Annual report 2017

Železiarne Podbrezová a.s. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2017 (In whole euros) These notes are an integral part of the consolidated financial statements. This is an English language translation of the original Slovak language document. 8 2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS Initial application of new amendments to the existing standards effective for the current reporting period The following amendments to the existing standards and new interpretations issued by the International Accounting Standards Board (IASB) and adopted by the EU are effective for the current reporting period:  Amendments to IAS 7 “Statement of Cash Flows” – Disclosure Initiative – adopted by the EU on 6 November 2017 (effective for annual periods beginning on or after 1 January 2017);  Amendments to IAS 12 “Income Taxes” – Recognition of Deferred Tax Assets for Unrealised Losses – adopted by the EU on 6 November 2017 (effective for annual periods beginning on or after 1 January 2017);  Amendments to IFRS 12 due to “Improvements to IFRSs (cycle 2014 – 2016)” resulting from the annual improvement project of IFRS (IFRS 1, IFRS 12 and IAS 28) primarily with a view to removing inconsistencies and clarifying wording – adopted by the EU on 7 February 2018 (amendments to IFRS 12 are to be applied for annual periods beginning on or after 1 January 2017);  Amendments to IFRS 2 “Share-based Payment” – Classification and Measurement of Share- based Payment Transactions – adopted by the EU on 27 February 2018 (effective for annual periods beginning on or after 1 January 2018);  Amendments to IFRS 1 and IAS 28 due to “Improvements to IFRSs (cycle 2014 – 2016)” resulting from the annual improvement project of IFRS (IFRS 1, IFRS 12 and IAS 28) primarily with a view to removing inconsistencies and clarifying wording – adopted by the EU on 8 February 2018 (amendments to IFRS 1 and IAS 28 are to be applied for annual periods beginning on or after 1 January 2018);  Amendments to IAS 40 “Investment Property” – Transfers of Investment Property – adopted by the EU on 15 March 2018 (effective for annual periods beginning on or after 1 January 2018); The adoption of these amendments to the existing standards has not led to any material changes to the Group’s financial statements. Standards and amendments to the existing standards issued by IASB and adopted by the EU but not yet effective At the date of authorisation of these financial statements, the following new standards issued by IASB and adopted by the EU are not yet effective:  IFRS 9 “Financial Instruments” – adopted by the EU on 22 November 2016 (effective for annual periods beginning on or after 1 January 2018); IFRS 9 includes requirements for recognition and measurement, impairment, derecognition, and requirements for general hedge accounting. Classification and Measurement – IFRS 9 introduces a new approach to the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held. This single, principle-based approach replaces existing rule-based requirements under IAS 39. The new model also results in a single impairment model being applied to all financial instruments. Impairment – IFRS 9 introduces a new, expected-loss impairment model that will require more timely recognition of expected credit losses. Specifically, the new standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis. Hedge accounting – IFRS 9 introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities. Own credit risk – IFRS 9 removes the volatility in profit or loss caused by changes to the credit risk of liabilities elected to be measured at a fair value. This change in accounting means that gains caused by the deterioration of an entity’s own credit risk on such liabilities are no longer recognised in profit or loss.