised and in future periods affected by the review.

The nature of the judgements and estimates, including the assumptions that accompany the uncertainties, are included in the note to the relevant items in the financial statements if they are deemed necessary for providing the required disclosure.

The effect of our judgements and estimates is significant for the:

• measurement of fixed assets (as disclosed in notes ‎4 ‘Impairment tests’, ‎5 ‘Tangible fixed assets’ and ‎6 ‘Intangible fixed assets’);
• measurement of other equity interests (as disclosed in note ‎10 ‘Other equity interests’); 
• measurement of deferred tax assets (as disclosed in note ‎11 ‘Deferred tax assets’);
• measurement of certain pension liabilities (as disclosed in note ‎22 ‘Employee benefits’);
• measurement and determination of the provision for abandonment costs (as disclosed in note ‎23 ‘Other provisions’);
• measurement of the derivative financial instruments (as disclosed in note ‎24 ‘Derivative financial instruments’).
• classification of investment in joint operations and joint ventures (as disclosed in notes ‎7 Investments in joint operations’ and ‎8 ‘Investments in joint ventures’).

In certain cases, developments in the area of the energy transition, environmental and climate objectives and/or geopolitical developments also affect the judgements and estimates as stated above. We take these developments into account in our judgements and estimates.

Determination of fair value

The determination of fair value is required for a number of accounting policies and disclosures. The fair value of a financial instrument is the amount for which we can trade an asset or settle a liability with parties knowledgeable about the matter who are willing to enter into a transaction and from whom we are independent. We measure the fair value as follows:

• We determine the fair value of listed financial instruments on the basis of the exit price.
• We determine the fair value of non-listed financial instruments by calculating the present value of the expected cash flows at a discount rate equal to the applicable risk-free market rate for the remaining term, plus credit and liquidity surcharges.
• We determine the fair value of derivatives for which we do not exchange any collateral by calculating the present value of the cash flows by means of the relevant swap curve plus credit and liquidity surcharges.

When determining the fair value of an asset or a liability, we make as much use as possible of market-observable data. We use a fair value hierarchy of disclosures, classifying fair values according to the quality of inputs used in our fair value estimates (‘fair value levelling’). The various levels are defined as follows:

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

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

We recognise reclassifications between levels of the fair value hierarchy at the end of the reporting period in which the change has taken place. We continually assess changes to significant information we use and, where necessary, adjust the fair value determination accordingly.

We exercise control if we, either directly or indirectly:

• have power over the relevant activities of the group company in question, are exposed to or entitled to variable returns from our involvement with the company; and 
• have the ability to use our power over the group company to influence the amount of our revenue.

Generally, we assume that we exercise control if we hold more than 50% of the voting rights. However, we consider all facts and circumstances when assessing each participating interest. When circumstances change, we reassess whether or not we exercise control.

We fully consolidate group companies from the date on which control of the group company is obtained. If we lose such control, we derecognise the assets and liabilities of that company, including non-controlling interest and other assets relating to that group company, from the date that our control ceases to exist. In the event of loss of control, we determine the fair value of the interest we retain and apply this as the initial carrying amount of the remaining interest. Differences between the carrying amount and the fair value of the interest we retain (determined at the time of loss of control) are recognised in profit and loss. This also applies to the result on the part of the interest we have disposed of.

We measure the items in the consolidated financial statements in accordance with the company’s accounting policies. We eliminate intra-group balances and transactions, as well as any unrealised profit and losses from intra-group transactions.

Consolidation scope

In note ‎62 ‘List of group companies and participating interests’ we have included a list of all the group companies in the consolidation.

Business combinations, goodwill and bargain purchases

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

We designate any surplus of the acquisition price above our share in the fair value of the net identifiable assets, liabilities and contingent liabilities as goodwill and recognise this under intangible fixed assets. After initial recognition, we measure goodwill at cost less any accumulated impairments. A bargain purchase gain occurs when, in an acquisition, our share in the net fair value of the identifiable assets, liabilities and contingent liabilities is higher than the acquisition price. We immediately recognise this gain in the statement of profit and loss at the acquisition date.

Non-controlling interest in equity and results

We present non-controlling interest in the equity and results separately. When initially recognising a non-controlling interest, we can choose to measure this interest at the proportionate part of the fair value of the assets acquired and liabilities assumed or the fair value of the non-controlling interest itself. We may make this choice separately for each individual transaction.

Fixed assets

Tangible fixed assets

We measure tangible fixed assets at cost, less any accumulated depreciation and accumulated impairments. When initially measured, the costs of periodic major repairs are recognised in the carrying amount of the asset on the basis of the component approach. This also applies, where appropriate, to the costs of abandonment and/or the costs of demobilisation. We capitalise interest expenses if they relate to the purchase, construction or production of qualifying assets, provided the assets need a substantial period (more than one year) before being ready for their intended use.

We determine depreciation by writing off the costs of the tangible fixed assets, less their estimated residual value, on a straight-line basis over their estimated useful life. We do not calculate depreciation on land, sites or the volumes of linepack or of cushion gas in the caverns.

A substantial part of the assets is intended for regulated business operations. Regulation of future cash flows by the regulatory authority will determine the recoverable amount of the regulated assets. We make significant estimates and judgements in this regard, in particular with regard to the useful life, residual value, and future cash flows of gas transmission. We annually review the residual value of the asset, the useful life and the depreciation methods, and we adjust this if necessary. In note ‎5 ‘Tangible fixed assets’ we provide a more detailed explanation of the expected useful life of the assets, including our considerations with regard to the energy transition.

We divided tangible fixed assets into categories. We determine the useful life and associated depreciation period for each category. In note ‎5 ‘Tangible fixed assets’ we describe the categories and give the depreciation period for each category.

We deduct third-party contributions to the cost of construction of the energy infrastructure from the investments, insofar as such contributions are either government-sourced (including grants) or not related to transport capacity. We recognise customer contributions to investments that are related to transmission capacity in the balance sheet as contract liabilities and we credit these to profit and loss at regular intervals in accordance with the expected useful life of the asset (as an indication of the expected term of the contract). If there is a significant financing component in the customer contributions, we recognise the finance expenses under financial expenses. We describe this recognition in more detail under ‘Net revenue’ in these accounting policies.

We recognise tangible fixed assets not yet in operation as at the balance sheet date as ‘Fixed operating assets under construction’. On commissioning, we classify the relevant assets according to their type in one of the main categories. We include the volumes of linepack in the transmission network and cushion gas in the storage caverns (needed for gas transmission and storage and related services) under ‘Other fixed operating assets’. If any changes occur in the volume of linepack and/or cushion gas, we use the average gas price for the period in which the change took place as the cost price.

We recognise any loss on disposal of a tangible fixed asset under depreciation costs in profit and loss at the time of decommissioning; we recognise any profit under ‘other revenue’.

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

Intangible fixed assets

We recognise intangible fixed assets in the balance sheet if it is likely that the future benefits inherent in that asset will accrue to us and if we can reliably determine the costs of the asset. We measure intangible fixed assets at the acquisition price or cost of production less accumulated depreciation and any accumulated impairments. We calculate the depreciation of the capitalised amounts using the straight-line method based on the expected useful life of the asset.

We add the expenses arising after initial recognition of an intangible fixed asset to the acquisition price or cost of production if it is probable that the expenses will lead to an increase in the expected future economic benefits and we can reliably calculate the expenses and reliably allocate these to the asset. If the conditions for capitalisation are not met, we recognise the expenses as costs in profit and loss.

Intangible fixed assets do not include the IT operating system for the transmission and storage network. Given that this operating system is an inextricable part of the transmission and storage network, we present this software under tangible fixed assets.

We measure advance payments for intangible fixed assets at acquisition price or cost of production. We do not calculate depreciation on advance payments for intangible fixed assets. The principles for determining and recognising impairment are included under ‘Impairment of fixed assets’ in these accounting policies.

Investments in joint operations

Investments in joint operations are participating interests in which we exercise joint control, have the rights to assets, and have liabilities with respect to the participating interest’s debts.

In our financial statements we have included the rights to the assets and liabilities with respect to the participating interest’s debts, and the associated rights relating to the joint operations’ revenues and expenses.

Investments in joint ventures and associates

Investments in joint ventures are participating interests in which we exercise joint control with other parties and have rights to the participating interests’ net assets. Investments in associates are participating interests in which we exercise significant influence on operating and financial policies, but have no control.

We measure these participating interests using the equity method. In accordance with this method, we measure the participating interests at cost (including goodwill) plus the share in the result and the share in other comprehensive income from the moment of acquisition less the share in dividend payments. We recognise our share in the result of joint ventures in the statement of profit and loss and in the consolidated statement of other comprehensive income.

In the event of loss of joint control in a joint venture or loss of significant influence over an associate, we determine the fair value of the interest we retain and apply this as the initial carrying amount of the remaining interest. We recognise differences between the carrying amount and the fair value of the joint venture or the associate (determined at the time of loss of joint control in a joint venture or loss of significant influence over an associate) in profit and loss. This also applies to the result on the part of the interest we have disposed of.

If our interest in a joint venture or an associate changes while we still retain joint control or significant influence respectively, no remeasurement of the existing interest will take place.

Elimination of transactions with participating interests

We eliminate unrealised profit from transactions with participating interests measured using the equity method in proportion to our share in the participating interest.

Other equity interests

On the basis of IFRS 9, we measure other equity interests at fair value after initial recognition, taking unrealised gains or losses to other comprehensive income. No recycling takes place through the statement of profit and loss.

When determining the fair value of the other equity interests, we make assumptions and estimates, including relating to expected dividends, cash flows and discount rates. In note ‎10 ‘Other equity interests’ and note ‎28 ‘Financial instruments’ we describe the key assumptions.

If we cannot reliably determine the fair value based on these assumptions, we use the cost or net asset value as the basis for fair value and state such in the notes to the financial statements.

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

Impairment of fixed assets

At the end of every reporting period, we analyse tangible and intangible fixed assets and non-current financial assets for any signs of impairment and, if we discover such, we determine the recoverable amount of the assets. The recoverable amount is the higher of the fair value less costs to sell (e.g. based on a sales contract less the costs of disposal) and the value in use (based on the results of a value-in-use calculation for example). If the recoverable amount is less than the carrying amount, we take the difference to profit and loss. Due to the nature of the tangible fixed assets, it is often not possible for us to determine the recoverable amount of an individual asset. In such cases, we determine the recoverable amount of the cash-generating unit to which the asset belongs.

We also investigate at regular intervals whether there are any signs that an impairment recognised in previous periods no longer exists or has decreased. If we find that an impairment recognised in the past no longer exists or has decreased, we do not set the increased carrying amount of the relevant asset or cash-generating unit higher than the carrying amount which would have been determined if no impairment for the asset or cash-generating unit had been recognised. We recognise any reversal of an impairment recognised in the past in the statement of profit and loss.

Current assets

Inventories

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

Inventories also includes the surplus emission allowances, i.e. the emission allowances that are not required at the end of the financial year to meet the emission obligation for the financial year under the EU Emissions Trading Scheme (EU ETS). Emission allowances are measured at cost. We hold emission allowances only for our own use and not for trading purposes. We only include an obligation (liability) under the EU ETS if the actual emissions at the end of the financial year are higher than the number of available certificates (the ‘net approach’). We measure such a liability at the fair value of the emission allowances yet to be acquired.

Trade and other receivables

At initial recognition, we measure trade and other receivables at fair value. After initial recognition, we recognise trade and other receivables at amortised cost because our business model concerns the collection of contractual cash flows under the aforementioned receivables and the cash flows relate solely to the payment of principal and interest.

Owing to the short term of the trade and other receivables, we use the simplified IFRS 9 method to measure trade and other receivables (based on the lifetime expected credit losses). In this context, we create an allowance to cover the expected credit losses, based on amounts yet to be received and the probability of non-payment. We also take into account any securities provided that may mitigate the credit loss.

Cash and cash equivalents

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

We hold cash and cash equivalents for the purpose of meeting our current liabilities. In principle, we do not hold cash and cash equivalents for making investments or for other purposes.

Derivative financial instruments

Derivative financial instruments – with application of hedge accounting

As required, we, or our non-consolidated participating interests, make use of derivative financial instruments in certain cases to manage financial risks arising from future transactions (cash flows). We initially recognise these instruments at fair value on the date on which the contract is concluded (the value is generally zero at the outset). We subsequently remeasure the fair value at the end of every reporting period. We recognise gains or losses on the effective part of the hedging instrument in the cash flow hedge reserve in equity, net of deferred taxation. We take any ineffective parts directly to profit and loss.

When we wind up a hedging instrument, we continue to recognise gains or losses on the effective part in equity for as long as the underlying cash flow is expected to occur. If we no longer expect underlying cash flow, we take the gains or losses on the effective part, which has been deferred in equity, directly to profit and loss.

We recognise effective derivative financial instruments designated for hedge accounting in the same way as the hedged position. Depending on the nature and the term of the underlying contract, we classify the instruments as either non-current or current.

Derivative financial instruments – without application of hedge accounting

Changes to other derivative financial instruments for which we do not use cash flow hedge accounting are immediately recognised in the fair value in profit and loss from initial recognition onwards.

Commodity contracts

In accordance with IFRS 9.2.4, we do not include commodity contracts, such as purchase of energy for the company’s operating activities, in the balance sheet.

Non-current liabilities

Non-current liabilities are liabilities with a remaining nominal term of more than one year. We include repayment obligations that are due within a year under current liabilities.

We initially recognise interest-bearing loans at fair value less transaction costs. After initial recognition, we measure interest-bearing loans at amortised cost on the basis of the effective interest method, recognising the transaction costs and the discount in profit and loss in the period to which they relate. We recognise discount and transaction costs not yet taken to profit and loss as a reduction in the non-current liabilities to which they relate.

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

When the contractual obligation has lapsed or expired, we no longer recognise these loans in the balance sheet.

Employee benefits

We recognise employee benefits as an expense in the statement of profit and loss in the period in which an employee performs the work and, until distributed, as a liability in the balance sheet. Personnel expenses include all costs related to employee benefits during and after employment. In addition to the liabilities that are legally enforceable, our liabilities with respect to employee benefits also include any liabilities involving a situation where we have no realistic alternative other than to comply with the obligation (‘constructive obligations’).

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

Personnel-related provisions

Personnel-related provisions comprise the provision for pension liabilities and other staff-related provisions.

Provision for pension liabilities

We have entered into pension plans entitling our employees to a number of benefits, including a retirement pension and a dependants’ pension.

The pension plan for employees of Gasunie in the Netherlands is a defined contribution pension plan. Under this pension plan, we have committed ourselves to paying a fixed, predetermined contribution to the independent company pension fund (Stichting Pensioenfonds Gasunie). Employees of Gasunie Deutschland who joined the company in or after 2012 are enrolled in an insured pension plan. This pension plan also qualifies as a defined contribution plan. 

The basic principle for recognition of both plans is that the expenses to be recognised in the reporting period equal the contributions payable to the pension provider or insurer for that same period. We recognise a liability for contributions that are due but have not yet been paid by the balance sheet date. If contributions prepaid by the balance sheet date exceed the total contributions payable, we will include an accrued income item to the extent that the pension fund or insurer will refund the excess contributions paid or offset this amount against future contributions.

Employees of Gasunie Deutschland who joined the company before 2012 are enrolled in a defined benefit pension plan. We calculate the present value of the provision for pension liabilities for these employees using the projected unit credit method. Significant assumptions have been made in the calculation about the market interest rate on high-quality corporate bonds for the purpose of determining the discount rate, expected future increases in salary, expected future increases in pensions and average life expectancy. For more information on these variables see note ‎22 ‘Employee benefits’ to the consolidated financial statements.

We recognise actuarial gains and losses and experience adjustments in the statement of other comprehensive income and subsequently take these to equity in the period in which they occur, net of deferred taxation. We have the relevant actuarial calculations drawn up and assessed annually by external actuaries.

Provision for long-service awards

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

Provision for costs of post-employment fringe benefits for non-active and retired employees

This provision relates to certain allowances we pay to our employees after they retire. It represents the present value of the benefits already committed to non-active and retired employees. Account is taken of life expectancy and a pre-tax discount rate that incorporates the prevailing market assessments of the time value of money and the risks inherent in the obligation.

At the end of every reporting period, we assess the assumptions on which the personnel-related provisions are based and adjust these based on mortality tables, interest and cost developments and other relevant information.

Other provisions

We recognise provisions in the balance sheet if:

• there is a present legal or constructive obligation resulting from a past event; 
• we can make a reliable estimate for the obligation; and
• it is probable that an outflow of resources is required to settle that obligation.

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 obligation, taking into account the probability of the event.

Other provisions comprise the provision for certain abandonment costs.

Provision for abandonment costs

The provision for abandonment costs recognised in the balance sheet has been formed for decommissioned assets for which we have an obligation to remove these and remediate the site based on laws and regulations and/or rights and permits. The provision is intended for the expected costs of decommissioning and dismantling assets and any additional decommissioning costs. We determine the size of the provision partially on the basis of experience figures derived from previous removal/remediation works and based on the technical feasibility of removing the assets.

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

For a more detailed explanation of the assets for which we have not formed a provision for abandonment costs see note ‎29 ‘Off-balance sheet assets and obligations’.

Leases

Initial recognition and measurement of leases is as follows:

• We break down lease liabilities into lease and non-lease components. The non-lease components are not considered to fall within the scope of IFRS 16. We recognise the costs resulting from these non-lease components in profit and loss in the period to which they refer.
• We determine the expected term of the lease liability on the basis of the contractual term of the agreement, taking into account any potential options for extension and termination, in the event that we may reasonably be expected to use them.
• If applicable, we take residual value guarantees, significant variable lease payments and penalty clauses into account when measuring the lease liabilities.
• In principle, we discount the present value of the lease liabilities at the implicit interest rate. Where the implicit interest rate cannot be directly derived from the leases, we use our incremental borrowing rate. We use a borrowing rate representative of the portfolio as a whole for portfolios of leases with similar features.
• We initially recognise the right-of-use asset connected with the lease in the balance sheet at the present value of the lease liability, plus any directly attributable costs and costs of abandonment and/or costs of demobilisation.
• Leases with a term of less than one year or with a contract value of less than € 5,000 are not included in the balance sheet, in accordance with the provisions of IFRS 16.

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

The subsequent measurement of the leases is as follows:

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

Current liabilities and other financial obligations

After initial recognition, we measure current liabilities and other financial obligations at amortised cost based on the effective interest method. We recognise the effective interest directly in the statement of profit and loss.

Determination of the result

We calculate the result as the difference between the revenue from services rendered to meet performance obligations and the costs and other expenses incurred over the year. We recognise revenues from transactions in the year in which the services under the performance commitments were rendered.

Net revenue

Net revenue is the sum of revenues from gas transmission and transport, gas storage and related services provided to third parties, after deduction of discounts (for non-regulated services and/or services exempt from regulation) and taxation on these revenues, such as VAT. Income is subject to key estimates we make regarding the interest rate in the case of contract liabilities with a significant financing component to them.

If we can reliably estimate the result of a transaction involving the rendering of a service, we recognise the revenues relating to the service in proportion to the services rendered in the financial year. We provide services in the area of gas transmission, transport and storage and related activities. We offer these services as capacity services. This gives our customers the right to use pre-agreed capacities for a pre-contracted period (hour, day, month, etc.). We regard the service as rendered over the period concerned and recognise the revenue accordingly.

We can reliably determine the realisation of net revenues. Our only compensation from customers are the amounts determined in accordance with the contractually agreed remuneration methods.

The tariffs for our regulated activities are set by the independent regulatory authorities in the Netherlands and Germany. We do not apply any discounts to regulated revenues. Customer contributions to the cost of construction or improvement of transmission/transport infrastructure or discounts/prepayments in the non-regulated segment and/or segment exempt from regulation are a possibility, however. We treat these customer contributions and discounts/advance payments as contract liabilities or contract receivables and recognise them in the balance sheet, periodically charging or crediting these to profit and loss over the term of the contract. In the event that a contract liability or contract receivable contains a significant financing component, we determine the value of this component based on an estimate of the relevant interest rate. We recognise the financing component in the financial income and expenses in the period to which it relates.

Capitalised expenses

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

Government grants

We credit operating grants to the profit and loss under ‘other revenue’ in the year to which the subsidised spending is allocated. We include any prepayments on operating grants under liabilities and amounts still to be received under receivables.

We initially present prepayments on investment grants under the other liabilities. As soon as investment spending starts and meets the conditions for capitalisation, we then deduct the investment grants from the tangible fixed assets for which the grant was awarded. We include any portion of investment grants still to be received under receivables.

Other costs

We recognise the other costs in the reporting period to which they relate.

Financial income and expenses

Included in this item are income and expenses relating to financing and similar income and expenses. We recognise interest income and similar income in the period to which it relates, taking into account the effective interest rate for the asset concerned, provided the income can be measured and is likely to be received. We recognise interest expenses and similar expenses in the period to which they relate. Financial expenses also include the amortisation of discount and transaction costs.

We describe the recognition of capitalised interest expenses under the heading ‘Tangible fixed assets’ in these accounting policies.

Income taxes

Income tax comprises tax on profits and deferred tax payable for the reporting period, as well as any tax expenses and/or tax income from prior periods. We take these taxes to profit and loss, except when they relate to items we recognise directly in equity, in which case we also recognise the tax effect directly in equity.

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

If the carrying amount of assets and liabilities for financial reporting purposes differs from their carrying amounts for tax purposes, these are classed as temporary differences. For all taxable temporary differences that qualify for it, we recognise a deferred tax liability. For all deductible temporary differences that qualify for it, we recognise a deferred tax asset, to the extent that it is likely that sufficient taxable profit will be available for future set-off. For this purpose, we make assumptions about our future taxable profits and the point at which the temporary differences are realised. We have included further information about this in note ‎11 ‘Deferred tax assets’.

We measure deferred tax liabilities and assets at the nominal value. For the measurement, we use the tax rates that are expected to apply in the period in which the deferred tax items will be realised, basing this on the tax rates and tax legislation effective as at the balance sheet date. We take the results of movements in corporate income tax arising from any rate changes to profit and loss, with the exception of such results for transactions that were originally taken directly to equity, in which case we also take the results of such movements in corporate income tax for these transactions directly to equity.

We present tax assets and liabilities, whether deferred or not, as a net amount if:

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

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

Financial information by operating segment

We explain per segment the information on operations for which separate financial information is available and for which we regularly assess the operating results. We have defined the following operating segments:

• Gasunie Transport Services 
• Gasunie Deutschland 
• Participations

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

Cash flow statement

We determine the cash flow from operating activities using the indirect method, based on the net revenue and the total expenses presented in the consolidated statement of profit and loss. The cash and cash equivalents in the cash flow statement consist of cash and cash equivalents that we can convert into a known cash amount without restrictions and without significant risk of impairments as a consequence of the transaction.

We recognise 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’.

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

We allocate cash flows from derivative financial instruments that we recognise as cash flow hedges to the same category as the cash flows from the hedged positions.

Events after the balance sheet date

We recognise events that provide further information about the actual situation at the balance sheet date and that appear before the date on which the financial statements are prepared in the financial statements.

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