5. Effects of new accounting standards

Amendments to IAS 28

Long-term Interests in Associates and Joint Ventures

The aim of the amendments, which were published in October 2017, is to clarify that an entity must apply IFRS 9 Financial Instruments to all long-term interests in an associate or joint venture, irrespective of the accounting method. The EU enacted this clarification in its legislation with Commission Regulation (EU) 2019/237 dated 8 February 2019. The amendments take effect for reporting periods that begin on or after 1 January 2019. First-time application had no impact on the Consolidated Financial Statements.

IFRS 16 Leases

The IASB published IFRS 16 Leases in January 2016. This standard supersedes the previously valid IAS 17 Leases and has introduced significant accounting changes for lessees. In general, all leases are now to be recognised as rights of use for accounting purposes. In terms of the reporting of assets for which the Group is the lessor, no adjustments are necessary on account of the application of the new leasing standard. The new rules aim to help improve the transparency of financial reporting and break down existing information imbalances. The EU enacted this standard in its legislation with Commission Regulation (EU) 2017/1986 dated 31 October 2017. The effective date is 1 January 2019.

The HHLA Group applied the standard for the financial year beginning on 1 January 2019 using the modified retrospective approach. With this method, the comparative prior-year figures are not adjusted; changeover effects are therefore recognised as adjustments to revenue reserves as of 1 January 2019. As part of the modified retrospective approach, an incremental borrowing rate of 2.5 % as of 1 January 2019 has been used to calculate the lease liability. Within Germany, the incremental borrowing rate ranges between 0.4 % and 2.2 %. As a result of the materiality of longer-term lease agreements, the average German incremental borrowing rate is 2.0 %. Outside of Germany, this value ranges between 2.1 % and 12.7 %. As a result of the higher proportion of countries with lower financing costs, the average incremental borrowing rate outside of Germany is 3.5 %.

In respect of many of the contracts, HHLA recognises the usage rights for leased assets in the amount of the corresponding lease liabilities at first-time application, meaning that no equity effects will arise at this time. Due to their material importance, usage rights for rental agreements for space at the Port of Hamburg, which were previously recognised as operating leases, will be recognised at their carrying amounts, as though IFRS 16 had applied since the start of the lease. This results in significant changeover effects as of 1 January 2019, which are shown as adjustments to revenue reserves.

The new lease standard was implemented via a Group-wide project. The effects of first-time application on the balance sheet are shown below this table.

Until now, expenses from operating leases had always been recognised under other operating expenses on the income statement. Since 1 January 2019, however, depreciation and amortisation on the right of use and interest expenses have been shown for the lease liability. In the reporting year, this change in terms of recognition has resulted in an increase in EBIT of some € 14.4 million compared with the previous year. In the cash flow statement, there is a shift between cash flow from operating activities and cash flow from financing activities. While EBIT and thus operating cash flow have increased, the capital outflows from financing activities have also risen because higher redemptions of lease liabilities also had to be accounted for.

Amendments to IFRS 9

Prepayment Features with Negative Compensation

The IASB published these amendments to IFRS 9 in October 2017. They are designed to facilitate measurement at amortised cost/fair value through other comprehensive income, even for financial assets that do not meet the payment flow criterion (SPPI, “solely payments of principal and interest”). These relate to financial assets with prepayment features that involve one party receiving or paying appropriate compensation in the event of termination (appropriate negative fee). The EU enacted this standard in its legislation with Commission Regulation (EU) 2018/498 dated 22 March 2018. First-time application had no impact on the Consolidated Financial Statements.

Amendments to IAS 19

Plan Amendment, Curtailment or Settlement

In accordance with IAS 19, pension obligations are to be measured based on updated assumptions in the event of a plan amendment, curtailment or settlement. This amendment clarifies that, after such an event, the past service cost and net interest for the remainder of the period must be taken into account based on updated assumptions.

First-time application had no impact on the Consolidated Financial Statements of HHLA.

Improvements to IFRS

2015–2017 Cycle

These clarifications were published in December 2017 and apply to four standards.

Based on the amendments to IFRS 3 Business Combinations, the principles governing successive business combinations are to be applied when an entity obtains control over a business operation in which it previously held an interest as part of a joint operation.

IFRS 11: If an entity obtains joint control of a business operation in which it previously held an interest as part of a joint operation, the previously held interest will not be remeasured.

The amendments to IAS 12 Income Taxes deal with the income tax consequences of dividend payments.

The amendments to IAS 23 Borrowing Costs clarify that, in connection with the calculation of the capitalisation rate, the cost associated with debt taken out specifically in connection with the acquisition of the qualifying assets is not to be included until the asset is completed if a company has generally borrowed funds to purchase qualifying assets.

The aforementioned clarifications had no significant impact on the Consolidated Financial Statements.