Section 1 General information and significant accounting policies

General information

NV Nederlandse Spoorwegen has its registered office at Laan van Puntenburg in Utrecht, the Netherlands (KvK number 30012558). The consolidated financial statements of the Company for the financial year 2021 comprise the Company and its subsidiaries (hereinafter referred to as the Group) and the Group’s interest in associates and companies over which control is exercised jointly with third parties. NV Nederlandse Spoorwegen is the holding company of NS Groep NV, which in turn is the holding company of the operating companies that carry out the group’s various business activities. The figures of the consolidated financial statements of NS Groep NV are the same as the consolidated figures of NV Nederlandse Spoorwegen. The operating companies of NS Groep NV are included in note 32. The Group’s activities mainly involve passenger transport, management and development of real estate and operation of station locations.

The Executive Board prepared the financial statements on 24 February 2022. In its preliminary advice, the Supervisory Board has advised the General Meeting of Shareholders to adopt the financial statements without amendment. The Executive Board and Supervisory Board gave their approval for the publication of the financial statements on 24 February 2022. The adoption of these financial statements will be on the agenda of the General Meeting of Shareholders on 3 March 2022.

In accordance with Section 2:402(1) of the Netherlands Civil Code, the separate financial statements of NV Nederlandse Spoorwegen only include an income statement in abbreviated form.

Acquisition and disposal of companies

No material acquisitions or disposals took place in 2021.

Significant accounting policies

The following is an explanation of the policies for consolidation, the measurement of assets and liabilities and the determination of the Group’s result. These policies are in accordance with IFRS as endorsed by the EU and are applied consistently to all the information presented. Furthermore, insofar as applicable, the statutory provisions regarding the financial statements as included in Title 9 of Book 2 of the Netherlands Civil Code are complied with. The Group uses the historical cost convention as the basis of measurement, unless stated otherwise.

In 2021 the Group has netted deferred tax assets and deferred tax liabilities within the fiscal unity. For comparative purposes, the comparative figures for 2020 have been adjusted accordingly. This netting should have taken place in previous years, but it is not material. This has resulted in a reduction of the deferred tax assets and a reduction of the deferred tax liabilities at year-end 2020 by €93 million.

Impact of COVID-19 and important (result) developments

The COVID-19 crisis still has a significant impact on NS's financial performance. The Group’s result from operating activities is €482 million, partly due to the release of €362 million of the provision for termination payments made in 2020 in the United Kingdom (note 29), the reversal of the impairment charges in the United Kingdom for a net amount of €80 million and lower depreciation charges in the Netherlands of €149 million in 2021 as a result of the impairment charge at year-end 2020. The result from operating activities was also positively influenced by government contributions (note 1). The government contributions are shown in the table below.

The net financing result amounted to -€349 million and was mainly caused by the write-down of a participating interest and loans to zero, costs of restructuring and terminating a number of franchises and provisions made regarding guarantees and settlement of possible other liabilities related to the insolvency proceedings concerning Abellio Germany.

Tax income of €367 million was recorded. In addition to the regular tax burden, this income is mainly caused by:

• the recognition of deferred tax assets, temporary differences and loss compensation in the Netherlands, which are the result of the amended tax regulations in the Netherlands (open-ended loss set-off);

• the recognition of a deferred tax asset in respect of the termination payments in the United Kingdom. The Group’s assessment with regard to the deductibility of these termination payments has changed in relation to year-end 2020, as a result of which the receivable has been recognised in 2021.

The COVID-19 outbreak also had a substantial impact on the Group in 2021, as follows:

• In 2021, as a result of the nationwide measures, the number of passengers and therefore the passenger revenue were still significantly below the pre-COVID-19 level. NS (largely) continued the timetable, partly at the explicit request of the Ministry of Infrastructure and Water Management. NS makes use of the measure of the Ministry of Infrastructure and Water Management with the promise of an availability fee for the public transport sector, as a vital sector, as compensation for the decrease in passenger revenue for the period until 31 August 2022. For the period after 31 August 2022, discussions are still being held with the Ministry of Infrastructure and Water Management. The availability fee amounts to 93% of the costs eligible for the availability fee, minus 100% of the realised revenues during the period from 15 March 2020 to 31 August 2022.

• In the United Kingdom, when COVID-19 broke out, the franchising authorities Department of Transport (Dft) and Transport Scotland (TS) amended the contractual conditions for Greater Anglia, East and West Midlands and ScotRail until 20 September 2020 by means of ‘Emergency Measures Agreements’ (EMAs). Subsequently, the franchising authority Dft followed up the EMA deadline with ‘Emergency Recovery Measures Agreements’ (ERMAs) for Greater Anglia, East and West Midlands and TS with an EMA2 for ScotRail. When this form of contract expired, the West Midlands and Greater Anglia contracts were then converted to new ‘National Rail’ contracts as of 19 September 2021. For East Midlands, the ERMA ends in October 2022, after which a ‘National Rail’ contract will be offered by the Dft there too. Due to these contractual changes, the risk with regard to passenger revenue has been shifted to the franchising authorities. ScotRail’s current EMA expires on 27 February 2022, after which a Temporary Measures Agreement will be concluded with TS, which will last until 31 March 2022.

• The results of Abellio Germany have been consolidated until 30 June 2021. The franchises are so-called gross contracts, whereby no risk is run on passenger revenue and the financial consequences of the COVID-19 pandemic are relatively limited. For the first half of 2021, Abellio Germany nevertheless incurred a loss due to higher than compensated personnel costs, a difficult start for new franchises and fines for, among other things, deteriorating punctuality, the causes of which lie outside Abellio’s sphere of influence. On 30 June 2021, the German court approved the request of the management of Abellio GmbH and its subsidiaries to apply ‘Schutzschirmverfahren’ and these insolvency proceedings under German law were initiated for each of these legal entities. As a result, Abellio Deutschland and its German group companies have been deconsolidated as of 30 June. As of 1 October 2021, following court approval, final insolvency proceedings have started with a restructuring process for each entity. The foregoing has resulted in NS, as a shareholder, no longer being able to exercise any significant influence over Abellio GmbH and its subsidiaries as of 1 October 2021. The Group has estimated the expected outflow of funds arising from the termination and winding up of the activities in Germany in its role as shareholder. The Group has formed a provision for this, which, with the exception of €10 million, has been charged to its financing result (see further section on deconsolidation and note 29 provisions). The remainder is recognised in other operating expenses.

A more detailed analysis of the result is included in the ‘Finance in brief’ section of the NS Annual Report.

The additional contributions on franchise contracts in the Netherlands and abroad had the following impact on the recognised revenue in 2021. This mainly concerns the availability fee for train-related transport in the Netherlands.

• * Train-related revenue in Germany refers to the first half year 2021 compared to a full year 2020
• ** Due to the new contract forms in the United Kingdom, it is no longer possible to refer to additional contributions in connection with COVID-19 and no breakdown is given. For the sake of comparability, the figures for 2020 have been adjusted. An amount of €2,037 billion was reclassified for this purpose.

Due to the changed economic circumstances in the Netherlands and in the United Kingdom, mainly as a result of the impact of COVID-19 and new contract forms in the UK, a renewed test for impairments recognised in 2020 took place in 2021 (see note 14).

Continuity assumption

The Group prepared the financial statements for the financial year 2021 on a going concern basis, which assumes the continuity of ongoing business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

The Group has prepared financial projections for the twelve months from the date of approval of these financial statements, which include an estimate of the ongoing business impact of COVID-19. The Group has concluded that it is appropriate to prepare the financial statements on a going concern basis and that there is no material uncertainty. To reach this conclusion, the Group has calculated different scenarios and in each of the scenarios there is room for possible revenue and/or expenditure shortfalls.

Conservative estimates of the expected cash flow and the risks arising from the Abellio operation and the completion or transfer of franchises have been made and included in the cash flow forecasts. With regard to Germany, estimates were made for expected outflows of resources required for the completion of the initiated insolvency proceedings and the settlement and/or transfer of franchises. Due to the changed contract forms in the United Kingdom, whereby the revenue risk is limited for Abellio, future liquidity risks from normal business operations are limited. See the section ‘Impact of COVID-19 and important (result) developments’.

The key assumptions and uncertainties in the Group’s liquidity forecast further relate to:

• setbacks in passenger revenue. Until at least 31 August 2022, 93% of the eligible costs (cost level indexed to 2019) are covered by the public transport availability fee, minus passenger receipts;

• for the period after 31 August 2022, it is expected that a form of availability fee will be provided for declining passenger revenue. The nature and extent of this arrangement is not yet known;

• timing of the receipt of the availability fee settlement for 2020 and 2021 as well as advance payments for 2022, whereby the Group assumes that these will be received in full during the period of the financial forecast. This concerns an amount of approximately €1,058 million;

• the student public transport contract will be continued in its regular form and this revenue for 2023 will be received in full in the period of the financial forecast;

• timing of investments in new equipment (especially ICNG);

• estimates were made for expected outflows of resources required for the completion of the initiated insolvency proceedings and the settlement and/or transfer of franchises in Germany.

The cash available to the Group (excluding the collateral received from Eneco by virtue of a Credit Support Agreement under the energy contract for the Dutch main rail network of €313 million as well as the money market funds amounts to €367 million in 2021. In addition, the Group has access to credit facilities of €545 million and a financing facility was signed in December 2021 under which one or more long-term loan(s) can be contracted for a maximum cumulative amount of €250 million until 17 December 2024. In addition, the Group expects to be able to make use of alternative financing options if the situation so requires.

Based on the above, the Group concludes that it is appropriate to prepare the financial statements on a going concern basis and there is no material uncertainty.

Deconsolidation

On 30 June 2021, the German court approved the request of the management of Abellio GmbH and its subsidiaries to apply ‘Schutzschirmverfahren’ and these insolvency proceedings under German law were initiated for each of these legal entities. The decision of the German insolvency court, accepting applications for insolvency proceedings, resulted in the loss of control as a shareholder over all group companies of Abellio GmbH. Pursuant to the court decisions, the management of these legal entities is supervised by a ‘trustee’ appointed by the court. As the consolidation criteria of IFRS 10 are no longer met, the Group has deconsolidated all German group companies that are part of the insolvency proceedings with effect from 30 June 2021.

The following balance sheet items have been deconsolidated as at 30 June 2021 (excluding intercompany loan):

The income statement of Abellio Germany up to 30 June 2021 is included below.

At the time of deconsolidation, NS estimated the fair value of Abellio GmbH in the context of the measurement of the equity interest as at 30 June 2021. At that time, the participating interest was stated at zero and additional provisions were made as explained in note 29 provisions.

As of 1 October 2021, following court approval, final insolvency proceedings have started with a restructuring plan for each entity. The foregoing has resulted in NS, as a shareholder, no longer being able to exercise any significant influence over Abellio GmbH and its subsidiaries as of 1 October 2021. As of 1 October 2021, the equity interest no longer meets the definition of an asset as it is no longer entitled to economic benefits.

The Group has reached an agreement with the franchising authorities of the Westfalenbahn franchises on the conditions for the continuation of the franchises. The Group is committed to acquiring the shares of the companies Westfalenbahn GmbH and PTS GmbH. For the acquisition of these shares, the Group paid €9 million and €1.75 million for Westfalenbahn GmbH and PTS GmbH respectively in December 2021. These share prepayments were stated at fair value via the income statement as at 31 December 2021. This fair value was determined on the basis of expected cash flows from the companies to be acquired.

The actual transfer of shares can only be effected once the insolvency proceedings of the companies concerned are completed. The shares of PTS GmbH were transferred in January 2022 and the shares of Westfalenbahn GmbH will be transferred at the end of February 2022. At that time, the Group will have acquired the shares and gained control over these companies. The Baden-Württemberg company was transferred to another party on 1 January 2022, thus completing the insolvency proceedings for that company. The Nordrhein-Westfalen franchise will be transferred to other parties and the company therefore remains in insolvency proceedings. The company Abellio GmbH also remains in the insolvency proceedings. The completion of these proceedings may take a considerable time and the outcome is subject to uncertainties. For the expected outflow of funds in the context of the settlement, the Group has made provisions that are explained in note 29.

New standards and amendments to standards that are mandatory as of 2021

The Group has adopted the following new standards and amendments to standards, including all consequential amendments to other standards, with effect from 1 January 2021. These new or amended standards have not had a significant impact on the Group’s consolidated financial statements:

• Amendments to IFRS 4 Insurance Contracts - deferral of IFRS9 (effective 1 January 2021)

• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2 (effective 1 January 2021)

• Amendments to IFRS 16 Leases: COVID-19-related rental concessions after 30 June 2021 (effective 1 April 2021)

New standards and amendments to standards that are mandatory as of 2022 or later

The Group has not voluntarily applied new standards, amendments to existing standards or interpretations that are mandatory only with effect from the financial statements for 2022 or later.

The following new or amended standards do not have a significant impact on the Group’s consolidated financial statements:

• Amendments to IAS 1 Presentation of Financial Statements: Classification of liabilities as current or non-current and Classification of liabilities as current or non-current - Deferral of effective date (effective 1 January 2023)

• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of accounting policies (effective 1 January 2023)

• Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of accounting estimates (effective 1 January 2023)

• Amendments to IAS 12 Income Taxes: Deferred tax in respect of assets and liabilities arising from a single transaction (effective 1 January 2023)

• Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and Annual Improvements 2018-2020 (effective 1 January 2022)

• IFRS 17 Insurance contracts; including amendments to IFRS 17 (effective 1 January 2023)

Estimates and assessments

The preparation of the financial statements requires the Executive Board to make judgements and estimates that affect the application of policies and reported amounts of assets and liabilities, income and expenditure. The estimates and associated assumptions are based on past experience and various other factors that are believed to be reasonable under the circumstances. Actual outcomes may differ from these estimates. The estimates and underlying assumptions are reviewed periodically. Revisions to accounting estimates are recognised in the period in which the estimate is revised, or in future periods if the revision relates to them.

The main estimates and assessments concern:

• going concern assumption (as stated above in the section ‘Going concern assumption’);

• impairments (note 3 and 14);

• infrastructure charges and franchise fees (note 7);

• settlement of the insolvency proceedings of Abellio Germany and prepayments on shares to be acquired (‘Deconsolidation’ section);

• deferred tax assets (note 10);

• debtors and other receivables (note 17);

• provision for termination payments/net asset payments (note 29).

• Other provisions (including for settlement in Germany)/arrangements not included on the balance sheet (note 29 and note 31);

The accounting policies set out below have been applied consistently to the periods presented in these consolidated financial statements.

Basis of consolidation

Subsidiaries

The Group controls an entity if, as a result of its involvement with the entity, it is exposed to, or has the right to, variable returns and has the ability to affect those returns through its control of the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Upon the loss of control over the subsidiary, the assets and liabilities of that subsidiary, any non-controlling interests and other components of equity related to the subsidiary are derecognised. Any surplus or deficit is recognised in the income statement. If the Group retains an interest in the former subsidiary, that interest is recognised at fair value at the date that control ceases.

Acquisition of subsidiaries

Business combinations are accounted for using the acquisition method as at the date on which control passes to the Group. The consideration transferred for the acquisition is measured at fair value, as are the net identifiable assets acquired. Any resulting goodwill is tested annually for impairment. Any book profit from a bargain purchase is recognised directly in the income statement. Transaction costs are recognised when incurred.

Elimination of transactions on consolidation

Intra-group balances and transactions, and any unrealised gains and losses on intra-group transactions or income and expenses arising from such transactions, are eliminated. Unrealised gains arising from transactions with investments accounted for in accordance with the equity method are eliminated to the extent of the Group’s interest in the investment. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Foreign currency

Foreign currency transactions

Transactions denominated in foreign currencies are translated into the respective functional currencies of Group entities at the exchange rate prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the foreign exchange rates prevailing on the dates on which the fair values were determined. Non-monetary assets and liabilities denominated in foreign currencies that are measured in terms of historical cost are not retranslated.

Foreign exchange differences arising on translation of the following items are recognised in other comprehensive income:

• financial liabilities that are designated as hedges of the net investment in a foreign operation;

• eligible cash flow hedges to the extent that the hedge is effective.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into euros at the exchange rates prevailing on the reporting date. The revenues and expenses of foreign operations are translated into euros at the average exchange rate, which approximates the exchange rate on the transaction date.

Currency translation differences are recognised in other comprehensive income and presented in the currency translation reserve. If the Group loses control, significant influence or joint control on the disposal of a foreign operation, the cumulative amount in the translation reserve is transferred to profit or loss when the gain or loss on disposal is recognised. If the Group disposes of only part of its interest in a subsidiary while retaining control, the relevant proportion of the cumulative amount is reattributed to the non-controlling interest. If the Group disposes of only part of its interest in an associate or joint venture, while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

Determination of fair value

A number of the Group’s accounting policies and disclosures require the determination of fair value for both financial and non-financial assets and liabilities. For measurement and disclosure purposes, fair values have been determined on the basis of the following methods:

Real estate assets

In view of the nature, diversity and locations (station areas), the fair value of the real estate portfolio is not determined periodically, unless there are indications of impairment. The fair value is expected to be higher than the carrying amount of the real estate assets. Real estate assets are measured at cost less accumulated depreciation and accumulated impairment losses.

Investments in financial fixed assets

The fair value of debt investments is determined on the basis of the price at the reporting date. The fair value of the equity investment (Eurofima) is determined on the basis of the latest available financial statements. 

Prepayments on shares

The fair value of prepayments on PTS and Westfalenbahn shares were determined on the basis of expected future cash flows of these entities.

Derivatives

The fair value of derivatives is based on derivative market quotations, taking account of current interest rates and the estimated creditworthiness of the contract counterparties.

Non-derivative financial liabilities

The fair value of non-derivative financial liabilities is determined for disclosure purposes and calculated on the basis of the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

Segmented information

The Group is not required to comply with the requirements of IFRS 8 due to the fact that it is not publicly listed. In order to meet the requirements of Dutch legislation and regulations, segment information by geographical area is included with regard to revenue and FTEs.

Consolidated cash flow statement accounting policies

The cash flow statement is prepared using the indirect method and is based on the comparison between the opening and closing balance sheets of the relevant financial year. The result is adjusted for changes that have not resulted in receipts or expenditure during the financial year.