4.Change in Presentation for Rebates Granted to Customers and Trade Working Capital

Change in presentation of rebates granted to customers

According to IFRS 15 (Revenue from Contracts with Customers), recognition of a refund liability is required if an entity receives consideration from a customer and expects this consideration to be refunded to the customer in whole or in part (i.e., amounts not included in the transaction price). Most refund liabilities result from rebates granted and comprise the amount of the rebate expected to be returned to the customer based on a reasonable estimate.

The presentation of refund liabilities relating to rebates granted was modified as of December 31, 2020, to reduce complexity while remaining in compliance with reporting guidelines under IFRS 15. Refund liabilities relating to rebates granted are no longer reclassified to trade accounts payable as soon as the uncertainty associated with the payment is eliminated. Instead, the rebate deemed to be due is reported in refund liabilities until payment.

As a result, refund liabilities increase by the same amount as customer rebates previously reclassified, whereas trade accounts payable decrease by this amount.

The prior-year figures were restated in accordance with IAS 1.41.

The following tables illustrate the effects of the change in presentation of refund liabilities relating to rebates granted:

Change in presentation of trade working capital

Covestro modified its definition of trade working capital as of December 31, 2020. Contract assets, contract liabilities, and refund liabilities are considered current items resulting from the ordinary course of business and were therefore added to Covestro’s definition of trade working capital. The prior-year figures were restated accordingly pursuant to IAS 1.41.

The following tables illustrate the effects of the change in presentation of trade working capital: