Accounting policy
Impairment of assets
Intangible assets, property, plant, and equipment (including oil and gas assets), and investments in associated companies and joint ventures are tested for impairment whenever events or changes in circumstances indicate that an asset may be impaired. Impairment tests are performed on the level of the asset or the smallest group of assets that generates cash inflows that are largely independent of those from other assets or groups of assets, called cash-generating units (CGUs).
If assets are determined to be impaired, the carrying amounts are written down to their recoverable amount, which is the higher of fair value less costs of disposal or value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. The cash flows are generally derived from the recent budgets and planning calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated.
The fair value less costs of disposal is determined on the basis of recent market transactions, if available. If no such transactions can be identified, an appropriate valuation model is used.
If the reasons for impairment no longer apply in a subsequent period, a reversal is recognized in profit or loss. The increased carrying amount related to the reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization and depreciation) had no impairment loss been recognized in prior years.
Impairment losses are part of the income statement line “Depreciation, amortization, impairments and write-ups,” except for impairment losses related to exploration and appraisal assets, which are shown in “Exploration expenses.”
Significant estimates: recoverability of assets
Evaluating whether assets or CGUs are impaired or whether past impairments should be reversed, requires the use of various estimates and assumptions such as price and margin developments, production volumes and discount rates.
Changes in the economic situation, expectations of climate-related risks or other facts and circumstances might require a revision of these assumptions and could lead to impairments of assets or reversals of impairments within the next financial year. The management performs this analysis for each material CGU.
The price and margin assumptions used in impairment testing are reviewed annually by management and approved by the Supervisory Board as part of mid-term planning (MTP). They are based on management’s best estimate and consistent with external sources. Whereas prices in the near term are anchored in recent forward prices and market developments, long-term price assumptions are developed using a variety of long-term forecasts by reputable experts and consider long-term views of global supply and demand. OMV’s long-term assumptions take into consideration the impacts of climate change and the energy transition to lower-carbon energy sources (see more information in Note 3 – Effects of climate change and the energy transition).
The key valuation assumptions for the recoverable amounts of E&P assets are oil and gas prices, production volumes, and exchange and discount rates. The production profiles were estimated based on reserves estimates (see Note 17 – Property, plant, and equipment) and past experience and represent management’s best estimate of future production. The cash flow projections for the first five years are based on the mid-term plan and thereafter on “life of field” planning and therefore cover the whole life span of the field.
In the F&F and Chemicals business segments, the main assumptions for the calculation of the recoverable amounts are the relevant margins and volumes plus discount, inflation, and growth rates. The value in use calculation is based on the cash flows of the five-year mid-term plan and a terminal value.
The price sets used for the value in use calculations are included in Note 3 – Effects of climate change and the energy transition.
The following tables provide a reconciliation to the amounts reported in the income statement.
In EUR mn |
|
|
|---|---|---|
|
2024 |
2023 |
Depreciation and amortization |
2,435 |
2,439 |
Write-ups |
–15 |
–189 |
Impairment losses (excl. exploration & appraisal) |
575 |
213 |
Depreciation, amortization, impairment losses (excluding exploration & appraisal) |
2,994 |
2,463 |
In EUR mn |
|
|
|---|---|---|
|
2024 |
2023 |
Impairment losses (excl. exploration & appraisal) |
575 |
213 |
Impairment losses (exploration & appraisal) |
79 |
152 |
Impairment losses (including exploration & appraisal) |
654 |
365 |
In EUR mn |
|
|
|---|---|---|
|
2024 |
2023 |
Depreciation and amortization |
2,435 |
2,439 |
attributable to exploration expenses |
– |
– |
attributable to production and operating expenses |
2,121 |
2,152 |
attributable to selling, distribution and administrative expenses |
314 |
287 |
|
|
|
Write-ups |
–15 |
–189 |
attributable to exploration expenses |
– |
–1 |
attributable to production and operating expenses |
–15 |
–116 |
attributable to selling, distribution and administrative expenses |
–0 |
–72 |
|
|
|
Impairment losses (incl. exploration & appraisal) |
654 |
365 |
attributable to exploration expenses |
80 |
158 |
attributable to production and operating expenses |
555 |
203 |
attributable to selling, distribution and administrative expenses |
19 |
4 |
Impairments in Chemicals
In 2024, Borealis recognized impairments totaling EUR 16 mn, including EUR 10 mn for idle tangible assets at Renasci N.V. and EUR 6 mn for intangible assets.
In 2023, the sale of the nitrogen business unit in the Borealis Group, including fertilizer, technical nitrogen, and melamine products, to AGROFERT, a.s. was completed. To reflect the fair value less cost of disposal, based on the Sales Purchase Agreement with AGROFERT, a.s., an impairment of EUR 57 mn was recognized.
Also in 2023, the acquisition of the additional 48.55% stake in Renasci N.V. on November 30, 2023, triggered a reassessment, which led to an impairment in the amount of EUR 54 mn, of which EUR 23 mn was allocated to the equity-accounted investment BlueAlp Holding B.V.
Impairments and write-ups in Energy
In 2024, an impairment of EUR 222 mn was recognized for certain gas assets with proved reserves in New Zealand. This impairment was driven by expected lower production volumes. The recoverable amount of related assets, determined based on the value in use, was EUR 40 mn. The after-tax discount rate applied was 8.25%.
An impairment of EUR 121 mn was recognized for several CGUs in Romania, primarily affecting oil and gas assets, mainly driven by updated general operating costs increases in the context of high inflationary pressure. The recoverable amount of related assets, determined based on the value in use, was EUR 671 mn. The after-tax discount rate applied was 9.50%.
A divestment process was initiated for certain oil and gas assets in the Energy segment, leading to their reclassification to assets held for sale in Q2/24. Due to revaluation to fair value less costs to sell, an impairment of EUR 125 mn was recognized.
Reported impairment losses attributable to exploration and appraisal amounted to EUR 79 mn, mainly related to unsuccessful exploration wells in Austria and Norway.
Other impairments in 2024 included EUR 65 mn related mainly to unsuccessful workovers and obsolete or replaced assets in Romania.
In 2023, a write-up of EUR 114 mn was recognized in some CGUs in Libya following stabilized production in recent years. Moreover, an impairment test was performed for the Etzel gas storage facility in Germany in 2023, resulting in a write-up of EUR 72 mn due to the improved market environment for gas storage facilities in Europe.
Impairment losses in 2023 included impairments of EUR 152 mn mainly related to unsuccessful exploration wells and expired exploration licenses in Malaysia and Norway.
Also in 2023, other impairments were mainly related to unsuccessful workovers and obsolete or replaced assets in Romania (EUR 55 mn).