2.Effects of New Financial Reporting Standards

Financial Reporting Standards Applied for the First Time in the Reporting Period

Initial application of the standards listed in the table had no or no material impact on the presentation of the net assets, financial position and results of operations of the Covestro Group.

Published Financial Reporting Standards that have not yet been Applied

The IASB and the IFRS IC have issued the following standards, amendments to standards, and interpretations whose application for fiscal 2021 is not yet mandatory.

The application of the following other standards, amendments to standards, and interpretations issued by the IASB and IFRS IC is conditional upon their endorsement by the European Union (EU). The effective date for the standards is assumed to be the effective date designated by the IASB.

The effects of the initial application of the financial reporting standards described below are currently being reviewed. At the time the financial statements were prepared, no material impact on the presentation of the net assets, financial position, and results of operations of the Covestro Group was expected. According to the analysis as it stands currently, initial application of the other standards listed in the table will have no effect on the presentation of the net assets, financial position, and results of operations of the Covestro Group.

On January 23, 2020, the IASB published “Classification of Liabilities as Current or Non-current,” an amendment to IAS 1 (Presentation of Financial Statements) that clarifies when a liability with an uncertain settlement date is classified as current or noncurrent in the statement of financial position. Due to the added pressure on companies from the coronavirus pandemic and the possible renegotiation of loans, the IASB issued an amendment to this publication on July 15, 2020, deferring the effective date by one year to January 1, 2023 (previously: January 1, 2022). The amendment must be applied retrospectively.

On February 12, 2021, the IASB issued additional amendments to IAS 1, “Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2),” along with an amendment to the relevant practice statement. These amendments require all companies to disclose those material accounting policies in their notes to the consolidated financial statements that are relevant for understanding the financial statements and the underlying transactions (“material accounting policies”), for example in the case of (de facto) accounting options for material individual items in the group, rather than their significant accounting policies in general. Accounting policies are significant, for example, when they relate to high-value positions such as pension provisions, but the standard on which they are based specifies clear accounting policies that apply to every entity. The amendments to IFRS Practice Statement 2 provide guidelines for the application of this materiality concept.

Also on February 12, 2021, the IASB issued amendments to IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) under the title “Definition of Accounting Estimates (Amendments to IAS 8).” These amendments are intended to clarify the distinction between changes in accounting policies and changes in accounting estimates. This distinction is generally relevant since changes in accounting policies are, subject to transitional provisions, always applied retrospectively to consolidated financial statements, while changes in accounting estimates are only applied prospectively from the date of the change in estimates.

On May 7, 2021, the IASB issued “Deferred Tax related to Assets and Liabilities arising from a Single Transaction,” which contains amendments to IAS 12 (Income Taxes). This amendment clarifies that deferred tax assets and liabilities have to be recognized when a transaction gives rise to equal amounts of deductible and taxable temporary differences at the same time. The initial recognition exemption providing that no deferred tax assets or liabilities are to be recognized at the acquisition date of an asset or liability is no longer applicable to such transactions. The amendment has no effect on the presentation of the net assets, financial position, and results of operations of the Covestro Group, since the exemption is not applied at this time.