ANNUAL REPORT 2020

Železiarne Podbrezová a.s. ANNUAL REPORT 2020 57 13 (t) Trade and other payables Trade and other payables are initially measured at fair value and subsequently at amortised cost using the effective interest rate method. (u) Revenue recognition (i) Goods sold and services rendered In relation tothesaleofgoodsandmerchandise,revenuesarerecognised whenallsignificantrisksandrewards of ownership have beentransferred to the buyer, and no significant uncertainties remain regarding the collection of consideration, associated costs and possible claims or returning of goods. Revenues are stated net of taxes and discounts, after eliminating sales within the Group. No revenue is recognised if there are significant uncertainties regarding the settlement of the consideration due, the associated costs or the possible return of goods, or regarding the continuous involvement of the Group in the management of the goods. Revenues from the provision of services are recognised when the relevant services are rendered in proportion to the stage of their completion at the reporting date. (ii) Government grants Grants are not recognised unless there is a reasonable assurance that the Group will meet the grant - related conditions. Grants are systematically recognised in the statement of comprehensive income in the periods in which the Group recognises as costs the related expenditures to be compensated by the grants. In particular, grants whose principal condition is for the Group to acquire, construct or otherwise obtain non - current assets are recognised as deferred income in the statement of financial position and reclassified on a systematic basis in the statement of comprehensive income over the useful life of the related assets. The grants which are to be received as compensation for expenditures or losses already incurred or the aim of which is to provide immediate financial aid to the Group without related future expenditures are recognised in the statement of comprehensive income on an accrual basis. (v) Expenses (i) Financial costs and financial income Financial costs and financial incomecomprise interest payable on borrowings calculated using the effective interest ratemethod, interest received, dividend income, proceeds on the sale of financial investments, foreign exchange gains and losses, and bank fees. Borrowing costs directly related to the acquisition of non - current tangible assets are included in the cost of the assets. Interest income is recognised in the statement of comprehensive income as it occurs using the effective yield method. Dividend income is recognised in the statement of comprehensive income on the date when the dividend is declared. (w) Taxation Income tax for the year comprises current and deferred tax. Current tax is calculated from the taxable income for the year using tax rates enacted at the reporting date, and any adjustments to current tax in respect of previous years. Deferred income tax is calculated, using the liability method, for alltemporary differences arising between the tax bases of assets and liabilities and their carrying amounts. Deferred tax is calculated at the income tax rates that are expected to apply to the period when the asset is to be realised or the liability settled. Deferred tax is charged or credited to the statement of comprehensive income, except for those items of receivables and payables that are credited or charged directly to equity. Deferred tax is not calculated for the following temporary differences: - Arising from goodwill – not deductible for tax purposes; - Arising from the initial recognition of assets or liabilities that do not affect accounting or taxable profit in a transaction other than a business combination; and - Arising from investments insubsidiaries and the joint venture, wherethe Group controls the settlement of temporary differences and temporary differences are unlikely to be utilised in the near future. When calculating deferred tax, the expectedmethod of realisation or settlement of the carrying amount of assets and liabilities is also considered. A deferred tax asset is recognised only to the extent that it is probable that the Group will generate a sufficient tax base in the future against which the asset can be utilised. Carrying amounts of deferred tax assets are always assessed as at the reporting date. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. 4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATE UNCERTAINTY In the process of applying the Group’s accounting policies, which are described in Note 3, the Group’s management has made the following judgements concerning uncertainties and estimates that have an effect on the amounts recognised in the financial statements. There is risk of potential adjustments in future periods relating to such matters, including the following: Impairment of property, plant and equipment The Group calculated and recognised a loss on the impairment of property, plant and equipment based on the assessment of their future use, planned disposals and sales. The Group does not believe that any material adjustments are needed in the future owing to impairment of the Group’s assets considering the production and sales levels (also see Note 6). Depreciation Non - current tangible assets are depreciated on a straight - line basis over the estimated useful life of individual items of the non - current tangible assets. Land and assets under construction are not depreciated. The estimated useful lives are as follows: Golf course and hotels 30 – 90 years; Buildings, halls and constructions 12 – 80 years; Plant and equipment and vehicles 4 – 20 years. Non - current tangible assets acquired under finance lease are depreciated over their expected useful lives on the same basis as owned assets. The gain or loss arising on the disposal or retirement of an item of non - current tangible assets is fully reflected in the statement of comprehensive income. Provisions for legal and court proceedings The Group is involved in various legal proceedings for which the management has assessed the probability of loss that will result in a cash outflow for the Group. Inmaking this assessment, the Group has relied on the advice of external legal counsel,the latest available information onthe status ofthecourt proceedingsand onan internalevaluation ofthe likely outcome. Thefinalamount ofany potential losses in relationto legal proceedings is not known and based on the Group management judgement will not result in a material adjustment to previous estimates. Details of the legal cases are included in Note 28.3. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 (IN EUROS)