EUROPEAN COMMISSION

Brussels, 25.6.2025

COM(2025) 359 final

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

CONSOLIDATED ANNUAL ACCOUNTS OF THE EUROPEAN UNION

FOR THE FINANCIAL YEAR 2024

CONTENTS

FINANCIAL HIGHLIGHTS OF THE YEAR    

NOTE ACCOMPANYING THE CONSOLIDATED ACCOUNTS    

CONSOLIDATED 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 AND EXPLANATORY NOTES    

GLOSSARY    

LIST OF ABBREVIATIONS    

FINANCIAL HIGHLIGHTS OF THE YEAR

The objective of this section on financial highlights, which has been prepared on the basis of the principles outlined in the IPSASB Recommended Practice Guideline (RPG) 2 ‘Financial Statement Discussion and Analysis’ is to assist readers in understanding how the operational, financial and investment activities of the EU are reflected in the different elements of the consolidated financial statements of the EU. The information presented in this section has not been audited.

Please note that due to the rounding of figures into millions of euro, some financial data in the tables below may appear not to add up.

CONTENTS

1.    KEY FIGURES AND HIGHLIGHTS OF THE YEAR    

2.    THE 2021-2027 MULTIANNUAL FINANCIAL FRAMEWORK, NextGenerationEU
   AND SUPPORT TO UKRAINE    

3.    NGEU IMPLEMENTATION    

3.1.    Overview    

3.2.    Disbursements of non-repayable support under the RRF
   (including REPowerEU)    

3.3.    Disbursements of loans under the RRF (including REPowerEU)    

3.4.    NGEU contributions to other programmes under the EU budget    

4.    BUDGETARY CONTINGENT LIABILITIES    

4.1.    Borrowing and lending activities    

4.2.    Budgetary guarantees    

4.3.    Common Provisioning Fund    

5.    FINANCIAL STATEMENTS ANALYSIS    

5.1.    Revenue    

5.2.    Expenses    

5.3.    Assets    

5.4.    Liabilities    

5.5.    Net assets    

6.    SUMMARY OF BUDGET IMPLEMENTATION    

6.1.    Revenue    

6.2.    Expenditure    

7.    EU POLITICAL AND FINANCIAL FRAMEWORK, GOVERNANCE AND    ACCOUNTABILITY    

7.1.    Political and financial framework    

7.2.    Governance and accountability    

1.KEY FIGURES AND HIGHLIGHTS OF THE YEAR

2.THE 2021-2027 MULTIANNUAL FINANCIAL FRAMEWORK, NextGenerationEU AND SUPPORT TO UKRAINE

The EU’s long-term budget for 2021-2027, together with the NextGenerationEU (NGEU) recovery instrument, amounts to EUR 2.028 trillion in current prices (EUR 1.8 trillion in 2018 prices).

The package consists of the long-term budget, the 2021-2027 multiannual financial framework (MFF), made up of EUR 1.221 trillion in current prices (EUR 1.081 trillion in 2018 prices), combined with the temporary NGEU recovery instrument, of an initial amount of up to EUR 806.9 billion in current prices (EUR 750 billion in 2018 prices). This initial amount has been adjusted to EUR 712 billion, as the total available loan support was not fully requested by the Member States.

—critical support for Ukraine: a new Ukraine Facility, based on grants, loans and guarantees, with a total capacity of EUR 50 billion over the period 2024-2027, will address Ukraine's immediate needs, reconstruction and modernisation on its path towards the EU; 

—strengthening sovereignty and competitiveness: the Strategic Technologies for Europe Platform (STEP) will boost the EU's long-term competitiveness in critical technologies, digital and deep tech, clean tech and biotech, with new flexibilities and incentives for cohesion funding and the Recovery and Resilience Facility, and a EUR 1.5 billion top-up to the European Defence Fund; 

—further action on migration and external challenges: an increase of EUR 9.6 billion will support the internal and external dimensions of migration and help partners in the Western Balkans, southern neighbourhood and beyond; 

—a stronger response to unforeseen crises: to enable the EU budget to continue to respond to unforeseen circumstances – such as the energy crisis, food crises and the aftermath of Russia’s war amid rising inflation and interest costs – the Flexibility Instrument will be reinforced with an additional EUR 2 billion, while the ceiling of the Emergency Aid Reserve will be increased by EUR 1.5 billion and split into two separate instruments: the European Solidarity Reserve and the Emergency Aid Reserve; 

—more crisis resilience: a three-step emergency mechanism and a new instrument will provide clarity on the budgetary mechanisms for financing the costs associated with NextGenerationEU; 

—the revision will be financed through a combination of new resources and redeployment within the EU budget. This will allow the EU to continue to address the most pressing priorities while minimising the impact on national budgets, for the benefit of people in the EU and beyond.

—the Cohesion policy under the recovery assistance for cohesion and the territories of Europe (REACT-EU), to help address the economic consequences of COVID-19 in the first years of the recovery;

—the Just Transition Fund, to guarantee that the transition to climate neutrality works for all;

—the European Agricultural Fund for Rural Development, to further support farmers;

—InvestEU, to support the investment efforts of our businesses;

—Horizon Europe, to make sure the EU has the capacity to fund more excellence in research;

—RescEU, to safeguard the capacity of the EU Civil Protection Mechanism to respond to large-scale emergencies.

—EUR 64.4 billion in financial assistance, budget support and humanitarian assistance, enabled by the EU budget and coming directly from EU Member States in the form of grants, loans and guarantees (of which, EUR 19.6 billion was mobilised throughout 2024 under all three pillars of the Ukraine Facility in the form of loans, non-repayable support and budgetary guarantees);

—EUR 47.3 billion in military assistance provided directly by EU Member States, including EUR 6.1 billion through the European Peace Facility (off-budget instrument);

—EUR 1.5 billion made available from the proceeds stemming from frozen and immobilised Russian sovereign assets (windfall profits); and

—EUR 17 billion made available by the EU and its Member States to support people fleeing Ukraine.

3.NGEU IMPLEMENTATION

3.1.Overview

At the end of 2024, the Commission had disbursed a total of EUR 373.0 billion in financial support. The majority of this amount, EUR 306.1 billion, was disbursed under the RRF (including support for REPowerEU reforms and investments), with EUR 197.5 billion disbursed as non-repayable support and EUR 108.7 billion disbursed as financial loan support. A further EUR 66.9 billion (net of recoveries) was disbursed as MFF payments under existing programmes.

3.2.Disbursements of non-repayable support under the RRF (including REPowerEU)

The total non-repayable support approved and legally committed under the 27 Member States’ recovery and resilience plans amounts to EUR 359.5 billion. On 31 December 2024 the budgetary commitments amounted to EUR 358.9 billion. At the end of 2024, the Commission had disbursed a total of EUR 197.5 billion of non-repayable support to 26 Member States:

During 2024, the Commission disbursed non-repayable support totalling EUR 55.9 billion. The main disbursements were to Germany (EUR 13.5 billion), Spain (EUR 10.9 billion), France (EUR 7.5 billion), Poland (EUR 6.8 billion) and Italy (EUR 5.5 billion).

3.3.Disbursements of loans under the RRF
(including REPowerEU)

The total financial loan support approved under the plans amounts to EUR 290.9 billion. The whole amount is covered by signed loan agreements. At the end of 2024, the Commission had disbursed EUR 108.7 billion in financial loan support to 13 Member States:

During 2024, the Commission provided new financial loan support for an amount of EUR 29.4 billion. The main disbursements were to Italy (EUR 14.7 billion), Poland (EUR 9.0 billion), Greece (EUR 2.3 billion) and Portugal (EUR 1.2 billion). According to the loan agreements, the Member States will repay 5% of the disbursed amounts every year, starting 10 years after the disbursement date. This results in a repayment period from 2032 to 2054 for the loans disbursed up until 31 December 2024.

3.4.NGEU contributions to other programmes
under the EU budget

At the end of 2024, the total amount of net payments disbursed to other programmes under the MFF stood at EUR 66.9 billion. This contribution, which is net of recoveries, mainly related to REACT-EU which finances the European Regional Development Fund (ERDF) and the European Social Fund (ESF, including FEAD):

During 2024, the Commission disbursed EUR 24.6 billion in payments to other MFF programmes. Included in this amount were payments relating to REACT-EU (EUR 14.9 billion, of which EUR 7.1 billion under the ERDF and EUR 7.8 billion under the ESF, including FEAD), the Just Transition Fund (EUR 6.0 billion), Rural Development (EUR 1.5 billion), InvestEU (EUR 1.2 billion), Horizon Europe (EUR 0.6 billion), RescEU (EUR 0.3 billion).

4.BUDGETARY CONTINGENT LIABILITIES

In the recent years, the EU has increasingly used financial instruments (such as loans, guarantees and equity investments), as a means to implement its policies and pursue EU objectives. For example, the loans by the EU to its Member States or partner countries aim at restoring financial stability or promoting economic recovery from crisis situations. The main objective of the EU guarantee programmes is boosting investments and enhancing access to finance to address market failures in the key policy areas.

When the EU provides support in the form of loans or guarantees, it expects a high value added from its financial contribution. This is because, in contrast to traditional non-repayable methods of budget implementation such as giving grants or subsidies, for each euro spent from the EU budget the final beneficiary receives more than the nominal amount of the EU financial support due to the so-called leverage effect.

While the EU expects that expenses incurred will be lower than the amount of funding provided, the EU budget may still incur losses, when some events – that are not fully in the control of the EU – occur. This is the case for the programmes where the EU undertakes borrowings to finance loans to Member States and third countries (see section 4.1 below) and when it issues guarantees to financial institutions (see section 4.2 below). As losses due to non-repayment by final beneficiaries are not likely to materialise in full, the EU does not hold assets for the entirely of those potential liabilities 1 , but only up to the level necessary to cover expected losses and a sufficient safety buffer for unexpected losses. Nevertheless, would the losses occur above the assets provisioned, they would be covered by the Member States through future EU budgets. In this sense they create ‘budgetary contingent liabilities’ for the EU budget. 

The EU regularly monitors the sustainability of its contingent liabilities and the adequacy of the assets provisioned held in the Common Provisioning Fund (CPF) 2 (see section 4.3 below).

At the end of 2024, the EU budgetary contingent liabilities totalled EUR 408.9 billion, of which EUR 298.9 billion related to the outstanding loans to sovereigns (EUR 296.4 billion nominal and EUR 2.5 billion accrued interest) and EUR 109.9 billion to the maximum amounts (ceilings) of the guarantees issued. The assets provisioned amounted to EUR 23.4 billion.

The EU also incurs other liabilities, which are not contingent in nature, but which – due to their long-term nature – will only be financed by the Member States through future budgets. This mainly relates to the pension liability (EUR 93.1 billion as at 31 December 2024) and to the unified funding approach borrowings that financed RRF/REPowerEU grants and some other MFF programmes (EUR 264.4 billion as at 31 December 2024, see sections 3.2 and 3.4).

4.1.Borrowing and lending activities

4.1.1.Borrowing

The Union borrows by issuing securities on the international capital markets. The EU budget, ultimately, guarantees all the Union borrowings. Until 2020, borrowings were used only to finance lending activities, see section 4.1.2. Following the introduction of the NGEU instrument, borrowings are now also used to finance non-repayable support, see section 3.2.

The funding approach

       Back-to-back                Unified funding

Until 2020, the Commission was following a ‘back to back’ approach, issuing a dedicated bond to fund a specific loan agreement. It was transferring the money directly to the beneficiary country on the same terms and conditions (interest rate, maturity). The timing, volume and maturity of bond issuances were determined by the needs of the beneficiary.

For the NGEU instrument, the Commission uses a diversified, pooled funding approach where the borrowings are not directly funding specific disbursements. Instead, the debt is issued according to semi‑annual funding plans, with long term bonds and short term bills. The Commission uses auctions and syndications to issue these securities. It then passes on the costs, in line with the cost allocation methodology agreed with Member States 3 , to the beneficiaries for the loans and to the EU budget for the non-repayable support. This pooled funding approach offers a more flexible and coherent borrowing and lending activity. It also offers better funding costs and allows the design of a better risk and compliance framework. This funding flexibility also requires a liquidity buffer for an efficient liquidity management.

Following the Regulation (EU, Euratom) 2022/2434 of the European Parliament and of the Council 4 in December 2022, the Commission can use this approach for all future borrowings. In this way, the Macro Financial Assistance (MFA)+ for Ukraine, the Ukraine Facility and other future lending programmes can benefit from this flexible and cost-efficient debt management, creating a unified funding approach for all EU borrowings.

During 2024, the outstanding borrowings of the EU increased by EUR 142.8 billion, bringing the nominal outstanding amount to EUR 601.3 billion at 31 December 2024. This amount includes EUR 68.2 billion of NGEU Green Bonds. These issuances are underpinned by the NGEU Green Bond Framework, which is aligned with the Green Bond Principles of the International Capital Market Association (ICMA) 5 . Funds raised through NGEU Green Bonds, finance climate-relevant measures from the national Recovery and Resilience plans (RRPs) under the Recovery and Resilience Facility (RRF).

The table below shows the repayment schedule for the outstanding EU borrowings at 31 December 2024:

The ‘unified funding’ finances the NGEU loans and non-repayable support as well as the Ukraine Facility and MFA loans signed as of 2023.

4.1.2.Lending

The Commission provides bilateral loans in accordance with decisions of the European Parliament and of the Council. In 2024, the Commission, acting on behalf of the EU, operates seven main programmes under which it may grant loans:

—SURE assistance (Support to mitigate Unemployment Risks in an Emergency);

—European Financial Stabilisation Mechanism (EFSM) assistance;

—Macro-Financial Assistance (MFA);

—Balance of Payments (BOP) assistance;

—Euratom;

—Ukraine Facility and

—NGEU (RRF and REPowerEU) see section 3.3.

At 31 December 2024, the nominal amount of the loans, were:

SURE

SURE was established in 2020 to provide financial assistance to Member States who were experiencing, or were seriously threatened with, a severe economic disturbance caused by the COVID-19 pandemic. The instrument complements the national measures taken by affected Member States.

The availability of the instrument ended at 31 December 2022 and there are no pending disbursements. The maturity of loans varies between 5 and 30 years.

EFSM

EFSM was created to provide financial assistance to all Member States experiencing or seriously threatened by a severe economic financial disturbance caused by exceptional occurrences beyond their control. This programme has expired and no additional loans can be drawn, except for specific tasks such as the lengthening of maturities of existing loans. Portugal requested the maturity extention of EUR 1.8 billion due in 2024. The new loan was financed by a long-term bond maturing in 2028.

MFA

The MFA programme is a form of financial assistance extended by the EU to partner countries outside the EU experiencing a balance of payments crisis. It takes the form of medium/long-term loans or grants, or a combination of these, and is only available to countries benefiting from an International Monetary Fund (IMF) programme.

Ukraine

In 2022 the European Parliament and the Council agreed three packages of financial assistance for Ukraine 6 , totalling EUR 7.2 billion, to strengthen the immediate resilience of the country subsequent to Russia’s unprovoked and unjustified war of aggression. All the loans had been disbursed to Ukraine by the end of 2022. The maturity of these loans to Ukraine varies between 10 to 30 years.

To continue the EU support for Ukraine, a new package of financial assistance of EUR 18 billion was adopted by the European Parliament and the Council on 14 December 2022 (Regulation (EU) 2022/2463 of the European Parliament and Council 7 ). The Commission and Ukraine signed a Memorandum of Understanding and a Loan Facility Agreement in early 2023 and the EUR 18 billion was disbursed in 2023. The MFA+ loans are funded through the unified funding approach, whereas all previous MFA loans were funded under the back-to-back funding approach.

In October 2024, the EU adopted a new MFA for Ukraine and the Ukraine Loan Cooperation Mechanism (ULCM) 8 . Under the ULCM, extraordinary revenues from immobilised Russian sovereign assets will be used to grant non-repayable support to Ukraine to assist the country in repaying new bilateral loans provided by the G7 partners and the EU under this initiative. Consequently, the EU signed a new MFA loan agreement with Ukraine in December 2024 for an amount of EUR 18.1 billion to be disbursed in 2025. Until May 2025, the Commission had disbursed EUR 6 billion.

During 2024 Ukraine has timely repaid EUR 600 million of previous MFA loans granted by EU. At the end of 2024, the total MFA loans outstanding to Ukraine amounted to EUR 29.0 billion (nominal amount).

Ukraine Facility

On 29 February 2024, the European Parliament and the Council adopted Regulation (EU) 2024/792 establishing the Ukraine Facility 9 . This new instrument covers the years 2024 to 2027 and offers up to EUR 50 billion in financial support to Ukraine, including up to EUR 33 billion of sovereign loans. By 31 December 2024, EUR 13.1 billion of loans have been disbursed to Ukraine. The Ukraine Facility sovereign loans are funded through borrowings following the unified funding approach.

BOP

The BOP is an assistance programme designed for Member States outside the euro area that are experiencing or are threatened by difficulties regarding their balance of payments. BOP assistance takes the form of medium-term loans that are conditional on the implementation of policies designed to address underlying economic problems. Typically, BOP assistance from the EU is offered in cooperation with the IMF and other international institutions or countries. No new operations or loan repayments occurred in 2024. The programme is expected to end in 2025 when the outstanding loan and the related borrowing are maturing.

Euratom

The European Atomic Energy Community lends money to both Member States and non-Member States, and to entities of both, to finance projects relating to energy installations.

Liquidity buffer

Under the unified funding strategy, a certain amount of proceeds from borrowings are kept in a bank account with the European Central Bank. This liquidity buffer ensures that sufficient funds are available to meet all upcoming disbursments needs while avoiding excess balances. In managing this liquidity buffer the Commission takes into account expected disbursment needs and the opportunity costs of cash balances. At year-end 2024 the funds held in the bank account amounted to EUR 33.9 billion.

4.1.3.System of protection

Borrowings of the EU constitute direct and unconditional obligations of the EU and are guaranteed by the EU Member States. The borrowings undertaken to finance loans are intended to be repaid through timely collection of the principal and interest due on those loans. Nevertheless, should a beneficiary country default on or delay their repayments, there are number of safeguards to ensure service of the EU debt, which are summarised in the table below. In the short term, the borrowings will be repaid from the available treasury balance of the Commission. Next, borrowings related to the loans to third countries (except for MFA+ and Ukraine Facility loans) will be repaid from the assets held in the CPF, while in case of the MFA+, Ukraine Facility loans and loans to Member States, the Commission may call additional resources from the Member States up to the available own resources margin (‘budgetary headroom’). For some programmes, there are also guarantees provided by the Member States. As a consequence, investors are only exposed to the credit risk of the EU, not to that of the beneficiary of the loans.

4.2.Budgetary guarantees

Under this type of budget implementation, the EU provides guarantees to financial institutions (implementing partners) for their financing (lending) and investment (equity) operations to pursue its policy objectives.

The EU has issued guarantees under the following programmes:

—External lending mandate (ELM) guarantees granted to the European Investment Bank (EIB) for their lending operations outside EU, mainly to sovereign and sub sovereign beneficiaries;

—European Fund for Strategic Investment (EFSI) guarantee granted to the EIB Group for their operations supporting additional investment in the EU and access to finance for SMEs;

—InvestEU guarantee provided to the EIB Group, the European Bank for Reconstruction and Development and several financial partners in the EU Member States, in order to mobilise private investments for the green and digital transition, innovation and social investments and skills. The InvestEU guarantee may be increased by EFTA and Member States contributions and counter guarantees; 

—External Action Guarantee under NDICI Regulation providing guarantees both to the EIB, for their financing and investments outside Europe, both to the public and private sector beneficiaries, as well as to several other counterparts, with the objective of promoting sustainable investments in the EU’s partner countries;

—European Fund for Sustainability Development (EFSD) guarantee issued to several counterparties with the aim to support investments in Africa and in the European Neighbourhood countries;

—Ukraine Guarantee issued under the Ukraine Facility regulation to several counterparties to boost investments for the recovery and reconstruction of Ukraine.

As at 31 December 2024, the nominal outstanding amount of those guarantees at the maximum level granted to those financial institutions amounted to EUR 109.9 billion, of which EUR 72.6 billion relates to financing or investment operations signed by the implementing partners (InvestEU, NDICI and Ukraine guarantees are still in the investment period, during which the partners can include new operations under the guarantee).

The Member States and EEA countries may also contribute to the InvestEU programme. Until 31 December 2024, the EU signed contribution agreements with those countries for EUR 2.8 billion, out of which EUR 2.2 billion relates to cash contributions and EUR 0.6 billion to counter-guarantees.

4.3.Common Provisioning Fund

In order to satisfy any guarantee calls to cover losses incurred by the implementing partners in a timely manner, the EU provisions amounts from the budget. As of 2021, all assets provisioned are held in the CPF, which functions as a single portfolio, with assets mainly invested in the debt securities. Currently, it combines provisioning for all the EU budgetary guarantees and some financial assistance programmes. The resources of the CPF are allocated into compartments for the purpose of tracing the amounts relating to the contributing budgetary guarantees and financial assistance programmes.

At 31 December 2024, the Commission holds EUR 23.2 billion net assets in the CPF for the following compartments:

—Guarantee Fund for external actions – EUR 3.2 billion (covering ELM guarantees as well as pre-2021 MFA and Euratom loans to third countries)

—EFSI – EUR 8.9 billion

—EFSD – EUR 0.8 billion

—InvestEU compartments – EUR 6.8 billion (including Member State and EEA countries cash contributions)

—NDICI EFSD+ – EUR 2.9 billion

—Ukraine Guarantee – EUR 0.2 billion

—MFA loans post-2020 – EUR 0.1 billion

—MFA Ukraine loans – EUR 0.3 billion

5.FINANCIAL STATEMENTS ANALYSIS

5.1.Revenue

The consolidated revenue of the EU incorporates amounts related to exchange transactions and non-exchange transactions, the latter being the most significant. The five-year trend of the main non-exchange revenue categories (comprising GNI resources, Traditional own resources, VAT resources, Plastics own resources, Fines and Recovery of expenses) is as follows:

Five-year trend of revenue from main non-exchange transactions*

*2020 to 2024 figures: excluding revenue relating to the UK’s withdrawal from the EU

As budget revenue should equal (or exceed) budget expenditure, the main driver in the revenue trend shown above is the payments made each year.

Main developments in 2024

In 2024, total revenue, comprising all revenue categories, amounted to EUR 175.7 billion, compared to EUR 171.9 billion in the previous year. The main developments explaining the increase of EUR 3.8 billion or 2.2% were:

—Fines related revenue increased by EUR 2.3 billion mainly due to fines issued to companies for breaches of EU competition rules;

—Financial revenue increased by EUR 2.0 billion mainly due to increased interest earned;

—VAT contributions have increased from EUR 22.5 billion in 2023 to EUR 24.5 billion in 2024; 

—Plastics own resources increased from EUR 7.2 billion in 2023 to EUR 8.2 billion in 2024;

—Traditional own resources increased from EUR 19.8 billion in 2023 to EUR 20.6 billion in 2024; and

—Revenue from GNI (gross national income), the primary element of the EU’s operating revenue, decreased from EUR 101.3 billion in 2023 to EUR 95.0 billion in 2024. The decrease of EUR 6.3 billion or 6.2%, partially offsetting the other movements in revenue described above, is explained to a great extent by a reduction of the payment appropriations needs.

5.2.Expenses

The main component of expenses recognised in the consolidated financial statements are expenses under the shared management mode, which includes the following funds: (i) European Agricultural Guarantee Fund (EAGF), (ii) European Agricultural Fund for Rural Development (EAFRD) and other rural development instruments, (iii) European Regional Development Fund (ERDF) & Cohesion Fund (CF), and (iv) European Social Fund (ESF). These funds made up EUR 101.9 billion or 37.3% of the total expenses of EUR 272.9 billion incurred in 2024 (2023: EUR 125.4 billion, 51.5% of the total expenses). The split of expenses under the shared management mode and their relative weights are presented below:

Main expenses under the shared management mode for the financial year 2024

The decrease of expenses under the shared management mode is mainly due to decreased expenses relating to the ERDF and Cohesion Fund (by EUR 23.6 billion) as the implementation of the programmes of the former MFF is now in its final stage.

Expenses under the direct management mode, which represents budget implementation by the Commission, executive agencies and trust funds, increased from EUR 61.9 billion in 2023 to EUR 99.0 billion in 2024. The increase of EUR 37.1 billion is mainly due to the non-repayable support granted under the NGEU’s RRF, which amounted to EUR 65.8 billion (2023: EUR 36.0 billion) as Member States use the funds provided and milestones are achieved.

Expenses under the indirect management mode represent the budget implementation by EU agencies, EU bodies, third countries, international organisations and other entities. In 2024, the expenses under the indirect management mode amounted to EUR 16.6 billion (2023: EUR 15.2 billion). The increase is mainly due to the increased expenses in external actions.

5.3.Assets

As at 31 December 2024 total assets amounted to EUR 518.5 billion (2023: EUR 467.7 billion) – the increase is mainly due to further lending under the NGEU instrument and new loans issued to Ukraine under the Ukraine Facility. The most significant assets on the EU balance sheet were financial assets other than cash and cash equivalents (EUR 328.3 billion), pre-financing (EUR 78.9 billion), receivables and recoverables (EUR 31.7 billon) and cash and cash equivalents (EUR 63.2 billion). Other assets, amounting to EUR 16.3 billion, mainly included property, plant and equipment and intangible assets.

Composition of assets at 31 December 2024

The increase in total assets of EUR 50.7 billion or 10.8% from the previous year was mainly due to the following effects:

—Loans outstanding increased from EUR 246.9 billion in 2023 to EUR 283.6 billion in 2024. The increase of EUR 36.7 billion or 14.9% mainly reflects the issuance of further loans to Member States under the RRF and REPowerEU (EUR 29.4 billion) and new loans under the Ukraine Facility and MFA programmes (EUR 13.1 billion and EUR 1.1 billion respectivelly), offset by EFSM and MFA repayments of EUR 1.4 billion and impairments on the new Ukraine loans (EUR 5.7 billion);

—Total pre-financing decreased from EUR 91.7 billion in 2023 to EUR 78.9 billion in 2024. This is linked mainly to the significant decrease of EUR 18 billion in ERDF, CF & ESF pre-financing of the previous programming period as the period is reaching its closure stage and higher amounts are cleared. There was additionally a considerable decrease of EUR 3.8 billion in the non-repayable financial support granted under the RRF due to clearings that took place during the year following Member States reaching milestones and targets;

—Cash and cash equivalents increased from EUR 39.6 billion in 2023 to EUR 63.2 billion in 2024. The increase of EUR 23.6 billion or 59.6% is mainly due to the higher liquidity buffer relating to the unified funding (EUR 12.5 billion held in the European Central Bank account in 2023 versus EUR 33.9 billion at the end of 2024), which resulted from high level of disbursements planned for the beginning of 2025; and

—Receivables and recoverables decreased from EUR 35.2 billion to EUR 31.7 billion. The decrease of EUR 3.5 billion or 9.9% is mainly due to the decrease in the net amount owed by the UK under the Withdrawal Agreement – see below. 

UK withdrawal from the EU

On 31 January 2020, the United Kingdom withdrew from the European Union. The terms of its departure are set out in an Agreement on the withdrawal of the UK from the EU and the European Atomic Energy Community, also known as the ‘Withdrawal Agreement’ or ‘WA’. As part of this deal, the UK agreed to honour all financial obligations undertaken while it was a member of the EU. The Agreement entered into force on 31 January 2020. Under the Withdrawal Agreement, the UK will continue to contribute to the EU budget and to benefit from pre-2021 EU programmes and expenditure as if it was a Member State. The UK will also receive back certain specified sums it paid into the EU budget or monies received by the EU budget linked to its period of membership. The EU reports twice a year to the UK on the amounts due and the UK pays these on a monthly basis. The reporting is updated each year based on actual figures.

The obligations under the Withdrawal Agreement create liabilities and receivables for the EU which have to be calculated and reflected in the EU’s annual accounts. They cover in particular the following areas:

—own resources (Article 136)

—outstanding commitments (Article 140)

—competition fines (Article 141)

—Union Liabilities (Article 142)

—contingent financial liabilities and financial instruments (Articles 143 & 144)

—net assets of the European Coal & Steel Community (Article 145)

—EU investment in the European Investment Fund, EIF (Article 146)

—contingent liabilities concerning legal cases (Article 147).

Pre-financing

In 2024, pre-financing, excluding other advances to Member States and contributions to the trust funds Bêkou and Africa, amounted to EUR 75.1 billion (2023: EUR 89.4 billion), almost all of which related to Commission activities. The decrease of EUR 14.3 billion or 16.0% is mainly related to the decrease of pre-financing related to shared management from EUR 36.6 billion in 2023 to EUR 25.0 billion in 2024, as programmes of the previous MFF advance further in their closure stage:

Commission pre-financing by management mode

The level of pre-financing granted under MFF programmes is significantly influenced by the respective MFF cycle – for example at the beginning of an MFF period large advances are expected to be paid to Member States under cohesion policy and these amounts remain available to Member States until the closure of the programmes. An annual pre-financing is also paid out, which must be used within the year or be recovered the following year as part of the annual closure of the accounts cycle. The Commission makes every effort to ensure that pre-financing is maintained at an appropriate level. A balance has to be struck between ensuring sufficient funding for projects and the timely recognition of expenditure.

5.4.Liabilities

As at 31 December 2024 the total liabilities were EUR 827.3 billion (2023: EUR 679.8 billion) – the increase is driven mainly by the borrowings taken out in 2024 under the unified funding approach. The most significant liabilities were borrowings for NGEU and financial assistance (EUR 594.0 billion), pension obligations and other post-employment benefits liabilities (EUR 93.1 billion), accrued charges and deferred income (EUR 67.1 billion) and payables to third parties (EUR 55.4 billion).

Composition of liabilities at 31 December 2024

The increase of EUR 147.5 billion or 21.7% over the previous year was mainly due to the following effects:

—Borrowings increased from EUR 450.6 billion in 2023 to EUR 594.0 billion in 2024. The increase of EUR 143.4 billion or 31.8% mainly relates to the new issuances under the unified funding approach (for NGEU and the Ukraine Facility), net of repayments and changes in carrying amount, of EUR 144.9 billion, less EFSM and MFA repayments of EUR 1.4 billion;

—Accrued charges and deferred income decreased from EUR 76.8 billion in 2023 to EUR 67.1 billion in 2024. The decrease of EUR 9.7 billion or 12.6% mainly relates to the ERDF & CF; and

—Payables increased from EUR 50.5 billion in 2023 to EUR 55.4 billion in 2024. The increase of EUR 4.9 billion or 9.7% is primarily related to RRF (increase of EUR 4.9 billion);

Total cost claims and invoices received and recognised in the Balance Sheet under the heading ‘Payables’

5.5.Net assets

The excess of liabilities over assets at 31 December 2024 stood at EUR 308.8 billion (2023: EUR 212.2 billion). It should be noted that this excess of liabilities over assets does not mean that the EU institutions and bodies are in financial difficulties, rather it means that certain liabilities will be funded by future annual budgets. Many expenses are recognised under accrual accounting rules in the current year although they may be actually paid in following years and funded using future budgets; the revenues related to these future fundings will only be accounted for in future periods. Apart from the borrowings under the unified funding approach, which are to be repaid up to 2054, and the employee benefits liability, which is to be paid over several decades, the most significant amounts are for activities relating to the EAGF, the bulk of which is usually paid in the first quarter of the following year.

6.SUMMARY OF BUDGET IMPLEMENTATION 

6.1.Revenue

In the initial adopted EU budget, signed by the President of the European Parliament on 22 November 2023, total payment appropriations amounted to EUR 142 630 million and the amount to be financed by own resources totalled EUR 136 499 million. The revenue and expenditure estimates in the initial budget are typically adjusted during the budgetary year by way of amending budgets. Adjustments in the GNI-based own resources ensure that budgeted revenue matches exactly budgeted expenditure. In accordance with the principle of equilibrium, budget revenue and expenditure (payment appropriations) must be in balance.

During 2024, five amending budgets were adopted. Taking them into account, the final adopted revenue for 2024 amounted to EUR 149 744 million and the total financed by own resources amounted to EUR 141 170 million. The main factor for that increase of Member States' contributions in 2024 was the increase of payment appropriations.

Title 1 : Own resources

The collection of traditional own resources was very close to the forecasted amounts in the budget.

Member States' final VAT, GNI and Plastics payments corresponded closely to the final budgetary estimate. The differences between the forecasted amounts and the amounts actually paid are due to the differences between the euro rates used for drawing up the budget and the rates in force at the time when the Member States outside the euro area actually made their payments.

Title 2 : Surpluses, balances and adjustments

The surplus of the previous financial year amounted to EUR 633 million. This amount was inscribed in the budget 2024 through an amending budget and the own resources contributions from the Member States was reduced accordingly.

For the VAT and GNI balances, the rules are set out in Article 10b of the Making Available Regulation (Council Regulation (EU, Euratom) No 609/2014). In the case of the Plastics balances the rules are stipulated in Article 9 of the Plastics Making Available Regulation (Council Regulation (EU, Euratom) No 2021/770).

According to these rules the total sum of the balances are calculated in order for the impact on the EU budget to be zero (‘netting system’) and the procedure does not entail a budgetary amendment. The Commission therefore directly requests the Member States to pay the net amounts in accordance with the rules of the Making Available Regulation.

Title 3 : Administrative revenue

This title comprises mainly revenue from taxes and levies on the remuneration of staff.

Title 4 : Financial revenue, default interest and fines

The main part corresponds to the fines in connection with the implementation of the rules on competition.

Title 5 : Budgetary guarantees, borrowing and lending operations

This title has increased significantly with the advent of the NGEU. NGEU funds within this title are assigned revenue. Title 5 covers revenue related to guarantees and interest and repayments of loans granted. It also channels funds (for the NGEU non-repayable support under the Recovery and Resilience Facility and for reinforcement of MFF programmes) from assigned revenue that Member States receive under the European Union Recovery Instrument (EURI).

Title 6 : Revenue, contributions and refunds related to Union policies

This title concerns mainly revenue from financial corrections related to structural and agricultural funds (ESIF, EAGF and EAFRD). It also includes the participation of third countries in research programs, the clearance of accounts in agricultural funds and other contributions and refunds to EU programs/activities. A substantial part of this total is made up of assigned revenue, which gives rise to the entering of additional appropriations on the expenditure side.

Total 2024 budget revenue amounted to EUR 250 609 million:

6.2.Expenditure

6.2.1.Budget implementation

In 2024, the fourth year of the MFF 2021-2027, the final adopted budget amounted to EUR 195.3 billion of commitment appropriations and EUR 149.7 billion of payment appropriations. In addition, EUR 31.1 billion of commitment appropriations were available as assigned revenue, out of which EUR 0.7 billion related to the NGEU 10 , and EUR 1.3 billion of commitment appropriations were carried over from 2023. The payment appropriations related to 2024 assigned revenue amounted to EUR 122.9 billion, out of which EUR 79.0 billion related to the NGEU and EUR 3.2 billion of payment appropriations were carried over from 2023.

Active monitoring of budget implementation and good cooperation between the European Parliament, the Council and the Commission brought about full implementation of the budget.

The implementation of the total commitment appropriations in 2024 amounted to EUR 213.7 billion:

—EUR 193.1 billion from the final adopted budget;

—EUR 0.9 billion from appropriations carried-over or made available again from 2023;

—EUR 19.7 billion from appropriations stemming from assigned revenue;

The implementation of the total payment appropriations in 2024 amounted to EUR 247.0 billion:

—EUR 146.1 billion from the final adopted budget;

—EUR 2.7 billion from appropriations carried-over or made available again from 2023;

—EUR 98.2 billion from appropriations stemming from assigned revenue;

In cases allowed by the Financial Regulation and/or legal bases, the appropriations of the voted budget that were not implemented in 2024 were carried over to 2025: EUR 1.4 billion of commitment appropriations and EUR 3.8 billion of payment appropriations.

Likewise, EUR 11.1 billion of commitment appropriations of assigned revenue and EUR 24.7 billion of payment appropriations of assigned revenue were carried over to 2025 in accordance with the Financial Regulation.

Total 2024 commitment appropriations implementation per MFF 2021-2027 heading were as shown below:

The 2024 implementation for all types of appropriations (budget, carry-overs from previous year and assigned revenue) was 94% for commitments and 90% for payments. Implementation rates including the appropriations carried over to 2025 (in accordance with the Financial Regulation and/or legal bases) reached 99.6% for commitment appropriations and 100% for payment appropriations of the voted budget for 2023.

The NGEU appropriations were inscribed in full in 2021, i.e. EUR 421.1 billion in commitment appropriations. 2023 was the last year for which the related legal commitments could be entered into.

In 2024, the NGEU payment appropriations amounted to EUR 76.6 billion and the implementation reached 95.4%. The remaining amount of EUR 3.5 billion of payment appropriations was carried over to 2025.

6.2.2.Commitment appropriations definitively cancelled

Under the Conditionality Regulation decommitments for a total of EUR 1 044 million (of which EUR 30 million under NGEU) were posted in the course of 2022 on commitments related to Hungary. By the end of 2024 the related commitment appropriations could not be reconstituted and were definitively cancelled.

6.2.3.Outstanding commitments

Outstanding commitments (commonly referred to as RAL – reste à liquider), which correspond to amounts committed but not yet paid for, stood at EUR 507.4 billion at the end of 2024. The outstanding commitments decreased as compared to 2023 (by EUR 35.6 billion).

The main driver of the 2024 decrease of the RAL was the NGEU (non-repayable part) implementation, contributing EUR 166.3 billion (33%) to the total RAL at the end of 2024. Because the NGEU appropriations are to be committed until 31 December 2023 and paid by 31 December 2026, in accordance with the Articles 3 (4) and 3 (9) of the EURI Regulation, the trend of nominally growing RAL linked to NGEU has reversed in 2024.

6.2.4.Budget result

The budget result (surplus) increased from EUR 0.6 billion in 2023 to EUR 1.3 billion in 2024. The 2024 budget result is mainly impacted by the overimplementation of budgetary revenue on title 4 – Financial revenue, default interest and fines. 

7.EU POLITICAL AND FINANCIAL FRAMEWORK, GOVERNANCE AND ACCOUNTABILITY

The European Union (EU) is a Union on which the Member States confer competences to attain objectives they have in common. The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.

7.1.Political and financial framework

The EU pursues the objectives established by the Treaty with various instruments, one of which is the EU budget. Others are, for example, a common legislative framework or joint policy strategies.

The main sources of funding of the EU budget are own resources revenues which are complemented by other revenues. There are four types of own resources: Traditional own resources (mainly custom duties), the own resource based on value added tax (VAT), the own resource based on non-recycled plastic packaging waste (introduced in 2021) and the own resource based on gross national income (GNI). Other revenues arising from the activities of the EU (e.g. competition fines) normally represent less than 10% of total revenue.

—Shared management: the vast proportion of the budget (around 3/4 of the budget) is managed under a system of shared management by the Commission in cooperation with the Member States, notably in the areas of structural funds and agriculture.

—Direct management: the Commission also manages programmes itself and can delegate the implementation of specific programmes to executive agencies.

—Indirect management: Expenditure decisions can also be indirectly managed via other bodies within or outside the EU. The Financial Regulation and/or contribution agreements define the necessary control and reporting mechanisms by these entities and the supervision by the Commission where budget implementation tasks are entrusted to national agencies, the European Investment Bank Group, third countries, international organisations (e.g. the World Bank or the United Nations) and other entities (e.g. EU decentralised agencies, Joint Undertakings).

7.2.Governance and accountability

7.2.1.Institutional structure

The EU has an institutional framework through which it aims to promote its values, advance its objectives, serve its interests, those of its citizens and those of the Member States, and ensure the consistency, effectiveness and continuity of its policies and actions. The organisational structure consists of institutions, agencies and other EU autonomous bodies. The Financial Regulation, together with the applicable accounting rules, defines which of these entities are included in the EU consolidated accounts (please see note 9 of the EU consolidated annual accounts for the list of entities included in the scope of consolidation).

The European Parliament, jointly with the Council, exercises legislative and budgetary functions. The Commission is politically accountable to the European Parliament. The Council also carries out policy-making and coordinating functions within the general political direction and priorities of the Union set by the European Council.

The European Commission is the executive arm of the European Union. It promotes the Union’s general interest and takes appropriate initiatives to that end. It ensures the application of the Treaties and oversees the application of Union law by Member States under the control of the Court of Justice of the European Union. It exercises coordinating, executive and management functions, executes the budget and manages programmes.

The Commission implements the budget, in large part in cooperation with the Member States. 14 Together, they ensure that the appropriations are used in accordance with the principles of sound financial management. Regulations lay down the control and audit obligations of the Member States when they share the implementation of the budget and the resulting responsibilities. They also lay down the responsibilities and detailed rules for each of the EU’s institutions as concerns their own expenditure.

7.2.2.The Commission’s governance structure

The Commission’s governance arrangements and how these ensure that the Commission functions as a modern, accountable and performance-oriented institution are described in the Communication 15 on Governance in the European Commission.

The Commission performs its functions under the leadership of the College of Commissioners, which sets priorities and takes overall political responsibility for the work of the Commission. As a College, the Commission works under the political guidance of its President, who presents, as part of his or her nomination to the European Parliament the objectives he or she intends to pursue in the form of political guidelines. The President decides on the internal organisation of the Commission, ensuring that it acts consistently, efficiently and as a collegiate body.

The College delegates the operational implementation of the budget and financial management to the Directors-General and Heads of Service who lead the administrative structure of the Commission. This decentralised approach creates an administrative culture that encourages civil servants to take responsibility for activities over which they have control and requires them to provide assurance as concerns the activities for which they are accountable.

Under the authority of the President and in close cooperation with the Member of the Commission in charge of budget, human resources and administration, and with the involvement of the Presidential and central services, the Corporate Management Board provides coordination, oversight, advice and strategic orientations.

The internal arrangements define a coherent set of robust controls and management tools which allow the College of Commissioners to assume political responsibility for the work of the Commission. 16

7.2.3.The Commission’s financial management

In the Commission, the roles and responsibilities in financial management are clearly defined (e.g. in the Financial Regulation and the Internal Rules 17 ) and applied accordingly. As authorising officers by delegation, the Commission’s Directors-General and Heads of Service are responsible for the sound financial management of EU resources, compliance with the provisions of the Financial Regulation, risk management and establishing an appropriate internal control framework.

The responsibility of the Authorising Officers covers the entire management process, from determining what needs to be done to achieve the policy objectives set by the institution to managing the activities from both an operational and a sound financial management standpoint. Tasks can further be sub-delegated to Directors, Heads of Unit and others, who thereby become Authorising Officers by Sub-Delegation. Each authorising officer by delegation may rely on one or two directors in charge of risk management and internal control to oversee and monitor the implementation of internal control systems.

The Commission’s central services provide guidance and advice and promote best practices, including through the work of the Corporate Management Board.

The Financial Regulation requires each authorising officer to prepare an annual activity report (AAR) detailing achievements, internal control and financial management activities during the year. The AAR includes a declaration that resources have been used based on the principles of sound financial management and that control procedures are in place which provide the necessary guarantees concerning the legality and regularity of the underlying transactions. The Annual Management and Performance Report for the EU budget 18 is the main instrument through which the College of Commissioners assumes political responsibility for the financial management of the EU budget.

The Accounting Officer of the Commission is centrally responsible for treasury management, recovery procedures, laying down accounting rules based on International Public Sector Accounting Standards (IPSAS), validating accounting systems and the preparation of the Commission's and consolidated annual accounts of the EU. Furthermore, the Accounting Officer is required to sign the annual accounts declaring that they present fairly, in all material aspects, the financial position, the results of the operations and the cash flows of the Union. The annual accounts are adopted by the College of Commissioners. The Accounting Officer is an independent function and bears a major responsibility as regards financial reporting in the Commission.

The Internal Auditor of the Commission is likewise a centralised and independent function and provides independent advice, opinions and recommendations on the quality and functioning of internal control systems inside the Commission, EU agencies and other EU autonomous bodies.

The Audit Progress Committee ensures the independence of the Internal Auditor and monitors the quality of internal audit work and the follow-up given by the Commission services to internal and external audit recommendations, as well as to the European Court of Auditors’ discharge related findings and recommendations on the reliability of the annual consolidated EU accounts. The advisory role of the committee contributes to the overall further improvement of the Commission’s effectiveness and efficiency in achieving its goals and facilitates the College’s oversight of the Commission’s governance, risk management, and internal control practices.

7.2.4.External audit and discharge procedure

In line with the principles of sound financial management, funds must be managed in an effective, efficient and economic manner. An accountability framework based on comprehensive reporting, external audit and political control exists to provide reasonable assurance that EU funds are spent in a proper manner.

The European Parliament decides, after a recommendation by the Council, on whether or not to provide its final approval, known as ‘granting discharge’, on the way the Commission implemented the EU budget in a given year. The annual discharge procedure ensures that the Commission is held politically accountable for the implementation of the EU budget.

Every year the European Court of Auditors examines the reliability of the accounts, whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management and the qualitative aspects of budgeting, including the performance dimension, have been sound. As from 2021, given the considerable importance of NextGenerationEU, the European Court of Auditor’s opinion on the legality and regularity of expenditure under the traditional EU budget is complemented by a separate opinion on the legality and regularity of expenditure under the Recovery and Resilience Facility. The publication of the annual report of the European Court of Auditors is the starting point for the discharge procedure. The auditors also prepare special reports on specific spending or policy areas, or on budgetary or management issues.

The decision on the discharge is also based on the Commission’s integrated financial and accountability reporting, on hearings of Commissioners in the European Parliament and on the replies provided to written questions addressed to the Commission.

NOTE ACCOMPANYING THE CONSOLIDATED ACCOUNTS

The consolidated annual accounts of the European Union for the year 2024 have been prepared on the basis of the information presented by the institutions and bodies under Article 252 (2) of the Financial Regulation applicable to the general budget of the European Union. I hereby declare that they were prepared in accordance with Title XIII of this Financial Regulation and with the accounting principles, rules and methods set out in the notes to the financial statements.

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

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

Beatriz SANZ REDRADO

Accounting Officer of the Commission

13 June 2025

EUROPEAN UNION

FINANCIAL YEAR 2024

CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES 19

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 RISK MANAGEMENT    

7.    RELATED PARTY DISCLOSURES    

8.    EVENTS AFTER THE BALANCE SHEET DATE    

9.    SCOPE OF CONSOLIDATION    

BALANCE SHEET

*    The European Parliament adopted a budget on 27 November 2024 which provides for the payment of the EU's short-term liabilities from own resources to be collected by, or called up from, the Member States in the following year. Additionally, under Article 83 of the Staff Regulations (Regulation (EEC, Euratom, ECSC) No 259/68 (OJ L 56, 4.3.1968, p.1) of 29 February 1968 as amended), the Member States shall jointly guarantee the liability for pensions.

STATEMENT OF FINANCIAL PERFORMANCE

CASHFLOW STATEMENT

STATEMENT OF CHANGES IN NET ASSETS

NOTES TO THE FINANCIAL STATEMENTS

Note that in the following tables amounts concerning the UK for MFFs up to the end of 2020 are still shown under the heading 'Member States'. This is because although the UK withdrew from the EU on 1 February 2020, in accordance with the Withdrawal Agreement, it continued to have a financial relationship with the EU equivalent to that of a Member State for these periods.

1.SIGNIFICANT ACCOUNTING POLICIES

2.LEGAL BASIS AND ACCOUNTING RULES

The accounts of the EU are kept in accordance with Regulation (EU, Euratom) 2024/2509 of the European Parliament and of the Council of 23 September 2024 on the financial rules applicable to the general budget of the Union (recast), OJ L, 2024/2509, 26.9.2024, referred to below 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 ensure the internal consistency of the EU consolidated accounts.

Application of new and amended European Union Accounting Rules (EAR)

Revised EAR effective for annual periods beginning on or after 1 January 2024

There are no new EAR which became effective for annual periods beginning on or after 1 January 2024.

New EAR adopted but not yet effective at 31 December 2024

There are no new EAR adopted but not yet effective at 31 December 2024.

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, joint arrangements and associates. The complete list of entities falling under the scope of consolidation, which now comprises 54 controlled entities and 1 associate (unchanged compared to 2023), can be found in note 9. Among the controlled entities are the EU institutions (including the Commission, but not the European Central Bank) and the EU agencies (except those acting in the area of the common and foreign security policy). The European Coal and Steel Community in Liquidation (ECSC i.L.) is also considered as a controlled entity. The EU’s only associate is the European Investment Fund (EIF).

Entities falling under the scope of consolidation but immaterial to the EU consolidated financial statements as a whole need not be consolidated or accounted for using the equity method where to do so would result in excessive time or cost to the EU. These entities are referred to as ‘Minor entities’ and are separately listed in note 9. In 2024, 11 entities have been classified as minor entities (2023: 10 entities).

Controlled entities

In order to determine the scope of consolidation, the control concept is applied. Controlled entities are 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.

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 of which the EU and one or more parties have joint control. Joint control is the agreed sharing of control of an arrangement by way of a binding arrangement, which exists only when decisions about the relevant activities require the unanimous consent of parties sharing control. Joint agreements can be either joint ventures or joint operations. A joint venture is a joint arrangement that is structured through a separate vehicle and whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Participations in joint ventures are accounted for using the equity method (see note 1.5.4). A joint operation is a joint arrangement whereby the parties that have joint control of the arrangements have rights to the assets, and obligations for the liabilities, related to the arrangement. Participations in joint operations are accounted for by recognising in the EU’s financial statements its assets and liabilities, revenues and expenses, as well as its share of assets, liabilities, revenues and expenses jointly held or incurred.

Associates

Associates are entities over which the EU has, directly or indirectly, significant influence but not exclusive or joint 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 whose funds 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 behalf of these entities. 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 in accordance with Article 249 of the Financial Regulation. 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 euro, unless stated otherwise, the euro being the EU’s functional currency.

Transactions and balances

Foreign currency transactions are translated into euro using the exchange rates prevailing on 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.

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

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

Euro exchange rates

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, financial risk of accounts receivable and the amounts disclosed in the notes concerning financial instruments, impairment allowance for financial assets at amortised cost and for financial guarantee contract liabilities, accrued revenue and charges, provisions, degree of impairment of intangible assets and property, plant and equipment, net realisable value of inventories, contingent assets and liabilities. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known, if the change affects that period only, or that period and future periods, if the change affects both.

8.BALANCE SHEET

9.Intangible assets

An intangible asset is an identifiable non-monetary asset without physical substance. An asset is identifiable if it is either separable (i.e. it is capable of being separated or divided from the entity, e.g. by being sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so), or arises from binding arrangements (including rights from contracts or other legal rights), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Acquired intangible assets are stated at historical cost less accumulated amortisation and impairment losses. 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 capitalisable costs 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.

Intangible assets are amortised on a straight-line basis over their estimated useful lives (3-11 years). The estimated useful lives of intangible assets depend on their specific economic lifetime or legal lifetime determined by an agreement.

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 is not depreciated as it is 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:

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

A lease is an agreement whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time. Leases are classified as either finance leases or operating leases.

Finance leases are leases where substantially all the risks and rewards incidental to ownership are transferred to the lessee. When entering a finance lease as a lessee, the assets acquired under the finance lease are recognised as assets and the associated lease obligations as liabilities as from the commencement of the lease term. The assets and liabilities are recognised at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Over the period of the lease term, the assets held under finance leases are depreciated over the shorter of the asset’s useful life and the lease term. The minimum lease payments are apportioned between the finance charge (the interest element) and the reduction of the outstanding liability (the capital element). The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability, which is presented as current/non-current, as applicable. Contingent rents are charged as expenses in the period in which they are incurred.

An operating lease is a lease other than a finance lease, i.e. a lease where the lessor retains substantially all the risks and rewards incidental to ownership of an asset. When entering an operating lease as a lessee, the operating lease payments are recognised as an expense in the statement of financial performance on a straight-line basis over the lease term with neither a leased asset nor a leasing liability presented in the balance sheet.

11.Impairment of non-financial assets

An impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset's future economic benefits or service potential through amortisation or depreciation (as applicable). 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 tested for impairment whenever there is an indication at the reporting date that an asset may be impaired. 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. 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, with the initial carrying amount subsequently being increased or decreased to recognise further contributions, the EU’s share of the surplus or deficit of the investee, any impairments and dividends. The initial cost together with all movements give the carrying amount of the investment in the financial statements at the balance sheet date. 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. 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 a 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 financial assets at fair value through surplus or deficit (‘FVSD’).

Associates and joint ventures classified as minor entities (see note 1.3) 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 at initial recognition

The classification depends on two criteria:

—The financial assets management model. This requires an assessment of how the EU manages the financial assets to generate cash flows and to achieve its objectives and how it evaluates the performance of financial assets.

—The asset contractual cash-flow characteristics. This requires an assessment of whether the contractual cash flows are solely payments of principal and interest on the principal outstanding. The interest is the consideration for the time value of money, credit risk and other basic lending risks and costs.

Following an assessment based on these criteria, the financial assets can be classified in three categories: Financial assets at amortised cost (AC), financial assets at fair value through net assets/equity (FVNA) or financial assets at fair value through surplus or deficit (FVSD).

Financial assets with contractual cash flows that represent solely principal and interest are classified depending on the entity’s management model. If the management model is to hold the financial assets in order to collect contractual cash flows, the financial assets are classified at AC. If the management model is to hold the financial assets both to collect contractual cash flows and to sell the financial assets, the classification is FVNA. If the management model is different to these two models (e.g. the financial assets are held for trading or held in a portfolio managed and evaluated on a fair value basis), the financial assets are classified as FVSD.

Financial assets with contractual cash flows that do not represent only principal and interest, but introduce exposure to risks and volatility other than those present in a basic lending arrangement (e.g. changes in equity prices), are classified as FVSD regardless of the management model.

At initial recognition, the EU classifies the financial assets as follows:

(a)Financial assets at amortised cost

The EU classifies in this category:

—cash and cash equivalents;

—loans (including term deposits with original maturity of more than three months);

—exchange receivables, except for the financial guarantee contract receivable leg classified as financial asset at fair value through surplus or deficit.

These non-derivative financial assets meet two conditions: The EU’s management model is to hold them in order to collect the contractual cash flows. Furthermore, on specified days, there are contractual cash flows that represent only principal and interest on the outstanding principal.

Financial assets at amortised cost are included in current assets, except for those with maturity of more than 12 months from the reporting date.

(b)Financial assets at fair value through net assets/equity

These non-derivatives financial assets have contractual cash flows that represent only principal and interest on the outstanding principal. In addition, the management model is to hold the financial assets both to collect contractual cash flows and to sell the financial assets.

Assets in this category are classified as current assets, if they are expected to be realised within 12 months from the reporting date.

The EU does not hold such assets at the end of this reporting period.

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

The EU classifies the following financial assets as FVSD because the contractual cash flows do not represent only principal and interest on the principal:

—derivatives;

—equity investments and investments in money market funds or in pooled portfolio funds;

—other equity-type investments (e.g. risk capital operations).

In addition, the EU classifies the debt securities it holds as FVSD because the portfolios of debt securities are managed and evaluated on a portfolio fair value basis (e.g. Common Provisioning Fund under Article 215 of the Financial Regulation).

Assets in this category are classified as current assets, if they are expected to be realised within 12 months from the reporting date.

Initial recognition and measurement

Purchases of financial assets at fair value through net assets/equity and at fair value through surplus or deficit are recognised on their trade date, i.e. the date on which the EU commits to purchase the asset. Cash equivalents and loans are recognised when cash is deposited in a financial institution or advanced to borrowers.

Financial assets are initially measured at fair value. For all financial assets not carried at fair value through surplus or deficit, the transactions costs are added to the fair value at initial recognition. For financial assets carried at fair value through surplus or deficit the 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 unless the transaction is not at arm’s length i.e. at no or at nominal consideration for public policy purposes. If that is the case, the difference between the fair value of the financial instrument and the transaction price is a non-exchange component which is recognised as an expense in the statement of financial performance. In this case, the fair value of a financial asset is derived from current market transactions for a directly equivalent instrument. If there is no active market for the instrument, the fair value is derived from a valuation technique that uses available data from observable markets.

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 under the Recovery and Resilience Facility and loans for financial assistance are initially measured at their nominal amount, with the transaction price considered the fair value of the loan. This is because:

—The ‘market environment’ for EU lending is very specific and different from the capital market used to issue commercial or government debt. As lenders in these markets have the opportunity to choose alternative investments, the opportunity of doing so is factored into market prices. However, this opportunity for alternative investments does not exist for the EU, which is not allowed to invest money in the capital markets; it only borrows funds for the purpose of lending. 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 should be the interest rate charged.

Subsequent measurement

Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method.

Financial assets at fair value through net assets/equity are subsequently measured at fair value. Gains and losses from changes in the fair value are recognised in the fair value reserve, except for foreign exchange translation differences on monetary assets, which are recognised in the statement of financial performance.

Financial assets at fair value through surplus or deficit are subsequently measured at fair value. Gains and losses from changes in the fair value (including those stemming from foreign currency translation and any interest earned) are included in the statement of financial performance in the period in which they arise.

Fair value at subsequent measurement

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 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.

Impairment of financial assets

The EU recognises and measures an impairment loss for expected credit losses on financial assets that are measured at amortised cost and at fair value through net assets/equity.

For assets at amortised cost, the asset’s carrying amount is reduced by the amount of the impairment loss which is recognised in the statement of financial performance. For assets at fair value through net assets/equity, the loss allowance is recognised in net assets/equity and does not reduce the carrying amount of the financial asset in the balance sheet. If, in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed through the statement of financial performance.

The expected credit loss (ECL) is the present value of the difference between the contractual cash flows and the cash flows that the EU expects to receive. The ECL incorporates reasonable and supportable information that is available without undue cost or effort at the reporting date.

Staging policies

The ECL is measured with a three stage model that takes into account probability weighted default events during the lifetime of the financial asset and the evolution of credit risk since the origination of the financial asset. For loans, origination is the date of the irrevocable loan commitment.

The allocation to stages mainly depends on the counterparty’s credit rating. The staging model relies on a relative assessment of credit risk, that is, the EU may have different loans with the same counterparty in different stages, depending on the counterparty’s credit risk at origination. The EU, having a unique institutional status, lends money to its Member States or to sovereigns in difficulty. As a result, the EU also applies a qualitative assessment of the credit risk based on monitoring the economic situation of borrowers in difficulty.

Stage 1 – No significant increase in credit risk

Loans to counterparties with credit ratings in the investment grade (i.e. between AAA (Aaa) and BBB- (Baa3) on the S&P/Fitch (Moody’s) rating scale or an equivalent external or internal rating) at the reporting date, are considered low credit risk loans, and thus held in Stage 1, except if they are overdue for more than 30 days (see Stage 2). In addition, any loans for which a significant increase in credit risk did not occur, as defined below, are classified to Stage 1. For the loans in Stage 1, the impairment allowance is measured at the level of the 12 month expected credit losses.

Stage 2 – Significant increase in credit risk (SICR)

In order to determine whether there has been a significant increase in the credit risk since origination, and thus whether a move to Stage 2 applies, the EU applies a combination of quantitative and qualitative assessments:

—all loans for which contractual payments are overdue by between 31 and 90 days, are moved to Stage 2;

—for counterparties with credit ratings between AAA (Aaa) and BB- (Ba3) at the initial recognition date: Unless the low risk case (above in Stage 1) applies, the deterioration is considered significant if the difference between the rating at origination and that at the reporting date is equal or superior to 3 notches;

—for counterparties with credit ratings of B+ (B1) or B (B2) at initial recognition date: The deterioration is considered significant if the difference between the initial rating and the current rating is equal or superior to 2 notches;

—for counterparties with credit ratings of B- (B3) or lower (in CCC/Caa – C range) at the initial recognition date: The deterioration is considered significant if the difference between the initial rating and the current rating at the reporting date is equal or superior to 1 notch; and

—loans originated before the transition to the revised EAR 11 (i.e. 1 January 2021), for which no information on the credit risk at initial recognition is available without undue cost and effort are classified to Stage 2.

For loans in Stage 2, the impairment allowance is measured at the level of lifetime expected credit losses.

Stage 3 – Credit impaired loans

Loans are classified in Stage 3 when they are 90 days past due or when one or more events occur after the loan origination that have a detrimental impact on the estimated future cash flows of that financial asset. For example, a loan is classified to Stage 3, if:

—it is becoming probable that a borrower will enter bankruptcy or other financial reorganisation;

—the borrower has a credit rating of D published by an external rating agency; and

—the borrower is in default under any financial obligation towards the EU, or in the case of loans for financial assistance, if the borrower is in default to any other international organisation financing the programme.

For loans in Stage 3, the impairment allowance is measured at the level of lifetime expected credit losses.

Purchased or originated as credit impaired (POCI)

The EU also holds POCI loans. These are defaulted loans where the EU paid a guarantee call to the implementing partner. For these loans, all rights have been subrogated to the EU. The EU recognises them on its balance sheet at fair value at initial recognition. The EU classifies them as POCI loans and calculates an impairment allowance based on the lifetime ECL. Under the relevant agreements between the EU and the implementing partners, recovery proceedings are carried out on behalf of the EU with the aim of recovering any sums due.

(a)Loans to sovereigns

The EU bases its assessment of loans’ impairment, in the context of the nature of the EU’s financing and its unique institutional status.

For the impairment of loans to non-Member States, the EU calculates the expected credit losses using external credit quality data, however taking into account its preferred creditor status, which reduces the credit risk. For the calculation of the present value, the discount rate is the loan’s original effective interest rate. If a loan has a variable interest rate, the discount rate is the current effective interest rate determined under the contract.

For loans to Member States, the EU has never incurred any impairment losses, nor faced any defaults on payments. For these loans, in addition to the preferred creditor status, the EU takes into account the relationships with its Member States. These two elements, in principle, guarantee the full recovery of the loans to Member States, on maturity. Therefore, the EU considers the expected credit losses from loans to Member States to be negligible, and a statistical approach to calculate expected credit losses as inappropriate for these loans. Thus no expected credit losses are recognised in the statement of financial performance for the loans to Member States.

(b)Receivables

The EU measures the impairment loss at the amount of lifetime ECL, using practical expedients (e.g. provision matrix).

(c)Cash and cash equivalents

The EU holds cash and cash equivalents in current bank accounts and term deposits of up to three months. The cash is mainly held in banks with very high credit ratings (see note 6.6), thus having very low default probabilities. Given the short duration and low default probabilities, the expected credit losses from cash and cash equivalents are negligible. As a result, no impairment allowance is recognised for cash equivalents.

Derecognition

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. Sales of financial assets at fair value through net assets/equity and through surplus or deficit are recognised on their trade date.

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 in accordance with the principle of sound financial management over a period laid down in the particular contract, decision, agreement or basic act. The float or advance is either used for the purpose for which it was provided during the period laid down in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, they have the obligation to return the pre-financing to the EU. As the EU retains control over the pre-financing and is entitled to a refund for the ineligible part, the amount is presented as an asset.

Pre-financing is initially recognised on the balance sheet when cash is transferred to the recipient. It is measured at the amount of the consideration given. In subsequent periods, pre-financing is measured at the amount initially recognised on the balance sheet less the 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 relevant agreement. An estimate of the accrued interest revenue, based on the most reliable information, is made at the end of the year and included in 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 heading ‘Pre-financing’. 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 contributions to EU trust funds (as established under Article 238 of the Financial Regulation) not consolidated in the European Commission, or to other unconsolidated entities, are classified as pre-financing since their purpose is to give a float to the trust fund to allow it to finance specific actions determined by 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

The EU accounting rules require a separate presentation of exchange and non-exchange transactions. To distinguish between the two categories, the term ‘receivables’ is reserved for exchange transactions, whereas for ‘non-exchange transactions’, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange, the term ‘recoverables’ is used (e.g. recoverables from Member States related to own resources).

Receivables from exchange transactions are financial assets measured at amortised cost, except for certain amounts of the financial guarantee contract receivable leg which are classified as financial assets at fair value through surplus or deficit (see note 1.5.5).

Recoverables from non-exchange transactions are carried at fair value as at the date of acquisition 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 on the treatment of accrued revenue at the end of the year. Amounts displayed and disclosed as recoverables from non-exchange 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 assets at amortised cost 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 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 leave and paid sick leave, 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 provided under the Pension Scheme of the European Officials, as well as health insurance coverage provided under the Joint Sickness Insurance Scheme (see note 2.9). These benefits are provided 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:

—Pension Scheme of European Officials (PSEO): The benefits granted under this notionally funded 20 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.

—Joint Sickness Insurance Scheme (JSIS): Under this scheme, the EU provides health insurance coverage for staff of the European Commission, EU institutions, agencies and other 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 and former 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, European Court of Justice, Court of Auditors, Council, European Parliament, European Ombudsman, and the European Data Protection Supervisor. The EU provides health coverage to the members of the EU institutions through 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 carried out 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 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 qualitative 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 in the net defined benefit liabilities 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 heading ‘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 contract liabilities.

Borrowings

Borrowings are composed of borrowings from credit institutions and debts evidenced by certificates (EU Bonds, EU deposits and EU Bills). 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. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are immaterial and are directly recognised in the statement of financial performance.

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

Financial liabilities at fair value through surplus or deficit

These include derivatives where the 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 contract liabilities

The EU recognises a financial guarantee contract (FGC) liability when it enters into a contract that requires the EU to make specified payments to reimburse the guarantee holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Where the guarantee contract requires the EU to make payments in response to price changes to financial instruments or changes to other underlyings, the guarantee contract is a derivative i.e. a financial liability at fair value through surplus or deficit. All other guarantee contracts are accounted for as financial provisions.

FGC liabilities are initially recognised at fair value. This equals the net present value of the premium receivable, if it is at market terms. When no guarantee premium is charged or where the consideration is not fair value, the fair value is determined based on the quoted prices in an active market for FGCs directly equivalent to that entered into the financial guarantee liability, if available, or using a valuation technique. If no reliable measure of fair value can be determined either by direct observation of an active market or through another valuation technique, the financial guarantee contract liability is initially measured at the amount of the lifetime expected credit losses.

The subsequent measurement depends on the evolution of the credit risk exposure from the financial guarantee, which is monitored by allocating the FGC to stages. The key risk indicator for the allocation of FGC to stages is the credit rating of the guaranteed debt. The staging model compares the credit rating at origination to the credit rating at the reporting date.

If there is no significant increase in credit risk (‘stage 1’), financial guarantee liabilities are measured at the higher of the 12 months expected credit losses and the amount initially recognised less, when appropriate, cumulative amortisation. If there is a significant increase in credit risk (‘stage 2’), financial guarantee liabilities are measured at the higher of the lifetime expected credit losses and the amount initially recognised less, when appropriate, cumulative amortisation.

The staging criteria for guaranteed debt in financial guarantee contracts covering a single debt instrument are the same as those for financial assets at amortised cost (see note 1.5.5).

The staging criteria for the guaranteed debt in portfolio guarantees follow the same staging criteria as for financial assets at amortised cost with the following exceptions:

—the weighted average credit rating of the guaranteed portfolio, or rating of the guarantee, is considered for the staging criteria, and not the rating of individual debt instruments separately.

—for guarantees with a credit rating between AAA (Aa1) and BB- (Ba3) at initial recognition date: the deterioration is considered significant if the difference between the rating at origination and that at the reporting date is equal or superior to 2 notches.

—for guarantees with a credit rating between B+ (B1) or lower at initial recognition date: the deterioration is considered significant if the difference between the rating at origination and that at the reporting date is equal or superior to 1 notch.

Alternatively, if the credit ratings are not available but there is an estimation of the expected annual claims at initial recognition, the actual level of claims compared to the initial estimate is also considered a reasonable risk indicator for the assessment of significant increase in credit risk (SICR).

In addition to the above criteria, the EU may apply a qualitative assessment of the SICR, based on additional, reasonable and justified, information available.

FGC originated before the transition to the revised EAR 11 (i.e. before 1 January 2021) for which no information on the credit risk at initial recognition is available without undue cost and effort are classified to Stage 2.

Classification to Stage 3 and POCI does not apply to FGC.

Financial guarantee contracts are classified as current liabilities, except if the EU has an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date.

Contributions with conditions

EU trust funds that are considered as part of the Commission’s operational activities (i.e. trust funds Madad and Colombia) 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 distribution of the remaining resources will be decided by the trust fund board.

The same measurement principles apply to the external contributions to the EU programmes, if such contributions are received with the condition to use the resources as stipulated in the contribution agreements or otherwise to return them to the contributor.

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 eligible amount.

Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount and the corresponding eligible 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. Accrued expenses are calculated in accordance with detailed operational and practical guidelines issued by the Commission which aim to ensure that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if a 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 as follows:

GNI-based resources, VAT and Plastics own resources

Revenue is recognised for the period for which the Commission sends out a call for funds to the Member States claiming their contribution. The revenue is measured at its ‘called amount’. As VAT, GNI and Plastics own resources are based on estimates of the data for the budgetary year concerned, they may be revised since 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 adopted and it is officially notified to the addressee. After the decision to impose a fine, the fined entities have two months from the date of notification:

—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; or

—not to accept the decision, in which case they challenge it in accordance with EU law.

Even if appealed, the fine must be paid within the three month time limit, as the appeal does not have suspensory effect (Article 278 TFEU). The cash received is used to clear the recoverable. However, subject to the agreement of the Commission’s Accounting Officer, the undertaking may present a bank guarantee for the amount instead. In that case the fine remains as a recoverable. If neither cash nor a guarantee is received and there are doubts about the undertaking’s solvency, a value reduction on the entitlement is recognised.

If the undertaking appeals against the decision, and has already provisionally paid the fine, the amount is disclosed as a contingent liability, or, 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 is given instead, the outstanding recoverable is written down.

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 interest rate 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 is considered credit impaired (‘stage 3’), the 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.

Revenue and expense from financial assets through surplus or deficit

This refers to the fair value gains (revenue) and fair value losses (expense) from these financial assets, including those stemming from foreign exchange translation. For interest-bearing financial assets, this also includes interest. See also note 3.9.

Revenue from financial guarantee contracts

The revenue from financial guarantee contracts (guarantee premium) is recognised over the time the EU stands ready to compensate the holder of the financial guarantee contract for the credit loss it may incur. The amortisation schedule applied takes into account the passage of time and the volume of the guaranteed exposure. Revenue from financial guarantee contracts include also amortisation of financial guarantee contracts liability in cases when the guarantee was provided at no or nominal consideration.

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: (i) entitlements, (ii) transfers under agreement and discretionary grants, as well as (iii) 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 the relevant 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 their 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 whose 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 whose 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, either 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 circumstance where the amount of the obligation cannot be measured with sufficient reliability. A contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.

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, investing and financing activities.

Operating activities are the activities of the EU other than investing or financing activities. As such, they account for the majority of the activities carried out by 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 as they are part of the general objectives and thus daily operations of the EU. The objective is to show the real investments made by the EU.

Financing activities are activities that result in changes in the size and composition of borrowings other than those granted to beneficiaries on a back-to-back basis or for the acquisition of properaty, plant and equipment (which are included under operating activities).

30.NOTES TO THE BALANCE SHEET

ASSETS

30.1.INTANGIBLE ASSETS

The above amounts relate primarily to computer software.

30.2.PROPERTY, PLANT AND EQUIPMENT

The space assets category covers operational fixed assets related to the two EU space programmes: the Global Navigation Satellite Systems (GNSS), i.e. Galileo and European Geostationary Navigation Overlay System (EGNOS), and the Copernicus European Earth observation programme. Assets of the space systems which are not yet operational are included under the heading ‘Assets under construction’. The assets related to the EU space programmes are being built with the assistance of the European Space Agency (ESA).

For Galileo, the constellation currently includes 30 satellites. The Galileo operational fixed assets, covering both satellites and ground installations, amounted to EUR 2 987 million at 31 December 2024, net of accumulated depreciation (2023: EUR 2 486 million). The remaining assets under construction total EUR 2 145 million (2023: EUR 2 479 million).

Regarding Copernicus, 8 satellites are operational with 17 satellites and instruments under construction. The total value of Copernicus operational fixed assets is EUR 492 million (2023: EUR 438 million), net of accumulated depreciation. A further EUR 3 520 million related to Copernicus satellites is recognised as assets under construction (2023: EUR 3 078 million).

Fixed assets related to the EGNOS ground infrastructure of EUR 160 million (2023: EUR 187 million) are also included under the heading ‘Space assets’. In addition, EGNOS assets under construction amount to EUR 345 million (2023: EUR 289 million).

On 29 April 2024, the European Commission sold 23 of its buildings in Brussels to SFPIM (‘Société Fédérale de Participations et d’Investissement’ – the national Belgian Sovereign Fund) for an overall selling price of EUR 900 million. The net book value of the buildings concerned was EUR 432 million, resulting in a gain of EUR 468 million which was fully recognised at the time of the sale. The proceeds of the sale will be reinvested in the financing of new buildings, the repayment of remaining financial liabilities and the renovation of existing buildings. Although the sale has been signed for all 23 buildings, the exit will be gradual, with the last buildings being vacated in September 2029.

Property, plant and equipment