ANNUAL REPORT 2020

Železiarne Podbrezová a.s. ANNUAL REPORT 2020 53 9 (c) Basis of consolidation (i) Subsidiaries The consolidated financial statements incorporate the financial statements of controlled reporting entities (“subsidiaries”). The control arises if the reporting entity: - Has power over an investee; - Has an exposure or rights to variable returns from its involvement with the investee; and - Has the ability to use its power over the investee to affect its returns. The subsidiaries’ financial statements are included in the consolidated financial statements from the date that control commences until the date when control ceases. The acquisition ofsubsidiaries isaccountedfor using the purchasemethod. The cost oftheacquisition is measured attheaggregate of the fairvalues, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the subsidiary. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised attheirfair values attheacquisition date, except for non - current assets (or disposal groups) thatareclassifiedas held for sale in accordance with IFRS 5 “Non - current assets held for sale and discontinued operations”, which are recognised andmeasured at fair value less costs to sell. G oodwill arising on an acquisition is measured as the excess of the sum of the consideration transferred, the amount of any non - controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net amount of the acquired identifiable assets as at the acquisition date net of the liabilities assumed. If, after reassessment, the assets acquired net of the liabilities assumed exceed the sum of the referred consideration, the amount of any non - controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Goodwill is initiallyrecognisedasanassetand issubsequentlymeasuredatcost lessanyaccumulated impairment loss.Forthe purpose of impairment testing, goodwill is allocated to each of the Group’s cash - generating units expected to benefit from the synergies of the business combination. The impairmentofgoodwill istestedannuallyormorefrequentlywhenthere isan indicationthattheunitmay be impaired. Iftherecoverableamount of the cash - generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of the goodwilland then to other assets of the unit pro - rata onthe basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included in the profit or loss on disposal. All intra - group transactions, balances, unrealised profits or losses from transactions have been eliminated on consolidation. Minority interest of other investors in the net assets of consolidated subsidiaries is identified separately from the Group’s equity therein. Minority interests represent the other investors’ proportionate share of the fair value at the acquisition date of the assets and liabilities of the relevant subsidiary, adjusted for the minorities’ share of subsequent profits and losses. Loss applicable to minority interests in excess of the minorities’ interest in the subsidiary’s equity is accounted for along with the Group’s interest except for the amount that represents contractual liability of minority shareholders and may represent an additional investment to cover losses. The acquisition of shares in subsidiaries from entities under common control is recognised using the Pooling of Interests method. The difference between the cost of investment and the Group’s share in the book value of assets and liabilities of the acquiree as of the acquisition date is recognised immediately in equity, ie in “Retained Earnings”. The minority interest refers to the proportion of the book value of assets and liabilities of the acquiree as of the date of its acquisition net of the minority interest in gains/losses after the aforementioned date. The list of the consolidated subsidiaries in the Group is as follows: Name Effective ownership (%) Voting rights (%) Principal activity 2020 2019 2020 2019 PIPEX ITALIA S.p.A., Arona (Novara) Italy 85.00% 85.00% 85.00% 85.00% Trading activities Pipex Deutschland GmbH, Munich Germany 88.50% 88.50% 88.50% 88.50% Trading activities SLOVRUR Sp. z o. o., Stalowa Wola Poland 90.00% 90.00% 90.00% 90.00% Trading activities ŽP Trade Bohemia, a.s. Prague Czech Republic 100.00% 100.00% 100.00% 100.00% Trading activities Tále, a.s., Tále Slovakia 94.66% 94.66% 94.66% 94.66% Tourism ŽP - Gastroservis, s.r.o., Valaská Slovakia 100.00% 100.00% 100.00% 100.00% Catering services Nadácia Železiarne Podbrezová, Podbrezová Slovakia 100.00% 100.00% 100.00% 100.00% Foundation ŽIAROMAT a.s., Kalinovo Slovakia 100.00% 100.00% 100.00% 100.00% Production of refractory products ŽP Informatika s.r.o., Podbrezová Slovakia 100.00% 100.00% 100.00% 100.00% IT services ŽP EKO QELET a.s., Martin Slovakia 66.27% 66.27% 66.27% 66.27% Purchase and sale of scrap Transformaciones Metalurgicas S.A.U., Arenys de Mar Spain 100.00% 100.00% 100.00% 100.00% Production of steel pipes TAP Tubos de Acero de Precisión, S.L.U., Arenys de Mar Spain 100.00% 100.00% 100.00% 100.00% Production of steel pipes Transmesa USA, Inc., Englewood Cliffs, NJ USA 100.00% 100.00% 100.00% 100.00% Trading activities ŽP VVC s.r.o., Podbrezová Slovakia 100.00% 100.00% 100.00% 100.00% Research and development KBZ s.r.o., Košice Slovakia 70.00% 70.00% 70.00% 70.00% Purchase and sale of scrap ŽP Bezpečnostné služby s.r.o., Podbrezová Slovakia 100.00% 100.00% 100.00% 100.00% Operation of security guards ŽP Rehabilitácia s.r.o., Podbrezová Slovakia 100.00% 100.00% 100.00% 100.00% Operation of a health - care facility ZANINONI SLOVAKIA, s.r.o., Valaská* Slovakia 100.00% 90.00% 100.00% 90.00% Transportation services ŠK Železiarne Podbrezová a.s., Podbrezová Slovakia 99.50% 99.50% 99.50% 99.50% Sport, advertising and promotion UHL Holding, a.s., Podbrezová Slovakia 100.00% 0.00% 100.00% 0.00% Trading activities UHL s.r.o., Podbrezová Slovakia 100.00% 0.00% 100.00% 0.00% Trading activities For details on changes in the Group during the current reporting period, see Note 5. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 (IN EUROS)