Effects of new and amended IFRSs

Volkswagen AG has applied all accounting pronouncements adopted by the EU and effective for periods beginning in fiscal year 2020.

On January 1, 2020, an amended definition of a business in IFRS 3 (Business Combinations) entered into force. According to the new definition, a set of activities and assets is a business only if it includes, as a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. At the same time, the definition of an output has been narrowed by focusing on goods and services provided to customers and on generating investment income. The reference to an ability to reduce costs as a single criterion has been removed. In addition, an optional concentration test has been introduced that permits an assessment of whether an acquired set of activities and assets is not a business.

Furthermore, amendments to IFRS 16 entered into force on June 1, 2020. These amendments exempt lessees from having to consider whether a rent concession in connection with the Covid-19 pandemic in relation to lease payments that, according to the original agreement, would have been due on or before June 30, 2021 is a lease modification and allows lessees to account for such rent concessions as if they were not lease modifications. The Volkswagen Group is electing not to apply this option.

In addition, as from January 1, 2020, the application of amendments to IFRS 9, IAS 39 and IFRS 7 (Benchmark Interest Rate Reform – Phase 1) became mandatory. In the previous year, the Volkswagen Group had voluntarily opted for early application of these amendments. This affects hedges that existed at the beginning of the reporting period or have subsequently been designated as such. In application of the associated practical expedient, the Volkswagen Group regards the effectiveness of designated hedges as given and not negatively impacted by the IBOR reform so that it will consequently not be necessary to terminate any hedges.

Also as of January 1, 2020, amendments to IAS 1 and IAS 8 entered into force, which clarify and standardize the definition of “material”.

The amendments referred to above do not materially affect the Volkswagen Group’s net assets, financial position and results of operations.

New and amended IFRSs not applied

In its 2020 consolidated financial statements, Volkswagen AG did not apply the following accounting pronouncements that have been adopted by the IASB until December 31, 2020, but were not yet required to be applied for the fiscal year.