Explanatory Memorandum to COM(2023)393 - Annual accounts of the European Commission for the financial year 2022

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dossier COM(2023)393 - Annual accounts of the European Commission for the financial year 2022.
source COM(2023)393 EN
date 28-06-2023
EUROPEAN COMMISSION

Contents

1.

Brussels, 28.6.2023


COM(2023) 393 final


COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN

PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS

ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION

FOR THE FINANCIAL YEAR 2022


2.

CONTENTS



CERTIFICATION OF THE ACCOUNTS

FINANCIAL STATEMENTS AND EXPLANATORY NOTES

BALANCE SHEET

STATEMENT OF FINANCIAL PERFORMANCE

CASHFLOW STATEMENT

STATEMENT OF CHANGES IN NET ASSETS

NOTES TO THE FINANCIAL STATEMENTS

BUDGETARY IMPLEMENTATION REPORTS


CERTIFICATION OF THE ACCOUNTS


The annual accounts of the European Commission for the year 2022 have been prepared in accordance with the Financial Regulation applicable to the general budget of the European Union and the accounting rules adopted by myself in my capacity as the Commission's Accounting Officer, as are to be applied by all the institutions and Union bodies.

I acknowledge my responsibility for the preparation and presentation of the annual accounts of the European Commission in accordance with Article 77 of the Financial Regulation.

I have obtained from the authorising officers, who certified its reliability, all the information necessary for the production of the accounts that show the European Commission's assets and liabilities and the budgetary implementation.

I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the accounts, I have a reasonable assurance that the accounts present fairly, in all material aspects, the financial position, the results of the operations and the cash flow of the European Commission.


3.

Rosa ALDEA BUSQUETS


Accounting Officer of the Commission

4.

19 June 2023



EUROPEAN COMMISSION

FINANCIAL YEAR 2022


FINANCIAL STATEMENTS AND EXPLANATORY NOTES


It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up.

5.

CONTENTS



BALANCE SHEET

STATEMENT OF FINANCIAL PERFORMANCE

CASHFLOW STATEMENT

STATEMENT OF CHANGES IN NET ASSETS

NOTES TO THE FINANCIAL STATEMENTS

6.

1. SIGNIFICANT ACCOUNTING POLICIES


7.

2. NOTES TO THE BALANCE SHEET


8.

3. NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE


9.

4. CONTINGENT LIABILITIES AND ASSETS


10.

5. BUDGETARY AND LEGAL COMMITMENTS


11.

6. FINANCIAL RISK MANAGEMENT


12.

7. RELATED PARTY DISCLOSURES


13.

8. EVENTS AFTER THE BALANCE SHEET DATE



BALANCE SHEET

EUR million
Note31.12.202231.12.2021
NON-CURRENT ASSETS
Intangible assets2.1442365
Property, plant and equipment2.29 8209 493
Investments accounted for using the equity method2.31 3131 192
Financial assets2.4225 268180 637
Pre-financing2.547 30360 665
Exchange receivables and non-exchange recoverables2.618 98440 804
303 132293 157
CURRENT ASSETS
Financial assets2.48 8216 512
Pre-financing2.554 04233 675
Exchange receivables and non-exchange recoverables2.629 41731 555
Inventories2.77679
Cash and cash equivalents2.845 20143 464
137 557115 285
TOTAL ASSETS440 688408 441
NON-CURRENT LIABILITIES
Pension and other employee benefits2.9(80 116)(121 848)
Provisions2.10(2 009)(2 763)
Financial liabilities2.11(323 444)(214 380)
(405 569)(338 990)
CURRENT LIABILITIES
Provisions2.10(534)(328)
Financial liabilities2.11(28 275)(31 090)
Payables2.12(56 913)(47 644)
Accrued charges and deferred income2.13(85 129)(77 057)
(170 851)(156 120)
TOTAL LIABILITIES(576 419)(495 111)
NET ASSETS(135 731)(86 669)
Reserves2.1413851
Amounts to be called from Member States*2.15(135 868)(86 721)
NET ASSETS(135 731)(86 669)

* The European Parliament adopted a budget on 23 November 2022 which provides for the payment of the Commission's short-term liabilities from own resources to be collected by, or called up from, the Member States in the following year. Additionally, under article 83 of the Staff Regulations (Council Regulation No 259/68 of 29 February 1968 as amended), the Member States shall jointly guarantee the liability for pensions.

14.

STATEMENT OF FINANCIAL PERFORMANCE


EUR million
Note20222021
REVENUE
Revenue from non-exchange transactions
GNI resources103 880115 955
Traditional own resources23 49520 590
VAT19 66618 340
Plastics own resources6 3375 831
Fines9151 990
Recovery of expenses3.11 2161 762
UK Withdrawal Agreement–1 122
Other3.26 7352 753
162 245168 342
Revenue from exchange transactions
Financial revenue3.32 5935 090
Other3.4864727
3 4585 817
Total Revenue165 702174 159
EXPENSES
Implemented by Member States3.5
European Agricultural Guarantee Fund(41 031)(40 829)
European Agricultural Fund for Rural Development

and other rural development instruments
(16 073)(15 451)
European Regional Development Fund &

Cohesion Fund
(43 083)(46 932)
European Social Fund(14 649)(16 727)
Other(3 482)(4 835)
Implemented by the Commission, executive agencies and trust funds3.6(94 049)(63 025)
Implemented by other EU agencies and bodies3.7(4 693)(4 211)
Implemented by third countries and int. organisations3.7(5 281)(4 512)
Implemented by other entities3.7(4 743)(3 225)
Staff and pension costs3.8(9 959)(8 593)
Finance costs3.9(7 470)(4 158)
UK Withdrawal Agreement(6 961)–
Other3.10(6 081)(3 736)
Total Expenses(257 554)(216 234)
ECONOMIC RESULT OF THE YEAR(91 852)(42 075)

15.

CASHFLOW STATEMENT


EUR million
20222021
Economic result of the year(91 852)(42 075)
Operating activities
Amortisation3227
Depreciation959758
(Increase)/decrease in loans(40 790)(70 281)
(Increase)/decrease in pre-financing(7 005)(30 887)
(Increase)/decrease in exchange receivables and non-exchange recoverables23 9581 838
(Increase)/decrease in inventories2(4)
Increase/(decrease) in pension and other employee benefits(41 732)6 440
Increase/(decrease) in provisions(548)(2 157)
Increase/(decrease) in financial liabilities (other than NGEU borrowings)14 12060 129
Increase/(decrease) in payables9 26814 538
Increase/(decrease) in accrued charges and deferred income8 07213 350
Prior year budgetary surplus taken as non-cash revenue(3 227)(1 769)
Remeasurements in employee benefits liabilities (non-cash movements not included in statement of financial performance)45 916(3 241)
Other non-cash movements102(1 757)
Investing activities
(Increase)/decrease in intangible assets and property, plant and equipment(1 396)(1 888)
(Increase)/decrease in investments accounted for using the equity method(121)(604)
(Increase)/decrease in non-derivative financial assets at fair value through surplus or deficit*(5 994)(4 703)
(Increase)/decrease in derivative financial assets at fair value through surplus or deficit(156)(629)
Financing activities
Increase/(decrease) in borrowings related to NGEU92 12891 000
NET CASHFLOW1 73628 084
Net increase/(decrease) in cash and cash equivalents1 73628 084
Cash and cash equivalents at the beginning of the year43 46415 380
Cash and cash equivalents at year-end45 20143 464

16.

STATEMENT OF CHANGES IN NET ASSETS


EUR million
Amounts to be called from Member States

Accumulated Surplus/(Deficit)
Other reservesFair value reserveNet Assets
BALANCE AS AT 31.12.2020(41 329)3 031470(37 828)
Impact of revised EAR 11 (see Note 1)1 693(3 043)(470)(1 820)
BALANCE AS AT 01.01.2021(39 636)(12)–(39 648)
Remeasurements in employee benefits liabilities(3 241)––(3 241)
Other–63–63
2020 budget result credited to Member States(1 769)––(1 769)
Economic result of the year(42 075)––(42 075)
BALANCE AS AT 31.12.2021(86 721)51–(86 669)
Remeasurements in employee benefits liabilities45 916––45 916
Other1586–102
2021 budget result credited to Member States(3 227)––(3 227)
Economic result of the year(91 852)––(91 852)
BALANCE AS AT 31.12.2022(135 868)138–(135 731)


17.

NOTES TO THE FINANCIAL STATEMENTS



For further information in addition to the notes below, please also see the 2022 EU consolidated annual accounts.

Note that in the following tables amounts concerning the UK in relation to MFFs up to end 2020 are still shown under the heading Member States as although the UK withdrew from the Union on 1 February 2020, in accordance with the Withdrawal Agreement, it continues to have a financial relationship with the Union equivalent to that of a Member State for these periods.

18.

1.SIGNIFICANT ACCOUNTING POLICIES


The European Commission (hereinafter referred to as the Commission) applies the accounting policies of the European Union (hereinafter referred to as the EU). A summary of the significant EU accounting policies is given below.

19.

1.1.LEGAL BASIS AND ACCOUNTING RULES


The accounts of the EU are kept in accordance with Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30 July 2018, p.

1) hereinafter referred to as the ‘Financial Regulation’ (FR).

In accordance with article 80 of the Financial Regulation, the EU prepares its financial statements on the basis of accrual-based accounting rules that are based on International Public Sector Accounting Standards (IPSAS). These accounting rules, adopted by the Accounting Officer of the Commission, have to be applied by all the institutions and EU bodies falling within the scope of consolidation in order to ensure the internal consistency of the EU consolidated accounts.

20.

Application of new and amended European Union Accounting Rules (EAR)


Revised EAR effective for annual periods beginning on or after 1 January 2022

There are no new EAR which became effective for annual periods beginning on or after 1 January 2022.

21.

New EAR adopted but not yet effective at 31 December 2022


There are no new EAR adopted but not yet effective at 31 December 2022.

22.

1.2.ACCOUNTING PRINCIPLES


The objective of financial statements is to provide information about the financial position, performance and cashflows of an entity that is useful to a wide range of users. For the EU as a public sector entity, the objectives are more specifically to provide information useful for decision-making, and to demonstrate the accountability of the entity for the resources entrusted to it. It is with these goals in mind that the present document has been drawn up.

The overall considerations (or accounting principles) to be followed when preparing the financial statements are laid down in EU accounting rule 1 ‘Financial Statements’ and are the same as those described in IPSAS 1: fair presentation, accrual basis, going concern, consistency of presentation, materiality, aggregation, offsetting and comparative information.

The qualitative characteristics of financial reporting are relevance, faithful representation (reliability), understandability, timeliness, comparability and verifiability.

23.

1.3.CONSOLIDATION


Scope of consolidation

The consolidated financial statements of the EU comprise all significant controlled entities, joint arrangements and associates. The complete list of entities falling under the scope of consolidation, which now comprises 54 controlled entities and 1 associate (2021: 55 controlled entities and 1 associate), can be found in note 9. Among the controlled entities are the EU institutions (including the Commission, but not the European Central Bank) and the EU agencies (except those of the Common and Foreign Security Policy). The European Coal and Steel Community in Liquidation (ECSC i.L.) is also considered as a controlled entity. The EU’s only associate is the European Investment Fund (EIF).

Entities falling under the scope of consolidation but immaterial to the EU consolidated financial statements as a whole need not be consolidated or accounted for using the equity method where to do so would result in excessive time or cost to the EU. These entities are referred to as ‘Minor entities’ and are separately listed in note 9. In 2022, 8 entities have been classified as such minor entities (2021: 8 entities).

24.

Controlled entities


In order to determine the scope of consolidation, the control concept is applied. Controlled entities are entities for which the EU is exposed, or has right, to variable benefits from its involvement and has the ability to affect the nature and amount of those benefits through its power over the other entity. This power must be presently exercisable and must relate to the relevant activities of the entity. Controlled entities are fully consolidated. The consolidation begins at the first date on which control exists, and ends when such control no longer exists.

The most common indicators of control within the EU are: creation of the entity through founding treaties or secondary legislation, financing of the entity from the EU budget, the existence of voting rights in the governing bodies, audit by the European Court of Auditors and discharge by the European Parliament. An individual assessment for each entity is made in order to decide whether one or all of the criteria listed above are sufficient to result in control.

All material inter-entity transactions and balances between EU controlled entities are eliminated, while unrealised gains and losses on such transactions are not material and so have not been eliminated.

25.

Joint Arrangements


A joint arrangement is an agreement of which the EU and one or more parties have joint control. Joint control is the agreed sharing of control of an arrangement by way of a binding arrangement, which exists only when decisions about the relevant activities require the unanimous consent of parties sharing control. Joint agreements can be either joint ventures or joint operations. A joint venture is a joint arrangement that is structured through a separate vehicle and whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Participations in joint ventures are accounted for using the equity method (see note 1.5.4). A joint operation is a joint arrangement whereby the parties that have joint control of the arrangements have rights to the assets, and obligations for the liabilities, related to the arrangement. Participations in joint operations are accounted for by recognising in the EU’s financial statements its assets and liabilities, revenues and expenses, as well as its share of assets, liabilities, revenues and expenses jointly held or incurred.

26.

Associates


Associates are entities over which the EU has, directly or indirectly, significant influence but not exclusive or joint control. It is presumed that significant influence exists if the EU holds directly or indirectly 20% or more of the voting rights. Participations in associates are accounted for using the equity method (see note 1.5.4).

27.

Non-consolidated entities the funds of which are managed by the Commission


The funds of the Joint Sickness Insurance Scheme for staff of the EU, the European Development Fund and the Participants Guarantee Fund are managed by the Commission on behalf of these entities. However, since these entities are not controlled by the EU, they are not consolidated in its financial statements.

28.

1.4.BASIS OF PREPARATION


Financial statements are presented annually in accordance with Article 243 of the Financial Regulation. The accounting year begins on 1 January and ends on 31 December.


29.

1.4.1.Currency and basis for conversion


Functional and reporting currency

The financial statements are presented in millions of euros, unless stated otherwise, the euro being the EU’s functional currency.

30.

Transactions and balances


Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the re-translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance.

Different conversion methods apply to property, plant and equipment and intangible assets, which retain their value in euros at the rate that applied at the date when they were purchased.

Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December:

31.

Euro exchange rates


Currency31.12.202231.12.2021Currency31.12.202231.12.2021
BGN1.95581.9558PLN4.68084.5969
CZK24.116024.8580RON4.94954.949
DKK7.43657.4364SEK11.121810.2503
GBP0.88690.8403CHF0.98471.0331
HRK7.53457.5156JPY140.6600130.3800
HUF400.8700369.1900USD1.06661.1326

32.

1.4.2.Use of estimates


In accordance with IPSAS and generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management based on the most reliable information available. Significant estimates include, but are not limited to: amounts for employee benefit liabilities, financial risk of accounts receivable and the amounts disclosed in the notes concerning financial instruments, impairment allowance for financial assets at amortised cost and for financial guarantee contract liabilities, accrued revenue and charges, provisions, degree of impairment of intangible assets and property, plant and equipment, net realisable value of inventories, contingent assets and liabilities. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known, if the change affects that period only, or that period and future periods, if the change affects both.

33.

1.5.BALANCE SHEET


34.

1.5.1.Intangible assets


An intangible asset is an identifiable non-monetary asset without physical substance. An asset is identifiable if it is either separable (i.e. it is capable of being separated or divided from the entity, e.g. by being sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so), or arises from binding arrangements (including rights from contracts or other legal rights), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations).

Acquired intangible assets are stated at historical cost less accumulated amortisation and impairment losses. Internally developed intangible assets are capitalised when the relevant criteria of the EU Accounting Rules are met and the expenses relate solely to the development phase of the asset. The capitalisable costs include all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Costs associated with research activities, non-capitalisable development costs and maintenance costs are recognised as expenses as incurred.

Intangible assets are amortised on a straight-line basis over their estimated useful lives (3 to 11 years). The estimated useful lives of intangible assets depend on their specific economic life time or legal life time determined by an agreement.

35.

1.5.2.Property, plant and equipment


All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition, construction or transfer of the asset.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits or service potential associated with the item will flow to the EU and its cost can be measured reliably. Repairs and maintenance costs are charged to the statement of financial performance during the financial period in which they are incurred.

Land is not depreciated as it is deemed to have an indefinite useful life. Assets under construction are not depreciated, as these assets are not yet available for use. Depreciation on other assets is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows:

Type of assetStraight line depreciation rate
Buildings4% to 10%
Space assets8% to 25%
Plant and equipment10% to 25%
Furniture and vehicles10% to 25%
Computer hardware25% to 33%
Other10% to 33%

Gains or losses on disposals are determined by comparing proceeds less selling expenses with the carrying amount of the disposed asset and are included in the statement of financial performance.

36.

Leases


A lease is an agreement whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time. Leases are classified as either finance leases or operating leases.

Finance leases are leases where substantially all the risks and rewards incidental to ownership are transferred to the lessee. When entering a finance lease as a lessee, the assets acquired under the finance lease are recognised as assets and the associated lease obligations as liabilities as from the commencement of the lease term. The assets and liabilities are recognised at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Over the period of the lease term, the assets held under finance leases are depreciated over the shorter of the asset’s useful life and the lease term. The minimum lease payments are apportioned between the finance charge (the interest element) and the reduction of the outstanding liability (the capital element). The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability, which is presented as current/non-current, as applicable. Contingent rents are charged as expenses in the period in which they are incurred.

An operating lease is a lease other than a finance lease, i.e. a lease where the lessor retains substantially all the risks and rewards incidental to ownership of an asset. When entering an operating lease as a lessee, the operating lease payments are recognised as an expense in the statement of financial performance on a straight-line basis over the lease term with neither a leased asset nor a leasing liability presented in the balance sheet.


37.

1.5.3.Impairment of non-financial assets


An impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset's future economic benefits or service potential through amortisation or depreciation (as applicable). Assets that have an indefinite useful life are not subject to amortisation/depreciation and are tested annually for impairment. Assets that are subject to amortisation/depreciation are tested for impairment whenever there is an indication at the reporting date that an asset may be impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable (service) amount. The recoverable (service) amount is the higher of an asset’s fair value less costs to sell and its value in use.

Intangible assets and property, plant and equipment residual values and useful lives are reviewed, and adjusted if appropriate, at least once per year. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly.

38.

1.5.4.Investments accounted for using the equity method


Participations in associates and joint ventures

Investments accounted for using the equity method are initially recognised at cost, with the initial carrying amount subsequently being increased or decreased to recognise further contributions, the EU’s share of the surplus or deficit of the investee, any impairments and dividends. The initial cost together with all movements give the carrying amount of the investment in the financial statements at the balance sheet date. The EU’s share of the investee’s surplus or deficit is recognised in the statement of financial performance, and its share of investee’s movements in equity is recognised in the reserves within net assets. Distributions received from the investment reduce the carrying amount of the asset.

If the EU's share of deficits of an investment accounted for using the equity method equals or exceeds its interest in the investment, the EU discontinues recognising its share of further losses (‘unrecognised losses’). After the EU’s interest is reduced to zero, additional losses are provided for and a liability is recognised only to the extent that the EU has incurred legal or constructive obligation or made payments on behalf of the entity.

If there are indications of impairment, a write-down to the lower recoverable amount is necessary. The recoverable amount is determined as described under note 1.5.3. If the reason for impairment ceases to apply at a later date, the impairment loss is reversed to the carrying amount that would have been determined had no impairment loss been recognised.

In cases where the EU holds 20% or more of an investment capital fund, it does not seek to exert significant influence. Such funds are therefore treated as financial instruments and categorised as financial assets at fair value through surplus or deficit (‘FVSD’).

Associates and joint ventures classified as minor entities (see note 1.3) are not accounted for under the equity method. EU contributions to those entities are accounted for as an expense of the period.

39.

1.5.5.Financial assets


Classification at initial recognition

The classification depends on two criteria:

·The financial assets management model. This requires an assessment of how the EU manages the financial assets to generate cash flows and to achieve its objectives and how it evaluates the performance on financial assets.

·The asset contractual cash-flow characteristics. This requires an assessment of whether the contractual cash flows are solely payments of principal and interest on the principal outstanding. The interest is the consideration for the time value of money, credit risk and other basic lending risks and costs.

Following assessment based on these criteria, the financial assets can be classified in three categories: Financial assets at amortised cost (‘AC’), financial assets at fair value through net assets/equity (‘FVNA’) or financial assets at fair value through surplus or deficit (‘FVSD’).

Financial assets with contractual cash flows that represent solely principal and interests are classified depending on the entity’s management model. If the management model is to hold the financial assets in order to collect contractual cash flows, the financial assets are classified at AC. If the management model is to hold the financial assets both to collect contractual cash flows and to sell the financial assets, the classification is FVNA. If the management model is different to these two models (e.g. the financial assets are held for trading or held in a portfolio managed and evaluated on a fair value basis), the financial assets are classified as FVSD.

Financial assets with contractual cash flows that do not represent only principal and interests, but introduce exposure to risks and volatility other than those present in a basic lending arrangement (e.g. changes in equity prices), are classified as FVSD regardless of the management model.

At initial recognition, the EU classifies the financial assets as follows:

(i) Financial assets at amortised cost

The EU classifies in this category:

·Cash and cash equivalents;

·Loans (including term deposits with original maturity of more than three months);

·Exchange receivables, except for the financial guarantee contract receivable leg classified as financial asset at fair value through surplus or deficit.

These non-derivative financial assets meet two conditions: The EU’s management model is to hold them in order to collect the contractual cash flows. Furthermore, on specified days, there are contractual cash flows that represent only principal and interest on the outstanding principal.

Financial assets at amortised cost are included in current assets, except for those with maturity of more than 12 months from the reporting date.

(ii) Financial assets at fair value through net assets/equity

These non-derivatives financial assets have contractual cash flows that represent only principal and interest on the outstanding principal. In addition, the management model is to hold the financial assets both to collect contractual cash flows and to sell the financial assets.

Assets in this category are classified as current assets, if they are expected to be realised within 12 months from the reporting date.

The EU does not hold such assets at 31 December 2022.

(iii) Financial assets at fair value through surplus or deficit

The EU classifies the following financial assets as FVSD because the contractual cash flows do not represent only principal and interests on the principal:

·Derivatives;

·Equity investments and investments in money market funds or in pooled portfolio funds;

·Other equity-type investments (e.g. Risk Capital Operations).

In addition, the EU classifies the debt securities it holds as FVSD because the portfolios of debt securities are managed and evaluated on a portfolio fair value basis (e.g. Common Provisioning Fund under Article 212 of the Financial Regulation).

Assets in this category are classified as current assets, if they are expected to be realised within 12 months from the reporting date.

40.

Initial recognition and measurement


Purchases of financial assets at fair value through net assets/equity and at fair value through surplus or deficit are recognised on their trade-date – the date on which the EU commits to purchase the asset. Cash equivalents and loans are recognised when cash is deposited in a financial institution or advanced to borrowers.

Financial assets are initially measured at fair value. For all financial assets not carried at fair value through surplus or deficit, the transactions costs are added to the fair value at initial recognition. For financial assets carried at fair value through surplus or deficit the transaction costs are expensed in the statement of financial performance.

The fair value of a financial asset on initial recognition is normally the transaction price unless the transaction is not at arm’s length i.e. at no or at nominal consideration for public policy purposes. In this case, the difference between the fair value of the financial instrument and the transaction price is a non-exchange component which is recognised as an expense in the statement of financial performance. In this case, the fair value of a financial asset is derived from current market transactions for a directly equivalent instrument. If there is no active market for the instrument, the fair value is derived from a valuation technique that uses available data from observable markets.

When a long-term loan that carries no interest or an interest below market conditions is granted, its fair value can be estimated as the present value of all future cash receipts discounted using the prevailing market rate of interest for a similar instrument with a similar credit rating.

Loans granted under the Recovery and Resilience Facility and loans for financial assistance are initially measured at their nominal amount, with the transaction price considered the fair value of the loan. This is because:

·The ‘market environment’ for EU lending is very specific and different from the capital market used to issue commercial or government debt. As lenders in these markets have the opportunity to choose alternative investments, the opportunity of doing so is factored into market prices. However, this opportunity for alternative investments does not exist for the EU, which is not allowed to invest money in the capital markets; it only borrows funds for the purpose of lending. This means that there is no alternative lending or investment option available to the EU for the sums borrowed. Thus, there is no opportunity cost and therefore no basis of comparison with market rates. In fact, the EU lending operation itself represents the market. Essentially, since the opportunity cost ‘option’ is not applicable, the market price does not fairly reflect the substance of the EU lending transactions. Therefore, it is not appropriate to determine the fair value of EU lending with reference to commercial or government bonds.

·Furthermore, as there is no active market or similar transactions to compare with, the interest rate to be used by the EU for fair valuing its lending operations should be the interest rate charged.

41.

Subsequent measurement


Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method.

Financial assets at fair value through net assets/equity are subsequently measured at fair value. Gains and losses from changes in the fair value are recognised in the fair value reserve, except for foreign exchange translation differences on monetary assets, which are recognised in the statement of financial performance.

Financial assets at fair value through surplus or deficit are subsequently measured at fair value. Gains and losses from changes in the fair value (including those stemming from foreign currency translation and any interests earned) are included in the statement of financial performance in the period in which they arise.

42.

Fair value at subsequent measurement


The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities and over-the–counter derivatives), the EU establishes a fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cashflow analysis, option pricing models and other valuation techniques commonly used by market participants.

Investments in venture capital funds which do not have a quoted market price in an active market are valued at the attributable net asset value, which is considered as an equivalent of their fair value.

43.

Impairment of financial assets


The EU recognises and measures an impairment loss for expected credit losses on financial assets that are measured at amortised cost and at fair value through net assets/equity.

The expected credit loss (ECL) is the present value of the difference between the contractual cash flows and the cash flows that the EU expects to receive. The ECL incorporates reasonable and supportable information that is available without undue cost or effort at the reporting date.

The ECL is measured with a three stage model that takes into account probability weighted default events during the lifetime of the financial asset and the evolution of credit risk since the origination of the financial asset. For loans, origination is the date of the irrevocable loan commitment.

If there is no significant increase in credit risk since origination (‘stage 1’), the impairment loss is the ECL from possible default events in the next 12 months from the reporting date (’12 months ECL’). If there is a significant increase in credit risk since origination (‘stage 2’), or if there is objective evidence of a credit impairment (‘stage 3’), the impairment loss equals the ECL from possible default events over the whole lifetime of the financial asset (‘lifetime ECL’) (see note 6.3).

For assets at amortised cost, the asset’s carrying amount is reduced by the amount of the impairment loss which is recognised in the statement of financial performance. For assets at fair value through net assets/equity the loss allowance is recognised in net assets/equity and does not reduce the carrying amount of the financial asset in the balance sheet. If, in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed through the statement of financial performance.

(a)Loans to sovereigns

The EU bases its assessment of loans’ impairment, in the context of the nature of the EU’s financing and its unique institutional status.

For the impairment of loans to non-Member States, the EU calculates the expected credit losses using external credit quality data, however taking into account its preferred creditor status, which reduces the credit risk. For the calculation of the present value, the discount rate is the loan’s original effective interest rate. If a loan has a variable interest rate, the discount rate is the current effective interest rate determined under the contract.

For loans to Member States, the EU has never incurred any impairment losses, nor faced any defaults on payments. For these loans, in addition to the preferred creditor status, the EU takes into account the relationships with its Member States. These two elements, in principle, guarantee the full recovery of the loans to Member States, on maturity. Therefore, the EU considers the expected credit losses from loans to Member States to be negligible, and a statistical approach to calculate expected credit losses as inappropriate for these loans. Thus no expected credit losses are recognised in the statement of financial performance for the loans to Member States.

(b)Receivables

The EU measures the impairment loss at the amount of lifetime ECL, using practical expedients (e.g. provision matrix).

(c)Cash and cash equivalents

The EU holds cash and cash equivalents in current bank accounts and term deposits of up to 3 months. The cash is held in banks with very high credit ratings (see note 6.3), thus having very low default probabilities. Given the short duration and low default probabilities, the expected credit losses from cash and cash equivalents are negligible. As a result, no impairment allowance is recognised for cash equivalents.

44.

Derecognition


Financial instruments are derecognised when the rights to receive cashflows from the investments have expired or the EU has transferred substantially all risks and rewards of ownership to another party. Sales of financial assets at fair value through net assets/equity and through surplus or deficit are recognised on their trade-date.

45.

1.5.6.Inventories


Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other directly attributable costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. When inventories are held for distribution at no charge or for a nominal charge, they are measured at the lower of cost and current replacement cost. Current replacement cost is the cost the EU would incur to acquire the asset on the reporting date.

46.

1.5.7.Pre-financing amounts


Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments in accordance with the principle of sound financial management over a period defined in the particular contract, decision, agreement or basic act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, they have the obligation to return the pre-financing to the EU. As the EU retains control over the pre-financing and is entitled to a refund for the ineligible part, the amount is presented as an asset.

Pre-financing is initially recognised on the balance sheet when cash is transferred to the recipient. It is measured at the amount of the consideration given. In subsequent periods pre-financing is measured at the amount initially recognised on the balance sheet less the eligible expenses (including estimated amounts where necessary) incurred during the period.

Interest on pre-financing is recognised as it is earned in accordance with the provisions of the relevant agreement. An estimate of the accrued interest revenue, based on the most reliable information, is made at the year-end and included in the balance sheet.

Other advances to Member States, which originate from reimbursement by the EU of amounts paid as advances by the Member States to their beneficiaries (including ‘financial instruments under shared management’), are recognised as assets and presented under the heading ‘Pre-financing’. Other advances to Member States are subsequently measured at the amount initially recognised on the balance sheet less a best estimate of the eligible expenses incurred by final beneficiaries, calculated on the basis of reasonable and supportable assumptions.

The contributions to EU trust funds (as established under Article 234 of the Financial Regulation) not consolidated in the European Commission, or to other unconsolidated entities, are classified as pre-financing since their purpose is to give a float to the trust fund to allow it to finance specific actions defined under the trust fund’s objectives. The EU contributions to trust funds are measured at the initial amount of the EU contribution less eligible expenses, including estimated amounts where necessary, incurred by the trust fund during the reporting period and allocated to the EU contribution in accordance with the underlying agreement.

47.

1.5.8.Exchange receivables and non-exchange recoverables


The EU Accounting Rules require a separate presentation of exchange and non-exchange transactions. To distinguish between the two categories, the term ‘receivables’ is reserved for exchange transactions, whereas for ‘non-exchange transactions’, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange, the term ‘recoverables’ is used (e.g. recoverables from Member States related to own resources).

Receivables from exchange transactions are financial assets measured at amortised cost, except for certain amounts of financial guarantee contract receivable leg which are classified as financial asset at fair value through surplus or deficit (see note 1.5.5).

Recoverables from non-exchange transactions are carried at fair value as at the date of acquisition less write-down for impairment. A write-down for impairment of recoverables from non-exchange transactions is established when there is objective evidence that the EU will not be able to collect all amounts due according to the original terms of recoverables from non-exchange transactions. The amount of the write-down is the difference between the asset’s carrying amount and the recoverable amount. The amount of the write-down is recognised in the statement of financial performance. A general write-down, based on past experience, is also made for outstanding recovery orders not already subject to a specific write-down. See note 1.5.14 concerning the treatment of accrued revenue at year-end. Amounts displayed and disclosed as recoverables from non-exchange transactions are not financial instruments, as they do not arise from a contract that would give rise to a financial liability or equity instrument. However, in the notes to the financial statements recoverables from non-exchange transactions are disclosed together with receivables from exchange transactions where appropriate.

48.

1.5.9.Cash and cash equivalents


Cash and cash equivalents are financial assets at amortised cost and include cash at hand, deposits held at call or at short notice with banks and other short-term highly liquid investments with original maturities of three months or less.

49.

1.5.10.Employee benefits


The EU provides a set of benefits (emoluments and social security) to employees. For accounting purposes these have to be classified into short-term and post-employment benefits.

50.

Short-term employee benefits


Short-term employee benefits are those benefits due to be settled before twelve months after the end of the reporting period in which employees rendered the service, such as salaries, annual and paid sick leaves, and other short-term allowances. Short-term employee benefits are recognised as an expense when the related service is provided. A liability is recognised for the amount expected to be paid if the EU has a present legal or constructive obligation to pay as a result of past service provided by the employee and the obligation can be estimated reliably.

51.

Post-employment benefits


The EU grants a set of post-employment benefits to employees, which include retirement, invalidity and survival pensions provided under the Pension Scheme of the European Officials (PSEO), as well as health insurance coverage provided under the Joint Sickness Insurance Scheme (JSIS) (see note 2.9). These benefits are provided under a single plan – although split in two schemes – and they must be treated similarly so as to give a fair presentation of the situation and reflect the economic reality:

I.Pension Scheme of European Officials (PSEO): The benefits granted under this notionally funded 1 scheme relate to seniority, invalidity and survival, as well as, family allowances, death before retirement to those employees that work or worked in the EU Institutions, Agencies and other EU bodies or are survivors of deceased officials or pensioners. Staff contribute one third of the expected cost of these benefits from their salaries.

II.Joint Sickness Insurance Scheme (JSIS): Under this scheme, the EU provides health insurance coverage for staff of the European Commission, Institutions, Agencies and other EU bodies through the reimbursement of medical expenses. The benefits granted to the ‘inactives’ of this scheme (i.e. pensioners, orphans, etc.) are classified as post-employment benefits.

The EU also provides post-employment benefits to Members and former Members of the EU institutions via separate pension schemes. These are shown under the heading ‘Other retirement benefit schemes’. Under these schemes the EU provides pension benefits to members of the Commission, European Court of Justice, Court of Auditors, Council, European Parliament, European Ombudsman, and the European Data Protection Supervisor. The EU provides health coverage to the members of the EU Institutions via the JSIS.

The above post-employment benefits qualify as defined benefit obligations of the EU and are calculated at each reporting date by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligation is performed annually using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

The post-employment benefits provided to EU staff are incorporated in a single plan comprising both a pension scheme (PSEO) and a sickness insurance scheme (JSIS), with the right to coverage under the JSIS scheme being dependent on having acquired the right to coverage under the PSEO scheme. Under the terms of this single plan, as set out in the Staff Regulation, certain entitlements, such as the right to a deferred and reduced pension under the PSEO scheme, are acquired after 10 years of service. However, the entitlements acquired under the single plan by the employee’s subsequent service are materially higher than those initial entitlements as reflected by subsequent annually accrued pension rights.

Therefore, in order to depict the economic substance of the underlying transaction required by the faithful representation qualitative characteristic of financial reporting as outlined in both EAR 1 and the IPSAS Conceptual Framework, the service cost incurred is accrued on a straight-line basis over staff’s estimated active service period, i.e. the period from the date when service by the employee first leads to benefits under the plan (whether or not the benefits are conditional on further service) until the date when further service by the employee will lead to no material amount of further benefits under the plan, other than from further salary increases. This approach is applied consistently to the benefits provided for under the single plan.

Remeasurements in the net defined benefit liabilities comprise actuarial gains and losses and the return on plan assets, and are recognised immediately in net assets.

The EU recognises the net interest expense (income) and other expenses related to the defined benefit plans in the statement of financial performance within the heading ‘Staff and pension costs’.

When benefits provided are changed or curtailed, the resulting change in benefits that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of financial performance. Gains and losses on settlement are recognised when the settlement occurs. Past service cost is recognised immediately in the statement of financial performance, unless the changes are conditional on the employees remaining in service for a specified period of time.

52.

1.5.11.Provisions


Provisions are recognised when the EU has a present legal or constructive obligation towards third parties as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses. The amount of the provision is the best estimate of the expenses expected to be required to settle the present obligation at the reporting date. Where the provision involves a large number of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities (‘expected value’ method).

Provisions for onerous contracts are measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.

53.

1.5.12.Financial liabilities


Financial liabilities are classified as financial liabilities at fair value through surplus or deficit, financial liabilities carried at amortised cost, or as financial guarantee contract liabilities.

Borrowings are composed of borrowings from credit institutions and debts evidenced by certificates (EU bonds, EU deposits and EU bills). They are recognised initially at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs incurred, then subsequently carried at amortised cost using the effective interest method; any difference between proceeds, net of transaction costs, and the redemption value is recognised in the statement of financial performance over the period of the borrowings using the effective interest method. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are immaterial and are directly recognised in the statement of financial performance.

Financial liabilities at fair value through surplus or deficit include derivatives where the fair value is negative. They follow the same accounting treatment as financial assets at fair value through surplus or deficit, see note 1.5.5.

The EU recognises a financial guarantee contract liability when it enters into a contract that requires the EU to make specified payments to reimburse the guarantee holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Where the guarantee contract requires the EU to make payments in response to financial instruments price changes or changes to other underlyings, the guarantee contract is a derivative i.e. a financial liability at fair value through surplus or deficit. All other guarantee contracts are accounted for as financial provisions.

Financial guarantee contract liabilities are initially recognised at fair value. This equals the net present value of the premium receivable, if it is at market terms. When no guarantee premium is charged or where the consideration is not fair value, the fair value is determined based on the quoted prices in an active market for financial guarantee contracts directly equivalent to that entered into the financial guarantee liability, if available, or using a valuation technique. If no reliable measure of fair value can be determined either by direct observation of an active market or through another valuation technique, the financial guarantee contract liability is initially measured at the amount of the lifetime expected credit losses.

The subsequent measurement depends on the evolution of the credit risk exposure from the financial guarantee. If there is no significant increase in credit risk (‘stage 1’), financial guarantee liabilities are measured at the higher of the 12 months expected credit losses and the amount initially recognised less, when appropriate, cumulative amortisation. If there is a significant increase in credit risk (‘stage 2’), financial guarantee liabilities are measured at the higher of the lifetime expected credit losses and the amount initially recognised less, when appropriate, cumulative amortisation (see note 6.3).

Financial liabilities are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date. Financial guarantee contracts are classified as current liabilities except if the EU has an unconditional right to defer the settlement of the liability for at least twelve months after the reporting date.

EU trust funds that are considered as part of the Commission’s operational activities (i.e. trust funds Madad and Colombia) are accounted for in the Commission accounts and further consolidated in the EU annual accounts. Therefore, contributions from other donors to the EU trust funds fulfil the criteria of revenues from non-exchange transactions under conditions and they are presented as financial liabilities until the conditions attached to the contributions transferred are met, i.e. eligible costs are incurred by the trust fund. The trust fund is required to finance specific projects and return remaining funds at the time of winding-up. At the balance sheet date the outstanding contribution liabilities are measured at contributions received less the expenses incurred by the trust fund, including estimated amounts when necessary. For reporting purposes the net expenses are allocated to the contributions of other donors in proportion to net contributions paid as at 31 December. This allocation of contributions is only indicative. When the trust fund is wound up the actual distribution of the remaining resources will be decided by the trust fund board.

The same measurement principles apply to the external contributions to the EU programmes, in case such contributions are received with conditions to use the resources as stipulated in the contribution agreements or otherwise to return them to the contributor.

54.

1.5.13.Payables


A significant amount of the payables of the EU are unpaid cost claims from beneficiaries of grants or other EU funding (non-exchange transactions). They are recorded as payables for the requested amount when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are valued at the eligible amount.

Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount and the corresponding eligible expenses are entered in the accounts when the supplies or services are delivered and accepted by the EU.

55.

1.5.14.Accrued and deferred revenue and charges


Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, the supplies have been delivered by the EU or a contractual agreement exists (e.g. by reference to a treaty), an accrued revenue will be recognised in the financial statements. In addition, at year-end, if an invoice is issued but the services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period.

Expenses are also accounted for in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. The calculation of accrued expenses is done in accordance with detailed operational and practical guidelines issued by the Commission which aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if a payment has been made in advance for services or goods that have not yet been received, the expense will be deferred and recognised in the subsequent accounting period.

56.

1.6.STATEMENT OF FINANCIAL PERFORMANCE


57.

1.6.1.Revenue


REVENUE FROM NON-EXCHANGE TRANSACTIONS

The vast majority of the EU’s revenue relates to non-exchange transactions as follows:

58.

GNI based resources, VAT and Plastics own resources


Revenue is recognised for the period for which the Commission sends out a call for funds to the Member States claiming their contribution. The revenue is measured at its ‘called amount’. As VAT, GNI and Plastics own resources are based on estimates of the data for the budgetary year concerned, they may be revised since changes occur until the final data are issued by the Member States. The effect of a change in estimate is included when determining the net surplus or deficit for the period in which the change occurred.

59.

Traditional own resources


Recoverables from non-exchange transactions and related revenues are recognised when the relevant monthly ‘A’ statements (including duties collected and amounts due that are guaranteed and not contested) are received from the Member States. At the reporting date, revenue collected by the Member States for the period but not yet paid to the Commission is estimated and recognised as accrued revenue. The quarterly ‘B’ statements (including duties neither collected nor guaranteed, as well as guaranteed amounts that have been contested by the debtor) received from the Member States are recognised as revenue less the collection costs to which they are entitled. In addition, a value reduction is recognised for the amount of the estimated recovery gap.

60.

Fines


Revenue from fines is recognised when the EU’s decision imposing a fine has been adopted and it is officially notified to the addressee. After the decision to impose a fine, the fined entities have two months from the date of notification:

61.

a)either to accept the decision, in which case they must pay the fine within the time limit laid down and the amount is definitively collected by the EU; or


b)not to accept the decision, in which case they challenge it in accordance with EU law.

Even if appealed, the fine must be paid within the time limit of three months laid down, as the appeal does not have suspensory effect (Article 278 TFEU). The cash received is used to clear the recoverable. However, subject to the agreement of the Commission’s Accounting Officer, the undertaking may present a bank guarantee for the amount instead. In that case the fine remains as a recoverable. If neither cash nor a guarantee is received and there are doubts about the undertaking’s solvency, a value reduction on the entitlement is recognised.

If the undertaking appeals against the decision, and has already provisionally paid the fine, the amount is disclosed as a contingent liability, or, if it appears probable that the General Court may not rule in favour of the EU, a provision is recognised to cover this risk. If a guarantee is given instead, the outstanding recoverable is written down.

The accumulated interest received by the Commission on the bank accounts where received payments are deposited is recognised as revenue, and any contingent liability is increased accordingly.

Since 2010, all provisionally cashed fines are managed by the Commission in a specifically created fund (BUFI) and invested in financial instruments.

62.

REVENUE FROM EXCHANGE TRANSACTIONS


Revenue from the sale of goods and services is recognised when the significant risk and rewards of ownership of the goods are transferred to the purchaser. Revenue associated with a transaction involving the provision of services is recognised by reference to the stage of completion of the transaction at the reporting date.

63.

Interest revenue and expense


Interest revenue and expense are recognised in the statement of financial performance using the effective interest method. This is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest revenue or interest expense over the relevant period. When calculating the effective interest rate, the EU estimates cashflows considering all contractual terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees and interest rate points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

Once a financial asset or a group of similar financial assets is considered credit impaired (‘stage 3’), the interest revenue is recognised using the rate of interest to discount the future cashflows for the purpose of measuring the impairment loss.

64.

Revenue from dividends


Revenue from dividends and similar distributions is recognised when the right to receive payment is established.

65.

Revenue and expense from financial assets through surplus or deficit


This refers to the fair value gains (revenue) and fair value losses (expense) from these financial assets, including those stemming from foreign exchange translation. For interest-bearing financial assets, this also includes interest. See also note 3.8.

66.

Revenue from financial guarantee contracts


The revenue from financial guarantee contracts (guarantee premium) is recognised over the time the EU stands ready to compensate the holder of the financial guarantee contract for the credit loss it may incure. The amortisation schedule applied takes into account the passage of time and the volume of the guaranteed exposure. Revenue from financial guarantee contracts include also amortisation of financial guarantee contracts liability in cases when the guarantee was provided at no or nominal consideration.


67.

1.6.2.Expenses


Expenses from non-exchange transactions account for the majority of the EU’s expenses. They relate to transfers to beneficiaries and can be of three types: (i) entitlements, (ii) transfers under agreement and discretionary grants, as well as (iii) contributions and donations.

Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation (Financial Regulation, Staff Regulations, or other regulation) or an agreement has been signed authorising the transfer, any eligibility criteria have been met by the beneficiary, and a reasonable estimate of the amount can be made.

When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expenses.

Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the EU. They are valued at their original invoice amount. Furthermore, at the balance sheet date, expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are estimated and recognised in the statement of financial performance.

68.

1.7.CONTINGENT ASSETS AND LIABILITIES


69.

1.7.1.Contingent assets


A contingent asset is a possible asset that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the EU. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable.

70.

1.7.2.Contingent liabilities


A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the EU, or a present obligation that arises from past events but is not recognised, either because it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation, or in the rare circumstances where the amount of the obligation cannot be measured with sufficient reliability. A contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.

71.

1.8.CASHFLOW STATEMENT


Cashflow information is used to provide a basis for assessing the ability of the EU to generate cash and cash equivalents, and its needs to utilise those cashflows.

The cashflow statement is prepared using the indirect method. This means that the economic result for the financial year is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of revenue or expense associated with investing cashflows.

Cashflows arising from transactions in a foreign currency are recorded in the EU’s reporting currency (Euro), by applying to the foreign currency amount the exchange rate between the euro and the foreign currency at the date of the cashflow.

The cashflow statement reports cashflows during the period classified by operating, investing and financing activities.

Operating activities are the activities of the EU that are not investing or financing activities. These are the majority of the activities performed.

Investing activities are the acquisition and disposal of intangible assets and property, plant and equipment and of other investments which are not included in cash equivalents. Investing activities do not include loans granted to beneficiaries as they are part of the general objectives and thus daily operations of the EU. The objective is to show the real investments made by the EU.

Financing activities are activities that result in changes in the size and composition of borrowings other than those granted to beneficiaries on a back-to-back basis or for the acquisition of properaty, plant and equipment (which are included under operating activities).

72.

2.NOTES TO THE BALANCE SHEET


ASSETS


73.

3.INTANGIBLE ASSETS


EUR million
Gross carrying amount at 31.12.2021603
Additions114
Disposals(22)
Transfer between asset categories–
Other changes–
Gross carrying amount at 31.12.2022694
Accumulated amortisation at 31.12.2021(238)
Amortisation charge for the year(32)
Amortisation written back–
Disposals18
Transfer between asset categories–
Other changes–
Accumulated amortisation at 31.12.2022(252)
NET CARRYING AMOUNT AT 31.12.2022442
NET CARRYING AMOUNT AT 31.12.2021365


74.

4.PROPERTY, PLANT AND EQUIPMENT


EUR million
Land and buildingsSpace assetsPlant and equipmentFurniture and vehiclesComputer hardwareOtherFinance leasesAssets under constructionTotal
Gross carrying amount at 31.12.20211 4927 730276642101531 5463 81415 286
Additions16752193581 2851 397
Disposals(3)(340)(13)(6)(19)(6)(57)–(444)
Transfer between asset categories2206–––––(208)–
Other changes––––––(6)–(6)
Gross carrying amount at 31.12.20221 5077 603269602111511 5394 89216 232
Accumulated depreciation at 31.12.2021(973)(3 250)(251)(57)(181)(136)(945)–(5 792)
Depreciation charge for the year(33)(811)(13)(2)(17)(6)(78)–(959)
Depreciation written back––––––5–5
Disposals125513618637–335
Transfer between asset categories–––––––––
Accumulated depreciation at 31.12.2022(1 005)(3 807)(250)(54)(180)(136)(980)–(6 412)
NET CARRYING AMOUNT AT 31.12.20225023 79618731145594 8929 820
NET CARRYING AMOUNT AT 31.12.20215194 48026729186013 8149 493

75.

5.INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD


The participation of the EU - represented by the Commission - in the European Investment Fund (EIF) is treated as an associate using the equity method of accounting. At 31 December 2022, the EU holds 30% of the ownership interest in EIF (2021: 30%).

EUR million
European Investment Fund
Participation at 31.12.20211 192
Contributions-
Dividends received(4)
Share of net result24
Share in the net assets102
Participation at 31.12.20221 313

EIF summarised financial information:

EUR million
31.12.202231.12.2021
Total EIFTotal EIF
Assets5 5045 187
Liabilities(1 127)(1 213)
Revenue340781
Expenses(261)(217)
Surplus/(deficit)79564

The reconciliation of the above summarised financial information to the carrying amount of the interest held in the EIF is as follows:

EUR million
31.12.202231.12.2021
Net assets of the associate4 3773 974
EC ownership interests in EIF30.0%30.0%
Carrying amount1 3131 192

The Commission has paid-in 20 % of its subscribed shares in the EIF capital at 31 December 2022, the uncalled amount is as follows:

EUR million
Total EIF capitalEU subscription
Total share capital7 3002 190
Paid-in(1 460)(438)
Uncalled5 8401 752


76.

6.FINANCIAL ASSETS


EUR million
Note31.12.202231.12.2021
Non-current
Financial assets at amortized cost2.4.1199 916160 200
Financial assets at fair value through surplus or deficit2.4.225 35220 437
225 268180 637
Current
Financial assets at amortized cost2.4.14 4223 349
Financial assets at fair value through surplus or deficit2.4.24 3983 163
8 8216 512
Total234 089187 149

77.

7.Financial assets at amortized cost


EUR million
Note31.12.202231.12.2021
Loans for RRF (NGEU) and financial assistance2.4.1.1204 103163 392
Other loans235157
Total204 338163 549
Non-current199 916160 200
Current4 4223 349

78.

7.8.2.1.Loans for RRF (NGEU) and financial assistance


EUR million
RRF (NGEU)SUREEFSMBOPMFAEuratomTotal
Total at 31.12.202117 97890 56747 1382017 170338163 392
New loans (nominal)27 1878 7182 200–7 535–45 639
Repayments––(2 700)–(10)(23)(2 733)
Changes in carrying amount176(155)(51)0(60)0(90)
Changes in impairment––––(2 023)(82)(2 105)
Total at 31.12.202245 34099 13046 58720112 613232204 103
Non-current45 15699 02642 66620012 482218199 749
Current1841043 9211130144 354

79.

Loans effective interest rates (expressed as a range of interest rates)


31.12.202231.12.2021
RRF (NGEU)0.14% - 2.54%0.11% - 0.12%
SURE(0.48)% - 2.78%(0.48)% - 0.77%
EFSM(0.03)% - 3.79%(0.03)% - 3.79%
BOP2.95%2.95%
MFA(0.14)% - 3.70%(0.14)% - 3.70%
Euratom(0.08)% - 1.53%(0.08)% - 1.66%


80.

8.Financial assets at fair value through surplus or deficit (FVSD)


EUR million
Note31.12.202231.12.2021
Financial assets at FVSD non-derivatives2.4.2.128 76722 773
Financial assets at FVSD derivatives2.4.2.2984828
Total29 75123 600
Non-current25 35220 437
Current4 3983 163

81.

8.8.2.1.Financial assets at FVSD non-derivatives


Financial assets at FVSD non-derivatives by type

EUR million
31.12.202231.12.2021
Debt securities23 34017 875
MMFs, ETFs and investments in pooled portfolios2 8952 513
Other equity investments2 5322 384
Total28 76722 773
Non-current24 37319 611
Current4 3943 161

82.

Financial assets at FVSD non-derivatives by programme


EUR million
31.12.202231.12.2021
Innovation Fund6 4764 195
BUFI investments2 0151 257
European Bank for Reconstruction and Development188188
8 6795 640
Budgetary Guarantee Funds:
Common Provisioning Fund14 05711 272
14 05711 272
Financial instruments supported by the EU budget:
Horizon 2020 and Horizon Europe3 7663 342
Connecting Europe Facility697762
EU SME Equity Facilities512684
European Fund for South East Europe214213
Green for Growth Fund107146
Energy Efficiency Finance Facility109107
Other628606
6 0315 861
Total28 76722 773
Non-current24 37319 611
Current4 3943 161


83.

Fair value hierarchy of non-derivative financial assets at FVSD


EUR million
Type of financial asset31.12.202231.12.2021
Level 1: Quoted prices in active markets23 37117 886
Level 2: Observable inputs other than quoted prices3 0612 698
Level 3: Valuation techniques with inputs not based on observable market data2 3352 190
Total28 76722 773

84.

Reconciliation of non-derivative financial assets measured using valuation techniques with inputs not based on observable market data (level 3)


EUR million
Fair value movements
Opening balance at 1.1.20222 190
Investments during the period383
Capital repayments(143)
Revenues settled(115)
Gains or losses for the period in surplus or deficit19
Transfers into level 3–
Transfers out of level 3–
Other–
Closing balance at 31.12.20222 335

85.

8.8.2.2.Financial assets and liabilities at FVSD derivatives


Financial assets and liabilities at FVSD derivatives by type

EUR million
Type of derivative31.12.202231.12.2021
Notional amountFair Value AssetFair Value LiabilityNotional amountFair Value AssetFair Value Liability
Foreign currency forward contract4885–6462–
Guarantee on equity portfolio4 694979(17)4 148826(1)
Guarantees on FX risk87–(8)28–(4)
Total5 269984(25)4 822828(5)
Non-current979(9)826(5)
Current5(15)2–


Derivative contracts for which the fair value is negative at year end are classified as financial liabilities (see note 2.11).

86.

Fair value hierarchy of derivative financial assets and liabilities


EUR million
Type of derivative31.12.202231.12.2021
Fair Value AssetFair Value LiabilityFair Value AssetFair Value Liability
Level 1: Quoted prices in active markets––––
Level 2: Observable inputs other than quoted prices5(3)2(2)
Level 3: Valuation techniques with inputs not based on observable market data979(21)826(2)
Total984(25)828(5)

During the period, there were no transfers between level 1 and level 2.

87.

Reconciliation of derivative financial assets and liabilities measured using valuation techniques with inputs not based on observable market data (Level 3)


EUR million
Fair value movements
Opening balance asset/(liability) as at 1.1.2022824
Guarantee call claims paid51
Guarantee calls returned–
Revenues from guarantee settled(98)
Gains or losses for the period in surplus or deficit181
Transfers into level 3–
Transfers out of level 3–
Other–
Closing balance at 31.12.2022958

88.

9.PRE-FINANCING


EUR million
Note31.12.202231.12.2021
Non-current
Pre-financing2.5.147 00157 637
Other advances to Member States2.5.22162 901
Contribution to Trust Funds86126
47 30360 665
Current
Pre-financing2.5.147 95429 446
Other advances to Member States2.5.26 0874 229
54 04233 675
Total101 34594 340

89.

10.Pre-financing


EUR million
Gross amountCleared via accrualsNet amount at 31.12.2022Gross amountCleared via accrualsNet amount at 31.12.2021
Shared Management
EAFRD & other rural

development instruments
3 051(527)2 5253 172(208)2 965
ERDF & CF29 812(4 932)24 88023 531(4 571)18 960
ESF11 621(1 974)9 6479 085(1 823)7 263
Other8 063(4 498)3 5654 836(2 263)2 572
Direct Management
Implemented by:
Commission42 115(14 069)28 04746 852(12 303)34 549
of which RRF (NGEU)28 347(5 389)22 95834 879(4 065)30 814
EU executive agencies29 568(17 104)12 46423 934(15 031)8 903
Trust funds738(582)1561 140(847)293
Indirect Management
Implemented by:
Other EU agencies &

bodies
7 299(4 860)2 4395 980(4 150)1 830
Third countries1 797(1 275)5221 874(1 261)614
International

organisations
12 488(7 491)4 9979 545(5 955)3 590
Other entities15 231(9 517)5 71413 001(7 455)5 546
Total161 783(66 828)94 955142 950(55 867)87 084
Non-current47 001–47 00157 637–57 637
Current114 782(66 828)47 95485 313(55 867)29 446

90.

11.Other advances to Member States


EUR million
31.12.202231.12.2021
Advances to Member States for financial instruments under shared management3 3903 647
Aid Schemes2 9143 483
Total6 3037 130
Non-current2162 901
Current6 0874 229

91.

12.EXCHANGE RECEIVABLES AND NON-EXCHANGE RECOVERABLES


EUR million
Note31.12.202231.12.2021
Non-current
Recoverables from non-exchange transactions2.6.116 51935 108
Receivables from exchange transactions2.6.22 4665 696
18 98440 804
Current
Recoverables from non-exchange transactions2.6.125 90729 426
Receivables from exchange transactions2.6.23 5102 129
29 41731 555
Total48 40272 359

92.

13.Recoverables from non-exchange transactions


EUR million
Note31.12.202231.12.2021
Non-current
Member States2.6.1.14982 491
UK Withdrawal Agreement2.6.1.214 81030 839
Accrued income and deferred charges2.6.1.41 0111 556
Other recoverables199222
16 51935 108
Current
Member States2.6.1.15 9675 625
UK Withdrawal Agreement2.6.1.29 06110 913
Competition fines2.6.1.39 42011 698
Accrued income and deferred charges2.6.1.41 006826
Other recoverables453363
25 90729 426
Total42 42664 534

93.

13.8.2.1.Recoverables from Member States


EUR million
31.12.202231.12.2021
TOR A accounts4 3976 137
TOR separate accounts1 3561 405
Own resources to be received715
Impairment(686)(875)
Other––
Own resource recoverables5 0736 683
European Agricultural Guarantee Fund (EAGF)1 6211 525
European Agricultural Fund for Rural Development (EAFRD) and other rural development instruments189668
Impairment(591)(843)
EAGF and rural development recoverables1 2191 350
Pre-financing recovery1326
VAT paid and recoverable1012
Other recoverables from Member States15046
Total6 4658 118
Non-current4982 491
Current5 9675 625

94.

13.8.2.2.UK Withdrawal agreement


EUR million
Article 140Article 142Other31.12.202231.12.2021
Due from the UK17 0299 5876826 68343 982
Due to the UK––(2 812)(2 812)(2 229)
Total17 0299 587(2 744)23 87141 753
Non-current8 4659 298(2 953)14 81030 839
Current8 5632882099 06110 913

EUR million
Remainder of

September 2021

report:


(due and paid from January to May 2022)
April 2022

report


(due and paid

from June to

September 2022)
September 2022

report:


(due and paid

from October to

December 2022)
Total

payments

in 2022
Article 1405 0904 0292 43711 556
Article 1421823611265
Article 13629–737
Article 147–6–6
5 1384 2712 45511 864
Article 136–(573)–(573)
Article 141(34)(0)(56)(90)
Article 143–(163)–(163)
Article 144–(73)–(73)
Article 145–(37)–(37)
Article 146–(7)–(7)
(34)(853)(56)(943)
Total5 1043 4182 39910 921


Article 140 – Outstanding Commitments

EUR million
Amount owed by the UK at 31.12.202128 620
Net financial corrections related to 2014-2020 or previous programme periods (including adjustment of 2021 deductions)(123)
TOR relating to 2020 and made available to the Union in 2022

(including adjustment of 2021 deductions)
–
Net payments received from the UK in 2022(11 556)
Adjustment of estimated non-implementation88
Total17 029
Non-current8 465
Current8 563

Article 142 – Outstanding 2020 liabilities

95.

Outstanding 2020 liabilities under Article 142 (6)


EUR million
Pension Scheme of European OfficialsJoint Sickness Insurance Scheme31.12.202231.12.2021
Outstanding 2020 liabilities67 8405 16873 008114 507
UK Share8 4346429 07614 235
PSEO/JSIS contributions2509259236
Total8 6846519 33514 471
Non-current8 4346429 07614 235
Current2509259236


96.

Other articles


EUR million
31.12.202231.12.2021
Due from the UK:
Article 136–557
Article 1476853
68610
Due to the UK:
Article 136(678)–
Article 141(1 637)(1 818)
Article 143(313)(163)
Article 144(54)(73)
Article 145(111)(148)
Article 146(20)(27)
(2 812)(2 229)
Total(2 744)(1 618)
Non-current(2 953)(711)
Current209(908)


Article 136 – Provisions applicable in relation to own resources

EUR million
Amount due from the UK at 31.12.2021557
Amount invoiced to the UK in September 202220
UK Share for undervaluation case(370)
Payments made to the UK in 2022536
UK correction including the rectified amount of 2018-2019 UK corrections update done in 2022 (EUR 3.7 million)11
Update of VAT and GNI adjustments (balances exercise 2021)(64)
VAT and GNI adjustments (balances exercise 2022)(1 377)
UK net traditional own resources after 28 February 20218
Amount due to the UK at 31.12.2022(678)
Non-current(1 377)
Current699

97.

13.8.2.3.Recoverables from competition fines


EUR million
31.12.202231.12.2021
Recoverable from fines gross amount13 63514 922
Provisional payments(2 980)(2 100)
Impairment(1 235)(1 125)
Total9 42011 698
Non-current––
Current9 42011 698

98.

13.8.2.4.Accrued income and deferred charges


EUR million
31.12.202231.12.2021
Other accrued income1 9312 301
Deferred charges relating to non-exchange transactions8681
Total2 0172 382
Non-current1 0111 556
Current1 006826


99.

14.Receivables from exchange transactions


EUR million
31.12.202231.12.2021
Non-current
Financial guarantee receivable1 8322 630
Late payment interest5973 052
Other receivables3714
2 4665 696
Current
Financial guarantee receivable369485
Customers223232
Impairment on receivables from customers(162)(167)
Deferred charges relating to exchange transactions127110
Late payment interest2 5541 127
Other400342
3 5102 129
Total5 9767 825

Out of the total amount of EUR 2 201 million of the Financial Guarantee Contract receivable as at 31 December 2022 (2021: EUR 3 115 million), EUR 2 198 million are classified as financial assets measured at fair value through surplus or deficit (Fair value level 3) (2021: EUR 3 113 million).


100.

15.INVENTORIES


EUR million
31.12.202231.12.2021
Scientific materials5458
Other2220
Total7679


101.

16.CASH AND CASH EQUIVALENTS


EUR million
31.12.202231.12.2021
Accounts with Treasuries and Central Banks21 41320 121
Current accounts178453
Imprest accounts88
Transfers (cash in transit)––
Bank accounts for budget implementation21 59820 582
NGEU19 92918 027
Financial instruments2 7132 838
Fines9141 953
Trust funds4765
Total45 20143 464


102.

LIABILITIES


103.

17.PENSION AND OTHER EMPLOYEE BENEFITS


Net employee benefit scheme liability

EUR million
Pension Scheme of European OfficialsOther retirement benefit schemesJoint Sickness Insurance Scheme31.12.2022

Total
31.12.2021

Total
Defined Benefit Obligation73 1261 3166 06480 507122 234
Plan assetsN/AN/A(390)(390)(386)
Net liability73 1261 3165 67480 116121 848


104.

Actuarial assumptions - employee benefits


20222021
Pension Scheme of European Officials
Nominal discount rate3.6%1.0%
Expected inflation rate2.4%2.0%
Real discount rate1.1%(1.0)%
Expected rate of salary increases1.5%1.8%
Retirement age63/64/6663/64/66
Joint Sickness Insurance Scheme
Nominal discount rate3.6%1.0%
Expected inflation rate2.4%2.0%
Real discount rate1.1%(1.0)%
Expected rate of salary increases1.6%1.9%
Medical cost trend rates2.3%2.5%
Retirement age63/64/6663/64/66


105.

Movement in present value of employee benefits defined benefit obligation


EUR million
Pension Scheme of European OfficialsOther retirement benefit SchemesJoint Sickness Insurance SchemeTotal
Present value as at 31.12.2021109 6791 90710 647122 234
Recognised in statement of financial performance
Current service cost4 5751163105 001
Interest expense1 096171061 219
Recognised in net assets
Remeasurements in employee benefits liabilities
Actuarial (gains)/losses from experience1 22610(267)970
Actuarial (gains)/losses from demographic assumptions7811191
Actuarial (gains)/losses from financial assumptions(41 533)(695)(4 642)(46 869)
Other
Benefits paid(1 996)(41)(102)(2 139)
Present value as at 31.12.202273 1261 3166 06480 507


106.

Movement in present value of plan assets of the Joint Sickness Insurance Scheme


EUR million
Present value as at 31.12.2021386
Net movement in plan assets5
Present value as at 31.12.2022390


107.

Pension Scheme of European Officials sensitivity



A ten basis points change in the assumed discount rate would have the following effects:

EUR million
20222021
Increase 0.1%Decrease 0.1%Increase 0.1%Decrease 0.1%
Defined benefit obligation(1 316)1 352(2 464)2 544


A ten basis points change in the expected salary increases rate would have the following effects:

EUR million
20222021
Increase 0.1%Decrease 0.1%Increase 0.1%Decrease 0.1%
Defined benefit obligation1 312(1 280)2 414(2 345)


A one year change in the assumed retirement age would have the following effects:

EUR million
20222021
One year increaseOne year decreaseOne year increaseOne year decrease
Defined benefit obligation(727)988(1 155)1 527


108.

Joint Sickness Insurance Scheme sensitivity



A ten basis points change in the assumed medical cost trend rates would have the following effects:

EUR million
20222021
Increase 0.1%Decrease 0.1%Increase 0.1%Decrease 0.1%
The aggregate of the current service cost and interest cost components of net periodic post-employment medical costs10(10)13(12)
Defined benefit obligation148(144)317(307)

A ten basis points change in the assumed discount rate would have the following effects:

EUR million
20222021
Increase 0.1%Decrease 0.1%Increase 0.1%Decrease 0.1%
Defined benefit obligation(118)121(265)274


A ten basis points change in the expected salary increases rate would have the following effects:

EUR million
20222021
Increase 0.1%Decrease 0.1%Increase 0.1%Decrease 0.1%
Defined benefit obligation(23)22(42)41


A one year change in the assumed retirement age would have the following effects:

EUR million
20222021
One year increaseOne year decreaseOne year increaseOne year decrease
Defined benefit obligation(173)184(317)334


109.

18.PROVISIONS


EUR million
Amount at 31.12.2021Revision of EAR 11Additional provisionsUnused amounts reversedAmounts usedTransfer between categoriesChange in estimationAmount at 31.12.2022
Legal cases:
Agriculture354–222(83)(216)––277
Other9–21(3)(2)––26
Nuclear site dismantling2 440–––(38)–(657)1 745
Financial1–––––01
Other287–494(246)(40)––494
Total3 091–737(332)(296)–(657)2 543
Non-current2 763–242(84)(218)(36)(657)2 009
Current328–495(248)(77)36–534


110.

19.FINANCIAL LIABILITIES


EUR million
Note31.12.202231.12.2021
Non-current
Financial liabilities at AC2.11.1323 257214 230
Financial liabilities at FVSD2.4.2.295
Financial guarantee liabilities2.11.2177146
323 444214 380
Current
Financial liabilities at AC2.11.121 98023 442
Financial liabilities at FVSD2.4.2.215–
Financial guarantee liabilities2.11.26 2797 648
28 27531 090
Total351 718245 470

111.

20.Financial liabilities at amortised cost


EUR million
Note31.12.202231.12.2021
Borrowings for NGEU and financial assistance2.11.1.1344 303236 720
Other financial liabilities2.11.1.2934951
Total345 237237 672
Non-current323 257214 230
Current21 98023 442

112.

20.8.2.1.Borrowings for NGEU and financial assistance


EUR million
NGEUSUREEFSMBOPMFAEuratomTotal
Total at 31.12.202191 00090 56747 1382017 464351236 720
New borrowings - nominal150 2678 7182 200–7 535–168 720
Repayments(53 381)–(2 700)–(10)(23)(56 114)
Changes in carrying amount(4 758)(155)(51)0(60)0(5 023)
Total at 31.12.2022183 12999 13046 58720114 929327344 303
Non-current165 54699 02642 66620014 798314322 549
Current17 5831043 92111311421 754


113.

Borrowings effective interest rates (expressed as a range of interest rates)


31.12.202231.12.2021
NGEU(0.49)% - 3.41%(0.95)% - 0.74%
SURE(0.48)% - 2.78%(0.48)% - 0.77%
EFSM(0.03)% - 3.79%(0.03)% - 3.79%
BOP2.95%2.95%
MFA(0.14)% - 3.70%(0.14)% - 3.70%
Euratom(0.08)% - 1.53%(0.08)% - 1.58%


114.

20.8.2.2.Other financial liabilities


EUR million
31.12.202231.12.2021
Non-current
Finance lease liabilities573660
Buildings paid for in instalments125156
Other1031
708847
Current
Finance lease liabilities7975
Buildings paid for in instalments3028
Fines to be reimbursed––
Other1172
226105
Total934951

115.

Finance lease liabilities


EUR million
Future amounts to be paid
< 1 year1 - 5 years> 5 yearsTotal Liability
Land and buildings74307259640
Other fixed assets67–12
Total at 31.12.202279314259652
Interest element359536166
Total future minimum lease payments at 31.12.2022114409295819
Total future minimum lease payments at 31.12.2021115439391945

116.

21.Financial guarantee liabilities


EUR million
31.12.202231.12.2021
Financial guarantee receivable

(Note 2.6.2)
Financial guarantee

liability
Financial guarantee receivable

(Note 2.6.2)
Financial guarantee

liability
EU budgetary guarantee programmes
EFSI guarantee2 0392 1782 9173 618
EIB ELM guarantees472 3581062 569
EFSD guarantee31802139
InvestEU guarantee46332––
NDICI EU guarantee0203–4
2 1345 2523 0246 330
EU financial instrument programmes
COSME06170780
Horizon 20203742259410
CCS–60–110
Other2910632165
661 204901 464
Total2 2016 4563 1157 794
Non-current1 8321772 630146
Current3696 2794857 648

117.

22.PAYABLES


EUR million
Gross AmountAdjustments*Net Amount at 31.12.2022Gross AmountAdjustments*Net Amount at 31.12.2021
Cost claims and invoices received from:
Member States
EAFRD & other rural development instruments80(0)8030(0)30
ERDF & CF6 258(1 614)4 6446 484(1 878)4 606
ESF2 796(368)2 4283 311(596)2 715
RRF (NGEU)24 629–24 62919 118–19 118
Other1 077(170)907677(58)619
Private and public entities1 527(467)1 0601 563(320)1 244
Total costs claims & invoices received36 368(2 620)33 74831 183(2 851)28 331
EAGF15 795N/A15 79515 650N/A15 650
Own Ressources Payables3 764N/A3 76438–38
Sundry Payables3 605N/A3 6053 625N/A3 625
Total59 533(2 620)56 91350 496(2 851)47 644

* Estimated non-eligible amounts and pending other advances to Member States.


118.

23.ACCRUED CHARGES AND DEFERRED INCOME


EUR million
31.12.202231.12.2021
Accrued charges84 97676 962
Deferred income21
Other15194
Total85 12977 057

The split of accrued charges is as follows:

EUR million
31.12.202231.12.2021
RRF (NGEU)17 1888 263
EAGF25 31625 241
EAFRD and other rural development instruments19 62519 245
ERDF and CF8 74110 710
ESF3 3663 499
Other10 73910 003
Total84 97676 962


119.

NET ASSETS


120.

24.RESERVES


EUR million
31.12.202231.12.2021
Other reserves13851
Total13851


121.

25.AMOUNTS TO BE CALLED FROM MEMBER STATES


EUR million
Amounts to be called from Member States at 31.12.202186 721
2021 budget result credited to Member States3 227
Remeasurements in employee benefits liabilities(45 916)
Other(15)
Economic result of the year91 852
Total amounts to be called from Member States at 31.12.2022135 868


122.

26.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE


REVENUE


REVENUE FROM NON-EXCHANGE TRANSACTIONS:

123.

TRANSFERS


124.

27.RECOVERY OF EXPENSES


EUR million
20222021
Shared management1 1101 682
Direct management9161
Indirect management1519
Total1 2161 762


125.

28.OTHER REVENUE FROM NON-EXCHANGE TRANSACTIONS


EUR million
20222021
Contribution from Member States to the Innovation Fund3 1922 187
Contribution from third countries and accession countries1 227973
Contribution from Member States for external aid204199
Staff taxes and contributions1 0951 036
Transfer of assets318353
Budgetary adjustments3 2461 245
Adjustment of provisions98963
Agricultural levies––
Funding of institutions(4 104)(3 660)
Other568356
Total6 7352 753


126.

REVENUE FROM EXCHANGE TRANSACTIONS


127.

29.FINANCIAL REVENUE


EUR million
20222021
Interest on:
Late payments(927)1 529
Loans1 2381 160
Borrowings325220
Other1199
Revenue from FGCs1 282987
Gains on financial assets or liabilities at FVSD:
Non-derivatives128324
Derivatives294815
Dividends11430
Other2015
Total2 5935 090


128.

30.OTHER REVENUE FROM EXCHANGE TRANSACTIONS


EUR million
20222021
Foreign exchange gains299284
Share of net result of EIF24169
Sales of goods1718
Fixed assets related revenue253
Other499253
Total864727


129.

EXPENSES


130.

31.SHARED MANAGEMENT


EUR million
Implemented by Member States20222021
European Agricultural Guarantee Fund41 03140 829
European Agricultural Fund for Rural Development and other rural development instruments16 07315 451
European Regional Development Fund and Cohesion Fund43 08346 932
European Social Fund14 64916 727
Other3 4824 835
Total118 318124 774

131.

32.DIRECT MANAGEMENT


EUR million
20222021
Implemented by the Commission78 51848 289
of which RRF (NGEU)69 46142 940
Implemented by EU Executive Agencies14 96314 233
Implemented by Trust funds568503
Total94 04963 025

132.

33.INDIRECT MANAGEMENT


EUR million
20222021
Implemented by other EU agencies and bodies4 6934 211
Implemented by third countries630887
Implemented by international organisations4 6503 624
Implemented by other entities4 7433 225
Total14 71711 947


133.

34.STAFF AND PENSION COSTS


EUR million
20222021
Staff costs3 7383 556
Pension costs6 2215 038
Total9 9598 593


134.

35.FINANCE COSTS


EUR million
20222021
Interest expenses:
Borrowings1 9121 209
Loans161146
Finance leases3744
Other2396
FGCs - subsidised remuneration514233
Net impairment losses on:
FGCs362947
Loans and receivables2 1051 244
Loss on financial assets or liabilities at FVSD:
Non-derivatives2 203195
Derivatives12640
Other274
Total7 4704 158


135.

36.OTHER EXPENSES


EUR million
20222021
Adjustment of provisions735480
Administrative and IT expenses1 006948
Fixed assets related expenses1 098808
Foreign exchange losses393156
Funding and contributions to other EU bodies608543
Land and buildings management expenses261227
Operating lease expenses136162
Reduction of fines by Court decision1 37815
Other465397
Total6 0813 736

The aggregate amount of research and development expenditure recognised as an expense during 2022 is as follows:

EUR million
20222021
Research costs409390
Non-capitalised development costs7178
Total480469


136.

37.SEGMENT REPORTING BY MULTIANNUAL FINANCIAL FRAMEWORK HEADING (MFF)


EUR million
Single market, Innovation and DigitalCohesion and ValuesNatural Resources and EnvironmentMigration and Border ManagementResilience, Security and DefenceNeighbour- hood and the WorldEuropean Public AdministrationNot assigned to MFF headings*Total
GNI resources–––––––103 880103 880
Traditional own resources–––––––23 49523 495
VAT–––––––19 66619 666
New own resources–––––––6 3376 337
Fines–––––––915915
Recovery of expenses6262046840630(2)1 216
UK Withdrawal Agreement–––––––––
Other1 1731403450657206(2 874)7 0876 735
Non-Exchange Revenue1 2367618134657269(2 874)161 379162 245
Financial revenue1 471181–0362–7412 593
Other111(25)(12)(0)(3)67345382864
Exchange Revenue1 582(7)(11)(0)(3)4293451 1233 458
Total revenue2 8177548024654699(2 529)162 502165 702
Expenses implemented by :
Member States:
EAGF––(41 031)–––––(41 031)
EAFRD & other––(16 073)–––––(16 073)
ERDF & CF–(43 083)––––––(43 083)
ESF–(14 649)––––––(14 649)
Other–(764)(755)(862)(72)(132)–(898)(3 482)
EC, executive agencies and trust funds(12 765)(73 573)(906)(459)(303)(5 802)(12)(229)(94 049)
Other EU agencies and bodies(2 848)(494)(90)(1 018)(210)(25)–(9)(4 693)
Third countries and int. organisations(418)(114)(5)(241)(163)(4 334)(1)(5)(5 281)
Other entities(225)(2 799)(1)(6)(57)(1 653)(0)(3)(4 743)
Staff and pension costs(493)(15)(2)(0)(3)(157)(9 288)–(9 959)
Finance costs(882)(11)(6)(0)(0)(574)(50)(5 946)(7 470)
UK Withdrawal Agreement–––––––(6 961)(6 961)
Other expenses(2 195)(168)(305)(19)(8)(281)(1 323)(1 783)(6 081)
Total expenses(19 825)(135 670)(59 174)(2 604)(816)(12 957)(10 673)(15 835)(257 554)
Economic result of the year(17 008)(134 916)(58 372)(2 600)(163)(12 258)(13 203)146 667(91 852)

* ‘Not assigned to MFF headings’ includes off-budget operations and unallocated programmes with individually immaterial amounts.

137.

38.CONTINGENT LIABILITIES AND ASSETS


138.

39.GUARANTEES GIVEN BY EU BUDGET


139.

40.Guarantees given under the EU budgetary guarantee programmes (nominal)


EUR million
31.12.2022
Guarantees givenAssets provisioned*
CeilingSignedDisbursed
EIB ELM guarantees30 59930 59920 9092 710
EFSI guarantee25 79324 61521 0848 571
EFSD guarantee1 176522446728
InvestEU guarantee21 2802 1083241 722
NDICI external action guarantee27 0204 5151561 067
Total105 86962 35942 91914 798

* The EUR 2.7 bn of assets provisioned for the EIB External Lending Mandate (ELM) guarantee also cover borrowings under legacy MFA and Euratom (see note 4.1.2).

31.12.2021
Guarantees givenAssets provisioned*
CeilingSignedDisbursed
EIB ELM guarantees33 02633 02620 8352 700
EFSI guarantee25 82624 73020 3588 602
EFSD guarantee1 391611535796
NDICI external action guarantee200200200–
Total60 44258 56641 92812 098

* The EUR 2.7 bn of assets provisioned for the EIB ELM guarantee also cover borrowings under legacy MFA and Euratom (see note 4.1.2).

140.

41.Guarantees given under EU financial instrument programmes (nominal)


EUR million
31.12.202231.12.2021
Horizon 20202 6492 590
Connecting Europe Facility648568
COSME674782
Other604653
Total4 5764 593


141.

42.Contingent liabilities relating to legal cases


EUR million
31.12.202231.12.2021
Fines2 9902 111
Agriculture19479
Cohesion–210
Other2 8891 146
Total6 0723 546

142.

43.Contingent assets


EUR million
31.12.202231.12.2021
Guarantees received:
Performance guarantees6468
Other guarantees22
Other contingent assets1998
Total85169

143.

44.BUDGETARY AND LEGAL COMMITMENTS


EUR million
Note31.12.202231.12.2021
Outstanding budgetary commitments not yet expensed5.1359 017261 062
Significant legal commitments5.2398 419126 936
Total757 436387 998


144.

45.OUTSTANDING BUDGETARY COMMITMENTS NOT YET EXPENSED


EUR million
31.12.202231.12.2021
Outstanding budgetary commitments not yet expensed359 017261 062


145.

46.SIGNIFICANT LEGAL COMMITMENTS


EUR million
Note31.12.202231.12.2021
Economic, Social and Territorial Cohesion298 948–
Natural Resources and Environment82 37217 662
Migration and Border Management8 368–
RRF (NGEU) non-repayable support commitments–99 530
Space Programmes3 5484 189
Connecting Europe Facility1 811–
Brexit Adjustment Reserve2963 072
EURATOM362445
HorizonEU322382
Fisheries agreements265412
EU Solidarity Fund700–
Operating lease commitments5.2.1881805
Other contractual commitments545438
Total398 419126 936

146.

47.Operating lease commitments


EUR million
Future amounts to be paid
< 1 year1- 5 years> 5 yearsTotal
Buildings135375364874
IT materials and other equipment4307
Total138379364881


147.

48.FINANCIAL RISK MANAGEMENT


148.

49.CURRENCY RISK


Exposure of the EC to currency risk at year-end – net position

EUR million
31.12.2022
USDGBPPLNSEKOtherEURTotal
Financial assets
Financial assets at AC*83–––12140235
Financial assets at FVSD
Non-derivatives84325–209827 78228 767
Derivatives(483)––––1 467984
Receivables**8711014045 6315 846
Cash and cash equivalents71101 0314731 27442 34345 201
6011441 0454931 38777 36381 033
Financial liabilities
Financial guarantee liability(793)(0)(37)(12)(164)(5 450)(6 456)
Financial liabilities at FVSD(1)––819(50)(25)
(795)(0)(37)(4)(146)(5 500)(6 481)
Total(194)1441 0084891 24271 86374 552

EUR million
31.12.2021
USDGBPPLNSEKOtherEURTotal
Financial assets
Financial assets at AC*63–––787157
Financial assets at FVSD––––––
Non-derivatives93451–237521 69022 773
Derivatives(646)––––1 474828
Receivables**108981084727 3187 707
Cash and cash equivalents74201 0145911 51640 25043 464
5321701 1216171 66970 81974 928
Financial liabilities
Financial guarantee liability(1 047)(0)(62)(19)(248)(6 418)(7 794)
Financial liabilities at FVSD(1)–––(4)–(5)
(1 048)(0)(62)(19)(251)(6 418)(7 798)
Total(516)1701 0595981 41864 40167 130


* Excluding back-to-back loans for financial assistance.

** Excluding deferred charges.


If the EUR had strengthened or weakened against the currency concerned by 10 % then this would have had the following impact on the economic result:

EUR million
FX Rate Increase (+)/ Decrease(-)2022
USDGBPPLNSEK
+10%18(13)(92)(44)
-10%(22)1611254

EUR million
FX Rate Increase (+)/ Decrease(-)2021
USDGBPPLNSEK
+10%47(15)(96)(54)
-10%(57)1911866

149.

50.INTEREST RATE RISK


The following table illustrates the interest rate sensitivity of debt securities assuming a possible change in interest rates of +/- 100 basis points (1 %).

EUR million
Increase (+) / decrease (-) in basis pointsEconomic result
2022: Financial assets at FVSD+100(699)
-100739
2021: Financial assets at FVSD+100(573)
-100608

150.

51.CREDIT RISK


Maximum credit risk exposure

EUR million
31.12.202231.12.2021
Financial assets
Loans204 338163 549
Cash and cash equivalents45 20143 464
Exchange receivables*5 8467 707
Financial assets at FVSD - debt securities23 34017 875
Financial assets at FVSD - derivatives984828
Guarantees given and loan commitments
FGCs55 50255 267
Loan commitments8–
Total at 31.12.2022335 219288 689

*Excluding deferred charges


151.

Loans: credit quality


EUR million
31.12.2022
Stage 1Stage 2Stage 3POCITotal
Credit rating
Premium and high grade12 833–––12 833
Upper medium grade62 240–––62 240
Lower medium grade106 537–––106 537
Non-investment grade (incl. default)11 92313 0942911425 159
Gross carrying amount193 53313 09429114206 769
Minus loss allowance(55)(2 361)(27)13(2 431)
Net carrying amount193 47810 7322126204 338

EUR million
31.12.2021
Stage 1Stage 2Stage 3POCITotal
Credit rating
Premium and high grade10 361–––10 361
Upper medium grade58 991–––58 991
Lower medium grade79 672–––79 672
Non-investment grade (incl. default)8 8195 965294814 860
Gross carrying amount157 8425 9652948163 884
Minus loss allowance(10)(299)(26)–(336)
Net carrying amount157 8325 665348163 549


152.

Loans: Movement in impairment loss allowance


EUR million
Stage 1Stage 2Stage 3POCITotal
Loss allowance at 01.01.20221029926–336
Transfer to Stage 1–––––
Transfer to Stage 2(0)1(1)–0
Transfer to Stage 3(1)(0)1––
New loans9763––772
Derecognitions - repayments(0)–––(0)
Derecognitions - write offs––(2)–(2)
Loss allowance remeasurement371 2983(13)1 326
Other–––––
Loss allowance at 31.12.2022552 36127(13)2 431


153.

Cash and cash equivalents: credit quality


EUR million
31.12.202231.12.2021
Credit rating
Premium and high grade39 63439 666
Upper medium grade3 5073 345
Lower medium grade1 322285
Non-investment grade737167
Gross carrying amount45 20143 464
Minus loss allowance--
Net carrying amount45 20143 464


154.

Receivables: credit quality


EUR million
Not duePast due 0-30 daysPast due 31-90 daysPast due 91 days - 1 yearPast due > 1 yearTotal
Gross carrying amount1 788710201 9863 812
Minus loss allowance(2)(2)(2)(13)(145)(163)
Net carrying amount at 31.12.20221 7865871 8413 648
Gross carrying amount2 728475751 4474 762
Minus loss allowance(2)(1)(4)(17)(143)(168)
Net carrying amount at 31.12.20212 726345581 3044 594

155.

The part of the financial guarantee contracts receivable leg, measured at FVSD, is excluded from this table (see note 2.6.2)


Financial guarantee contracts: credit quality

EUR million
31.12.202231.12.2021
Stage 1Stage 2TotalStage 1Stage 2Total
Long-term rating
Prime and high grade044011
Upper medium grade3–32–2
Lower medium grade23–23219–219
Non-investment grade24 12431 33955 4633 96451 07955 043
Managed on collective basis / not rated7292–2
Total24 15731 34555 5024 18751 08055 267


156.

Financial guarantee contracts: Movement in the loss allowance


EUR million
Stage 1Stage 2Total
Loss allowance at 01.01.20224857 0487 533
Transfer to Stage 2(3)3–
Transfer to Stage 12 855(2 855)–
Additions17045215
Release of guarantees(9)(1)(10)
Remeasurement(2 298)(1 110)(3 409)
Loss allowance at 31.12.20221 1993 1304 330
Financial guarantee liability carrying amount at 31.12.20223 1943 2636 456


157.

52.LIQUIDITY RISK


Maturity analysis of non-derivative financial liabilities by remaining contractual maturity

EUR million
Undiscounted contractual cash-flows
< 1 year1-5 years> 5 yearsTotalCarrying amount
Borrowings(23 204)(80 495)(280 075)(383 774)(344 303)
Payables(56 913)––(56 913)(56 913)
Other(268)(491)(373)(1 132)(934)
Total at 31.12.2022(80 385)(80 986)(280 448)(441 819)(402 150)
Borrowings(23 769)(45 030)(180 660)(249 459)(236 720)
Payables(47 644)––(47 644)(47 644)
Other(153)(564)(484)(1 201)(951)
Total at 31.12.2021(71 567)(45 594)(181 144)(298 305)(285 316)


158.

Maturity analysis of derivative financial liabilities by remaining contractual maturity


EUR million
Undiscounted contractual cash-flowsCarrying amount
< 1 year1-5 years> 5 yearsTotal
Derivative pay leg(504)(8)–(512)
Derivative receive leg487––487
Net cash flows at 31.12.2022(17)(8)–(25)(20)
Derivative pay leg(646)(5)–(651)
Derivative receive leg648––648
Net cash flows at 31.12.20212(5)–(3)(3)

159.

Maturity analysis of financial guarantee contracts issued by earliest period in which the guarantee could be called


EUR million
Maximum amount of guaranteeCarrying amount
< 1 year1-5 years> 5 yearsTotal
FGCs at 31.12.2022(65 109)(13 332)(4 902)(83 343)(6 456)
FGCs at 31.12.2021(55 381)(878)(1)(56 259)(7 794)


160.

53.OTHER PRICE RISK


EUR million
10%(10)%
Equity investments253(253)
MMFs, ETFs and investments in pooled portfolios290(290)
Guarantees on equity*469(469)
Total at 31.12.20221,012(1,012)
Equity investments238(238)
MMFs, ETFs and investments in pooled portfolios251(251)
Guarantees on equity*415(415)
Total at 31.12.2021905(905)

*The risk of guarantees on equity is based on the notional amount that is covered by the guarantee.

161.

54.RELATED PARTY DISCLOSURES


The related parties of the entity are the EU consolidated entities and the key management personnel of these entities. Transactions between these entities take place as part of the normal operations of the EU and as this is the case, no specific disclosure requirements are necessary for these transactions in accordance with the EU accounting rules.

Details on key management entitlements are provided in note 7 of the EU consolidated annual accounts.

162.

55.EVENTS AFTER THE BALANCE SHEET DATE


At the date of signature of these accounts no material issues had come to the attention of, or were reported to, the Accounting Officer of the Commission that would require separate disclosure under this section. The accounts and related notes were prepared using the most recently available information and this is reflected in the information presented.

163.

EUROPEAN COMMISSION


FINANCIAL YEAR 2022


BUDGETARY IMPLEMENTATION REPORTS


It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up.

164.

CONTENTS


165.

1. EU BUDGET RESULT


166.

2. STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS


167.

2.1. BUDGET REVENUE


168.

2.2. BUDGET EXPENDITURE: COMMITMENTS BY MULTIANNUAL FINANCIAL FRAMEWORK (MFF) HEADING


169.

2.3. BUDGET EXPENDITURE: PAYMENTS BY MULTIANNUAL FINANCIAL FRAMEWORK (MFF) HEADING


170.

3. IMPLEMENTATION OF EC BUDGET REVENUE


171.

4. IMPLEMENTATION OF EC BUDGET EXPENDITURE


4.1. MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS

172.

4.2. MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS


173.

4.3. MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS


174.

4.4. MFF: MOVEMENTS IN OUTSTANDING COMMITMENTS (RAL)


175.

4.5. MFF: OUTSTANDING COMMITMENTS BY YEAR OF ORIGIN


176.

4.6. POLICY AREA: BREAKDOWN AND CHANGES IN COMMITMENT AND PAYMENT APPROPRIATIONS


177.

4.7. POLICY AREA: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS


178.

4.8. POLICY AREA: IMPLEMENTATION OF PAYMENT APPROPRIATIONS


179.

4.9. POLICY AREA: MOVEMENTS IN OUTSTANDING COMMITMENTS (RAL)


180.

4.10. POLICY AREA: OUTSTANDING COMMITMENTS BY YEAR OF ORIGIN


181.

5. RECONCILIATION OF ECONOMIC RESULT WITH BUDGET RESULT



182.

1. EU BUDGET RESULT


EUR million
20222021
Revenue for the financial year245 265239 596
Payments against current year appropriations(239 157)(226 175)
Payment appropriations carried over to year N+1(2 452)(4 244)
Cancellation of unused appropriations carried over from year N-180265
Evolution of assigned revenue (B)-(A)(1 121)(6 338)
Unused appropriations at the end of current year (A)15 15214 032
Unused appropriations at the end of previous year (B)14 0327 694
Exchange rate differences for the year(97)126
Budget result2 5193 230


183.

2.STATEMENT OF COMPARISON OF BUDGET

AND ACTUAL AMOUNTS


184.

2.1.BUDGET REVENUE


EUR million
TitleInitial adopted budgetFinal adopted budgetEntitlements establishedRevenue
1Own resources157 701153 928157 320155 758
2Surpluses, balances and adjustments2 9803 2333 227
3Administrative revenue1 3831 3831 7791 747
4Financial revenue, default interest and fines11545416 634595
5Budgetary guarantees, borrowing-and-lending operations62 20362 203
6Revenue, contributions and refunds related to union policies10 99710 88426 68920 874
Total170 195169 630267 859244 404


185.

2.2.BUDGET EXPENDITURE: COMMITMENTS BY MULTIANNUAL FINANCIAL FRAMEWORK

(MFF) HEADING

EUR million
MFF HeadingInitial adopted budgetFinal adopted budgetTotal appropriations availableCommitments made
1Single Market, Innovation and Digital21 77521 84533 07127 330
2Cohesion, Resilience and Values56 03967 805325 372218 907
Economic, social and territorial cohesion49 70961 31476 06874 632
Resilience and values6 3306 491249 303144 275
3Natural Resources and Environment56 23556 68175 20068 142
of which market-related expenditure and direct payments40 36940 36941 68741 182
4Migration and Border Management3 0913 4103 5203 446
5Security and Defence1 7851 8131 8511 840
6Neighbourhood and the World17 17017 67020 36420 153
7European Public Administration6 1996 2987 0346 814
OOutside MFF––6 6923 006
SSolidarity mechanisms within and outside the Union (Special instruments)2 7992 2193 5312 602
Total165 095177 742476 635352 241


186.

2.3.BUDGET EXPENDITURE: PAYMENTS BY MULTIANNUAL FINANCIAL FRAMEWORK (MFF) HEADING


EUR million
MFF HeadingInitial adopted budgetFinal adopted budgetTotal appropriations availablePayments made
1Single Market, Innovation and Digital21 47420 60629 37925 174
2Cohesion, Resilience and Values62 05363 140129 654126 570
Economic, social and territorial cohesion56 35157 61075 54673 015
Resilience and values5 7025 53154 10853 555
3Natural Resources and Environment56 60255 78259 27158 276
of which market-related expenditure and direct payments40 39340 35641 67441 152
4Migration and Border Management3 0783 3733 6423 368
5Security and Defence1 2381 1591 1921 154
6Neighbourhood and the World12 91613 15614 90214 521
7European Public Administration6 1996 2987 4246 782
OOutside MFF––6 83072
SSolidarity mechanisms within and outside the Union (Special instruments)2 6232 0403 3512 602
Total166 183165 553255 646238 520


187.

3. IMPLEMENTATION OF EC BUDGET REVENUE


EUR million
Income appropriationsEntitlements establishedRevenueReceipts as % of budgetOut-

standing
TitleInitial budget adoptedFinal budget adoptedCurrent yearCarried overTotalOn entitle-

ments of current year
On entitle-

ments carried over
Total
1Own resources157 701153 928155 0832 237157 320155 073686155 758101 %1 562
2Surpluses, balances and adjustments02 9803 22773 2333 227–3 227108 %7
3Administrative revenue1 3831 3831 734461 7791 712351 747126 %33
4Financial revenue, default interest and fines115454(226)16 86116 634(949)1 544595131 %16 039
5Budgetary guarantees, borrowing-and-lending operations0062 203–62 20362 203–62 203––
6Revenue, contributions and refunds related to union policies10 99710 88420 4026 28726 68914 9525 92220 874192 %5 815
Total170 195169 630242 42225 437267 859236 2178 187244 404144 %23 455


188.

4. IMPLEMENTATION OF EC BUDGET EXPENDITURE


4.1.MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS

EUR million
Commitment appropriationsPayment appropriations
Budget appropriationsAdditional appropriationsTotal appropr. availableBudget appropriationsAdditional appropriat.Total appropr. available
MFF HeadingInitial adopted budgetAmending budgets & transfersFinal adopted budgetCarry-oversAssigned revenueInitial adopted budgetAmending budgets & transfersFinal adopted budgetCarry-oversAssigned revenue
123=1+2456=3+4+5789=7+8101112=9+10

+11
1Single Market, Innovation and Digital21 7757021 84523010 99533 07121 474(868)20 6061478 62529 379
2Cohesion, Resilience and Values56 03911 76667 8050257 566325 37262 0531 08863 1402766 487129 654
Economic, social and territorial cohesion49 70911 60561 314–14 75476 06856 3511 25957 610317 93475 546
Resilience and values6 3301616 4910242 812249 3035 702(171)5 5312548 55354 108
3Natural Resources and Environment56 23544656 68168617 83275 20056 602(820)55 7826932 79759 271
of which market-related expenditure and direct payments40 369040 36968663241 68740 393(37)40 35668763241 674
4Migration and Border Management3 0913193 41021083 5203 0782943 373272423 642
5Security and Defence1 785281 813–381 8511 238(79)1 1595281 192
6Neighbourhood and the World17 17050017 6702 23745620 36412 91624013 1561 04869814 902
7European Public Administration6 199996 298–7367 0346 199996 2983907367 424
OOutside MFF––––6 6926 692––––6 8306 830
SSolidarity mechanisms within and outside the Union (Special instruments)2 799(580)2 2191 303103 5312 623(583)2 0401 30383 351
Total165 09512 647177 7424 459294 434476 635166 183(629)165 5533 64086 452255 646


189.

4.2.MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS


EUR million
Total appropr. availableCommitments madeAppropriations carried over

to 2023
Appropriations lapsing
MFF Headingfrom final adopted budgetfrom carry-oversfrom assigned revenueTotal%from final adopted budgetfrom assigned revenueTotalfrom final adopted budgetfrom carry- oversfrom assigned revenueTotal
12345=2+3+46=5/1789=7+810111213=10+

11+12
1Single Market, Innovation and Digital33 07121 8432305 25727 33083 %–5 7385 7382–13
2Cohesion, Resilience and Values325 37266 6440152 263218 90767 %159105 221105 3811 002–821 084
Economic, social and territorial cohesion76 06860 159–14 47374 63298 %159199359996–821 078
Resilience and values249 3036 4850137 790144 27558 %0105 022105 0225–16
3Natural Resources and Environment75 20056 07067611 39668 14291 %4886 2756 76312310161295
of which market-related expenditure and direct payments41 68739 87667662941 18299 %4852488710018
4Migration and Border Management3 5203 3952503 44698 %1658740–00
5Security and Defence1 8511 809–301 84099 %37110–01
6Neighbourhood and the World20 36417 6332 23728320 15399 %381732110000
7European Public Administration7 0346 288–5266 81497 %–20920910–010
OOutside MFF6 692––3 0063 00645 %–3 6863 686––––
SSolidarity mechanisms within and outside the Union (Special instruments)3 5311 2991 303–2 60274 %7463749173–7180
Total476 635174 9814 448172 812352 24174 %1 451121 371122 8211 311112521 573


190.

4.3.MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS


EUR million
Total appropr. availablePayments madeAppropriations carried over to 2023Appropriations lapsing
MFF Headingfrom final adopted budgetfrom carry-oversfrom assigned revenueTotal%from final adopted budgetfrom assigned revenueTotalfrom final adopted budgetfrom carry- oversfrom assigned revenueTotal
12345=2+

3+4
6=5/1789=7+810111213=10+

11+12
1Single Market, Innovation and Digital29 37920 4711324 57025 17486 %1124 0524 1642315341
2Cohesion, Resilience and Values129 65463 0552463 491126 57098 %762 9953 071103114
Economic, social and territorial cohesion75 54657 600115 41473 01597 %32 5202 5237208
Resilience and values54 1085 4552348 07753 55599 %734755483205
3Natural Resources and Environment59 27155 1986822 39658 27698 %49340189491110102
of which market-related expenditure and direct payments41 67439 84667762941 15299 %48624882410034
4Migration and Border Management3 6423 29226493 36892 %3193196780078
5Security and Defence1 1921 1305191 15497 %6915230023
6Neighbourhood and the World14 90213 0491 03244014 52197 %932583521316030
7European Public Administration7 4245 9623614596 78291 %3262766031029139
OOutside MFF6 830––72721 %–6 7576 757––––
SSolidarity mechanisms within and outside the Union (Special instruments)3 3511 2941 30352 60278 %74637490––0
Total255 646163 4513 56571 504238 52093 %1 85514 94416 799247754326


191.

4.4.MFF: MOVEMENTS IN OUTSTANDING COMMITMENTS (RAL)


EUR million
Commitments outstanding at the end of previous yearCommitments of the current yearTotal commitm. outstanding at end of the year
MFF HeadingCommit. carried forward from prev. yearDecommitments/

Revaluations/

Cancellations
PaymentsCommitm. outstanding at year-endCommit. made during the yearPaymentsCancellation of commitm. which cannot be carried-overCommitm. outstanding at year-end
1234=1+2+35678=5+6+79=4+8
1Single Market, Innovation and Digital48 717(733)(19 163)28 82027 330(6 011)(10)21 30950 130
2Cohesion, Resilience and Values209 033(288)(89 146)119 599218 907(37 423)(1)181 482301 081
Economic, social and territorial cohesion152 840(155)(65 983)86 70374 632(7 032)(1)67 599154 302
Resilience and values56 193(133)(23 163)32 896144 275(30 392)(0)113 883146 779
3Natural Resources and Environment43 691(98)(16 091)27 50268 142(42 185)(0)25 95753 459
of which market-related expenditure and direct payments334(6)(118)21041 182(41 034)–147357
4Migration and Border Management3 980(50)(1 464)2 4653 446(1 903)–1 5434 008
5Security and Defence2 397(21)(769)1 6071 840(385)(0)1 4553 061
6Neighbourhood and the World32 535(1 205)(8 701)22 62920 153(5 820)(0)14 33336 962
7European Public Administration392(30)(362)06 814(6 420)(0)394394
OOutside MFF147(9)(11)1273 006(62)–2 9443 071
SSolidarity mechanisms within and outside the Union (Special instruments)––––2 602(2 602)–00
Total340 892(2 435)(135 708)202 749352 241(102 812)(11)249 417452 167


192.

4.5.MFF: OUTSTANDING COMMITMENTS BY YEAR OF ORIGIN


EUR million
MFF heading<20162016201720182019202020212022Total
1Single Market, Innovation and Digital6346121 3642 0725 4008 8959 82321 32950 130
2Cohesion, Resilience and Values2 1295286 0638 99715 49425 26861 090181 512301 081
3Natural Resources and Environment1 4841 1001 0171 2752 3496 63813 64025 95753 459
4Migration and Border Management17261051705591 0255621 5434 008
5Security and Defence2891111342043208011 4553 061
6Neighbourhood and the World1 1528141 3652 4923 9434 4528 41114 33336 962
7European Public Administration00––000394394
OOutside MFF0000–01272 9443 071
SSolidarity mechanisms within and outside the Union (Special instruments)000000000
Total5 4453 09010 02515 14027 94946 59994 453249 466452 167


An internal re-organisation at the HADEA agency included a re-allocation of transactions resulting in a shift of outstanding amount (49 EUR million) between years. The overall amount of outstanding commitments remains unchanged.


193.

4.6.POLICY AREA: BREAKDOWN AND CHANGES IN COMMITMENT AND PAYMENT APPROPRIATIONS


EUR million
Commitment appropriationsPayment appropriations
Budget appropriationsAdditional appropriationsTotal appropr. availableBudget appropriationsAdditional appropriat.Total appropr. available
Policy areaInitial adopted budgetAmending budgets & transfersFinal adopted budgetCarry-oversAssigned revenueInitial adopted budgetAmending budgets & transfersFinal adopted budgetCarry-oversAssigned revenue
123=1+2456=3+4+5789=7+8101112=9+10

+11
01Research and Innovation13 237013 2372306 03719 50413 558(598)12 9601226 50519 588
02European Strategic Investments5 50725 509–4 75910 2684 853(62)4 791111 7886 590
03Single Market953701 023–711 093904(65)839982930
04Space2 077–2 077–1292 2052 156(140)2 01652492 271
05Regional Development and Cohesion36 5708 83645 406–8 65354 05942 65191443 565212 37455 942
06Recovery and Resilience1 5081771 6850242 344244 0291 093(64)1 029747 95548 991
07Investing in People, Social Cohesion and Values17 9612 75320 715–6 56927 28418 30923718 546196 15724 722
08Agriculture and Maritime Policy54 25416754 4206866 78161 88856 003(813)55 1896882 43958 316
09Environment and Climate Action1 9782832 261–11 05113 312595(3)5925358956
10Migration1 2732911 5642361 6031 4452001 64626361 707
11Border Management1 816301 846–721 9181 631961 72712071 935
12Security59244636–16652567(38)529316548
13Defence1 177–1 177–221 199655(25)630212644
14External Action15 15951915 6781 90631217 89610 54476111 3051 03736012 703
15Pre-accession Assistance2 012(19)1 9923311452 4682 372(521)1 851113382 200
16Expenditure outside the annual ceilings set out in the Multiannual Financial Framework501 9952 0451 3036 70210 050751 9652 0401 3036 83810 181
20Administrative expenditure of the European Commission3 868123 880–4754 3553 868123 8803884764 743
21European Schools and Pensions2 331872 418–2612 6792 331872 41822612 681
30Reserves2 774(2 600)173––1732 572(2 572)––––
Total165 09512 647177 7424 459294 434476 635166 183(629)165 5533 64086 452255 646


194.

4.7.POLICY AREA: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS


EUR million
Total appropr. availableCommitments madeAppropriations carried over

to 2023
Appropriations lapsing
Policy areafrom final adopted budgetfrom carry-oversfrom assigned revenueTotal%from final adopted budgetfrom assigned revenueTotalfrom final adopted budgetfrom carry- oversfrom assigned revenueTotal
12345=2+3+46=5/1789=7+810111213=10+

11+12
01Research and Innovation19 50413 2362302 94316 40984 %–3 0943 0941–01
02European Strategic Investments10 2685 508–2 2027 71075 %–2 5572 5571–01
03Single Market1 0931 022–331 05697 %–37370–11
04Space2 2052 077–792 15698 %–5050––––
05Regional Development and Cohesion54 05944 307–8 41452 72198 %151166317947–731 020
06Recovery and Resilience244 0291 6840137 535139 21957 %0104 809104 8091–01
07Investing in People, Social Cohesion and Values27 28420 653–6 31426 96799 %824625553–963
08Agriculture and Maritime Policy61 88853 9256766 39460 99599 %488226715710161179
09Environment and Climate Action13 3122 145–5 0037 14854 %–6 0486 048116–0116
10Migration1 6031 5572271 58599 %810170–00
11Border Management1 9181 838–231 86197 %849570–00
12Security652632–864098 %37110–01
13Defence1 1991 177–221 199100 %–––––––
14External Action17 89615 6441 90619017 74099 %341221560000
15Pre-accession Assistance2 4681 989331942 41398 %45155(0)0–0
16Expenditure outside the annual ceilings set out in the Multiannual Financial Framework10 0501 2991 3033 0065 60856 %7463 6894 4350–77
20Administrative expenditure of the European Commission4 3553 870–2714 14195 %–20320310–010
21European Schools and Pensions2 6792 418–2552 673100 %–660–(0)0
30Reserves173––––0 %–––173––173
Total476 635174 9814 448172 812352 24174 %1 451121 371122 8211 311112521 573

195.

4.8. POLICY AREA: IMPLEMENTATION OF PAYMENT APPROPRIATIONS


EUR million
Total appropr. availablePayments madeAppropriations carried over to 2023Appropriations lapsing
Policy areafrom final adopted budgetfrom carry-oversfrom assigned revenueTotal%from final adopted budgetfrom assigned revenueTotalfrom final adopted budgetfrom carry- oversfrom assigned revenueTotal
12345=2+

3+4
6=5/1789=7+810111213=12+

13+14
01Research and Innovation19 58812 8691092 81915 79781 %893 6853 773213218
02European Strategic Investments6 5904 768101 6606 43898 %12128140110012
03Single Market93082383286293 %65057101011
04Space2 2712 0125612 07791 %51891930101
05Regional Development and Cohesion55 94243 557110 80854 36797 %21 5661 56871(0)7
06Recovery and Resilience48 991977647 84648 829100 %511091591102
07Investing in People, Social Cohesion and Values24 72218 521174 83623 37495 %231 3201 3442204
08Agriculture and Maritime Policy58 31654 6126772 21857 50799 %48722070791110101
09Environment and Climate Action956586517876980 %61801870000
10Migration1 7071 59725231 64596 %21214470048
11Border Management1 9351 6951261 72289 %1181182300030
12Security5485033751394 %3912230023
13Defence644627212641100 %3–30000
14External Action12 70311 2211 02318712 43198 %77173250814022
15Pre-accession Assistance2 2001 82982532 09095 %178510162(0)8
16Expenditure outside the annual ceilings set out in the Multiannual Financial Framework10 1811 2941 303782 67426 %7466 7607 5060––0
20Administrative expenditure of the European Commission4 7433 5433592054 10887 %3262705961029139
21European Schools and Pensions2 6812 41822542 674100 %0670–(0)0
30Reserves––––––––––––
Total255 646163 4513 56571 504238 52093 %1 85514 94416 799247754326

196.

4.9.POLICY AREA: MOVEMENTS IN OUTSTANDING COMMITMENTS (RAL)


EUR million
Commitments outstanding at the end of previous yearCommitments of the current yearTotal commitm. outstanding at end of the year
Policy areaCommit. carried forward from prev. yearDecommitments/

Revaluations/

Cancellations
PaymentsCommitm. outstanding at year-endCommit. made during the yearPaymentsCancellation of commitm. which cannot be carried-overCommitm. outstanding at year-end
1234=1+2+35678=5+6+79=4+8
01Research and Innovation29 329(418)(12 145)16 76716 409(3 652)(9)12 74829 514
02European Strategic Investments16 844(253)(5 691)10 9007 710(748)–6 96217 862
03Single Market1 159(59)(555)5451 056(307)(0)7491 293
04Space1 384(4)(772)6082 156(1 304)–8511 459
05Regional Development and Cohesion109 700(134)(49 026)60 54052 721(5 340)(1)47 380107 920
06Recovery and Resilience53 033(37)(21 648)31 349139 219(27 181)(0)112 037143 386
07Investing in People, Social Cohesion and Values46 300(117)(18 473)27 71126 967(4 902)(0)22 06549 775
08Agriculture and Maritime Policy41 502(61)(15 584)25 85760 995(41 923)(0)19 07244 928
09Environment and Climate Action2 188(36)(506)1 6467 148(262)–6 8858 531
10Migration2 383(39)(861)1 4821 585(784)–8012 283
11Border Management1 597(11)(603)9831 861(1 119)–7421 725
12Security1 077(20)(207)850640(306)–3351 185
13Defence1 320(1)(562)7571 199(79)(0)1 1201 876
14External Action25 065(1 066)(6 929)17 07017 740(5 502)(0)12 23729 307
15Pre-accession Assistance7 471(139)(1 773)5 5592 413(318)–2 0967 655
16Expenditure outside the annual ceilings set out in the Multiannual Financial Framework147(9)(11)1275 608(2 664)–2 9443 071
20Administrative expenditure of the European Commission390(30)(360)04 141(3 748)(0)393393
21European Schools and Pensions2–(2)–2 673(2 672)–11
Total340 892(2 435)(135 708)202 749352 241(102 812)(11)249 417452 167


197.

4.10.POLICY AREA: OUTSTANDING COMMITMENTS BY YEAR OF ORIGIN


EUR million
Policy area<20162016201720182019202020212022Total
01Research and Innovation4083917181 2962 5205 0536 37912 75029 514
02European Strategic Investments1982116257132 7373 3313 0846 96217 862
03Single Market28102026681092667661 293
04Space––13774402948511 459
05Regional Development and Cohesion1 6673864 6866 85912 10118 18616 65447 380107 920
06Recovery and Resilience014133524831 020112 067143 386
07Investing in People, Social Cohesion and Values4621411 3732 1253 3596 83413 41622 06549 775
08Agriculture and Maritime Policy1 3881 0429219742 0786 30113 15219 07244 928
09Environment and Climate Action9658963012713364886 8858 531
10Migration–17981353166452728012 283
11Border Management1798362433812907421 725
12Security2891111331602491593351 185
13Defence000043716421 1201 876
14External Action8065921 0231 7802 3943 4856 99012 23729 307
15Pre-accession Assistance3462223437121 5499681 4212 0967 655
16Expenditure outside the annual ceilings set out in the Multiannual Financial Framework0000–01272 9443 071
20Administrative expenditure of the European Commission00––000393393
21European Schools and Pensions000000–11
Total5 4453 09010 02515 14027 94946 59994 453249 466452 167


An internal re-organisation at the HADEA agency included a re-allocation of transactions resulting in a shift of outstanding amount (49 EUR million) between years. The overall amount of outstanding commitments remains unchanged.

198.

5.RECONCILIATION OF ECONOMIC RESULT WITH BUDGET RESULT


EUR million
20222021
ECONOMIC RESULT OF THE YEAR(91 852)(42 075)
Revenue
Entitlements established in current year but not yet collected(5 972)(7 050)
Entitlements established in previous years and collected in current year74 07064 353
Accrued revenue (net)2 072(5 434)
Expenses
Accrued expenses (net)45 59952 987
Amount from liaison account4 1043 660
Expenses prior year paid in current year(2 053)(1 046)
Net-effect pre-financing(21 630)(47 463)
Payment appropriations carried over to next year(1 855)(3 591)
Payments made from carry-overs & cancellation of unused payment appropriations2 473(4 899)
Movement in provisions3 6351 041
Other(2 181)(3 488)
BUDGET RESULT OF THE YEAR6 4096 995
BUDGET RESULT OTHER INSTITUTIONS(3 890)(3 765)
BUDGET RESULT OF THE YEAR (EU)2 5193 230


(1)

The PSEO is a notional (virtual) fund with defined benefits in which staff’s contributions serve to finance their future pensions. Although there is no actual investment fund, the amount that would have been collected by such a fund is considered to have been invested in the Member States’ long-term bonds and is reflected in the pension liability that is registered in the annual accounts of the European Union. Member States jointly guarantee the payment of the benefits pursuant to Article 83 of the Staff Regulations and Article 4(3) of the Treaty on European Union (see COM(2018) 829 for a detailed description of the scheme).