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Document 52013DC0558
COMMUNICATION FROM THE COMMISSION ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION FINANCIAL YEAR 2012
COMMUNICATION FROM THE COMMISSION ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION FINANCIAL YEAR 2012
COMMUNICATION FROM THE COMMISSION ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION FINANCIAL YEAR 2012
/* COM/2013/0558 final */
52013DC0558
COMMUNICATION FROM THE COMMISSION ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION FINANCIAL YEAR 2012 /* COM/2013/0558 final */
CONTENTS
Page CERTIFICATION OF THE ACCOUNTS 3 PART I: FINANCIAL STATEMENTS
AND EXPLANATORY NOTES 5 Balance Sheet 8 Statement of Financial Performance 9 Cashflow Statement 10 Statement of Changes in Net
Assets 11 Notes to the Financial Statements 12 PART II: REPORTS ON THE IMPLEMENTATION OF THE BUDGET AND EXPLANATORY NOTES 47
CERTIFICATION OF THE ACCOUNTS
The annual accounts of the European
Commission for the year 2012 have been prepared in accordance with the
Financial Regulation applicable to the general budget of the European Union and
the accounting rules adopted by myself in my capacity as the Commission's
Accounting Officer, as are to be applied by all the institutions and community
bodies. I acknowledge my responsibility for
the preparation and presentation of the annual accounts of the European
Commission in accordance with Article 68 of the Financial Regulation. I have obtained from the
authorising officer, who certified its reliability, all the information necessary
for the production of the accounts that show the European Commission's assets
and liabilities and the budgetary implementation. I hereby certify that based on this
information, and on such checks as I deemed necessary to sign off the accounts,
I have a reasonable assurance that the accounts present fairly, in all material
aspects, the financial position, the results of the operations and the
cash-flow of the European Commission. (Signed)
Manfred Kraff
Accounting Officer 18 July 2013 EUROPEAN COMMISSION FINANCIAL STATEMENTS AND EXPLANATORY NOTES* FINANCIAL YEAR 2012 *
It should be noted that due to the rounding of figures into millions of euros, some financial data in
the tables below may appear not to add-up
CONTENTS
Page PART I: FINANCIAL STATEMENTS AND
EXPLANATORY NOTES Balance Sheet 8 Statement of
Financial Performance 9 Cashflow Statement
10 Statement of Changes
in Net Assets 11 Notes to the Financial
Statements: 12 1. Significant
accounting policies 13 2. Notes to the Balance Sheet 22 3. Notes to the Statement of Financial Performance 39 4. Notes
to the Cashflow Statement 43 5. Contingent
Assets and Liabilities and other significant
disclosures 44 BALANCE SHEET || || || || EUR millions || Note || 31.12.2012 || 31.12.2011 || NON-CURRENT ASSETS || || || || Intangible assets || 2.1 || 61 || 45 || Property, plant and equipment || 2.2 || 2 488 || 2 073 || Investments accounted for using the equity method || 2.3 || 392 || 374 || Financial assets || 2.4 || 60 920 || 43 433 || Receivables and recoverables || 2.5 || 595 || 321 || Pre-financing || 2.6 || 44 487 || 44 723 || || || 108 943 || 90 969 || CURRENT ASSETS || || || || Inventories || 2.7 || 85 || 83 || Financial assets || 2.8 || 1 338 || 2 013 || Receivables and recoverables || 2.9 || 13 922 || 9 349 || Pre-financing || 2.10 || 13 148 || 10 973 || Cash and cash equivalents || 2.11 || 9 278 || 17 361 || || || 37 771 || 39 779 || TOTAL ASSETS || || 146 714 || 130 748 || NON-CURRENT LIABILITIES || || || || Pension and other employee benefits || 2.12 || (41 620) || (34 138) || Provisions || 2.13 || (1 237) || (1 475) || Financial liabilities || 2.14 || (57 038) || (40 989) || Other liabilities || 2.15 || (1 502) || (1 550) || || || (101 397) || (78 152) || CURRENT LIABILITIES || || || || Provisions || 2.16 || (714) || (242) || Financial liabilities || 2.17 || (15) || (5) || Payables || 2.18 || (89 484) || (90 920) || || || (90 213) || (91 167) || TOTAL LIABILITIES || || (191 610) || (169 319) || || || || || NET ASSETS || || (44 896) || (38 571) || || || || || Reserves || 2.19 || 2 254 || 1 888 || Amounts to be called from Member States* || 2.20 || (47 150) || (40 459) || || || || || NET ASSETS || || (44 896) || (38 571) * The European
Parliament has adopted a budget on 13 December 2012 which
provides for the payment of the Union's current liabilities from own resources
to be collected by, or called up from, the Member States in 2013. Additionally,
under Article 83 of the Staff Regulations (Council Regulation 259/68 of 29
February 1968 as amended), the Member States shall jointly guarantee the
liability for pensions. || STATEMENT OF FINANCIAL PERFORMANCE || || || || || || || EUR millions || Note || 2012 || 2011 OPERATING REVENUE || || || Own resource and contributions revenue || 3.1 || 128 076 || 121 769 Other operating revenue || 3.2 || 6 083 || 4 621 || || 134 159 || 126 390 || || || OPERATING EXPENSES || || || Administrative expenses || 3.3 || (5 221) || (5 062) Operating expenses || 3.4 || (125 008) || (124 241) || || (130 229) || (129 303) || || || (DEFICIT)/SURPLUS FROM OPERATING ACTIVITIES || || 3 930 || (2 913) || || || Financial revenue || 3.5 || 2 084 || 1 400 Financial expenses || 3.6 || (1 897) || (1 312) Movement in pension and other employee benefits liability || || (8 636) || 1 176 Share of net deficit of joint ventures and associates || 3.7 || (489) || (436) || || || ECONOMIC RESULT OF THE YEAR || || (5 008) || (2 085) || CASHFLOW STATEMENT || || || || || EUR millions || Note || 2012 || 2011 || || || Economic result of the year || || (5 008) || (2 085) || || || Operating activities || 4.2 || || Amortisation || || 8 || 6 Depreciation || || 143 || 147 (Reversal of) impairment losses on investments || || 2 || 0 (Increase)/decrease in loans || || (16 074) || (27 798) (Increase)/decrease in receivables and recoverables || || (4 847) || 1 685 (Increase)/decrease in pre-financing || || (1 939) || (1 497) (Increase)/decrease in inventories || || (2) || 0 Increase/(decrease) in provisions || || 234 || 219 Increase/(decrease) in financial liabilities || || 16 059 || 27 776 Increase/(decrease) in other non-current liabilities || || (48) || (93) Increase/(decrease) in payables || || (1 436) || 6 806 Prior year budgetary surplus taken as non-cash revenue || || (1 497) || (4 539) Other non-cash movements || || 178 || (57) || || || Increase/(decrease) in pension and employee benefits liability || || 7 482 || (2 277) || || || Investing activities || 4.3 || || (Increase)/decrease in intangible assets and property, plant and equipment || || (582) || (265) (Increase)/decrease in investments accounted for using the equity method || || (18) || 118 (Increase)/decrease in AFS investments || || (738) || (1 166) || || || NET CASHFLOW || || (8 083) || (3 020) || || || Net increase/(decrease) in cash and cash equivalents || || (8 083) || (3 020) Cash and cash equivalents at the beginning of the year || 2.11 || 17 361 || 20 381 Cash and cash equivalents at year-end || 2.11 || 9 278 || 17 361 STATEMENT OF CHANGES IN NET ASSETS || || || || || || || EUR millions || || Reserves (A) || Amounts to be called from Member States (B) || Net Assets =(A)+(B) Fair value reserve || Other reserves || Accumulated Surplus/(Deficit) || Economic result of the year BALANCE AS AT 31.12.2010 || (66) || 1 803 || (50 646) || 17 019 || (31 890) Movement in Guarantee Fund reserve || || 165 || (165) || || 0 Fair value movements || (16) || || || || (16) Other || || 2 || (43) || || (41) Allocation of the 2010 economic result || || || 17 019 || (17 019) || 0 2010 budget result credited to Member States || || || (4 539) || || (4 539) Economic result of the year || || || || (2 085) || (2 085) BALANCE AS AT 31.12.2011 || (82) || 1 970 || (38 374) || (2 085) || (38 571) Movement in Guarantee Fund reserve || || 168 || (168) || || 0 Fair value movements || 178 || || || || 178 Other || || 20 || (18) || || 2 Allocation of the 2011 economic result || || || (2 085) || 2 085 || 0 2011 budget result credited to Member States || || || (1 497) || || (1 497) Economic result of the year || || || || (5 008) || (5 008) BALANCE AS AT 31.12.2012 || 96 || 2 158 || (42 142) || (5 008) || (44 896) Notes to the
Financial Statements* *
For further information in addition to that included in the notes below, please
also see the 2012 EU consolidated annual accounts.
1. SIGNIFICANT ACCOUNTING POLICIES
The European Commission
applies, as all other consolidated EU entities do, the EU accounting rules as
adopted by the Commission's accounting officer. The significant accounting
policies are explained below: 1.1 LEGAL BASIS AND ACCOUNTING RULES
The
accounts of the European Union (and Commission) are kept in accordance with
Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the
Council of 25 October 2012 (OJ L 298 of 26 October 2012), on the financial
rules applicable to the general budget of the Union (hereinafter referred to as
the 'Financial Regulation') and Commission Delegated Regulation (EU) No
1268/2012 of 29 October 2012 laying down detailed rules of application of
this Financial Regulation. In accordance with article 143 of
the Financial Regulation, the European Union prepares its financial statements
on the basis of accrual-based accounting rules that are based on International
Public Sector Accounting Standards (IPSAS). These accounting rules, adopted by
the Accounting Officer of the Commission, have to be applied by all the
institutions and EU bodies falling within the scope of consolidation in order
to establish a uniform set of rules for accounting, valuation and presentation
of the accounts with a view to harmonising the process for drawing up the
financial statements and consolidation. The accounts are kept in Euro on the
basis of the calendar year.
1.2 ACCOUNTING PRINCIPLES The objective of the 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 2 and are the same as those described in
IPSAS 1, that is: fair presentation, accrual basis, going concern, consistency
of presentation, aggregation, offsetting and comparative information. Preparation of the financial
statements in accordance with the above mentioned rules and principles requires
management to make estimates that affect the reported amounts of certain items
in the balance sheet and statement of financial performance, as well as the
disclosures of contingent assets and liabilities. 1.3 CONSOLIDATION
The
financial statements of the European Commission comprise
5 joint ventures and 4 associates. The Commission accounts are themselves
consolidated in the EU consolidated financial statements. Joint ventures A joint venture is a contractual
arrangement whereby the European Union and one or more parties (the
"venturers") undertake an economic activity which is subject to joint
control. Joint control is the contractually agreed sharing of control, directly
or indirectly, over an activity embodying service potential.
Participations in joint ventures are accounted for using the equity method
initially recognised at cost. The European Union's interest in the results of
its jointly controlled entities is recognised in the statement of financial
performance, and its interest in the movements in reserves is recognised in the
reserves. The initial cost plus all movements (further contributions, share of
economic results and reserve movements, impairments, and dividends) give the
book value of the joint venture in the accounts at the balance sheet date. Unrealised gains and losses on
transactions between the European Union and its jointly controlled entities are
not material and have therefore not been eliminated. The accounting policies of
joint ventures may differ from those adopted by the European Union for like
transactions and events in similar circumstances. Associates Associates are entities over which
the European Union has, directly or indirectly, significant influence but not
control. It is presumed that significant influence is given if the European
Union holds directly or indirectly 20% or more of the voting rights.
Participations in associates are accounted for using the equity method,
initially recognised at cost. The European Union's share of its associates'
results is recognised in the statement of financial performance, and its share
of movements in reserves is recognised in the reserves. The initial cost plus
all movements (further contributions, share of economic results and reserve
movements, impairments, and dividends) give the book value of the associate in
the accounts at the balance sheet date. Distributions received from an
associate reduce the carrying amount of the asset. Unrealised gains and losses
on transactions between the European Union and its associates are not material
and have therefore not been eliminated.
The accounting policies of associates may differ from those adopted by the
European Union for like transactions and events in similar circumstances. In
cases where the European Union holds 20% or more of an investment capital fund,
it does not seek to exert significant influence. Such funds are therefore
treated as financial instruments and categorised as available for sale
financial assets.
1.4 BASIS OF PREPARATION
1.4.1 Currency and basis for conversion Functional and reporting currency The financial statements are
presented in millions of euros, the euro being the European Union's functional
and reporting currency.
Transactions and balances Foreign currency transactions are
translated into euros using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement
of foreign currency transactions and from the 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 euros at the rate that applied at the date when they were purchased. Year-end balances of monetary
assets and liabilities denominated in foreign currencies are converted into
euros on the basis of the exchange rates applying on 31 December: Currency || 31.12.2012 || 31.12.2011 || Currency || 31.12.2012 || 31.12.2011 BGN || 1.9558 || 1.9558 || PLN || 4.0740 || 4.4580 CZK || 25.1510 || 25.7870 || RON || 4.4445 || 4.3233 DKK || 7.4610 || 7.4342 || SEK || 8.5820 || 8.9120 GBP || 0.8161 || 0.8353 || CHF || 1.2072 || 1.2156 HUF || 292.3000 || 314.5800 || JPY || 113.6100 || 100.2000 LVL || 0.6977 || 0.6995 || USD || 1.3194 || 1.2939 LTL || 3.4528 || 3.4528 || || || Changes in
the fair value of monetary financial instruments denominated in a foreign
currency and classified as available for sale that relate to a translation
difference are recognised in the statement of financial performance. Translation differences on non-monetary
financial assets and liabilities held at fair value through profit or loss are
recognised in the statement of financial performance. Translation differences
on non-monetary financial instruments classified as available for sale are included in the fair value reserve. 1.4.2 Use of
estimates In accordance with IPSAS and
generally accepted accounting principles, the financial statements necessarily
include amounts based on estimates and assumptions by management based on the
most reliable information available. Significant estimates include, but are not
limited to, amounts for employee benefit liabilities, provisions, financial
risk on inventories and accounts receivables, accrued income and charges,
contingent assets and liabilities, and degree of impairment of intangible
assets and property, plant and equipment. Actual results could differ from
those estimates. Changes in estimates are reflected in the period in which they
become known. 1.5 BALANCE
SHEET
1.5.1 Intangible assets Acquired computer
software licences are stated at historical cost less accumulated amortisation
and impairment losses. The assets are amortised on a straight-line basis over
their estimated useful lives. Internally developed intangible assets are
capitalised when the relevant criteria of the EU accounting rules are met. The
costs capitalisable include all directly attributable costs necessary to
create, produce, and prepare the asset to be capable of operating in the manner
intended by management. Costs associated with research activities,
non-capitalisable development costs and maintenance costs are recognised as expenses
as incurred. 1.5.2 Property,
plant and equipment All property, plant and
equipment are stated at historical cost less accumulated depreciation and
impairment losses. Historical cost includes expenses that are directly
attributable to the acquisition or construction of the asset. Subsequent costs
are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits or
service potential associated with the item will flow to the EU and its cost
can be measured reliably. Repairs and maintenance costs are charged to the statement of financial
performance during the financial period in which they
are incurred.
Land and works of art are not depreciated as they are deemed to have an
indefinite useful life. Assets under construction are not depreciated as these
assets are not yet available for use. Depreciation on other assets is
calculated using the straight-line method to allocate their cost to their
residual values over their estimated useful lives, as follows: Type of asset || Straight line depreciation rate Buildings || 4% Plant, machinery and equipment || 10% to 25% Furniture || 10% to 25% Fixtures and fittings || 10% to 33% Vehicles || 25% Computer hardware || 25% Other tangible assets || 10% to 33% Gains or losses on
disposals are determined by comparing proceeds less selling expenses with the
carrying amount of the disposed asset and are included in the statement of financial
performance. Leases Leases of tangible
assets, where the European Union has substantially all the
risks and rewards of ownership, are classified as finance leases. Finance
leases are capitalised at the inception of the lease at the lower of the fair
value of the leased asset and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as
to achieve a constant rate on the finance balance outstanding. The rental
obligations, net of finance charges, are included in other liabilities (non-current
and current). The interest element of the finance cost is charged to the statement of financial
performance over the lease period so as to produce a
constant periodic interest rate on the remaining balance of the liability for
each period. The assets held under finance leases are depreciated over the
shorter of the assets' useful life and the lease term.
Leases where the lessor retains a significant portion of the risks and rewards
inherent to ownership are classified as operating leases. Payments made under
operating leases are charged to the statement of financial performance on a straight-line basis over the period of the lease. 1.5.3 Impairment of
non-financial assets Assets that have an indefinite
useful life are not subject to amortisation/depreciation and are tested
annually for impairment. Assets that are
subject to amortisation/depreciation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and its value in use.
Intangible assets and property, plant and equipment residual values and useful
lives are reviewed, and adjusted if appropriate, at least once per year. An
asset’s carrying amount is written down immediately to its recoverable amount
if the asset’s carrying amount is greater than its estimated recoverable
amount. If the reasons for impairments recognised in previous years no longer
apply, the impairment losses are reversed accordingly. 1.5.4 Investments Participations in Associates and
Joint Ventures Participations in associates and
joint ventures are accounted for using the equity method. The costs of equity
are adjusted to reflect the share of increases or reductions in net assets of
the associates and joint ventures that are attributable to the European Union
after initial recognition if there are indications of impairment and written
down to the lower recoverable amount if necessary. The recoverable amount is
determined as described under 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.
Investments in Venture Capital Funds Investments in Venture Capital
Funds are classified as available for sale financial assets (see 1.5.5) and accordingly, are carried at fair value
with gains and losses arising from changes
in the fair value (including translation differences) recognised in the fair
value reserve. Since they do not have a quoted
market price in an active market, investments in Venture Capital Funds are valued
on a line-by-line basis at the lower of cost or attributable net asset value
(“NAV”). Unrealised gains resulting from the fair value measurement are
recognised through reserves and unrealised losses are assessed for impairment
so as to determine whether they are recognised as impairment losses in the statement
of financial performance or as changes in the fair value reserve.
1.5.5 Financial assets Classification The European Union classifies their financial assets in
the following categories: financial assets at fair value through profit or
loss; loans and receivables; held to maturity investments; and available for sale
financial assets. The classification of the financial instruments is determined
at initial recognition and re-evaluated at each balance sheet date. (i) Financial assets at fair
value through profit or loss A financial asset is classified in
this category if acquired principally for the purpose of selling in the short
term or if so designated by the European Union. Derivatives are also categorised in this category. Assets in
this category are classified as
current assets if they are expected to be realised within 12 months of
the balance sheet date.
(ii) Loans
and receivables Loans and receivables are
non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when
the EU provides money, goods or
services directly to a debtor with no intention of trading the
receivable. They are included in non-current assets, except for maturities within 12 months of the balance sheet
date.
(iii) Held to maturity investments Held to maturity investments are
non-derivative financial assets with fixed or determinable payments and fixed
maturities that the European Union has
the positive intention and ability to hold to maturity. During this financial
year, the European Union did not
hold any investments in this category.
(iv) Available
for sale financial assets Available for sale financial assets
are non-derivatives that are either designated in this category or not classified
in any of the other categories. They are classified as either current or
non-current assets, depending on the time period in which the EU expects to
dispose of them which is usually the remaining maturity at the balance sheet
date. Investments in unconsolidated entities and other equity investments (e.g.
Risk Capital Operations) that are not accounted for using the equity method are
also classified as available for sale financial assets.
Initial
recognition and measurement Purchases and sales of financial
assets at fair value through profit or loss, held to maturity and available for
sale are recognised on trade-date – the date on which the European Union commits to purchase or sell the asset. Loans are
recognised when cash is advanced to the borrowers. Financial instruments are
initially recognised at fair value. For all financial assets not carried at
fair value through profit or loss transactions costs are added to the fair
value at initial recognition. Financial assets carried at fair value through
profit or losses are initially recognised at fair value and transaction costs
are expensed in the statement of financial performance.
The fair value of a financial asset on initial recognition is normally the
transaction price (i.e. the fair value of the consideration received). However,
when a non-current 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 on borrowed funds are
measured at their nominal amount, which is considered to be the fair value of
the loan. The reasoning for this is as follows: –
The
“market environment” for EU lending is very specific and different from the
capital market used to issue commercial or government bonds. As lenders in
these markets have the opportunity to choose alternative investments, the
opportunity possibility is factored into market prices. However, this
opportunity for alternative investments does not exist for the EU which is not
allowed to invest money on the capital markets; it only borrows funds for the
purpose of lending at the same rate. This means that there is no alternative
lending or investment option available to the EU for the sums borrowed. Thus,
there is no opportunity cost and therefore no basis of comparison with market
rates. In fact, the EU lending operation itself represents the market.
Essentially, since the opportunity cost "option" is not applicable,
the market price does not fairly reflect the substance of the EU lending
transactions. Therefore, it is not appropriate to determine the fair value of
EU lending with reference to commercial or government bonds. –
Furthermore
as there is no active market or similar transactions to compare with, the
interest rate to be used by the European Union for fair valuing its lending
operations under EFSM, BOP and other such loans, should be the interest rate
charged. –
In
addition, for these loans, there are compensating effects between loans and
borrowings due to their back-to-back character. Thus, the effective interest
for the loan equals the effective interest rate for the related borrowings. The
transaction costs incurred by the EU and then recharged to the beneficiary of
the loan are directly recognised in the statement of financial performance. Financial
instruments are
derecognised when the rights to receive
cash flows from the investments have expired or have been transferred
and the European Union has transferred substantially all risks and rewards of
ownership.
Subsequent
measurement (i) Financial assets at fair value
through profit or loss are subsequently carried at fair value. Gains and losses arising from changes in the fair
value of the ‘financial instruments at fair value through profit or loss’
category are included in the statement of financial performance in the period in which they arise. (ii) Loans and receivables and held
to maturity investments are carried at amortised cost using the effective
interest method. In the case of loans granted on borrowed funds, the same
effective interest rate is applied to both the loans and borrowings since these
loans have the characteristics of 'back-to-back operations' and the differences
between the loan and the borrowing conditions and amounts are not material. The
transaction costs incurred by the EU and then recharged to the beneficiary of
the loan are directly recognised in the statement of financial performance. (iii) Held to maturity – the EU
currently holds no held to maturity investments. (iv) Available for sale financial
assets are subsequently carried at fair value. Gains and losses arising from
changes in the fair value of available for sale financial assets are recognised
in the fair value reserve. When assets classified as available for sale are
sold or impaired, the cumulative fair value adjustments previously recognised
in the fair value reserve are recognised in the statement of financial
performance. Interest on availablefor-sale financial assets calculated using
the effective interest method is recognised in the statement of financial
performance. Dividends on available for sale equity instruments are recognised
when the EU's right to receive payment is established. The fair values of quoted
investments in active markets are based on current bid prices. If the market
for a financial asset is not active (and for unlisted securities), the European
Union 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 cash flow analysis, option pricing
models and other valuation techniques commonly used by market participants. In cases where the fair value of
investments in equity instruments that do not have quoted market price in an
active market cannot be reliably measured, these investments are valued at cost
less impairment losses.
Impairment
of financial assets The European Union assesses
at each balance sheet date whether there is objective evidence that a financial
asset is impaired. A financial asset
is impaired and impairment losses are incurred if, and only if, there is
objective evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset and that loss event (or
events) has an impact on the estimated future cash flows of the financial asset
that can be reliably estimated. (a) Assets carried at amortised
cost If there is objective evidence that
an impairment loss on loans and receivables or held to maturity investments
carried at amortised cost has been incurred, the amount of the loss is measured
as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset’s original effective interest rate.
The carrying amount of the asset is reduced and the amount of the loss is
recognised in the statement of financial performance. If a loan or held to maturity
investment has a variable interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate determined under the
contract. The calculation of the present value of the estimated future cash
flows of a collateralised financial asset reflects the cash flows that may
result from foreclosure less costs for obtaining and selling the collateral,
whether or not foreclosure is probable. If, in a subsequent period, the amount
of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised, the previously
recognised impairment loss is reversed through the statement of financial
performance. (b) Assets carried at fair value In the case of
equity investments classified as available for sale, a significant or
permanent (prolonged) decline in the fair value of the security below its cost
is considered in determining whether the securities are impaired. If any such
evidence exists for available for sale financial assets, the cumulative loss – measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognised in the statement of financial
performance – is removed from reserves and
recognised in the statement of financial performance. Impairment losses recognised in the
statement of financial performance on equity instruments are not reversed
through the statement of financial performance. If, in a subsequent period, the
fair value of a debt instrument classified as available for sale increases and
the increase can be objectively related to an event occurring after the
impairment loss was recognised, the impairment loss is reversed through the
statement of financial performance.
1.5.6 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 European Union would incur to acquire the asset on the
reporting date. 1.5.7 Pre-financing
amounts Pre-financing is a payment intended
to provide the beneficiary with a cash advance, i.e. a float. It may be split
into a number of payments over a period defined in the particular pre-financing
agreement. The float or advance is repaid or used for the purpose for which it
was provided during the period defined in the agreement. If the beneficiary
does not incur eligible expenditures, he has the obligation to return the
pre-financing advance to the European Union. The amount of the pre-financing is
reduced (wholly or partially) by the acceptance of eligible costs (which are recognised
as an expense) and amounts returned. At year-end, outstanding pre-financing
amounts are valued at the original amount(s) paid less: amounts returned,
eligible amounts expensed, estimated eligible amounts not yet cleared at
year-end, and value reductions.
Interest on pre-financing is recognised as it is earned in accordance with the
provisions of the relevant agreement. An estimate of the accrued interest
revenue, based on the most reliable information, is made at the year-end and
included in the balance sheet. 1.5.8 Receivables Receivables are carried
at original amount less write-down for impairment. A write-down for impairment
of receivables is established when there is objective evidence that the
European Union will not be able to collect all amounts due according to the
original terms of receivables. 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 below
concerning the treatment of accrued income at year-end.
1.5.9 Cash and cash equivalents Cash and cash
equivalents are financial instruments and defined as current assets. They
include cash at hand, deposits held at call with banks, other current highly
liquid investments with original maturities of three months or less. 1.5.10 Employee
benefits Pension obligations The European Union operates defined
benefit pension plans. Whilst staff contribute from their salaries one third of
the expected cost of these benefits, the liability is not funded. The liability
recognised in the balance sheet in respect of defined benefit pension plans is
the present value of the defined benefit obligation at the balance sheet date.
The defined benefit obligation is calculated by actuaries 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. Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions are recognised
immediately in the statement of financial performance. Past-service costs are
recognised immediately in statement of financial performance, unless the changes to the pension plan are conditional on the employees remaining in service
for a specified period of time (the vesting period). In this case, the
past-service costs are amortised on a straight-line basis over the vesting
period.
Post-employment sickness benefits The European Union provides health
benefits to its employees through the reimbursement of medical expenses. A
separate fund has been created for the day-to-day administration. Both current
employees, pensioners, widowers and their beneficiaries benefit from the
system. The benefits granted to the "inactives" (pensioners, orphans,
etc.) are classified as "Post-Employment Employee Benefits". Given
the nature of these benefits, an actuarial calculation is required. The
liability in the balance sheet is determined on a similar basis as that for the
pension obligations (see above).
1.5.11 Provisions Provisions are recognised when the
European Union 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).
1.5.12 Financial liabilities Financial liabilities are
classified as financial liabilities at fair value through profit or loss or as
financial liabilities carried at amortised cost (borrowings). Borrowings are
composed of borrowings from credit institutions and debts evidenced by
certificates. They are recognised initially at fair value, being their issue
proceeds (fair value of consideration received) net of transaction costs
incurred, then subsequently carried at amortised cost using the effective
interest method; any difference between proceeds, net of transaction costs, and
the redemption value is recognised in the statement of financial performance
over the period of the borrowings using the effective interest method.
They are classified as non-current liabilities, except for maturities less than
12 months after the balance sheet date. In the case of loans granted on
borrowed funds, the effective interest method may not be applied to loans and
borrowings, based on materiality considerations. The transaction costs incurred
by the European Union and then recharged to the beneficiary of the loan are
directly recognised in the statement of financial performance.
Financial liabilities categorised at fair value through profit or loss include derivatives
when their fair value is negative. They follow the same accounting treatment as
financial assets at fair value through profit or loss, see note 1.5.5.
1.5.13 Payables A significant amount of the
payables of the EU are not related
to the purchase of goods or services – instead they are unpaid cost claims from
beneficiaries of grants or other EU funding.
They are recorded as payables for the requested amount when the cost claim is
received. Upon verification and acceptance of the eligible costs, the payables
are valued at the accepted and eligible amount. Payables arising from the purchase
of goods and services are recognised at invoice reception for the original
amount and corresponding expenses are entered in the accounts when the supplies
or services are delivered and accepted by the European Union.
1.5.14 Accrued and deferred income and charges According to the European Union
accounting rules, transactions and events are recognised in the financial
statements in the period to which they relate. At the end of the accounting
period, accrued expenses are recognised based on an estimated amount of the
transfer obligation of the period. The calculation of accrued expenses is done
in accordance with detailed operational and practical guidelines issued by the
Commission which aim at ensuring that the financial statements reflect a true
and fair view.
Revenue is also accounted for in the period to which it relates. 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 (i.e. by
reference to a treaty), an accrued income 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.
1.6 STATEMENT OF FINANCIAL PERFORMANCE
1.6.1 Revenue Non-exchange revenue This makes up the vast majority of
the EU's revenue and includes mainly
direct and indirect taxes and own resource amounts. In addition to taxes the
European Union may also receive
payments from other parties, such as duties, fines and donations.
GNI based resources and VAT resources Revenue is recognised for the
period for which the European Commission sends
out a call for funds to the Member States claiming their contribution. They are
measured at their “called amount”. As VAT and GNI resources are based on
estimates of the data for the budgetary year concerned, they may be revised as
changes occur until the final data are issued by the Member States. The effect
of a change in estimate is included when determining the net surplus or deficit
for the period in which the change occurred.
Traditional own resources Receivables 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 European 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 (25%). In addition, a value reduction is recognised for
the amount of the estimated recovery gap in the statement of financial
performance. Fines Revenue from fines is recognised
when the EU's decision imposing a fine has been taken and it is officially
notified to the addressee. If there are doubts about the undertaking's
solvency, a value reduction on the entitlement is recognised. After the
decision to impose a fine, the debtors have two months from the date of
notification: – 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 lodge an appeal under EU law. However, even if appealed, the
principal of the fine must be paid within the time limit of three months laid
down as the appeal does not have suspensory effect (Article 278 of the EU
Treaty) or, under certain circumstances and subject to the agreement of the
Commission's Accounting Officer, it may present a bank guarantee for the amount
instead.
If the undertaking appeals against the decision, and has already provisionally
paid the fine, the amount is disclosed as a contingent liability. However, since
an appeal against an EU decision by the addressee does not have suspensory
effect, the cash received is used to clear the receivable. If a guarantee is
received instead of payment, the fine remains as a receivable. If it appears
probable that the General Court may not rule in favour of the EU, a provision is recognised to cover
this risk. If a guarantee had been given instead, then the receivable
outstanding is written-down as required. The accumulated interest received by
the European Commission on the bank
accounts where received payments are deposited is recognised as revenue, and
any contingent liability is increased accordingly. Exchange revenue 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 income and expense Interest income 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 income
or interest expense over the relevant period. When calculating the effective
interest rate, the European Union estimates
cash flows considering all contractual terms of the financial instrument (for
example, prepayment options) but do not consider future credit losses. The
calculation includes all fees and points paid or received between parties to
the contract that are an integral part of the effective interest rate,
transaction costs and all other premiums or discounts. Once a financial asset or a group
of similar financial assets has been written down as a result of an impairment
loss, interest income is recognised using the rate of interest used to discount
the future cash flows for the purpose of measuring the impairment loss.
Dividend income Dividend income is recognised when
the right to receive payment is established. 1.6.2 Expense Exchange expenses arising from the
purchase of goods and services are recognised when the supplies are delivered
and accepted by the European Union.
They are valued at original invoice cost. Non-exchange expenses are specific to
the EU and account for the majority of its expenses. They relate to transfers
to beneficiaries and can be of three types: entitlements, transfers under
agreement and discretionary grants, contributions and donations. Transfers are recognised as
expenses in the period during which the events giving rise to the transfer
occurred, as long as the nature of the transfer is allowed by regulation
(Financial Regulation, Staff Regulations, or other regulation) or a contract
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. 1.7 CONTINGENT
ASSETS AND LIABILITIES
1.7.1 Contingent assets A contingent asset is a possible
asset that arises from past events and of which the existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the European Union.
A contingent asset is disclosed when an inflow of economic benefits or service
potential is probable.
1.7.2 Contingent liabilities A contingent liability is a
possible obligation that arises from past events and of which the existence
will be confirmed only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the European Union; or a present obligation that arises
from past events but is not recognised because: it is not probable that an
outflow of resources embodying economic benefits or service potential will be
required to settle the obligation or, in the rare circumstances where the
amount of the obligation cannot be measured with sufficient reliability.
2. NOTES TO THE BALANCE SHEET
NON-CURRENT ASSETS 2.1 INTANGIBLE
ASSETS || EUR millions || Amount || Gross carrying amount at 31.12.2011 || 88 Additions || 26 Disposals || (9) Transfer between asset categories || 3 Other changes || 5 || Gross carrying amount at 31.12.2012 || 113 || Accumulated amortisation at 31.12.2011 || (43) Amortisation charge for the year || (8) Disposals || 2 Transfer between asset categories || (3) Other changes || 0 || Accumulated amortisation at 31.12.2012 || (52) || Net carrying amount at 31.12.2012 || 61 Net carrying amount at 31.12.2011 || 45 The above amounts
relate primarily to computer software. 2.2 PROPERTY,
PLANT AND EQUIPMENT (PPE) The increase in PPE of
EUR 415 million was mainly driven by an increase in assets under construction. Included
under assets under construction at 31 December 2012 are EUR 660 million (2011:
EUR 219 million) of assets relating to the Galileo project, the EU's Global
Navigation Satellite System, being built with the assistance of the European
Space Agency (ESA). An amount of EUR 12 million of non-capitalisable development
cost has been recognised as expenses during the period. PROPERTY, PLANT AND EQUIPMENT || || || || || || || || || EUR millions || Land and || Plant and || Furniture and || Computer hardware || Other tangible || Finance leases || Assets under || TOTAL || buildings || equipment || vehicles || || assets || || construction || || || || || || || || || || || || || || || || || Gross carrying amount at 31.12.2011 || 1 258 || 303 || 72 || 254 || 119 || 1 511 || 261 || 3 778 Additions || 6 || 23 || 11 || 20 || 5 || 14 || 486 || 565 Disposals || (26) || (20) || (15) || (32) || (7) || 0 || 0 || (100) Transfers between asset categories || 0 || 5 || 0 || 11 || 0 || (14) || (5) || (3) Other changes || 25 || 2 || 1 || 0 || 1 || 0 || 1 || 30 || || || || || || || || Gross carrying amount at 31.12.2012 || 1 263 || 313 || 69 || 253 || 118 || 1 511 || 743 || 4 270 || || || || || || || || Accumulated depreciation at 31.12.2011 || (633) || (265) || (56) || (207) || (85) || (459) || || (1 705) Depreciation charge for the year || (32) || (18) || (10) || (20) || (9) || (54) || || (143) Depreciation written back || 0 || 0 || 0 || 0 || 0 || 1 || || 1 Disposals || 3 || 20 || 15 || 31 || 6 || 5 || || 80 Transfers between asset categories || 0 || 0 || 0 || (11) || 0 || 14 || || 3 Other changes || (3) || (2) || (1) || (5) || 0 || (7) || || (18) || || || || || || || || Accumulated depreciation at 31.12.2012 || (665) || (265) || (52) || (212) || (88) || (500) || || (1 782) || || || || || || || || NET CARRYING AMOUNT AT 31.12.2012 || 598 || 48 || 17 || 41 || 30 || 1 011 || 743 || 2 488 NET CARRYING AMOUNT AT 31.12.2011 || 625 || 38 || 16 || 47 || 34 || 1 052 || 261 || 2 073 Charges still to be
paid in respect of finance leases and similar entitlements are shown in non-current
and current liabilities in the balance sheet (see notes 2.15 and 2.18.1). They
break down as follows: Finance Leases || EUR millions Description || Cumulative charges (A) || Future amounts to be paid || Total Value || Subsequent expenses on assets || Asset value || Depreciation || Net carrying amount (A+B+C+D) < 1 year || > 1 year || > 5 years || Total Liability (B) || (A+B) || (C) || (A+B+C) || (D) Land and buildings || 267 || 35 || 175 || 938 || 1 148 || 1 415 || 60 || 1 475 || (481) || 994 Other tangible assets || 18 || 7 || 11 || 0 || 18 || 36 || 0 || 36 || (19) || 17 Total at 31.12.2012 || 285 || 42 || 186 || 938 || 1 166 || 1 451 || 60 || 1 511 || (500) || 1 011 Interest element || 66 || 238 || 425 || 729 || Total future minimum lease payments at 31.12.2012 || 108 || 424 || 1 363 || 1 895 || Total future minimum lease payments at 31.12.2011 || 106 || 415 || 1 439 || 1 960 || 2.3 INVESTMENTS
ACCOUNTED FOR USING THE EQUITY METHOD || || || EUR millions || Note || 31.12.2012 || 31.12.2011 Participations in joint ventures || 2.3.1 || 42 || 62 Participations in associates || 2.3.2 || 350 || 312 Total investments || || 392 || 374 2.3.1 Participations
in joint ventures || EUR millions || GJU || SESAR || ITER || IMI || FCH || Total Amount at 31.12.2011 || 0 || 0 || 0 || 25 || 37 || 62 Contributions || 0 || 70 || 116 || 98 || 54 || 338 Share of net result || 0 || (70) || (106) || (91) || (91) || (358) Amount at 31.12.2012 || 0 || 0 || 10 || 32 || 0 || 42 Participations in joint ventures
are accounted for using the equity method. The following carrying amounts are
attributable to the European Commission based on its percentage of
participation: || || || EUR millions || || 31.12.2012 || 31.12.2011 Non-current assets || || 226 || 211 Current assets || || 106 || 123 Non-current liabilities || || 0 || 0 Current liabilities || || (291) || (314) Revenue || || 8 || 8 Expenses || || (427) || (379) 2.3.2 Participations
in associates || || || || EUR millions || EIF || ARTEMIS || Clean Sky || ENIAC || Total Amount at 31.12.2011 || 292 || 0 || 0 || 20 || 312 Contributions || - || 22 || 97 || 16 || 135 Share of net surplus/(deficit) || 9 || (22) || (97) || (22) || (132) Other equity movements || 35 || - || - || - || 35 Amount at 31.12.2012 || 336 || 0 || 0 || 14 || 350 Participations in associates are
accounted for using the equity method. The following carrying amounts are
attributable to the European Commission based on its percentage of
participation: || || || EUR millions || || 31.12.2012 || 31.12.2011 Assets || || 505 || 460 Liabilities || || (191) || (162) Revenue || || 33 || 28 Surplus/(Deficit) || || (177) || (182) European Investment Fund (EIF) The European Investment Fund (EIF) is the European Union's
financial institution specialising in providing risk capital and guarantees to
SMEs. The Commission has paid in 20% of its participation, the balance being
uncalled corresponding to an amount of EUR 720 million.
EUR
millions || Total EIF capital || Commission subscription Total Share Capital || 3 000 || 900 Paid-in || (600) || (180) Uncalled || 2 400 || 720 2.4 NON-CURRENT FINANCIAL
ASSETS || || || EUR millions || Note || 31.12.2012 || 31.12.2011 Available for sale financial assets || 2.4.1 || 3 715 || 2 272 Loans || 2.4.2 || 57 205 || 41 161 Total || || 60 920 || 43 433 2.4.1 Non-current available
for sale financial assets || || EUR millions || 31.12.2012 || 31.12.2011 Guarantee Fund (GF)* || 1 327 || 1 475 BUFI investments || 832 || - Risk Sharing Finance Facility (RSFF) || 594 || - Loan Guarantee Instrument for TEN-T projects (LGTT) || 52 || - European Bank for Reconstruction and Development (EBRD) || 188 || 188 Risk Capital Operations || 123 || 134 ETF Start up || 305 || 234 Other available for sale investments || 294 || 241 Total || 3 715 || 2 272 *After elimination of
the EFSM bonds In order to better
present the economic reality, from 2012 onwards, all available for sale
financial assets are presented according to their remaining maturity at the
balance sheet date. Assets with a maturity of greater than 1 year at the
reporting date are shown as non-current, whereas assets maturing before end
2013 are shown as current (see note 2.8). The above 2012 amount for the
Guarantee Fund is, unlike in 2011, shown excluding cash and cash equivalents
(2011: EUR 302 million) and the related liability (2011: EUR 1 million). Had
the current approach been followed in the 2011 accounts, the comparatives would
have been as follows: || || EUR millions || 31.12.2012 || 31.12.2011 Guarantee Fund (GF)* || 1 327 || 973 BUFI investments || 832 || 588 Risk Sharing Finance Facility (RSFF) || 594 || 365 Loan Guarantee Instrument for TEN-T projects (LGTT) || 52 || 47 European Bank for Reconstruction and Development (EBRD) || 188 || 188 Risk Capital Operations || 123 || 134 ETF Start up || 305 || 234 Other available for sale investments || 294 || 241 Total || 3 715 || 2 770 *After elimination of
the EFSM bonds 2.4.2 Non-current loans || || || || EUR millions || || Note || 31.12.2012 || 31.12.2011 Loans granted from the EU budget || || 2.4.2.1 || 147 || 151 Loans granted from borrowed funds || || 2.4.2.2 || 57 058 || 41 010 Total || || 57 205 || 41 161 2.4.2.1 Loans granted from the European Union budget || EUR millions Loans with special conditions || Amount Total at 31.12.2011 || 151 New loans || 0 Repayments || (17) Exchange differences || 2 Changes in carrying amount || 11 Total at 31.12.2012 || 147 This item
covers loans with special conditions granted at preferential rates as part of co-operation with non-member countries. All amounts fall due
more than 12 months after year-end. The effective interest rates on
these loans vary between 7.73% and 14.507%. 2.4.2.2 Loans
granted from borrowed funds || EUR millions || MFA || Euratom || BOP || EFSM || Total Total at 31.12.2011 || 595 || 451 || 11 625 || 28 344 || 41 015 New loans || 39 || - || - || 15 800 || 15 839 Repayments || (84) || (24) || - || - || (108) Exchange differences || - || - || - || - || - Change in carrying amount || (1) || (2) || (2) || 332 || 327 Total at 31.12.2012 || 549 || 425 || 11 623 || 44 476 || 57 073 Amount due < 1 year || (15) || - || - || - || (15) Amount due > 1 year || 534 || 425 || 11 623 || 44 476 || 57 058 The
effective interest rates (expressed as a range of interest rates) were as
follows: Loans || 31.12.2012 || 31.12.2011 Macro Financial Assistance (MFA) || 0.298%-4.54% || 1.58513%-4.54% Euratom || 0.431%-5.76% || 1.067%-5.76% Balance of Payment (BOP) || 2.375%-3.625% || 2.375%-3.625% European Financial Stability Mechanism (EFSM) || 2.375%-3.750% || 2.375%-3.50% The European Union (EU) is
empowered by the EU Treaty to adopt borrowing programmes to mobilise the
financial resources necessary to fulfill its mandate. The European Commission,
acting on behalf of the EU, currently operates three main programmes, the
European Financial Stability Mechanism (EFSM), Balance of Payments (BOP)
assistance and Macro-Financial Assistance (MFA). Additionally, the Euratom
legal entity (represented by the Commission) borrows money to lend to both Member
and non-Member States to finance projects relating to energy installations. The increase in loans
granted from borrowed funds is due to new EFSM loans granted to Ireland and Portugal
during 2012. This increase is mirrored by an increase in the Commission's
borrowings. For more information on
borrowing and lending activities, see note 2.14 and note 7 of the EU
consolidated annual accounts. European Financial Stability Mechanism (EFSM) loans – nominal
value || EUR millions || Ireland || Portugal || Total Total loans granted || 22 500 || 26 000 || 48 500 Disbursed at 31.12.2011 || 13 900 || 14 100 || 28 000 Disbursed in 2012 || 7 800 || 8 000 || 15 800 Loans disbursed at 31.12.2011 || 21 700 || 22 100 || 43 800 Loans repaid at 31.12.2012 || - || - || - Loans outstanding at 31.12.2012 || 21 700 || 22 100 || 43 800 Undrawn amounts at 31.12.2012 || 800 || 3 900 || 4 700 Balance of Payment
(BOP) loans – nominal value || EUR millions || Hungary || Latvia || Romania || Total Total loans granted || 6 500 || 3 100 || 6 400 || 16 000 Loans disbursed at 31.12.2012 || 5 500 || 2 900 || 5 000 || 13 400 Loans repaid at 31.12.2012 || (2 000) || - || - || (2 000) Loans outstanding at 31.12.2012 || 3 500 || 2 900 || 5 000 || 11 400 Undrawn amounts at 31.12.2012 || - || - || 1 400 || 1 400 2.5 NON-CURRENT RECEIVABLES
AND RECOVERABLES || EUR millions || 31.12.2012 || 31.12.2011 Member States || 545 || 268 Due from ECSC in liquidation || 48 || 52 Guarantees and deposits || 2 || 1 Total || 595 || 321 Of the total non-current
receivables, EUR 593 million (2011: EUR 320 million) relate to non-exchange
transactions. The amounts due from Member States relate to non-executed
conformity clearance decisions for EAGF and EAFRD. 2.6 NON-CURRENT PRE-FINANCING || || EUR millions || Note || 31.12.2012 || 31.12.2011 Pre-financing || 2.6.1 || 40 772 || 40 625 Prepaid expenses || 2.6.2 || 3 715 || 4 098 Total || 44 487 || 44 723 Guarantees received in respect of
pre-financing These are guarantees that the
Commission requests from beneficiaries that are not Member States, in certain
cases when paying out advance payments (pre-financing).
There are two values to disclose for this type of guarantee, the
“nominal” and the “on-going” values. For the “nominal” value, the generating
event is linked to the existence of the guarantee. For the “on-going” value,
the guarantee’s generating event is the pre-financing payment and/or subsequent
clearings. At 31 December 2012 the "nominal" value of guarantees
received in respect of pre-financing amounted to EUR 1 220 million while the
"on-going" value of those guarantees was EUR 955 million (2011: EUR 1 330 million
and EUR 1 083 million respectively). 2.6.1 Non-current pre-financing || || EUR millions Management type || 31.12.2012 || 31.12.2011 Direct centralised management || 1 247 || 1 220 Indirect centralised management || 1 042 || 774 Decentralised management || 677 || 697 Shared management || 37 214 || 37 249 Joint management || 592 || 685 Total || 40 772 || 40 625 2.6.2 Non-current prepaid
expenses || || EUR millions || 31.12.2012 || 31.12.2011 Financial Engineering Instruments || 2 717 || 3 378 Aid schemes || 998 || 720 Total || 3 715 || 4 098 Under the framework of
the structural funds programmes 2007-2013, payments can be made from the EU
Budget to Member States so as to contribute to Financial Engineering
Instruments (be it in the form of loans, guarantees or equity investments) set
up and managed under the responsibility of the Member State. Monies that are
unused by these instruments at year-end are the property of the EU (as with
standard pre-financing) and are thus treated as an asset on the Commission
balance sheet. Amounts included under the Aid
Schemes heading are the Commission's estimate of open advances based on information collected
from Member States. CURRENT ASSETS 2.7 INVENTORIES || EUR millions || 31.12.2012 || 31.12.2011 Scientific materials || 71 || 67 Other || 14 || 16 Total || 85 || 83 2.8 CURRENT FINANCIAL
ASSETS || || || EUR millions || Note || 31.12.2012 || 31.12.2011 Available for sale financial assets || 2.8.1 || 1 300 || 2 005 Loans || 2.8.2 || 38 || 8 Total || || 1 338 || 2 013 2.8.1 Current available
for sale financial assets The following table provides an
overview of available for sale financial assets with a remaining maturity
before end 2013: || || EUR millions || 31.12.2012 || 31.12.2011 Guarantee Fund (GF) || 268 || - BUFI investments || 845 || 1 358 Risk Sharing Finance Facility (RSFF) || 160 || 547 Loan Guarantee Instrument for TEN-T projects (LGTT) || 23 || 97 Other || 4 || 3 Total || 1 300 || 2 005 As explained under note 2.4.1,
the presentation of available for sale financial assets has been changed from
2012 onwards. Had the same approach been followed in the 2011 accounts, the
comparatives would have been as follows: || || EUR millions || 31.12.2012 || 31.12.2011 Guarantee Fund (GF) || 268 || 201 BUFI investments || 845 || 770 Risk Sharing Finance Facility (RSFF) || 160 || 182 Loan Guarantee Instrument for TEN-T projects (LGTT) || 23 || 49 Other || 4 || 3 Total || 1 300 || 1 205 2.8.2 Current loans These amounts represent mainly loans
with remaining final maturities less than 12 months after the balance sheet
date (see note 2.4.2.2 for more details). 2.9 CURRENT RECEIVABLES
AND RECOVERABLES || EUR millions || Note || 31.12.2012 || 31.12.2011 Fines || 2.9.1 || 4 090 || 3 125 Member States || 2.9.2 || 6 222 || 2 593 Accrued income and deferred charges || 2.9.3 || 3 214 || 3 139 Other receivables and recoverables || || 396 || 492 Total || || 13 922 || 9 349 The total above contains
an estimated EUR 13 842 million (2011: EUR 9 019 million) relating to
non-exchange transactions. 2.9.1 Fines This concerns amounts to
be recovered relating to fines issued by the Commission of EUR 4 357 million
(2011: EUR 3 369 million) less a write-down of EUR 267 million (2011: EUR 244
million). Guarantees
totalling EUR 2 513 million had been received for the fines outstanding at 31
December 2012 (2011: EUR 3 012 million). It should be noted that EUR 1 471
million of these receivables were due for payment after 31 December 2012. 2.9.2 Member States || EUR millions || 31.12.2012 || 31.12.2011 EAGF and Rural Development receivables: || || EAGF || 1 172 || 1 439 EAFRD || 14 || 23 TRDI || 44 || 37 SAPARD || 136 || 142 Write-down || (814) || (771) Total || 552 || 870 VAT paid and recoverable || 15 || 19 Own resources: || || Established in the A account || 45 || 29 Established in the separate account || 1 294 || 1 263 Own resources to be received || 3 617 || 0 Write-down || (773) || (779) Other || 16 || 114 Total || 4 199 || 627 Other receivables from Member States: || || Pre-financing recovery expected || 1 220 || 963 Other || 236 || 114 Total || 1 456 || 1 077 Total || 6 222 || 2 593 The significant increase in
receivables from Member States is mainly explained by EUR 3 617 million of own
resources to be received at year-end relating to the Amending Budgets 5 and
6/2012. These Amending Budgets were adopted on 21 November 2012 and 12 December
2012 respectively. According to Article 10 of Regulation 1150/2000 the entries
corresponding to the readjustments of GNI contributions were carried out on the
first working day of January 2013. 2.9.3 Accrued income
and deferred charges || EUR millions || 31.12.2012 || 31.12.2011 Accrued income || 2 988 || 2 939 Deferred charges || 215 || 182 Other || 11 || 18 Total || 3 214 || 3 139 The main amount under this heading
is accrued income. || EUR millions || 31.12.2012 || 31.12.2011 Own resources || 2 388 || 2 644 Agricultural assigned revenue Nov and Dec || 218 || 111 Structural Funds: financial corrections || 276 || 16 Other accrued income || 106 || 168 Total accrued income || 2 988 || 2 939 2.10 CURRENT PRE-FINANCING || || EUR millions || Note || 31.12.2012 || 31.12.2011 Pre-financing || 2.10.1 || 9 458 || 8 055 Prepaid expenses || 2.10.2 || 3 690 || 2 918 Total || 13 148 || 10 973 2.10.1 Current pre-financing || || EUR millions Management type || 31.12.2012 || 31.12.2011 Direct centralised management || 3 369 || 3 092 Indirect centralised management || 3 936 || 3 069 Decentralised management4 || 301 || 330 Shared management || 1 008 || 761 Joint management || 844 || 803 Total || 9 458 || 8 055 The current
pre-financing balance has two distinct components: the gross pre-financing and
the accruals made on this pre-financing (made to reflect the related
expenditure estimated to have been incurred at year-end). Both elements have to
be taken into consideration for a proper analysis of the variation of the
current net pre-financing balance from one year to another. On the one hand, the year
2012 marked a further decrease of EUR 3 billion in gross current pre-financing
under shared management due to the significant advancement in the closure
process of the previous programming period 2000-2006. On the other hand, the
accruals on this pre-financing have decreased by EUR 3.3 billion, which led to
an overall increase of EUR 0.3 billion in the net current pre-financing. The reason for these
movements lies in the overlapping of the previous programming period 2000-2006
(which is now in its closure phase) with the current programming period
2007-2013. Whereas pre-financing related to the previous programming period is
estimated to have been entirely used (i.e. net balance zero), the pre-financing
of the current programming period is estimated to be only partially used as at
31.12.2012. The remaining part is estimated to be used in 2013 or later. A similar situation is
noted for direct centralised management, where the gross pre-financing has
decreased by EUR 741 million, while the net pre-financing has slightly
increased by EUR 277 million. 2.10.2 Current prepaid
expenses || || EUR millions || 31.12.2012 || 31.12.2011 Financial Engineering Instruments || 1 358 || 1 126 Aid Schemes || 2 332 || 1 792 Total || 3 690 || 2 918 2.11 CASH AND CASH EQUIVALENTS || || EUR millions || Note || 31.12.2012 || 31.12.2011 Unrestricted cash: || 2.11.1 || || Accounts with Treasuries and Central Banks || || 2 203 || 7 369 Current accounts || || 106 || 220 Imprest accounts || || 3 || 3 Transfers (cash in transit) || || (1) || (10) Total || || 2 311 || 7 582 Cash belonging to financial instruments || 2.11.2 || 1 845 || 1 459 Restricted cash || 2.11.3 || 5 122 || 8 320 Total || || 9 278 || 17 361 2.11.1 Unrestricted cash Unrestricted cash covers all the
funds which the Commission keeps in its accounts in each Member State and EFTA
country (treasury or central bank), as well as in current accounts, imprest
accounts and petty cash. The significant decrease in
unrestricted cash was mainly caused by a decrease in the accounts with
treasuries and central banks. The ending balance of 2012 was significantly
lower than the ending balance of 2011 due to the high budget execution rate for
2012. Moreover, additional cash resources related to the Amending Budget 5/2012
and the Amending Budget 6/2012 were only received in 2013. 2.11.2 Cash belonging
to financial instruments Amounts shown under this heading
are mainly current deposits and other cash equivalents managed by fiduciaries
on behalf of the Commission for the purpose of implementing particular
financial instruments programmes funded by the EU budget. This cash can thus
only be used in the financial instruments programme concerned. At year-end, EUR
100 million had been committed to, but not yet been drawn down by the other
parties. As explained under note 2.4.1,
the presentation of available for sale financial assets and the related cash
and cash equivalents has been changed from 2012 onwards. In 2012, this heading
includes the cash and cash equivalents of the Guarantee Fund whereas the 2011
total does not include the EUR 302 million cash and cash equivalents of the
Guarantee Fund for 2011, which had been shown under non-current AFS assets. Had
the new presentation, including showing cash belonging to
all financial instruments on a separate line, been followed in the 2011
accounts, the comparatives would have been EUR 85 million for current accounts
and EUR 1 896 million for cash belonging to financial instruments. 2.11.3 Restricted cash Restricted cash refers to amounts
received in connection with fines issued by the Commission for which the case
is still open. These are kept in specific deposit accounts that are not used
for any other activities. In case an appeal has been
lodged or where it is unknown if an appeal will be made by the other party the
underlying amount is shown as contingent liability in note 5.2. The decrease in restricted cash is
due to two main reasons: on the one hand there were a number of final decisions
by the Court of Justice which concerned significant amounts, and on the other
hand, there was an increased use made of the specifically created fund for
fines (BUFI). Since January 2010, all provisionally
cashed fines are managed by the Commission in this fund and invested in
financial instruments categorised as available for sale (see notes 2.4.1
and 2.8.1). NON-CURRENT
LIABILITIES 2.12 PENSION AND
OTHER EMPLOYEE BENEFITS || EUR millions || 31.12.2012 || 31.12.2011 Pensions – Staff || 37 528 || 30 617 Pensions – Members of the Commission || 85 || 80 Joint Sickness Insurance Scheme || 4 007 || 3 441 Total || 41 620 || 34 138 The significant increase in the
pension liability is explained by the sizeable decrease in the discount rate
applied, resulting in a large actuarial loss for the year. 2.12.1 Pensions –
Staff In accordance with
Article 83 of the Staff Regulations, the payment of the benefits provided for
in the staff pension scheme (PSEO: Pension Scheme of European Officials) constitutes
a charge to the EU's budget. The scheme is not funded, but the Member States
guarantee the payment of these benefits collectively according to the scale fixed
for the financing of this expense. In addition, officials contribute one third
to the long-term financing of this scheme via a compulsory contribution. The liabilities of the pension
scheme were assessed on the basis of the number of staff and retired staff at
31 December 2012 and on the rules of the Staff Regulations applicable at this
date. This valuation was carried out in accordance with the methodology of IPSAS
25 (and therefore also EU accounting rule 12). The
method used to calculate this liability is the projected unit credit method.
The main actuarial assumptions available at the valuation date and used on the
valuation were as follows: || Actuarial Assumptions – staff pension liability || 31.12.2012 || 31.12.2011 Nominal discount rate || 3.6% || 4.9% Expected inflation rate || 2.0% || 1.8% Real discount rate || 1.6% || 3.0% Probability of marriage: Man/Woman || 84%/38% || 84%/38% General Salary Growth/pension revaluation || 0% || 0% 2008 International Civil Servants Life Table || Yes || Yes || EUR millions Movement in Gross Employee Benefits liability || Staff pension liability || Sickness Insurance Gross Liability at 31.12.2011 || 34 233 || 3 711 Service/normal cost || 1 144 || - Interest cost || 1 043 || - Benefits paid || (1 243) || - Actuarial losses || 6 691 || 567 Change due to newcomers || 93 || - Gross Liability at 31.12.2012 || 41 961 || 4 278 Correction coefficients applied to pensions || 1 022 || N/A Deduction of taxes on pensions || (5 455) || N/A Plan assets || N/A || (271) Net liability at 31.12.2012 || 37 528 || 4 007 2.12.2 Joint Sickness
Insurance Scheme A valuation is also made for the estimated liability that the EU
has regarding its contributions to the Joint Sickness Insurance Scheme in
relation to its retired staff. The gross liability has been valued at
EUR 4 278 million (2011: 3 711 million) and plan assets of EUR 271 million (2011:
270 million) are deducted from the gross liability to arrive at the net amount.
The discount rate and the general salary growth used in the calculation are the
same as those used in the staff pension valuation, hence the significant
increase in the liability. 2.13 NON-CURRENT PROVISIONS || || || EUR millions || Amount at 31.12.2011 || Additional provisions || Unused amounts reversed || Amounts used || Transfer to current || Change in estimation || Amount at 31.12.2012 Legal cases || 366 || 58 || (241) || (53) || 0 || 0 || 130 Nuclear site dismantling || 1 005 || 0 || 0 || (3) || (29) || 24 || 997 Financial || 100 || 38 || 0 || 0 || (33) || 3 || 108 Other || 4 || 0 || (1) || (1) || (1) || 1 || 2 Total || 1 475 || 96 || (242) || (57) || (63) || 28 || 1 237 The decrease in the non-current provisions balance is mainly due
to a decrease in the provisions for legal cases following the closure of an EAGF
court case in 2012. Nuclear
site dismantlement This provision covers
the estimated costs of the decommissioning of the JRC nuclear facilities and
waste management programme. It is based on a study made by a consortium of
independent experts. 2.14 NON-CURRENT FINANCIAL
LIABILITIES || || EUR millions || Note || 31.12.2012 || 31.12.2011 Borrowings || 2.14.1 || 57 058 || 41 010 Elimination Guarantee Fund* || || (20) || (21) Total || || 57 038 || 40 989 * The Guarantee Fund holds EFSM
bonds issued by the Commission, so these need to be eliminated. 2.14.1 Non-current borrowings || EUR millions || MFA || Euratom || BOP || EFSM || Total Total at 31.12.2011 || 595 || 451 || 11 625 || 28 344 || 41 015 New borrowings || 39 || - || - || 15 800 || 15 839 Repayments || (84) || (24) || - || - || (108) Exchange differences || - || - || - || - || - Changes in carrying amount || (1) || (2) || (2) || 332 || 327 Total at 31.12.2012 || 549 || 425 || 11 623 || 44 476 || 57 073 Amount due < 1 year || (15) || 0 || 0 || 0 || (15) Amount due > 1 year || 534 || 425 || 11 623 || 44 476 || 57 058 This heading includes
borrowings due by the European Commission maturing in over one year. The changes in carrying
amount correspond to the change in accrued interests. The effective interest
rates (expressed as a range of interest rates) were as follows: Borrowings || 31.12.2012 || 31.12.2011 Macro Financial Assistance (MFA) || 0.298%-4.54% || 1.58513%-4.54% Euratom || 0.351%-5.6775% || 0.867%-5.6775% BOP || 2.375%-3.625% || 2.375%-3.625% EFSM || 2.375%-3.750% || 2.375%-3.50% For more information on
borrowing and lending activities, see Note 7 of the EU consolidated
annual accounts. 2.15 OTHER NON-CURRENT
LIABILITIES || EUR millions || 31.12.2012 || 31.12.2011 Finance Leasing debts || 1 124 || 1 155 Buildings paid for in instalments || 352 || 367 Other || 26 || 28 Total || 1 502 || 1 550 CURRENT LIABILITIES 2.16 CURRENT PROVISIONS || || || EUR millions || Amount at 31.12.2011 || Additional provisions || Unused amounts reversed || Amounts used || Transfers from non-current || Change in estimation || Amount at 31.12.2012 Legal cases || 10 || 217 || (1) || (4) || 0 || 0 || 222 Nuclear site dismantlement || 29 || 0 || 0 || (29) || 29 || 0 || 29 Financial || 165 || 30 || 0 || (44) || 33 || 4 || 188 Other || 38 || 271 || (31) || (4) || 1 || 0 || 275 Total || 242 || 518 || (32) || (81) || 63 || 4 || 714 2.17 CURRENT
FINANCIAL LIABILITIES This heading relates to
the portion of non-current borrowings (see note 2.14) that mature during
the 12
months following the balance sheet date. 2.18 PAYABLES || || EUR millions || Note || 31.12.2012 || 31.12.2011 Current portion of non-current liabilities || 2.18.1 || 57 || 53 Payables || 2.18.2 || 21 351 || 22 110 Accrued charges and deferred income || 2.18.3 || 68 076 || 68 757 Total || || 89 484 || 90 920 2.18.1 Current portion
of non-current liabilities || EUR millions || 31.12.2012 || 31.12.2011 Finance leasing liabilities || 42 || 39 Other || 15 || 14 Total || 57 || 53 2.18.2 Current
payables || || EUR millions || Type || 31.12.2012 || 31.12.2011 Member States || 23 020 || 22 189 Suppliers and other || 1 506 || 1 421 Estimated non-eligible amounts and pending pre-payments || (3 175) || (1 500) Total || 21 351 || 22 110 Member
States The primary amounts
here relate to unpaid cost claims for Structural Fund actions; EUR 5.6 billion
for ESF and EUR 15.6 billion for ERDF and Cohesion Fund (EUR 5.8 billion and
EUR 14 billion respectively in 2011). 2.18.3 Accrued charges
and deferred income || EUR millions || 31.12.2012 || 31.12.2011 Accrued charges || 67 914 || 68 302 Deferred income || 157 || 449 Amounts related to consolidated entities || 5 || 6 Total || 68 076 || 68 757 The split of accrued
charges is as follows: || EUR millions || 31.12.2012 || 31.12.2011 Agriculture and Rural Development: || || EAGF: Direct aid period 16/10 to 31/12 || 33 040 || 33 774 EAGF: Direct Aid – other entitlements || 11 492 || 10 701 EAGF: Sugar restructuring || 0 || 224 EAGF: Other || 1 || 23 EAFRD || 12 497 || 12 127 Total || 57 030 || 56 849 Structural Actions: || || EFF/FIFG || 66 || 56 ERDF and Cohesion fund || 4 359 || 4 791 ISPA || 382 || 172 ESF || 1 378 || 1 687 Total || 6 185 || 6 706 Other accrued charges: || || R&D || 1 077 || 1 157 Other || 3 622 || 3 590 Total || 4 699 || 4 747 Total accrued charges || 67 914 || 68 302 NET ASSETS 2.19 RESERVES || EUR millions || 31.12.2012 || 31.12.2011 Fair value reserve || 96 || (82) Guarantee Fund reserve || 2 079 || 1 911 Other reserves || 79 || 59 Total || 2 254 || 1 888 The reserve of the
Guarantee Fund reflects the 9% target amount of the outstanding amounts
guaranteed by the Fund that is required to be kept as assets. 2.20 AMOUNTS TO BE
CALLED FROM MEMBER STATES || EUR millions || Amount Amounts to be called from Member States at 31.12.2011 || 40 459 Return of 2011 budget surplus to Member States || 1 497 Movement in Guarantee Fund reserve || 168 Other reserve movements || 18 Economic result of the year || 5 008 Total amounts to be called from Members States at 31.12.2012 || 47 150 This amount represents
that part of the expenses already incurred by the Commission up to 31 December
2012 that must be funded by future budgets. Many expenses are recognised under
accrual accounting rules in the year N although they may be actually paid in
year N+1 (or later) and funded using the budget of year N+1 (or later). The
inclusion in the accounts of these liabilities coupled with the fact that the
corresponding amounts are financed from future budgets, results in liabilities
greatly exceeding assets at the year-end. The most significant amounts to be
highlighted are the EAGF activities. The majority of the amounts to be called
are in fact paid by the Member States in less than 12 months after the end of
the financial year in question as part of the budget of the following year. It is essentially only
the employee benefits obligations of the Commission towards its staff which are
paid out over a longer period, noting that the funding of the pension payments
by the annual budgets is guaranteed by the Member States. It should also be noted
that the above has no effect on the budget result – budget revenue should
always equal or exceed budget expenditure and any excess of revenue is returned
to Member States.
3. NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE
3.1 OWN RESOURCE AND CONTRIBUTIONS
REVENUE || || EUR millions || 2012 || 2011 Own resource revenue: GNI resources || 98 061 || 88 442 Traditional own resources: || || Customs duties || 16 087 || 16 528 Sugar levies || 157 || 161 VAT resources || 14 871 || 14 763 Total || 129 176 || 119 894 Budgetary adjustments || (1 402) || 1 627 Contributions of third countries (incl. EFTA countries) || 302 || 248 Total || 128 076 || 121 769 Own resources revenue
is the primary element of the European Commission’s operating revenue. Thus the
bulk of expenses is financed by own resources as other revenue represents only
a minor part of the total financing. The increase in own resources and
contributions revenue in 2012 compared to 2011 is in line with the increase in the
budget between the years. 3.2 OTHER OPERATING REVENUE || || EUR millions || 2012 || 2011 Fines || 1 884 || 868 Agricultural levies || 87 || 65 Recovery of expenses: || || Direct centralised management || 62 || 76 Indirect centralised management || 30 || 17 Decentralised management || 27 || 106 Joint management || 8 || 3 Shared management || 1 376 || 845 Total || 1 503 || 1 047 Revenue from administrative operations: || || Staff || 890 || 878 Property, plant and equipment related revenue || 18 || 25 Other administrative revenue || 164 || 158 Total || 1 072 || 1 061 Miscellaneous operating revenue: || || Adjustments/provisions || 274 || 51 Exchange gains || 328 || 469 Other || 935 || 1 060 Total || 1 537 || 1 580 Total || 6 083 || 4 621 The increase in other
operating revenue compared to 2011 of EUR 1 462 million is mainly driven by an
increase in revenue relating to fines (EUR 1 016 million). A high value fine case
in 2012 relating to TV and computer monitor tubes contributed to this
increase. 3.3 ADMINISTRATIVE EXPENSES || || EUR millions || 2012 || 2011 Staff expenses || 3 197 || 3 080 Depreciation and impairment || 155 || 166 Other administrative expenses || 1 869 || 1 816 Total || 5 221 || 5 062 Included under this heading are
expenses of EUR 151 million (2011: EUR 153 million) relating to operating
leases – amounts committed to be paid during the remaining term of these lease
contracts are as follows: || || || || || EUR millions Description || Future amounts to be paid < 1 year || 1- 5 years || > 5 years || Total Buildings || 129 || 446 || 459 || 1 034 IT materials and other equipment || 3 || 4 || 0 || 7 Total || 132 || 450 || 459 || 1 041 3.4 OPERATING EXPENSES || || EUR millions || 2012 || 2011 Primary operating expenses: || || Direct centralised management || 10 728 || 11 197 Indirect centralised management || 4 218 || 4 137 Decentralised management || 1 019 || 766 Shared management || 106 378 || 104 068 Joint management || 1 819 || 1 714 Total || 124 162 || 121 882 Other operating expenses: || || Adjustments/provisions || 425 || 243 Exchange losses || 265 || 368 Other || 156 || 1 748 Total || 846 || 2 359 Total || 125 008 || 124 241 The main elements of operating
expenses above cover the following areas: agriculture and rural development
(EUR 57 billion), regional development and cohesion (EUR 39 billion),
employment and social affairs (EUR 11 billion), research and communication
networks, content and technology (EUR 6 billion) and external relations (EUR 3
billion). In 2011, the item other (under other operating expenses) mainly comprised
a correction of fines issued in previous years totalling EUR 1 471 million. Included under administrative and operating
expenses are expenses relating to research and development as follows: || || EUR millions Research and Development costs recognised as expense || 2012 || 2011 Research costs || 322 || 319 Non-capitalised development costs || 58 || 116 Total || 380 || 435 3.5 FINANCIAL REVENUE || || EUR millions || 2012 || 2011 Dividend income || 12 || 5 Interest income: || || On pre-financing || 28 || 40 On late payments || 242 || 89 On available for sale assets || 58 || 68 On loans || 1 543 || 905 On cash and cash equivalents || 20 || 118 Total || 1 891 || 1 220 Other financial income: || || Realised gain on sale of financial assets || 12 || 3 Other || 160 || 169 Total || 172 || 172 Exchange gains || 9 || 3 Total || 2 084 || 1 400 The increase in financial revenue
is mainly explained by an increase in interest income on loans. This increase is
in line with the increased balance of the EFSM loans (see notes 2.4.2.2 and
2.14.1). As these loans are back-to-back loans, a similar increase was
also noted in interest expenses on loans (see note 3.6). The decrease in income on cash and
cash equivalents can be explained by significant diminution of market interest
rates recorded in 2012. The category which was impacted most is interest from
fines provisionally cashed. In this specific category, the combined effect of
interest rate decrease and an important number of fines accounts closed in 2012
led to the diminution of interest income by approximately EUR 81 million. 3.6 FINANCIAL EXPENSES || || EUR millions || 2012 || 2011 Interest expenses: || || Leasing || 65 || 67 On borrowings || 1 528 || 888 Other || 21 || 30 Total || 1 614 || 985 Other financial expenses: || || Adjustments to financial provisions || 75 || 74 Expenses relating to financial instruments managed by fiduciaries || 43 || 47 Impairment losses on AFS financial assets || 7 || 12 Realised loss on sale of financial assets || 4 || 3 Other || 140 || 142 Total || 269 || 278 Exchange losses || 14 || 49 Total || 1 897 || 1 312 3.7 SHARE OF NET DEFICIT OF JOINT
VENTURES AND ASSOCIATES In accordance with the
equity method of accounting, the Commission includes in its statement of
financial performance its share of the net deficit of its joint ventures and associates
(see also notes 2.3.1 and 2.3.2). 3.8 REVENUE FROM NON-EXCHANGE TRANSACTIONS In 2012, EUR 133 882
million revenue from non-exchange transactions has been recognised in the
economic outturn account (2011: 127 243 million). 3.9 SEGMENT REPORTING || || || EUR millions || Activities within the EU || Activities outside the EU || Services and Other || Total Fines || 1 884 || - || - || 1 884 Agricultural levies || 87 || - || - || 87 Recovery of expenses || 1 444 || 59 || - || 1 503 Revenue from administrative operations || 78 || 1 || 993 || 1 072 Miscellaneous operating revenue || 1 052 || 90 || 395 || 1 537 OTHER OPERATING REVENUE || 4 545 || 150 || 1 388 || 6 083 Administrative expenses: || (2 276) || (628) || (2 317) || (5 221) Staff expenses || (1 550) || (317) || (1 330) || (3 197) Intangible assets and PPE related expenses || (43) || 1 || (113) || (155) Other administrative expenses || (683) || (312) || (874) || (1 869) Operating expenses: || (118 210) || (5 989) || (809) || (125 008) Direct centralised management || (6 997) || (3 572) || (159) || (10 728) Indirect centralised management || (3 762) || (422) || (34) || (4 218) Decentralised management || (494) || (525) || 0 || (1 019) Shared management || (106 463) || 82 || 3 || (106 378) Joint management || (269) || (1 550) || 0 || (1 819) Other operating expenses || (225) || (2) || (619) || (846) TOTAL OPERATING EXPENSES || (120 486) || (6 617) || (3 126) || (130 229) Net operating expenses || (115 941) || (6 467) || (1 738) || (124 146) Own resource and contributions revenue || || || || 128 076 Surplus from operating activities || || || || 3 930 Net financial revenue || || || || 187 Movement in pension and other employee benefits liability || || (8 636) Share of associates/joint ventures deficit || || || || (489) Economic result of the year || || || || (5 008)
4. NOTES TO THE CASHFLOW STATEMENT
4.1 PURPOSE AND PREPARATION OF THE
CASHFLOW STATEMENT Cash flow information
is used to provide a basis for assessing the ability of the Commission to
generate cash and cash equivalents, and its needs to utilise those cash flows. The cashflow statement
is prepared using the indirect method. This means that the net surplus or
deficit 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
cash flows. Cash flows arising from
transactions in a foreign currency are recorded in the European Commission’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 cash
flow. The cashflow statement presented
reports cash flows during the period classified by operating and investing
activities (the Commission does not have financing activities). 4.2 OPERATING ACTIVITIES Operating activities
are the activities of the Commission that are not investing activities. These
are the majority of the activities performed. Loans granted to beneficiaries
(and the related borrowings, when applicable) are not considered as investing
(or financing) activities as they are part of the general objectives and thus
daily operations of the Commission. Operating activities also include
investments such as EIF, EBRD and venture capital funds. Indeed, the objective
of these activities is to participate in the achievement of policy targeted
outcomes. 4.3 INVESTING ACTIVITIES Investing activities
are the acquisition and disposal of intangible assets and property, plant and
equipment and of other investments
which are not included in cash equivalents. Investing activities do not include
loans granted to beneficiaries. The objective is to show the real investments
made by the Commission.
5. CONTINGENT ASSETS AND LIABILITIES AND OTHER SIGNIFICANT DISCLOSURES
5.1 CONTINGENT ASSETS || || || EUR millions || || 31.12.2012 || 31.12.2011 Guarantees received: || || || Performance guarantees || || 232 || 236 Other guarantees || || 2 || 2 Other contingent assets || || 12 || 15 Total || || 246 || 253 Performance
guarantees are requested to ensure that beneficiaries of Commission funding
meet the obligations of their contracts with the Commission. 5.2 CONTINGENT LIABILITIES || || || EUR millions || Note || 31.12.2012 || 31.12.2011 Guarantees given || 5.2.1 || 22 317 || 24 394 Fines || 5.2.2 || 6 378 || 8 951 EAGF, rural development and pre-accession || 5.2.3 || 1 188 || 2 345 Cohesion policy || 5.2.4 || 546 || 318 Legal cases and other disputes || 5.2.5 || 78 || 187 Other contingent liabilities || || 1 || 2 Total || || 30 508 || 36 197 All
contingent liabilities, except those relating to fines, would be financed,
should they fall due, by the EU budget in the years to come. 5.2.1 Guarantees
given || EUR millions || 31.12.2012 || 31.12.2011 On loans granted by the EIB from its own resources: 65% guarantee || 18 683 || 20 362 70% guarantee || 1 654 || 1 992 75% guarantee || 383 || 534 100% guarantee || 594 || 724 Total || 21 314 || 23 612 Other guarantees given || 1 003 || 782 Total || 22 317 || 24 394 The EU budget guarantees loans
signed and granted by the EIB from its own resources to third countries
(including loans granted to Member States before accession). However, the EU's
guarantee is limited to a percentage of the ceiling of the credit lines
authorised: 65% (for the mandate 2000-2007), 70%, 75% or 100%. For the mandate
2007-2013, the EU's guarantee is limited to 65% of the outstanding balances,
not on the credit lines authorised. Where the ceiling is not reached, the EU
guarantee covers the full amount. The above 2011 amount for the 65% guarantee
does not take the difference in calculation with regard to the 2000-2007 and
2007-2013 mandates into account. Had the 2011 amount been calculated based on
this differentiation, the amount to be
disclosed would have been EUR 17 423 million. Other guarantees given relate
mainly to the Risk Sharing Finance Facility (EUR 948 million) and the Loan
Guarantee Instrument for Ten-T projects (EUR 39 million). For more information
on these see note 2.4.1. 5.2.2 Fines These amounts concern
fines imposed by the Commission for infringement of competition rules that have
been provisionally paid and where either an appeal has been lodged or where it
is unknown if an appeal will be made. The contingent liability will be
maintained until a decision by the Court of Justice on the case is final. Interest earned on provisional payments is included in the
economic result of the year and also as a contingent liability to reflect the
uncertainty of the Commission’s title to these amounts. 5.2.3 EAGF, rural
development and pre-accession These are contingent
liabilities towards the Member States connected with the EAGF conformity
decisions, rural development and pre-accession financial corrections pending
judgement of the Court of Justice. The determination of the final amount of the
liability and the year in which the effect of successful appeals will be
charged to the budget will depend on the length of the procedure before the
Court. 5.2.4 Cohesion
policy These are contingent
liabilities towards the Member States in conjunction with actions under
cohesion policy awaiting the oral hearing date or pending judgement of the
Court of Justice. 5.2.5 Legal cases
and other disputes This heading relates to actions for
damages currently being brought against the Commission, other legal disputes
and the estimated legal costs. It should be noted that in an action for damages
under Article 288 EC the applicant must demonstrate a sufficiently serious
breach by the institution of a rule of law intended to confer rights on
individuals, real harm suffered by the applicant, and a direct causal link between
the unlawful act and the harm. 5.3 OTHER SIGNIFICANT DISCLOSURES 5.3.1 Outstanding commitments
not yet expensed || EUR millions || 31.12.2012 || 31.12.2011 Outstanding commitments not yet expensed || 174 070 || 164 197 The amount disclosed above is the budgetary
RAL ("Reste à Liquider") less related amounts that have been included
as expenses in the 2012 statement of financial performance. The budgetary RAL
is an amount representing the open commitments for which payments and/or
de-commitments have not yet been made. This is the normal consequence of the
existence of multi-annual programmes. At 31 December 2012 the budgetary RAL
totalled EUR 217 222 million (2011: EUR 207 046 million). 5.3.2 Significant
legal commitments || EUR millions || 31.12.2012 || 31.12.2011 Structural actions || 71 775 || 142 916 Protocol with Mediterranean countries || 264 || 264 Fisheries agreements || 173 || 37 Galileo programme || 143 || 320 GMES programme || 233 || 400 TEN-T || 1 331 || 3 416 Other contractual commitments || 538 || 461 Total || 74 457 || 147 814 These commitments originated
because the Commission entered into long-term legal commitments in respect of
amounts that were not yet covered by commitment appropriations in the budget.
This can relate to multi-annual programmes such as Structural Actions or amounts
that the European Commission is committed to pay in the future under
administrative contracts existing at the balance sheet date (e.g. relating to
the provision of services such as security, cleaning, etc, but also contractual
commitments concerning specific projects such as building works). Structural actions The table below shows a
comparison between the legal commitments for which budget commitments have not
yet been made and the maximum commitments in relation to the amounts foreseen
in the financial framework 2007-2013. || || || || || EUR millions || Financial perspective amounts 2007-2013 (A) || Legal commitments concluded (B) || Budget commitments 2007-2011 (C) || Legal commitments less budget commitments (=B-C) || Maximum commitment (=A-C) Structural funds || 347 552 || 347 521 || 293 050 || 54 471 || 54 502 Natural Resources || 100 549 || 100 539 || 85 058 || 15 481 || 15 491 Instrument for Pre-Accession Assistance || 11 255 || 9 895 || 9 473 || 422 || 1 782 Total || 459 356 || 457 955 || 387 581 || 70 374 || 71 775 TEN-T commitments This amount relates to
grants in the field of the trans-European transport network (TEN-T) for the
period 2007 - 2013. The programme applies to projects identified for the
development of a trans-European transport network to support both
infrastructure projects and research and innovation projects to foster the
integration of new technologies and innovative processes on the deployment of
new transport infrastructure. The decrease in legal commitments relating to TEN-T is the
combined effect of reduced legal commitments following amendment decisions and
increased budget commitments. 5.3.3 Related party
disclosures The related parties of the
Commission are the other EU consolidated entities and the key management
personnel of these entities. Transactions between these entities take place as part
of the normal operations of the EU and as this is the case, no specific
disclosure requirements are necessary for these transactions in accordance with
the EU accounting rules. Details on
key management entitlements are provided in the EU consolidated annual accounts. 5.3.4 Events after
the balance sheet date At the date of transmission of
these annual accounts no material issues had come to the attention of the
Accounting Officer of the Commission or were reported to him that would require
separate disclosure under this section. The annual accounts and related notes
were prepared using the most recently available information and this is
reflected in the information presented. EUROPEAN COMMISSION REPORTs on THE IMPLEMENTATION OF
THE budgEt AND EXPLANATORY NOTES FINANCIAL YEAR 2012 *
It should be noted that due to the rounding of figures into millions of
euros, some
financial data in these budgetary tables may appear not to add-up
CONTENTS
Page Part II: Reports on the
implementation of the budget and explanatory notes 1. Budget implementation
1.1 Statement of comparison of budget
and actual amounts 49 1.2 Reconciliation of economic
result with budget result 53 2. Revenue: Summary of the
implementation of budget revenue 55 3. Expenditure: 3.1 Breakdown and changes in commitment and payment
appropriations by
financial framework heading 56 3.2 Implementation of commitment appropriations by
financial framework heading 56 3.3 Implementation of payment appropriations by
financial framework heading 56 3.4 Movement in commitments
outstanding by financial framework heading 57 3.5 Breakdown of commitments
outstanding by year by financial framework heading 58 3.6 Breakdown and changes in commitment and payment
appropriations by policy area 59 3.7 Implementation of commitment appropriations by
policy area 60 3.8 Implementation of payment appropriations by
policy area 61 3.9 Movement in commitments
outstanding by policy area 62 3.10 Breakdown of commitments
outstanding by year of origin by policy area 63 1. BUDGET IMPLEMENTATION 1.1 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS 1.1.1 REVENUE || || || EUR millions || Title || Initial Budget || Final Budget* || Actual Revenue || 1. Own resources || 127 512 || 128 655 || 128 886 || Of which Customs duties || 19 171 || 16 701 || 16 261 || Of which VAT || 14 499 || 14 546 || 14 648 || Of which GNI || 93 719 || 97 284 || 97 856 || 3. Surpluses, balances and adjustments || 0 || 1 994 || 2 041 || 4. Revenue accruing from persons working with the institutions and other EU bodies || 987 || 987 || 898 || 5. Revenue accruing from the administrative operation of the institutions || 59 || 67 || 267 || 6. Contributions and refunds in connection with Union agreements and programmes || 50 || 50 || 2 921 || 7. Interest on late payments and fines || 123 || 3 648 || 3 807 || 8. Borrowing and lending operations || 0 || 0 || 0 || 9. Miscellaneous revenue || 30 || 30 || 29 || Total || 128 761 || 135 431 || 138 849 || * including amending budgets 1.1.2 COMMITMENTS BY FINANCIAL FRAMEWORK HEADING EUR millions || Financial Framework Heading || Initial Budget || Final Budget* || Commitments || 1. Sustainable growth || 67 506 || 70 842 || 69 000 || 2. Preservation and mgt of natural resources || 59 976 || 62 198 || 60 817 || 3. Citizenship, freedom, security, justice || 2 065 || 2 994 || 2 892 || 4. The EU as a global player || 9 406 || 9 931 || 9 753 || 5. Administration || 4 816 || 5 130 || 4 981 || 6. Compensations || 0 || 0 || 0 || Total || 143 768 || 151 094 || 147 443 || * including amending budgets, appropriations carried over and assigned
revenue 1.1.3 COMMITMENTS BY POLICY AREA || EUR millions Policy Area || Initial Budget || Final Budget* || Commitments 01 Economic and financial affairs || 611 || 536 || 535 02 Enterprise || 1 148 || 1 276 || 1 236 03 Competition || 92 || 96 || 94 04 Employment and social affairs || 11 581 || 11 818 || 11 782 05 Agriculture and rural development || 58 587 || 60 877 || 59 514 06 Mobility and transport || 1 664 || 1 754 || 1 713 07 Environment and Climate action || 493 || 508 || 496 08 Research || 5 930 || 7 618 || 7 059 09 Information society and media || 1 678 || 1 985 || 1 878 10 Direct research || 411 || 932 || 494 11 Maritime affairs and Fisheries || 1 033 || 1 011 || 1 007 12 Internal market || 101 || 107 || 101 13 Regional policy || 42 045 || 42 662 || 42 647 14 Taxation and customs union || 143 || 147 || 144 15 Education and culture || 2 697 || 3 292 || 3 088 16 Communication || 262 || 271 || 265 17 Health and consumer protection || 687 || 653 || 639 18 Home affairs || 1 264 || 1 322 || 1 290 19 External relations || 4 817 || 4 969 || 4 872 20 Trade || 104 || 106 || 104 21 Development and relations with ACP States || 1 498 || 1 733 || 1 719 22 Enlargement || 1 088 || 1 166 || 1 135 23 Humanitarian aid || 900 || 1 299 || 1 294 24 Fight against fraud || 79 || 79 || 79 25 Commission's policy coord and legal advice || 194 || 204 || 196 26 Commission’s administration || 1 017 || 1 200 || 1 149 27 Budget || 69 || 63 || 61 28 Audit || 12 || 12 || 12 29 Statistics || 134 || 144 || 135 30 Pensions and related expenditure || 1 335 || 1 321 || 1 318 31 Language Services || 399 || 477 || 435 32 Energy || 718 || 764 || 731 33 Justice || 218 || 233 || 222 40 Reserves || 759 || 461 || 0 Total || 143 768 || 151 094 || 147 443 * including amending budgets, appropriations carried over and assigned
revenue 1.1.4 EXPENDITURE BY FINANCIAL FRAMEWORK HEADING
EUR
millions Financial Framework Heading || Initial Budget || Final Budget* || Payments made 1. Sustainable growth || 55 337 || 63 753 || 61 585 2. Preservation and mgt of natural resources || 57 034 || 60 409 || 59 096 3. Citizenship, freedom, security, justice || 1 484 || 2 477 || 2 375 4. The EU as a global player || 6 955 || 7 182 || 7 064 5. Administration || 4 814 || 5 448 || 4 968 6. Compensations || 0 || 0 || 0 Total || 125 624 || 139 268 || 135 087 * including amending budgets, appropriations carried over and assigned
revenue 1.1.5 EXPENDITURE BY POLICY AREA || EUR millions Policy Area || Initial Budget || Final Budget* || Payments made 01 Economic and financial affairs || 511 || 493 || 484 02 Enterprise || 1 079 || 1 395 || 1 271 03 Competition || 92 || 103 || 92 04 Employment and social affairs || 9 075 || 11 755 || 11 699 05 Agriculture and rural development || 55 880 || 59 242 || 57 948 06 Mobility and transport || 1 079 || 1 156 || 1 105 07 Environment and Climate action || 393 || 409 || 382 08 Research || 4 218 || 6 245 || 5 307 09 Information society and media || 1 357 || 1 776 || 1 501 10 Direct research || 404 || 893 || 466 11 Maritime affairs and Fisheries || 806 || 757 || 745 12 Internal market || 98 || 112 || 99 13 Regional policy || 35 538 || 38 282 || 38 254 14 Taxation and customs union || 110 || 140 || 130 15 Education and culture || 2 112 || 3 059 || 2 761 16 Communication || 253 || 278 || 256 17 Health and consumer protection || 592 || 652 || 635 18 Home Affairs || 756 || 860 || 835 19 External relations || 3 276 || 3 271 || 3 233 20 Trade || 102 || 111 || 105 21 Development and relations with ACP States || 1 310 || 1 475 || 1 429 22 Enlargement || 921 || 976 || 943 23 Humanitarian aid || 842 || 1 141 || 1 128 24 Fight against fraud || 74 || 83 || 71 25 Commission's policy coord and legal advice || 193 || 219 || 195 26 Commission’s administration || 1 001 || 1 343 || 1 149 27 Budget || 69 || 73 || 61 28 Audit || 12 || 13 || 12 29 Statistics || 122 || 148 || 128 30 Pensions and related expenditure || 1 335 || 1 321 || 1 318 31 Language Services || 399 || 501 || 433 32 Energy || 1 339 || 782 || 723 33 Justice || 187 || 206 || 190 40 Reserves || 90 || 0 || 0 Total || 125 624 || 139 268 || 135 087 * including amending budgets, appropriations carried over and assigned
revenue In the initial adopted budget,
signed on 1 December 2011, the amount of payment appropriations was EUR 129 088
million (of which EUR 125 624 million was for the Commission) and the amount to
be financed by own resources totalled EUR 127 512 million. The revenue and
expenditure estimates in the initial budget are typically adjusted during the
budgetary year, such modifications being presented in 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. Revenue: During 2012 six amending budgets
were adopted. Taking these into account, the total final revenue in the 2012
budget amounted to EUR 135 431 million. This was financed by own resources
totalling EUR 128 655 million (thus EUR 1 143 million more than initially
forecasted) and the remainder by other revenue. The increased need for
financing payment appropriations was covered mainly from the inclusion of EUR 3
525 million relating to fines and interest on late payments in the Amending
Budget no. 6/2012 under other revenue. Concerning the own resources result,
the collection of traditional own resources was close to the forecasted
amounts. This was because the budget estimates that were modified at the time
Amending Budget No. 4/2012 was established (they were decreased by EUR 1 520
million according to the new macroeconomic forecasts of spring 2012), were once
again amended in the Amending Budget No. 6/2012 to take into account the actual
rhythm of collection. Thus they were once again decreased, this time by EUR 950
million. The final Member States' VAT and
GNI payments also correspond closely to the final budget estimate. The
differences between the forecasted amounts and the amounts actually paid are
due to the differences between the euro rates used for budgetary purposes and
the rates in force at the time when the Member States outside the EMU actually
made their payments. Expenditure: The year 2012 was the sixth and
penultimate year of the current programming period 2007-2013. All major
programmes were at cruising speed, and the inflow of payment claims increased
significantly, as is normal as the cycle draws to a close. In the general
context of fiscal consolidation in the Member States, the voted budget for 2012
was rather conservative. This, combined with a significant amount of unpaid
payment claims from 2011, and the mounting requests for reimbursements, created
a high pressure on payment appropriations, which had to be addressed during the
year through careful budgetary management, and ultimately through an amending
budget. For commitments, the authorised
budget, and hence the political targets set, were fully implemented (99.9%).
The most notable adjustments by means of amending budgets during the year
concerned increases of EUR 650 million for ITER, in line with the December 2011
agreement on its financing, and EUR 688 million for the mobilisation of the
European Union Solidarity Fund, unforeseeable expenditure by its very nature.
Commitments were reduced by EUR 142.2 million in Amending Budget 6/2012, by
returning unused amounts to the margin, in particular in relation to the
reserve for international fisheries agreements, and animal disease eradication
and monitoring programmes. The total implementation of budgeted commitment
appropriations, being EUR 144 390 million of the total commitments made of EUR
147 443 million, left EUR 108 million unused. After the carryover to 2013, an
amount of EUR 77 million lapses as well as the un-mobilised reserves: EUR 426
million for the European Globalisation Adjustment Fund, EUR 35 million for the
Emergency Aid Reserve and EUR 5 million of other un-mobilised reserves. The total implementation of budgeted
payment appropriations, being EUR 131 722 million of the total payments of EUR
135 087 million, represents an implementation rate of 99.6 %. The total level
of payment appropriations was increased at the end of the year through Amending
Budget 6/2012 for an amount EUR 6 billion, increasing the initial budget by
4.8%. The shortage of payments affected nearly all headings, and in particular
heading 1b Cohesion for Growth and Employment. It must also be recalled that
the EUR 6 billion agreed was EUR 3 billion less that the
amount requested by the Commission. Finally, the year 2012 ended with
outstanding payment claims of EUR 16.2 billion for the current programming
period of Cohesion Policy (2007-2013), and a further EUR 1.1 billion related to
the closure of 2000-2006 programmes. These amounts will need to be paid in
2013. As in the case of commitments, the budget line for the European Union
Solidarity Fund was reinforced by EUR 688 million in payment appropriations
during the course of the year. The unused voted payment appropriations
excluding the reserves amounted to EUR 560 million (2011: EUR 1 580 million)
and after the carryover to 2013, a total of EUR 66 million (2011: EUR 560
million) lapses. Un-mobilised reserves amounted to EUR 12 million. The detailed analysis of budgetary
adjustments, their relevant context, their justification and their impact is
presented in Commission's Report on Budgetary and Financial Management 2012,
Part A "Overview at budget level" and Part B dealing with each
heading of the multi-annual financial framework. 1.2 RECONCILIATION OF ECONOMIC RESULT
WITH BUDGET RESULT || || EUR millions || 2012 || 2011 || || ECONOMIC RESULT OF THE YEAR || (5 008) || (2 085) || || Revenue || || Entitlements established in current year but not yet collected || (1 986) || (360) Entitlements established in previous years and collected in current year || 4 567 || 2 061 Accrued revenue (net) || (38) || (236) || || Expenses || || Accrued expenses (net) || (1 980) || 3 387 Amount from liaison account with Commission in EOA || 2 842 || 2 906 Expenses prior year paid in current year || (2 695) || (936) Net-effect pre-financing || 1 233 || 1 144 Payment appropriations carried over to next year || (4 028) || (647) Payments made from carry-overs and cancellation of unused payment appropriations || 4 203 || 1 469 Movement in provisions || 7 591 || (2 058) Other || (700) || (293) || || BUDGET RESULT OF THE YEAR (COMMISSION)* || 4 001 || 4 352 || || *Note that the budget result of the Commission is different
from the EU budget result as it does not include the revenue and expenditure of
the other Institutions. The economic result of the year is
calculated on the basis of accrual accounting principles. The budget result is
however based on modified cash accounting rules, in accordance with the Financial
Regulation. As both are the result of the same underlying transactions, it is a
useful control to ensure that they are reconcilable. The table below shows this
reconciliation, highlighting the key reconciling amounts, split between revenue
and expense items. Reconciling items - Revenue The actual budgetary
revenue for a financial year corresponds to the revenue collected from
entitlements established in the course of the year and amounts collected from
entitlements established in previous years. Therefore the entitlements
established in the current year but not yet collected are to be deducted
from the economic result for reconciliation purposes as they do not form part
of budgetary revenue. On the contrary the entitlements established in
previous years and collected in current year must be added to the economic
result for reconciliation purposes. The net accrued
revenue mainly consists of accrued revenue for agricultural levies, own
resources and interests and dividends. Only the net-effect, i.e. accrued
revenue for current year minus reversal accrued revenue from previous year, is
taken into consideration. Reconciling items - Expenses The net accrued
expenses mainly consist of accruals made for year-end cut-off purposes,
i.e. eligible expenses incurred by beneficiaries of Community funds but not yet
reported to the Commission. While accrued expenses
are not considered as budgetary expenditure, the payments made in the current
year relating to invoices registered in prior years are part of current
year's budgetary expenditure. The net effect of
pre-financing is the combination of (1) the new pre-financing amounts paid
in the current year and recognised as budgetary expenditure of the year and (2)
the clearing of the pre-financing paid in current year or previous years
through the acceptance of eligible costs. The latter represent an expense in
accrual terms but not in the budgetary accounts since the payment of the
initial pre-financing had already been considered as a budgetary expenditure at
the time of its payment. Besides the payments
made against the year's appropriations, the appropriations for that year that
are carried to the next year also need to be taken into account in
calculating the budget result of the year (in accordance with Article 15 of
Regulation No 1150/2000). The same applies for the budgetary payments made in
the current year from carry-overs and the cancellation of unused payment
appropriations. The movement
in provisions relate to year-end estimates made in the accrual accounts
(employee benefits mainly) that do not impact the budgetary accounts. Other
reconciling amounts comprise different elements such as asset depreciation,
asset acquisitions, capital lease payments and financial participations for
which the budgetary and accrual accounting treatments differ.