15. Impairments of non-current assets/onerous contracts
The Group has determined that there are indicators for impairment of assets of some of the Group’s cash-generating units (CGUs). First of all, the various CGUs were identified by the Group, after which the assets of these CGUs were assessed for possible impairment. It was then assessed whether, in addition to the possible impairment to be recognised, the formation of a provision for onerous contracts was necessary.
The recoverable amount of the CGUs was determined based on the higher of the value in use or the fair value less costs to sell. The value in use was determined by discounting the expected cash flows at the balance sheet date.
The discount rate is determined after tax on the basis of the interest rate of government bonds issued by the most creditworthy government in the relevant market and in the same currency as the cash flows, adjusted by a risk premium to reflect both the increased risk of investing in shares in general and the risk of the specific CGU. In 2024, the peer group for setting the discount rate was reviewed and an adjustment was made.
For each country, the following discount rate after taxation was employed:
|
31 December 2024 |
31 December 2023 |
|
|
The Netherlands |
6.9% |
5.7% |
|
Germany |
N.A. |
5.0% |
The pre-tax discount rate at the end of 2024 was 8.4%.
The assessment resulted in the following impairment:
|
(in millions of euros) |
2024 |
2023 |
|
The Netherlands |
90 |
402 |
|
Germany |
- |
121 |
|
Total |
90 |
523 |
Impairment is divided into the following categories:
|
(in millions of euros) |
2024 |
2023 |
|
Property, plant and equipment |
86 |
379 |
|
Intangible assets |
3 |
23 |
|
Right-of-use assets |
1 |
121 |
|
Total |
90 |
523 |
The Netherlands
The COVID-19 crisis forced the Group to perform an impairment analysis in 2020. This resulted in an impairment loss of €1,562 million at the end of 2020. This impairment is attributed proportionally to all non-current assets. A reassessment of the impairment was carried out as at 31 December 2022, resulting in reversal of the impairment in the amount of €385 million. At the end of 2022, it was assumed that the main rail network contract would be awarded for the period beyond 2024 under conditions that would enable NS to earn the ‘cost of capital’. The reversal of the impairment as at 31 December 2022 therefore applied to the years 2023 and 2024.
The impairment was reassessed at year-end 2023. The reassessment led to a reversal of the recognised impairment loss for an amount of €402 million.
At the end of 2023, the Group entered into the concession for the main rail network (HRN) in the Netherlands for the period 2025–2033. In addition, changed assumptions on passenger forecast estimates apply for 2024. These are triggers to reassess the impairment at the end of 2024, with an impairment test based on the most likely scenario. At year-end 2024, the impairment test was performed on the basis of the following assumptions:
For the Netherlands, the main rail network (HRN) contract, including the lines in ‘open access’ has been designated as one cash-generating unit.
At the end of 2023, the concession for the period 2025-2033 was awarded to NS by the Ministry of Infrastructure and Water Management; the financial return over this period is expected to be lower than the 'cost of capital' according to market standards. Key elements in the concession with potential financial impact are:
NS receives an annual subsidy of €5.5 million to implement the concession. This amount is supplemented by a sum of €7.5 million per year the costs incurred by NS in managing the national travel information system.
The concession includes agreements on risk sharing at the time when the number of passenger kilometres deviates from lower and upper limits. This reduces the risk (both upward and downward) for NS. The projected cash flows underlying the impairment test assume that these lower and upper limits will not be touched.
NS will be given room to incorporate the financial impact of sharply rising energy costs (exceeding the CPI development) in its fares.
NS will be given room to raise fares by an extra amount from 1 January 2025 and 1 January 2026, on top of the regular indexation that NS is allowed. Part of the reason for this is that, in 2021, 2022 and 2023, the costs of NS, like those of other transport companies, have increased sharply, but fares could only be increased by a limited amount in those years. Fares have not been fully increased in 2025. NS will receive compensation amounting to €42 million for this.
The fair value of the assets in question cannot be reliably determined, as the assets are strongly linked to the HRN contract, the trains are specifically produced for the Dutch railway network and no active market exists for these specific trains.
The income from passenger transport partly depends on the choices regarding the timetable, which are coordinated with the Ministry of Infrastructure and Water Management.
Continuation of the current student public transport passes contract.
The production assets can be transferred at book value to the successor concessionaire at the end of the concession period when it is not NS. At the time when, at the end of the concession period, all or part of the concession is structured differently (e.g. through Open Access), NS and the Ministry of Infrastructure and Water Management will make process and other agreements on how to deal with the transition of the associated production assets.
The cash flows of the main rail network and 'open access' lines underlying the impairment test were derived from the business plan for the period 2025-2029 and assumptions extended for the years 2030-2033.
The sensitivity of the cost of capital and recovery of passenger revenue is as follows:
A change in the cost of capital by half a percentage point (positive or negative) has an effect of approximately €100 million in relation to the recognised impairment.
The Group notes in this connection that the underlying analyses include significant estimation uncertainties. The realisation may differ, and the impairment may have to be adjusted in the future with a positive or negative result effect.
In 2024, due to the impairment, an amount of €113 million less was depreciated (2023: €84 million) compared to the situation before this impairment.
The reassessment as at 31 December 2024 led to a reversal of the recognised impairment loss for an amount of €90 million. At year-end 2024, the carrying amount of the impairment was €1.173 million (2023: €1.197 million).
The recognised impairments have been proportionally deducted from the carrying amounts of the assets of the main rail network. The revised carrying amounts are depreciated over the remaining life of the assets.
No impairments have occurred in the other activities in the Netherlands (station development and operation).
Accounting policy
The carrying amount of the Group’s non-current assets is reviewed on every reporting date in order to determine whether there are indications of impairment. If such indications are found, an estimate is made of the recoverable amount of the asset concerned. For goodwill and intangible assets that are not yet available for use, the recoverable amount is estimated at each reporting date.
The recoverable amount of an asset or a cash-generating unit is the higher of the value in use and the fair value less costs to sell. In assessing the value in use, the present value of the estimated future pre-tax cash flows is calculated using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into identifiable groups of assets that generate cash flows from continuing use and that are largely independent of other assets or groups of assets (‘cash-generating units’). In impairment testing, the goodwill acquired in a business combination is allocated to the cash-generating units that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or the cash-generating unit to which it belongs exceeds its estimated recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are first deducted from the carrying amount of any goodwill allocated to the units and then deducted from the carrying amount of the other assets in the unit or group of units on a pro rata basis.
After impairment, the remaining carrying amount is amortised over the expected useful life of the related asset.
Impairment losses in respect of goodwill are not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of amortisation, if no impairment loss had been recognised.