Notes to the Consolidated Financial Statements of the Covestro Group – Principles and Methods

2. Effects of New Financial Reporting Standards

2.1  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.

The European Directive for implementing global minimum taxation under the OECD’s Global Anti-Base Erosion Model Rules (Pillar Two) came into force in December 2022 and was transposed into national law in Germany in November 2023. In this context, the IASB issued amendments to IAS 12 Income Taxes on May 23, 2023 under the title International Tax Reform – Pillar Two Model Rules. The amendments contain a mandatory temporary exception to the accounting for deferred taxes arising from the implementation of Pillar Two income taxes. The amendments apply directly and retrospectively and require additional disclosures at the reporting date, depending on whether transposition into national tax law has already happened or is still pending (see note 11 “Taxes”). Covestro applies the mandatory temporary exception to the accounting for deferred taxes in connection with Pillar Two income taxes.

2.2  Published Financial Reporting Standards That Have Not Yet Been Applied

The IASB issued the following standards and amendments to standards which have already been adopted by the European Union (EU) but are not mandatory for financial statements 2023. The Covestro Group has not made use of the option to apply these before their effective date.

The effects of the initial application of the aforementioned financial reporting standards are currently being reviewed. At the time the financial statements were prepared, no, or no material, impact on the presentation of the net assets, financial position, and results of operations of the Covestro Group was expected.

The application of the following other standards and amendments to standards issued by the IASB is conditional upon their endorsement by the 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 aforementioned financial reporting standards are currently being reviewed. At the time the financial statements were prepared, no, or no material, impact on the presentation of the net assets, financial position, and results of operations of the Covestro Group was expected.

The Amendments to IAS 7 (Statement of Cash Flows) and IFRS 7 (Financial Instruments: Disclosures) result in additional disclosure requirements for Covestro relating to reverse factoring transactions (supplier finance arrangements).