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Document 52019DC0312

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION FOR THE FINANCIAL YEAR 2018

COM/2019/312 final

Brussels, 26.6.2019

COM(2019) 312 final

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS

ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION FOR THE FINANCIAL YEAR 2018


Annual accounts
of the European Commission

Financial year 2018    

CONTENTS

 

CERTIFICATION OF THE ACCOUNTS    

FINANCIAL STATEMENTS AND EXPLANATORY NOTES    

BALANCE SHEET

STATEMENT OF FINANCIAL PERFORMANCE

CASHFLOW STATEMENT

STATEMENT OF CHANGES IN NET ASSETS

NOTES TO THE FINANCIAL STATEMENTS

BUDGETARY IMPLEMENTATION REPORTS    

 

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Commission for the year 2018 have been prepared in accordance with the Financial Regulation applicable to the general budget of the European Union and the accounting rules adopted by myself in my capacity as the Commission's Accounting Officer, as are to be applied by all the institutions and Union bodies.

I acknowledge my responsibility for the preparation and presentation of the annual accounts of the European Commission in accordance with Article 77 of the Financial Regulation.

I have obtained from the authorising officers, who certified its reliability, all the information necessary for the production of the accounts that show the European Commission's assets and liabilities and the budgetary implementation.

I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the accounts, I have a reasonable assurance that the accounts present fairly, in all material aspects, the financial position, the results of the operations and the cash flow of the European Commission.

[signed]

Rosa ALDEA BUSQUETS

Accounting Officer of the Commission

21 June 2019

 

EUROPEAN COMMISSION

FINANCIAL YEAR 2018

FINANCIAL STATEMENTS AND EXPLANATORY NOTES

 

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up.

CONTENTS

BALANCE SHEET    

STATEMENT OF FINANCIAL PERFORMANCE    

CASHFLOW STATEMENT    

STATEMENT OF CHANGES IN NET ASSETS    

NOTES TO THE FINANCIAL STATEMENTS    

1.SIGNIFICANT ACCOUNTING POLICIES

2.NOTES TO THE BALANCE SHEET

3.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE

4.CONTINGENT LIABILITIES AND ASSETS

5.BUDGETARY AND LEGAL COMMITMENTS

6.FINANCIAL INSTRUMENTS DISCLOSURES

7.RELATED PARTIES

8.EVENTS AFTER THE BALANCE SHEET DATE

 

BALANCE SHEET

 

EUR million

Note

31.12.2018

31.12.2017

NON-CURRENT ASSETS

Intangible assets

2.1

168

149

Property, plant and equipment

2.2

8 098

7 544

Investments accounted for using the equity method

2.3

591

581

Financial assets

2.4

63 917

58 533

Pre-financing

2.5

25 807

24 745

Exchange receivables and non-exchange recoverables

2.6

415

619

98 997

92 172

CURRENT ASSETS

Financial assets

2.4

3 875

8 339

Pre-financing

2.5

24 502

24 552

Exchange receivables and non-exchange recoverables

2.6

23 903

11 421

Inventories

2.7

67

62

Cash and cash equivalents

2.8

16 946

23 113

69 293

67 488

TOTAL ASSETS

168 290

159 659

NON-CURRENT LIABILITIES

Pension and other employee benefits

2.9

(79 865)

(72 495)

Provisions

2.10

(3 013)

(2 617)

Financial liabilities

2.11

(52 764)

(49 414)

(135 642)

(124 526)

CURRENT LIABILITIES

Provisions

2.10

(820)

(645)

Financial liabilities

2.11

(2 489)

(6 813)

Payables

2.12

(32 539)

(39 376)

Accrued charges and deferred income

2.13

(62 500)

(63 314)

(98 348)

(110 148)

TOTAL LIABILITIES

(233 990)

(234 674)

NET ASSETS

(65 700)

(75 014)

Reserves

2.14

3 186

3 062

Amounts to be called from Member States*

2.15

(68 885)

(78 077)

NET ASSETS

(65 700)

(75 014)

*    The European Parliament adopted a budget on 12 December 2018 which provides for the payment of the Commission's short-term liabilities from own resources to be collected by, or called up from, the Member States in 2019. Additionally, under article 83 of the Staff Regulations (Council Regulation 259/68 of 29 February 1968 as amended), the Member States shall jointly guarantee the liability for pensions.

 

STATEMENT OF FINANCIAL PERFORMANCE

 

EUR million

Note

2018

2017

REVENUE

Revenue from non-exchange transactions

GNI resources

105 780

78 620

Traditional own resources

3.1

22 767

20 520

VAT

17 624

16 947

Fines

6 740

4 664

Recovery of expenses

3.2

2 213

1 879

Other

3.3

(674)

6 515

154 450

129 145

Revenue from exchange transactions

Financial revenue

3.4

3 103

1 820

Other

3.5

716

692

3 819

2 511

Total Revenue

158 270

131 657

EXPENSES

Implemented by Member States

3.6

European Agricultural Guarantee Fund

(43 527)

(44 289)

European Agricultural Fund for Rural Development and other rural development instruments

(13 149)

(11 359)

European Regional Development Fund & Cohesion Fund

(30 230)

(17 650)

European Social Fund

(11 935)

(7 353)

Other

(2 826)

(1 253)

Implemented by the Commission, executive agencies and trust funds

3.7

(17 576)

(15 763)

Implemented by other EU agencies and bodies

3.8

(3 622)

(3 429)

Implemented by third countries and int. organisations

3.8

(4 016)

(4 115)

Implemented by other entities

3.8

(3 569)

(1 478)

Staff and pension costs

3.9

(7 789)

(6 995)

Changes in employee benefits actuarial assumptions

(3 581)

Finance costs

3.10

(1 640)

(1 849)

Other

3.11

(4 019)

(4 642)

Total Expenses

(143 897)

(123 756)

ECONOMIC RESULT OF THE YEAR

14 372

7 901

 

CASHFLOW STATEMENT

 

EUR million

2018

2017

Economic result of the year

14 372

7 901

Operating activities

Amortisation

29

27

Depreciation

705

630

(Increase)/decrease in loans

1 037

395

(Increase)/decrease in pre-financing

(1 012)

(3 557)

(Increase)/decrease in exchange receivables and non-exchange recoverables

(12 278)

(705)

(Increase)/decrease in inventories

(5)

13

Increase/(decrease) in pension and other employee benefits

7 369

5 945

Increase/(decrease) in provisions

571

850

Increase/(decrease) in financial liabilities

(974)

(313)

Increase/(decrease) in payables

(6 837)

(864)

Increase/(decrease) in accrued charges and deferred income

(814)

(3 713)

Prior year budgetary surplus taken as non-cash revenue

(556)

(6 405)

Remeasurement of employee benefits liability (non-cash movement not included in statement of financial performance)

(4 432)

Other non-cash movements

(70)

4

Investing activities

(Increase)/decrease in intangible assets and property, plant and equipment

(1 307)

(1 382)

(Increase)/decrease in investments accounted for using the equity method

(9)

(53)

(Increase)/decrease in available for sale financial assets

(1 964)

(3 217)

(Increase)/decrease in financial assets at fair value through surplus or deficit

7

(22)

NET CASHFLOW

(6 167)

(4 467)

Net increase/(decrease) in cash and cash equivalents

(6 167)

(4 467)

Cash and cash equivalents at the beginning of the year

23 113

27 579

Cash and cash equivalents at year-end

16 946

23 113

STATEMENT OF CHANGES IN NET ASSETS

EUR million

Amounts to be called from Member States

Accumulated Surplus/(Deficit)

Other reserves

Fair value reserve

Net Assets

BALANCE AS AT 31.12.2016

(79 546)

2 720

311

(76 515)

Movement in Guarantee Fund reserve

(20)

20

Fair value movements

10

10

Other

(7)

47

(46)

(6)

2016 budget result credited to Member States

(6 405)

(6 405)

Economic result of the year

7 901

7 901

BALANCE AS AT 31.12.2017

(78 077)

2 788

275

(75 014)

Movement in Guarantee Fund reserve

(186)

186

Fair value movements

(46)

(46)

Remeasurements in employee benefits liability

(4 432)

(4 432)

Other

(7)

(17)

(24)

2017 budget result credited to Member States

(556)

(556)

Economic result of the year

14 372

14 372

BALANCE AS AT 31.12.2018

(68 885)

2 957

229

(65 700)

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

For further information in addition to the notes below, please also see the 2018 EU consolidated annual accounts.

1.SIGNIFICANT ACCOUNTING POLICIES

The European Commission (hereinafter referred to as the Commission) applies the accounting policies of the European Union (hereinafter referred to as the EU). A summary of the significant EU accounting policies is given below.

 

2.LEGAL BASIS AND ACCOUNTING RULES

The accounts of the EU are kept in accordance with Regulation (EU, Euratom) No 1046/2018 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30 July 2018, p. 1) hereinafter referred to as the 'Financial Regulation' (FR).

In accordance with article 80 of the Financial Regulation, the EU prepares its financial statements on the basis of accrual-based accounting rules that are based on International Public Sector Accounting Standards (IPSAS). These accounting rules, adopted by the Accounting Officer of the Commission, have to be applied by all the institutions and EU bodies falling within the scope of consolidation in order to establish a uniform set of rules for accounting, valuation and presentation of the accounts with a view to harmonising the process for drawing up the financial statements and consolidation.

Application of new and amended European Union accounting rules (EAR)

Revised EAR which is effective for annual periods beginning on or after 1 January 2018

The following accounting rules, adopted by the Accounting Officer of the Commission, became mandatorily effective in the current year:

·Revision of EAR 12 "Employee Benefits": The revised EAR 12 was adopted by the Accounting Officer in 2017 which is based on the new IPSAS 39 “Employee Benefits” published in July 2016. For the first application of the revised EAR 12 there were no significant impacts on the EU consolidated financial statements, aside from the recognition of any gain or loss resulting from changes in the actuarial assumptions, which under the revised EAR is recognised directly in net assets, in contrast with the previous requirement to recognise in surplus or deficit.

New EAR adopted but not yet effective at 31 December 2018

The EU has not applied the following new EAR, which have been adopted by the Accounting Officer of the Commission, but which is not yet effective:

·New EAR 20 "Public Sector Combinations" (effective for annual periods beginning on or after 1 January 2019): The EAR 20, which is based on the IPSAS 40 "Public Sector Combinations", establishes the classification of a public sector combination into two different types depending on whether the transaction takes place under common control or not: (i) amalgamation, in which the transaction is based on the carrying amounts of the entity combined with the EU; and (ii) acquisition, in which the transaction is based on the acquisition date fair values of the entity acquired by the EU. Both have distinct requirements and levels of disclosure, in order to provide a better understanding of its effects to users of the financial statements of the EU.

The impact on the EU financial statements in the year of initial application will depend on whether in that period the EU would enter into a public sector combination transaction.

3.ACCOUNTING PRINCIPLES

The objective of financial statements is to provide information about the financial position, performance and cashflows of an entity that is useful to a wide range of users. For the EU as a public sector entity, the objectives are more specifically to provide information useful for decision making, and to demonstrate the accountability of the entity for the resources entrusted to it. It is with these goals in mind that the present document has been drawn up.

The overall considerations (or accounting principles) to be followed when preparing the financial statements are laid down in EU accounting rule 1 "Financial Statements" and are the same as those described in IPSAS 1: fair presentation, accrual basis, going concern, consistency of presentation, materiality, aggregation, offsetting and comparative information. The qualitative characteristics of financial reporting are relevance, faithful representation (reliability), understandability, timeliness, comparability and verifiability.

4.CONSOLIDATION

Scope of consolidation

The consolidated financial statements of the EU comprise all significant controlled entities (i.e. the EU institutions (including the Commission) and the EU agencies), associates and joint ventures. The complete list of consolidated entities can be found in note 9 of the EU financial statements. It now comprises 52 controlled entities and 1 associate. Entities that fall under the consolidation scope, but which are immaterial to the EU consolidated financial statements as a whole, need not be consolidated or accounted for using equity method where to do so would result in excessive time or cost to the EU. Those entities are referred to as 'Minor entities' and are separately listed in note 9. In 2018, 7 entities have been classified as minor entities.

Controlled entities

The decision to include an entity in the scope of consolidation is based on the control concept. Controlled entities are all entities for which the EU is exposed, or has right, to variable benefits from its involvement and has the ability to affect the nature and amount of those benefits through its power over the other entity. This power must be presently exercisable and must relate to the relevant activities of the entity. Controlled entities are fully consolidated. The consolidation begins at the first date on which control exists, and ends when such control no longer exists.

The most common indicators of control within the EU are: creation of the entity through founding treaties or secondary legislation, financing of the entity from the EU budget, the existence of voting rights in the governing bodies, audit by the European Court of Auditors and discharge by the European Parliament. An individual assessment for each entity is made in order to decide whether one or all of the criteria listed above are sufficient to result in control.

Under this approach, the EU's institutions (except the European Central Bank) and agencies (excluding the agencies of the former 2nd pillar) are considered as under the exclusive control of the EU and are therefore included in the consolidation scope. Furthermore the European Coal and Steel Community (ECSC) in Liquidation is also considered as a controlled entity.

All material "inter-entity transactions and balances" between EU controlled entities are eliminated, while unrealised gains and losses on such transactions are not material and so have not been eliminated.

Joint Arrangements

A joint arrangement is an agreement over which the EU and one or more parties have joint control. Joint control is contractually agreed sharing of control over an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of parties sharing control. Joint agreements can be either joint operations or joint ventures. In case a joint arrangement is structured through a separate vehicle and parties to the joint arrangement have rights to the net assets of the arrangement, this joint arrangement classifies as a joint venture. Participations in joint ventures are accounted for using the equity method (see note 1.5.4). In case the parties have rights to the assets, and obligations for the liabilities, related to the arrangement, this joint arrangement is classified as a joint operation. In relation to its interest in joint operations, the EU recognises in its financial statements: its assets and liabilities, revenue and expense, as well as its share of assets, liabilities, revenue and expense held or incurred jointly.

Associates

Associates are entities over which the EU has, directly or indirectly, significant influence but not control. It is presumed that significant influence exists if the EU holds directly or indirectly 20 % or more of the voting rights. Participations in associates are accounted for using the equity method (see note 1.5.4).

Non-consolidated entities the funds of which are managed by the Commission

The funds of the Joint Sickness Insurance Scheme for staff of the EU, the European Development Fund and the Participants Guarantee Fund are managed by the Commission on their behalf. However, since these entities are not controlled by the EU, they are not consolidated in its financial statements.

5.BASIS OF PREPARATION

Financial statements are presented annually. The accounting year begins on 1 January and ends on 31 December.

6.Currency and basis for conversion

Functional and reporting currency

The financial statements are presented in millions of euros, unless stated otherwise, the euro being the EU's functional and reporting currency.

Transactions and balances

Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the re-translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance. Translation differences on non-monetary financial instruments classified as available for sale financial assets are included in the fair value reserve.

Different conversion methods apply to property, plant and equipment and intangible assets, which retain their value in euros at the rate that applied at the date when they were purchased.

Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December:

Euro exchange rates

 

Currency

31.12.2018

31.12.2017

Currency

31.12.2018

31.12.2017

BGN

1.9558

1.9558

PLN

4.3014

4.177

CZK

25.7240

25.5350

RON

4.6635

4.6585

DKK

7.4673

7.4449

SEK

10.2548

9.8438

GBP

0.8945

0.8872

CHF

1.1269

1.1702

HRK

7.4125

7.4400

JPY

125.8500

135.01

HUF

320.9800

310.3300

USD

1.145

1.1993

7.Use of estimates

In accordance with IPSAS and generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management based on the most reliable information available. Significant estimates include, but are not limited to: amounts for employee benefit liabilities, provisions, financial risk on inventories and accounts receivable, accrued revenue and charges, contingent assets and liabilities, degree of impairment of intangible assets and property, plant and equipment and amounts disclosed in the notes concerning financial instruments. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known.



8.BALANCE SHEET

9.Intangible assets

Acquired computer software licences are stated at historical cost less accumulated amortisation and impairment losses. The assets are amortised on a straight-line basis over their estimated useful lives (311 years). The estimated useful lives of intangible assets depend on their specific economic lifetime or legal lifetime determined by an agreement. Internally developed intangible assets are capitalised when the relevant criteria of the EU accounting rules are met and the expenses relate solely to the development phase of the asset. The costs capitalisable include all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Costs associated with research activities, non-capitalisable development costs and maintenance costs are recognised as expenses as incurred.    

10.Property, plant and equipment

All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition, construction or transfer of the asset.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits or service potential associated with the item will flow to the EU and its cost can be measured reliably. Repairs and maintenance costs are charged to the statement of financial performance during the financial period in which they are incurred.

Land and works of art are not depreciated as they are deemed to have an indefinite useful life. Assets under construction are not depreciated as these assets are not yet available for use. Depreciation on other assets is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows:

Type of asset

Straight line depreciation rate

Buildings

4 % to 10 %

Space assets

8 % to 25 %

Plant and equipment

10 % to 25 %

Furniture and vehicles

0 % to 25 %

Computer hardware

25 % to 33 %

Other

10 % to 33 %

Gains or losses on disposals are determined by comparing proceeds less selling expenses with the carrying amount of the disposed asset and are included in the statement of financial performance.

Leases

Leases of tangible assets, where the EU has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The interest element of the finance lease payment is charged to expenditure over the period of the lease at a constant periodic rate in relation to the balance outstanding. The rental obligations, net of finance charges, are included in financial liabilities (non-current and current). The interest element of the finance cost is charged to the statement of financial performance over the lease period so as to produce a constant periodic interest rate on the remaining balance of the liability for each period. The assets held under finance leases are depreciated over the shorter of the asset's useful life and the lease term.

Leases where the lessor retains a significant portion of the risks and rewards inherent to ownership are classified as operating leases. Operating lease payments are recognised as an expense in the statement of financial performance on a straight-line basis over the lease term.



11.Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation/depreciation and are tested annually for impairment. Assets that are subject to amortisation/depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable (service) amount. The recoverable (service) amount is the higher of an asset’s fair value less costs to sell and its value in use.

Intangible assets and property, plant and equipment residual values and useful lives are reviewed, and adjusted if appropriate, at least once per year. An asset’s carrying amount is written down immediately to its recoverable (service) amount if the asset’s carrying amount is greater than its estimated recoverable (service) amount. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly.

12.Investments accounted for using the equity method

Participations in associates and joint ventures

Investments accounted for using the equity method are initially recognised at cost, being the carrying amount subsequently increased or decreased to recognise the EU’s share of the surplus or deficit of the investee after the date of acquisition. The EU's share of the investee’s surplus or deficit is recognised in the statement of financial performance, and its share of investee’s movements in equity is recognised in the reserves within net assets. The initial cost together with all movements (further contributions, share of economic results and reserve movements, impairments and dividends) give the book value of the investment in the financial statements at the balance sheet date. Distributions received from the investment reduce the carrying amount of the asset.

If the EU's share of deficits of an investment accounted for using the equity method equals or exceeds its interest in the investment, the EU discontinues recognising its share of further losses ("unrecognised losses"). After the EU's interest is reduced to zero, additional losses are provided for and a liability is recognised only to the extent that the EU has incurred legal or constructive obligation or made payments on behalf of the entity.

If there are indications of impairment, a write-down to the lower recoverable amount is necessary. The recoverable amount is determined as described under note 1.5.3. If the reason for impairment ceases to apply at a later date, the impairment loss is reversed to the carrying amount that would have been determined had no impairment loss been recognised.

In cases where the EU holds 20 % or more of an investment capital fund, it does not seek to exert significant influence. Such funds are therefore treated as financial instruments and categorised as available for sale financial assets.

Associates and joint ventures classified as minor entities are not accounted for under the equity method. EU contributions to those entities are accounted for as an expense of the period.

13.Financial assets

Classification

The EU classifies their financial assets in the following categories: financial assets at fair value through surplus or deficit; loans and receivables; held-to-maturity investments; and available for sale financial assets. The classification of financial instruments is determined at initial recognition and re-evaluated at each balance sheet date.

(I)Financial assets at fair value through surplus or deficit

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by the entity. Derivatives are also categorised in this category. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the balance sheet date.

(II)Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the EU provides money, goods or services directly to a debtor with no intention of trading the receivable, or in case the EU is subrogated to the rights of the original lender following a payment made by the EU under a guarantee contract. Payments due within 12 months of the balance sheet date are classified as current assets. Payments due after 12 months from the balance sheet date are classified as non-current assets. Loans and receivables include term deposits with the original maturity above three months.

(III)Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the EU has the positive intention and ability to hold to maturity. During this financial year, the EU did not hold any investments in this category.

(IV)Available for sale financial assets

Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are classified as either current or non-current assets, depending on the period of time the EU expects to hold them. Investments in entities that are neither consolidated nor accounted for using the equity method and other equity-type investments (e.g. Risk Capital Operations) are also classified as available for sale financial assets.

Initial recognition and measurement

Purchases and sales of financial assets at fair value through surplus or deficit, held-to-maturity and available for sale are recognised on trade-date – the date on which the EU commits to purchase or sell the asset. Cash equivalents and loans are recognised when cash is deposited in a financial institution or advanced to borrowers. Financial instruments are initially recognised at fair value. For all financial assets not carried at fair value through surplus or deficit transactions costs are added to the fair value at initial recognition. Financial assets carried at fair value through surplus or deficit are initially recognised at fair value and transaction costs are expensed in the statement of financial performance.

The fair value of a financial asset on initial recognition is normally the transaction price (i.e. the fair value of the consideration received), unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets (e.g. in case of some derivative contracts). However, when a long-term loan that carries no interest or an interest below market conditions is granted, its fair value can be estimated as the present value of all future cash receipts discounted using the prevailing market rate of interest for a similar instrument with a similar credit rating.

Loans granted are measured at their nominal amount, which is considered to be the fair value of the loan. The reasoning for this is as follows:

·The “market environment” for EU lending is very specific and different from the capital market used to issue commercial or government bonds. As lenders in these markets have the opportunity to choose alternative investments, the opportunity possibility is factored into market prices. However, this opportunity for alternative investments does not exist for the EU which is not allowed to invest money on the capital markets; it only borrows funds for the purpose of lending at the same rate. This means that there is no alternative lending or investment option available to the EU for the sums borrowed. Thus, there is no opportunity cost and therefore no basis of comparison with market rates. In fact, the EU lending operation itself represents the market. Essentially, since the opportunity cost "option" is not applicable, the market price does not fairly reflect the substance of the EU lending transactions. Therefore, it is not appropriate to determine the fair value of EU lending with reference to commercial or government bonds.

·Furthermore as there is no active market or similar transactions to compare with, the interest rate to be used by the EU for fair valuing its lending operations under the EFSM, BOP and other such loans, should be the interest rate charged.

·In addition, for these loans, there are compensating effects between loans and borrowings due to their back-to-back character. Thus, the effective interest for the loan equals the effective interest rate for the related borrowings. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance.

Financial instruments are derecognised when the rights to receive cashflows from the investments have expired or the EU has transferred substantially all risks and rewards of ownership to another party.

Subsequent measurement

a)Financial assets at fair value through surplus or deficit are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the ‘financial instruments at fair value through surplus or deficit’ category are included in the statement of financial performance in the period in which they arise.

b)Loans and receivables are carried at amortised cost using the effective interest method. In the case of loans granted on borrowed funds, the same effective interest rate is applied to both the loans and borrowings since these loans have the characteristics of 'back-to-back operations' and the differences between the loan and the borrowing conditions and amounts are not material. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance.

c)Held to maturity assets are carried at amortised cost using the effective interest method. The EU currently holds no held to maturity investments.

d)Available for sale financial assets are subsequently carried at fair value. Gains and losses arising from changes in the fair value of available for sale financial assets are recognised in the fair value reserve, except for translation differences on monetary assets which are recognised in the statement of financial performance. When assets classified as available for sale financial assets are derecognised or impaired, the cumulative fair value adjustments previously recognised in the fair value reserve are recognised in the statement of financial performance. Interest on available for sale financial assets calculated using the effective interest method is recognised in the statement of financial performance. Dividends on available for sale equity instruments are recognised when the EU's right to receive payment is established.

The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities and over-the–counter derivatives), the EU establishes a fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cashflow analysis, option pricing models and other valuation techniques commonly used by market participants.

Investments in Venture Capital Funds, classified as available for sale financial assets, which do not have a quoted market price in an active market are valued at the attributable net asset value, which is considered as an equivalent of their fair value.

In cases where the fair value of investments in equity instruments that do not have a quoted market price in an active market cannot be reliably measured, these investments are valued at cost less impairment losses.

Impairment of financial assets

A financial asset is impaired and a loss is recognised if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss event (or events) has an impact on the estimated future cashflows of the financial asset that can be reliably estimated. The EU assesses at each reporting date whether there is objective evidence that a financial asset is impaired.

(a)Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cashflows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of financial performance. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation of the present value of the estimated future cashflows of a collateralised financial asset reflects the cashflows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the statement of financial performance.

(b)Assets carried at fair value

In the case of equity investments classified as available for sale financial assets, a significant or permanent (prolonged) decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the statement of financial performance – is removed from reserves and recognised in the statement of financial performance. Impairment losses recognised in the statement of financial performance on equity instruments are not reversed through the statement of financial performance. If, in a subsequent period, the fair value of a debt instrument classified as available for sale financial asset increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the statement of financial performance.

14.Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other directly attributable costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. When inventories are held for distribution at no charge or for a nominal charge, they are measured at the lower of cost and current replacement cost. Current replacement cost is the cost the EU would incur to acquire the asset on the reporting date.

15.Pre-financing amounts

Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular contract, decision, agreement or basic legal act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, they have the obligation to return the pre-financing advance to the EU. The amount of the pre-financing may be reduced (wholly or partially) by the acceptance of eligible costs (which are recognised as expenses).

Pre-financing is, on subsequent balance sheet dates, measured at the amount initially recognised on the balance sheet less eligible expenses (including estimated amounts where necessary) incurred during the period.

Interest on pre-financing is recognised as it is earned in accordance with the provisions of the relevant agreement. An estimate of the accrued interest revenue, based on the most reliable information, is made at the year-end and included on the balance sheet.

Other advances to Member States which originate from reimbursement by the EU of amounts paid as advances by the Member States to their beneficiaries (including "financial instruments under shared management") are recognised as assets and presented under the pre-financing heading. Other advances to Member States are subsequently measured at the amount initially recognised on the balance sheet less a best estimate of the eligible expenses incurred by final beneficiaries, calculated on the basis of reasonable and supportable assumptions.

The EU contributions to the trust funds of the European Development Fund or other unconsolidated entities are also classified as pre-financing since their purpose is to give a float to the trust fund to allow it to finance specific actions defined under the trust fund's objectives. The EU contributions to trust funds are measured at the initial amount of the EU contribution less eligible expenses, including estimated amounts where necessary, incurred by the trust fund during the reporting period and allocated to the EU contribution in accordance with the underlying agreement.



16.Exchange receivables and non-exchange recoverables

As the EU accounting rules require a separate presentation of exchange and non-exchange transactions, for the purpose of drawing up the accounts, receivables are defined as stemming from exchange transactions and recoverables are defined as stemming from non-exchange transactions, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange (for example recoverables from Member States related to own resources).

Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly (see note 1.5.5). The financial instruments notes disclosures concerning receivables from exchange transactions include accrued revenue and deferred charges from exchange transactions as they are not material. A general write-down based on past experience is made for outstanding recovery orders not already subject to a specific write-down.

Recoverables from non-exchange transactions are carried at original amount (adjusted for interest and penalties) less write-down for impairment. A write-down for impairment of recoverables from
non-exchange transactions is established when there is objective evidence that the EU will not be able to collect all amounts due according to the original terms of recoverables from non-exchange transactions. The amount of the write-down is the difference between the asset’s carrying amount and the recoverable amount. The amount of the write-down is recognised in the statement of financial performance. A general write-down, based on past experience, is also made for outstanding recovery orders not already subject to a specific write-down. See note
1.5.14 concerning the treatment of accrued revenue at year-end. Amounts displayed and disclosed as recoverables from non-exchanges transactions are not financial instruments as they do not arise from a contract that would give rise to a financial liability or equity instrument. However, in the notes to the financial statements recoverables from non-exchange transactions are disclosed together with receivables from exchange transactions where appropriate.

17.Cash and cash equivalents

Cash and cash equivalents are financial instruments and include cash at hand, deposits held at call or at short notice with banks and other short-term highly liquid investments with original maturities of three months or less.

18.Employee benefits

The accounting policy for employee benefits has been updated in line with the requirements of the revised accounting rule EAR 12 Employee Benefits, effective for periods beginning on or after 1 January 2018 which is based on the new IPSAS 39 (Employee Benefits) published in July 2016. The main change, arising from the revision of accounting rule 12, is the presentation of actuarial gains and losses as a movement in net assets instead of in the statement of financial performance.

Accounting for defined benefit plans is complex because actuarial assumptions and judgement are required to measure the obligation. In applying the revised accounting rule, the EU has reassessed the judgements used, in particular, as regards to the estimate of the ultimate cost of the benefit attributed to the employees. As a result of this exercise, the appropriateness of the use of the estimated active service period of the employee as the basis for attributing benefits to periods of service was confirmed. The benefits which the EU’s employees are entitled to are given under a single plan – although split in two schemes – and they must be treated similarly so as to give a fair presentation of the situation and reflect the economic reality.

The EU provides a set of benefits (emoluments and social security) to employees. For accounting purposes these have to be classified into short term and post-employment benefits.

Short-term employee benefits

Short-term employee benefits are those benefits due to be settled before twelve months after the end of the reporting period in which employees rendered the service, such as salaries, annual and paid sick leaves, and other short-term allowances. Short-term employee benefits are recognised as an expense when the related service is provided. A liability is recognised for the amount expected to be paid if the EU has a present legal or constructive obligation to pay as a result of past service provided by the employee and the obligation can be estimated reliably.

Post-employment benefits

The EU grants a set of post-employment benefits to employees, which include retirement, invalidity and survival pensions, as well as medical coverage (see note 2.9).

The EU provides its staff with a post-employment benefit plan that includes:

I.Pension Scheme of European Officials (PSEO): The benefits granted under this notionally funded 1 scheme relate to seniority, invalidity and survival, as well as, family allowances, death before retirement to those employees that work or worked in the EU Institutions, Agencies and other EU bodies or are survivors of deceased officials or pensioners. Staff contribute one third of the expected cost of these benefits from their salaries.

II.Joint Sickness Insurance Scheme (JSIS): Under this scheme, the EU provides health coverage for staff of the European Commission, Institutions, Agencies and other EU bodies through the reimbursement of medical expenses. The benefits granted to the "inactives" of this scheme (i.e. pensioners, orphans, etc.) are classified as post-employment benefits.

The EU also provides post-employment benefits to members of the EU institutions via separate pension schemes. These are shown under the heading other retirement benefit schemes. Under these schemes the EU provides pension benefits to members of the Commission, Court of Justice and General Court, Court of Auditors, Council, European Parliament, Ombudsman, Data Protection Supervisor, Civil Service Tribunal. The EU provides health coverage to the members of the EU Institutions via the JSIS.

The above post-employment benefits qualify as defined benefit obligations of the EU and are calculated at each reporting date by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligation is performed annually using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

The post-employment benefits provided to EU staff are incorporated in a single plan comprising both a pension scheme (PSEO) and a sickness insurance scheme (JSIS), with the right to coverage under the JSIS scheme being dependent on having acquired the right to coverage under the PSEO scheme. Under the terms of this single plan, as set out in the Staff Regulation, certain entitlements, such as the right to a deferred and reduced pension under the PSEO scheme, are acquired after 10 years of service. However, the entitlements acquired under the single plan by the employee’s subsequent service are materially higher than those initial entitlements as reflected by subsequent annually accrued pension rights.

Therefore, in order to depict the economic substance of the underlying transaction required by the faithful representation qualitiative characteristic of financial reporting as outlined in both EAR 1 and the IPSAS Conceptual Framework, the service cost incurred is accrued on a straight-line basis over staff’s estimated active service period, i.e. the period from the date when service by the employee first leads to benefits under the plan (whether or not the benefits are conditional on further service) until the date when further service by the employee will lead to no material amount of further benefits under the plan, other than from further salary increases. This approach is applied consistently to the benefits provided for under the single plan.

Remeasurements of the net defined benefit liability comprise actuarial gains and losses and the return on plan assets, and are recognised immediately in net assets.

The EU recognises the net interest expense (income) and other expenses related to the defined benefit plans in the statement of financial performance within the caption ‘staff and pension costs’.

When benefits provided are changed or curtailed, the resulting change in benefits that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of financial performance. Gains and losses on settlement are recognised when the settlement occurs. Past service cost is recognised immediately in the statement of financial performance, unless the changes are conditional on the employees remaining in service for a specified period of time.

19.Provisions

Provisions are recognised when the EU has a present legal or constructive obligation towards third parties as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses. The amount of the provision is the best estimate of the expenses expected to be required to settle the present obligation at the reporting date. Where the provision involves a large number of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities (“expected value” method).

Provisions for onerous contracts are measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.

20.Financial liabilities

Financial liabilities are classified as financial liabilities at fair value through surplus or deficit, financial liabilities carried at amortised cost or as financial guarantee liabilities.

Borrowings are composed of borrowings from credit institutions and debts evidenced by certificates. They are recognised initially at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs incurred, then subsequently carried at amortised cost using the effective interest method; any difference between proceeds, net of transaction costs, and the redemption value is recognised in the statement of financial performance over the period of the borrowings using the effective interest method. In the case of loans granted on borrowed funds, the effective interest method may not be applied to loans and borrowings, based on materiality considerations. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance.

Financial liabilities categorised at fair value through surplus or deficit include derivatives where fair value is negative. They follow the same accounting treatment as financial assets at fair value through surplus or deficit, see note 1.5.5.

Financial guarantee liabilities are initially recognised at fair value, being the premium received. Subsequently, financial guarantee liabilities are measured at the higher of the best estimate of the expenses expected to be required to settle the financial guarantee liability and the amount initially recognised less, when appropriate, cumulative amortisation. The EU recognises a financial guarantee liability when it receives consideration for granting of the guarantee, that is at market terms, or when the fair value of the guarantee can be measured reliably. In case no active market for a directly equivalent guarantee contract exists, the EU discloses the guarantee given as a contingent liability (see note 1.7.2) or - when it is more likely than not that an outflow of resources will be required to settle the obligation – the EU recognises a provision (see note 1.5.11).

Financial liabilities are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date.

EU trust funds that are considered as part of the Commission's operational activities are accounted for in the Commission accounts and further consolidated in the EU annual accounts. Therefore, contributions from other donors to the EU trust funds fulfil the criteria of revenues from non-exchange transactions under conditions and they are presented as financial liabilities until the conditions attached to the contributions transferred are met, i.e. eligible costs are incurred by the trust fund. The trust fund is required to finance specific projects and return remaining funds at the time of winding-up. At the balance sheet date the outstanding contribution liabilities are measured at contributions received less the expenses incurred by the trust fund, including estimated amounts when necessary. For reporting purposes the net expenses are allocated to the contributions of other donors in proportion to net contributions paid as at 31 December. This allocation of contributions is only indicative. When the trust fund is wound up the actual split of remaining resources will be decided by the trust fund board.



21.Payables

A significant amount of the payables of the EU are unpaid cost claims from beneficiaries of grants or other EU funding (non-exchange transactions). They are recorded as payables for the requested amount when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are valued at the accepted and eligible amount.

Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount and corresponding expenses are entered in the accounts when the supplies or services are delivered and accepted by the EU.

22.Accrued and deferred revenue and charges

Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, the supplies have been delivered by the EU or a contractual agreement exists (e.g. by reference to a treaty), an accrued revenue will be recognised in the financial statements. In addition, at year-end, if an invoice is issued but the services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period.

Expenses are also accounted for in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. The calculation of accrued expenses is done in accordance with detailed operational and practical guidelines issued by the Commission which aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if payment has been made in advance for services or goods that have not yet been received, the expense will be deferred and recognised in the subsequent accounting period.

23.STATEMENT OF FINANCIAL PERFORMANCE

24.Revenue

REVENUE FROM NON-EXCHANGE TRANSACTIONS

The vast majority of the EU's revenue relates to non-exchange transactions:

GNI based resources and VAT resources

Revenue is recognised for the period for which the Commission sends out a call for funds to the Member States claiming their contribution. They are measured at their “called amount”. As VAT and GNI resources are based on estimates of the data for the budgetary year concerned, they may be revised as changes occur until the final data are issued by the Member States. The effect of a change in estimate is included when determining the net surplus or deficit for the period in which the change occurred.

Traditional own resources

Recoverables from non-exchange transactions and related revenues are recognised when the relevant monthly "A" statements (including duties collected and amounts due that are guaranteed and not contested) are received from the Member States. At the reporting date, revenue collected by the Member States for the period but not yet paid to the Commission is estimated and recognised as accrued revenue. The quarterly "B" statements (including duties neither collected nor guaranteed, as well as guaranteed amounts that have been contested by the debtor) received from the Member States are recognised as revenue less the collection costs to which they are entitled. In addition, a value reduction is recognised for the amount of the estimated recovery gap.

Fines

Revenue from fines is recognised when the EU's decision imposing a fine has been taken and it is officially notified to the addressee. If there are doubts about the undertaking's solvency, a value reduction on the entitlement is recognised. After the decision to impose a fine, the debtors have two months from the date of notification:

a)either to accept the decision, in which case they must pay the fine within the time limit laid down and the amount is definitively collected by the EU;

b)or not to accept the decision, in which case they lodge an appeal under EU law.

However, even if appealed, the fine must be paid within the time limit of three months laid down as the appeal does not have suspensory effect (Article 278 of the EU Treaty) or, under certain circumstances and subject to the agreement of the Commission's Accounting Officer, the debtor may present a bank guarantee for the amount instead.

If the undertaking appeals against the decision, and has already provisionally paid the fine, the amount is disclosed as a contingent liability. However, since an appeal against an EU decision by the addressee does not have suspensory effect, the cash received is used to clear the recoverable. If a guarantee is received instead of payment, the fine remains as a recoverable. If it appears probable that the General Court may not rule in favour of the EU, a provision is recognised to cover this risk. If a guarantee had been given instead, then the recoverable outstanding is written-down as required. The accumulated interest received by the Commission on the bank accounts where received payments are deposited is recognised as revenue, and any contingent liability is increased accordingly.

Since 2010, all provisionally cashed fines are managed by the Commission in a specifically created fund (BUFI) and invested in financial instruments.

REVENUE FROM EXCHANGE TRANSACTIONS

Revenue from the sale of goods and services is recognised when the significant risk and rewards of ownership of the goods are transferred to the purchaser. Revenue associated with a transaction involving the provision of services is recognised by reference to the stage of completion of the transaction at the reporting date.

Interest revenue and expense

Interest revenue and expense are recognised in the statement of financial performance using the effective interest method. This is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest revenue or interest expense over the relevant period. When calculating the effective interest rate, the EU estimates cashflows considering all contractual terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest revenue is recognised using the rate of interest to discount the future cashflows for the purpose of measuring the impairment loss.

Revenue from dividends

Revenue from dividends and similar distributions is recognised when the right to receive payment is established.

25.Expenses

Expenses from non-exchange transactions account for the majority of the EU's expenses. They relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, contributions and donations.

Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation (Financial Regulation, Staff Regulations, or other regulation) or an agreement has been signed authorising the transfer; any eligibility criteria have been met by the beneficiary; and a reasonable estimate of the amount can be made.

When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expenses.

Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the EU. They are valued at original invoice amount. Furthermore, at the balance sheet date expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are estimated and recognised in the statement of financial performance.

26.CONTINGENT ASSETS AND LIABILITIES

27.Contingent assets

A contingent asset is a possible asset that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the EU. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable.

28.Contingent liabilities

A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the EU; or a present obligation that arises from past events but is not recognised because: it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation or in the rare circumstances where the amount of the obligation cannot be measured with sufficient reliability.

29.CASHFLOW STATEMENT

Cashflow information is used to provide a basis for assessing the ability of the EU to generate cash and cash equivalents, and its needs to utilise those cashflows.

The cashflow statement is prepared using the indirect method. This means that the economic result for the financial year is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of revenue or expense associated with investing cashflows.

Cashflows arising from transactions in a foreign currency are recorded in the EU’s reporting currency (Euro), by applying to the foreign currency amount the exchange rate between the euro and the foreign currency at the date of the cashflow.

The cashflow statement reports cashflows during the period classified by operating and investing activities (the EU does not have financing activities).

Operating activities are the activities of the EU that are not investing activities. These are the majority of the activities performed. Loans granted to beneficiaries (and the related borrowings, when applicable) are not considered as investing (or financing) activities as they are part of the general objectives and thus daily operations of the EU.

Investing activities are the acquisition and disposal of intangible assets and property, plant and equipment and of other investments which are not included in cash equivalents. Investing activities do not include loans granted to beneficiaries. The objective is to show the real investments made by the EU.

 

30.NOTES TO THE BALANCE SHEET 

ASSETS

 

31.INTANGIBLE ASSETS

EUR million

Gross carrying amount at 31.12.2017

292

Additions

49

Disposals

(9)

Transfer between asset categories

Other changes

Gross carrying amount at 31.12.2018

333

Accumulated amortisation at 31.12.2017

(143)

Amortisation charge for the year

(29)

Amortisation written back

Disposals

8

Transfer between asset categories

Other changes

(1)

Accumulated amortisation at 31.12.2018

(165)

NET CARRYING AMOUNT AT 31.12.2018

168

NET CARRYING AMOUNT AT 31.12.2017

149

 

32.PROPERTY, PLANT AND EQUIPMENT

EUR million

Land and buildings

Space assets

Plant and equipment

Furniture and vehicles

Computer hardware

Other

Finance leases

Assets under construction

TOTAL

Gross carrying amount at 31.12.2017

1 448

4 264

260

71

248

156

1 552

2 544

10 544

Additions

12

14

9

1

15

7

8

1 198

1 263

Disposals

(8)

(0)

(16)

(2)

(35)

(3)

(9)

(73)

Transfer between asset categories

(2)

982

0

5

0

(5)

(983)

(3)

Other changes

1

0

12

0

2

0

1

0

16

Gross carrying amount at 31.12.2018

1 450

5 259

266

69

235

161

1 548

2 759

11 747

Accumulated depreciation at 31.12.2017

(840)

(780)

(240)

(57)

(207)

(121)

(756)

(3 000)

Depreciation charge for the year

(43)

(561)

(10)

(3)

(21)

(11)

(54)

(705)

Depreciation written back

Disposals

8

0

9

2

33

3

7

63

Transfer between asset categories

(5)

(0)

5

Other changes

(0)

(0)

(5)

(0)

(1)

(0)

(1)

(7)

Accumulated depreciation at 31.12.2018

(875)

(1 341)

(246)

(58)

(200)

(130)

(798)

(3 649)

NET CARRYING AMOUNT AT 31.12.2018

575

3 918

20

11

35

30

750

2 759

8 098

NET CARRYING AMOUNT AT 31.12.2017

608

3 484

21

14

41

35

797

2 544

7 544

 

33.INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

The participation of the EU represented by the Commission in the European Investment Fund (EIF) is treated as an associate using the equity method of accounting. At 31 December 2018, the EU holds 29.7 % of the ownership interest in EIF (2017: 29.7 %).

EUR million

European Investment Fund

Participation at 31.12.2017

581

Contributions

Dividends received

(3)

Share of net result

37

Share in the net assets

(24)

Participation at 31.12.2018

591

EIF summarised financial information:

EUR million

31.12.2018

31.12.2017

Total EIF

Total EIF

Assets

2 662

2 488

Liabilities

(674)

(532)

Revenue

291

263

Expenses

(167)

(153)

Surplus/(deficit)

124

110

Reconciliation of the above summarised financial information to the carrying amount of the interest held in the EIF is as follows:

EUR million

31.12.2018

31.12.2017

Net assets of the associate

1 988

1 956

EC ownership interests in EIF

29.7%

29.7%

Carrying amount

591

581

The Commission has paid-in 20 % of its subscribed shares in the EIF capital at 31 December 2018, the amount uncalled being as follows:

EUR million

Total EIF capital

EU subscription

Total share capital

4 500

1 337

Paid-in

(900)

(267)

Uncalled

3 600

1 070

 

34.FINANCIAL ASSETS

EUR million

Note

31.12.2018

31.12.2017

Non-current financial assets

Available for sale financial assets

2.4.1

12 345

10 410

Financial assets at fair value through surplus or deficit

2.4.2

14

16

Loans

2.4.3

51 559

48 107

63 917

58 533

Current financial assets

Available for sale financial assets

2.4.1

1 592

1 563

Financial assets at fair value through surplus or deficit

2.4.2

2

6

Loans

2.4.3

2 281

6 770

3 875

8 339

Total

67 793

66 872

35. Available for sale financial assets

EUR million

31.12.2018

31.12.2017

BUFI investments

1 888

2 158

European Bank for Reconstruction and Development

188

188

2 076

2 346

Guarantee Funds for budgetary guarantees:

EFSI Guarantee Fund

5 000

3 414

Guarantee Fund for external actions

2 465

2 199

EFSD Guarantee Fund

9

7 474

5 613

Financial instruments supported by the EU budget:

Horizon 2020

2 031

1 730

Risk Sharing Finance Facility

679

665

Connecting Europe Facility

540

482

EU SME Equity Facilities

464

508

Risk Capital Operations

113

113

European Fund for South East Europe

115

119

Other

444

398

4 386

4 014

Total

13 937

11 973

Non-current

12 345

10 410

Current

1 592

1 563

36.Financial assets at fair value through surplus or deficit

EUR million

31.12.2018

31.12.2017

Type of derivative

Notional amount

Fair value

Notional amount

Fair value

Foreign currency forward contract

476

2

634

6

Guarantee on equity portfolio

674

14

258

16

Total

1 150

16

892

23

Non-current

674

14

258

16

Current

476

2

634

6



Fair value hierarchy of financial assets measured at fair value

EUR million

31.12.2018

31.12.2017

Level 1: Quoted prices in active markets

12 487

10 325

Level 2: Observable inputs other than quoted prices

275

510

Level 3: Valuation techniques with inputs not based on observable market data

1 191

1 161

Total

13 953

11 996

Reconciliation of financial assets measured using valuation techniques with inputs not based on observable market data (level 3)

EUR million

Opening balance at 1.1.2018

1 161

Purchases, sales, issues and settlements

104

Gains or losses for the period in financial income or finance costs

(36)

Gains or losses in net assets

(37)

Transfers into level 3

Transfers out of level 3

Other

Closing balance at 31.12.2018

1 191

37. Loans

EUR million

Note

31.12.2018

31.12.2017

Loans for financial assistance

2.4.3.1

53 775

54 744

Other loans

2.4.3.2

64

133

Total

53 840

54 877

Non-current

51 559

48 107

Current

2 281

6 770

37.1.1.1.Loans for financial assistance

EUR million

EFSM

BOP

MFA

Euratom

Total

Total at 31.12.2017

47 456

3 114

3 924

250

54 744

New loans

4 500

515

50

5 065

Repayments

(4 500)

(1 350)

(56)

(46)

(5 952)

Exchange differences

(0)

(0)

Changes in carrying amount

(56)

(30)

5

0

(82)

Impairment

Total at 31.12.2018

47 400

1 734

4 388

254

53 775

Non-current

46 800

200

4 309

213

51 521

Current

600

1 534

79

41

2 254

The change in carrying amount corresponds to the change in accrued interests.

Nominal value of loans for financial assistance at 31 December 2018 total EUR 53 114 million (2017: EUR 54 000 million).

Loans effective interest rates (expressed as a range of interest rates)

31.12.2018

31.12.2017

Macro Financial Assistance (MFA)

0 % - 3.82 %

0 % - 4.54 %

Euratom

0.08 % - 5.76 %

0.08 % - 5.76 %

Balance of Payment (BOP)

2.88 % - 3.38 %

2.88 % - 3.38 %

European Financial Stability Mechanism (EFSM)

0.50 % - 3.75 %

0.62 % - 3.75 %

37.1.1.2.Other loans

EUR million

31.12.2018

31.12.2017

Loans with special conditions

64

78

Term deposits

0

55

Total

64

133

Non-current

37

59

Current

27

75

Nominal value of other loans at 31 December 2018 total EUR 615 million (2017: EUR 557 million).

Impairment on other loans

EUR million

31.12.2017

Additions

Reversals

Write-off

Other

31.12.2018

Loans with special conditions

8

1

(0)

8

Subrogated loans

432

147

579

Total

440

148

(0)

587

38.PRE-FINANCING

EUR million

Note

31.12.2018

31.12.2017

Non-current pre-financing

Pre-financing

2.5.1

21 615

21 663

Other advances to Member States

2.5.2

4 122

3 018

Contribution to Trust Funds

71

64

25 807

24 745

Current pre-financing

Pre-financing

2.5.1

22 106

22 908

Other advances to Member States

2.5.2

2 396

1 645

24 502

24 552

Total

50 309

49 297



39.Pre-financing

EUR million

Gross amount

Cleared via accruals

Net amount at 31.12.2018

Gross amount

Cleared via accruals

Net amount at 31.12.2017

Shared Management

EAFRD & other rural development instruments

3 743

3 743

3 735

3 735

ERDF & CF

18 088

(3 461)

14 627

20 561

(5 678)

14 883

ESF

6 548

(1 147)

5 401

6 792

(1 182)

5 610

Other

4 684

(2 498)

2 186

5 037

(2 267)

2 770

Direct Management

Implemented by:

Commission

12 827

(8 523)

4 304

12 454

(8 587)

3 867

EU executive agencies

15 012

(9 540)

5 472

13 845

(8 751)

5 094

Trust funds

585

(432)

152

440

(212)

228

Indirect Management

Implemented by:

Other EU agencies & bodies

3 830

(2 975)

856

3 767

(2 951)

816

Third countries

1 546

(879)

667

1 586

(956)

630

International organisations

7 684

(5 053)

2 631

9 001

(5 879)

3 121

Other entities

9 107

(5 426)

3 681

7 752

(3 936)

3 816

Total

83 655

(39 933)

43 721

84 969

(40 399)

44 570

Non-current

21 615

21 615

21 663

21 663

Current

62 040

(39 933)

22 106

63 307

(40 399)

22 908

40.Other advances to Member States

EUR million

31.12.2018

31.12.2017

Advances to Member States for financial instruments under shared management

3 675

2 768

Aid Schemes

2 843

1 895

Total

6 518

4 663

Non-current

4 122

3 018

Current

2 396

1 645

 

41.EXCHANGE RECEIVABLES AND NON-EXCHANGE RECOVERABLES

EUR million

Note

31.12.2018

31.12.2017

Non-current

Recoverables from non-exchange transactions

2.6.1

409

616

Receivables from exchange transactions

2.6.2

6

3

415

619

Current

Recoverables from non-exchange transactions

2.6.1

22 075

10 924

Receivables from exchange transactions

2.6.2

1 828

497

23 903

11 421

Total

24 318

12 040

42. Recoverables from non-exchange transactions

EUR million

Note

31.12.2018

31.12.2017

Non-current

Member States

2.6.1.1

397

594

Other recoverables

12

22

409

616

Current

Member States

2.6.1.1

10 836

6 123

Competition fines

2.6.1.2

9 727

4 225

Accrued income and deferred charges

2.6.1.3

1 291

384

Other recoverables

222

192

22 075

10 924

Total

22 485

11 540



42.1.1.1.Recoverables from Member States

EUR million

31.12.2018

31.12.2017

Recoverables related to own resources:

TOR A accounts

5 609

3 113

TOR separate accounts

1 612

1 617

Own resources to be received

2 758

46

Impairment

(991)

(997)

Other

86

56

Own resource recoverables

9 075

3 836

Recoverables in the area of agriculture and rural development:

European Agricultural Guarantee Fund (EAGF)

1 708

2 280

European Agricultural Fund for Rural Development (EAFRD)

859

955

Temporary Rural Development Instrument (TRDI)

13

16

Special Accession Programme for Agriculture and Rural Development (SAPARD)

82

136

Impairment

(788)

(804)

EAGF and rural development recoverables

1 875

2 583

Pre-financing recovery expected

145

182

VAT paid and recoverable

12

22

Other recoverables from Member States

127

94

Total

11 232

6 717

Non-current

397

594

Current

10 836

6 123

42.1.1.2.Recoverables from competition fines

EUR million

31.12.2018

31.12.2017

Recoverable from fines gross amount

13 022

7 679

Provisional payments

(3 131)

(3 282)

Impairment

(164)

(172)

Total

9 727

4 225

Non-current

Current

9 727

4 225

42.1.1.3.Accrued income and deferred charges

EUR million

31.12.2018

31.12.2017

Other accrued income

1 238

323

Deferred charges relating to non-exchange transactions

53

61

Total

1 291

384

Non-current

Current

1 291

384



43.Receivables from exchange transactions

EUR million

31.12.2018

31.12.2017

Non-current

Other receivables

6

3

6

3

Current

Customers

181

184

Impairment on receivables from customers

(141)

(136)

Deferred charges relating to exchange transactions

157

172

Other

1 631

277

1 828

497

Total

1 834

501

44.INVENTORIES

EUR million

31.12.2018

31.12.2017

Scientific materials

52

45

Other

16

18

Total

67

62

 

45.CASH AND CASH EQUIVALENTS

EUR million

31.12.2018

31.12.2017

Accounts with Treasuries and Central Banks

12 932

20 078

Current accounts

79

152

Imprest accounts

5

5

Transfers (cash in transit)

0

0

Bank accounts for budget implementation

13 017

20 236

Cash belonging to financial instruments

2 377

1 608

Cash relating to fines

1 438

1 234

Cash relating to trust funds

114

34

Total

16 946

23 113

 

LIABILITIES

46.PENSION AND OTHER EMPLOYEE BENEFITS

Net employee benefit scheme liability

EUR million

Pension Scheme of European Officials

Other retirement benefit schemes

Joint Sickness Insurance Scheme

31.12.2018

Total

31.12.2017

Total

Defined Benefit Obligation

70 017

1 154

8 990

80 160

72 796

Plan assets

N/A

N/A

(296)

(296)

(301)

Net liability

70 017

1 154

8 694

79 865

72 495

Actuarial assumptions - employee benefits

Pension Scheme of European Officials

Joint Sickness Insurance Scheme

2018

Nominal discount rate

1.9 %

2.0 %

Expected inflation rate

1.4 %

1.5 %

Real discount rate

0.5 %

0.5 %

Expected rate of salary increases

1.9 %

1.8 %

Medical cost trend rates

N/A

3.0 %

Retirement age

63/64/66

63/64/66

2017

Nominal discount rate

1.9 %

2.0 %

Expected inflation rate

1.5 %

1.6 %

Real discount rate

0.4 %

0.4 %

Expected rate of salary increases

1.8 %

1.7 %

Medical cost trend rates

N/A

3.0 %

Retirement age

63/64/66

63/64/66

 

Movement in present value of employee benefits defined benefit obligation

EUR million

Pension Scheme of European Officials

Other retirement benefit Schemes

Joint Sickness Insurance Scheme

Total

Present value as at 31.12.2017

63 951

1 089

7 756

72 796

Recognised in statement of financial performance

Current service cost

2 716

84

270

3 070

Interest expense

1 215

20

155

1 391

Recognised in net assets

Remeasurements in employee benefits liabilities

Actuarial (gains)/losses from experience

3 380

6

4

3 390

Actuarial (gains)/losses from demographic assumptions

Actuarial (gains)/losses from financial assumptions

251

(20)

901

1 132

Other

Benefits paid

(1 496)

(27)

(96)

(1 619)

Present value as at 31.12.2018

70 017

1 154

8 990

80 160



Movement in present value of plan assets of the Joint Sickness Insurance Scheme

EUR million

Present value as at 31.12.2017

301

Net movement in plan assets

(5)

Present value as at 31.12.2018

296

Joint Sickness Insurance Scheme sensitivity

A ten basis points change in the assumed medical cost trend rates would have the following effects:

EUR million

2018

2017

Increase 0.1%

Decrease 0.1%

Increase 0.1%

Decrease 0.1%

The aggregate of the current service cost and interest cost components of net periodic post-employment medical costs

12

(12)

11

(11)

Defined benefit obligation

253

(246)

220

(213)

 

A ten basis points change in the assumed discount rate would have the following effects:

EUR million

2018

2017

Increase 0.1%

Decrease 0.1%

Increase 0.1%

Decrease 0.1%

Defined benefit obligation

(219)

226

(188)

194

A ten basis points change in the expected salary increases rate would have the following effects:

EUR million

2018

2017

Increase 0.1%

Decrease 0.1%

Increase 0.1%

Decrease 0.1%

Defined benefit obligation

(26)

25

(25)

24

A one year change in the assumed retirement age would have the following effects:

EUR million

2018

2017

One year increase

One year decrease

One year increase

One year decrease

Defined benefit obligation

(91)

54

(82)

44

Pension Scheme of European Officials sensitivity

A ten basis points change in the assumed discount rate would have the following effects:

EUR million

2018

2017

Increase 0.1%

Decrease 0.1%

Increase 0.1%

Decrease 0.1%

Defined benefit obligation

(1 434)

1 478

(1 281)

1 319

A ten basis points change in the expected salary increases rate would have the following effects:

EUR million

2018

2017

Increase 0.1%

Decrease 0.1%

Increase 0.1%

Decrease 0.1%

Defined benefit obligation

1 427

(1 388)

1 313

(1 192)

A one year change in the assumed retirement age would have the following effects:

EUR million

2018

2017

One year increase

One year decrease

One year increase

One year decrease

Defined benefit obligation

(573)

645

(496)

639

47.PROVISIONS

EUR million

Amount at 31.12.2017

Additional provisions

Unused amounts reversed

Amounts used

Transfer between categories

Change in estimation

Amount at 31.12.2018

Legal cases:

  Agriculture

49

270

(2)

(47)

270

  Cohesion

20

(20)

  Other

29

1

(17)

(1)

0

11

Nuclear site dismantling

1 934

(34)

32

1 933

Financial

1 115

590

(7)

(149)

2

1 551

Fines

27

(27)

Other

87

24

(30)

(13)

68

Total

3 262

885

(105)

(243)

34

3 833

Non-current

2 617

693

(30)

(52)

(250)

36

3 013

Current

645

192

(74)

(191)

250

(1)

820

48.FINANCIAL LIABILITIES

EUR million

Note

31.12.2018

31.12.2017

Non-current financial liabilities

Financial liabilities at amortised cost

2.11.1

52 757

49 412

Financial liabilities at fair value through surplus or deficit

2.11.2

7

2

52 764

49 414

Current financial liabilities

Financial liabilities at amortised cost

2.11.1

2 475

6 813

Financial liabilities at fair value through surplus or deficit

2.11.2

15

2 489

6 813

Total

55 253

56 227

49.Financial liabilities at amortised cost

EUR million

Note

31.12.2018

31.12.2017

Borrowings for financial assistance

2.11.1.1

53 775

54 744

Other financial liabilities

2.11.1.2

1 456

1 482

Total

55 231

56 225

Non-current

52 757

49 412

Current

2 475

6 813



49.1.1.1.Borrowings for financial assistance

EUR million

EFSM

BOP

MFA

Euratom

Total

Total at 31.12.2017

47 456

3 114

3 924

250

54 744

New borrowings

4 500

515

50

5 065

Repayments

(4 500)

(1 350)

(56)

(46)

(5 952)

Exchange differences

(0)

(0)

Changes in carrying amounts

(56)

(30)

5

0

(82)

Total at 31.12.2018

47 400

1 734

4 388

254

53 775

Non-current

46 800

200

4 309

213

51 521

Current

600

1 534

79

41

2 254

Borrowings effective interest rates (expressed as a range of interest rates)

31.12.2018

31.12.2017

Macro Financial Assistance (MFA)

0 % - 3.82 %

0 % - 4.54 %

Euratom

0 % - 5.68 %

0 % - 5.68 %

Balance of Payment (BOP)

2.88 % - 3.38 %

2.88 % - 3.38 %

European Financial Stability Mechanism (EFSM)

0.50 % - 3.75 %

0.62 % - 3.75 %

49.1.1.2.Other financial liabilities

EUR million

31.12.2018

31.12.2017

Non-current

Finance lease liabilities

860

918

Buildings paid for in instalments

235

258

Other

141

188

1 235

1 363

Current

Finance lease liabilities

64

58

Buildings paid for in instalments

23

22

Fines to be reimbursed

125

13

Other

9

25

221

118

Total

1 456

1 482

Finance lease liabilities

EUR million

Future amounts to be paid

< 1 year

1 - 5 years

> 5 years

Total Liability

Land and buildings

58

276

576

910

Other fixed assets

6

8

14

Total at 31.12.2018

64

283

576

924

Interest element

51

166

134

351

Total future minimum lease payments at 31.12.2018

115

450

710

1 275

Total future minimum lease payments at 31.12.2017

113

447

821

1 381



50.Financial liabilities at fair value through surplus and deficit

EUR million

31.12.2018

31.12.2017

Type of derivative

Notional amount

Fair value

Notional amount

Fair value

Guarantee on equity portfolio

536

20

FX option (put spread)

11

2

9

2

Total

546

22

9

2

Non-current

82

7

9

2

Current

464

15

Fair value hierarchy of financial liabilities measured at fair value

EUR million

31.12.2018

31.12.2017

Level 1: Quoted prices in active markets

Level 2: Observable inputs other than quoted prices

2

2

Level 3: Valuation techniques with inputs not based on observable market data

20

Total

22

2

51.PAYABLES

EUR million

Gross Amount

Adjust-

ments*

Net Amount at 31.12.2018

Gross Amount

Adjust-

ments*

Net Amount at 31.12.2017

Cost claims and invoices received from:

Member States

EAFRD & other rural development instruments

247

247

481

481

ERDF & CF

10 761

(1 724)

9 037

12 602

(883)

11 719

ESF

5 195

(496)

4 699

4 183

(264)

3 919

Other

632

(75)

557

748

(280)

467

Private and public entities

1 461

(179)

1 282

1 563

(144)

1 419

Total costs claims & invoices received

18 296

(2 475)

15 822

19 577

(1 571)

18 006

EAGF

14 772

N/A

14 772

11 534

N/A

11 534

Own Resources Payables

769

N/A

769

8 836

N/A

8 836

Sundry Payables

1 176

N/A

1 176

1 000

N/A

1 000

Total

35 013

(2 475)

32 539

40 947

(1 571)

39 376

* Estimated non-eligible amounts and pending other advances to Member States.

 

52.ACCRUED CHARGES AND DEFERRED INCOME

EUR million

31.12.2018

31.12.2017

Accrued charges

62 263

63 070

Deferred income

213

219

Other

24

24

Total

62 500

63 314

 

The split of accrued charges is as follows:

EUR million

31.12.2018

31.12.2017

EAGF

29 387

33 303

EAFRD and other rural development instruments

18 687

17 464

ERDF and CF

5 863

4 249

ESF

2 321

2 870

Other

6 005

5 185

Total

62 263

63 070

 

NET ASSETS

53.RESERVES

EUR million

Note

31.12.2018

31.12.2017

Fair value reserve

2.14.1

229

275

Guarantee Fund reserve

2 849

2 663

Other reserves

108

125

Total

3 186

3 062

54. Fair value reserve

Movements during the period of fair value reserve related to the available for sale financial assets:

EUR million

2018

2017

Included in fair value reserve

(68)

(8)

Included in statement of financial performance

22

18

Total

(46)

10

55.AMOUNTS TO BE CALLED FROM MEMBER STATES

EUR million

Amounts to be called from Member States at 31.12.2017

78 077

Return of 2017 budget surplus to Member States

556

Movement in Guarantee Fund reserve

186

Remeasurements in employee benefits liability

4 432

Other reserve movements

7

Economic result of the year

(14 372)

Total amounts to be called from Member States at 31.12.2018

68 885

 

56.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE 

 

REVENUE

REVENUE FROM NON-EXCHANGE TRANSACTIONS:
OWN RESOURCES

57.TRADITIONAL OWN RESOURCES

EUR million

2018

2017

Customs duties

22 763

20 475

Sugar levies

4

45

Total

22 767

20 520

 

REVENUE FROM NON-EXCHANGE TRANSACTIONS: TRANSFERS

58.RECOVERY OF EXPENSES

EUR million

2018

2017

Shared management

2 116

1 775

Direct management

65

81

Indirect management

31

23

Total

2 213

1 879

 

59.OTHER REVENUE FROM NON-EXCHANGE TRANSACTIONS

EUR million

2018

2017

Contribution of third countries and accession countries

1 347

1 256

Staff taxes and contributions

954

923

Contribution from Member States for external aid

594

988

Transfer of assets

85

208

Adjustment of provisions

97

28

Agricultural levies

4

4

Budgetary adjustments

(726)

5 806

Funding of institutions

(3 493)

(3 371)

Other

465

672

Total

(674)

6 515

 


REVENUE FROM EXCHANGE TRANSACTIONS

60.FINANCIAL REVENUE

EUR million

2018

2017

Interest on:

Late payments

1 458

217

Loans

1 259

1 371

Other

63

36

Premium on financial guarantee liability (EFSI)

121

61

Dividend

103

23

Financial revenue from financial assets or liabilities at fair value through surplus or deficit

29

57

Realised gains on sale of available for sale financial assets

23

26

Other

48

28

Total

3 103

1 820

 

61.OTHER REVENUE FROM EXCHANGE TRANSACTIONS

EUR million

2018

2017

Foreign exchange gains

318

266

Fee and premium revenue related to financial instruments

54

51

Sales of goods

18

26

Share of net result of EIF

37

21

Fixed assets related revenue

7

6

Other

281

321

Total

716

692

 

EXPENSES

62.SHARED MANAGEMENT

EUR million

2018

2017

European Agricultural Guarantee Fund

43 527

44 289

European Agricultural Fund for Rural Development and other rural development instruments

13 149

11 359

European Regional Development Fund and Cohesion Fund

30 230

17 650

European Social Fund

11 935

7 353

Other

2 826

1 253

Total

101 666

81 905

63. DIRECT MANAGEMENT

EUR million

2018

2017

Implemented by the Commission

8 146

8 855

Implemented by EU Executive Agencies

8 962

6 700

Implemented by Trust funds

468

208

Total

17 576

15 763

64.INDIRECT MANAGEMENT

EUR million

2018

2017

Implemented by other EU agencies and bodies

3 622

3 429

Implemented by third countries

679

1 101

Implemented by international organisations

3 337

3 014

Implemented by other entities

3 569

1 478

Total

11 208

9 022

 

65.STAFF AND PENSION COSTS

EUR million

2018

2017

Staff costs

3 328

3 186

Pension costs

4 461

3 809

Total

7 789

6 995

66.FINANCE COSTS

EUR million

2018

2017

Interest expenses:

Borrowings

1 252

1 363

Other

25

21

Finance leases

56

56

Impairment losses on available for sale financial assets

25

39

Impairment loss on loans and receivables

126

324

Realised loss on sale of available for sale financial assets

20

2

Loss on financial assets or liabilities at fair value through surplus or deficit

95

12

Other

41

33

Total

1 640

1 849

 

67.OTHER EXPENSES

EUR million

2018

2017

Fixed assets related expenses

953

870

Administrative and IT expenses

831

790

Adjustment of provisions

919

1 371

Funding and contributions to other EU bodies

470

458

Foreign exchange losses

328

429

Operating lease expenses

195

160

Reduction of fines by the Court of Justice

1

67

Other

322

495

Total

4 019

4 642

Expenses relating to research and development are as follows:

EUR million

2018

2017

Research costs

373

366

Non-capitalised development costs

58

58

Total

430

424

 

68.SEGMENT REPORTING BY MULTI ANNUAL FINANCIAL FRAMEWORK (MFF) HEADING

EUR million

Smart and inclusive growth

Sustainable growth

Security and citizenship

Global Europe

Administration

Not assigned to MFF headings*

Total

GNI resources

105 780

105 780

Traditional own resources

22 767

22 767

VAT

17 624

17 624

Fines

6 740

6 740

Recovery of expenses

1 395

777

6

35

0

0

2 213

Other

1 223

48

109

228

985

(3 267)

(674)

Revenue from non-exchange transactions

2 619

825

115

262

985

149 644

154 450

Financial revenue

282

0

0

16

0

2 805

3 103

Other

170

(14)

(8)

6

242

318

716

Revenue from exchange transactions

453

(13)

(8)

23

242

3 123

3 819

Total revenue

3 072

812

107

285

1 227

152 767

158 270

Expenses implemented by Member States:

EAGF

(43 527)

(43 527)

EAFRD & other rural develop. instruments

(13 149)

(13 149)

ERDF & CF

(30 230)

(30 230)

ESF

(11 935)

(11 935)

Other

(437)

(596)

(1 762)

(31)

(2 826)

Implemented by the Commission, executive agencies and trust funds

(11 565)

(571)

(930)

(4 496)

(13)

0

(17 576)

Implemented by other EU agencies and bodies

(2 767)

2

(810)

(48)

(3 622)

Implemented by third countries and international organisations

(505)

(74)

(202)

(3 236)

(0)

(4 016)

Implemented by other entities

(2 696)

(0)

2

(875)

(0)

(3 569)

Staff and pension costs

(1 675)

(369)

(447)

(699)

(4 599)

(7 789)

Finance costs

(149)

(22)

(0)

(16)

(68)

(1 385)

(1 640)

Other expenses

(1 945)

(313)

(137)

(109)

(1 182)

(332)

(4 019)

Total expenses

(63 903)

(58 620)

(4 287)

(9 510)

(5 861)

(1 717)

(143 897)

Economic result of the year

(60 831)

(57 808)

(4 180)

(9 225)

(4 634)

151 049

14 372

* "Not assigned to MFF headings" includes off-budget operations and unallocated programmes with individually immaterial amounts.

69.CONTINGENT LIABILITIES AND ASSETS

 

70.CONTINGENT LIABILITIES

71.Budgetary guarantees

EUR million

31.12.2018

31.12.2017

Ceiling

Signed

Disbursed

Ceiling

Signed

Disbursed

EIB external lending mandate guarantees

40 417

30 889

20 510

37 479

28 950

19 972

EFSI guarantee

25 898

19 842

15 764

16 000

13 473

10 128

Total

66 315

50 731

36 273

53 479

42 423

30 100

72.Guarantees relating to financial assistance (borrowing and lending activities)

EUR million

31.12.2018

31.12.2017

Drawn

Undrawn

Total

Drawn

Undrawn

Total

EFSM

47 400

47 400

47 456

47 456

BOP

1 734

1 734

3 114

3 114

MFA

4 388

980

5 368

3 924

460

4 384

Euratom

254

200

454

250

250

500

Total

53 775

1 180

54 955

54 744

710

55 454

73.Guarantees given for EU financial instruments

EUR million

31.12.2018

31.12.2017

Horizon 2020

1 467

1 297

Risk Sharing Finance Facility

642

654

Connecting Europe Facility

579

490

Other

29

32

Total

2 717

2 473

74.Legal cases

EUR million

31.12.2018

31.12.2017

Fines

3 187

3 242

Agriculture

653

1 737

Cohesion

26

3

Other

1 823

438

Total

5 688

5 420

 


75.CONTINGENT ASSETS

EUR million

31.12.2018

31.12.2017

Guarantees received:

Performance guarantees

79

89

Other guarantees

7

5

Other contingent assets

25

32

Total

111

125

 

76.BUDGETARY AND LEGAL COMMITMENTS

 

EUR million

Note

31.12.2018

31.12.2017

Outstanding budgetary commitments not yet expensed

5.1

234 621

220 479

Shared management legal commitments under the current MFF pending implementation

5.2

143 883

211 688

Significant legal commitments in other areas

5.3

14 592

16 267

Total

393 097

448 434

 

77.OUTSTANDING BUDGETARY COMMITMENTS NOT YET EXPENSED

EUR million

31.12.2018

31.12.2017

Outstanding budgetary commitments not yet expensed

234 621

220 479

 

78.SHARED MANAGEMENT LEGAL COMMITMENTS UNDER THE CURRENT MFF PENDING IMPLEMENTATION

EUR million

Funds

Financial framework 2014-2020 (A)

Legal commitments concluded (B)

Budget commitments (C )

Legal commitments less budget commitments (B-C)

European Regional Development Fund and Cohesion Fund

262 408

262 408

179 831

82 578

European Social Fund

92 935

92 819

65 230

27 588

European Neighbourhood Policy Instrument

Fund for European Aid to the most Deprived

3 814

3 814

2 670

1 144

HEADING 1B: COHESION POLICY FUNDS

359 157

359 041

247 731

111 310

European Agricultural Fund for Rural Development

100 079

100 079

70 748

29 331

European Maritime and Fisheries Fund

5 749

5 749

4 048

1 702

HEADING 2: NATURAL RESOURCES

105 828

105 828

74 795

31 033

Asylum and Migration Fund

5 028

4 393

3 577

816

Internal Security Fund

3 016

2 883

2 159

724

HEADING 3: SECURITY & CITIZENSHIP

8 044

7 276

5 736

1 540

Total

473 030

472 145

328 262

143 883

79.SIGNIFICANT LEGAL COMMITMENTS IN OTHER AREAS

EUR million

Note

31.12.2018

31.12.2017

Connecting Europe Facility

11 554

12 676

Copernicus

1 267

1 841

Galileo

493

253

Fisheries agreements

46

133

Operating lease commitments

5.3.1

796

868

Other contractual commitments

435

497

Total

14 592

16 267

 

80.Operating lease commitments

EUR million

Future amounts to be paid

< 1 year

1- 5 years

> 5 years

Total

Buildings

139

351

298

787

IT materials and other equipment

3

6

9

Total

142

357

298

796

 

81.FINANCIAL INSTRUMENTS DISCLOSURES

82.CURRENCY RISKS

Exposure of the EC to currency risk at year end – net position

EUR million

31.12.2018

USD

GBP

DKK

SEK

EUR

Other

Total

Financial assets

Available for sale financial assets

619

57

18

7

13 220

17

13 937

Financial assets at fair value through surplus or deficit

(475)

491

16

Loans*

6

53

5

64

Receivables and recoverables

4 109

98

108

19 777

226

24 318

Cash and cash equivalents

43

1 520

287

406

13 197

1 493

16 946

193

5 686

403

522

46 737

1 741

55 282

Financial liabilities

Financial liabilities at fair value through surplus or deficit

(20)

(2)

(22)

Payables

(0)

(32 538)

(1)

(32 539)

(0)

(32 558)

(2)

(32 561)

Total

193

5 686

403

522

14 179

1 738

22 721

 

EUR million

31.12.2017

USD

GBP

DKK

SEK

EUR

Other

Total

Financial assets

Available for sale financial assets

680

57

17

56

11 147

16

11 973

Financial assets at fair value through surplus or deficit

(632)

655

23

Loans*

6

120

7

133

Receivables and recoverables

550

62

86

11 338

6

12 040

Cash and cash equivalents

42

3 178

27

693

17 509

1 664

23 113

97

3 785

105

834

40 768

1 693

47 282

Financial liabilities

Financial liabilities at fair value through surplus or deficit

(2)

(2)

Payables

(0)

(0)

(1)

(39 374)

(1)

(39 376)

(0)

(0)

(1)

(39 374)

(3)

(39 378)

Total

96

3 785

105

833

1 395

1 690

7 904

* Excluding back-to-back loans for financial assistance.

If the EUR had strengthened against the currency concerned by 10 % then this would have had the following impact:

EUR million

Economic result

USD

GBP

DKK

SEK

2018

(5)

(512)

(35)

(47)

2017

(3)

(339)

(8)

(71)

 

EUR million

Net assets

USD

GBP

DKK

SEK

2018

(13)

(5)

(2)

(1)

2017

(5)

(5)

(2)

(5)



If the EUR had weakened against the currency concerned by 10 % then this would have had the following impact:

EUR million

Economic result

USD

GBP

DKK

SEK

2018

6

625

43

57

2017

4

414

10

86

 

EUR million

Net assets

USD

GBP

DKK

SEK

2018

16

6

2

1

2017

7

6

2

6

83.INTEREST RATE RISK

The following table illustrates the interest rate sensitivity of available for sale financial assets assuming possible change in interest rates of +/- 100 basis points (1 %).

EUR million

Increase (+) / decrease (-) in basis points

Effect on net assets

2018: Available for sale financial assets

+100

(303)

-100

325

2017: Available for sale financial assets

+100

(305)

-100

324

84.CREDIT RISK

Analysis of the age of financial assets that are not impaired

EUR million

Total

Neither past due nor impaired

Past due but not impaired

< 1 year

1-5 years

> 5 years

Loans

53 840

53 840

Receivables and recoverables

24 318

14 399

6 577

3 208

134

Financial assets at fair value through surplus or deficit

16

16