2.Change in accounting methods

2.1.Standards and interpretations applied or amended and adopted by the EU for the first time

IFRS 9 (Financial Instruments)

IFRS 9, issued in July 2014, replaces the existing guidelines in IAS 39 (Financial Instruments: Recognition and Measurement). IFRS 9 contains revised guidelines for the classification and measurement of financial instruments, including a new Expected Credit Losses Model to calculate the impairment of financial assets, as well as the new general reporting requirements for hedge accounting. It also applies the principles for the recognition and derecognition of financial instruments required under IAS 39.

IFRS 9 is applied for the first time in fiscal year 2018/2019. The option to provisionally maintain the guidelines of IAS 39 for the accounting of hedging transactions is not exercised. IFRS 9 is applied prospectively, where applicable.

In accordance with IAS 39, unlisted equity instruments classified as available for sale did not have to be measured at their fair value if the value cannot be reliably ascertained. IFRS 9 does however strictly require their measurement at fair value. This results in a write-up to an investment recognised under other investments (previously AfS (at cost), carrying amount as of 30 September 2018: EUR 8,534.4 thousand, now FVOCI) by EUR 4,702.0 thousand. The other effects are immaterial.

IFRS 9 no longer permits the reclassification of accumulated profits or losses from equity instruments recognised in the other comprehensive income to profit or loss.

Securities that were classified as AFS under IAS 39 (carrying amount as of 30 September 2018: EUR 17,972.8 thousand) will now be allocated to the FVOCI category (equity instruments) in the amount of EUR 14,892.1 thousand and to the FVPL category (debt instruments) in the amount of EUR 3,080.7 thousand.

The financial assets in the LaR category were classified as measured at “amortised costs” (AC) in accordance with IFRS 9. A loss allowance is recognised for expected credit losses. If the credit risk has not increased significantly since the initial recognition, an allowance in the amount of the credit losses expected over a period of 12 months will be recognised. An allowance for trade receivables is, differently to what was explained above, recognised in the amount of the credit losses expected over the full term. If the credit risk has increased significantly since the initial recognition, the allowance amount will correspond to the amount of credit losses expected over the full term. The expected credit risk is determined on the basis of historical information about payment defaults, or on the basis of credit loss probabilities determined internally or procured from external financial service providers.

Recognition of impairments for these financial assets on 1 October 2018 has resulted in a reduction of the carrying amounts for lendings to companies in which a participating interest is held (EUR -120.5 thousand), other lendings (EUR -23.2 thousand), trade receivables (EUR -266.7 thousand) and fixed term deposits (EUR -242.2 thousand).

Derivatives with a cash flow-hedge relationship and derivatives with a fair value-hedge relationship are also classified effective hedging transactions under IFRS 9.

The following table shows the previous measurement category and carrying amount determined in accordance with IAS 39, as well as the new measurement category and carrying amount determined in accordance with IFRS 9 at the time of the initial application of IFRS 9:

In accordance with IFRS 9, financial instruments that were classified as AtFVP&L (FV option) on 30 September 2018 will have to be classified as FVPL.

The effects of the initial application of IFRS 9 on equity are as follows:

IFRS 15 (Revenue from Contracts with Customers)

IFRS 15, which was published in May 2014, replaces the previous rules in IAS 18, IAS 11, IFRIC 13, IFRIC 15 and IFRIC 18. IFRS 15 was for the first time applied in fiscal year 2018/2019.

Using a five-step model, companies must determine at what time (or period) and what amount sales revenues are recognised. The model specifies that sales revenues must be reported at the time (or over the period) of the transfer of control over goods or services from the company to the customer with the amount which the company is expected to be entitled to. Depending on the fulfilment of various criteria, revenues are recognised as follows:

• Over a period such that the service provision of the company is reflected; or
• At a time at which the control over the goods or services is transferred to the customer.

The most important components of the sales revenues are:

• Sales revenues from the delivery of electricity
• Sales revenues from the sale of natural gas
• Sales revenues from the electricity and gas grid
• Sales revenues from waste management (collection, recycling, processing)
• Sales revenues from the delivery of water and intake of waste water

Contracts exist within the Group that provide for contractual obligations consisting of discrete and distinct goods or services. The initial application of IFRS 15 did not result in any changes because the different components are already being factored in, recorded and billed separately.

IFRS 15 requires qualitative and quantitative information that allows the target audience of the financial statements to understand the type, amount, time and uncertainty of sales revenues and cash flows from contracts with customers.

In accordance with IFRIC 18, revenues from construction cost subsidies in the amount of EUR 26.6 million were previously recognised as sales revenues over the respective useful life of the asset. In the future, construction cost subsidies will be recognised in accordance with IFRS 15. This will not result in any changes to the recognition and measurement of construction cost subsidies under IFRIC 18.

Its first-time application had retrospective effect, with any accumulated adjustment amounts from the initial application being recognised at the time of the initial application (modified retrospective application). The initial application of IFRS 15 did not result in any adjustment amounts.

Other applicable new standards

Newly applicable amended standards and interpretations adopted by the EU that take effect on 1 January 2018 or later:

• IFRS 2 (Amendments: Classification and Measurement of Share-based Payment Transactions)
• IAS 40 (Amendments: Transfer of Investment Property)
• IFRS 4 (Amendments: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts)
• Annual Improvements to IFRS Standards 2014-2016 Cycle (Amendments to IFRS 1 and IAS 28)
• IFRIC 22 (Foreign Currency Transactions and Advance Consideration)

The initial application does not result in any material changes.

2.2. Standards and interpretations that have not been applied early

In the 2018/2019 Consolidated Financial Statements, the following amendments adopted by the EU were not applied early:

Entry into force in the EU on 1 January 2019:

• IFRS 16 (Leases)
• IFRS 9 (Amendments: Prepayment Features with Negative Compensation)
• IFRIC 23 (Uncertainty over Income Tax Treatments)
• IAS 28 (Amendments: Long-term Interests in Associates and Joint Ventures)
• IAS 19 (Amendments: Plan Amendment, Curtailment or Settlement)
• Annual Improvements to IFRS Standards 2015-2017 Cycle (Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23)

The following standards and interpretations, amendments and improvements of standards enter into force on 1 January 2020 or a later date, although they have not yet been adopted by the European Union at this time:

• Amendments to References to the Conceptual Framework in IFRS Standards
• IFRS 3 (Amendments: Definition of a Business)
• IAS 1, IAS 8 (Amendments: Definition of Material)
• IFRS 9, IAS 39 and IFRS 7 (Amendments: Interest Rate Benchmark Reform)
• IFRS 17 (Insurance Contracts)

These standards are expected to be applied on the effective date promulgated by the EU.

The following standard came into force on 1 January 2016, but was not adopted by the EU:

• IFRS 14 (Regulatory Deferral Accounts)

Application of the following standard was postponed indefinitely:

• IFRS 10 and IAS 28 (Amendments: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture)

With the exception of IFRS 16 (Leases), initial application is not expected to have any material effects on the Consolidated Financial Statements.

IFRS 16 (Leases)

IFRS 16 was published in January 2016 and replaces IAS 17, IFRIC 4, SIC-15 and SIC-27. The new standard provides that in future all leases and the contractual rights and obligations associated with them must be reported on the balance sheet of the lessee. The previously different treatment of operating and finance leases by the lessee as prescribed under IAS 17 is abolished. The lessee will recognise a right-of-use asset representing its right to use an underlying asset and a lease liability in the amount of the lease's present value. The right of use asset must then be amortised and the lease liability carried forward using the effective interest method. There are exemptions possible for short-term leases and leased properties of low value.

The most material change concerns the Group's head office in Linz. The use of the Group's head office is currently arranged on the basis of an operating lease. Under the current conditions, it is expected that a right-of-use asset and a lease liability in the amount of EUR 40.2 million (estimated lease liability as per 1 October 2019) will have to be recognised. In addition, portfolio contracts regarding property were localised in the Waste Management segment resulting, based on the currently available information, in the recognition of a right of use asset and a corresponding liability in the amount of EUR 25.6 million.

The Group applies IFRS 16 to all contracts that were concluded prior to 1 October 2019 and identified as leases under IAS 17 and IFRIC 4. Current finance leases will be continued; the assets will merely be reclassified as right-of-use assets. This predominantly relates to assets in the Waste Management segment, which were sold in the 2007/2008 fiscal year and leased back for a term of 15 years (“sale and leaseback”). The carrying amount of these assets was EUR 19.3 million as of 30 September 2019.

From today's perspective, the remaining leases are of subordinate importance, both individually as well as in their entirety.

IFRS 16 is not applied to short-term leases and leases concerning an underlying asset of minor value. In accordance with IFRS 16.4, the company has opted out of voluntary application of IFRS 16 for intangible assets. Application takes place with retrospective effect by recognising the accumulated effect at the time of initial application. The initial application will take place in the fiscal year 2019/2020.