ANNUAL REPORT 2021

Annual report 2021 Železiarne Podbrezová a.s. 66 14 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. Thegrants whichareto be receivedascompensationfor expenditures or lossesalready incurred ortheaim ofwhich isto 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 income comprise interest payable on borrowings calculated using the effective interest rate method, 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 effectiveyieldmethod.Dividend income is recognised inthestatement of comprehensive income onthe datewhenthe 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 all temporary 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 liabilitysettled.Deferredtax ischarged orcreditedtothestatement ofcomprehensive income, exceptforthose items ofreceivables 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 in subsidiaries and the joint venture, where the Group controls the settlement of temporary differences and temporary differences are unlikely to be utilised in the near future. When calculating deferred tax, the expected method 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 suchmatters, including the following: Impairment of property, plant and equipment TheGroupcalculatedandrecogniseda lossonthe impairment ofproperty, plantand equipment basedontheassessmentoftheirfutureuse, 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 themanagement has assessedthe probability of lossthat will result in a cash outflow for the Group. In making this assessment, the Group has relied on the advice of external legal counsel, the latest available information on the status of the court proceedings and on an internal evaluation of the likely outcome. The final amount of any potential losses in relation to 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. Provision for employee benefits TheGroupusesamodeltocalculate employeebenefits(seeNote3(p)above),whichreflectstheexpected employeeturnover,wagegrowth,discount factor and all of the benefits the Company plans to pay to the employees. 5 CHANGES IN THE GROUP As at 1 September 2021, UHL Holding, a. s., merged with the parent company ŽP. On 24 March 2021, PIPEX ENERGY S.R.L., in which the Group has a 41.65% effective share, was established. As at 24 March 2021, Tále, a. s. issued nine new shares to a new shareholder, Tále Invest a.s. ŽP a.s. holds a 92.87% share in Tále, a.s. In August 2021, the Group purchased additional 348 shares of FK Železiarne Podbrezová, a.s. and thereby gained control over the company. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 (IN EUROS)