ÖBB Annual Report 2023

239 Consolidated Financial Statements Österreichische Bundesbahnen-Holding Aktiengesellschaft Consolidated Financial Statements | Group Management Report 21 Stage 1: expected credit losses within the next twelve months Stage 1 basically includes all financial instruments at inception as well as financial instruments that have not experienced any significant deterioration in credit quality since inception. The expected loss corresponds to the present value of the expected payment defaults arising from possible default events within the next twelve months (12-month expected credit loss) after the reporting date. Stage 2: expected credit losses over the entire term – no deterioration in credit rating If there is a significant increase in the default risk but no objective evidence of impairment, the allowance for losses on loans and advances must be increased to the amount of the expected losses over the entire remaining term. There is a rebuttable presumption of a transfer from stage 1 to stage 2 if contractual payments are past due for more than 30 days. Stage 3: expected credit losses over the entire term – impaired creditworthiness If there is objective evidence that a financial asset is impaired, the impairment loss is transferred to Stage 3. If the contractual cash flows are past due by more than 90 days, there is a rebuttable presumption that there is objective evidence of default. In which case, the financial instrument must be transferred to Stage 3. The determination of whether a financial asset has experienced a material increase in credit risk is based on an estimation of probabilities of default conducted at least annually, which takes into account both external rating information and internal information about the credit quality financial asset. The probability of default is taken into account at the time of the initial recognition of assets and the existence of a significant increase in the default risk during all reporting periods. In order to assess whether the default risk has increased significantly, the default risk with respect to the asset on the reporting date is compared with the default risk at the time of initial recognition. The available, appropriate and reliable forward-looking information is taken into account. Irrespective of the above analysis, there is a significant increase in credit risk if settlement of the contractual cash flows is more than 30 days past due. A default on a financial asset occurs when the counterparty fails to make contractual payments within 90 days of the due date. Financial assets are written off when they are no longer expected to be realisable according to reasonable estimates. If receivables have been written off, enforcement measures are continued in order to realise the due receivable. Realised amounts are recognised in profit or loss. Financial instruments with low credit risk In the case of debt instruments with a low credit risk that have an investment grade rating, the ÖBB Group applies the relief provision from the allocation to the relevant stages and allocates these in all cases to Stage 1. ÖBB Group considers this to be applicable, if debt instruments have a rating of BBB- or higher at Standard & Poor’s. Simplified impairment model Trade receivables The ÖBB Group applies the simplified approach for trade receivables mandatory under IFRS 9, where expected credit losses over the term are recorded from the initial recognition of the receivables. In accordance with the simplified impairment model, a provision must be recognised for all instruments, irrespective of their credit quality, amounting to the expected losses over the remaining term. The simplified procedure is applied to trade receivables or assets that fall within the scope of IFRS 15 “Revenue from Contracts with Customers” and that do not contain a significant financing component. If objective indications of impairment exist (e.g. insolvencies), individual value adjustments are created. The default risk for trade receivables is determined on a collective basis. The Group default risk is mainly influenced by the individual characteristics of its customers. For the trade receivables the estimated expected payment defaults were determined based on experience with actual payment defaults from the last eight years using the simplified impairment model. The historical default rates are adjusted, if applicable, for expected future changes in macroeconomic factors such as gross domestic product (GDP), the unemployment rate and insolvency rates. Classification and measurement of financial liabilities Financial liabilities are measured at amortised cost (FLAC) or at fair value through profit or loss (FVTPL). A financial liability is measured at FVTPL if it is classified as being held for trading or is a derivative.