ANNUAL REPORT 2021

Annual report 2021 Železiarne Podbrezová a.s. 12 13 (p) Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made. A provision is measured on the basis of the best estimate made by management of the cost of the liability settlement as at the reporting date. If the effect is material, provisions are determined by discounting the expected future cash flows by a pre - tax discount rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (q) Accruals The Company makes an estimate of the expenses and liabilities that have not been invoiced at the reporting date. These expenses and liabilities are recorded in the accounting records and reported in the financial statements of the periods to which they relate. (r) 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. (s) Revenue recognition (i) Goods sold and services rendered In relation to the sale of goods and merchandise, revenues are recognised when all significant risks and rewards of ownership have been transferred tothe buyer and no significant uncertainties remain regarding the collection ofthe consideration, associated costsand possible claims or returning of goods. Revenues are stated net of taxes and discounts. 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 Company 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 completion of the transaction at the reporting date. (ii) Government grants Grants are not recognised unless there is a reasonable assurance that the Company will meet the grant - related conditions. Grants are systematically recognised in the statement of comprehensive income in the periods in which the Company recognises as costs the related expenditures to be compensated by the grants. In particular, grants whose principal condition is for the Company to acquire, construct or otherwise obtain non - current assets are reported as deferred income in the statement of financial position and recognised 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 Company without related future expenditures are recognised in the statement of comprehensive income on an accrual basis. (t) Expenses (i) Operating lease payments For operating leases, the lease payments are expensed on a straight - line basis over the lease period. (ii) 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 profit and loss as it occurs using the effective yield method. Dividend income is recognised in the statement of profit and loss on the date when the dividend is declared. (u) Segment reporting Based on the Company’s management and internal reporting structure, the Company is presented as one business segment, ie the production and sale of steel pipes in particular for industrial purposes and supporting services. (v) Income tax 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 or substantially 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 liability settled. Deferred tax is charged or credited to the statement of profit and loss, 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 neither affect accounting nor taxable profit and are attributable to other than business combination transactions; and - Arising from investments in subsidiaries, joint ventures and associates, where the Company controls the settlement of temporary differences and it is probable that they will not reverse in the foreseeable future. When calculating deferred tax,the expectedmethod of realisation or settlement of the carrying amount of assetsand liabilities isalso considered. A deferred tax asset is recognised only to the extent that it is probable that the Company will generate a sufficient tax base in the future against which the asset can be utilised. Carrying amounts of deferred tax assets are always considered as at the reporting date. Deferred tax assets and liabilities are offset when there is a legally - enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. NOTES TO THE SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 (IN EUROS)