2.Change in accounting methods

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

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 all leases and the contractual rights and obligations associated with them must be reported on the lessee's statement of financial position. This resolves the current differences in the recognition of operating and finance leases under IAS 17 by the lessee. The lessee recognises a right-of-use asset representing its right to use an underlying asset and, at the same time, a lease liability in the amount of the present value of the lease payments. Discounting takes place at the lease-specific interest rate, or the incremental borrowing interest rate if the lease-specific interest rate cannot be determined. Depending on the term, an incremental borrowing interest rate of 1.2% or 1.7% was assumed to apply on 1 October 2019. The right of use asset is then amortised and the lease liability carried forward using the effective interest method.

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 standard is applied for the first time in the 2019/2020 fiscal year. The Group applies IFRS 16 to all contracts 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. The option to waive impairment testing for leases was exercised in favour of an assessment on whether the contract is onerous, to be carried out immediately before first-time application. Additionally, the term of leases that provide for an extension or termination option was determined retrospectively.

The initial application of IFRS 16 additionally affects the Consolidated Financial Statements as follows: 

The Group has been leasing the property at Böhmerwaldstraße 3, Linz, where Group headquarters is located, from Power Tower GmbH since the year 2008. The Group holds a 1% share in the entity.

The entity is not funded by the Group. The leasing contract is for an indefinite period, cancellation by the lessee is only possible 20 years after the start of the contract at the earliest, under certain circumstances only after 23 years. The Group has the unilateral right, but no obligation, to acquire Power Tower GmbH 15 or 20 years after the commencement of the lease.
Leasing payments are linked to interest rate developments. The Group is required to perform the ongoing maintenance of the property and fulfill all legal requirements that could also apply to the owner. There are no other additional risks. In the past, the lease was classified as an operating lease contract in line with IAS 17. Power Tower GmbH is to be considered a structured entity pursuant to IFRS 12, but the lack of control means that it is not to be included as a subsidiary in the Consolidated Financial Statements. In accordance with IFRS 16, a right of use asset and a lease liability in the amount of EUR 39.9 million have been recognised as of 1 October 2019.

In the Waste Management Segment, portfolio contracts concerning properties resulted in the recognition of right-of-use assets and corresponding liabilities in the amount of EUR 25.7 million.

Additionally, in the 2007/2008 fiscal year, plant and equipment assets were sold and leased back for a term of 15 years (“sale-and-leaseback”) in the Waste Management Segment. In accordance with IAS 17, the lease was classified as a finance lease. The assets continued to be capitalised in the Statement of Financial Position until 30 September 2019. The present value of the minimum lease payments is recognised in the same amount on the liabilities side. At the end of the lease term, the lessor has the right to sell the asset to the lessee at the outstanding loan amount. During the leasing term, subleasing to third parties is not permitted. As of 1 October 2019, the carrying amount of the assets of EUR 19.3 million was transferred into a right of use asset. The corresponding liability amounts to EUR 46.2 million.

As of 30 September 2020, the lease liability amounts to EUR 113.1 million (up to 1 year: EUR 7.2 million, 1-5 years EUR 55.3 million, more than 5 years EUR 50.6 million). The Statement of Financial Position recognises the lease liabilities in the item for financial liabilities.

For fiscal year 2019/2020, the cash outflows for leases amount to EUR 8,719.6 thousand. The expenses for leases not recognised in accordance with IFRS 16 amount to EUR 3,561.0 thousand.

Reconciliation of the liabilities from rentals and leases to the lease liability as of the date of initial application presents as follows:

The item property, plant and equipment recognises the following right of use assets:

Other applicable new standards

Newly applicable amended standards and interpretations adopted by the EU that take effect on 1 January 2019 or later:

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

The initial application does not result in any material changes.

2.2. Standards and interpretations that have not been applied early

In the 2019/2020 Consolidated Financial Statements, the following amendments adopted by the EU were not applied early:

Entry into force in the EU on 1 January 2020:

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

Entry into force in the EU on 1 June 2020:

• IFRS 16 (Amendments: Leases Covid-19-Related Rent Concessions)

The following standards and interpretations, amendments and improvements of standards enter into force on 1 January 2021 or a later date, although they have not yet been adopted by the European Union at this time:

• IFRS 17 (Insurance Contracts including Amendments)
• IAS 1 (Classification of Liabilities as Current or Non current including Deferral of Effective Date)
• IFRS 3 (References to the Conceptual Framework)
• IAS 37 (Onerous Contracts Costs of Fulfilling a Contract)
• IAS 16 (PP&E: Proceeds before Intended Use)
• Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments: IFRS 1, IFRS 9 , IFRS 16 und IAS 41)
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2

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)

The first-time application of the following standards is not expected to result in any significant implications for the Consolidated Financial Statements.