The Consolidated Financial Statements of KPN have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS) and with the statutory provisions of Part 9, Book 2 of the Dutch Civil Code, under the historical cost convention, except for certain equity investments accounted for using the equity method, and certain equity investments and derivative financial instruments measured at fair value, and on a going-concern basis.
All amounts are presented in millions unless stated otherwise. Certain figures may not tally exactly due to rounding. In addition, certain percentages may have been calculated using rounded figures.
Some comparative financial information for 2021 has been restated. The restatements consisted of reclassifications within revenues categories and reclassifications of expenses between the various operating expense categories. The adjustments were based on further review of the nature of these revenues and expense types. The impact on total revenues and total operating expenses is limited as both decreased by EUR 1m.
The general accounting policies as applied are described below. Significant accounting policies are described in the Notes to the Consolidated Financial Statements.
KPN applies new standards and amendments issued by the International Accounting Standards Board (IASB), when effective and endorsed by the European Union. KPN has not early adopted any standards.
KPN has concluded that the following, endorsed, amendments effective 1 January 2022 did not have a significant impact:
IFRS 3 regarding the added exception to avoid potential \u2018day 2\u2019 gains or losses from contingent assets and liabilities or levies; and
IAS 16 regarding recognition of proceeds generated by items of property, plant & equipment during their construction phase.
KPN has not applied the amendments to IFRS 16 regarding COVID-19 related rent concessions.
The amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets specify which costs must be included when assessing whether a contract is onerous or loss-making using a \u2018directly related cost approach\u2019.
Costs that relate directly to a contract to provide goods or services include both incremental costs (such as costs of direct labor and materials) and an allocation of costs directly related to contract activities (such as depreciation of equipment used to fulfill the contract as well as costs of contract management). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. Previously, KPN did not consider costs of own personnel as incremental costs, whereas costs of externally hired personnel are included in the incremental costs.
The amendments have been endorsed by the EU and are effective as of 1 January 2022 with mandatory prospective application for contracts for which KPN had not yet fulfilled all of its obligations at the beginning of the annual reporting period in which it first applies the amendments (2022). The amendments resulted in an increase of the provisions for onerous contracts of EUR 14m on 1 January 2022. The impact on equity (net of tax) is EUR 11m. The cumulative effect of initially applying the amendments was recognized as an adjustment to retained earnings at 1 January 2022.
The IASB has issued several new standards and amendments to existing standards with an effective date of 1 January 2023 or later.
KPN has concluded that the following, endorsed, amendments effective 1 January 2023 (or later) will not have a significant impact:
Amendments to IAS 12: Deferred tax related to assets and liabilities arising from a single transaction;
IAS 1 on the presentation of financial statements and disclosure of accounting policies; and
Amendments to IAS 8 Accounting policies, changes in accounting estimates and errors: definition of accounting estimates.
KPN is reviewing the impact of the following amendments which are effective as of 1 January 2023 (or later) but have not yet been endorsed:
IFRS 10 and IAS 28 regarding the sale or contribution of assets between an investor and its associate or joint venture;
Amendments to IAS 1 on classification of liabilities as current or non-current; and
Amendments to IFRS 16 on measurement of the lease liability in a sale and leaseback transaction.
KPN currently does not expect a significant impact from these standards.
KPN\u2019s Consolidated Financial Statements include the financial results of its subsidiaries and incorporate KPN\u2019s share of the results from associates.
Subsidiaries are all entities directly or indirectly controlled by KPN. \u2018Control\u2019 is defined as the power over an entity, i.e. the ability to govern the financial and operating policies, resulting in obtaining the variable returns from the entity\u2019s activities.
Subsidiaries are fully consolidated from the date on which control is obtained by KPN and are deconsolidated from the date on which KPN\u2019s control ceases. All intercompany transactions, balances and unrealized results on transactions with subsidiaries are eliminated.
Changes in ownership interests in subsidiaries without change of control that do not result in loss of control are accounted for as equity transactions. Gains or losses on disposals to non-controlling interests are also recorded in equity.
The Financial Statements are presented in euro (EUR), which is KPN\u2019s presentation currency as well as functional currency.
Transactions in foreign currencies are translated into euro using the exchange rates applicable at transaction date. At reporting date, monetary assets and liabilities denominated in foreign currencies are translated to euro using the rates at reporting date. Exchange rate differences are recognized in profit or loss - except when these differences are related to qualifying cash flow hedges and qualifying net investment hedges, in which case the exchange rate differences are recorded in Other Comprehensive Income (OCI).
Exchange rate differences on non-monetary assets and liabilities are reported as part of the fair value gain or loss from that asset or liability. Exchange rate differences arising from the translation of the net investment in foreign entities, of borrowings and other currency instruments designated as hedges of such investments are recognized in OCI.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate at the reporting date.
For consolidation purposes, the results and financial position of subsidiaries are translated into euro at the closing rate of the date of the financial position (assets and liabilities) or at the average exchange rates applicable for the specific reporting period (income and expenses). All resulting exchange differences are recognized in OCI.
The Statement of Cash Flows is prepared using the indirect method. Cash flows denominated in currencies other than euro are translated at average exchange rates. Cash flows relating to interest and taxes on profits and tax deductions relating to interest on perpetual hybrid bonds are included in the cash flow from operating activities. Tax payments directly related to disposal of subsidiaries are presented as part of the cash flows from investing activities when separately identifiable. The consideration paid in cash for acquired subsidiaries is included in the cash flow from investing activities, net of cash acquired. Cash flows resulting from the disposal of subsidiaries are disclosed separately, net of cash sold.
Significant accounting estimates, judgments and assumptions made by management are evaluated continuously and are based on historic experience and other factors, including expectations of future events thought to be reasonable under the circumstances. Actual results may deviate from the estimates applied. Estimates are revised when material changes to the underlying assumption occur.
The accounting estimates, judgments and assumptions deemed significant to KPN\u2019s Financial Statements relate to:
| Subjects | Notes |
|---|---|
| Determination of deferred tax assets for losses carry forward and provisions for tax contingencies | Notes 8 and 22 |
| Determination of value in use of cash-generating units for goodwill impairment testing | Note 11 |
| Assessments of exposure to credit risk and financial markets risk | Note 13.4 |
| The 'more likely than not' assessment required to determine whether or not to recognize a provision for idle cables, which are part of a public electronic communications network | Notes 18 and 22 |
| The assessment of the lease terms deemed reasonably certain of KPN's lease contracts and the incremental borrowing rate used to measure the lease liabilities | Note 19 |
| Assessments whether revenue for variable consideration is probable or highly probable. This concerns revenue related to disputes and revenue related to VAT regarding unused multipurpose bundles | Notes 4 |
| Several assessments related to KPN\u2019s 50% interest in Glaspoort B.V. (classified as a joint venture): - The assessment whether KPN has joint control over Glaspoort; - The assessment whether operational contracts between Glaspoort and KPN are at arm\u2019s length; - The valuation of KPN\u2019s interest in the joint venture (initially set at fair value, subsequently accounted for using the equity method subject to periodic impairment testing); and - The valuation of the contingent cash consideration (financial asset at fair value through profit or loss). | Notes 12, 13.1 and 21 |
In preparing the Financial Statements, KPN has applied the concept of materiality to the presentation and level of disclosures. Only essential and mandatory information is disclosed that is relevant to a reader\u2019s understanding of these Financial Statements.
KPN is continuously enhancing, improving and modernizing its network to realize its sustainability goals, which include: providing internet access for everyone and everything and stimulate social inclusion, while building the most efficient network using technology to reduce energy consumption despite higher data usage. Through its sustainability efforts, KPN not only reduces its own energy consumption but also enables its customers to do the same. KPN\u2019s increasing fiber footprint and the migration from copper to fiber network contributes to the realization of KPN's sustainability goals. Through participation in its joint venture Glaspoort B.V., KPN is accelerating its nationwide ambitions. In mobile, initiatives include the modernization of broadcasting and customer premises equipment. Other initiatives include the reduction of KPN's leased fleet and replacement of expired vehicle leases with electric vehicles only. The Board of Management has committed to the sustainability goals by adding non-financial sustainability linked targets to the LTI plans, such as the reduction of supply chain emissions (scope 3) and gender ratio targets.
In 2022, KPN issued a Green Hybrid Bond, demonstrating its commitment to the realization of its goals (see Note 13.2).
KPN has analyzed whether the above has had any impact on the valuation of KPN's assets, liabilities and financial results and concluded the impact is limited. The migration to new generation network equipment has resulted in an acceleration of depreciation charges for the assets to be replaced. KPN is also investing in its employees by facilitating suitable solutions to continue working from home.
The core principle is that revenue is recognized to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which KPN expects to be entitled in exchange for those goods or services. Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to KPN and the amount of revenue and associated costs can be measured reliably.
KPN follows the five-step process of IFRS 15 to recognize revenue. After a contract with a customer has been entered into, the separate performance obligations are identified, which are the distinct goods and services promised to the customer (the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer, and the transfer of goods or services to the customer are separately identifiable from other promises in the contract). The next steps are the determination of the transaction price and the allocation to the performance obligations. Allocation of the transaction price to performance obligations is based on standalone selling prices, which are based on our price lists and therefore readily available. The final step is to recognize revenue when a performance obligation is satisfied. Revenue is recognized either at a point in time or over time. In general, telco and IT services are delivered over time, whereas handsets and peripheral and network equipment, in case they are treated as separate performance obligations, are delivered at a point in time.
Revenue for variable considerations, including revenue under dispute, is recognized only when it is highly probable which, in some cases, requires significant judgment.
An adjustment for the time value of money is made to a transaction price for the effects of financing if time between recognition of revenue and cash receipt is expected to exceed 12 months and if it provides the customer with a significant benefit.
If KPN transfers goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized in case the earned consideration is conditional. A financial receivable is recognized if KPN\u2019s right to an amount of consideration is unconditional (only the passage of time is required before payment of the consideration is due).
KPN recognizes contract liabilities in the Statement of Financial Position for considerations received in respect of unsatisfied performance obligations. Contract liabilities are recognized as revenue when KPN performs under the contract.
At the start of a contract with a customer, in case services or goods are delivered by sub-contractors, KPN determines whether its performance obligation is to provide the specified goods or services itself (KPN acts as a principal) or to arrange for another party to provide those goods or services (KPN acts as an agent) based on the agreed terms and conditions with the customer and the sub-contractor, as well as the nature of the goods and services promised to the customer. When KPN acts as an agent, the revenue recognized is not the gross amount but the net amount that KPN is entitled to retain for its services as the agent.
The incremental costs of obtaining a contract with a customer are recognized as an asset if KPN expects to recover those costs. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer, regardless of whether the contract is obtained or not. Costs to fulfill a contract are recognized as an asset if:
The costs relate directly to a contract; and
The costs generate or enhance resources that will be used in satisfying performance obligations in the future; and
The costs are expected to be recovered.
Capitalized contract costs are amortized on a linear basis over the period in which KPN transfers the related goods or services to the customer. KPN applies the practical expedient to immediately expense contract costs when the asset that would have resulted from capitalizing such costs would have been amortized within one year or less.
Assets recognized for costs to obtain a contract and costs to fulfill a contract are subject to impairment testing.
Other income includes gains on the sale of property, plant and equipment, gains on the sale of subsidiaries as well as other gains not related to KPN\u2019s operating activities.
For equity-settled plans, the fair value of shares granted to employees is measured at grant date. For cash-settled plans, the fair value of the liability for the awards granted is remeasured at each reporting date and at settlement date.
The costs of share-based compensation plans are determined based on the fair value of the shares and the number of shares expected to vest. On each balance date, KPN determines whether it is necessary to revise the expectation of the number of shares that will vest. The fair value is recognized as personnel expense in profit or loss over the vesting period of the shares against an increase in equity in the case of equity-settled share-based compensation plans and against the recognition of a liability in the case of cash-settled share-based compensation plans.
Operating expenses are divided into direct cost (cost of goods and services) and indirect cost (IT/TI, personnel expenses and other operating expenses).
Cost of goods and services are costs incurred in the context of a sales transaction and include subscriber acquisition and retention costs and traffic expenses. These costs are expensed as incurred, except handset fees paid to dealers and transaction-related dealer commissions that are capitalized and amortized over the contract term. The cost of a handset is expensed when the handset is sold (as incurred), both as an individual sale or as a component of a transaction in combination with a subscription.
Information technology (IT) expenses relate to KPN\u2019s IT environment and include licenses and maintenance expenses for software and/or IT hardware when not directly related to a sales transaction. Technical infrastructure (TI) expenses are expenses related to KPN\u2019s fixed and mobile networks.
Personnel expenses are all expenses related to KPN\u2019s workforce, both related to own employees and external personnel from employment agencies.
Other operating expenses include expenses related to marketing and communication, billing and collection, housing and facilities.
The current income tax charge is calculated in accordance with the prevailing tax regulations and rates, taking into account non-taxable income and non-deductible expenses. The current income tax expense reflects the amount for the current reporting period that KPN expects to recover from or pay to the tax authorities. Income tax related to items recognized directly in equity/OCI is recorded in equity/OCI and not in profit or loss, with an exception for (hybrid) financial instruments classified as equity.
KPN\u2019s management periodically evaluates positions taken in the tax returns regarding situations in which uncertainty on a tax position exists over whether the relevant taxation authority will accept the tax treatment under law. These uncertain tax positions (\u2018UTP\u2019) will be recognized if the amount can be reliably estimated and when the chance of a cash outflow is estimated as probable. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote.
Deferred income tax positions are recognized for temporary differences between the tax basis of assets and liabilities and their carrying values. DTAs are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. DTAs are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Both the recognized and unrecognized DTAs are reassessed on each reporting date based on available projections. If future taxable profits are insufficiently available, derecognition may become inevitable unless certain exceptions can be applied. DTAs are recorded for deductible temporary differences associated with investments in subsidiaries and associates. They are recorded only to the extent that it is probable that the temporary differences will reverse in the foreseeable future, and taxable profit will be available against which the temporary differences can be utilized.
DTLs are recognized for all taxable temporary differences except when they arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the profit or loss reported in the Statement of Profit or Loss nor the taxable profit or loss. Also, no DTLs are recorded for taxable temporary differences associated with investments in subsidiaries and associates when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax positions are stated at nominal value and are measured at the corporate income tax rates KPN expects to be applicable in the year when the asset is realized or liability is settled based on enacted or substantially enacted tax laws.
If a tax provision is recognized for a UTP that relates to deferred taxes, the UTP will be netted against these deferred taxes. DTAs and DTLs are netted if there is a legally enforceable right to offset current tax assets against current tax liabilities and the DTAs/DTLs relate to income taxes levied by the same taxation authority on the same taxable entity or if, in the case of different taxable entities, there is an intention either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
PPE are valued at cost less depreciation and impairment. The cost include direct costs (materials, direct labor and work contracted out) and directly attributable overhead costs.
Asset retirement obligations are capitalized as part of the cost of tangible fixed assets and expensed as either depreciation over the assets\u2019 estimated useful life or as impairment charges.
PPE are depreciated using the straight-line method, based on estimated useful life, taking into account residual value. Land is not depreciated. PPE are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the assets concerned may not be recoverable. An impairment loss is recognized for the amount by which the assets\u2019 book value exceeds its recoverable amount.
Impairments are reversed if and to the extent that the impairment no longer exists. The recoverable amount is defined as the higher of an assets\u2019 fair value less costs of disposal and its value in use.
Interest is capitalized as an increase in PPE if the construction of assets takes a substantial period of time and the amount is material.
The excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination is recorded as goodwill. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is allocated to CGUs for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the synergies of the business combination. Goodwill is carried at cost less accumulated impairment losses and tested for impairment annually or whenever there is an indication that goodwill may be impaired. Goodwill is impaired if the recoverable amount is lower than the book value. The recoverable amount is defined as the higher of the fair value less costs of disposal and the value in use of the CGU concerned. Impairment losses on goodwill are not reversed in the event that circumstances that triggered the impairment have changed.
Licenses and software are valued at cost less amortization and impairment. Amortization is calculated using the straight-line method over the economic useful life and commences at the date that services can be offered (available for use). Internally developed and acquired software which is not an integral part of PPE, is capitalized on the basis of the costs incurred, which includes direct costs and directly attributable overhead costs incurred.
Other intangible assets, such as customer relationships and trade names acquired in business combinations, are capitalized at their fair values at acquisition date and are amortized using the straight-line method over the economic useful life.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. An impairment loss is recognized for the amount by which the book value of the licenses exceeds its recoverable amount. Impairments are reversed if and to the extent that the impairment no longer exists. Intangible assets not yet available for use are tested annually for impairment or whenever KPN has an indication that the intangible fixed assets may be impaired. For example, licenses are tested as part of a CGU as licenses do not generate independent cash flows.
The amortization periods of the intangible assets with finite lives are 5-20 years for licenses, 3-5 years for software and 4-20 years for other intangible assets.
Equity investments accounted for using the equity method include associates and joint ventures.
Associates are entities over which KPN has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in KPN\u2019s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.
The statement of profit or loss reflects KPN\u2019s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of KPN\u2019s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, KPN recognizes its share of any change, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between KPN and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture through KPN's share of the profit (or loss) of associates and joint ventures.
The aggregate of KPN\u2019s share of profit or loss of an associate and a joint venture is shown in the statement of profit or loss.
The financial statements of the associate or joint venture are prepared for the same reporting period as KPN. When necessary, adjustments are made to bring the accounting policies in line with those of KPN.
After application of the equity method, KPN determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, KPN determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, KPN calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within \u2018share of profit/loss (-) of associates and joint ventures\u2019 in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control, and the fair value of the retained investment and proceeds from disposal, is recognized in profit or loss.
Financial assets are classified at initial recognition.
The classification of financial assets at initial recognition depends on the financial asset\u2019s contractual cash flow characteristics and KPN\u2019s business model for managing them.
KPN initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
For the purposes of subsequent measurement, financial assets are classified into four categories:
Financial assets at amortized cost (debt instruments);
Financial assets at fair value through other comprehensive income (OCI) with recycling of cumulative gains and losses (debt instruments);
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments);
Financial assets at fair value through profit or loss.
After initial recognition, loans and borrowings that are not part of a fair value hedge, are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the P&L over the period of the borrowings using the effective interest method. The amortized cost is calculated by taking into account any discounts or premiums on acquisition or issuance and transaction costs. The effective interest rate amortization is recognized in the P&L as finance costs.
Derivatives are recognized at fair value. Gains and losses arising from changes in fair value are recognized as finance cost/income during the period in which they arise to the extent that the derivatives have no hedging designation or they are ineffective.
KPN applies IFRS 9 hedge accounting. Derivatives related to loans are designated as either cash flow or fair value hedges.
Offsetting effects are recognized in the P&L.
The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how KPN will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument;
The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that KPN actually hedges and the quantity of the hedging instrument that KPN actually uses to hedge that quantity of hedged item.
Changes in the fair value of an effective derivative, which is designated as a fair value hedge, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in the P&L as finance cost/ income. Changes in the fair value of an effective derivative, which is designated as a cash flow hedge, are recorded in OCI for the effective part, until the P&L is affected by the variability in cash flows of the designated hedged item. The ineffective part of the cash flow hedge is recognized as finance cost/income. If an underlying transaction has ceased to be an effective hedge or in case of early redemption of the hedged item, hedge accounting is discontinued prospectively which means that subsequent changes in fair value are recognized in the P&L as finance cost/income and the cumulative amount recorded in OCI is released in the P&L.
Financial assets and liabilities are offset and reported on a net basis on the balance sheet only when there is a current legally enforceable right to offset the recognized amounts, and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Trade and other receivables and contract assets classify as financial assets and are measured at amortized cost if both of the following conditions are met:
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortized cost are subsequently measured using the effective interest method less provisions for impairment. An allowance for expected credit losses is recorded for all financial assets and contract assets at initial recognition. This allowance is regularly updated.
The amortized cost is calculated by taking into account any discounts or premiums on acquisition and transactions costs.
The effective interest rate amortization is recognized under finance income or finance costs.
If a financial asset is held within a business model with the objective of both collecting contractual cash flows and selling the financial asset, the financial asset is measured at fair value through other comprehensive income (FVOCI).
A financial asset is derecognized when the rights to receive cash flows from the asset have expired or KPN has transferred the rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (1) KPN has transferred substantially all the risk and rewards of the asset, or (2) KPN has neither transferred nor retained substantially all the risks and rewards\u00a0of the asset, but has transferred control of the asset.
When KPN has transferred the rights to receive cash flows from an asset or has entered into a pass-through arrangement, KPN evaluates if, and to what extent, KPN has retained the risks and rewards of ownership.\u00a0The risks and rewards are substantially transferred if more than 90% of the variability of the cash flows with respect to an asset is transferred.
See Note 4 for the accounting policy regarding contract costs.
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, AAA-rated prime money market funds, and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included in borrowings in current liabilities.
The liability recognized in respect of all pension and early retirement plans that qualify as a defined benefit obligation is the present value of the defined benefit obligation less the fair value of plan assets. KPN uses actuarial calculations (projected unit credit method) to measure the obligations and the costs. For the calculation, actuarial assumptions are made about demographic variables (such as employee turnover and mortality) and financial variables (such as future indexation and the discount rate). The discount rate is determined by reference to market rates. These are interest rates of high-quality corporate bonds that are denominated in the currency in which the benefit will be paid and that have terms to maturity approximating the terms of the related liability. A net defined benefit asset may arise where a defined benefit plan has been overfunded. KPN recognizes a net defined benefit asset in such a case only when future economic benefits are available to KPN in the form of a reduction in future contributions or a cash refund. Actuarial gains and losses are recognized immediately in OCI.
Past service costs, curtailments and settlements are recognized immediately in the P&L.
The amount of pension costs included in operating expenses with respect to defined benefit plans consists of service cost, past service costs, curtailments and settlements, and administration costs. Net interest on the net defined benefit liability is presented as part of finance costs.
For pension plans that qualify as a defined contribution plan, KPN recognizes contributions as an expense when an employee has rendered service in exchange for those contributions.
Provisions for asset retirement obligations, restructuring costs and legal claims are recognized when KPN has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote.
Provisions are measured at the present value of management\u2019s best estimate of the expenditure required to settle the present obligation at balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.
At the commencement date of a lease (i.e. the date on which the underlying asset of the lease is available for use by KPN), KPN recognizes a lease liability measured at the present value of future lease payments to be made over the term of the lease. This includes fixed fees (including in-substance fixed payments), lease incentives (such as rent-free periods or fee discounts), variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. KPN does not have purchase options to be taken into account. Penalties for early termination of a lease are not included when KPN is reasonably certain that the related early termination will not take place.
All contracts of KPN that contain variable lease payments depend on a consumer price index or a rate. However, should other types of fees occur, these variable fees will be accounted for in the operating expenses.
After the commencement date, the lease liabilities increase due to the accrual of interest and decrease due to the payments of the fees due. The lease liabilities are remeasured when a change occurs in the fees due, the lease term deemed reasonably certain and/or changes to the scope of a lease. Upon remeasurement of the lease liability of a contract, the applied discount rate (incremental borrowing rate) is revised unless the remeasurement relates to a fee change following a change in consumer price index or rate.
The total lease liability recognized is split into a non-current and a current portion. The current lease liabilities reflect only the part of the payments due within one year related to the repayment of the total lease liabilities.
KPN determined the lease term as the non-cancellable term of a contract together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised.
KPN applies judgment when assessing if the use of an option is reasonably certain. Factors included are KPN\u2019s asset and network strategy, technological developments, and other circumstances that may impose an economic incentive affecting the expected use of an underlying asset. For vehicles, renewal options are not included in the initial assessment of the lease term as KPN\u2019s policy prescribes the return of vehicles to the lessor at the end of the lease term.
After the commencement of a lease, KPN reassesses the lease term if there is a significant event or change in circumstances that is within KPN\u2019s control and effects KPN\u2019s ability to exercise or not to exercise the option to renew or to terminate a lease.
The implicit discount rates of KPN\u2019s leases are not readily available, with the exception for vehicles. KPN applies its applicable incremental borrowing rate to determine the discounted value of the lease liabilities. Upon modification of a lease, the lease liability is remeasured using the applicable discount rate at the date of the remeasurement. KPN\u2019s incremental borrowing rates are mainly determined using a risk-free rate combined with a spread reflecting KPN\u2019s credit risk. The applicable rate per contract is primarily dependent on the total expected term of a lease at its commencement date (new leases) or the total expected remaining lease term in case of a remeasurement of a lease.
Right-of-use assets are recognized at commencement date of a lease as counterpart to the lease liabilities. The right-of-use assets are measured at cost, less accumulated depreciation and impairment losses, and adjusted for any remeasurement in the corresponding lease liabilities. The cost of the right-of-use assets includes the initially recognized amount of the corresponding lease liabilities, initial direct costs incurred in obtaining the lease (if any) and lease payments made at or before commencement of the lease. Lease incentives received are deducted from the carrying value of the right-of-use assets.
The right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life of the underlying asset and the lease term. Right-of-use assets are subject to impairment.
KPN does not apply the practical expedients for low-value leases (leases of an underlying asset with a value of less than EUR 5,000) and short-term leases (leases with a total expected term of less than 12 months) except for short-term rental vehicles.
Regarding vehicle leases, KPN applies the practical expedient not to separate non-lease components from lease components. Therefore, the full monthly lease fees are reflected in KPN\u2019s Statement of Financial Position. For all types of leased assets, electricity and fuel-related expenses remain part of operating expenses.
Leases where KPN as lessor retains a significant portion of the risk and rewards of ownership of the lease asset are classified as operating leases. The assets remain on the balance sheet and are depreciated over the assets\u2019 useful life.
Lease payments received from lessees are recognized as revenue on a straight-line basis over the lease period.
If KPN acts as a lessor in a finance lease, the transaction is accounted for as a normal sale and the present value of the lease payments is recognized as a receivable. The difference between the gross receivable and the present value of the receivable is deferred and recognized as interest over the lease term.
Trade and other payables are classified as \u2018borrowings\u2019 within KPN\u2019s financial liabilities. For the accounting policy, see Note 13.
For the accounting policy regarding contract liabilities, see Note 4.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
Some comparative financial information for 2021 has been restated. The restatements consisted of reclassifications within revenues categories and reclassifications of expenses between the various operating expense categories. The adjustments were based on further review of the nature of these revenues and expense types. The impact on total revenues and total operating expenses is limited as both decreased by EUR 1m.
Comparative financial information for 2021 has been restated as several smaller units were transferred from the Consumer and Business segments to Network, Operations & IT (NOI) and Other. In addition, some limited expenses were reclassified between existing operating expense categories based on further review of their nature. The impact on the segment information was not material.
", "dimensions": { "concept": "ifrs-full:DisclosureOfReclassificationsOrChangesInPresentationExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-507": { "value": "KPN applies new standards and amendments issued by the International Accounting Standards Board (IASB), when effective and endorsed by the European Union. KPN has not early adopted any standards.
KPN has concluded that the following, endorsed, amendments effective 1 January 2022 did not have a significant impact:
IFRS 3 regarding the added exception to avoid potential \u2018day 2\u2019 gains or losses from contingent assets and liabilities or levies; and
IAS 16 regarding recognition of proceeds generated by items of property, plant & equipment during their construction phase.
KPN has not applied the amendments to IFRS 16 regarding COVID-19 related rent concessions.
The amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets specify which costs must be included when assessing whether a contract is onerous or loss-making using a \u2018directly related cost approach\u2019.
Costs that relate directly to a contract to provide goods or services include both incremental costs (such as costs of direct labor and materials) and an allocation of costs directly related to contract activities (such as depreciation of equipment used to fulfill the contract as well as costs of contract management). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. Previously, KPN did not consider costs of own personnel as incremental costs, whereas costs of externally hired personnel are included in the incremental costs.
The amendments have been endorsed by the EU and are effective as of 1 January 2022 with mandatory prospective application for contracts for which KPN had not yet fulfilled all of its obligations at the beginning of the annual reporting period in which it first applies the amendments (2022). The amendments resulted in an increase of the provisions for onerous contracts of EUR 14m on 1 January 2022. The impact on equity (net of tax) is EUR 11m. The cumulative effect of initially applying the amendments was recognized as an adjustment to retained earnings at 1 January 2022.
The IASB has issued several new standards and amendments to existing standards with an effective date of 1 January 2023 or later.
KPN has concluded that the following, endorsed, amendments effective 1 January 2023 (or later) will not have a significant impact:
Amendments to IAS 12: Deferred tax related to assets and liabilities arising from a single transaction;
IAS 1 on the presentation of financial statements and disclosure of accounting policies; and
Amendments to IAS 8 Accounting policies, changes in accounting estimates and errors: definition of accounting estimates.
KPN is reviewing the impact of the following amendments which are effective as of 1 January 2023 (or later) but have not yet been endorsed:
IFRS 10 and IAS 28 regarding the sale or contribution of assets between an investor and its associate or joint venture;
Amendments to IAS 1 on classification of liabilities as current or non-current; and
Amendments to IFRS 16 on measurement of the lease liability in a sale and leaseback transaction.
KPN currently does not expect a significant impact from these standards.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesAccountingEstimatesAndErrorsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-508": { "value": "KPN applies new standards and amendments issued by the International Accounting Standards Board (IASB), when effective and endorsed by the European Union. KPN has not early adopted any standards.
KPN has concluded that the following, endorsed, amendments effective 1 January 2022 did not have a significant impact:
IFRS 3 regarding the added exception to avoid potential \u2018day 2\u2019 gains or losses from contingent assets and liabilities or levies; and
IAS 16 regarding recognition of proceeds generated by items of property, plant & equipment during their construction phase.
KPN has not applied the amendments to IFRS 16 regarding COVID-19 related rent concessions.
The amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets specify which costs must be included when assessing whether a contract is onerous or loss-making using a \u2018directly related cost approach\u2019.
Costs that relate directly to a contract to provide goods or services include both incremental costs (such as costs of direct labor and materials) and an allocation of costs directly related to contract activities (such as depreciation of equipment used to fulfill the contract as well as costs of contract management). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. Previously, KPN did not consider costs of own personnel as incremental costs, whereas costs of externally hired personnel are included in the incremental costs.
The amendments have been endorsed by the EU and are effective as of 1 January 2022 with mandatory prospective application for contracts for which KPN had not yet fulfilled all of its obligations at the beginning of the annual reporting period in which it first applies the amendments (2022). The amendments resulted in an increase of the provisions for onerous contracts of EUR 14m on 1 January 2022. The impact on equity (net of tax) is EUR 11m. The cumulative effect of initially applying the amendments was recognized as an adjustment to retained earnings at 1 January 2022.
The IASB has issued several new standards and amendments to existing standards with an effective date of 1 January 2023 or later.
KPN has concluded that the following, endorsed, amendments effective 1 January 2023 (or later) will not have a significant impact:
Amendments to IAS 12: Deferred tax related to assets and liabilities arising from a single transaction;
IAS 1 on the presentation of financial statements and disclosure of accounting policies; and
Amendments to IAS 8 Accounting policies, changes in accounting estimates and errors: definition of accounting estimates.
KPN is reviewing the impact of the following amendments which are effective as of 1 January 2023 (or later) but have not yet been endorsed:
IFRS 10 and IAS 28 regarding the sale or contribution of assets between an investor and its associate or joint venture;
Amendments to IAS 1 on classification of liabilities as current or non-current; and
Amendments to IFRS 16 on measurement of the lease liability in a sale and leaseback transaction.
KPN currently does not expect a significant impact from these standards.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-869": { "value": " Basis of consolidation KPN\u2019s Consolidated Financial Statements include the financial results of its subsidiaries and incorporate KPN\u2019s share of the results from associates. Subsidiaries are all entities directly or indirectly controlled by KPN. \u2018Control\u2019 is defined as the power over an entity, i.e. the ability to govern the financial and operating policies, resulting in obtaining the variable returns from the entity\u2019s activities. Subsidiaries are fully consolidated from the date on which control is obtained by KPN and are deconsolidated from the date on which KPN\u2019s control ceases. All intercompany transactions, balances and unrealized results on transactions with subsidiaries are eliminated. Changes in ownership interests in subsidiaries without change of control that do not result in loss of control are accounted for as equity transactions. Gains or losses on disposals to non-controlling interests are also recorded in equity. Subsidiaries For consolidation purposes, the results and financial position of subsidiaries are translated into euro at the closing rate of the date of the financial position (assets and liabilities) or at the average exchange rates applicable for the specific reporting period (income and expenses). All resulting exchange differences are recognized in OCI. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-511": { "value": " Basis of consolidation KPN\u2019s Consolidated Financial Statements include the financial results of its subsidiaries and incorporate KPN\u2019s share of the results from associates. Subsidiaries are all entities directly or indirectly controlled by KPN. \u2018Control\u2019 is defined as the power over an entity, i.e. the ability to govern the financial and operating policies, resulting in obtaining the variable returns from the entity\u2019s activities. Subsidiaries are fully consolidated from the date on which control is obtained by KPN and are deconsolidated from the date on which KPN\u2019s control ceases. All intercompany transactions, balances and unrealized results on transactions with subsidiaries are eliminated. Changes in ownership interests in subsidiaries without change of control that do not result in loss of control are accounted for as equity transactions. Gains or losses on disposals to non-controlling interests are also recorded in equity. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-870": { "value": " Foreign currency translation The Financial Statements are presented in euro (EUR), which is KPN\u2019s presentation currency as well as functional currency. Transactions in foreign currencies are translated into euro using the exchange rates applicable at transaction date. At reporting date, monetary assets and liabilities denominated in foreign currencies are translated to euro using the rates at reporting date. Exchange rate differences are recognized in profit or loss - except when these differences are related to qualifying cash flow hedges and qualifying net investment hedges, in which case the exchange rate differences are recorded in Other Comprehensive Income (OCI). Exchange rate differences on non-monetary assets and liabilities are reported as part of the fair value gain or loss from that asset or liability. Exchange rate differences arising from the translation of the net investment in foreign entities, of borrowings and other currency instruments designated as hedges of such investments are recognized in OCI. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate at the reporting date. Subsidiaries For consolidation purposes, the results and financial position of subsidiaries are translated into euro at the closing rate of the date of the financial position (assets and liabilities) or at the average exchange rates applicable for the specific reporting period (income and expenses). All resulting exchange differences are recognized in OCI. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-873": { "value": " Statement of Cash Flows The Statement of Cash Flows is prepared using the indirect method. Cash flows denominated in currencies other than euro are translated at average exchange rates. Cash flows relating to interest and taxes on profits and tax deductions relating to interest on perpetual hybrid bonds are included in the cash flow from operating activities. Tax payments directly related to disposal of subsidiaries are presented as part of the cash flows from investing activities when separately identifiable. The consideration paid in cash for acquired subsidiaries is included in the cash flow from investing activities, net of cash acquired. Cash flows resulting from the disposal of subsidiaries are disclosed separately, net of cash sold. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCashFlowsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-513": { "value": "Significant accounting estimates, judgments and assumptions made by management are evaluated continuously and are based on historic experience and other factors, including expectations of future events thought to be reasonable under the circumstances. Actual results may deviate from the estimates applied. Estimates are revised when material changes to the underlying assumption occur.
The accounting estimates, judgments and assumptions deemed significant to KPN\u2019s Financial Statements relate to:
| Subjects | Notes |
|---|---|
| Determination of deferred tax assets for losses carry forward and provisions for tax contingencies | Notes 8 and 22 |
| Determination of value in use of cash-generating units for goodwill impairment testing | Note 11 |
| Assessments of exposure to credit risk and financial markets risk | Note 13.4 |
| The 'more likely than not' assessment required to determine whether or not to recognize a provision for idle cables, which are part of a public electronic communications network | Notes 18 and 22 |
| The assessment of the lease terms deemed reasonably certain of KPN's lease contracts and the incremental borrowing rate used to measure the lease liabilities | Note 19 |
| Assessments whether revenue for variable consideration is probable or highly probable. This concerns revenue related to disputes and revenue related to VAT regarding unused multipurpose bundles | Notes 4 |
| Several assessments related to KPN\u2019s 50% interest in Glaspoort B.V. (classified as a joint venture): - The assessment whether KPN has joint control over Glaspoort; - The assessment whether operational contracts between Glaspoort and KPN are at arm\u2019s length; - The valuation of KPN\u2019s interest in the joint venture (initially set at fair value, subsequently accounted for using the equity method subject to periodic impairment testing); and - The valuation of the contingent cash consideration (financial asset at fair value through profit or loss). | Notes 12, 13.1 and 21 |
In preparing the Financial Statements, KPN has applied the concept of materiality to the presentation and level of disclosures. Only essential and mandatory information is disclosed that is relevant to a reader\u2019s understanding of these Financial Statements.
The Wholesale segment bills customers at (regulated) tariffs that may be disputed by other operators and regulators. A contract liability is recognized in case the invoiced revenue is not considered highly probable.
Revenue for variable considerations, including revenue under dispute, is recognized only when it is highly probable which, in some cases, requires significant judgment.
At the end of 2022, the German Tax Authorities finalized their tax audit of the remaining/former E-Plus companies. The overall net impact is zero. As all relevant tax years have been audited, KPN will now proceed to dissolve the respective legal entities.
| \u20ac\u00a0million | Tax loss & other carry forwards1 | Unrealized liquidation losses2 | Bonds & hedges3 | Restriction on depreciation4 | Fiscal goodwill5 | Lease Liabilities6 | Other | Offset against deferred tax liabilities | Total7 |
|---|---|---|---|---|---|---|---|---|---|
| Balance at 31 December 2020 | 81 | 501 | 64 | 94 | 4 | 206 | 61 | -446 | 567 |
| Income statement benefit/(charge) | -8 | - | -4 | -20 | -5 | -16 | 28 | 33 | 7 |
| Transfer to current tax | -73 | - | - | 1 | - | - | - | - | -72 |
| Tax charged to OCI | - | - | -10 | - | - | - | - | - | -10 |
| Tax rate changes8 | - | 16 | 2 | 6 | 1 | 11 | - | -22 | 14 |
| Balance at 31 December 2021 | - | 517 | 52 | 81 | - | 201 | 89 | -435 | 506 |
| Income statement benefit/(charge) | - | - | - | -13 | - | 11 | -18 | 6 | -14 |
| Transfer to current tax | -225 | - | - | - | - | - | 3 | - | -222 |
| Tax charged to OCI | - | - | -13 | - | - | - | - | 3 | -10 |
| Tax rate changes | - | - | - | - | - | - | - | - | - |
| Other | 517 | -517 | - | - | - | - | 7 | -7 | - |
| Balance at 31 December 2022 | 293 | - | 39 | 68 | - | 212 | 82 | -433 | 261 |
| \u00a0 | 31 December 2022 | 31 December 2021 - restated | ||||
|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset |
| Koninklijke KPN \u2013 corporate tax1 | 1,134 | 293 | 293 | - | - | - |
| Other | 1042 | 22 | - | 723 | 15 | - |
| Total KPN Group | 1,238 | 315 | 293 | 72 | 15 | - |
In accordance with IAS 36, KPN assesses goodwill for impairment at the end of each year and when a triggering event occurs. The annual impairment tests as at 31 December 2022 did not indicate that the book value of KPN\u2019s goodwill is not recoverable. KPN\u2019s market capitalization on 31 December 2022 was higher than the book value of its equity. A test was performed of the recoverable amount of the book value of each cash-generating unit (CGU), based on their value-in-use, which was determined by using the discounted cash flow method.
Key assumptions used in the cash flow projections are estimated EBITDA, Capex, change in working capital and pre-tax weighted average cost of capital (WACC). The cash flow projections are management\u2019s best estimate based on the updated strategic plan and extrapolation to terminal values. Housing and facilities expenses, which includes energy costs, are expected to increase by around 50% in 2023 and 10% in 2024. After 2024, energy costs are expected to normalize. The WACC is calculated using a capital asset pricing model. The terminal growth rate for the period after 10 years is updated consistently in line with the changes in the discount rate. In 2022, the WACC and the terminal growth rate were higher compared to 2021.
For all three CGUs, the annual impairment tests in 2022 and 2021 resulted in significant positive headroom as at 31 December 2022 and 31 December 2021.
| CGU | EBITDA margin | Capex intensity | Discount rate | Terminal sales growth1 |
|---|---|---|---|---|
| Consumer 2022 | 49% \u2013 51% | 24% \u2013 28% | 7% \u2013 8% | 0.5% |
| Consumer 2021 | 53% \u2013 56% | 25% \u2013 30% | 6% \u2013 7% | -0.6% |
| Business 2022 | 31% \u2013 32% | 14% \u2013 16% | 7% \u2013 8% | 0.5% |
| Business 2021 | 30% \u2013 33% | 14% \u2013 16% | 6% \u2013 7% | -0.6% |
| Wholesale 2022 | 67% \u2013 73% | 34% \u2013 37% | 7% \u2013 8% | 0.5% |
| Wholesale 2021 | 69% \u2013 75% | 35% \u2013 39% | 6% \u2013 7% | -0.6% |
The sensitivity analyses on the impairment test, resulting from a change in the key assumptions, showed that the headroom of the CGUs is more than sufficient. The analyses were performed for each key assumption separately. For example, a 1% higher discount rate, a 20% higher Capex, a 1% lower terminal growth rate or a 20% lower EBITDA in each of the CGUs would not lead to a goodwill impairment.
Glaspoort is classified as a joint venture based on the assessment of ownership and voting power (50/50 with the joint venture partner) and the joint control established through the joint venture agreement between the shareholders. The assessment includes, among others, the following:
KPN's option to purchase one additional share in Glaspoort. This option is exercisable between the 5th and the 8th anniversary of the transaction (9 June 2021) provided certain criteria are met, and in any case after the 8th anniversary.
KPN's influence on Glaspoort's relevant activities through KPN's presence in the governance structure.
KPN is anchor tenant on Glaspoort's network and will also be one of its suppliers through a number of operational contracts between KPN and Glaspoort.
The assessment whether joint control remains in place is reviewed annually.
Upon sale in 2021 of the 50% interest in Glaspoort B.V. to Drepana Investments Holding B.V. (see Note 21), KPN received a cash consideration upon deal close of EUR 233m and a contingent cash receivable of EUR 234m. The contingent cash receivable, to be received in annual installments based on the roll-out progress of Glaspoort, is classified as a financial asset measured at fair value through profit or loss. The contingent cash receivable was initially valued at EUR 218m. As at 31 December 2022, the carrying value is EUR 197m (2021: EUR 218m), of which EUR 28m is current (2021: EUR 14m). In 2022, the book value increased with interest income of EUR 8m (2021: EUR 3m) and decreased with EUR 16m (2021: EUR 2m) due to a fair value adjustment and EUR 14m (2021: EUR 0m) due to received deferred payment. The fair value adjustment was recognized as a loss in other financial results.
Based on Glaspoort's current roll-out plan, KPN expects the final payment in 2027. The fair value of this contingent receivable is deemed equal to the net present value of the full amount of the installments to be received using the expected roll-out schedule as included in Glaspoort's initial business plan. A weighted average discount rate of 5.68% has been used based on the following elements:
A base-rate using mid-swap rates to account for the time value of money, plus
A credit spread mark-up to account for the risk of non-payment based on AA-rated credit curves resulting in a weighted average spread of ~0.1% over a 5-year tenor, plus
A mark-up to reflect the roll-out risk (mostly the risk of delay).
See schedule of the allowances for expected losses in Note 14 for information about credit losses on trade and other receivables. There were no other credit losses.
The provision for asset retirement obligations (ARO) is based on assumptions of the estimated costs of removal, discount rate and estimated period of removal, which vary per type of asset. In 2022, EUR 20m was released from the ARO provision, mainly because of changes in the discount rates. Of this release, EUR 19m was recognised as a reduction of the carrying value of the activated asset retirement costs, which is included in plant and equipment.
As defined in the Telecommunications Act, the obligation for landlords to tolerate cables terminates as soon as those cables have been idle for a continuous period of 10 years. Because the date when the cables will become idle is uncertain and KPN is not able to predict whether and when a landlord will place a request for removal, KPN is not able to make a reliable estimate of the impact and therefore no provision was recognized at 31 December 2022 nor at 31 December 2021.
Most of KPN\u2019s lease contracts include extension (renewal) or termination options. KPN exercises significant judgment in determining whether these options are reasonably certain to be exercised (see Note 2). The assessments are updated annually or when a significant change in the economic circumstances occurs. Periods covered by renewal options deemed reasonably certain or early termination options that are reasonably certain not to be exercised are included in the total lease liability.
A significant number of KPN\u2019s contracts have an unlimited number of extension options. Only those deemed reasonably certain are included in the lease term and therefore the lease liability. A reliable estimate of the potential future lease payments related to periods beyond the lease terms reflected on the balance sheet cannot be provided. This affects mostly the mobile and fixed network, as well as real estate. Vehicles are generally returned by the end of their term.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
KPN is involved in a number of legal and tax proceedings that have arisen in the ordinary course of its business and in discontinued operations, including commercial, regulatory or other proceedings. KPN periodically carefully assesses the likelihood that legal and tax proceedings may lead to a cash outflow and recognizes provisions in such matters if and when the chance of a cash outflow is estimated as probable and a reliable estimate of the cash outflow can be made. When these criteria are not met, such matters are classified as contingent liabilities, unless the cash outflow is considered remote.
However, the outcome of such proceedings can be difficult to predict with certainty and KPN can offer no assurances in this regard. In some cases, the impact of a legal proceeding may be more strategic than financial and such impact cannot properly be quantified. Below is a description of legal related contingent liabilities that could have a material impact for KPN.
See Note 18 for a contingent liability related to idle cables and the accounting policy of provisions.
In KPN\u2019s Articles of Association and in a further decision by the Board of Management, which was approved by the Supervisory Board, KPN has indemnified the members and former members of KPN\u2019s Board of Management and Supervisory Board, as well as a number of KPN\u2019s officers and directors and former officers and directors, against liabilities, claims, judgments, fines and penalties incurred by such officer or director as a result of any threatened, pending or completed action, investigation or proceeding (whether civil, criminal or administrative) brought by a third party in relation to acts or omissions in or related to their capacity as officer or director.
The indemnification does not apply to claims and expenses reimbursed by insurers nor to an officer or a director adjudged to be liable for willful misconduct (\u2018opzet\u2019) or intentional recklessness (\u2018bewuste roekeloosheid\u2019).
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-514": { "value": "Significant accounting estimates, judgments and assumptions made by management are evaluated continuously and are based on historic experience and other factors, including expectations of future events thought to be reasonable under the circumstances. Actual results may deviate from the estimates applied. Estimates are revised when material changes to the underlying assumption occur.
The accounting estimates, judgments and assumptions deemed significant to KPN\u2019s Financial Statements relate to:
| Subjects | Notes |
|---|---|
| Determination of deferred tax assets for losses carry forward and provisions for tax contingencies | Notes 8 and 22 |
| Determination of value in use of cash-generating units for goodwill impairment testing | Note 11 |
| Assessments of exposure to credit risk and financial markets risk | Note 13.4 |
| The 'more likely than not' assessment required to determine whether or not to recognize a provision for idle cables, which are part of a public electronic communications network | Notes 18 and 22 |
| The assessment of the lease terms deemed reasonably certain of KPN's lease contracts and the incremental borrowing rate used to measure the lease liabilities | Note 19 |
| Assessments whether revenue for variable consideration is probable or highly probable. This concerns revenue related to disputes and revenue related to VAT regarding unused multipurpose bundles | Notes 4 |
| Several assessments related to KPN\u2019s 50% interest in Glaspoort B.V. (classified as a joint venture): - The assessment whether KPN has joint control over Glaspoort; - The assessment whether operational contracts between Glaspoort and KPN are at arm\u2019s length; - The valuation of KPN\u2019s interest in the joint venture (initially set at fair value, subsequently accounted for using the equity method subject to periodic impairment testing); and - The valuation of the contingent cash consideration (financial asset at fair value through profit or loss). | Notes 12, 13.1 and 21 |
In preparing the Financial Statements, KPN has applied the concept of materiality to the presentation and level of disclosures. Only essential and mandatory information is disclosed that is relevant to a reader\u2019s understanding of these Financial Statements.
The Wholesale segment bills customers at (regulated) tariffs that may be disputed by other operators and regulators. A contract liability is recognized in case the invoiced revenue is not considered highly probable.
Revenue for variable considerations, including revenue under dispute, is recognized only when it is highly probable which, in some cases, requires significant judgment.
At the end of 2022, the German Tax Authorities finalized their tax audit of the remaining/former E-Plus companies. The overall net impact is zero. As all relevant tax years have been audited, KPN will now proceed to dissolve the respective legal entities.
| \u20ac\u00a0million | Tax loss & other carry forwards1 | Unrealized liquidation losses2 | Bonds & hedges3 | Restriction on depreciation4 | Fiscal goodwill5 | Lease Liabilities6 | Other | Offset against deferred tax liabilities | Total7 |
|---|---|---|---|---|---|---|---|---|---|
| Balance at 31 December 2020 | 81 | 501 | 64 | 94 | 4 | 206 | 61 | -446 | 567 |
| Income statement benefit/(charge) | -8 | - | -4 | -20 | -5 | -16 | 28 | 33 | 7 |
| Transfer to current tax | -73 | - | - | 1 | - | - | - | - | -72 |
| Tax charged to OCI | - | - | -10 | - | - | - | - | - | -10 |
| Tax rate changes8 | - | 16 | 2 | 6 | 1 | 11 | - | -22 | 14 |
| Balance at 31 December 2021 | - | 517 | 52 | 81 | - | 201 | 89 | -435 | 506 |
| Income statement benefit/(charge) | - | - | - | -13 | - | 11 | -18 | 6 | -14 |
| Transfer to current tax | -225 | - | - | - | - | - | 3 | - | -222 |
| Tax charged to OCI | - | - | -13 | - | - | - | - | 3 | -10 |
| Tax rate changes | - | - | - | - | - | - | - | - | - |
| Other | 517 | -517 | - | - | - | - | 7 | -7 | - |
| Balance at 31 December 2022 | 293 | - | 39 | 68 | - | 212 | 82 | -433 | 261 |
| \u00a0 | 31 December 2022 | 31 December 2021 - restated | ||||
|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset |
| Koninklijke KPN \u2013 corporate tax1 | 1,134 | 293 | 293 | - | - | - |
| Other | 1042 | 22 | - | 723 | 15 | - |
| Total KPN Group | 1,238 | 315 | 293 | 72 | 15 | - |
In accordance with IAS 36, KPN assesses goodwill for impairment at the end of each year and when a triggering event occurs. The annual impairment tests as at 31 December 2022 did not indicate that the book value of KPN\u2019s goodwill is not recoverable. KPN\u2019s market capitalization on 31 December 2022 was higher than the book value of its equity. A test was performed of the recoverable amount of the book value of each cash-generating unit (CGU), based on their value-in-use, which was determined by using the discounted cash flow method.
Key assumptions used in the cash flow projections are estimated EBITDA, Capex, change in working capital and pre-tax weighted average cost of capital (WACC). The cash flow projections are management\u2019s best estimate based on the updated strategic plan and extrapolation to terminal values. Housing and facilities expenses, which includes energy costs, are expected to increase by around 50% in 2023 and 10% in 2024. After 2024, energy costs are expected to normalize. The WACC is calculated using a capital asset pricing model. The terminal growth rate for the period after 10 years is updated consistently in line with the changes in the discount rate. In 2022, the WACC and the terminal growth rate were higher compared to 2021.
For all three CGUs, the annual impairment tests in 2022 and 2021 resulted in significant positive headroom as at 31 December 2022 and 31 December 2021.
| CGU | EBITDA margin | Capex intensity | Discount rate | Terminal sales growth1 |
|---|---|---|---|---|
| Consumer 2022 | 49% \u2013 51% | 24% \u2013 28% | 7% \u2013 8% | 0.5% |
| Consumer 2021 | 53% \u2013 56% | 25% \u2013 30% | 6% \u2013 7% | -0.6% |
| Business 2022 | 31% \u2013 32% | 14% \u2013 16% | 7% \u2013 8% | 0.5% |
| Business 2021 | 30% \u2013 33% | 14% \u2013 16% | 6% \u2013 7% | -0.6% |
| Wholesale 2022 | 67% \u2013 73% | 34% \u2013 37% | 7% \u2013 8% | 0.5% |
| Wholesale 2021 | 69% \u2013 75% | 35% \u2013 39% | 6% \u2013 7% | -0.6% |
The sensitivity analyses on the impairment test, resulting from a change in the key assumptions, showed that the headroom of the CGUs is more than sufficient. The analyses were performed for each key assumption separately. For example, a 1% higher discount rate, a 20% higher Capex, a 1% lower terminal growth rate or a 20% lower EBITDA in each of the CGUs would not lead to a goodwill impairment.
Glaspoort is classified as a joint venture based on the assessment of ownership and voting power (50/50 with the joint venture partner) and the joint control established through the joint venture agreement between the shareholders. The assessment includes, among others, the following:
KPN's option to purchase one additional share in Glaspoort. This option is exercisable between the 5th and the 8th anniversary of the transaction (9 June 2021) provided certain criteria are met, and in any case after the 8th anniversary.
KPN's influence on Glaspoort's relevant activities through KPN's presence in the governance structure.
KPN is anchor tenant on Glaspoort's network and will also be one of its suppliers through a number of operational contracts between KPN and Glaspoort.
The assessment whether joint control remains in place is reviewed annually.
Upon sale in 2021 of the 50% interest in Glaspoort B.V. to Drepana Investments Holding B.V. (see Note 21), KPN received a cash consideration upon deal close of EUR 233m and a contingent cash receivable of EUR 234m. The contingent cash receivable, to be received in annual installments based on the roll-out progress of Glaspoort, is classified as a financial asset measured at fair value through profit or loss. The contingent cash receivable was initially valued at EUR 218m. As at 31 December 2022, the carrying value is EUR 197m (2021: EUR 218m), of which EUR 28m is current (2021: EUR 14m). In 2022, the book value increased with interest income of EUR 8m (2021: EUR 3m) and decreased with EUR 16m (2021: EUR 2m) due to a fair value adjustment and EUR 14m (2021: EUR 0m) due to received deferred payment. The fair value adjustment was recognized as a loss in other financial results.
Based on Glaspoort's current roll-out plan, KPN expects the final payment in 2027. The fair value of this contingent receivable is deemed equal to the net present value of the full amount of the installments to be received using the expected roll-out schedule as included in Glaspoort's initial business plan. A weighted average discount rate of 5.68% has been used based on the following elements:
A base-rate using mid-swap rates to account for the time value of money, plus
A credit spread mark-up to account for the risk of non-payment based on AA-rated credit curves resulting in a weighted average spread of ~0.1% over a 5-year tenor, plus
A mark-up to reflect the roll-out risk (mostly the risk of delay).
See schedule of the allowances for expected losses in Note 14 for information about credit losses on trade and other receivables. There were no other credit losses.
The provision for asset retirement obligations (ARO) is based on assumptions of the estimated costs of removal, discount rate and estimated period of removal, which vary per type of asset. In 2022, EUR 20m was released from the ARO provision, mainly because of changes in the discount rates. Of this release, EUR 19m was recognised as a reduction of the carrying value of the activated asset retirement costs, which is included in plant and equipment.
As defined in the Telecommunications Act, the obligation for landlords to tolerate cables terminates as soon as those cables have been idle for a continuous period of 10 years. Because the date when the cables will become idle is uncertain and KPN is not able to predict whether and when a landlord will place a request for removal, KPN is not able to make a reliable estimate of the impact and therefore no provision was recognized at 31 December 2022 nor at 31 December 2021.
Most of KPN\u2019s lease contracts include extension (renewal) or termination options. KPN exercises significant judgment in determining whether these options are reasonably certain to be exercised (see Note 2). The assessments are updated annually or when a significant change in the economic circumstances occurs. Periods covered by renewal options deemed reasonably certain or early termination options that are reasonably certain not to be exercised are included in the total lease liability.
A significant number of KPN\u2019s contracts have an unlimited number of extension options. Only those deemed reasonably certain are included in the lease term and therefore the lease liability. A reliable estimate of the potential future lease payments related to periods beyond the lease terms reflected on the balance sheet cannot be provided. This affects mostly the mobile and fixed network, as well as real estate. Vehicles are generally returned by the end of their term.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
KPN is involved in a number of legal and tax proceedings that have arisen in the ordinary course of its business and in discontinued operations, including commercial, regulatory or other proceedings. KPN periodically carefully assesses the likelihood that legal and tax proceedings may lead to a cash outflow and recognizes provisions in such matters if and when the chance of a cash outflow is estimated as probable and a reliable estimate of the cash outflow can be made. When these criteria are not met, such matters are classified as contingent liabilities, unless the cash outflow is considered remote.
However, the outcome of such proceedings can be difficult to predict with certainty and KPN can offer no assurances in this regard. In some cases, the impact of a legal proceeding may be more strategic than financial and such impact cannot properly be quantified. Below is a description of legal related contingent liabilities that could have a material impact for KPN.
See Note 18 for a contingent liability related to idle cables and the accounting policy of provisions.
In KPN\u2019s Articles of Association and in a further decision by the Board of Management, which was approved by the Supervisory Board, KPN has indemnified the members and former members of KPN\u2019s Board of Management and Supervisory Board, as well as a number of KPN\u2019s officers and directors and former officers and directors, against liabilities, claims, judgments, fines and penalties incurred by such officer or director as a result of any threatened, pending or completed action, investigation or proceeding (whether civil, criminal or administrative) brought by a third party in relation to acts or omissions in or related to their capacity as officer or director.
The indemnification does not apply to claims and expenses reimbursed by insurers nor to an officer or a director adjudged to be liable for willful misconduct (\u2018opzet\u2019) or intentional recklessness (\u2018bewuste roekeloosheid\u2019).
", "dimensions": { "concept": "ifrs-full:DisclosureOfAssetsAndLiabilitiesWithSignificantRiskOfMaterialAdjustmentExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-515": { "value": "Significant accounting estimates, judgments and assumptions made by management are evaluated continuously and are based on historic experience and other factors, including expectations of future events thought to be reasonable under the circumstances. Actual results may deviate from the estimates applied. Estimates are revised when material changes to the underlying assumption occur.
The accounting estimates, judgments and assumptions deemed significant to KPN\u2019s Financial Statements relate to:
| Subjects | Notes |
|---|---|
| Determination of deferred tax assets for losses carry forward and provisions for tax contingencies | Notes 8 and 22 |
| Determination of value in use of cash-generating units for goodwill impairment testing | Note 11 |
| Assessments of exposure to credit risk and financial markets risk | Note 13.4 |
| The 'more likely than not' assessment required to determine whether or not to recognize a provision for idle cables, which are part of a public electronic communications network | Notes 18 and 22 |
| The assessment of the lease terms deemed reasonably certain of KPN's lease contracts and the incremental borrowing rate used to measure the lease liabilities | Note 19 |
| Assessments whether revenue for variable consideration is probable or highly probable. This concerns revenue related to disputes and revenue related to VAT regarding unused multipurpose bundles | Notes 4 |
| Several assessments related to KPN\u2019s 50% interest in Glaspoort B.V. (classified as a joint venture): - The assessment whether KPN has joint control over Glaspoort; - The assessment whether operational contracts between Glaspoort and KPN are at arm\u2019s length; - The valuation of KPN\u2019s interest in the joint venture (initially set at fair value, subsequently accounted for using the equity method subject to periodic impairment testing); and - The valuation of the contingent cash consideration (financial asset at fair value through profit or loss). | Notes 12, 13.1 and 21 |
In preparing the Financial Statements, KPN has applied the concept of materiality to the presentation and level of disclosures. Only essential and mandatory information is disclosed that is relevant to a reader\u2019s understanding of these Financial Statements.
The Wholesale segment bills customers at (regulated) tariffs that may be disputed by other operators and regulators. A contract liability is recognized in case the invoiced revenue is not considered highly probable.
Revenue for variable considerations, including revenue under dispute, is recognized only when it is highly probable which, in some cases, requires significant judgment.
At the end of 2022, the German Tax Authorities finalized their tax audit of the remaining/former E-Plus companies. The overall net impact is zero. As all relevant tax years have been audited, KPN will now proceed to dissolve the respective legal entities.
| \u20ac\u00a0million | Tax loss & other carry forwards1 | Unrealized liquidation losses2 | Bonds & hedges3 | Restriction on depreciation4 | Fiscal goodwill5 | Lease Liabilities6 | Other | Offset against deferred tax liabilities | Total7 |
|---|---|---|---|---|---|---|---|---|---|
| Balance at 31 December 2020 | 81 | 501 | 64 | 94 | 4 | 206 | 61 | -446 | 567 |
| Income statement benefit/(charge) | -8 | - | -4 | -20 | -5 | -16 | 28 | 33 | 7 |
| Transfer to current tax | -73 | - | - | 1 | - | - | - | - | -72 |
| Tax charged to OCI | - | - | -10 | - | - | - | - | - | -10 |
| Tax rate changes8 | - | 16 | 2 | 6 | 1 | 11 | - | -22 | 14 |
| Balance at 31 December 2021 | - | 517 | 52 | 81 | - | 201 | 89 | -435 | 506 |
| Income statement benefit/(charge) | - | - | - | -13 | - | 11 | -18 | 6 | -14 |
| Transfer to current tax | -225 | - | - | - | - | - | 3 | - | -222 |
| Tax charged to OCI | - | - | -13 | - | - | - | - | 3 | -10 |
| Tax rate changes | - | - | - | - | - | - | - | - | - |
| Other | 517 | -517 | - | - | - | - | 7 | -7 | - |
| Balance at 31 December 2022 | 293 | - | 39 | 68 | - | 212 | 82 | -433 | 261 |
| \u00a0 | 31 December 2022 | 31 December 2021 - restated | ||||
|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset |
| Koninklijke KPN \u2013 corporate tax1 | 1,134 | 293 | 293 | - | - | - |
| Other | 1042 | 22 | - | 723 | 15 | - |
| Total KPN Group | 1,238 | 315 | 293 | 72 | 15 | - |
In accordance with IAS 36, KPN assesses goodwill for impairment at the end of each year and when a triggering event occurs. The annual impairment tests as at 31 December 2022 did not indicate that the book value of KPN\u2019s goodwill is not recoverable. KPN\u2019s market capitalization on 31 December 2022 was higher than the book value of its equity. A test was performed of the recoverable amount of the book value of each cash-generating unit (CGU), based on their value-in-use, which was determined by using the discounted cash flow method.
Key assumptions used in the cash flow projections are estimated EBITDA, Capex, change in working capital and pre-tax weighted average cost of capital (WACC). The cash flow projections are management\u2019s best estimate based on the updated strategic plan and extrapolation to terminal values. Housing and facilities expenses, which includes energy costs, are expected to increase by around 50% in 2023 and 10% in 2024. After 2024, energy costs are expected to normalize. The WACC is calculated using a capital asset pricing model. The terminal growth rate for the period after 10 years is updated consistently in line with the changes in the discount rate. In 2022, the WACC and the terminal growth rate were higher compared to 2021.
For all three CGUs, the annual impairment tests in 2022 and 2021 resulted in significant positive headroom as at 31 December 2022 and 31 December 2021.
| CGU | EBITDA margin | Capex intensity | Discount rate | Terminal sales growth1 |
|---|---|---|---|---|
| Consumer 2022 | 49% \u2013 51% | 24% \u2013 28% | 7% \u2013 8% | 0.5% |
| Consumer 2021 | 53% \u2013 56% | 25% \u2013 30% | 6% \u2013 7% | -0.6% |
| Business 2022 | 31% \u2013 32% | 14% \u2013 16% | 7% \u2013 8% | 0.5% |
| Business 2021 | 30% \u2013 33% | 14% \u2013 16% | 6% \u2013 7% | -0.6% |
| Wholesale 2022 | 67% \u2013 73% | 34% \u2013 37% | 7% \u2013 8% | 0.5% |
| Wholesale 2021 | 69% \u2013 75% | 35% \u2013 39% | 6% \u2013 7% | -0.6% |
The sensitivity analyses on the impairment test, resulting from a change in the key assumptions, showed that the headroom of the CGUs is more than sufficient. The analyses were performed for each key assumption separately. For example, a 1% higher discount rate, a 20% higher Capex, a 1% lower terminal growth rate or a 20% lower EBITDA in each of the CGUs would not lead to a goodwill impairment.
Glaspoort is classified as a joint venture based on the assessment of ownership and voting power (50/50 with the joint venture partner) and the joint control established through the joint venture agreement between the shareholders. The assessment includes, among others, the following:
KPN's option to purchase one additional share in Glaspoort. This option is exercisable between the 5th and the 8th anniversary of the transaction (9 June 2021) provided certain criteria are met, and in any case after the 8th anniversary.
KPN's influence on Glaspoort's relevant activities through KPN's presence in the governance structure.
KPN is anchor tenant on Glaspoort's network and will also be one of its suppliers through a number of operational contracts between KPN and Glaspoort.
The assessment whether joint control remains in place is reviewed annually.
Upon sale in 2021 of the 50% interest in Glaspoort B.V. to Drepana Investments Holding B.V. (see Note 21), KPN received a cash consideration upon deal close of EUR 233m and a contingent cash receivable of EUR 234m. The contingent cash receivable, to be received in annual installments based on the roll-out progress of Glaspoort, is classified as a financial asset measured at fair value through profit or loss. The contingent cash receivable was initially valued at EUR 218m. As at 31 December 2022, the carrying value is EUR 197m (2021: EUR 218m), of which EUR 28m is current (2021: EUR 14m). In 2022, the book value increased with interest income of EUR 8m (2021: EUR 3m) and decreased with EUR 16m (2021: EUR 2m) due to a fair value adjustment and EUR 14m (2021: EUR 0m) due to received deferred payment. The fair value adjustment was recognized as a loss in other financial results.
Based on Glaspoort's current roll-out plan, KPN expects the final payment in 2027. The fair value of this contingent receivable is deemed equal to the net present value of the full amount of the installments to be received using the expected roll-out schedule as included in Glaspoort's initial business plan. A weighted average discount rate of 5.68% has been used based on the following elements:
A base-rate using mid-swap rates to account for the time value of money, plus
A credit spread mark-up to account for the risk of non-payment based on AA-rated credit curves resulting in a weighted average spread of ~0.1% over a 5-year tenor, plus
A mark-up to reflect the roll-out risk (mostly the risk of delay).
See schedule of the allowances for expected losses in Note 14 for information about credit losses on trade and other receivables. There were no other credit losses.
The provision for asset retirement obligations (ARO) is based on assumptions of the estimated costs of removal, discount rate and estimated period of removal, which vary per type of asset. In 2022, EUR 20m was released from the ARO provision, mainly because of changes in the discount rates. Of this release, EUR 19m was recognised as a reduction of the carrying value of the activated asset retirement costs, which is included in plant and equipment.
As defined in the Telecommunications Act, the obligation for landlords to tolerate cables terminates as soon as those cables have been idle for a continuous period of 10 years. Because the date when the cables will become idle is uncertain and KPN is not able to predict whether and when a landlord will place a request for removal, KPN is not able to make a reliable estimate of the impact and therefore no provision was recognized at 31 December 2022 nor at 31 December 2021.
Most of KPN\u2019s lease contracts include extension (renewal) or termination options. KPN exercises significant judgment in determining whether these options are reasonably certain to be exercised (see Note 2). The assessments are updated annually or when a significant change in the economic circumstances occurs. Periods covered by renewal options deemed reasonably certain or early termination options that are reasonably certain not to be exercised are included in the total lease liability.
A significant number of KPN\u2019s contracts have an unlimited number of extension options. Only those deemed reasonably certain are included in the lease term and therefore the lease liability. A reliable estimate of the potential future lease payments related to periods beyond the lease terms reflected on the balance sheet cannot be provided. This affects mostly the mobile and fixed network, as well as real estate. Vehicles are generally returned by the end of their term.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
KPN is involved in a number of legal and tax proceedings that have arisen in the ordinary course of its business and in discontinued operations, including commercial, regulatory or other proceedings. KPN periodically carefully assesses the likelihood that legal and tax proceedings may lead to a cash outflow and recognizes provisions in such matters if and when the chance of a cash outflow is estimated as probable and a reliable estimate of the cash outflow can be made. When these criteria are not met, such matters are classified as contingent liabilities, unless the cash outflow is considered remote.
However, the outcome of such proceedings can be difficult to predict with certainty and KPN can offer no assurances in this regard. In some cases, the impact of a legal proceeding may be more strategic than financial and such impact cannot properly be quantified. Below is a description of legal related contingent liabilities that could have a material impact for KPN.
See Note 18 for a contingent liability related to idle cables and the accounting policy of provisions.
In KPN\u2019s Articles of Association and in a further decision by the Board of Management, which was approved by the Supervisory Board, KPN has indemnified the members and former members of KPN\u2019s Board of Management and Supervisory Board, as well as a number of KPN\u2019s officers and directors and former officers and directors, against liabilities, claims, judgments, fines and penalties incurred by such officer or director as a result of any threatened, pending or completed action, investigation or proceeding (whether civil, criminal or administrative) brought by a third party in relation to acts or omissions in or related to their capacity as officer or director.
The indemnification does not apply to claims and expenses reimbursed by insurers nor to an officer or a director adjudged to be liable for willful misconduct (\u2018opzet\u2019) or intentional recklessness (\u2018bewuste roekeloosheid\u2019).
", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-874": { "value": " Sustainability and climate change KPN is continuously enhancing, improving and modernizing its network to realize its sustainability goals, which include: providing internet access for everyone and everything and stimulate social inclusion, while building the most efficient network using technology to reduce energy consumption despite higher data usage. Through its sustainability efforts, KPN not only reduces its own energy consumption but also enables its customers to do the same. KPN\u2019s increasing fiber footprint and the migration from copper to fiber network contributes to the realization of KPN's sustainability goals. Through participation in its joint venture Glaspoort B.V., KPN is accelerating its nationwide ambitions. In mobile, initiatives include the modernization of broadcasting and customer premises equipment. Other initiatives include the reduction of KPN's leased fleet and replacement of expired vehicle leases with electric vehicles only. The Board of Management has committed to the sustainability goals by adding non-financial sustainability linked targets to the LTI plans, such as the reduction of supply chain emissions (scope 3) and gender ratio targets. In 2022, KPN issued a Green Hybrid Bond, demonstrating its commitment to the realization of its goals (see Note 13.2). KPN has analyzed whether the above has had any impact on the valuation of KPN's assets, liabilities and financial results and concluded the impact is limited. The migration to new generation network equipment has resulted in an acceleration of depreciation charges for the assets to be replaced. KPN is also investing in its employees by facilitating suitable solutions to continue working from home. ", "dimensions": { "concept": "ifrs-full:DescriptionOfOtherAccountingPoliciesRelevantToUnderstandingOfFinancialStatements", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-516": { "value": "Operating segments are reported in a manner consistent with the internal reporting to KPN\u2019s CEO, who is the Chief Operating Decision-Maker according to IFRS 8 Operating Segments.
Comparative financial information for 2021 has been restated as several smaller units were transferred from the Consumer and Business segments to Network, Operations & IT (NOI) and Other. In addition, some limited expenses were reclassified between existing operating expense categories based on further review of their nature. The impact on the segment information was not material.
Almost all of KPN\u2019s operating activities are in the Netherlands.
KPN\u2019s operating segments comprise of Consumer, Business, Wholesale and Network, Operations & IT (NOI). For general information on these segments, read more in sections Shareholder value and Customer value.
\u2018Other\u2019 comprises KPN Holding, Corporate Center and eliminations. KPN accounts for its interest in Glaspoort within this segment.
As part of the simplification process, KPN has limited the intercompany charges to charges that are considered relevant for tax purposes.
The EBITDA AL of Consumer, Business and Wholesale represents the contribution margin of these segments and the EBITDA AL of NOI mostly consists of operating expenses. Due to the fact that KPN neither allocates interest expenses to segments nor accounts for taxes in the segments, the disclosure is limited to operating profit for the year.
Investments in property, plant and equipment, and intangible assets (Capex) are centrally managed and reported to KPN\u2019s Chief Operating Decision-Maker at the KPN Group level, not at a segment level.
For an explanation of EBITDA, EBITDA AL and incidental transactions included in Revenues, Other income and EBITDA AL, see Appendix 2.
| \u20ac\u00a0million | Notes | Consumer | Business | Wholesale | NOI | Other (incl. eliminations) | Total KPN Group |
|---|---|---|---|---|---|---|---|
| Statement of Profit or Loss | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| External revenues1 | \u00a0 | 2,849 | 1,793 | 658 | 22 | 2 | 5,324 |
| Other income | [4.2] | - | 1 | - | 49 | - | 50 |
| Inter-division revenues | \u00a0 | 8 | 5 | 32 | 1 | -45 | - |
| Total | [4] | 2,857 | 1,798 | 689 | 72 | -43 | 5,374 |
| Operating expenses | \u00a0 | -989 | -942 | -120 | -582 | -180 | -2,814 |
| EBITDA | \u00a0 | 1,868 | 857 | 569 | -510 | -223 | 2,560 |
| DA&I | \u00a0 | -153 | -58 | -8 | -1,061 | -66 | -1,346 |
| Operating result | \u00a0 | 1,715 | 799 | 561 | -1,571 | -289 | 1,214 |
| Share of profit or loss of associates and joint ventures | [12] | - | - | - | - | 6 | 6 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| EBITDA | \u00a0 | 1,868 | 857 | 569 | -510 | -223 | 2,560 |
| DA&I right-of-use assets | [19] | -12 | -2 | -1 | -60 | -56 | -131 |
| Interest lease liabilities | [19] | -1 | - | - | -13 | -4 | -18 |
| EBITDA after lease | \u00a0 | 1,854 | 855 | 568 | -583 | -282 | 2,411 |
| Total assets2 | \u00a0 | 4,368 | 2,862 | 623 | 9,254 | -5,144 | 11,963 |
| Total liabilities | \u00a0 | 4,366 | 2,740 | 624 | 9,264 | -8,684 | 8,311 |
| \u20ac\u00a0million | Notes | Consumer | Business | Wholesale | NOI | Other (incl. eliminations) | Total KPN Group |
|---|---|---|---|---|---|---|---|
| Statement of Profit or Loss | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| External revenues1 | \u00a0 | 2,845 | 1,754 | 646 | 13 | 11 | 5,270 |
| Other income | [4.2] | 1 | 1 | - | 20 | 830 | 852 |
| Inter-division revenues | \u00a0 | 11 | 7 | 38 | 1 | -57 | - |
| Total | [4] | 2,857 | 1,762 | 684 | 34 | 785 | 6,122 |
| Operating expenses | \u00a0 | -984 | -941 | -132 | -582 | -161 | -2,800 |
| EBITDA | \u00a0 | 1,873 | 821 | 553 | -549 | 624 | 3,322 |
| DA&I | \u00a0 | -176 | -57 | -8 | -1,162 | -57 | -1,460 |
| Operating result | \u00a0 | 1,697 | 764 | 545 | -1,711 | 567 | 1,862 |
| Share of profit or loss of associates and joint ventures | [12] | - | - | - | - | -2 | -2 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| EBITDA | \u00a0 | 1,873 | 821 | 553 | -549 | 624 | 3,322 |
| DA&I right-of-use assets | [19] | -12 | -2 | -1 | -63 | -45 | -123 |
| Interest lease liabilities | [19] | -1 | - | - | -14 | -5 | -20 |
| EBITDA after lease | \u00a0 | 1,860 | 818 | 552 | -626 | 575 | 3,180 |
| Total assets2 | \u00a0 | 4,398 | 2,846 | 629 | 9,343 | -4,480 | 12,737 |
| Total liabilities | \u00a0 | 4,401 | 2,727 | 630 | 9,354 | -7,605 | 9,507 |
The disaggregation of the revenues per segment has been restated. Within the Business segment, EUR 137m service revenues that are related to core telco products have been restated from Tailored Solutions (large corporate customers with integrated solutions) to LCE (large corporate enterprises). Within the Consumer segment, EUR 8m revenues of a few services were restated from non-service revenues to service revenues (see Note 2).
| \u20ac\u00a0million | 2022 | 2021 (Restated) |
|---|---|---|
| Fixed-Mobile service revenues | 1,494 | 1,459 |
| Fixed-only service revenues | 758 | 782 |
| Postpaid-only service revenues | 246 | 241 |
| Legacy/other service revenues | 90 | 110 |
| Consumer service revenues | 2,588 | 2,592 |
| Non-service revenues1 | 269 | 265 |
| Total Consumer revenues | 2,857 | 2,857 |
| \u00a0 | \u00a0 | \u00a0 |
| Access & connectivity2 | 555 | 517 |
| IT services3 | 42 | 31 |
| SME service revenues | 596 | 548 |
| Access & connectivity2 | 521 | 534 |
| IT services & Other3 | 255 | 261 |
| LCE service revenues | 776 | 795 |
| Access & connectivity2 | 73 | 67 |
| IT services3 | 48 | 46 |
| Service management | 171 | 176 |
| Tailored Solutions service revenues | 292 | 289 |
| Business service revenues | 1,664 | 1,632 |
| Non-service & other revenues1 | 133 | 130 |
| Total Business revenues | 1,797 | 1,762 |
| \u00a0 | \u00a0 | \u00a0 |
| Mobile service revenues | 178 | 156 |
| Broadband service revenues | 296 | 293 |
| Other service revenues4 | 214 | 233 |
| Wholesale service revenues | 688 | 681 |
| Non-service revenues | 1 | 2 |
| Total Wholesale revenues | 689 | 683 |
| \u00a0 | \u00a0 | \u00a0 |
| NOI and Other (incl. eliminations) | -20 | -32 |
| \u00a0 | \u00a0 | \u00a0 |
| Total | 5,324 | 5,270 |
| \u20ac\u00a0million | 2022 | 2021 (Restated) |
|---|---|---|
| Service revenues | 4,909 | 4,860 |
| Non-service revenues | 385 | 377 |
| Revenues from contracts with customers | 5,295 | 5,237 |
| Rentals and other revenues | 29 | 33 |
| Revenues | 5,324 | 5,270 |
Service revenues are all revenues recognized over time and includes fees for usage of KPN\u2019s network and facilities, e.g. monthly subscription fees and revenues from customer-specific IT solutions.
Non-service revenues are revenues recognized at a point in time and includes, for example, sale of handsets, peripheral equipment as well as software licenses sold without ongoing support.
The application of KPN\u2019s accounting policies on revenue recognition, including relevant judgments, and information about KPN\u2019s performance obligations is summarized below:
Exploitation services are considered a separate performance obligation. Revenue is recognized over time during the contract period.
Network access is considered a separate performance obligation. Revenue is recognized over time during the subscription period. Content, e.g. TV content, is generally considered part of the network access performance obligation and revenue is recognized on a gross basis.
Revenues for streaming services, which are contracted and billed to customers separately, are recognized on a net basis if KPN acts as an agent.
One-off connection fees are not separate performance obligations as they are considered to be necessary to get access to the network. The fees charged to the customer are recognized as a contract liability and bundled with the performance obligation for network access.
Transaction-related dealer fees paid to acquire or retain subscribers are capitalized as contract costs and expensed on a straight-line basis over the contract term of the underlying customer contract.
Installation services offered to consumers are generally considered a separate performance obligation, as customers can choose to use an engineer for installation or to install the equipment themselves. Installation services that are treated as a separate performance obligation include installation of customer premises equipment (CPE), e.g. set-top boxes, setting up in-home WiFi, and installation of customers\u2019 own devices. Revenue from installation services is allocated to the installation service at the start of the contract and recognized as revenue at a point in time (at completion of the installation).
The difference between the amount of revenue recognized and the amount charged to the customer is recognized as a contract asset. Most CPE is considered part of KPN\u2019s network. These hardware elements are capitalized as part of property, plant and equipment as KPN retains ownership and control over the economic benefits, and are therefore not considered a separate performance obligation nor an identified asset in terms of IFRS 16.
Transition and transformation projects for establishing new services to large business customers (for example workspace management services) are considered separate performance obligations, as the customer can benefit from the project deliverables on their own. Revenue is recognized over time (percentage of completion during the project phase). The projects sometimes include the delivery of peripheral equipment and software licenses. These are not considered as separate performance obligations if KPN performs the installation and/or must provide ongoing support as part of the transition project. If not part of a transition project, revenue for peripheral equipment is recognized as revenue at a point in time (upon delivery of the equipment), whereas revenue for licenses with ongoing support is recognized over time (on a monthly basis).
The Wholesale segment bills customers at (regulated) tariffs that may be disputed by other operators and regulators. A contract liability is recognized in case the invoiced revenue is not considered highly probable.
Handset sales are a separate performance obligation and are recognized as revenue at a point in time (upon delivery of the handset equipment). The amount of revenue allocated to the handset less the amount charged to the customer upfront is recognized as a contract asset if the payment to be received for the handset is conditional on the delivery of telco services, and as a financial receivable if the payment to be received is unconditional.
A handset sale combined with a postpaid subscription is treated as a consumer loan under the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft) if the consumer customer repays the handset in monthly instalments and the credit amount is above EUR 250. These handset instalment payments are not conditional on the delivery of the telco services. Therefore, a financial receivable is recognized for the instalments to be received (see Note 14). These receivables do not include a significant financing component and are therefore measured at nominal value.
The handsets sold and delivered by third parties, related to KPN subscription contracts, do not qualify as performance obligations for KPN. Handset-related dealer fees result in an unbilled receivable on the Statement of Financial Position, which is decreased when handset instalments are billed to the end-customer.
In 2021 and 2022, the time value of money was not significant and therefore not recorded.
Generally, the payment term is two weeks in the consumer market and 30 days in the business market.
KPN applies the practical expedients provided in IFRS 15 under which disclosure of amounts of consideration allocated to the remaining performance obligations (unsatisfied or partially satisfied) do not need to be disclosed. This applies to contracts with an original expected duration of less than one year or when KPN bills a fixed amount for network services provided. KPN recognizes revenue from network services in the amount to which KPN has a right to invoice the customer and this amount corresponds directly with the value of KPN\u2019s performance completed to date.
The disaggregation of the revenues per segment has been restated. Within the Business segment, EUR 137m service revenues that are related to core telco products have been restated from Tailored Solutions (large corporate customers with integrated solutions) to LCE (large corporate enterprises). Within the Consumer segment, EUR 8m revenues of a few services were restated from non-service revenues to service revenues (see Note 2).
| \u20ac\u00a0million | 2022 | 2021 (Restated) |
|---|---|---|
| Fixed-Mobile service revenues | 1,494 | 1,459 |
| Fixed-only service revenues | 758 | 782 |
| Postpaid-only service revenues | 246 | 241 |
| Legacy/other service revenues | 90 | 110 |
| Consumer service revenues | 2,588 | 2,592 |
| Non-service revenues1 | 269 | 265 |
| Total Consumer revenues | 2,857 | 2,857 |
| \u00a0 | \u00a0 | \u00a0 |
| Access & connectivity2 | 555 | 517 |
| IT services3 | 42 | 31 |
| SME service revenues | 596 | 548 |
| Access & connectivity2 | 521 | 534 |
| IT services & Other3 | 255 | 261 |
| LCE service revenues | 776 | 795 |
| Access & connectivity2 | 73 | 67 |
| IT services3 | 48 | 46 |
| Service management | 171 | 176 |
| Tailored Solutions service revenues | 292 | 289 |
| Business service revenues | 1,664 | 1,632 |
| Non-service & other revenues1 | 133 | 130 |
| Total Business revenues | 1,797 | 1,762 |
| \u00a0 | \u00a0 | \u00a0 |
| Mobile service revenues | 178 | 156 |
| Broadband service revenues | 296 | 293 |
| Other service revenues4 | 214 | 233 |
| Wholesale service revenues | 688 | 681 |
| Non-service revenues | 1 | 2 |
| Total Wholesale revenues | 689 | 683 |
| \u00a0 | \u00a0 | \u00a0 |
| NOI and Other (incl. eliminations) | -20 | -32 |
| \u00a0 | \u00a0 | \u00a0 |
| Total | 5,324 | 5,270 |
The core principle is that revenue is recognized to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which KPN expects to be entitled in exchange for those goods or services. Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to KPN and the amount of revenue and associated costs can be measured reliably.
KPN follows the five-step process of IFRS 15 to recognize revenue. After a contract with a customer has been entered into, the separate performance obligations are identified, which are the distinct goods and services promised to the customer (the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer, and the transfer of goods or services to the customer are separately identifiable from other promises in the contract). The next steps are the determination of the transaction price and the allocation to the performance obligations. Allocation of the transaction price to performance obligations is based on standalone selling prices, which are based on our price lists and therefore readily available. The final step is to recognize revenue when a performance obligation is satisfied. Revenue is recognized either at a point in time or over time. In general, telco and IT services are delivered over time, whereas handsets and peripheral and network equipment, in case they are treated as separate performance obligations, are delivered at a point in time.
Revenue for variable considerations, including revenue under dispute, is recognized only when it is highly probable which, in some cases, requires significant judgment.
An adjustment for the time value of money is made to a transaction price for the effects of financing if time between recognition of revenue and cash receipt is expected to exceed 12 months and if it provides the customer with a significant benefit.
If KPN transfers goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized in case the earned consideration is conditional. A financial receivable is recognized if KPN\u2019s right to an amount of consideration is unconditional (only the passage of time is required before payment of the consideration is due).
KPN recognizes contract liabilities in the Statement of Financial Position for considerations received in respect of unsatisfied performance obligations. Contract liabilities are recognized as revenue when KPN performs under the contract.
At the start of a contract with a customer, in case services or goods are delivered by sub-contractors, KPN determines whether its performance obligation is to provide the specified goods or services itself (KPN acts as a principal) or to arrange for another party to provide those goods or services (KPN acts as an agent) based on the agreed terms and conditions with the customer and the sub-contractor, as well as the nature of the goods and services promised to the customer. When KPN acts as an agent, the revenue recognized is not the gross amount but the net amount that KPN is entitled to retain for its services as the agent.
The incremental costs of obtaining a contract with a customer are recognized as an asset if KPN expects to recover those costs. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer, regardless of whether the contract is obtained or not. Costs to fulfill a contract are recognized as an asset if:
The costs relate directly to a contract; and
The costs generate or enhance resources that will be used in satisfying performance obligations in the future; and
The costs are expected to be recovered.
Capitalized contract costs are amortized on a linear basis over the period in which KPN transfers the related goods or services to the customer. KPN applies the practical expedient to immediately expense contract costs when the asset that would have resulted from capitalizing such costs would have been amortized within one year or less.
Assets recognized for costs to obtain a contract and costs to fulfill a contract are subject to impairment testing.
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Other income | 50 | 852 |
Other income in 2022 relates to the book gain on the sale of assets to Glaspoort B.V. (EUR 47m) and book gains on the sale of various fixed assets (EUR 3m).
Other income in 2021 relates to the book gain on the sale of the subsidiary Glaspoort B.V. (EUR 830m), see Note 21 for further information on the sale of subsidiaries, the book gain on the sale of assets to Glaspoort B.V. (EUR 15m), book gains on the sale of various fixed assets (EUR 5m) and adjustments to the book result on sale of subsidiaries in 2019 and 2020 (EUR 1m).
Other income includes gains on the sale of property, plant and equipment, gains on the sale of subsidiaries as well as other gains not related to KPN\u2019s operating activities.
| \u20ac\u00a0million | 2022 | 2021 Restated |
|---|---|---|
| Salaries and wages | 727 | 748 |
| Retirement benefits | 79 | 79 |
| Social security contributions | 92 | 84 |
| Additional labor capacity | 47 | 58 |
| Own work capitalized | -134 | -116 |
| Other | -2 | -8 |
| Total personnel expenses | 809 | 844 |
Employee redundancy costs are not included in personnel expenses but in other operating expenses (see Note 18).
| Number of own personnel (FTE) per segment1 | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Consumer | 2,538 | 2,566 |
| Business | 2,638 | 2,694 |
| Wholesale | 222 | 213 |
| NOI | 3,090 | 3,232 |
| Other | 963 | 993 |
| Total FTE | 9,452 | 9,699 |
KPN has granted shares (equity-settled) and share-based awards (cash-settled) on its shares to members of the Board of Management and senior management. The conditionally granted awards will vest after three years if the employee is still employed by KPN. For awards granted until 2018, vesting is based on individual vesting of 25% relative total shareholder return (TSR) versus peer group, 25% free cash flow, 25% earnings per share, 12.5% on sustainability/environmental targets and 12.5% on stakeholder/customer targets. Vesting of non-financial targets is subject to achieving a cumulative net profit during the vesting period of three years (i.e. a qualifier for vesting). The peer group and the vesting schedule can be found under \u2018Long-term incentives\u2019 in the Remuneration Report.
As of 2019, the targets for the LTI plan are set as follows: 70% financial targets, of which 45% on cumulative free cash flow over the plan period and 25% on relative TSR measured against the STOXX Europe 600 Telecommunications index and 30% non-financial targets, determined at the start of a new plan from the following categories: (i) Sustainability; (ii) Reputation; (iii) Social; (iv) Key business projects; and (v) Market share.
The main features of the awards granted to KPN management are summarized in the following table.
| \u00a0 | Board of Management | Senior management | Maximum term | Settlement type1 | Vesting period | Holding period after vesting of/until |
|---|---|---|---|---|---|---|
| 2018 | X | X | 5 years | Equity2 | 3 years | 2 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2019 | X | X | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2020 | X | \u00a0 | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2021 | X | \u00a0 | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2022 | X | \u00a0 | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
The total compensation expense associated with the share plans was EUR 11m in 2022 (2021: EUR 8m). The related liability (for cash-settled shares) on 31 December 2022 was EUR 10m (31 December 2021: EUR 8m). This liability is included under Other payables. For the 2019 Share Plan and share-based awards, the service conditions were met in 2022. The intrinsic value at vesting was EUR 8m (2021: EUR 6m).
The following table presents the number of shares and share-based awards in thousands under the share plans.
| \u00a0 | Total 31 Dec 2020 | Granted/ additional vesting1 | Exercised/ Vested | Forfeited | Total 31 Dec 2021 | Granted/ additional vesting2 | Exercised/ Vested | Forfeited3 | Total 31 Dec 20224 | -of which: Non- vested |
|---|---|---|---|---|---|---|---|---|---|---|
| 2018 Share-based awards Sr. man. | 1,083 | - | -834 | -249 | - | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| 2018 Shares BoM/Sr. man. | 1,913 | - | -1,473 | -440 | - | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| 2019 Share-based awards Sr. man. | 2,022 | - | - | -265 | 1,757 | - | -1,619 | -139 | - | - |
| 2019 Shares BoM/Sr. man. | 1,137 | - | - | -30 | 1,107 | - | -1,020 | -87 | - | - |
| 2020 Share-based awards Sr. man. | 2,925 | - | - | -167 | 2,758 | - | - | -657 | 2,101 | 2,101 |
| 2020 Shares BoM | 1,809 | - | - | - | 1,809 | - | - | - | 1,809 | 1,809 |
| 2021 Share-based awards Sr. man. | - | 2,033 | - | - | 2,033 | - | - | -354 | 1,679 | 1,679 |
| 2021 Shares BoM | - | 1,409 | - | - | 1,409 | - | - | - | 1,409 | 1,409 |
| 2022 Share-based awards Sr. man. | \u00a0 | \u00a0 | \u00a0 | \u00a0 | - | 1,740 | - | -88 | 1,652 | 1,652 |
| 2022 Shares BoM | \u00a0 | \u00a0 | \u00a0 | \u00a0 | - | 1,157 | - | - | 1,157 | 1,157 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
The fair value of each award at the grant date is determined using the following assumptions:
| Assumptions | 2022 LTI | 2021 LTI |
|---|---|---|
| Risk-free interest rate based on euro government bonds for remaining time to maturity of 2.7 years | 0.7% | -0.5% |
| Expected dividend for KPN (based on one year\u2019s historical daily data preceding the date of award) | 4.7% | 5.6% |
| Expected volatility (PSP grant based on 2.7 years\u2019 historical daily data) used for TSR | 26.3% | 27.0% |
| Share price at date of award (closing at grant date) | \u20ac\u00a03.47 | \u20ac\u00a02.82 |
The following paragraphs detail the actual remuneration of the Board of Management. Please refer to the Remuneration Report for the executive pay policy.
The remuneration of the Board of Management, representing the costs incurred by the company measured under IFRS principles, is as follows:
| Name current member | Year | Salary | STI1 | LTI2 | Pension Cost3 | Social security and other compensation4 | Total |
|---|---|---|---|---|---|---|---|
| J.F.E. Farwerck | 2022 | 879,375 | 716,568 | 1,108,118 | 219,036 | 30,022 | 2,953,119 |
| \u00a0 | 2021 | 875,000 | 936,775 | 971,240 | 213,246 | 30,364 | 3,026,625 |
| H.C. Figee | 2022 | 678,375 | 368,493 | 528,456 | 116,895 | 37,160 | 1,729,379 |
| \u00a0 | 2021 | 675,000 | 481,815 | 324,249 | 109,638 | 37,416 | 1,628,118 |
| J.P.E. van Overbeke | 2022 | 653,250 | 354,872 | 561,278 | 154,304 | 14,558 | 1,738,262 |
| \u00a0 | 2021 | 650,000 | 463,944 | 526,584 | 152,525 | 14,814 | 1,807,867 |
| M.W.M. Snoep | 2022 | 653,250 | 354,872 | 550,466 | 126,138 | 29,814 | 1,714,540 |
| \u00a0 | 2021 | 650,000 | 463,944 | 462,514 | 117,328 | 30,070 | 1,723,856 |
| B. Fouladi | 2022 | 653,250 | 354,872 | 561,278 | 126,214 | 12,645 | 1,708,259 |
| \u00a0 | 2021 | 650,000 | 463,944 | 501,586 | 124,975 | 12,901 | 1,753,406 |
| H. Garssen | 2022 | 502,500 | 272,978 | 408,082 | 82,638 | 14,572 | 1,280,770 |
| \u00a0 | 2021 | 500,000 | 356,880 | 300,294 | 81,984 | 14,828 | 1,253,986 |
| Total current members | 2022 | 4,020,000 | 2,422,655 | 3,717,678 | 825,225 | 138,771 | 11,124,329 |
| \u00a0 | 2021 | 4,000,000 | 3,167,302 | 3,086,467 | 799,696 | 140,393 | 11,193,858 |
See the Remuneration Report for the number of shares under the share plans per individual board member.
See the Insider Transactions section for stock ownership of members of the Board of Management and Supervisory Board.
Please see the Remuneration Report for the actual fee received by each member of the Supervisory Board. The total fee for 2022 is EUR 648,215 (2021: EUR 652,889).
For equity-settled plans, the fair value of shares granted to employees is measured at grant date. For cash-settled plans, the fair value of the liability for the awards granted is remeasured at each reporting date and at settlement date.
The costs of share-based compensation plans are determined based on the fair value of the shares and the number of shares expected to vest. On each balance date, KPN determines whether it is necessary to revise the expectation of the number of shares that will vest. The fair value is recognized as personnel expense in profit or loss over the vesting period of the shares against an increase in equity in the case of equity-settled share-based compensation plans and against the recognition of a liability in the case of cash-settled share-based compensation plans.
Other operating expenses comprise, among others, a net addition to the restructuring provision (see Note 18).
The fees listed below relate to the services provided to KPN and its consolidated group entities by Ernst & Young Accountants LLP, as well as by other Dutch and foreign-based EY individual partnerships and legal entities, including their tax services and advisory groups:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Financial statements audit fees | 3.8 | 3.9 |
| Other assurance fees | 0.8 | 0.9 |
| Total audit fees, charged by Ernst & Young Accountants LLP | 4.7 | 4.7 |
| Tax fees | - | 0.2 |
| Total | 4.7 | 5.0 |
The financial statements audit fees include the fees for professional services rendered for the audit of KPN\u2019s annual financial statements and the annual statutory financial statements of subsidiaries or services that are normally provided by the auditor in connection with the audits.
The other assurance fees include the fees incurred for assurance and related services that are reasonably related to the performance of the audit or review of KPN\u2019s Financial Statements, such as revenue and IT-related assurance services and regulatory-related assurance services.
Operating expenses are divided into direct cost (cost of goods and services) and indirect cost (IT/TI, personnel expenses and other operating expenses).
Cost of goods and services are costs incurred in the context of a sales transaction and include subscriber acquisition and retention costs and traffic expenses. These costs are expensed as incurred, except handset fees paid to dealers and transaction-related dealer commissions that are capitalized and amortized over the contract term. The cost of a handset is expensed when the handset is sold (as incurred), both as an individual sale or as a component of a transaction in combination with a subscription.
Information technology (IT) expenses relate to KPN\u2019s IT environment and include licenses and maintenance expenses for software and/or IT hardware when not directly related to a sales transaction. Technical infrastructure (TI) expenses are expenses related to KPN\u2019s fixed and mobile networks.
Personnel expenses are all expenses related to KPN\u2019s workforce, both related to own employees and external personnel from employment agencies.
Other operating expenses include expenses related to marketing and communication, billing and collection, housing and facilities.
| \u20ac\u00a0million | Notes | 2022 | 2021 |
|---|---|---|---|
| Finance income | \u00a0 | 8 | - |
| Interest on borrowings | \u00a0 | -192 | -192 |
| Interest expense lease liability | [19] | -18 | -20 |
| Interest on other provisions | \u00a0 | -1 | -3 |
| Other interest expenses | \u00a0 | -3 | -8 |
| Finance costs | \u00a0 | -213 | -223 |
| Hedge ineffectiveness | \u00a0 | 10 | - |
| Amortizable part of hedge reserve | \u00a0 | -15 | -15 |
| Amortization discontinued fair value hedges | \u00a0 | 18 | 22 |
| Derivative financial instruments not qualified for hedge accounting | [13.3] | -11 | -17 |
| Exchange rate differences | \u00a0 | 3 | 5 |
| Fair value loss on contingent cash receivable Glaspoort | [13.1 | -16 | -2 |
| Other | \u00a0 | -12 | -4 |
| Other financial results | \u00a0 | -22 | -11 |
| Total | \u00a0 | -227 | -234 |
Finance income in 2022 was EUR 8m (2021: EUR 0m), mainly due to interest income on the contingent cash receivable related to Glaspoort, partly offset by negative interest on cash balances.
Finance costs decreased by EUR 10m, which was mainly related to lower other interest expenses. Lower interest cost related to debt redemptions were largely offset by higher interest rates on floating rate debt. Interest on borrowings included a non-cash amount of EUR 6m (2021: EUR 6m) relating to debt issuance and similar costs, which are amortized over the remaining life of the respective bonds using the effective interest rate method.
Other financial results increased by EUR 11m (higher net cost), mainly due to a EUR 16m fair value loss on the contingent cash receivable related to Glaspoort (2021: EUR 2m loss), EUR 9m costs in 2022 related to the tender of the USD hybrid bond (included in Other), EUR 4m lower gains from amortization of discontinued fair value hedges and EUR 2m lower exchange rate gains, partly offset by EUR 10m gain on hedge ineffectiveness (2021: EUR 0m) and EUR 6m lower fair value loss on derivative financial instruments not qualified for hedge accounting due to maturing swaps.
The book loss, which is recognized as a result of the sale of E-Plus in 2014 (see schedule net DTA book loss sale of E-Plus), was used to offset KPN\u2019s taxable income in the Netherlands in 2014 up to and including 2022, and will be used to offset a significant part of KPN\u2019s taxable income in the Netherlands in the coming years. KPN's unrealized losses as per 2021 are realized in 2022. Due to the realization in 2022, the current tax expense in 2022 is significantly lower compared to 2021.\u00a0
KPN has an agreement with the Dutch tax authorities with respect to the application of the Dutch innovation box tax regime. This is a facility under Dutch corporate income tax law where profits attributable to innovation are taxed at an effective rate of 9.0% (2021: 9.0%). The application of the innovation box resulted in a benefit of EUR 29m over 2022 (2021: EUR 40m). The higher iBox benefit in 2021 is a result of the bookgain related to the realization of the Glaspoort joint venture.
In 2021, the realization of the joint venture (Glaspoort) with APG triggered a taxable event, which has been discussed and agreed with the Dutch tax authorities (see Note 21). Also, the extension of the fiber roll-out between KPN, APG and Glaspoort, will follow the same principles for tax purposes as the initial transaction (see Note 12).
At the end of 2022, the German Tax Authorities finalized their tax audit of the remaining/former E-Plus companies. The overall net impact is zero. As all relevant tax years have been audited, KPN will now proceed to dissolve the respective legal entities.
See Note 21 for the impact of the acquisitions, which are separately liable for income taxes, and disposals of subsidiaries and business units.
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Current tax | 9 | -292 |
| Deferred taxes | -236 | -52 |
| Income tax (charge)/benefit from continuing operations | -227 | -344 |
The reconciliation from the Dutch statutory tax of 25.8% (2021: 25%) to the effective tax rate (ETR) of 23.0% (2021: 21.1%) is explained in the following table.
| \u00a0 | 2022 | 2021 - restated | ||
|---|---|---|---|---|
| \u00a0 | \u20ac\u00a0million | ETR | \u20ac\u00a0million | ETR |
| Profit before income tax from continuing operations excluding associates and joint ventures | 987 | \u00a0 | 1,628 | \u00a0 |
| Taxes at Dutch statutory tax rates | -255 | 25.8% | -407 | 25.0% |
| Dutch tax rate adjustment | - | 0.0% | 14 | -0.8% |
| Not taxable income, non deductible expenses and liquidation losses | -2 | 0.2% | 1 | -0.1% |
| Innovation tax facilities current year | 29 | -2.9% | 40 | -2.4% |
| Deferred tax related to prior years | - | 0.0% | 7 | -0.4% |
| Deferred tax related to current year | -3 | 0.3% | 4 | -0.2% |
| Tax benefit perpetual EUR instrument | 6 | -0.6% | 3 | -0.1% |
| Other | -1 | 0.1% | -5 | 0.3% |
| Income tax benefit/(charge) from continuing operations | -227 | 23.0% | -344 | 21.1% |
Changes in Dutch tax rates resulted in a benefit of EUR 14m in 2021 due to the valuation of our net deferred tax assets, while the tax exemption of the result on disposal of subsidiaries and business units resulted in a tax loss of EUR 2m in 2022 (2021: EUR 1m benefit). Furthermore, in 2021, a one-time tax benefit of EUR 7m has been claimed due to an update of tax calculations on real estate and lease property depreciation that relate to deferred tax positions reported in prior years.
| \u20ac\u00a0million | Tax loss & other carry forwards1 | Unrealized liquidation losses2 | Bonds & hedges3 | Restriction on depreciation4 | Fiscal goodwill5 | Lease Liabilities6 | Other | Offset against deferred tax liabilities | Total7 |
|---|---|---|---|---|---|---|---|---|---|
| Balance at 31 December 2020 | 81 | 501 | 64 | 94 | 4 | 206 | 61 | -446 | 567 |
| Income statement benefit/(charge) | -8 | - | -4 | -20 | -5 | -16 | 28 | 33 | 7 |
| Transfer to current tax | -73 | - | - | 1 | - | - | - | - | -72 |
| Tax charged to OCI | - | - | -10 | - | - | - | - | - | -10 |
| Tax rate changes8 | - | 16 | 2 | 6 | 1 | 11 | - | -22 | 14 |
| Balance at 31 December 2021 | - | 517 | 52 | 81 | - | 201 | 89 | -435 | 506 |
| Income statement benefit/(charge) | - | - | - | -13 | - | 11 | -18 | 6 | -14 |
| Transfer to current tax | -225 | - | - | - | - | - | 3 | - | -222 |
| Tax charged to OCI | - | - | -13 | - | - | - | - | 3 | -10 |
| Tax rate changes | - | - | - | - | - | - | - | - | - |
| Other | 517 | -517 | - | - | - | - | 7 | -7 | - |
| Balance at 31 December 2022 | 293 | - | 39 | 68 | - | 212 | 82 | -433 | 261 |
| \u20ac\u00a0million | Net DTA | Realized | Unrealized | Offset by DTL | Net Loss |
|---|---|---|---|---|---|
| Balance at 31 December 2020 | 547 | 46 | 501 | - | 2,188 |
| Movement 2021 | -30 | -46 | 16 | - | -184 |
| Balance at 31 December 2021 | 517 | - | 517 | - | 2,004 |
| Movement 2022 | -224 | 293 | -517 | - | -870 |
| Balance at 31 December 2022 | 293 | 293 | - | - | 1,134 |
| \u20ac\u00a0million | Software development1 | Goodwill depreciation2 | PPA3 | Right of use assets4 | Other | Offset against deferred tax assets | Total |
|---|---|---|---|---|---|---|---|
| Balance at 31 December 2020 | 100 | 102 | 44 | 189 | 11 | -446 | - |
| Income statement benefit/(charge) | -24 | 10 | -7 | -14 | 2 | 33 | - |
| Tax rate changes | 7 | 4 | 1 | 10 | - | -22 | - |
| Balance at 31 December 2021 | 83 | 116 | 38 | 185 | 13 | -435 | - |
| Income statement benefit/(charge) | -10 | 1 | -8 | 10 | 1 | 6 | - |
| Tax charged to OCI | - | - | - | - | -3 | 3 | - |
| Tax rate changes | - | - | - | - | - | - | - |
| Other | - | - | 9 | - | - | -7 | 2 |
| Balance at 31 December 2022 | 73 | 117 | 39 | 195 | 11 | -433 | 2 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| \u00a0 | 31 December 2022 | 31 December 2021 - restated | ||||
|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset |
| Koninklijke KPN \u2013 corporate tax1 | 1,134 | 293 | 293 | - | - | - |
| Other | 1042 | 22 | - | 723 | 15 | - |
| Total KPN Group | 1,238 | 315 | 293 | 72 | 15 | - |
| \u00a0 | 31 December 2022 | 31 December 2021 - restated | ||||
|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset |
| 2023 | - | - | - | - | - | - |
| 2024 | - | - | - | - | - | - |
| 2025 | - | - | - | - | - | - |
| 2026 | 4 | 1 | - | 3 | 1 | - |
| Later | 57 | 12 | - | 54 | 11 | - |
| Unlimited | 1,177 | 302 | 293 | 15 | 3 | - |
| Total | 1,238 | 315 | 293 | 72 | 15 | - |
The current income tax charge is calculated in accordance with the prevailing tax regulations and rates, taking into account non-taxable income and non-deductible expenses. The current income tax expense reflects the amount for the current reporting period that KPN expects to recover from or pay to the tax authorities. Income tax related to items recognized directly in equity/OCI is recorded in equity/OCI and not in profit or loss, with an exception for (hybrid) financial instruments classified as equity.
KPN\u2019s management periodically evaluates positions taken in the tax returns regarding situations in which uncertainty on a tax position exists over whether the relevant taxation authority will accept the tax treatment under law. These uncertain tax positions (\u2018UTP\u2019) will be recognized if the amount can be reliably estimated and when the chance of a cash outflow is estimated as probable. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote.
Deferred income tax positions are recognized for temporary differences between the tax basis of assets and liabilities and their carrying values. DTAs are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. DTAs are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Both the recognized and unrecognized DTAs are reassessed on each reporting date based on available projections. If future taxable profits are insufficiently available, derecognition may become inevitable unless certain exceptions can be applied. DTAs are recorded for deductible temporary differences associated with investments in subsidiaries and associates. They are recorded only to the extent that it is probable that the temporary differences will reverse in the foreseeable future, and taxable profit will be available against which the temporary differences can be utilized.
DTLs are recognized for all taxable temporary differences except when they arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the profit or loss reported in the Statement of Profit or Loss nor the taxable profit or loss. Also, no DTLs are recorded for taxable temporary differences associated with investments in subsidiaries and associates when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax positions are stated at nominal value and are measured at the corporate income tax rates KPN expects to be applicable in the year when the asset is realized or liability is settled based on enacted or substantially enacted tax laws.
If a tax provision is recognized for a UTP that relates to deferred taxes, the UTP will be netted against these deferred taxes. DTAs and DTLs are netted if there is a legally enforceable right to offset current tax assets against current tax liabilities and the DTAs/DTLs relate to income taxes levied by the same taxation authority on the same taxable entity or if, in the case of different taxable entities, there is an intention either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
The following table shows the income and share data used in the calculations of the basic and diluted EPS.
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Profit for the year from continuing operations | 766 | 1,283 |
| Profit for the year from discontinued operations | -5 | 5 |
| Profit for the year | 761 | 1,288 |
| Profit attributable to non-controlling interests | - | - |
| Deduction for perpetual capital securities | -18 | -10 |
| Adjusted profit (loss) attributable to ordinary shareholders of the company | 743 | 1,278 |
| Weighted average number of subscribed ordinary shares | 4,080,828,686 | 4,178,961,845 |
| Dilution effects: non-vested shares | 5,615,541 | 4,363,596 |
| Weighted average number of subscribed ordinary shares including dilution effects | 4,086,444,227 | 4,183,325,441 |
Earnings per ordinary share after taxes attributable to equity holders of the company for the year:
| \u20ac | 2022 | 2021 |
|---|---|---|
| Basic (continuing operations) | 0.18 | 0.30 |
| Diluted (continuing operations) | 0.18 | 0.30 |
| Basic (discontinued operations) | - | - |
| Diluted (discontinued operations) | - | - |
| Basic (total, including discontinued operations) | 0.18 | 0.31 |
| Diluted (total, including discontinued operations) | 0.18 | 0.31 |
Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
Non-vested shares are regarded to have potential dilutive effects on the ordinary shares.
Coupons and carrying amount adjustments on the perpetual capital securities were deducted from the profit attributable to equity holders, since the perpetual hybrid bonds represent equity but do not constitute profit attributable to ordinary shareholders.
The total basic earnings per share include EUR 0.06 (2021: EUR 0.08) tax expenses.
| \u20ac\u00a0million | Land and buildings | Plant and equipment | Other tangible non-current assets | Assets under construction | Total |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 405 | 4,863 | 38 | 116 | 5,422 |
| Investments1 | 44 | 937 | 13 | 3 | 997 |
| Depreciation | -46 | -872 | -15 | - | -933 |
| Impairments and retirements | - | -8 | - | -1 | -10 |
| Other | -2 | -9 | -2 | - | -13 |
| Closing net book value | 401 | 4,912 | 34 | 118 | 5,463 |
| Cost | 1,569 | 9,756 | 79 | 118 | 11,521 |
| Accumulated depreciation/impairments | -1,168 | -4,845 | -45 | - | -6,058 |
| Balance at 31 December 2021 | 401 | 4,912 | 34 | 118 | 5,463 |
| Investments | 25 | 881 | 3 | 32 | 942 |
| Depreciation | -44 | -767 | -12 | - | -823 |
| Impairments and retirements | -2 | -8 | - | -2 | -12 |
| Other | -2 | - | - | - | -2 |
| Closing net book value | 377 | 5,018 | 24 | 148 | 5,568 |
| Cost | 1,580 | 9,280 | 56 | 148 | 11,064 |
| Accumulated depreciation/impairments | -1,202 | -4,262 | -32 | - | -5,496 |
| Balance at 31 December 2022 | 377 | 5,018 | 24 | 148 | 5,568 |
| PPE category | Depreciation period |
|---|---|
| Land | No depreciation |
| Buildings | 14-33 years |
| Network equipment | 3-7 years |
| Fiber network infrastructure | 30 years |
| Copper network infrastructure | 5-10 years |
| Office equipment | 4-10 years |
The assets\u2019 residual values and useful lives are reviewed at least annually and adjusted if appropriate.
KPN's strategy includes, among others, accelerating the roll-out of fiber, which affects the depreciation period of all new investments in copper infrastructure. As of 1 January 2019, depreciations of these investments were capped at 10 years.
In early 2020, KPN announced its plans to phase out its copper network after three years starting in early 2023 for existing addresses where fiber service delivery is available as per early 2020, and for the addresses in every then already announced fiber roll-out project under construction. Together with the current fiber roll-out these overlay addresses receive an announcement that copper will be phased out after three years. The depreciation of this part of the copper network was accelerated for an additional amount of EUR 18m in 2022 (2021: EUR 17m).
As of 1 October 2022, the depreciation period of switching equipment (IP routers) was revised from four to seven years. The impact on the depreciation expenses in 2022 was EUR -7m (expected impact 2023 is estimated at around EUR -27m).
PPE are valued at cost less depreciation and impairment. The cost include direct costs (materials, direct labor and work contracted out) and directly attributable overhead costs.
Asset retirement obligations are capitalized as part of the cost of tangible fixed assets and expensed as either depreciation over the assets\u2019 estimated useful life or as impairment charges.
PPE are depreciated using the straight-line method, based on estimated useful life, taking into account residual value. Land is not depreciated. PPE are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the assets concerned may not be recoverable. An impairment loss is recognized for the amount by which the assets\u2019 book value exceeds its recoverable amount.
Impairments are reversed if and to the extent that the impairment no longer exists. The recoverable amount is defined as the higher of an assets\u2019 fair value less costs of disposal and its value in use.
Interest is capitalized as an increase in PPE if the construction of assets takes a substantial period of time and the amount is material.
| \u20ac\u00a0million | Goodwill | Customer relationships | Software acquired from third parties | Software internally generated | Software in development | Licenses | Other | Total |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 1,496 | 175 | 100 | 305 | 27 | 1,132 | 3 | 3,238 |
| Investments | - | - | 31 | 182 | 9 | - | 4 | 226 |
| Changes in consolidation1 | -64 | - | - | - | - | - | - | -64 |
| Amortization | - | -26 | -61 | -199 | - | -100 | -1 | -387 |
| Impairments | - | - | -1 | -6 | - | - | - | -8 |
| Reclassifications | - | -1 | -1 | 1 | - | - | 1 | - |
| Closing net book value | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Cost | 2,089 | 326 | 177 | 650 | 35 | 1,779 | 17 | 5,074 |
| Accumulated amortization/impairments | -657 | -178 | -108 | -367 | - | -747 | -11 | -2,068 |
| Balance at 31 December 2021 | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Investments | 7 | - | 20 | 192 | 29 | - | - | 247 |
| Changes in consolidation2 | - | 9 | - | - | - | - | - | 9 |
| Amortization | - | -25 | -45 | -189 | - | -100 | -1 | -361 |
| Impairments | - | -4 | -1 | -7 | -8 | - | - | -19 |
| Reclassifications | - | - | 2 | -1 | 1 | - | - | 2 |
| Closing net book value | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| Cost | 2,096 | 335 | 136 | 604 | 57 | 1,779 | 17 | 5,025 |
| Accumulated amortization/impairments | -657 | -207 | -92 | -326 | - | -847 | -12 | -2,141 |
| Balance at 31 December 2022 | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Consumer | 743 | 743 |
| Business1 | 661 | 654 |
| Wholesale | 35 | 35 |
| Total | 1,439 | 1,432 |
In accordance with IAS 36, KPN assesses goodwill for impairment at the end of each year and when a triggering event occurs. The annual impairment tests as at 31 December 2022 did not indicate that the book value of KPN\u2019s goodwill is not recoverable. KPN\u2019s market capitalization on 31 December 2022 was higher than the book value of its equity. A test was performed of the recoverable amount of the book value of each cash-generating unit (CGU), based on their value-in-use, which was determined by using the discounted cash flow method.
Key assumptions used in the cash flow projections are estimated EBITDA, Capex, change in working capital and pre-tax weighted average cost of capital (WACC). The cash flow projections are management\u2019s best estimate based on the updated strategic plan and extrapolation to terminal values. Housing and facilities expenses, which includes energy costs, are expected to increase by around 50% in 2023 and 10% in 2024. After 2024, energy costs are expected to normalize. The WACC is calculated using a capital asset pricing model. The terminal growth rate for the period after 10 years is updated consistently in line with the changes in the discount rate. In 2022, the WACC and the terminal growth rate were higher compared to 2021.
For all three CGUs, the annual impairment tests in 2022 and 2021 resulted in significant positive headroom as at 31 December 2022 and 31 December 2021.
| CGU | EBITDA margin | Capex intensity | Discount rate | Terminal sales growth1 |
|---|---|---|---|---|
| Consumer 2022 | 49% \u2013 51% | 24% \u2013 28% | 7% \u2013 8% | 0.5% |
| Consumer 2021 | 53% \u2013 56% | 25% \u2013 30% | 6% \u2013 7% | -0.6% |
| Business 2022 | 31% \u2013 32% | 14% \u2013 16% | 7% \u2013 8% | 0.5% |
| Business 2021 | 30% \u2013 33% | 14% \u2013 16% | 6% \u2013 7% | -0.6% |
| Wholesale 2022 | 67% \u2013 73% | 34% \u2013 37% | 7% \u2013 8% | 0.5% |
| Wholesale 2021 | 69% \u2013 75% | 35% \u2013 39% | 6% \u2013 7% | -0.6% |
The sensitivity analyses on the impairment test, resulting from a change in the key assumptions, showed that the headroom of the CGUs is more than sufficient. The analyses were performed for each key assumption separately. For example, a 1% higher discount rate, a 20% higher Capex, a 1% lower terminal growth rate or a 20% lower EBITDA in each of the CGUs would not lead to a goodwill impairment.
The excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination is recorded as goodwill. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is allocated to CGUs for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the synergies of the business combination. Goodwill is carried at cost less accumulated impairment losses and tested for impairment annually or whenever there is an indication that goodwill may be impaired. Goodwill is impaired if the recoverable amount is lower than the book value. The recoverable amount is defined as the higher of the fair value less costs of disposal and the value in use of the CGU concerned. Impairment losses on goodwill are not reversed in the event that circumstances that triggered the impairment have changed.
Licenses and software are valued at cost less amortization and impairment. Amortization is calculated using the straight-line method over the economic useful life and commences at the date that services can be offered (available for use). Internally developed and acquired software which is not an integral part of PPE, is capitalized on the basis of the costs incurred, which includes direct costs and directly attributable overhead costs incurred.
Other intangible assets, such as customer relationships and trade names acquired in business combinations, are capitalized at their fair values at acquisition date and are amortized using the straight-line method over the economic useful life.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. An impairment loss is recognized for the amount by which the book value of the licenses exceeds its recoverable amount. Impairments are reversed if and to the extent that the impairment no longer exists. Intangible assets not yet available for use are tested annually for impairment or whenever KPN has an indication that the intangible fixed assets may be impaired. For example, licenses are tested as part of a CGU as licenses do not generate independent cash flows.
The amortization periods of the intangible assets with finite lives are 5-20 years for licenses, 3-5 years for software and 4-20 years for other intangible assets.
KPN holds several equity investments accounted for using the equity method of which Glaspoort (see below) is the most significant. Other equity investments are not material, individually nor in aggregate. Their combined carrying value at 31 December 2022 is EUR 7m (31 December 2021: EUR 8m) and KPN's share in their net result amounted to a loss of EUR -1m in 2022 (2021: nil).
Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. See Note 21 for more information on the sale of 50% of the shares of Glaspoort B.V. in 2021.
Glaspoort is classified as a joint venture based on the assessment of ownership and voting power (50/50 with the joint venture partner) and the joint control established through the joint venture agreement between the shareholders. The assessment includes, among others, the following:
KPN's option to purchase one additional share in Glaspoort. This option is exercisable between the 5th and the 8th anniversary of the transaction (9 June 2021) provided certain criteria are met, and in any case after the 8th anniversary.
KPN's influence on Glaspoort's relevant activities through KPN's presence in the governance structure.
KPN is anchor tenant on Glaspoort's network and will also be one of its suppliers through a number of operational contracts between KPN and Glaspoort.
The assessment whether joint control remains in place is reviewed annually.
KPN accounts for its interest in Glaspoort using the equity method in the Consolidated Financial Statements. KPN initially recognized its interest in the joint venture at its fair value (EUR 451m), based on the total consideration received (see Note 21). The initial fair value has been allocated to equity of Glaspoort, determined under application of KPN's accounting policies, and goodwill. In determining equity, intangible assets of EUR 878m have been recognized in the initial balance sheet of Glaspoort, which mostly relate to contractual relationships held by Glaspoort, with - among others - KPN. The sale of the additional scope projects to Glaspoort in December 2021 (refer below), which is treated as a sale of assets, has been used as an input to determine the fair value of the intangible assets. The intangible assets are amortized over a period of 30 years.
In December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) for the sale of the additional scope from Glaspoort. Of this amount, EUR 60m has been received in cash upon closing of the transaction in 2021. The remaining amount (EUR 110m) will be received in annual installments based on progress of the roll-out. Upon start of the roll-out activities of the additional scope projects by Glaspoort, KPN deems its obligations regarding the realization of the additional scope projects fulfilled. Until such time, KPN recognizes the amount received as contract liability. Upon start of the roll-out activities by Glaspoort, KPN recognizes the related deferred consideration as receivable (contract asset), releases the related prepayment (from contract liabilities) and recognized 50% of the agreed consideration as other income. The remaining 50% is recognized over time as part of the result from joint ventures following the requirements of IAS 28 on downstream transactions.
At 31 December 2022, projects with a transaction value of EUR 124m have started (31 December 2021: EUR 30m). During 2022, KPN recognized EUR 47m in other income related to the sale of these additional scope projects (2021: EUR 15m). As at 31 December 2022, the deferred gain of EUR 59m is included in the net book value of the joint venture (31 December 2021: EUR 15m). The deferred consideration to be received for these projects is EUR 80m at 31 December 2022, of which EUR 51m is considered current (31 December 2021: EUR 20m, fully non-current). Of the prepayment received from Glaspoort at transaction date, EUR 16m remains as current contract liability (31 December 2021: EUR 49m).
On the closing date of the initial transaction (9 June 2021), both shareholders paid a share premium contribution of EUR 39m to Glaspoort's equity. In December 2021, both shareholders contributed an additional share premium of EUR 30m as part of the scope extension. During 2022, both shareholders contributed additional share premiums of EUR 24m each. KPN added the share premium payments to the carrying value of KPN's interest in the joint venture.
Summarized financial information of the joint venture, based on IFRS as applied by KPN, and reconciliation with the carrying amount of the investment in the consolidated financial statements, is set out below:
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Tangible fixed assets | 217 | 77 |
| Intangible assets | 989 | 908 |
| Other non-current assets | 43 | 11 |
| Current assets | 24 | 90 |
| Net cash and cash equivalents | 19 | 28 |
| Non-current liabilities | -158 | -99 |
| Current liabilities | -67 | -11 |
| Equity | 1,067 | 1,004 |
| KPN's share in equity | 533 | 502 |
| Goodwill from initial valuation at fair value | 15 | 15 |
| Carrying amount of the investment Equity Method | 548 | 517 |
| Less: Deferred gain on downstream transactions | -59 | -15 |
| Carrying amount of the investment | 489 | 503 |
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Revenue | 16 | 2 |
| Operating expenses | -7 | -6 |
| Depreciation, amortization & impairment expenses | -16 | -1 |
| Net finance result | 27 | - |
| Profit before tax | 19 | -5 |
| Income tax expense | -5 | 2 |
| Profit for the year | 14 | -3 |
| Total comprehensive income for the year | 14 | -3 |
| KPN's share of profit for the year | 7 | -2 |
| Adjustment PY | -1 | - |
| Release deferred gain on downstream transactions (net of tax) | 2 | - |
| KPN's total reported result from JV GP | 8 | -2 |
Both shareholders have committed to additional share premium contributions. On 31 December 2022, the remaining maximum commitment of each shareholder is EUR 163m, payable to Glaspoort based on funding requirements following its annual budget (31 December 2021; EUR 187m). Neither shareholder has additional funding obligations regarding Glaspoort. Glaspoort has entered into funding agreements with financial institutions to cover its financial commitments, which include its fiber roll-out activities. These funding agreements have been entered into on a non-recourse basis without any guarantees from the shareholders.
For information on transactions between Glaspoort and KPN and unsettled positions between Glaspoort and KPN, see Note 23. Glaspoort cannot distribute its profits without the consent from the two joint venture partners and not before 2026. After 2026, Glaspoort can distribute dividends only if specific criteria are met.
Equity investments accounted for using the equity method include associates and joint ventures.
Associates are entities over which KPN has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in KPN\u2019s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.
The statement of profit or loss reflects KPN\u2019s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of KPN\u2019s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, KPN recognizes its share of any change, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between KPN and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture through KPN's share of the profit (or loss) of associates and joint ventures.
The aggregate of KPN\u2019s share of profit or loss of an associate and a joint venture is shown in the statement of profit or loss.
The financial statements of the associate or joint venture are prepared for the same reporting period as KPN. When necessary, adjustments are made to bring the accounting policies in line with those of KPN.
After application of the equity method, KPN determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, KPN determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, KPN calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within \u2018share of profit/loss (-) of associates and joint ventures\u2019 in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control, and the fair value of the retained investment and proceeds from disposal, is recognized in profit or loss.
| \u00a0 | \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|---|
| \u20ac\u00a0million | Notes | Carrying amount | Fair value | Carrying amount | Fair value |
| Financial assets at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Contingent cash receivable regarding sale Glaspoort | [13.1] | 197 | 197 | 218 | 218 |
| Other current financial assets | [13.1] | 100 | 100 | 300 | 300 |
| Derivatives | [13.3] | 148 | 148 | 212 | 212 |
| Cash and cash equivalents, including classified as held for sale | [15] | 399 | 399 | 793 | 793 |
| Financial assets at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Trade and other receivables1 | [14.1] | 455 | 455 | 641 | 641 |
| Financial assets at FVOCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Financial receivables handsets | [14.1] | 158 | 158 | - | - |
| Equity investments | [13.1] | 76 | 76 | 49 | 49 |
| Total financial assets | \u00a0 | 1,534 | 1,534 | 2,213 | 2,213 |
| Financial liabilities FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Derivatives | [13.3] | 366 | 366 | 64 | 64 |
| Financial liabilities at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Borrowings | [13.2] | 5,368 | 5,203 | 6,744 | 7,223 |
| Lease liabilities | [19] | 923 | 923 | 873 | 873 |
| Trade and other payables2 | [20] | 955 | 955 | 973 | 973 |
| Total financial liabilities | \u00a0 | 7,612 | 7,447 | 8,654 | 9,132 |
| \u20ac\u00a0million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Contingent cash receivable regarding sale Glaspoort | - | - | 197 | 197 |
| Derivatives (cross-currency interest rate swap) | - | 123 | - | 123 |
| Derivatives (interest rate swap) and other | - | 25 | - | 25 |
| Financial assets at FVOCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Financial receivables handsets | - | - | 158 | 158 |
| Equity investments: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Unlisted securities | - | - | 76 | 76 |
| Total assets | - | 148 | 431 | 579 |
| Financial liabilities at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Derivatives (cross-currency interest rate swap) | - | 100 | - | 100 |
| Derivatives (interest rate swap) | - | 266 | - | 266 |
| Total liabilities | - | 366 | - | 366 |
| \u20ac\u00a0million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Other financial asset at fair value through profit or loss | - | - | 218 | 218 |
| Derivatives (cross-currency interest rate swap) | - | 117 | - | 117 |
| Derivatives (interest rate swap) and other | - | 95 | - | 95 |
| Financial assets at FVOCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Equity investments: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Unlisted securities | - | - | 49 | 49 |
| Total assets | - | 212 | 267 | 479 |
| Financial liabilities at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Derivatives (cross-currency interest rate swap) | - | 47 | - | 47 |
| Derivatives (interest rate swap) | - | 17 | - | 17 |
| Total liabilities | - | 64 | - | 64 |
Level 1: Fair value of instruments traded in active markets and based on quoted market prices.
Level 2: Instrument is not traded in an active market and fair value is determined by using valuation techniques based on maximum use of observable market data for all significant inputs.
Level 3: One or more of the significant inputs is not based on observable market data; the fair value is estimated using models and other valuation methods. The valuation of available-for-sale unlisted securities is based on a discounted cash flow model.
Financial assets are classified at initial recognition.
The classification of financial assets at initial recognition depends on the financial asset\u2019s contractual cash flow characteristics and KPN\u2019s business model for managing them.
KPN initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
For the purposes of subsequent measurement, financial assets are classified into four categories:
Financial assets at amortized cost (debt instruments);
Financial assets at fair value through other comprehensive income (OCI) with recycling of cumulative gains and losses (debt instruments);
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments);
Financial assets at fair value through profit or loss.
Upon sale in 2021 of the 50% interest in Glaspoort B.V. to Drepana Investments Holding B.V. (see Note 21), KPN received a cash consideration upon deal close of EUR 233m and a contingent cash receivable of EUR 234m. The contingent cash receivable, to be received in annual installments based on the roll-out progress of Glaspoort, is classified as a financial asset measured at fair value through profit or loss. The contingent cash receivable was initially valued at EUR 218m. As at 31 December 2022, the carrying value is EUR 197m (2021: EUR 218m), of which EUR 28m is current (2021: EUR 14m). In 2022, the book value increased with interest income of EUR 8m (2021: EUR 3m) and decreased with EUR 16m (2021: EUR 2m) due to a fair value adjustment and EUR 14m (2021: EUR 0m) due to received deferred payment. The fair value adjustment was recognized as a loss in other financial results.
Based on Glaspoort's current roll-out plan, KPN expects the final payment in 2027. The fair value of this contingent receivable is deemed equal to the net present value of the full amount of the installments to be received using the expected roll-out schedule as included in Glaspoort's initial business plan. A weighted average discount rate of 5.68% has been used based on the following elements:
A base-rate using mid-swap rates to account for the time value of money, plus
A credit spread mark-up to account for the risk of non-payment based on AA-rated credit curves resulting in a weighted average spread of ~0.1% over a 5-year tenor, plus
A mark-up to reflect the roll-out risk (mostly the risk of delay).
This includes several minority stakes of KPN Ventures. In 2022, additional investments for an amount of EUR 26m were acquired (2021: EUR 7m) and EUR 9m investments were sold (2021: nil).
These investments were irrevocably designated at fair value through OCI because KPN believes that the fluctuations in the fair value of these investments do not give a fair view of KPN\u2019s performance. In 2022, fair value net gains of EUR 10m were recognized (2021: EUR 5m).
The fair value of the equity investments of KPN Ventures is based, where applicable, on the price of the last fundraising round of the equity investment, investment valuations or the bid made in mergers and acquisitions transactions. The investment valuations take into account forward-looking estimates and judgments about the underlying business, market conditions and other factors.
Other current financial assets include investments in short-term money market funds of EUR 100m (2021: EUR 300m), which are held at fair value through profit or loss (FVPL). These funds have a low volatility, with an investment objective of preservation of principal.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Carrying amount | Fair value | Carrying amount | Fair value |
| Senior eurobonds EUR | 2,678 | 2,509 | 3,638 | 3,667 |
| Senior eurobonds GBP | 1,401 | 1,408 | 1,478 | 1,762 |
| Senior global bonds USD | 641 | 628 | 620 | 751 |
| Subordinated hybrid bonds classified as liability | 136 | 136 | 529 | 558 |
| Other borrowings | 511 | 521 | 480 | 484 |
| Total borrowings | 5,368 | 5,203 | 6,744 | 7,223 |
| > of which: current | 196 | 196 | 677 | 681 |
| > of which: non-current | 5,171 | 5,007 | 6,067 | 6,542 |
The fair value for eurobonds, global bonds and hybrid bonds is based on the listed price of the bonds. Other borrowings include commercial paper, cash collateral received on derivatives, bank overdrafts and other loans.
KPN\u2019s weighted average interest rate on total outstanding borrowings on 31 December 2022 was 3.6% after swaps (2021: 2.9%). KPN\u2019s weighted average interest rate on senior debt on 31 December 2022 was 3.5% after swaps (2021: 2.7%).
| million | Nominal | Carrying amount \u20ac | Nominal after swap \u20ac | Number of bonds |
|---|---|---|---|---|
| Senior eurobonds EUR | 2,981 | 2,678 | 2,981 | 5 |
| Senior eurobonds GBP | 1,250 | 1,401 | 1,452 | 2 |
| Senior global bonds USD | 595 | 641 | 450 | 1 |
KPN has an unlimited Global Medium-Term Notes program which is used to meet medium- to long-term funding requirements. As at 31 December 2022, the total amounts outstanding under this program were EUR 2,981m across five bonds (carrying value EUR 2,678m) and GBP 1,250m across two bonds (carrying value EUR 1,401m, swapped to EUR 1,452m nominal). In addition, KPN has a senior global bond with USD 595m outstanding (carrying value EUR 641m, swapped to EUR 450m nominal) which was issued under standalone documentation.
On 1 March 2022, KPN redeemed the 4.25% EUR\u00a0616m senior bond in line with its scheduled maturity. No new senior bonds have been issued during the year.
| million | Nominal | Nominal \u20ac | Coupon | Classification | Final maturity | First reset date | Swapped | Credit rating1 |
|---|---|---|---|---|---|---|---|---|
| USD hybrid bond | 146 | 113 | 7,000% | Liability | 28 Mar 2073 | 28 Mar 2023 | Fixed 6.37% | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 2,000% | Equity | Perpetual | 8 Feb 2025 | N/a | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 6,000% | Equity | Perpetual | 21 Dec 20272 | N/a | BB+/BB+/N.a. |
As at 31 December 2022, three hybrid bonds are outstanding with an aggregate nominal amount of EUR 1,113m after swaps. The USD 146m hybrid bond (carrying value EUR 136m, swapped to EUR 113m nominal) is included in borrowings, while the EUR 1,000m perpetual hybrid bonds are classified as equity. Both EUR hybrid bonds are subordinated debt instruments and are treated for 50% as equity and 50% as debt in KPN\u2019s gross and net debt definitions.
On 21 September 2022, KPN issued a new 6% EUR\u00a0500m perpetual Green Hybrid Bond under KPN\u2019s Green Finance Framework. With the proceeds, KPN will finance or refinance projects with positive environmental impact in three areas: (i) energy efficiency (network transformation including roll-out of fiber and modernization of KPN\u2019s mobile network), (ii) circular economy (investments that extend product life and reduce waste) and (iii) clean transportation (reducing emissions by shifting to electric vehicles). KPN has committed, on a best effort basis, to allocate an amount at least equal to the net proceeds of this instrument to finance investments and expenditures in the above areas within 36\u00a0months of issuance (with a maximum look-back period of 24\u00a0months for all expenditures). This hybrid bond can, at KPN\u2019s discretion, be redeemed at any time between 21 September 2027 and 21 December 2027, and annually on 21 December thereafter at par. The ratings for the green hybrid bond are BB+ by S&P and BB+ by Fitch. The rating agencies recognize 50% of the hybrid bond as equity in line with the existing hybrid bonds. The green hybrid bond has been listed on Euronext Dublin GEM.
On 21 September 2022, KPN tendered the 7% USD 600m hybrid bond and repurchased USD 454m notional amount, with USD 146m remaining outstanding after the tender offer. The hybrid bond had been swapped to a principal amount of EUR 465m and KPN effectively retired EUR 352m notional amount. The remaining EUR 113m notional amount after swaps can be called in March 2023.
KPN may, at its discretion and subject to certain conditions, elect to defer payments of interest on the hybrid bonds. Arrears of interest must be paid if dividends are paid on ordinary shares, if payments are made on other hybrid bonds, in the event of early redemption, and for the USD hybrid bonds at final maturity. KPN does not recognize accruals for coupon payments on the EUR perpetual hybrid bonds of EUR 40m per annum. If an accrual had been recognized, the amount would have been EUR 10m on 31 December 2022.
KPN has a Euro-Commercial Paper Program under which KPN can issue short-term debt instruments for up to EUR 1 billion. As at 31 December 2022, the outstanding balance of commercial paper amounted to EUR 60m (2021: EUR 60m), issued at an average interest rate of 2.01%.
KPN has a EUR\u00a0300m credit facility from the European Investment Bank, which was fully drawn at year-end 2022 and 2021. This loan has a floating interest rate referenced to 3-month Euribor and a single repayment on 2 August 2027. The interest for the current interest period was fixed at 2.64% per annum.
As at 31 December 2022, other borrowings furthermore included EUR 103m of collateral received as security under derivative financial instruments and EUR 50m borrowings under private placements.
After initial recognition, loans and borrowings that are not part of a fair value hedge, are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the P&L over the period of the borrowings using the effective interest method. The amortized cost is calculated by taking into account any discounts or premiums on acquisition or issuance and transaction costs. The effective interest rate amortization is recognized in the P&L as finance costs.
| \u20ac\u00a0million | Borrowings | Derivative financial instruments | Net liability | Lease liabilities | Net liability, including lease liabilities |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 6,500 | -6 | 6,494 | 937 | 7,432 |
| Exchange differences | 177 | -178 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -613 | - | -613 | -135 | -748 |
| Issued bonds & loans2 | 689 | - | 689 | - | 689 |
| Fair value adjustments | -67 | 36 | -31 | - | -31 |
| Other movements3 | 59 | - | 59 | 70 | 130 |
| Balance at 31 December 2021 | 6,744 | -148 | 6,596 | 873 | 7,469 |
| Exchange differences | 20 | -23 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -1,075 | 80 | -995 | -124 | -1,119 |
| Issued bonds & loans | - | - | - | - | - |
| Fair value adjustments | -359 | 309 | -50 | - | -50 |
| Other movements3 | 37 | - | 37 | 174 | 211 |
| Balance at 31 December 2022 | 5,368 | 218 | 5,586 | 923 | 6,509 |
KPN uses derivatives solely for the purpose of hedging underlying exposures. The primary risks managed using derivative instruments are foreign currency risk and interest rate risk.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Assets (current and non-current) | 148 | 212 |
| Liabilities (current and non-current) | -366 | -64 |
| Total derivatives | -218 | 148 |
| of which: designated in a hedge relationship | -233 | 122 |
| of which: other derivatives not designated in a hedge relationship | 15 | 26 |
A total gain of EUR 10m due to hedge ineffectiveness was recognized in the P&L in 2022 (2021: EUR 0m). This was mainly due to differences in the valuation of hedging instruments and hedged items due to credit risk and valuation curves in combination with the cumulative change of the fair value of the hedging instrument becoming greater than the change in the fair value of the hedged item. Note that all hedges continue to be highly effective prospectively.
Derivatives positions are reported on a gross basis and include a credit value adjustment attributable to derivative counterparty default risk. As at 31 December 2022, this lowered the net liability by EUR 9m (2021: net effect of EUR 0m). The increase in the credit value adjustment was primarily driven by the increased mark-to-market value of interest rate swaps as a result of significantly higher interest rates. Part of the derivatives portfolio is subject to master netting agreements that allow netting under certain circumstances.
If netting had been applied, the total derivatives asset position would be EUR 52m and the total derivatives liability position would be EUR 270m as at 31 December 2022 (2021: EUR 155m and EUR 6m respectively).
Bonds denominated in foreign currencies are hedged with cross-currency swaps. The currency exposure is hedged by effectively fixing the countervalue in the foreign currency to EUR and by hedging the interest rate exposure by swapping the fixed interest rates in foreign currency to fixed interest rates in EUR. There is an economic relationship between the hedged items and hedging instruments as the terms of the cross-currency swaps match the terms of the bonds. KPN has established a hedge ratio of 1:1 for the hedging relationships as the quantity of hedged items equals the notional amount of the cross-currency swaps. The hedges are until maturity of the underlying senior bonds or until the first call date in the case of the USD hybrid bond. For these hedges, KPN meets the criteria of, and also applies, cash flow hedge accounting. The effectiveness of the hedges is determined at inception and on a quarterly basis. To test the hedge effectiveness, KPN uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against the changes in the fair value of the hedged items attributable to the hedged risks. If the cumulative change in fair value of the hedging instrument and hedged item are not equal in absolute terms, the difference will be reported in the P&L to the extent that, in absolute terms, the fair value change of the hedging instrument is greater than the fair value change of the hedged item. Hedge ineffectiveness can arise from:
Different curves linked to hedged items and hedging instruments
The counterparties\u2019 credit risk differently impacting the fair value movement of the hedging instruments and hedged items
Changes in the terms of the hedged item or hedge instrument
| Nominal (receive) | Coupon (receive) | Nominal (pay) (EUR m) | Coupon (pay) | Maturity date | Fair value 2022 (EUR m) | Fair value 2021 (EUR m) |
|---|---|---|---|---|---|---|
| USD 600m | 7.000% semi-annual | 465 | 6.344% semi-annual | 28-3-2023 | - | 66 |
| USD 143m | 7.000% semi-annual | 111 | 6.359% semi-annual | 28-3-2023 | 23 | - |
| GBP 400m | 5.000% annual | 480 | 4.138% (2021: 4.424%) annual | 18-11-2026 | -38 | -16 |
| GBP 850m | 5.750% annual | 971 | 5.432% annual | 17-9-2029 | -62 | -18 |
| USD 595m | 8.375% semi-annual | 450 | 8.517% semi-annual | 1-10-2030 | 100 | 38 |
| Total | 23 | 70 |
| \u20ac\u00a0million | Notional amount | Carrying amount | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 1,452 | -100 | Derivatives | -66 |
| Cross-currency swaps USD | 561 | 123 | Derivatives | 127 |
| Total | 2,013 | 23 | \u00a0 | 61 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 1,445 | -34 | Derivatives | 97 |
| Cross-currency swaps USD | 915 | 104 | Derivatives | 108 |
| Total | 2,361 | 70 | \u00a0 | 205 |
The change in fair value of the associated hedged items attributable to the hedged risks resulted in an ineffectiveness loss in 2022 of EUR 1m (2021: EUR 1m gain).
| \u20ac\u00a0million | Total hedging gain/(loss) recognized in OCI | Ineffectiveness recognized as a gain/(loss) in P&L | Line item in P&L | Amount reclassified from OCI as a gain/ (loss) in P&L | Line item in P&L |
|---|---|---|---|---|---|
| Year ended 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 68 | 1 | Other financial results | -78 | Other financial results |
| Cross-currency swaps USD | -129 | -2 | Other financial results | 101 | Other financial results |
| Total | -62 | -1 | \u00a0 | 23 | \u00a0 |
| Year ended 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | -96 | 2 | Other financial results | 97 | Other financial results |
| Cross-currency swaps USD | -108 | - | Other financial results | 81 | Other financial results |
| Total | -204 | 1 | \u00a0 | 178 | \u00a0 |
The 0.625% fixed-rate eurobond maturing on 9 April 2025 has also been swapped to a floating rate using fixed-to-floating interest rate swaps, where KPN receives a fixed rate of 0.920% and pays interest at a variable rate equal to six-month Euribor (fixed in arrears).
The 1.125% fixed-rate eurobond maturing on 11 September 2028 has been swapped to a floating rate using fixed-to-floating interest rate swaps, where KPN receives a fixed rate of 0.907% and pays interest at a variable rate equal to six-month Euribor.
In 2022, the 0.875% fixed rate Eurobond maturing on 15 November 2033 was also swapped to a floating rate using fixed-to-floating interest rate swaps, whereby KPN receives a fixed rate of 0.799% and pays interest at a variable rate equal to six-month Euribor (fixed in arrears). The swaps are used to hedge the exposure to changes in the fair value of these fixed rate eurobonds against changes in the EUR interest curve.
There is an economic relationship between the hedged item and the hedging instrument, as the terms of the interest rate swaps match the terms of the fixed-rate bonds (i.e. notional amount, maturity and payment dates). KPN has established a hedge ratio of 1:1 for the hedging relationships as the quantity of hedged item equals the notional amount of the hedging instrument. For these hedges, KPN meets the criteria of, and also applies, hedge accounting. If the cumulative change in the fair value of the hedging instrument and hedged item are not equal in absolute terms, the difference will be recorded in the P&L. The hedge ineffectiveness can arise from:
Different curves linked to the hedged items and hedging instruments
The counterparties\u2019 credit risk differently impacting the fair value movement of the hedging instruments and hedged items
Changes in the terms of the hedge item or hedge instrument
| \u20ac\u00a0million | Notional amount | Carrying amount | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Interest rate swaps | 1,950 | -256 | Derivatives | -331 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Interest rate swaps | 1,250 | 52 | Derivatives | -47 |
| \u20ac\u00a0million | Carrying amount | Change in fair value adjustments | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Fixed-rate eurobonds 2025, 2028 & 2033 | 1,643 | 308 | Borrowings | 341 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Fixed-rate eurobonds 2025 & 2028 | 1,308 | 47 | Borrowings | 45 |
The ineffectiveness recognized in the P&L for the year ended 31 December 2022 was a gain of EUR 11m (2021: EUR 1m loss).
In 2011, fixed-rate eurobonds with maturities on 30 September 2024 were swapped to a floating interest rate using fixed-to-floating interest rate swaps. Subsequently, in May 2015, KPN swapped the floating rate exposure on these bonds to a fixed rate for the remaining maturity of these bonds and discontinued fair value hedge accounting for the fixed-to-floating interest rate swaps. As a result, the cumulative gain until de-designation, which amounted to EUR 224m, is amortized to earnings until maturity of the associated bonds. This is offset by the change in fair value of the outstanding interest rate swaps. The amortization recognized in earnings for 2022 was a gain of EUR 7m (2021: EUR 11m) and the remaining balance of the unamortized gain was EUR 12m at 31 December 2022 (2021: EUR 19m). The fair value of the outstanding interest rate swaps was EUR 15m as at December 2022 (2021: EUR 26m) and the change in fair value of these swaps resulted in a P&L loss of EUR 11m in 2022 (2021: EUR 17m loss). The net interest income of these swaps was an additional loss of EUR 15m (2021: EUR 16m gain), which results in net earnings (including amortization and change in fair value) in 2022 of EUR 19m negative (2021: EUR 10m positive).
Derivatives are recognized at fair value. Gains and losses arising from changes in fair value are recognized as finance cost/income during the period in which they arise to the extent that the derivatives have no hedging designation or they are ineffective.
KPN applies IFRS 9 hedge accounting. Derivatives related to loans are designated as either cash flow or fair value hedges.
Offsetting effects are recognized in the P&L.
The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how KPN will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument;
The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that KPN actually hedges and the quantity of the hedging instrument that KPN actually uses to hedge that quantity of hedged item.
Changes in the fair value of an effective derivative, which is designated as a fair value hedge, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in the P&L as finance cost/ income. Changes in the fair value of an effective derivative, which is designated as a cash flow hedge, are recorded in OCI for the effective part, until the P&L is affected by the variability in cash flows of the designated hedged item. The ineffective part of the cash flow hedge is recognized as finance cost/income. If an underlying transaction has ceased to be an effective hedge or in case of early redemption of the hedged item, hedge accounting is discontinued prospectively which means that subsequent changes in fair value are recognized in the P&L as finance cost/income and the cumulative amount recorded in OCI is released in the P&L.
KPN strives for the right balance between investments in the business, shareholder remuneration and a prudent financing policy. It is KPN's policy to utilize excess cash for operational and financial flexibility and/or shareholder remuneration.
The net debt/EBITDA AL ratio is one of the drivers for KPN\u2019s credit rating. It is based on the nominal value of borrowings and takes 50% equity credit on hybrid bonds into account. KPN remains committed to an investment-grade credit profile and aims for a net debt/EBITDA AL ratio of below 2.5x in the medium term.
The difference between the carrying value and nominal value of borrowings includes: (1) carrying value adjustments resulting from fair value hedges; (2) in case of foreign currency bonds, the difference between the nominal amount at the prevailing spot rate and the swapped nominal amount in EUR; and (3) amortized debt issuance costs.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Borrowings | 5,368 | 6,744 |
| Perpetual hybrid bonds | 1,000 | 500 |
| 50% equity credit for hybrid bonds | -500 | -483 |
| Less: Cash collateral paid on derivatives | -75 | -56 |
| Difference between carrying value and nominal value | 141 | -305 |
| Adjusted gross debt | 5,935 | 6,400 |
| Net cash and cash equivalents | 399 | 793 |
| Short-term investments | 100 | 300 |
| Net debt1 | 5,435 | 5,307 |
| Adjusted EBITDA AL | 2,404 | 2,347 |
| Net debt/EBITDA AL | 2.3x | 2.3x |
KPN is exposed to a variety of financial risks. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on KPN\u2019s financial position and performance.
Derivatives are used to hedge certain risk exposures (see Note 13.3).
KPN\u2019s key financial risks are:
Credit and counterparty risk
Liquidity risk
Market risk
KPN\u2019s Treasury department manages the financial risks according to policies approved by the Board of Management and Supervisory Board. These policies are established to identify and analyze financial risks, set appropriate risk limits and controls, and monitor adherence to those limits.
The COVID-19 crisis, geopolitical tensions (including the war in Ukraine) and the impact of inflation, rising energy and raw material prices, have led to increased volatility in capital markets and periods of deteriorated market liquidity. In addition, the reversal of central banks' monetary policies led to a significant increase in (expected) interest rate levels. KPN\u2019s Treasury department monitored the situation closely and the impact on KPN\u2019s liquidity position, sources of financing and financial counterparties remained within acceptable risk limits. KPN did not suffer any material impact on its liquidity reserves and its ability to raise financing remained very strong, albeit at higher cost levels.
Credit risk arises from the possibility of asset impairment occurring when counterparties are unable to meet their obligations in transactions involving financial instruments. KPN\u2019s counterparty policy sets limits for the maximum exposure per counterparty, which are primarily based on credit ratings, investment periods and collateral. The minimum counterparty credit rating (Moody\u2019s equivalent) is Baa2 for cash balances and Baa1 for entering into new derivative transactions. Cash balances used for working capital purposes can also reside at banks with lower credit ratings. Capital preservation is KPN\u2019s main priority when investing excess cash.
As at 31 December 2022, KPN\u2019s cash balances and short-term investments were held in bank accounts, bank deposits and money market funds with maturities of up to three months. The majority of cash balances were invested with counterparties with a credit rating equivalent to A3 at Moody\u2019s or higher, and the counterparties of outstanding derivatives have a credit rating equivalent to Baa1 or higher with Moody\u2019s.
KPN mitigates credit risk on bank counterparties arising from derivative financial instruments through collateral support agreements, which results in cash being paid or received as security. This cash collateral is released when derivatives are settled and/or mature. In 2022, the net cash collateral movement was EUR 14m receipt (2021: EUR 115m). As at 31 December 2022, KPN held net cash collateral (liability) of EUR 28m (2021: EUR 14m).
Credit risk on trade receivables is controlled using restrictive policies for customer acceptance. Credit management is focused on mobile services. Before accepting certain new customers in this segment, the creditworthiness of prospective clients is checked. In addition, KPN keeps track of the payment performance of customers. If customers fail to meet set criteria, payment issues must be resolved before a new transaction will be entered into.
KPN\u2019s policy is to provide financial guarantees only to wholly-owned subsidiaries. As at 31 December 2022, KPN had parent guarantees and bank guarantees outstanding to third parties for various wholly-owned Dutch subsidiaries. The carrying amount of financial assets, including cash, and contract assets represents the maximum credit exposure, which amounts to EUR 1,643m as at 31 December 2022 (2021: EUR 2,265m). On 31 December 2022, the total outstanding bank guarantees amounted to EUR 6m (2021: EUR 6m), which were issued in the ordinary course of business.
See schedule of the allowances for expected losses in Note 14 for information about credit losses on trade and other receivables. There were no other credit losses.
| \u00a0 | Borrowings | \u00a0 | Derivatives | \u00a0 | \u00a0 | ||||
|---|---|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Bonds and loans | Interest on bonds and loans | Lease liabilities (undiscounted) | Other debt and cash collateral | \u00a0 | Derivatives inflow (including interest) | Derivatives outflow (including interest) | Trade and other payables1 | Total |
| 2023 | 1962 | 1873 | 178 | 36 | \u00a0 | -308 | 288 | 903 | 1,481 |
| 2024 | 431 | 181 | 139 | -4 | \u00a0 | -166 | 170 | - | 752 |
| 2025 | 625 | 157 | 129 | - | \u00a0 | -141 | 156 | - | 925 |
| 2026 | 451 | 153 | 122 | - | \u00a0 | -587 | 619 | - | 758 |
| 2027 | 300 | 128 | 93 | - | \u00a0 | -113 | 119 | - | 527 |
| 2028 and further | 3,491 | 330 | 399 | - | \u00a0 | -1,806 | 1,766 | - | 4,181 |
| Contractual cash flows | 5,495 | 1,136 | 1,060 | 32 | \u00a0 | -3,121 | 3,118 | 903 | 8,623 |
Liquidity risk is the risk that KPN will not be able to meet its financial obligations associated with financial instruments as they become due. KPN\u2019s approach to managing liquidity is to ensure sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage. Some of the derivatives contain reset clauses or collateral postings at pre-agreed dates, in order to mitigate counterparty exposure during the life of the swap. These reset clauses will result in early euro settlement obligations in cash with the swap counterparty, which could lead to additional cash inflows or outflows before maturity. In order to reduce liquidity risks, the reset clauses or collateral postings are spread over different points in time.
During 2022, KPN received net collateral of EUR 14m (2021: EUR 115m) according to pre-agreed settlement schedules.
In addition to the available cash and cash equivalents, short-term investments and cash flows from operations, KPN has the following committed financing resources available:
KPN has a sustainability-linked revolving credit facility for EUR 1.0 billion provided by twelve relationship banks, originally signed in August 2021. The facility can be used for general corporate purposes and does not contain any financial covenants. In August 2022, all banks agreed to a one year extension, which extends the maturity of the revolving credit facility to 4 August 2027. The facility contains another one-year extension option which can be exercised in August 2023 and which could extend the maturity to August 2028. The facility has a mechanism to adjust the margin based on KPN\u2019s performance on predefined sustainability targets on the roll-out of fiber, reduction in KPN\u2019s energy consumption and reduction of carbon emissions in the supply chain. The facility was undrawn as at 31 December 2022 resp. 31 December 2021.
KPN\u2019s existing capital resources contain the following covenants as at 31 December 2022, which could trigger additional financial obligations or early redemption of the outstanding indebtedness. All senior bonds issued after 1 January 2006 (EUR 4.4bn outstanding as at 31 December 2022) contain a change of control clause. KPN may be required to early redeem if certain changes of control occur and within this change of control period (maximum of 90 days) a rating downgrade to sub-investment grade occurs. The hybrid bonds also contain a change of control clause by means of which KPN has the possibility to repurchase the hybrid bonds at par. A 5% interest step-up applies if a rating downgrade occurs during the change of control period in respect of that change of control. In addition, many of KPN\u2019s capital resources contain a covenant prohibiting KPN from entering into any amalgamation, demerger, merger, corporate restructuring or reorganization, unless prior written consent has been given by a majority of the lenders or bondholders or the resulting company assumes all of the rights and obligations with respect to the loans or bonds.
KPN is exposed to various kinds of market risks in the ordinary course of business. These risks include foreign currency exchange rate risk and interest rate risk.
Foreign currency risks mainly result from settlement of international telecommunications traffic and purchase of assets and primarily consist of GBP and USD exposure. Foreign currency exchange rate risks related to bonds that are not denominated in EUR are hedged into EUR in line with KPN\u2019s hedging policies. Group companies and business operations are obliged to hedge their firm commitments and highly predictable anticipated transactions in non-functional currencies by forward exchange contracts.
Accordingly, KPN\u2019s Treasury department matches and manages the intercompany and external exposures using forward exchange contracts. No hedge accounting is applied for these hedge instruments.
As at 31 December 2022, more than 95% (2021: 98%) of cash and cash equivalents was denominated in the functional currency of the related entities. More than 99% of the net amount of trade receivables and more than 95% of the amount of trade payables was outstanding in the functional currency of the related entities as at 31 December 2022 (2021: more than 99% resp. 93%).
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. Borrowings, derivatives, cash and cash equivalents are subject to interest rate risk. With regard to interest rate risk exposure, KPN periodically evaluates the desired mix of fixed and floating interest rate liabilities, balancing the benefit of lower interest costs vs. the variability of cash flows. Any interest rate risk exposure longer than one year is considered to be fixed. KPN may use derivative financial instruments to adjust the desired interest rate risk exposure.
As at 31 December 2022, 64% of KPN\u2019s interest-bearing gross debt (after swaps, excluding bank overdrafts) was at fixed interest rates (2021: 77%).
With a view to the existing and forecasted debt structure, KPN could enter into additional future derivatives to further adjust the mix of fixed and floating interest rate liabilities.
A sensitivity analysis as at 31 December 2022 with regard to interest rate risk on floating interest-bearing liabilities showed that, ceteris paribus, each adverse change of 100 bps in Euribor would hypothetically result in EUR 23m higher interest costs per annum (2021: EUR 16m).
Interest rate benchmarks (Interbank Offered Rates, or IBORs) are reformed and/or replaced by alternative Risk-Free Rates (RFRs). This affects financial instruments on the derivatives and cash markets that operate with the impacted floating reference rates. The three most used IBORs are the European Interbank Offered Rate (Euribor), the London Interbank Offered Rate (Libor) and the EURO Overnight Index Average (Eonia). For each benchmark, the developments are at different stages and vary in scope and transition time. For example, GBP Libor is discontinued after 31 December 2021 whereas most tenors of USD Libor will continue until 1 July 2023. Euribor has been reformed and is not scheduled to be discontinued. As the Euribor benchmark remains, there is no impact for KPN on the used floating EUR interest rates. The transition of Eonia to Euro Short-Term Rate (ESTR) has a negligible impact for KPN, concerning interest on collateral paid and/or received under credit support agreements with swap counterparties. The relevant agreements have been amended to reflect the change to ESTR. The transition of GBP Libor to Secured Overnight Financing Rate (SOFR) may have a small impact on the valuation of KPN\u2019s cross-currency swaps as this benchmark is used to value the derivatives with a GBP currency leg.
KPN carried out a sensitivity analysis as at 31 December 2022 with regard to interest rate and currency risk on the cash flow hedges. KPN applies cash flow hedge accounting on all bonds not denominated in EUR. With all other variables held constant, KPN calculated the hypothetical impact of changes in interest rates based on various scenarios. This would hypothetically result in a higher or lower value of the hedge reserve, which is included in equity attributable to equity holders. In a similar way, KPN calculated the hypothetical impact of changes in the EUR/USD rate and the EUR/GBP rate, holding all other variables constant. The results of the analysis are shown in the table below, indicating the hypothetical impact on the fair value of the cross-currency swaps (excluding the partially offsetting impact on the hedged items).
| \u00a0 | \u00a0 | GBP | USD | Total | |||
|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million (before tax) | Change | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Change in interest rate | +1%-point | 6 | -3 | 6 | 3 | 12 | - |
| \u00a0 | -1%-point | -6 | 3 | -6 | -3 | -12 | - |
| Change in FX rate | +10%-point | 6 | 31 | -24 | 29 | -18 | 60 |
| \u00a0 | -10%-point | -7 | -42 | 30 | -36 | 22 | -78 |
Prospective effectiveness testing indicates that all cash flow hedges are expected to be highly effective. Consequently, the expected impact on the P&L is immaterial.
KPN carried out a sensitivity analysis on 31 December 2022 with regard to the fair value of interest rate swaps (excluding the partial offsetting impact on the hedged items):
| \u20ac\u00a0million | Change | 2022 | 2021 |
|---|---|---|---|
| Change in EUR interest rates | +1%-point | -120 | -63 |
| \u00a0 | -1%-point | 123 | 66 |
For the sensitivity analysis on interest rate risk regarding pensions, see Note 17.
| \u20ac\u00a0million | Gross amount | Financial liabilities offset | Net amount in balance sheet | Not offset: Financial instruments/Cash collateral | Net amount |
|---|---|---|---|---|---|
| 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cash and cash equivalents | 399 | - | 399 | - | 399 |
| Collateral1 | 53 | - | 53 | -53 | - |
| Derivatives | 148 | - | 148 | -148 | - |
| Total | 600 | - | 600 | -201 | 399 |
| 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cash and cash equivalents | 793 | - | 793 | - | 793 |
| Collateral1 | 56 | - | 56 | -15 | 41 |
| Derivatives | 212 | - | 212 | -88 | 124 |
| Total | 1,061 | - | 1,061 | -103 | 958 |
| \u20ac\u00a0million | Gross amount | Financial assets offset | Net amount in balance sheet | Not offset: Financial instruments/Cash collateral | Net amount |
|---|---|---|---|---|---|
| 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Collateral1 | 103 | - | 103 | -75 | 28 |
| Derivatives | 366 | - | 366 | -126 | 240 |
| Total | 469 | - | 469 | -201 | 268 |
| 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Collateral1 | 46 | - | 46 | -46 | - |
| Derivatives | 64 | - | 64 | -57 | 6 |
| Total | 110 | - | 110 | -103 | 6 |
For the financial assets and liabilities summarized above, each agreement between KPN and the counterparty allows for net settlement of the relevant financial assets and liabilities when both parties elect to settle on a net basis.
Financial assets and liabilities are offset and reported on a net basis on the balance sheet only when there is a current legally enforceable right to offset the recognized amounts, and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Trade receivables | 245 | - | 222 | - |
| Financial receivables handsets | 174 | - | 199 | - |
| Sales to be invoiced | 107 | - | 103 | - |
| Interest to be received | 9 | - | 17 | - |
| Prepayments | 93 | 16 | 95 | 16 |
| Accruals and other receivables | 5 | 79 | 40 | 61 |
| Total | 632 | 95 | 677 | 77 |
The financial receivables handsets consist of not yet invoiced installment payments on the handset loans, mainly issued by KPN Finance B.V. In 2022, KPN Finance B.V. assigned EUR 28m outstanding financial receivables handsets to a bank and removed these receivables from the balance sheet as the transfer of the receivables is characterized as a sale because the risks and rewards of ownership of the receivables have been substantially transferred. KPN has provided an indemnity to the bank in case the realized losses on the transferred receivables are exceptionally high. At 31 December 2022, the financial receivables handsets of KPN Finance B.V. (EUR 158m) are measured at FVOCI and at 31 December 2021 at amortized cost.
The non-current other receivables relate for EUR 75m to cash collateral received on derivatives (2021: EUR 56m).
Sales to be invoiced include accrued income related to usage of KPN\u2019s network, which is invoiced monthly in arrears.
The carrying amounts of trade and other receivables approximate their fair value. Trade and other receivables are non-interest bearing. Trade receivables are generally on payment terms of 14-30 days. The aging of the gross trade receivables is as follows:
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Trade receivables gross | \u00a0 | \u00a0 |
| Amounts undue | 189 | 169 |
| Past due 0\u201390 days | 50 | 48 |
| Past due 91\u2013360 days | 15 | 17 |
| More than one year | 8 | 10 |
| Total trade receivables gross | 262 | 244 |
| Provision for credit risk exposure | -17 | -21 |
| Total trade receivables net | 245 | 222 |
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Contract assets | 80 | 29 | 32 | 20 |
| Costs to obtain a contract | - | 21 | - | 15 |
| Costs to fulfill a contract | 4 | - | 13 | - |
| Total | 84 | 50 | 45 | 36 |
A contract asset is recognized if the earned consideration is conditional. This includes:
Deferred discounts invoiced to customers if the discount is only granted in the first period of the service contract and the discount is recognized on a straight-line basis over the contract term.
The consideration to be received regarding those additional scope projects sold to Glaspoort B.V. in December 2021 of which the roll-out activities have started, at which point other income is recognized. KPN has received 35% of the total consideration in cash upon closing of the transaction and the remaining amount will be received based on the roll-out progress (see Note 12 for the sale to Glaspoort of additional scope projects).
Installation services and hardware delivered at the start of the contract if the amount of revenue recognized is higher than the amounts charged upfront.
Transition projects for business customers when the revenue recognized is higher than the amounts invoiced for the transition phase.
Upon invoicing of contracts assets, the invoiced amounts are reclassified to trade receivables.
Contract costs include:
Transaction-related dealer fees paid to acquire or retain mobile subscribers.
Costs incurred during the transition phase of projects for business customers to be able to deliver exploitation services that are not treated as a separate performance obligation. The costs are capitalized as costs to fulfill a contract and expensed in principle on a straight-line basis over the remaining contract term in which the exploitation services are delivered.
Movement schedule of the allowances for expected credit losses:
| \u20ac\u00a0million | Trade receivables | Financial receivables handsets | Contract assets | Total |
|---|---|---|---|---|
| Balance at 1 January 2021 | 20 | 3 | 1 | 24 |
| Additions/releases P&L | 9 | - | - | 9 |
| Usage | -8 | -1 | -1 | -10 |
| Balance at 31 December 2021 | 21 | 3 | - | 24 |
| Additions/releases P&L | 12 | -1 | - | 11 |
| Usage | -13 | - | - | -13 |
| Reclassification to FVOCI | -3 | -1 | - | -4 |
| Balance at 31 December 2022 | 17 | 1 | - | 18 |
The allowance for expected credit losses for trade receivables is based on the aging of the gross trade receivables and historic losses. For the largest customers, an assessment is done whether or not an additional allowance needs to be recognized.\u00a0The allowance for financial receivables handsets is also based on historic losses and is adjusted if there is an indication that customer payment behavior will deteriorate. The financial receivables handsets are the installments to be invoiced on average in approximately the next 12 months.\u00a0
Trade and other receivables and contract assets classify as financial assets and are measured at amortized cost if both of the following conditions are met:
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortized cost are subsequently measured using the effective interest method less provisions for impairment. An allowance for expected credit losses is recorded for all financial assets and contract assets at initial recognition. This allowance is regularly updated.
The amortized cost is calculated by taking into account any discounts or premiums on acquisition and transactions costs.
The effective interest rate amortization is recognized under finance income or finance costs.
If a financial asset is held within a business model with the objective of both collecting contractual cash flows and selling the financial asset, the financial asset is measured at fair value through other comprehensive income (FVOCI).
A financial asset is derecognized when the rights to receive cash flows from the asset have expired or KPN has transferred the rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (1) KPN has transferred substantially all the risk and rewards of the asset, or (2) KPN has neither transferred nor retained substantially all the risks and rewards\u00a0of the asset, but has transferred control of the asset.
When KPN has transferred the rights to receive cash flows from an asset or has entered into a pass-through arrangement, KPN evaluates if, and to what extent, KPN has retained the risks and rewards of ownership.\u00a0The risks and rewards are substantially transferred if more than 90% of the variability of the cash flows with respect to an asset is transferred.
See Note 4 for the accounting policy regarding contract costs.
Cash and cash equivalents consist of highly liquid instruments with initial maturities of three months or less, including balances on bank accounts, bank deposits and money market funds.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Cash | 144 | 258 |
| Short-term bank deposits and money market funds | 255 | 535 |
| Total cash and cash equivalents | 399 | 793 |
The decrease in cash and cash equivalents was mainly the result of EUR 571m dividend payments, EUR 300m share repurchases, EUR 468m of net debt redemptions (including EUR 500m bond proceeds and EUR 968m bond redemptions), EUR 71m net payments related to M&A and Glaspoort, and EUR 17m net investments Ventures, partly offset by EUR 862m free cash flow and EUR 200m change in short-term investments.
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, AAA-rated prime money market funds, and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included in borrowings in current liabilities.
Total distributable reserves as at 31 December 2022 amounted to EUR 2,818m, which includes the perpetual capital securities (2021: EUR 2,545m). For further details on non-distributable reserves, see Note C to the Corporate Financial Statements.
Authorized capital stock totals EUR 720m divided into nine billion ordinary shares of EUR 4ct each and nine billion preference shares B of EUR 4ct each. At 31 December 2022, a total of 4,037,319,593 ordinary shares were outstanding and fully paid-in. Dutch law prohibits KPN from casting a vote on shares KPN holds (treasury shares). The ordinary shares and preference shares B carry the right to cast one vote each. The ordinary shares are registered or payable to the bearer.
Shareholders may request the company to convert their registered shares to bearer shares, but not vice versa.
In 2021, KPN repurchased 73,684,157 ordinary shares at an average price of EUR 2.71, and in 2022 92,840,654 ordinary shares at an average price of EUR 3.23. Of these shares, 165,524,811 were cancelled in 2022, reducing the number of outstanding shares to 4,037,319,593.
At the 13 April 2022 AGM, shareholders granted the Board of Management the authority to acquire the company\u2019s own ordinary shares for a period of 18 months - starting on 13 April 2022 and ending on 13 October 2023. The number of ordinary shares to be acquired is limited to a maximum of 10% of the issued capital per 13 April 2022. The shares may be acquired, by or on behalf of the company, on the stock exchange or through other means at a price per share of at least the par value and at most the quoted share price plus 10%. The quoted share price is defined as the average of the closing prices of KPN shares as reported in the official price list of Euronext Amsterdam over the five trading days prior to the acquisition date. Resolutions by the Board of Management to acquire the company\u2019s own shares are subject to the approval of the Supervisory Board.
Ordinary shares purchased by the company will either be cancelled or held in treasury. At the 13 April 2022 AGM, shareholders granted the Board of Management the authority to reduce the issued capital by cancelling own shares with the approval of the Supervisory Board. The number of shares that may be cancelled is restricted to a maximum of 10% of the issued capital as at 13 April 2022 and may, if desired, be cancelled in one or more phases.
| \u20ac\u00a0million, unless indicated otherwise | Number of treasury shares | Treasury shares reserve | Hedge reserve | Currency translation reserve | Total Other reserves |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 5,609,432 | -65 | -156 | 22 | -199 |
| Movements recorded in OCI (net) | - | - | 31 | -7 | 24 |
| Share buyback | 73,684,157 | -200 | - | - | -200 |
| Sold treasury shares | -1,643,571 | 17 | - | - | 17 |
| Balance at 31 December 2021 | 77,650,018 | -248 | -125 | 15 | -358 |
| Movements recorded in OCI (net) | - | - | 39 | 2 | 41 |
| Share buyback | 92,840,654 | -300 | - | - | -300 |
| Shares canceled | -165,524,811 | 492 | - | - | 492 |
| Sold treasury shares | -1,343,847 | 14 | - | - | 14 |
| Other | - | 5 | - | - | 5 |
| Balance at 31 December 2022 | 3,622,014 | -37 | -86 | 17 | -106 |
The additional paid-in capital is exempt from Dutch tax up to an amount of EUR 8,802m at 31 December 2022 (2021: EUR 9,282m).
Movements in the hedge reserve recorded in OCI are net of a tax loss of EUR 14m in 2022 (2021: EUR 9m loss) and in the currency translation reserve net of a tax gain of EUR 1m (2021: EUR 1m gain).
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Effective portion cash flow hedges1 | -23 | -61 |
| Amortizable part2 | -93 | -107 |
| Hedge reserve | -116 | -168 |
| Tax effect | 30 | 43 |
| Hedge reserve, net of tax | -86 | -125 |
KPN purchased shares in its own capital for delivery upon vesting of equity-settled share plans for management (see Note 5). Votes on purchased shares may not be cast and do not count in determining the number of votes required at a General Meeting of Shareholders. In 2022, 1 million shares were purchased for the equity-settled share plans (none in 2021). In 2022 and 2021, shares were sold in connection with vesting of these plans.
Treasury shares are accounted for at cost, representing the market price on the acquisition date. The proceeds at delivery of the treasury shares are recognized directly in the other reserves.
On 8 November 2019, KPN issued a EUR 500m hybrid bond with a 2.00% coupon and on 21 September 2022 a EUR 500m hybrid bond with a 6.00% coupon, both with a perpetual maturity. These bonds are classified as equity in the Consolidated Statement of Financial Position and valued at net proceeds (see Note 13.2).
KPN has granted a call option, which is not limited in time, to the Foundation Preference Shares B KPN (the Foundation) to acquire preference shares B. For further information about the Foundation, see chapter \u2018Corporate governance\u2019.
In KPN\u2019s opinion, the call option does not represent a significant fair value due to the fact that the preference shares B, issued after exercise of the call option, bear interest linked to Euribor.
At the AGM of Shareholders on 12 April 2023, a final dividend of EUR 9.5ct per share will be proposed in respect of 2022. In August 2022, KPN paid an interim dividend in respect of 2022 of EUR 4.8ct per share, in total EUR 196m, bringing the total regular dividend in respect of 2022 to EUR 14.3ct per share (in total EUR 579m based on the number of outstanding shares at 31 December 2022 less Treasury shares held by KPN).
These Financial Statements do not reflect the proposal for the remaining dividend payable. In April 2022, KPN paid a final dividend of EUR 9.1ct per share in respect of 2021, in total EUR 375m. The total dividend in respect of 2021 was EUR 13.6ct per ordinary share.
Retirement benefits are provided through a number of defined contribution plans and funded and unfunded defined benefit plans. The most significant plans are described hereafter.
KPN\u2019s main pension plan covers employees in the Netherlands who are subject to KPN\u2019s collective labor agreement and employees with an individual labor agreement, and is externally funded through Stichting Pensioenfonds KPN. This plan is a collective defined contribution pension plan. It is accounted for as a defined contribution plan because KPN has no other obligation than to pay the annual contribution. This is a fixed percentage of the pensionable base for a period of three years. After this three-year period the annual contribution is reassessed based on a fixed and agreed method in which no reflection to past service or the funded status of the fund is included. As of 1 January 2023, a new three-year period has become effective.
The Getronics US and UK operations were divested in 2008 and 2012, respectively. The closed and frozen pension plans of the former US and UK operations remained with KPN and are accounted for as a defined benefit plan. The assets of the plans are held separately from KPN in independently administered funds. The UK plan operates under the regulations of the UK Pensions Regulator and the US plan under the provisions of the Employee Retirement Income Security Act (ERISA). The deficit in the plans\u2019 funding must be recovered by the investment returns in the plans\u2019 assets and contributions by KPN. The pension plans in the UK and US expose KPN to a number of risks, which can have an impact on the future contributions by KPN and the liability recorded in its balance sheet. The most significant risks are summarized below:
Asset volatility risk: the pension plans\u2019 assets are partially invested in equity securities and other return-seeking assets, so the plans\u2019 funding levels are exposed to equity market risks. The war in the Ukraine and increases in interest rates, for example caused significant volatility in 2022.
Interest rate risk: a decrease in interest rates will increase the plans\u2019 liabilities, although this will be partially offset by an increase in the value of the plans\u2019 bond holdings.
Inflation risk: the indexation of part of the accrued benefits in the UK is based on a combination of consumer and retail price indices, so the UK plan is exposed to inflation risk although the indexation is capped.
Life expectancy risk: the plans provide benefits for the life of the participants, so increases in life expectancy will result in an increase in the plans\u2019 liabilities.
In the UK, guaranteed minimum pension (GMP) is a portion of pension that was accrued by individuals who were contracted out of the state second pension prior to 6 April 1997. At present there is an inequality of benefits between male and female members who have GMP. The High Court in the UK ruled in 2018 that equalization will be required for affected defined benefit pension schemes. A number of options can be used to equalize, which had not been finalized as at 31 December 2022. The estimated cost of equalization as at 31 December 2022 and 2021 for the UK plan is EUR 6m, which has been recognized as a past service cost in 2018. However, the cost to the UK plan for equalizing heavily depends on a complex interaction between the benefit design and membership profile as well as the method used to equalize, which must be determined by the trustees.
In 2022, an additional voluntary pension contribution of EUR 23m into the US plan was made. This will lead to lower contributions going forward and brings the plan closer to full funding and an eventual buyout.
KPN has a number of other funded (insured) plans in the Netherlands which are all closed to new entrants. Based on Dutch law, KPN could be required to make contributions if participants of these plans require a value transfer to another pension fund or insurer. However, the risk related to these value transfers is limited and therefore no provision has been recognized for these plans.
In 2021, a final payment of EUR 7m for the unfunded transitional early retirement plan was made. In 2022, a new early retirement plan was implemented for a limited group of employees for which an expense of EUR 1m was recorded in 2022.
The provisions for retirement benefit obligations consist of the net defined benefit liability regarding pension plans and early retirement plans, which are accounted for as defined benefit plans as described above. See the table below for a specification of the balance sheet position.
| \u00a0 | \u00a0 | Defined benefit obligation1 | Fair value of assets | Net defined benefit liability (asset) | |||
|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million | \u00a0 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Balance at 1 January | \u00a0 | 574 | 651 | -482 | -499 | 92 | 152 |
| Included in profit or loss | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Operating expense2 | \u00a0 | -33 | -56 | 37 | 58 | 4 | 2 |
| Interest expense (income) | \u00a0 | 12 | 9 | -10 | -7 | 2 | 2 |
| Included in OCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Remeasurements loss (gain): | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Actuarial loss (gain)3 | \u00a0 | -141 | -32 | - | - | -141 | -32 |
| Return on plan assets excluding interest income | \u00a0 | - | - | 137 | -20 | 137 | -20 |
| Effect of movements in exchange rates | \u00a0 | -4 | 40 | 3 | -31 | -1 | 9 |
| Total | \u00a0 | -145 | 8 | 140 | -51 | -5 | -43 |
| Other | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Employer\u2019s contribution | \u00a0 | - | - | -43 | -21 | -43 | -21 |
| Benefits paid | \u00a0 | -28 | -38 | 28 | 38 | - | - |
| Balance at 31 December | \u00a0 | 380 | 574 | -330 | -482 | 49 | 92 |
The key actuarial assumptions used in the calculation of the defined benefit obligations are as follows:
| \u00a0 | 31 December 2022 | 31 December 2021 | ||||
|---|---|---|---|---|---|---|
| \u00a0 | Getronics UK | Getronics US | Other | Getronics UK | Getronics US | Other |
| Discount rate (%) | 4.8 | 4.9 | 3.7 | 2.0 | 2.6 | 1.0 |
| Expected salary increases (%) | N/a | N/a | 2.0 | N/a | N/a | 2.0 |
| Expected benefit increases/indexation (%) | 2.3-2.9 | N/a | 0.0 | 2.5-3.1 | N/a | 0.0 |
| Life expectancy for pensioners at retirement age: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Male | 21.8 | 20.7 | 21.7 | 22.1 | 20.6 | 21.4 |
| Female | 23.8 | 22.6 | 23.8 | 24.1 | 22.6 | 23.4 |
The discount rate is based on yield curves of AA corporate bonds with maturities equal to the duration of the benefit obligations and in the applicable currency. As at 31 December 2022, the (weighted) average duration of the defined benefit obligation was 10 years.
Assumptions regarding life expectancy are based on published statistics and mortality tables that include allowances for future improvement in mortality. The mortality table used in the Netherlands is the projected table AG 2022, which includes projected improvement rates varying by year of birth, corrected for fund-specific circumstances. The mortality table used in the UK is the 102% for males and 107% for females of the SAPS S3PXA tables with CMI 2021 projection with a 1.25% long-term improvement, and in the US the Pri-2012 Total Dataset with Scale MP-2021. The life expectancy at the age of 65 is expected to increase in the next 20 years by between one and two years in the UK and the US.
The following table shows the approximate impact on the defined benefit obligation of a change in the key actuarial assumptions of 0.5% and in the case of life expectancy of a change of one year.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Increase | Decrease | Increase | Decrease |
| Discount rate | -18 | 20 | -35 | 39 |
| Expected salary increases | - | - | - | - |
| Expected benefit increases | 7 | -8 | 16 | -19 |
| Life expectancy | 13 | -14 | 26 | -26 |
The assets of all defined benefit pension plans as at 31 December 2022 and 2021 comprise of:
| \u00a0 | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Quoted in active markets: | \u00a0 | \u00a0 |
| Equity securities | 14% | 21% |
| Fixed-income securities | 55% | 41% |
| Real estate1 | 0% | 0% |
| Commodities2 | 1% | 1% |
| Other | 5% | 2% |
| Other: | \u00a0 | \u00a0 |
| Equity securities | 0% | 6% |
| Fixed-income securities | 0% | 10% |
| Real estate1 | 5% | 3% |
| Other3 | 20% | 16% |
The strategic asset allocations of the defined benefit plans at year-end 2022 were as follows:
| \u20ac\u00a0million | Getronics UK | Getronics US | Other plans |
|---|---|---|---|
| Equity securities | 20% | 0% | 0% |
| Fixed-income securities (including inflation-linked bonds) | 55% | 100% | 0% |
| Other | 25% | 0% | 100% |
| Total | 100% | 100% | 100% |
In both the UK and the US, a roadmap is in place to move to more fixed-income exposure as the funded status improves. The Getronics UK pension fund partially hedges interest rate and inflation risks. The Getronics US pension fund fully hedges interest rate risks. As the UK pension fund invests in global investment funds, a minor part of these investments could be related to KPN equities. The pension funds do not have direct investments in KPN equities.
In 2022, the total employer\u2019s contributions and benefit payments for all defined benefit and defined contribution plans amounted to EUR 122m, consisting of EUR 78m employer\u2019s premiums for defined contribution plans, EUR 43m contributions for funded defined benefit plans and EUR 1m payments for unfunded plans.
The amount of employer\u2019s contributions in 2023 for the remaining defined benefit pension plans is estimated to be EUR 17m for the funded plans. The total amount of employer\u2019s premiums to be paid in 2023 for the defined contribution plans is estimated to be EUR 81m.
The liability recognized in respect of all pension and early retirement plans that qualify as a defined benefit obligation is the present value of the defined benefit obligation less the fair value of plan assets. KPN uses actuarial calculations (projected unit credit method) to measure the obligations and the costs. For the calculation, actuarial assumptions are made about demographic variables (such as employee turnover and mortality) and financial variables (such as future indexation and the discount rate). The discount rate is determined by reference to market rates. These are interest rates of high-quality corporate bonds that are denominated in the currency in which the benefit will be paid and that have terms to maturity approximating the terms of the related liability. A net defined benefit asset may arise where a defined benefit plan has been overfunded. KPN recognizes a net defined benefit asset in such a case only when future economic benefits are available to KPN in the form of a reduction in future contributions or a cash refund. Actuarial gains and losses are recognized immediately in OCI.
Past service costs, curtailments and settlements are recognized immediately in the P&L.
The amount of pension costs included in operating expenses with respect to defined benefit plans consists of service cost, past service costs, curtailments and settlements, and administration costs. Net interest on the net defined benefit liability is presented as part of finance costs.
For pension plans that qualify as a defined contribution plan, KPN recognizes contributions as an expense when an employee has rendered service in exchange for those contributions.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Restructuring provision | 13 | 19 |
| Asset retirement obligations | 75 | 98 |
| Other provisions | 66 | 60 |
| Total provisions for other liabilities and charges | 154 | 177 |
| of which: non-current | 131 | 150 |
| of which: current | 23 | 27 |
| \u20ac\u00a0million | Personnel | Contractual | Total restructuring | Asset retirement obligation | Other provisions | Total provisions |
|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 18 | 2 | 19 | 94 | 76 | 189 |
| of which: current portion | 18 | - | 18 | 4 | 17 | 38 |
| Additions | 38 | - | 38 | 8 | 8 | 54 |
| Releases | - | - | - | -1 | -7 | -7 |
| Usage | -38 | - | -38 | -4 | -13 | -55 |
| Other movements, incl. discontinued operations | - | - | - | 1 | -5 | -3 |
| Balance at 31 December 2021 | 18 | 1 | 19 | 98 | 60 | 177 |
| of which: current portion | 18 | - | 18 | 2 | 7 | 27 |
| Transition impact IAS 371 | - | - | - | - | 14 | 14 |
| Additions | 23 | 1 | 24 | - | 1 | 25 |
| Releases | - | - | - | -20 | -3 | -24 |
| Usage | -29 | - | -30 | -2 | -7 | -40 |
| Other movements, incl. discontinued operations and new business combinations | - | - | - | -1 | 2 | 1 |
| Balance at 31 December 2022 | 11 | 2 | 13 | 75 | 66 | 154 |
| < 1 year | 11 | - | 12 | 3 | 8 | 23 |
| 1-5 years | - | 2 | 2 | 11 | - | 13 |
| > 5 years | - | - | - | 61 | 58 | 119 |
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts redundancy in exchange for these benefits.
Termination benefits are recognized when KPN is demonstrably committed either to terminating the employment according to a detailed formal plan without the possibility of withdrawal or to providing termination benefits as a result of an individual and accepted offer made to encourage redundancy. Benefits falling due more than 12 months after 31 December are discounted to present value.
The provision for asset retirement obligations (ARO) is based on assumptions of the estimated costs of removal, discount rate and estimated period of removal, which vary per type of asset. In 2022, EUR 20m was released from the ARO provision, mainly because of changes in the discount rates. Of this release, EUR 19m was recognised as a reduction of the carrying value of the activated asset retirement costs, which is included in plant and equipment.
As defined in the Telecommunications Act, the obligation for landlords to tolerate cables terminates as soon as those cables have been idle for a continuous period of 10 years. Because the date when the cables will become idle is uncertain and KPN is not able to predict whether and when a landlord will place a request for removal, KPN is not able to make a reliable estimate of the impact and therefore no provision was recognized at 31 December 2022 nor at 31 December 2021.
Includes provisions for claims and litigations, onerous contracts and warranties and provisions for long-term employee obligations related to jubilee or other long-service employee benefits, long-term disability benefits and, if they are not fully payable within 12 months after the end of the period, bonuses and deferred compensation. The expected costs of these benefits are accrued over the period of employment using an accounting method similar to that for defined benefit pension plans, except that actuarial gains and losses and past-service costs are recognized immediately in the P&L.
Provisions for asset retirement obligations, restructuring costs and legal claims are recognized when KPN has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote.
Provisions are measured at the present value of management\u2019s best estimate of the expenditure required to settle the present obligation at balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.
| \u20ac\u00a0million | Mobile network | Fixed network & data centers | Real estate | Vehicles | Other | Total |
|---|---|---|---|---|---|---|
| Accumulated cost | 995 | 119 | 493 | 137 | 4 | 1,749 |
| Accumulated depreciation & impairment | -429 | -96 | -288 | -76 | -3 | -892 |
| Balance as at 1 January 2021 | 566 | 23 | 205 | 61 | 1 | 857 |
| Additions | 8 | - | 3 | 7 | 8 | 27 |
| Remeasurement & lease modifications | 35 | 3 | 9 | 1 | 1 | 48 |
| Depreciation | -57 | -10 | -31 | -28 | -2 | -127 |
| Impairments | - | - | - | - | - | - |
| Closing net book value | 553 | 17 | 186 | 40 | 9 | 804 |
| Accumulated cost | 997 | 89 | 458 | 119 | 14 | 1,677 |
| Accumulated depreciation & impairment | -445 | -71 | -272 | -80 | -5 | -872 |
| Balance as at 31 December 2021 | 553 | 17 | 186 | 40 | 9 | 804 |
| Additions | 26 | 0 | 3 | 25 | 4 | 58 |
| Remeasurement & lease modifications | 87 | 4 | 27 | 4 | 1 | 123 |
| Depreciation | -57 | -7 | -31 | -24 | -3 | -121 |
| Impairments | - | - | -161 | - | - | -16 |
| Closing net book value | 608 | 14 | 169 | 45 | 11 | 848 |
| Accumulated cost | 1,060 | 76 | 472 | 111 | 19 | 1,737 |
| Accumulated depreciation & impairment | -451 | -61 | -303 | -66 | -7 | -889 |
| Balance as at 31 December 2022 | 608 | 14 | 169 | 45 | 11 | 848 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Total estimated lease term at commencement of a lease (in years) | 5-15 | 5-20 | 5-20 | 5-7 | <5 | \u00a0 |
| \u20ac\u00a0million | Mobile network | Fixed network & data centers | Real estate | Vehicles | Other | Total |
|---|---|---|---|---|---|---|
| Non-current lease liability | 531 | 19 | 202 | 35 | - | 787 |
| Current lease liability | 88 | 9 | 30 | 23 | - | 150 |
| Balance as at 1 January 2021 | 618 | 27 | 232 | 58 | 1 | 937 |
| Additions | 8 | 1 | 3 | 7 | 8 | 27 |
| Remeasurement & lease modifications | 30 | 3 | 8 | - | 1 | 42 |
| Interest | 13 | 1 | 5 | 1 | - | 20 |
| Redemptions | -73 | -11 | -40 | -28 | -2 | -154 |
| Closing net book value | 597 | 20 | 210 | 37 | 9 | 873 |
| Non-current lease liability | 515 | 14 | 180 | 20 | 7 | 736 |
| Current lease liability | 83 | 6 | 30 | 17 | 2 | 137 |
| Balance as at 31 December 2021 | 598 | 20 | 209 | 37 | 9 | 873 |
| Additions | 26 | - | 3 | 25 | 3 | 57 |
| Remeasurement & lease modifications | 81 | 4 | 27 | 4 | 2 | 117 |
| Interest | 12 | 1 | 5 | - | - | 18 |
| Redemptions | -68 | -9 | -39 | -24 | -3 | -142 |
| Closing net book value | 649 | 16 | 205 | 43 | 11 | 923 |
| Non-current lease liability | 551 | 10 | 174 | 27 | 8 | 770 |
| Current lease liability | 97 | 6 | 31 | 16 | 3 | 153 |
| Balance as at 31 December 2022 | 649 | 16 | 205 | 43 | 11 | 923 |
The redemptions reflect the total payments made during the year for the lease fees included in the lease liability. The redemption consists of the repayments of the lease liabilities which are presented in the cash flow from financing activities (2022: EUR 124m, 2021: EUR 135m) and the interest paid during the year (2022: EUR 18m, 2021: EUR 20m), which is part of the cash flow from operating activities.
The maturity analysis of the lease liabilities can be found in Note 13.4.
KPN\u2019s lease portfolio consists of mobile network (mostly site rentals and mobile towers), fixed network & data centers (technical buildings), real estate (offices and shops), vehicles and other leased assets.
The following amounts are recognized in the profit or loss:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Depreciation right-of-use assets | -121 | -127 |
| Impairment (-) or impairment reversal right-of-use assets | -16 | - |
| Gain or loss (-) on early terminations | 7 | 5 |
| Total depreciation & impairments presented in the P&L | -131 | -123 |
| Interest on lease liabilities | -18 | -20 |
| Total amount recognized in profit or loss | -149 | -142 |
In 2022, KPN entered into sale and leaseback transactions for some of its technical buildings. The transactions resulted in a gain of EUR 2m in both 2022 and 2021, included in Other income. The leaseback periods are limited to a period of five years. The impact on the lease liability and right-of-use asset (fixed network) was limited.
The expenses related to short-term vehicle leases (included in Personnel expenses) are not material. KPN does not apply the low-value exemption and does not have contracts with variable lease payments other than variable lease payments dependent on an index or a rate.
Most of KPN\u2019s lease contracts include extension (renewal) or termination options. KPN exercises significant judgment in determining whether these options are reasonably certain to be exercised (see Note 2). The assessments are updated annually or when a significant change in the economic circumstances occurs. Periods covered by renewal options deemed reasonably certain or early termination options that are reasonably certain not to be exercised are included in the total lease liability.
A significant number of KPN\u2019s contracts have an unlimited number of extension options. Only those deemed reasonably certain are included in the lease term and therefore the lease liability. A reliable estimate of the potential future lease payments related to periods beyond the lease terms reflected on the balance sheet cannot be provided. This affects mostly the mobile and fixed network, as well as real estate. Vehicles are generally returned by the end of their term.
KPN acts as a lessor in a limited number of real estate, mobile site contracts and some specific types of customer premises equipment, all classified as operating leases. These lessor contracts are not material to KPN Group, individually nor in aggregate. The terms are 1-10 years. All leases include a clause to enable upward revision of the lease fees (annual indexation). Rental income recognized in 2022 amounted to EUR 2m (2021: EUR 2m). The future minimum lease receivable under the non-cancellable operating leases as at 31 December 2022 is EUR 6m (31 December 2021: EUR 7m).
At the commencement date of a lease (i.e. the date on which the underlying asset of the lease is available for use by KPN), KPN recognizes a lease liability measured at the present value of future lease payments to be made over the term of the lease. This includes fixed fees (including in-substance fixed payments), lease incentives (such as rent-free periods or fee discounts), variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. KPN does not have purchase options to be taken into account. Penalties for early termination of a lease are not included when KPN is reasonably certain that the related early termination will not take place.
All contracts of KPN that contain variable lease payments depend on a consumer price index or a rate. However, should other types of fees occur, these variable fees will be accounted for in the operating expenses.
After the commencement date, the lease liabilities increase due to the accrual of interest and decrease due to the payments of the fees due. The lease liabilities are remeasured when a change occurs in the fees due, the lease term deemed reasonably certain and/or changes to the scope of a lease. Upon remeasurement of the lease liability of a contract, the applied discount rate (incremental borrowing rate) is revised unless the remeasurement relates to a fee change following a change in consumer price index or rate.
The total lease liability recognized is split into a non-current and a current portion. The current lease liabilities reflect only the part of the payments due within one year related to the repayment of the total lease liabilities.
KPN determined the lease term as the non-cancellable term of a contract together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised.
KPN applies judgment when assessing if the use of an option is reasonably certain. Factors included are KPN\u2019s asset and network strategy, technological developments, and other circumstances that may impose an economic incentive affecting the expected use of an underlying asset. For vehicles, renewal options are not included in the initial assessment of the lease term as KPN\u2019s policy prescribes the return of vehicles to the lessor at the end of the lease term.
After the commencement of a lease, KPN reassesses the lease term if there is a significant event or change in circumstances that is within KPN\u2019s control and effects KPN\u2019s ability to exercise or not to exercise the option to renew or to terminate a lease.
The implicit discount rates of KPN\u2019s leases are not readily available, with the exception for vehicles. KPN applies its applicable incremental borrowing rate to determine the discounted value of the lease liabilities. Upon modification of a lease, the lease liability is remeasured using the applicable discount rate at the date of the remeasurement. KPN\u2019s incremental borrowing rates are mainly determined using a risk-free rate combined with a spread reflecting KPN\u2019s credit risk. The applicable rate per contract is primarily dependent on the total expected term of a lease at its commencement date (new leases) or the total expected remaining lease term in case of a remeasurement of a lease.
Right-of-use assets are recognized at commencement date of a lease as counterpart to the lease liabilities. The right-of-use assets are measured at cost, less accumulated depreciation and impairment losses, and adjusted for any remeasurement in the corresponding lease liabilities. The cost of the right-of-use assets includes the initially recognized amount of the corresponding lease liabilities, initial direct costs incurred in obtaining the lease (if any) and lease payments made at or before commencement of the lease. Lease incentives received are deducted from the carrying value of the right-of-use assets.
The right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life of the underlying asset and the lease term. Right-of-use assets are subject to impairment.
KPN does not apply the practical expedients for low-value leases (leases of an underlying asset with a value of less than EUR 5,000) and short-term leases (leases with a total expected term of less than 12 months) except for short-term rental vehicles.
Regarding vehicle leases, KPN applies the practical expedient not to separate non-lease components from lease components. Therefore, the full monthly lease fees are reflected in KPN\u2019s Statement of Financial Position. For all types of leased assets, electricity and fuel-related expenses remain part of operating expenses.
Leases where KPN as lessor retains a significant portion of the risk and rewards of ownership of the lease asset are classified as operating leases. The assets remain on the balance sheet and are depreciated over the assets\u2019 useful life.
Lease payments received from lessees are recognized as revenue on a straight-line basis over the lease period.
If KPN acts as a lessor in a finance lease, the transaction is accounted for as a normal sale and the present value of the lease payments is recognized as a receivable. The difference between the gross receivable and the present value of the receivable is deferred and recognized as interest over the lease term.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Trade payables | 591 | - | 514 | - |
| Accrued interest | 52 | - | 77 | - |
| Accrued expenses | 286 | - | 338 | - |
| Social security and other taxes payable | 184 | - | 220 | - |
| Other payables | 28 | 8 | 26 | 8 |
| Total | 1,140 | 8 | 1,176 | 8 |
Some of KPN\u2019s suppliers participate in Supplier Finance Programs giving suppliers the opportunity to receive earlier payment (from a financial institution), without modifying KPN\u2019s payment terms, or providing KPN an extended payment period. As the payment terms under these programs do not materially deviate from customary payment terms in the industry or from the terms agreed with suppliers who do not participate in these programs, the relating liabilities are classified as trade and other payables, and payments are classified as operating cash flow. The Supplier Finance Programs do not impact covenants or KPN\u2019s access to (future) borrowings from financial institutions. As at 31 December 2022, the total amount of payables under the three Supplier Finance Programs amounted to EUR 205m (2021: EUR 141m).
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Contract liabilities | 169 | 130 | 186 | 169 |
| Of which variable considerations | - | 86 | - | 86 |
The contract liabilities primarily relate to the consideration received from customers before satisfying performance obligations, such as advances for subscriptions and airtime. KPN recognizes a contract liability for postpaid and prepaid bundled minutes and data increasingly based on the passage of time of these bundles per proposition. The utilization percentage is the actual pro-rata period as a percentage of total credits granted for that period.
For the transition phase of projects for business customers which are treated as a separate performance obligation, a contract liability is recognized if the amount invoiced is higher than the amount of revenue allocated to these projects. A contract liability is also recognized for the mobile connection fees charged to the customer if the connection is not treated as a separate performance obligation.
Contract liabilities are recognized for variable considerations which are not deemed highly probable. The introduction of new mobile consumer propositions in August 2016 caused a change in the VAT calculation methodology, which resulted in a lower remittance of VAT from August 2016 until December 2018. KPN\u2019s view is not shared by the Dutch tax authorities. KPN concluded, based on the applicable regulations, that a positive outcome of this dispute is not highly probable and therefore recorded a contract liability for the VAT amount. Additionally, an amount for the corresponding interest amount has been accounted for. A potential final negative outcome of the current court procedure will lead to a negative cash flow in future years.
In 2022, EUR 4m revenue was recognized from variable considerations related to performance obligations satisfied (or partially satisfied) in previous years (in 2021: EUR 13m).
The year\u2019s revenues include the current portion of the contract liability balance at the beginning of the year.
Trade and other payables are classified as \u2018borrowings\u2019 within KPN\u2019s financial liabilities. For the accounting policy, see Note 13.
For the accounting policy regarding contract liabilities, see Note 4.
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Amount of assets and liabilities in the subsidiaries or businesses over which control is lost: | \u00a0 | \u00a0 |
| Property, plant and equipment | - | 7 |
| Trade and other receivables, prepayments and accrued income | - | 17 |
| Trade and other payables and accrued expenses | - | -24 |
| Total net assets | - | - |
| Transaction costs1 | - | 7 |
| Allocation of goodwill upon loss of control over a business | - | 64 |
| Total costs | - | 71 |
| Cash consideration | - | 233 |
| Contingent cash consideration | - | 218 |
| Interest in joint venture (50%) | - | 451 |
| Total consideration | - | 902 |
| Book gain before income tax | - | 831 |
| Income taxes | - | -190 |
| Book gain after income tax | - | 640 |
On 30 December 2022, KPN acquired 100% of the shares of Itzos B.V., a Dutch IT provider specializing in integrating healthcare systems and optimizing communication between healthcare providers. The transaction is accounted for as a business combination because the assets acquired and liabilities assumed constitute a business.
The preliminary purchase price allocation:
| \u20ac\u00a0million | 2022 |
|---|---|
| Recognized amounts of identifiable assets acquired and liabilities assumed: | \u00a0 |
| Intangible assets | 9 |
| Trade and other receivables, prepayments and accrued income | 2 |
| Net cash and cash equivalents | 1 |
| Non-current liabilities | -3 |
| Trade and other payables and accrued expenses | -2 |
| Total net assets | 7 |
| Total transaction costs | - |
| Cash consideration | 13 |
| Contingent cash consideration | 1 |
| Total consideration | 14 |
| Goodwill | 7 |
The impact of the acquisition on KPN's Group revenues, EBITDA AL and net profit in 2022 is negligible, also if the acquisition had taken place at the beginning of the year.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
Due to the limited relative size of Glaspoort to the KPN Group, Glaspoort did not qualify as a discontinued operation. Therefore, the results and cash flows of Glaspoort remained included in KPN\u2019s consolidated income and cash flow statements until the date of completion of the transaction, whereas its assets and liabilities were classified on KPN\u2019s consolidated balance sheet as part of the \u2018assets held for sale\u2019.
The transaction was subject to closing conditions and the regulatory approvals were obtained on 12 May 2021. The transaction resulted in a net book gain of EUR 639m, consisting of a book gain on the transaction of EUR 830m, included in other income (see Note 4.2), and a tax expense of EUR 190m. KPN\u2019s 50% share in the result of Glaspoort in the period between the transaction and 31 December 2021 was EUR -2m.
The transaction resulted in a net cash inflow of EUR 196m in 2021, classified as cash flow from investing activities in the Consolidated Statement of Cash Flows. This amount consists of the cash consideration received for the shares (EUR 233m), the transferred assets at closing (EUR 24m), less the share premium contribution (EUR 39m), transaction costs paid (EUR 8m) and EUR 15m for invoices paid by KPN regarding transferred assets.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
| \u20ac\u00a0million | Less than 1 year | 1-5 years | More than 5 years | Total 31 December 2022 | Total 31 December 2021 |
|---|---|---|---|---|---|
| Capital and purchase commitments | 799 | 268 | 7 | 1,074 | 1,291 |
| Guarantees and other | 3 | - | 132 | 135 | 131 |
| Total commitments | 802 | 269 | 139 | 1,209 | 1,422 |
The capital and purchase commitments mainly relate to minimum contractual obligations with regard to network operations, mobile handsets and telco services, and lease contracts that have not yet commenced.
Guarantees consist of financial obligations of group companies under certain contracts guaranteed by KPN. A total amount of EUR 135m relates to parent guarantees (2021: EUR 131m). The table presented above does not include KPN's commitment on share premium contributions regarding Glaspoort of EUR 163m (31 December 2021: EUR 187m). See Note 12.
KPN is involved in a number of legal and tax proceedings that have arisen in the ordinary course of its business and in discontinued operations, including commercial, regulatory or other proceedings. KPN periodically carefully assesses the likelihood that legal and tax proceedings may lead to a cash outflow and recognizes provisions in such matters if and when the chance of a cash outflow is estimated as probable and a reliable estimate of the cash outflow can be made. When these criteria are not met, such matters are classified as contingent liabilities, unless the cash outflow is considered remote.
However, the outcome of such proceedings can be difficult to predict with certainty and KPN can offer no assurances in this regard. In some cases, the impact of a legal proceeding may be more strategic than financial and such impact cannot properly be quantified. Below is a description of legal related contingent liabilities that could have a material impact for KPN.
See Note 18 for a contingent liability related to idle cables and the accounting policy of provisions.
In KPN\u2019s Articles of Association and in a further decision by the Board of Management, which was approved by the Supervisory Board, KPN has indemnified the members and former members of KPN\u2019s Board of Management and Supervisory Board, as well as a number of KPN\u2019s officers and directors and former officers and directors, against liabilities, claims, judgments, fines and penalties incurred by such officer or director as a result of any threatened, pending or completed action, investigation or proceeding (whether civil, criminal or administrative) brought by a third party in relation to acts or omissions in or related to their capacity as officer or director.
The indemnification does not apply to claims and expenses reimbursed by insurers nor to an officer or a director adjudged to be liable for willful misconduct (\u2018opzet\u2019) or intentional recklessness (\u2018bewuste roekeloosheid\u2019).
KPN considers none of the related-party transactions to be material on an individual basis. Transactions between group companies are not included in the description below as these are eliminated in the Consolidated Financial Statements.
On 14 February 2023, Am\u00e9rica M\u00f3vil, S.A.B. de C.V. (AMX) published in its fourth quarter 2022 report that it owned 18.3% of KPN\u2019s ordinary share capital as at 31 December 2022. The total value of sales and purchase transactions by the continuing operations of KPN in 2022 with AMX, its subsidiaries and associated companies is estimated to be less than EUR 1m and less than EUR 2m respectively (2021: less than EUR 1m) and total trade receivables and payables as at 31 December 2021 and 2022 are estimated to be less than EUR 1m.
Other shareholdings equaling or exceeding 3% of the issued capital:
On 23 December 2022, BlackRock, Inc. notified the AFM that it held 4.91% of the shares and 5.98% of the voting rights related to KPN\u2019s ordinary share capital.
On 16 December 2022, Amundi Asset Management notified the AFM that it held 4.57% of the shares and voting rights related to KPN\u2019s ordinary share capital.
On 2 August 2022, Capital Research and Management Company notified the AFM that it held 9.70% of the voting rights related to KPN\u2019s ordinary share capital.
On 2 June 2022, The Income Fund of America notified the AFM that it held 4.97% of the shares and voting rights to KPN\u2019s ordinary share capital.
To KPN\u2019s knowledge, no other shareholder owned 3% or more of KPN\u2019s issued share capital as at 31 December 2022. KPN did not enter into agreements with AMX or other shareholders that could have a material impact on KPN\u2019s Financial Statements.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. and entered into a joint venture agreement with APG (see Note 12). As of 9 June 2021, KPN's remaining 50% interest in Glaspoort is classified as a joint venture and accounted for using the equity method. KPN is the anchor tenant on the network of Glaspoort and also supplies services to Glaspoort. The value of the services delivered to and acquired from Glaspoort amounted to EUR 15m and EUR 16m respectively in 2022 (EUR 5m and EUR 3m respectively in the period between completion of the sale and 31 December 2021). Furthermore, in December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) from Glaspoort for the sale of the additional scope projects. Of this amount, EUR 60m has been received in cash upon closing of the transaction and the remaining amount will be received in annual installments based on the fiber roll-out starting in 2023. Trade and other receivables with respect to Glaspoort as at 31 December 2022 amounted to EUR 1m (2021: EUR 36m), trade payables EUR 2m (2021: nil), non-current contract assets EUR 29m (2021: EUR 20m), current contract assets EUR 51m (2021: nil) and non-current contract liabilities EUR 16m (2021: EUR 49m).
The following table provides the total value of the transactions by KPN with other associated and non-consolidated companies for the relevant year:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Sales in the year | 39 | 23 |
| Purchases in the year | <1 | 1 |
| Trade receivables at 31 December | 2 | <1 |
| Trade payables at 31 December | <1 | <1 |
For details of the relationship between directors and the company, see the Remuneration Report section of this Integrated Annual Report. Directors in this respect are defined as key management and relate to those having authority and responsibility for planning, directing, and controlling the activities of an entity, either directly or indirectly. At KPN, key management consists of the members of the Board of Management and the Supervisory Board.
The members of KPN\u2019s Board of Management and Supervisory Board or close members of their families are also members of supervisory boards or management boards of other companies or are shareholders of other companies, without having (joint) control, with which KPN maintains relations in the ordinary course of business. All transactions with these companies are performed on an arm\u2019s length basis.
| Name of significant subsidiaries and other principal interests | Country of incorporation |
|---|---|
| KPN B.V. | \u00a0 |
| - Broadband Hosting B.V. | Netherlands |
| - CAM IT Solutions B.V. | Netherlands |
| - E-Zorg B.V. | Netherlands |
| - Glaspoort B.V. | Netherlands |
| - GroupIT B.V. | Netherlands |
| - Inspark Holding B.V. | Netherlands |
| - KPN Finance B.V. | Netherlands |
| - Reggefiber Group B.V. | Netherlands |
| - Solcon Internetdiensten B.V. | Netherlands |
| - XS4ALL Internet B.V. | Netherlands |
| KPN Mobile N.V. | Netherlands |
| - KPN Mobile International B.V. | Netherlands |
| KPN Ventures B.V. | Netherlands |
| Getronics B.V. | Netherlands |
| - Getronics Finance Holdings B.V. | Netherlands |
| - Getronics Pensions UK Ltd. | UK |
| - Getronics US Operations, Inc. | US |
| KPN Insurance Company DAC | Ireland |
The percentage ownership/voting interest of these entities is 100%, except the joint venture Glaspoort B.V. in which KPN has an interest of 50%.
On outstanding Class B preferred shares, a dividend is paid out equal to the average of the 12-month Euribor increased by 1%. If the 12-month Euribor is no longer determined, the dividend on preference shares will be calculated based on the yield on state loans. Subsequently, subject to the approval of the Supervisory Board, the Board of Management will determine what proportion of net income remaining after payment of the dividend on any Class B preferred shares will be appropriated to the reserves. The part of the profit remaining after the appropriation to the reserves shall be at the disposal of the AGM. No Class B preferred shares were outstanding on 31 December 2022.
The profit of the financial year 2022 that is attributable to equity holders of the company amounts to EUR 760m. On 4 August 2022, a regular interim dividend of EUR 4.8ct per ordinary share was paid (total amount of EUR 196m). On 23 February 2023, the Board of Management, with the approval of the Supervisory Board, appropriated EUR 181m of the profit 2022 to the other reserves. Taking into account the interim dividend that was paid in August 2022, the remaining part of the profit is available for payment of a final dividend in respect of 2022. The Board of Management, with the approval of the Supervisory Board, will propose to the AGM to pay a final regular dividend of EUR 9.5ct per ordinary share in respect of 2022 (in total EUR 383m based on the number of outstanding shares at 31 December 2022 less Treasury shares held by KPN).
KPN has evaluated events up to publication date of these Financial Statements of this Integrated Annual Report and determined that no subsequent event activity required disclosure.
", "dimensions": { "concept": "ifrs-full:DisclosureOfNotesAndOtherExplanatoryInformationExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-519": { "value": "| \u20ac\u00a0million | 2022 | 2021 (Restated) |
|---|---|---|
| Service revenues | 4,909 | 4,860 |
| Non-service revenues | 385 | 377 |
| Revenues from contracts with customers | 5,295 | 5,237 |
| Rentals and other revenues | 29 | 33 |
| Revenues | 5,324 | 5,270 |
Service revenues are all revenues recognized over time and includes fees for usage of KPN\u2019s network and facilities, e.g. monthly subscription fees and revenues from customer-specific IT solutions.
Non-service revenues are revenues recognized at a point in time and includes, for example, sale of handsets, peripheral equipment as well as software licenses sold without ongoing support.
The application of KPN\u2019s accounting policies on revenue recognition, including relevant judgments, and information about KPN\u2019s performance obligations is summarized below:
Exploitation services are considered a separate performance obligation. Revenue is recognized over time during the contract period.
Network access is considered a separate performance obligation. Revenue is recognized over time during the subscription period. Content, e.g. TV content, is generally considered part of the network access performance obligation and revenue is recognized on a gross basis.
Revenues for streaming services, which are contracted and billed to customers separately, are recognized on a net basis if KPN acts as an agent.
One-off connection fees are not separate performance obligations as they are considered to be necessary to get access to the network. The fees charged to the customer are recognized as a contract liability and bundled with the performance obligation for network access.
Transaction-related dealer fees paid to acquire or retain subscribers are capitalized as contract costs and expensed on a straight-line basis over the contract term of the underlying customer contract.
Installation services offered to consumers are generally considered a separate performance obligation, as customers can choose to use an engineer for installation or to install the equipment themselves. Installation services that are treated as a separate performance obligation include installation of customer premises equipment (CPE), e.g. set-top boxes, setting up in-home WiFi, and installation of customers\u2019 own devices. Revenue from installation services is allocated to the installation service at the start of the contract and recognized as revenue at a point in time (at completion of the installation).
The difference between the amount of revenue recognized and the amount charged to the customer is recognized as a contract asset. Most CPE is considered part of KPN\u2019s network. These hardware elements are capitalized as part of property, plant and equipment as KPN retains ownership and control over the economic benefits, and are therefore not considered a separate performance obligation nor an identified asset in terms of IFRS 16.
Transition and transformation projects for establishing new services to large business customers (for example workspace management services) are considered separate performance obligations, as the customer can benefit from the project deliverables on their own. Revenue is recognized over time (percentage of completion during the project phase). The projects sometimes include the delivery of peripheral equipment and software licenses. These are not considered as separate performance obligations if KPN performs the installation and/or must provide ongoing support as part of the transition project. If not part of a transition project, revenue for peripheral equipment is recognized as revenue at a point in time (upon delivery of the equipment), whereas revenue for licenses with ongoing support is recognized over time (on a monthly basis).
The Wholesale segment bills customers at (regulated) tariffs that may be disputed by other operators and regulators. A contract liability is recognized in case the invoiced revenue is not considered highly probable.
Handset sales are a separate performance obligation and are recognized as revenue at a point in time (upon delivery of the handset equipment). The amount of revenue allocated to the handset less the amount charged to the customer upfront is recognized as a contract asset if the payment to be received for the handset is conditional on the delivery of telco services, and as a financial receivable if the payment to be received is unconditional.
A handset sale combined with a postpaid subscription is treated as a consumer loan under the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft) if the consumer customer repays the handset in monthly instalments and the credit amount is above EUR 250. These handset instalment payments are not conditional on the delivery of the telco services. Therefore, a financial receivable is recognized for the instalments to be received (see Note 14). These receivables do not include a significant financing component and are therefore measured at nominal value.
The handsets sold and delivered by third parties, related to KPN subscription contracts, do not qualify as performance obligations for KPN. Handset-related dealer fees result in an unbilled receivable on the Statement of Financial Position, which is decreased when handset instalments are billed to the end-customer.
In 2021 and 2022, the time value of money was not significant and therefore not recorded.
Generally, the payment term is two weeks in the consumer market and 30 days in the business market.
KPN applies the practical expedients provided in IFRS 15 under which disclosure of amounts of consideration allocated to the remaining performance obligations (unsatisfied or partially satisfied) do not need to be disclosed. This applies to contracts with an original expected duration of less than one year or when KPN bills a fixed amount for network services provided. KPN recognizes revenue from network services in the amount to which KPN has a right to invoice the customer and this amount corresponds directly with the value of KPN\u2019s performance completed to date.
The disaggregation of the revenues per segment has been restated. Within the Business segment, EUR 137m service revenues that are related to core telco products have been restated from Tailored Solutions (large corporate customers with integrated solutions) to LCE (large corporate enterprises). Within the Consumer segment, EUR 8m revenues of a few services were restated from non-service revenues to service revenues (see Note 2).
| \u20ac\u00a0million | 2022 | 2021 (Restated) |
|---|---|---|
| Fixed-Mobile service revenues | 1,494 | 1,459 |
| Fixed-only service revenues | 758 | 782 |
| Postpaid-only service revenues | 246 | 241 |
| Legacy/other service revenues | 90 | 110 |
| Consumer service revenues | 2,588 | 2,592 |
| Non-service revenues1 | 269 | 265 |
| Total Consumer revenues | 2,857 | 2,857 |
| \u00a0 | \u00a0 | \u00a0 |
| Access & connectivity2 | 555 | 517 |
| IT services3 | 42 | 31 |
| SME service revenues | 596 | 548 |
| Access & connectivity2 | 521 | 534 |
| IT services & Other3 | 255 | 261 |
| LCE service revenues | 776 | 795 |
| Access & connectivity2 | 73 | 67 |
| IT services3 | 48 | 46 |
| Service management | 171 | 176 |
| Tailored Solutions service revenues | 292 | 289 |
| Business service revenues | 1,664 | 1,632 |
| Non-service & other revenues1 | 133 | 130 |
| Total Business revenues | 1,797 | 1,762 |
| \u00a0 | \u00a0 | \u00a0 |
| Mobile service revenues | 178 | 156 |
| Broadband service revenues | 296 | 293 |
| Other service revenues4 | 214 | 233 |
| Wholesale service revenues | 688 | 681 |
| Non-service revenues | 1 | 2 |
| Total Wholesale revenues | 689 | 683 |
| \u00a0 | \u00a0 | \u00a0 |
| NOI and Other (incl. eliminations) | -20 | -32 |
| \u00a0 | \u00a0 | \u00a0 |
| Total | 5,324 | 5,270 |
The core principle is that revenue is recognized to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which KPN expects to be entitled in exchange for those goods or services. Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to KPN and the amount of revenue and associated costs can be measured reliably.
KPN follows the five-step process of IFRS 15 to recognize revenue. After a contract with a customer has been entered into, the separate performance obligations are identified, which are the distinct goods and services promised to the customer (the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer, and the transfer of goods or services to the customer are separately identifiable from other promises in the contract). The next steps are the determination of the transaction price and the allocation to the performance obligations. Allocation of the transaction price to performance obligations is based on standalone selling prices, which are based on our price lists and therefore readily available. The final step is to recognize revenue when a performance obligation is satisfied. Revenue is recognized either at a point in time or over time. In general, telco and IT services are delivered over time, whereas handsets and peripheral and network equipment, in case they are treated as separate performance obligations, are delivered at a point in time.
Revenue for variable considerations, including revenue under dispute, is recognized only when it is highly probable which, in some cases, requires significant judgment.
An adjustment for the time value of money is made to a transaction price for the effects of financing if time between recognition of revenue and cash receipt is expected to exceed 12 months and if it provides the customer with a significant benefit.
If KPN transfers goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized in case the earned consideration is conditional. A financial receivable is recognized if KPN\u2019s right to an amount of consideration is unconditional (only the passage of time is required before payment of the consideration is due).
KPN recognizes contract liabilities in the Statement of Financial Position for considerations received in respect of unsatisfied performance obligations. Contract liabilities are recognized as revenue when KPN performs under the contract.
At the start of a contract with a customer, in case services or goods are delivered by sub-contractors, KPN determines whether its performance obligation is to provide the specified goods or services itself (KPN acts as a principal) or to arrange for another party to provide those goods or services (KPN acts as an agent) based on the agreed terms and conditions with the customer and the sub-contractor, as well as the nature of the goods and services promised to the customer. When KPN acts as an agent, the revenue recognized is not the gross amount but the net amount that KPN is entitled to retain for its services as the agent.
The incremental costs of obtaining a contract with a customer are recognized as an asset if KPN expects to recover those costs. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer, regardless of whether the contract is obtained or not. Costs to fulfill a contract are recognized as an asset if:
The costs relate directly to a contract; and
The costs generate or enhance resources that will be used in satisfying performance obligations in the future; and
The costs are expected to be recovered.
Capitalized contract costs are amortized on a linear basis over the period in which KPN transfers the related goods or services to the customer. KPN applies the practical expedient to immediately expense contract costs when the asset that would have resulted from capitalizing such costs would have been amortized within one year or less.
Assets recognized for costs to obtain a contract and costs to fulfill a contract are subject to impairment testing.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Contract assets | 80 | 29 | 32 | 20 |
| Costs to obtain a contract | - | 21 | - | 15 |
| Costs to fulfill a contract | 4 | - | 13 | - |
| Total | 84 | 50 | 45 | 36 |
A contract asset is recognized if the earned consideration is conditional. This includes:
Deferred discounts invoiced to customers if the discount is only granted in the first period of the service contract and the discount is recognized on a straight-line basis over the contract term.
The consideration to be received regarding those additional scope projects sold to Glaspoort B.V. in December 2021 of which the roll-out activities have started, at which point other income is recognized. KPN has received 35% of the total consideration in cash upon closing of the transaction and the remaining amount will be received based on the roll-out progress (see Note 12 for the sale to Glaspoort of additional scope projects).
Installation services and hardware delivered at the start of the contract if the amount of revenue recognized is higher than the amounts charged upfront.
Transition projects for business customers when the revenue recognized is higher than the amounts invoiced for the transition phase.
Upon invoicing of contracts assets, the invoiced amounts are reclassified to trade receivables.
Contract costs include:
Transaction-related dealer fees paid to acquire or retain mobile subscribers.
Costs incurred during the transition phase of projects for business customers to be able to deliver exploitation services that are not treated as a separate performance obligation. The costs are capitalized as costs to fulfill a contract and expensed in principle on a straight-line basis over the remaining contract term in which the exploitation services are delivered.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Contract liabilities | 169 | 130 | 186 | 169 |
| Of which variable considerations | - | 86 | - | 86 |
The contract liabilities primarily relate to the consideration received from customers before satisfying performance obligations, such as advances for subscriptions and airtime. KPN recognizes a contract liability for postpaid and prepaid bundled minutes and data increasingly based on the passage of time of these bundles per proposition. The utilization percentage is the actual pro-rata period as a percentage of total credits granted for that period.
For the transition phase of projects for business customers which are treated as a separate performance obligation, a contract liability is recognized if the amount invoiced is higher than the amount of revenue allocated to these projects. A contract liability is also recognized for the mobile connection fees charged to the customer if the connection is not treated as a separate performance obligation.
Contract liabilities are recognized for variable considerations which are not deemed highly probable. The introduction of new mobile consumer propositions in August 2016 caused a change in the VAT calculation methodology, which resulted in a lower remittance of VAT from August 2016 until December 2018. KPN\u2019s view is not shared by the Dutch tax authorities. KPN concluded, based on the applicable regulations, that a positive outcome of this dispute is not highly probable and therefore recorded a contract liability for the VAT amount. Additionally, an amount for the corresponding interest amount has been accounted for. A potential final negative outcome of the current court procedure will lead to a negative cash flow in future years.
In 2022, EUR 4m revenue was recognized from variable considerations related to performance obligations satisfied (or partially satisfied) in previous years (in 2021: EUR 13m).
The year\u2019s revenues include the current portion of the contract liability balance at the beginning of the year.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueFromContractsWithCustomersExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-520": { "value": "| \u20ac\u00a0million | 2022 | 2021 (Restated) |
|---|---|---|
| Service revenues | 4,909 | 4,860 |
| Non-service revenues | 385 | 377 |
| Revenues from contracts with customers | 5,295 | 5,237 |
| Rentals and other revenues | 29 | 33 |
| Revenues | 5,324 | 5,270 |
Service revenues are all revenues recognized over time and includes fees for usage of KPN\u2019s network and facilities, e.g. monthly subscription fees and revenues from customer-specific IT solutions.
Non-service revenues are revenues recognized at a point in time and includes, for example, sale of handsets, peripheral equipment as well as software licenses sold without ongoing support.
The application of KPN\u2019s accounting policies on revenue recognition, including relevant judgments, and information about KPN\u2019s performance obligations is summarized below:
Exploitation services are considered a separate performance obligation. Revenue is recognized over time during the contract period.
Network access is considered a separate performance obligation. Revenue is recognized over time during the subscription period. Content, e.g. TV content, is generally considered part of the network access performance obligation and revenue is recognized on a gross basis.
Revenues for streaming services, which are contracted and billed to customers separately, are recognized on a net basis if KPN acts as an agent.
One-off connection fees are not separate performance obligations as they are considered to be necessary to get access to the network. The fees charged to the customer are recognized as a contract liability and bundled with the performance obligation for network access.
Transaction-related dealer fees paid to acquire or retain subscribers are capitalized as contract costs and expensed on a straight-line basis over the contract term of the underlying customer contract.
Installation services offered to consumers are generally considered a separate performance obligation, as customers can choose to use an engineer for installation or to install the equipment themselves. Installation services that are treated as a separate performance obligation include installation of customer premises equipment (CPE), e.g. set-top boxes, setting up in-home WiFi, and installation of customers\u2019 own devices. Revenue from installation services is allocated to the installation service at the start of the contract and recognized as revenue at a point in time (at completion of the installation).
The difference between the amount of revenue recognized and the amount charged to the customer is recognized as a contract asset. Most CPE is considered part of KPN\u2019s network. These hardware elements are capitalized as part of property, plant and equipment as KPN retains ownership and control over the economic benefits, and are therefore not considered a separate performance obligation nor an identified asset in terms of IFRS 16.
Transition and transformation projects for establishing new services to large business customers (for example workspace management services) are considered separate performance obligations, as the customer can benefit from the project deliverables on their own. Revenue is recognized over time (percentage of completion during the project phase). The projects sometimes include the delivery of peripheral equipment and software licenses. These are not considered as separate performance obligations if KPN performs the installation and/or must provide ongoing support as part of the transition project. If not part of a transition project, revenue for peripheral equipment is recognized as revenue at a point in time (upon delivery of the equipment), whereas revenue for licenses with ongoing support is recognized over time (on a monthly basis).
The Wholesale segment bills customers at (regulated) tariffs that may be disputed by other operators and regulators. A contract liability is recognized in case the invoiced revenue is not considered highly probable.
Handset sales are a separate performance obligation and are recognized as revenue at a point in time (upon delivery of the handset equipment). The amount of revenue allocated to the handset less the amount charged to the customer upfront is recognized as a contract asset if the payment to be received for the handset is conditional on the delivery of telco services, and as a financial receivable if the payment to be received is unconditional.
A handset sale combined with a postpaid subscription is treated as a consumer loan under the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft) if the consumer customer repays the handset in monthly instalments and the credit amount is above EUR 250. These handset instalment payments are not conditional on the delivery of the telco services. Therefore, a financial receivable is recognized for the instalments to be received (see Note 14). These receivables do not include a significant financing component and are therefore measured at nominal value.
The handsets sold and delivered by third parties, related to KPN subscription contracts, do not qualify as performance obligations for KPN. Handset-related dealer fees result in an unbilled receivable on the Statement of Financial Position, which is decreased when handset instalments are billed to the end-customer.
In 2021 and 2022, the time value of money was not significant and therefore not recorded.
Generally, the payment term is two weeks in the consumer market and 30 days in the business market.
KPN applies the practical expedients provided in IFRS 15 under which disclosure of amounts of consideration allocated to the remaining performance obligations (unsatisfied or partially satisfied) do not need to be disclosed. This applies to contracts with an original expected duration of less than one year or when KPN bills a fixed amount for network services provided. KPN recognizes revenue from network services in the amount to which KPN has a right to invoice the customer and this amount corresponds directly with the value of KPN\u2019s performance completed to date.
The disaggregation of the revenues per segment has been restated. Within the Business segment, EUR 137m service revenues that are related to core telco products have been restated from Tailored Solutions (large corporate customers with integrated solutions) to LCE (large corporate enterprises). Within the Consumer segment, EUR 8m revenues of a few services were restated from non-service revenues to service revenues (see Note 2).
| \u20ac\u00a0million | 2022 | 2021 (Restated) |
|---|---|---|
| Fixed-Mobile service revenues | 1,494 | 1,459 |
| Fixed-only service revenues | 758 | 782 |
| Postpaid-only service revenues | 246 | 241 |
| Legacy/other service revenues | 90 | 110 |
| Consumer service revenues | 2,588 | 2,592 |
| Non-service revenues1 | 269 | 265 |
| Total Consumer revenues | 2,857 | 2,857 |
| \u00a0 | \u00a0 | \u00a0 |
| Access & connectivity2 | 555 | 517 |
| IT services3 | 42 | 31 |
| SME service revenues | 596 | 548 |
| Access & connectivity2 | 521 | 534 |
| IT services & Other3 | 255 | 261 |
| LCE service revenues | 776 | 795 |
| Access & connectivity2 | 73 | 67 |
| IT services3 | 48 | 46 |
| Service management | 171 | 176 |
| Tailored Solutions service revenues | 292 | 289 |
| Business service revenues | 1,664 | 1,632 |
| Non-service & other revenues1 | 133 | 130 |
| Total Business revenues | 1,797 | 1,762 |
| \u00a0 | \u00a0 | \u00a0 |
| Mobile service revenues | 178 | 156 |
| Broadband service revenues | 296 | 293 |
| Other service revenues4 | 214 | 233 |
| Wholesale service revenues | 688 | 681 |
| Non-service revenues | 1 | 2 |
| Total Wholesale revenues | 689 | 683 |
| \u00a0 | \u00a0 | \u00a0 |
| NOI and Other (incl. eliminations) | -20 | -32 |
| \u00a0 | \u00a0 | \u00a0 |
| Total | 5,324 | 5,270 |
The core principle is that revenue is recognized to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which KPN expects to be entitled in exchange for those goods or services. Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to KPN and the amount of revenue and associated costs can be measured reliably.
KPN follows the five-step process of IFRS 15 to recognize revenue. After a contract with a customer has been entered into, the separate performance obligations are identified, which are the distinct goods and services promised to the customer (the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer, and the transfer of goods or services to the customer are separately identifiable from other promises in the contract). The next steps are the determination of the transaction price and the allocation to the performance obligations. Allocation of the transaction price to performance obligations is based on standalone selling prices, which are based on our price lists and therefore readily available. The final step is to recognize revenue when a performance obligation is satisfied. Revenue is recognized either at a point in time or over time. In general, telco and IT services are delivered over time, whereas handsets and peripheral and network equipment, in case they are treated as separate performance obligations, are delivered at a point in time.
Revenue for variable considerations, including revenue under dispute, is recognized only when it is highly probable which, in some cases, requires significant judgment.
An adjustment for the time value of money is made to a transaction price for the effects of financing if time between recognition of revenue and cash receipt is expected to exceed 12 months and if it provides the customer with a significant benefit.
If KPN transfers goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized in case the earned consideration is conditional. A financial receivable is recognized if KPN\u2019s right to an amount of consideration is unconditional (only the passage of time is required before payment of the consideration is due).
KPN recognizes contract liabilities in the Statement of Financial Position for considerations received in respect of unsatisfied performance obligations. Contract liabilities are recognized as revenue when KPN performs under the contract.
At the start of a contract with a customer, in case services or goods are delivered by sub-contractors, KPN determines whether its performance obligation is to provide the specified goods or services itself (KPN acts as a principal) or to arrange for another party to provide those goods or services (KPN acts as an agent) based on the agreed terms and conditions with the customer and the sub-contractor, as well as the nature of the goods and services promised to the customer. When KPN acts as an agent, the revenue recognized is not the gross amount but the net amount that KPN is entitled to retain for its services as the agent.
The incremental costs of obtaining a contract with a customer are recognized as an asset if KPN expects to recover those costs. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer, regardless of whether the contract is obtained or not. Costs to fulfill a contract are recognized as an asset if:
The costs relate directly to a contract; and
The costs generate or enhance resources that will be used in satisfying performance obligations in the future; and
The costs are expected to be recovered.
Capitalized contract costs are amortized on a linear basis over the period in which KPN transfers the related goods or services to the customer. KPN applies the practical expedient to immediately expense contract costs when the asset that would have resulted from capitalizing such costs would have been amortized within one year or less.
Assets recognized for costs to obtain a contract and costs to fulfill a contract are subject to impairment testing.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Contract assets | 80 | 29 | 32 | 20 |
| Costs to obtain a contract | - | 21 | - | 15 |
| Costs to fulfill a contract | 4 | - | 13 | - |
| Total | 84 | 50 | 45 | 36 |
A contract asset is recognized if the earned consideration is conditional. This includes:
Deferred discounts invoiced to customers if the discount is only granted in the first period of the service contract and the discount is recognized on a straight-line basis over the contract term.
The consideration to be received regarding those additional scope projects sold to Glaspoort B.V. in December 2021 of which the roll-out activities have started, at which point other income is recognized. KPN has received 35% of the total consideration in cash upon closing of the transaction and the remaining amount will be received based on the roll-out progress (see Note 12 for the sale to Glaspoort of additional scope projects).
Installation services and hardware delivered at the start of the contract if the amount of revenue recognized is higher than the amounts charged upfront.
Transition projects for business customers when the revenue recognized is higher than the amounts invoiced for the transition phase.
Upon invoicing of contracts assets, the invoiced amounts are reclassified to trade receivables.
Contract costs include:
Transaction-related dealer fees paid to acquire or retain mobile subscribers.
Costs incurred during the transition phase of projects for business customers to be able to deliver exploitation services that are not treated as a separate performance obligation. The costs are capitalized as costs to fulfill a contract and expensed in principle on a straight-line basis over the remaining contract term in which the exploitation services are delivered.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Contract liabilities | 169 | 130 | 186 | 169 |
| Of which variable considerations | - | 86 | - | 86 |
The contract liabilities primarily relate to the consideration received from customers before satisfying performance obligations, such as advances for subscriptions and airtime. KPN recognizes a contract liability for postpaid and prepaid bundled minutes and data increasingly based on the passage of time of these bundles per proposition. The utilization percentage is the actual pro-rata period as a percentage of total credits granted for that period.
For the transition phase of projects for business customers which are treated as a separate performance obligation, a contract liability is recognized if the amount invoiced is higher than the amount of revenue allocated to these projects. A contract liability is also recognized for the mobile connection fees charged to the customer if the connection is not treated as a separate performance obligation.
Contract liabilities are recognized for variable considerations which are not deemed highly probable. The introduction of new mobile consumer propositions in August 2016 caused a change in the VAT calculation methodology, which resulted in a lower remittance of VAT from August 2016 until December 2018. KPN\u2019s view is not shared by the Dutch tax authorities. KPN concluded, based on the applicable regulations, that a positive outcome of this dispute is not highly probable and therefore recorded a contract liability for the VAT amount. Additionally, an amount for the corresponding interest amount has been accounted for. A potential final negative outcome of the current court procedure will lead to a negative cash flow in future years.
In 2022, EUR 4m revenue was recognized from variable considerations related to performance obligations satisfied (or partially satisfied) in previous years (in 2021: EUR 13m).
The year\u2019s revenues include the current portion of the contract liability balance at the beginning of the year.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-878": { "value": "The application of KPN\u2019s accounting policies on revenue recognition, including relevant judgments, and information about KPN\u2019s performance obligations is summarized below: Service revenues Exploitation services are considered a separate performance obligation. Revenue is recognized over time during the contract period. Network access is considered a separate performance obligation. Revenue is recognized over time during the subscription period. Content, e.g. TV content, is generally considered part of the network access performance obligation and revenue is recognized on a gross basis. Revenues for streaming services, which are contracted and billed to customers separately, are recognized on a net basis if KPN acts as an agent. One-off connection fees are not separate performance obligations as they are considered to be necessary to get access to the network. The fees charged to the customer are recognized as a contract liability and bundled with the performance obligation for network access. Transaction-related dealer fees paid to acquire or retain subscribers are capitalized as contract costs and expensed on a straight-line basis over the contract term of the underlying customer contract. Installation services offered to consumers are generally considered a separate performance obligation, as customers can choose to use an engineer for installation or to install the equipment themselves. Installation services that are treated as a separate performance obligation include installation of customer premises equipment (CPE), e.g. set-top boxes, setting up in-home WiFi, and installation of customers\u2019 own devices. Revenue from installation services is allocated to the installation service at the start of the contract and recognized as revenue at a point in time (at completion of the installation). The difference between the amount of revenue recognized and the amount charged to the customer is recognized as a contract asset. Most CPE is considered part of KPN\u2019s network. These hardware elements are capitalized as part of property, plant and equipment as KPN retains ownership and control over the economic benefits, and are therefore not considered a separate performance obligation nor an identified asset in terms of IFRS 16. Transition and transformation projects for establishing new services to large business customers (for example workspace management services) are considered separate performance obligations, as the customer can benefit from the project deliverables on their own. Revenue is recognized over time (percentage of completion during the project phase). The projects sometimes include the delivery of peripheral equipment and software licenses. These are not considered as separate performance obligations if KPN performs the installation and/or must provide ongoing support as part of the transition project. If not part of a transition project, revenue for peripheral equipment is recognized as revenue at a point in time (upon delivery of the equipment), whereas revenue for licenses with ongoing support is recognized over time (on a monthly basis). The Wholesale segment bills customers at (regulated) tariffs that may be disputed by other operators and regulators. A contract liability is recognized in case the invoiced revenue is not considered highly probable. Non-service revenues Handset sales are a separate performance obligation and are recognized as revenue at a point in time (upon delivery of the handset equipment). The amount of revenue allocated to the handset less the amount charged to the customer upfront is recognized as a contract asset if the payment to be received for the handset is conditional on the delivery of telco services, and as a financial receivable if the payment to be received is unconditional. A handset sale combined with a postpaid subscription is treated as a consumer loan under the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft) if the consumer customer repays the handset in monthly instalments and the credit amount is above EUR 250. These handset instalment payments are not conditional on the delivery of the telco services. Therefore, a financial receivable is recognized for the instalments to be received (see Note 14). These receivables do not include a significant financing component and are therefore measured at nominal value. The handsets sold and delivered by third parties, related to KPN subscription contracts, do not qualify as performance obligations for KPN. Handset-related dealer fees result in an unbilled receivable on the Statement of Financial Position, which is decreased when handset instalments are billed to the end-customer. KPN applies the practical expedients provided in IFRS 15 under which disclosure of amounts of consideration allocated to the remaining performance obligations (unsatisfied or partially satisfied) do not need to be disclosed. This applies to contracts with an original expected duration of less than one year or when KPN bills a fixed amount for network services provided. KPN recognizes revenue from network services in the amount to which KPN has a right to invoice the customer and this amount corresponds directly with the value of KPN\u2019s performance completed to date. Accounting policy: Revenues The core principle is that revenue is recognized to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which KPN expects to be entitled in exchange for those goods or services. Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to KPN and the amount of revenue and associated costs can be measured reliably. KPN follows the five-step process of IFRS 15 to recognize revenue. After a contract with a customer has been entered into, the separate performance obligations are identified, which are the distinct goods and services promised to the customer (the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer, and the transfer of goods or services to the customer are separately identifiable from other promises in the contract). The next steps are the determination of the transaction price and the allocation to the performance obligations. Allocation of the transaction price to performance obligations is based on standalone selling prices, which are based on our price lists and therefore readily available. The final step is to recognize revenue when a performance obligation is satisfied. Revenue is recognized either at a point in time or over time. In general, telco and IT services are delivered over time, whereas handsets and peripheral and network equipment, in case they are treated as separate performance obligations, are delivered at a point in time. Revenue for variable considerations, including revenue under dispute, is recognized only when it is highly probable which, in some cases, requires significant judgment. An adjustment for the time value of money is made to a transaction price for the effects of financing if time between recognition of revenue and cash receipt is expected to exceed 12 months and if it provides the customer with a significant benefit. If KPN transfers goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized in case the earned consideration is conditional. A financial receivable is recognized if KPN\u2019s right to an amount of consideration is unconditional (only the passage of time is required before payment of the consideration is due). KPN recognizes contract liabilities in the Statement of Financial Position for considerations received in respect of unsatisfied performance obligations. Contract liabilities are recognized as revenue when KPN performs under the contract. At the start of a contract with a customer, in case services or goods are delivered by sub-contractors, KPN determines whether its performance obligation is to provide the specified goods or services itself (KPN acts as a principal) or to arrange for another party to provide those goods or services (KPN acts as an agent) based on the agreed terms and conditions with the customer and the sub-contractor, as well as the nature of the goods and services promised to the customer. When KPN acts as an agent, the revenue recognized is not the gross amount but the net amount that KPN is entitled to retain for its services as the agent. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-530": { "value": "KPN applies the practical expedients provided in IFRS 15 under which disclosure of amounts of consideration allocated to the remaining performance obligations (unsatisfied or partially satisfied) do not need to be disclosed. This applies to contracts with an original expected duration of less than one year or when KPN bills a fixed amount for network services provided. KPN recognizes revenue from network services in the amount to which KPN has a right to invoice the customer and this amount corresponds directly with the value of KPN\u2019s performance completed to date. Accounting policy: Revenues The core principle is that revenue is recognized to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which KPN expects to be entitled in exchange for those goods or services. Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to KPN and the amount of revenue and associated costs can be measured reliably. KPN follows the five-step process of IFRS 15 to recognize revenue. After a contract with a customer has been entered into, the separate performance obligations are identified, which are the distinct goods and services promised to the customer (the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer, and the transfer of goods or services to the customer are separately identifiable from other promises in the contract). The next steps are the determination of the transaction price and the allocation to the performance obligations. Allocation of the transaction price to performance obligations is based on standalone selling prices, which are based on our price lists and therefore readily available. The final step is to recognize revenue when a performance obligation is satisfied. Revenue is recognized either at a point in time or over time. In general, telco and IT services are delivered over time, whereas handsets and peripheral and network equipment, in case they are treated as separate performance obligations, are delivered at a point in time. Revenue for variable considerations, including revenue under dispute, is recognized only when it is highly probable which, in some cases, requires significant judgment. An adjustment for the time value of money is made to a transaction price for the effects of financing if time between recognition of revenue and cash receipt is expected to exceed 12 months and if it provides the customer with a significant benefit. If KPN transfers goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized in case the earned consideration is conditional. A financial receivable is recognized if KPN\u2019s right to an amount of consideration is unconditional (only the passage of time is required before payment of the consideration is due). KPN recognizes contract liabilities in the Statement of Financial Position for considerations received in respect of unsatisfied performance obligations. Contract liabilities are recognized as revenue when KPN performs under the contract. At the start of a contract with a customer, in case services or goods are delivered by sub-contractors, KPN determines whether its performance obligation is to provide the specified goods or services itself (KPN acts as a principal) or to arrange for another party to provide those goods or services (KPN acts as an agent) based on the agreed terms and conditions with the customer and the sub-contractor, as well as the nature of the goods and services promised to the customer. When KPN acts as an agent, the revenue recognized is not the gross amount but the net amount that KPN is entitled to retain for its services as the agent. Contract liabilities \u00a031 December 2022 31 December 2021 \u20ac\u00a0million Current Non-current Current Non-current Contract liabilities 169 130 186 169 Of which variable considerations - 86 - 86 The contract liabilities primarily relate to the consideration received from customers before satisfying performance obligations, such as advances for subscriptions and airtime. KPN recognizes a contract liability for postpaid and prepaid bundled minutes and data increasingly based on the passage of time of these bundles per proposition. The utilization percentage is the actual pro-rata period as a percentage of total credits granted for that period. For the transition phase of projects for business customers which are treated as a separate performance obligation, a contract liability is recognized if the amount invoiced is higher than the amount of revenue allocated to these projects. A contract liability is also recognized for the mobile connection fees charged to the customer if the connection is not treated as a separate performance obligation. Contract liabilities are recognized for variable considerations which are not deemed highly probable. The introduction of new mobile consumer propositions in August 2016 caused a change in the VAT calculation methodology, which resulted in a lower remittance of VAT from August 2016 until December 2018. KPN\u2019s view is not shared by the Dutch tax authorities. KPN concluded, based on the applicable regulations, that a positive outcome of this dispute is not highly probable and therefore recorded a contract liability for the VAT amount. Additionally, an amount for the corresponding interest amount has been accounted for. A potential final negative outcome of the current court procedure will lead to a negative cash flow in future years. In 2022, EUR 4m revenue was recognized from variable considerations related to performance obligations satisfied (or partially satisfied) in previous years (in 2021: EUR 13m). The year\u2019s revenues include the current portion of the contract liability balance at the beginning of the year. For the accounting policy regarding contract liabilities, see Note 4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-884": { "value": "Accounting policy: Costs to obtain and/or fulfill a contract The incremental costs of obtaining a contract with a customer are recognized as an asset if KPN expects to recover those costs. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer, regardless of whether the contract is obtained or not. Costs to fulfill a contract are recognized as an asset if: The costs relate directly to a contract; and The costs generate or enhance resources that will be used in satisfying performance obligations in the future; and The costs are expected to be recovered. Capitalized contract costs are amortized on a linear basis over the period in which KPN transfers the related goods or services to the customer. KPN applies the practical expedient to immediately expense contract costs when the asset that would have resulted from capitalizing such costs would have been amortized within one year or less. Assets recognized for costs to obtain a contract and costs to fulfill a contract are subject to impairment testing. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCustomerAcquisitionCostsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-540": { "value": " 4.2 Other income \u20ac\u00a0million 2022 2021 Other income 50 852 Other income in 2022 relates to the book gain on the sale of assets to Glaspoort B.V. (EUR 47m) and book gains on the sale of various fixed assets (EUR 3m). Other income in 2021 relates to the book gain on the sale of the subsidiary Glaspoort B.V. (EUR 830m), see Note 21 for further information on the sale of subsidiaries, the book gain on the sale of assets to Glaspoort B.V. (EUR 15m), book gains on the sale of various fixed assets (EUR 5m) and adjustments to the book result on sale of subsidiaries in 2019 and 2020 (EUR 1m). Accounting policy: Other income Other income includes gains on the sale of property, plant and equipment, gains on the sale of subsidiaries as well as other gains not related to KPN\u2019s operating activities. Disposals \u20ac\u00a0million 2022 2021 Amount of assets and liabilities in the subsidiaries or businesses over which control is lost: \u00a0\u00a0Property, plant and equipment - 7 Trade and other receivables, prepayments and accrued income - 17 Trade and other payables and accrued expenses - -24 Total net assets - - Transaction costs1 - 7 Allocation of goodwill upon loss of control over a business - 64 Total costs - 71 Cash consideration - 233 Contingent cash consideration - 218 Interest in joint venture (50%) - 451 Total consideration - 902 Book gain before income tax - 831 Income taxes - -190 Book gain after income tax - 640 The transaction costs in 2021 include EUR 1m release of accruals related to disposals in previous years ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-541": { "value": "| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Other income | 50 | 852 |
Other income in 2022 relates to the book gain on the sale of assets to Glaspoort B.V. (EUR 47m) and book gains on the sale of various fixed assets (EUR 3m).
Other income in 2021 relates to the book gain on the sale of the subsidiary Glaspoort B.V. (EUR 830m), see Note 21 for further information on the sale of subsidiaries, the book gain on the sale of assets to Glaspoort B.V. (EUR 15m), book gains on the sale of various fixed assets (EUR 5m) and adjustments to the book result on sale of subsidiaries in 2019 and 2020 (EUR 1m).
Other income includes gains on the sale of property, plant and equipment, gains on the sale of subsidiaries as well as other gains not related to KPN\u2019s operating activities.
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Amount of assets and liabilities in the subsidiaries or businesses over which control is lost: | \u00a0 | \u00a0 |
| Property, plant and equipment | - | 7 |
| Trade and other receivables, prepayments and accrued income | - | 17 |
| Trade and other payables and accrued expenses | - | -24 |
| Total net assets | - | - |
| Transaction costs1 | - | 7 |
| Allocation of goodwill upon loss of control over a business | - | 64 |
| Total costs | - | 71 |
| Cash consideration | - | 233 |
| Contingent cash consideration | - | 218 |
| Interest in joint venture (50%) | - | 451 |
| Total consideration | - | 902 |
| Book gain before income tax | - | 831 |
| Income taxes | - | -190 |
| Book gain after income tax | - | 640 |
On 30 December 2022, KPN acquired 100% of the shares of Itzos B.V., a Dutch IT provider specializing in integrating healthcare systems and optimizing communication between healthcare providers. The transaction is accounted for as a business combination because the assets acquired and liabilities assumed constitute a business.
The preliminary purchase price allocation:
| \u20ac\u00a0million | 2022 |
|---|---|
| Recognized amounts of identifiable assets acquired and liabilities assumed: | \u00a0 |
| Intangible assets | 9 |
| Trade and other receivables, prepayments and accrued income | 2 |
| Net cash and cash equivalents | 1 |
| Non-current liabilities | -3 |
| Trade and other payables and accrued expenses | -2 |
| Total net assets | 7 |
| Total transaction costs | - |
| Cash consideration | 13 |
| Contingent cash consideration | 1 |
| Total consideration | 14 |
| Goodwill | 7 |
The impact of the acquisition on KPN's Group revenues, EBITDA AL and net profit in 2022 is negligible, also if the acquisition had taken place at the beginning of the year.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
Due to the limited relative size of Glaspoort to the KPN Group, Glaspoort did not qualify as a discontinued operation. Therefore, the results and cash flows of Glaspoort remained included in KPN\u2019s consolidated income and cash flow statements until the date of completion of the transaction, whereas its assets and liabilities were classified on KPN\u2019s consolidated balance sheet as part of the \u2018assets held for sale\u2019.
The transaction was subject to closing conditions and the regulatory approvals were obtained on 12 May 2021. The transaction resulted in a net book gain of EUR 639m, consisting of a book gain on the transaction of EUR 830m, included in other income (see Note 4.2), and a tax expense of EUR 190m. KPN\u2019s 50% share in the result of Glaspoort in the period between the transaction and 31 December 2021 was EUR -2m.
The transaction resulted in a net cash inflow of EUR 196m in 2021, classified as cash flow from investing activities in the Consolidated Statement of Cash Flows. This amount consists of the cash consideration received for the shares (EUR 233m), the transferred assets at closing (EUR 24m), less the share premium contribution (EUR 39m), transaction costs paid (EUR 8m) and EUR 15m for invoices paid by KPN regarding transferred assets.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Other income | 50 | 852 |
Other income in 2022 relates to the book gain on the sale of assets to Glaspoort B.V. (EUR 47m) and book gains on the sale of various fixed assets (EUR 3m).
Other income in 2021 relates to the book gain on the sale of the subsidiary Glaspoort B.V. (EUR 830m), see Note 21 for further information on the sale of subsidiaries, the book gain on the sale of assets to Glaspoort B.V. (EUR 15m), book gains on the sale of various fixed assets (EUR 5m) and adjustments to the book result on sale of subsidiaries in 2019 and 2020 (EUR 1m).
Other income includes gains on the sale of property, plant and equipment, gains on the sale of subsidiaries as well as other gains not related to KPN\u2019s operating activities.
Other operating expenses comprise, among others, a net addition to the restructuring provision (see Note 18).
The fees listed below relate to the services provided to KPN and its consolidated group entities by Ernst & Young Accountants LLP, as well as by other Dutch and foreign-based EY individual partnerships and legal entities, including their tax services and advisory groups:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Financial statements audit fees | 3.8 | 3.9 |
| Other assurance fees | 0.8 | 0.9 |
| Total audit fees, charged by Ernst & Young Accountants LLP | 4.7 | 4.7 |
| Tax fees | - | 0.2 |
| Total | 4.7 | 5.0 |
The financial statements audit fees include the fees for professional services rendered for the audit of KPN\u2019s annual financial statements and the annual statutory financial statements of subsidiaries or services that are normally provided by the auditor in connection with the audits.
The other assurance fees include the fees incurred for assurance and related services that are reasonably related to the performance of the audit or review of KPN\u2019s Financial Statements, such as revenue and IT-related assurance services and regulatory-related assurance services.
Operating expenses are divided into direct cost (cost of goods and services) and indirect cost (IT/TI, personnel expenses and other operating expenses).
Cost of goods and services are costs incurred in the context of a sales transaction and include subscriber acquisition and retention costs and traffic expenses. These costs are expensed as incurred, except handset fees paid to dealers and transaction-related dealer commissions that are capitalized and amortized over the contract term. The cost of a handset is expensed when the handset is sold (as incurred), both as an individual sale or as a component of a transaction in combination with a subscription.
Information technology (IT) expenses relate to KPN\u2019s IT environment and include licenses and maintenance expenses for software and/or IT hardware when not directly related to a sales transaction. Technical infrastructure (TI) expenses are expenses related to KPN\u2019s fixed and mobile networks.
Personnel expenses are all expenses related to KPN\u2019s workforce, both related to own employees and external personnel from employment agencies.
Other operating expenses include expenses related to marketing and communication, billing and collection, housing and facilities.
| \u20ac\u00a0million | 2022 | 2021 Restated |
|---|---|---|
| Salaries and wages | 727 | 748 |
| Retirement benefits | 79 | 79 |
| Social security contributions | 92 | 84 |
| Additional labor capacity | 47 | 58 |
| Own work capitalized | -134 | -116 |
| Other | -2 | -8 |
| Total personnel expenses | 809 | 844 |
Employee redundancy costs are not included in personnel expenses but in other operating expenses (see Note 18).
| Number of own personnel (FTE) per segment1 | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Consumer | 2,538 | 2,566 |
| Business | 2,638 | 2,694 |
| Wholesale | 222 | 213 |
| NOI | 3,090 | 3,232 |
| Other | 963 | 993 |
| Total FTE | 9,452 | 9,699 |
KPN has granted shares (equity-settled) and share-based awards (cash-settled) on its shares to members of the Board of Management and senior management. The conditionally granted awards will vest after three years if the employee is still employed by KPN. For awards granted until 2018, vesting is based on individual vesting of 25% relative total shareholder return (TSR) versus peer group, 25% free cash flow, 25% earnings per share, 12.5% on sustainability/environmental targets and 12.5% on stakeholder/customer targets. Vesting of non-financial targets is subject to achieving a cumulative net profit during the vesting period of three years (i.e. a qualifier for vesting). The peer group and the vesting schedule can be found under \u2018Long-term incentives\u2019 in the Remuneration Report.
As of 2019, the targets for the LTI plan are set as follows: 70% financial targets, of which 45% on cumulative free cash flow over the plan period and 25% on relative TSR measured against the STOXX Europe 600 Telecommunications index and 30% non-financial targets, determined at the start of a new plan from the following categories: (i) Sustainability; (ii) Reputation; (iii) Social; (iv) Key business projects; and (v) Market share.
The main features of the awards granted to KPN management are summarized in the following table.
| \u00a0 | Board of Management | Senior management | Maximum term | Settlement type1 | Vesting period | Holding period after vesting of/until |
|---|---|---|---|---|---|---|
| 2018 | X | X | 5 years | Equity2 | 3 years | 2 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2019 | X | X | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2020 | X | \u00a0 | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2021 | X | \u00a0 | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2022 | X | \u00a0 | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
The total compensation expense associated with the share plans was EUR 11m in 2022 (2021: EUR 8m). The related liability (for cash-settled shares) on 31 December 2022 was EUR 10m (31 December 2021: EUR 8m). This liability is included under Other payables. For the 2019 Share Plan and share-based awards, the service conditions were met in 2022. The intrinsic value at vesting was EUR 8m (2021: EUR 6m).
The following table presents the number of shares and share-based awards in thousands under the share plans.
| \u00a0 | Total 31 Dec 2020 | Granted/ additional vesting1 | Exercised/ Vested | Forfeited | Total 31 Dec 2021 | Granted/ additional vesting2 | Exercised/ Vested | Forfeited3 | Total 31 Dec 20224 | -of which: Non- vested |
|---|---|---|---|---|---|---|---|---|---|---|
| 2018 Share-based awards Sr. man. | 1,083 | - | -834 | -249 | - | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| 2018 Shares BoM/Sr. man. | 1,913 | - | -1,473 | -440 | - | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| 2019 Share-based awards Sr. man. | 2,022 | - | - | -265 | 1,757 | - | -1,619 | -139 | - | - |
| 2019 Shares BoM/Sr. man. | 1,137 | - | - | -30 | 1,107 | - | -1,020 | -87 | - | - |
| 2020 Share-based awards Sr. man. | 2,925 | - | - | -167 | 2,758 | - | - | -657 | 2,101 | 2,101 |
| 2020 Shares BoM | 1,809 | - | - | - | 1,809 | - | - | - | 1,809 | 1,809 |
| 2021 Share-based awards Sr. man. | - | 2,033 | - | - | 2,033 | - | - | -354 | 1,679 | 1,679 |
| 2021 Shares BoM | - | 1,409 | - | - | 1,409 | - | - | - | 1,409 | 1,409 |
| 2022 Share-based awards Sr. man. | \u00a0 | \u00a0 | \u00a0 | \u00a0 | - | 1,740 | - | -88 | 1,652 | 1,652 |
| 2022 Shares BoM | \u00a0 | \u00a0 | \u00a0 | \u00a0 | - | 1,157 | - | - | 1,157 | 1,157 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
The fair value of each award at the grant date is determined using the following assumptions:
| Assumptions | 2022 LTI | 2021 LTI |
|---|---|---|
| Risk-free interest rate based on euro government bonds for remaining time to maturity of 2.7 years | 0.7% | -0.5% |
| Expected dividend for KPN (based on one year\u2019s historical daily data preceding the date of award) | 4.7% | 5.6% |
| Expected volatility (PSP grant based on 2.7 years\u2019 historical daily data) used for TSR | 26.3% | 27.0% |
| Share price at date of award (closing at grant date) | \u20ac\u00a03.47 | \u20ac\u00a02.82 |
The following paragraphs detail the actual remuneration of the Board of Management. Please refer to the Remuneration Report for the executive pay policy.
The remuneration of the Board of Management, representing the costs incurred by the company measured under IFRS principles, is as follows:
| Name current member | Year | Salary | STI1 | LTI2 | Pension Cost3 | Social security and other compensation4 | Total |
|---|---|---|---|---|---|---|---|
| J.F.E. Farwerck | 2022 | 879,375 | 716,568 | 1,108,118 | 219,036 | 30,022 | 2,953,119 |
| \u00a0 | 2021 | 875,000 | 936,775 | 971,240 | 213,246 | 30,364 | 3,026,625 |
| H.C. Figee | 2022 | 678,375 | 368,493 | 528,456 | 116,895 | 37,160 | 1,729,379 |
| \u00a0 | 2021 | 675,000 | 481,815 | 324,249 | 109,638 | 37,416 | 1,628,118 |
| J.P.E. van Overbeke | 2022 | 653,250 | 354,872 | 561,278 | 154,304 | 14,558 | 1,738,262 |
| \u00a0 | 2021 | 650,000 | 463,944 | 526,584 | 152,525 | 14,814 | 1,807,867 |
| M.W.M. Snoep | 2022 | 653,250 | 354,872 | 550,466 | 126,138 | 29,814 | 1,714,540 |
| \u00a0 | 2021 | 650,000 | 463,944 | 462,514 | 117,328 | 30,070 | 1,723,856 |
| B. Fouladi | 2022 | 653,250 | 354,872 | 561,278 | 126,214 | 12,645 | 1,708,259 |
| \u00a0 | 2021 | 650,000 | 463,944 | 501,586 | 124,975 | 12,901 | 1,753,406 |
| H. Garssen | 2022 | 502,500 | 272,978 | 408,082 | 82,638 | 14,572 | 1,280,770 |
| \u00a0 | 2021 | 500,000 | 356,880 | 300,294 | 81,984 | 14,828 | 1,253,986 |
| Total current members | 2022 | 4,020,000 | 2,422,655 | 3,717,678 | 825,225 | 138,771 | 11,124,329 |
| \u00a0 | 2021 | 4,000,000 | 3,167,302 | 3,086,467 | 799,696 | 140,393 | 11,193,858 |
See the Remuneration Report for the number of shares under the share plans per individual board member.
See the Insider Transactions section for stock ownership of members of the Board of Management and Supervisory Board.
Please see the Remuneration Report for the actual fee received by each member of the Supervisory Board. The total fee for 2022 is EUR 648,215 (2021: EUR 652,889).
For equity-settled plans, the fair value of shares granted to employees is measured at grant date. For cash-settled plans, the fair value of the liability for the awards granted is remeasured at each reporting date and at settlement date.
The costs of share-based compensation plans are determined based on the fair value of the shares and the number of shares expected to vest. On each balance date, KPN determines whether it is necessary to revise the expectation of the number of shares that will vest. The fair value is recognized as personnel expense in profit or loss over the vesting period of the shares against an increase in equity in the case of equity-settled share-based compensation plans and against the recognition of a liability in the case of cash-settled share-based compensation plans.
Other operating expenses comprise, among others, a net addition to the restructuring provision (see Note 18).
The fees listed below relate to the services provided to KPN and its consolidated group entities by Ernst & Young Accountants LLP, as well as by other Dutch and foreign-based EY individual partnerships and legal entities, including their tax services and advisory groups:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Financial statements audit fees | 3.8 | 3.9 |
| Other assurance fees | 0.8 | 0.9 |
| Total audit fees, charged by Ernst & Young Accountants LLP | 4.7 | 4.7 |
| Tax fees | - | 0.2 |
| Total | 4.7 | 5.0 |
The financial statements audit fees include the fees for professional services rendered for the audit of KPN\u2019s annual financial statements and the annual statutory financial statements of subsidiaries or services that are normally provided by the auditor in connection with the audits.
The other assurance fees include the fees incurred for assurance and related services that are reasonably related to the performance of the audit or review of KPN\u2019s Financial Statements, such as revenue and IT-related assurance services and regulatory-related assurance services.
Operating expenses are divided into direct cost (cost of goods and services) and indirect cost (IT/TI, personnel expenses and other operating expenses).
Cost of goods and services are costs incurred in the context of a sales transaction and include subscriber acquisition and retention costs and traffic expenses. These costs are expensed as incurred, except handset fees paid to dealers and transaction-related dealer commissions that are capitalized and amortized over the contract term. The cost of a handset is expensed when the handset is sold (as incurred), both as an individual sale or as a component of a transaction in combination with a subscription.
Information technology (IT) expenses relate to KPN\u2019s IT environment and include licenses and maintenance expenses for software and/or IT hardware when not directly related to a sales transaction. Technical infrastructure (TI) expenses are expenses related to KPN\u2019s fixed and mobile networks.
Personnel expenses are all expenses related to KPN\u2019s workforce, both related to own employees and external personnel from employment agencies.
Other operating expenses include expenses related to marketing and communication, billing and collection, housing and facilities.
| \u20ac\u00a0million | 2022 | 2021 Restated |
|---|---|---|
| Salaries and wages | 727 | 748 |
| Retirement benefits | 79 | 79 |
| Social security contributions | 92 | 84 |
| Additional labor capacity | 47 | 58 |
| Own work capitalized | -134 | -116 |
| Other | -2 | -8 |
| Total personnel expenses | 809 | 844 |
Employee redundancy costs are not included in personnel expenses but in other operating expenses (see Note 18).
Retirement benefits are provided through a number of defined contribution plans and funded and unfunded defined benefit plans. The most significant plans are described hereafter.
KPN\u2019s main pension plan covers employees in the Netherlands who are subject to KPN\u2019s collective labor agreement and employees with an individual labor agreement, and is externally funded through Stichting Pensioenfonds KPN. This plan is a collective defined contribution pension plan. It is accounted for as a defined contribution plan because KPN has no other obligation than to pay the annual contribution. This is a fixed percentage of the pensionable base for a period of three years. After this three-year period the annual contribution is reassessed based on a fixed and agreed method in which no reflection to past service or the funded status of the fund is included. As of 1 January 2023, a new three-year period has become effective.
The Getronics US and UK operations were divested in 2008 and 2012, respectively. The closed and frozen pension plans of the former US and UK operations remained with KPN and are accounted for as a defined benefit plan. The assets of the plans are held separately from KPN in independently administered funds. The UK plan operates under the regulations of the UK Pensions Regulator and the US plan under the provisions of the Employee Retirement Income Security Act (ERISA). The deficit in the plans\u2019 funding must be recovered by the investment returns in the plans\u2019 assets and contributions by KPN. The pension plans in the UK and US expose KPN to a number of risks, which can have an impact on the future contributions by KPN and the liability recorded in its balance sheet. The most significant risks are summarized below:
Asset volatility risk: the pension plans\u2019 assets are partially invested in equity securities and other return-seeking assets, so the plans\u2019 funding levels are exposed to equity market risks. The war in the Ukraine and increases in interest rates, for example caused significant volatility in 2022.
Interest rate risk: a decrease in interest rates will increase the plans\u2019 liabilities, although this will be partially offset by an increase in the value of the plans\u2019 bond holdings.
Inflation risk: the indexation of part of the accrued benefits in the UK is based on a combination of consumer and retail price indices, so the UK plan is exposed to inflation risk although the indexation is capped.
Life expectancy risk: the plans provide benefits for the life of the participants, so increases in life expectancy will result in an increase in the plans\u2019 liabilities.
In the UK, guaranteed minimum pension (GMP) is a portion of pension that was accrued by individuals who were contracted out of the state second pension prior to 6 April 1997. At present there is an inequality of benefits between male and female members who have GMP. The High Court in the UK ruled in 2018 that equalization will be required for affected defined benefit pension schemes. A number of options can be used to equalize, which had not been finalized as at 31 December 2022. The estimated cost of equalization as at 31 December 2022 and 2021 for the UK plan is EUR 6m, which has been recognized as a past service cost in 2018. However, the cost to the UK plan for equalizing heavily depends on a complex interaction between the benefit design and membership profile as well as the method used to equalize, which must be determined by the trustees.
In 2022, an additional voluntary pension contribution of EUR 23m into the US plan was made. This will lead to lower contributions going forward and brings the plan closer to full funding and an eventual buyout.
KPN has a number of other funded (insured) plans in the Netherlands which are all closed to new entrants. Based on Dutch law, KPN could be required to make contributions if participants of these plans require a value transfer to another pension fund or insurer. However, the risk related to these value transfers is limited and therefore no provision has been recognized for these plans.
In 2021, a final payment of EUR 7m for the unfunded transitional early retirement plan was made. In 2022, a new early retirement plan was implemented for a limited group of employees for which an expense of EUR 1m was recorded in 2022.
The provisions for retirement benefit obligations consist of the net defined benefit liability regarding pension plans and early retirement plans, which are accounted for as defined benefit plans as described above. See the table below for a specification of the balance sheet position.
| \u00a0 | \u00a0 | Defined benefit obligation1 | Fair value of assets | Net defined benefit liability (asset) | |||
|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million | \u00a0 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Balance at 1 January | \u00a0 | 574 | 651 | -482 | -499 | 92 | 152 |
| Included in profit or loss | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Operating expense2 | \u00a0 | -33 | -56 | 37 | 58 | 4 | 2 |
| Interest expense (income) | \u00a0 | 12 | 9 | -10 | -7 | 2 | 2 |
| Included in OCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Remeasurements loss (gain): | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Actuarial loss (gain)3 | \u00a0 | -141 | -32 | - | - | -141 | -32 |
| Return on plan assets excluding interest income | \u00a0 | - | - | 137 | -20 | 137 | -20 |
| Effect of movements in exchange rates | \u00a0 | -4 | 40 | 3 | -31 | -1 | 9 |
| Total | \u00a0 | -145 | 8 | 140 | -51 | -5 | -43 |
| Other | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Employer\u2019s contribution | \u00a0 | - | - | -43 | -21 | -43 | -21 |
| Benefits paid | \u00a0 | -28 | -38 | 28 | 38 | - | - |
| Balance at 31 December | \u00a0 | 380 | 574 | -330 | -482 | 49 | 92 |
The key actuarial assumptions used in the calculation of the defined benefit obligations are as follows:
| \u00a0 | 31 December 2022 | 31 December 2021 | ||||
|---|---|---|---|---|---|---|
| \u00a0 | Getronics UK | Getronics US | Other | Getronics UK | Getronics US | Other |
| Discount rate (%) | 4.8 | 4.9 | 3.7 | 2.0 | 2.6 | 1.0 |
| Expected salary increases (%) | N/a | N/a | 2.0 | N/a | N/a | 2.0 |
| Expected benefit increases/indexation (%) | 2.3-2.9 | N/a | 0.0 | 2.5-3.1 | N/a | 0.0 |
| Life expectancy for pensioners at retirement age: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Male | 21.8 | 20.7 | 21.7 | 22.1 | 20.6 | 21.4 |
| Female | 23.8 | 22.6 | 23.8 | 24.1 | 22.6 | 23.4 |
The discount rate is based on yield curves of AA corporate bonds with maturities equal to the duration of the benefit obligations and in the applicable currency. As at 31 December 2022, the (weighted) average duration of the defined benefit obligation was 10 years.
Assumptions regarding life expectancy are based on published statistics and mortality tables that include allowances for future improvement in mortality. The mortality table used in the Netherlands is the projected table AG 2022, which includes projected improvement rates varying by year of birth, corrected for fund-specific circumstances. The mortality table used in the UK is the 102% for males and 107% for females of the SAPS S3PXA tables with CMI 2021 projection with a 1.25% long-term improvement, and in the US the Pri-2012 Total Dataset with Scale MP-2021. The life expectancy at the age of 65 is expected to increase in the next 20 years by between one and two years in the UK and the US.
The following table shows the approximate impact on the defined benefit obligation of a change in the key actuarial assumptions of 0.5% and in the case of life expectancy of a change of one year.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Increase | Decrease | Increase | Decrease |
| Discount rate | -18 | 20 | -35 | 39 |
| Expected salary increases | - | - | - | - |
| Expected benefit increases | 7 | -8 | 16 | -19 |
| Life expectancy | 13 | -14 | 26 | -26 |
The assets of all defined benefit pension plans as at 31 December 2022 and 2021 comprise of:
| \u00a0 | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Quoted in active markets: | \u00a0 | \u00a0 |
| Equity securities | 14% | 21% |
| Fixed-income securities | 55% | 41% |
| Real estate1 | 0% | 0% |
| Commodities2 | 1% | 1% |
| Other | 5% | 2% |
| Other: | \u00a0 | \u00a0 |
| Equity securities | 0% | 6% |
| Fixed-income securities | 0% | 10% |
| Real estate1 | 5% | 3% |
| Other3 | 20% | 16% |
The strategic asset allocations of the defined benefit plans at year-end 2022 were as follows:
| \u20ac\u00a0million | Getronics UK | Getronics US | Other plans |
|---|---|---|---|
| Equity securities | 20% | 0% | 0% |
| Fixed-income securities (including inflation-linked bonds) | 55% | 100% | 0% |
| Other | 25% | 0% | 100% |
| Total | 100% | 100% | 100% |
In both the UK and the US, a roadmap is in place to move to more fixed-income exposure as the funded status improves. The Getronics UK pension fund partially hedges interest rate and inflation risks. The Getronics US pension fund fully hedges interest rate risks. As the UK pension fund invests in global investment funds, a minor part of these investments could be related to KPN equities. The pension funds do not have direct investments in KPN equities.
In 2022, the total employer\u2019s contributions and benefit payments for all defined benefit and defined contribution plans amounted to EUR 122m, consisting of EUR 78m employer\u2019s premiums for defined contribution plans, EUR 43m contributions for funded defined benefit plans and EUR 1m payments for unfunded plans.
The amount of employer\u2019s contributions in 2023 for the remaining defined benefit pension plans is estimated to be EUR 17m for the funded plans. The total amount of employer\u2019s premiums to be paid in 2023 for the defined contribution plans is estimated to be EUR 81m.
The liability recognized in respect of all pension and early retirement plans that qualify as a defined benefit obligation is the present value of the defined benefit obligation less the fair value of plan assets. KPN uses actuarial calculations (projected unit credit method) to measure the obligations and the costs. For the calculation, actuarial assumptions are made about demographic variables (such as employee turnover and mortality) and financial variables (such as future indexation and the discount rate). The discount rate is determined by reference to market rates. These are interest rates of high-quality corporate bonds that are denominated in the currency in which the benefit will be paid and that have terms to maturity approximating the terms of the related liability. A net defined benefit asset may arise where a defined benefit plan has been overfunded. KPN recognizes a net defined benefit asset in such a case only when future economic benefits are available to KPN in the form of a reduction in future contributions or a cash refund. Actuarial gains and losses are recognized immediately in OCI.
Past service costs, curtailments and settlements are recognized immediately in the P&L.
The amount of pension costs included in operating expenses with respect to defined benefit plans consists of service cost, past service costs, curtailments and settlements, and administration costs. Net interest on the net defined benefit liability is presented as part of finance costs.
For pension plans that qualify as a defined contribution plan, KPN recognizes contributions as an expense when an employee has rendered service in exchange for those contributions.
| \u20ac\u00a0million | Personnel | Contractual | Total restructuring | Asset retirement obligation | Other provisions | Total provisions |
|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 18 | 2 | 19 | 94 | 76 | 189 |
| of which: current portion | 18 | - | 18 | 4 | 17 | 38 |
| Additions | 38 | - | 38 | 8 | 8 | 54 |
| Releases | - | - | - | -1 | -7 | -7 |
| Usage | -38 | - | -38 | -4 | -13 | -55 |
| Other movements, incl. discontinued operations | - | - | - | 1 | -5 | -3 |
| Balance at 31 December 2021 | 18 | 1 | 19 | 98 | 60 | 177 |
| of which: current portion | 18 | - | 18 | 2 | 7 | 27 |
| Transition impact IAS 371 | - | - | - | - | 14 | 14 |
| Additions | 23 | 1 | 24 | - | 1 | 25 |
| Releases | - | - | - | -20 | -3 | -24 |
| Usage | -29 | - | -30 | -2 | -7 | -40 |
| Other movements, incl. discontinued operations and new business combinations | - | - | - | -1 | 2 | 1 |
| Balance at 31 December 2022 | 11 | 2 | 13 | 75 | 66 | 154 |
| < 1 year | 11 | - | 12 | 3 | 8 | 23 |
| 1-5 years | - | 2 | 2 | 11 | - | 13 |
| > 5 years | - | - | - | 61 | 58 | 119 |
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts redundancy in exchange for these benefits.
Termination benefits are recognized when KPN is demonstrably committed either to terminating the employment according to a detailed formal plan without the possibility of withdrawal or to providing termination benefits as a result of an individual and accepted offer made to encourage redundancy. Benefits falling due more than 12 months after 31 December are discounted to present value.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-546": { "value": "Number of own personnel (FTE) per segment1 31 December 2022 31 December 2021 Consumer 2,538 2,566 Business 2,638 2,694 Wholesale 222 213 NOI 3,090 3,232 Other 963 993 Total FTE 9,452 9,699 All employees were employed in the Netherlands ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-547": { "value": " Share plans KPN has granted shares (equity-settled) and share-based awards (cash-settled) on its shares to members of the Board of Management and senior management. The conditionally granted awards will vest after three years if the employee is still employed by KPN. For awards granted until 2018, vesting is based on individual vesting of 25% relative total shareholder return (TSR) versus peer group, 25% free cash flow, 25% earnings per share, 12.5% on sustainability/environmental targets and 12.5% on stakeholder/customer targets. Vesting of non-financial targets is subject to achieving a cumulative net profit during the vesting period of three years (i.e. a qualifier for vesting). The peer group and the vesting schedule can be found under \u2018Long-term incentives\u2019 in the Remuneration Report. As of 2019, the targets for the LTI plan are set as follows: 70% financial targets, of which 45% on cumulative free cash flow over the plan period and 25% on relative TSR measured against the STOXX Europe 600 Telecommunications index and 30% non-financial targets, determined at the start of a new plan from the following categories: (i) Sustainability; (ii) Reputation; (iii) Social; (iv) Key business projects; and (v) Market share. The main features of the awards granted to KPN management are summarized in the following table. \u00a0Board of Management Senior management Maximum term Settlement type1 Vesting period Holding period after vesting of/until 2018 X X 5 years Equity2 3 years 2 years \u00a0\u00a0X 3 years Cash 3 years \u2013 2019 X X 6 years Equity2 3 years 3 years \u00a0\u00a0X 3 years Cash 3 years \u2013 2020 X \u00a06 years Equity2 3 years 3 years \u00a0\u00a0X 3 years Cash 3 years \u2013 2021 X \u00a06 years Equity2 3 years 3 years \u00a0\u00a0X 3 years Cash 3 years \u2013 2022 X \u00a06 years Equity2 3 years 3 years \u00a0\u00a0X 3 years Cash 3 years \u2013 The cash-settled share awards will be settled in cash and no holding restrictions apply. An exception to the holding period for equity-settled plans is made with respect to shares that were sold upon vesting to cover the tax obligation on the vested shares. After vesting, the holder is able to sell a number of unconditional granted shares only up to the amount necessary to settle the wage taxes liability relating to the profit made on the stock compensation plan. Wage tax in the Netherlands is generally around 50% of the total vested amount Including deferred dividend The total compensation expense associated with the share plans was EUR 11m in 2022 (2021: EUR 8m). The related liability (for cash-settled shares) on 31 December 2022 was EUR 10m (31 December 2021: EUR 8m). This liability is included under Other payables. For the 2019 Share Plan and share-based awards, the service conditions were met in 2022. The intrinsic value at vesting was EUR 8m (2021: EUR 6m). The following table presents the number of shares and share-based awards in thousands under the share plans. \u00a0Total 31 Dec 2020 Granted/ additional vesting1 Exercised/ Vested Forfeited Total 31 Dec 2021 Granted/ additional vesting2 Exercised/ Vested Forfeited3 Total 31 Dec 20224 -of which: Non- vested 2018 Share-based awards Sr. man. 1,083 - -834 -249 - \u00a0\u00a0\u00a0\u00a0\u00a02018 Shares BoM/Sr. man. 1,913 - -1,473 -440 - \u00a0\u00a0\u00a0\u00a0\u00a02019 Share-based awards Sr. man. 2,022 - - -265 1,757 - -1,619 -139 - - 2019 Shares BoM/Sr. man. 1,137 - - -30 1,107 - -1,020 -87 - - 2020 Share-based awards Sr. man. 2,925 - - -167 2,758 - - -657 2,101 2,101 2020 Shares BoM 1,809 - - - 1,809 - - - 1,809 1,809 2021 Share-based awards Sr. man. - 2,033 - - 2,033 - - -354 1,679 1,679 2021 Shares BoM - 1,409 - - 1,409 - - - 1,409 1,409 2022 Share-based awards Sr. man. \u00a0\u00a0\u00a0\u00a0- 1,740 - -88 1,652 1,652 2022 Shares BoM \u00a0\u00a0\u00a0\u00a0- 1,157 - - 1,157 1,157 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 On the basis of a 100% grant. The equity-settled share numbers do not include any deferred dividend during the vesting period. The deferred dividend during the vesting period will be granted in additional shares At grant date, the fair value is calculated using a Monte Carlo Simulation model. In April 2022 the fair value was EUR 3.26 (2021 grant: EUR 2.41) for the 2022 share-based award (cash-settled) and EUR 3.55 (2021 grant: EUR 2.70) for the 2022 equity-settled share grant for the Board of Management (excluding deferred dividend) At the end of 2022, KPN held the 4th position with respect to the 2020 share grant and at the end of 2021, KPN held the 8th position with respect to the 2019 share grant. This position and the outcomes of the other targets will lead to 121% vesting in April 2023 of the 2020 share grant. Final TSR measurement for the 2019 share grant was conducted in February 2022, which resulted in 92.1% vesting in April 2022 The fair value of each cash-settled share-based award was measured on 31 December 2022 using recent strategic plans, forecasts and a Monte Carlo Simulation model, based on the most recent available share price of KPN and its performance compared with peer companies at the moment of valuation (i.e. closing share prices as at 31 December 2022). The fair value on 31 December 2022 was EUR 4.67 (2021: EUR 2.23) for the 2020 share-based award, EUR 3.74 (2021: EUR 2.19) for the 2021 share-based award and EUR 3.68 for the 2022 share-based award The fair value of each award at the grant date is determined using the following assumptions: Assumptions 2022 LTI 2021 LTI Risk-free interest rate based on euro government bonds for remaining time to maturity of 2.7 years 0.7% -0.5% Expected dividend for KPN (based on one year\u2019s historical daily data preceding the date of award) 4.7% 5.6% Expected volatility (PSP grant based on 2.7 years\u2019 historical daily data) used for TSR 26.3% 27.0% Share price at date of award (closing at grant date) \u20ac\u00a03.47 \u20ac\u00a02.82 The following paragraphs detail the actual remuneration of the Board of Management. Please refer to the Remuneration Report for the executive pay policy. Details of actual remuneration The remuneration of the Board of Management, representing the costs incurred by the company measured under IFRS principles, is as follows: Name current member Year Salary STI1 LTI2 Pension Cost3 Social security and other compensation4 Total J.F.E. Farwerck 2022 879,375 716,568 1,108,118 219,036 30,022 2,953,119 \u00a02021 875,000 936,775 971,240 213,246 30,364 3,026,625 H.C. Figee 2022 678,375 368,493 528,456 116,895 37,160 1,729,379 \u00a02021 675,000 481,815 324,249 109,638 37,416 1,628,118 J.P.E. van Overbeke 2022 653,250 354,872 561,278 154,304 14,558 1,738,262 \u00a02021 650,000 463,944 526,584 152,525 14,814 1,807,867 M.W.M. Snoep 2022 653,250 354,872 550,466 126,138 29,814 1,714,540 \u00a02021 650,000 463,944 462,514 117,328 30,070 1,723,856 B. Fouladi 2022 653,250 354,872 561,278 126,214 12,645 1,708,259 \u00a02021 650,000 463,944 501,586 124,975 12,901 1,753,406 H. Garssen 2022 502,500 272,978 408,082 82,638 14,572 1,280,770 \u00a02021 500,000 356,880 300,294 81,984 14,828 1,253,986 Total current members 2022 4,020,000 2,422,655 3,717,678 825,225 138,771 11,124,329 \u00a02021 4,000,000 3,167,302 3,086,467 799,696 140,393 11,193,858 Actual STI relates to performance in the current year but paid out in the following financial year. Please see the \u2018Short-term incentives\u2019 section in the Remuneration Report for the actual pay-out levels per target The amounts in the table represent the cost recognized for shares in 2022 and 2021 based on their fair values at grant date. The fair value of the share-based award is recorded as cost over the vesting period. Please see the \u2018Long-term incentives\u2019 section in the Remuneration Report for a further explanation The pension costs include the costs for survivor\u2019s pension, disability coverage, administration as well as the gross allowances. The fixed gross allowance (for the base pay part above EUR 114,866) in 2022 was, EUR 159,047 for Mr. Farwerck (2021: EUR 153,991), EUR 80,273 for Mr. Figee (2021: EUR 75,095), EUR 112,117 for Mr. Van Overbeke (2021: EUR 110,922), EUR 88,578 for Ms. Snoep (2021: EUR 81,622), EUR 88,495 for Mr. Fouladi (2021: EUR 87,758) and EUR 53,706 for Ms. Garssen (2021: EUR 53,411) In addition to social security, the stated amounts include allowances that can be considered as indirect remuneration and relates to the value for the private use of the company car See the Remuneration Report for the number of shares under the share plans per individual board member. See the Insider Transactions section for stock ownership of members of the Board of Management and Supervisory Board. Accounting policy: Share-based compensation For equity-settled plans, the fair value of shares granted to employees is measured at grant date. For cash-settled plans, the fair value of the liability for the awards granted is remeasured at each reporting date and at settlement date. The costs of share-based compensation plans are determined based on the fair value of the shares and the number of shares expected to vest. On each balance date, KPN determines whether it is necessary to revise the expectation of the number of shares that will vest. The fair value is recognized as personnel expense in profit or loss over the vesting period of the shares against an increase in equity in the case of equity-settled share-based compensation plans and against the recognition of a liability in the case of cash-settled share-based compensation plans. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-548": { "value": "KPN has granted shares (equity-settled) and share-based awards (cash-settled) on its shares to members of the Board of Management and senior management. The conditionally granted awards will vest after three years if the employee is still employed by KPN. For awards granted until 2018, vesting is based on individual vesting of 25% relative total shareholder return (TSR) versus peer group, 25% free cash flow, 25% earnings per share, 12.5% on sustainability/environmental targets and 12.5% on stakeholder/customer targets. Vesting of non-financial targets is subject to achieving a cumulative net profit during the vesting period of three years (i.e. a qualifier for vesting). The peer group and the vesting schedule can be found under \u2018Long-term incentives\u2019 in the Remuneration Report.
As of 2019, the targets for the LTI plan are set as follows: 70% financial targets, of which 45% on cumulative free cash flow over the plan period and 25% on relative TSR measured against the STOXX Europe 600 Telecommunications index and 30% non-financial targets, determined at the start of a new plan from the following categories: (i) Sustainability; (ii) Reputation; (iii) Social; (iv) Key business projects; and (v) Market share.
The main features of the awards granted to KPN management are summarized in the following table.
| \u00a0 | Board of Management | Senior management | Maximum term | Settlement type1 | Vesting period | Holding period after vesting of/until |
|---|---|---|---|---|---|---|
| 2018 | X | X | 5 years | Equity2 | 3 years | 2 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2019 | X | X | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2020 | X | \u00a0 | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2021 | X | \u00a0 | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
| 2022 | X | \u00a0 | 6 years | Equity2 | 3 years | 3 years |
| \u00a0 | \u00a0 | X | 3 years | Cash | 3 years | \u2013 |
The total compensation expense associated with the share plans was EUR 11m in 2022 (2021: EUR 8m). The related liability (for cash-settled shares) on 31 December 2022 was EUR 10m (31 December 2021: EUR 8m). This liability is included under Other payables. For the 2019 Share Plan and share-based awards, the service conditions were met in 2022. The intrinsic value at vesting was EUR 8m (2021: EUR 6m).
The following table presents the number of shares and share-based awards in thousands under the share plans.
| \u00a0 | Total 31 Dec 2020 | Granted/ additional vesting1 | Exercised/ Vested | Forfeited | Total 31 Dec 2021 | Granted/ additional vesting2 | Exercised/ Vested | Forfeited3 | Total 31 Dec 20224 | -of which: Non- vested |
|---|---|---|---|---|---|---|---|---|---|---|
| 2018 Share-based awards Sr. man. | 1,083 | - | -834 | -249 | - | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| 2018 Shares BoM/Sr. man. | 1,913 | - | -1,473 | -440 | - | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| 2019 Share-based awards Sr. man. | 2,022 | - | - | -265 | 1,757 | - | -1,619 | -139 | - | - |
| 2019 Shares BoM/Sr. man. | 1,137 | - | - | -30 | 1,107 | - | -1,020 | -87 | - | - |
| 2020 Share-based awards Sr. man. | 2,925 | - | - | -167 | 2,758 | - | - | -657 | 2,101 | 2,101 |
| 2020 Shares BoM | 1,809 | - | - | - | 1,809 | - | - | - | 1,809 | 1,809 |
| 2021 Share-based awards Sr. man. | - | 2,033 | - | - | 2,033 | - | - | -354 | 1,679 | 1,679 |
| 2021 Shares BoM | - | 1,409 | - | - | 1,409 | - | - | - | 1,409 | 1,409 |
| 2022 Share-based awards Sr. man. | \u00a0 | \u00a0 | \u00a0 | \u00a0 | - | 1,740 | - | -88 | 1,652 | 1,652 |
| 2022 Shares BoM | \u00a0 | \u00a0 | \u00a0 | \u00a0 | - | 1,157 | - | - | 1,157 | 1,157 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
The fair value of each award at the grant date is determined using the following assumptions:
| Assumptions | 2022 LTI | 2021 LTI |
|---|---|---|
| Risk-free interest rate based on euro government bonds for remaining time to maturity of 2.7 years | 0.7% | -0.5% |
| Expected dividend for KPN (based on one year\u2019s historical daily data preceding the date of award) | 4.7% | 5.6% |
| Expected volatility (PSP grant based on 2.7 years\u2019 historical daily data) used for TSR | 26.3% | 27.0% |
| Share price at date of award (closing at grant date) | \u20ac\u00a03.47 | \u20ac\u00a02.82 |
The following paragraphs detail the actual remuneration of the Board of Management. Please refer to the Remuneration Report for the executive pay policy.
The remuneration of the Board of Management, representing the costs incurred by the company measured under IFRS principles, is as follows:
| Name current member | Year | Salary | STI1 | LTI2 | Pension Cost3 | Social security and other compensation4 | Total |
|---|---|---|---|---|---|---|---|
| J.F.E. Farwerck | 2022 | 879,375 | 716,568 | 1,108,118 | 219,036 | 30,022 | 2,953,119 |
| \u00a0 | 2021 | 875,000 | 936,775 | 971,240 | 213,246 | 30,364 | 3,026,625 |
| H.C. Figee | 2022 | 678,375 | 368,493 | 528,456 | 116,895 | 37,160 | 1,729,379 |
| \u00a0 | 2021 | 675,000 | 481,815 | 324,249 | 109,638 | 37,416 | 1,628,118 |
| J.P.E. van Overbeke | 2022 | 653,250 | 354,872 | 561,278 | 154,304 | 14,558 | 1,738,262 |
| \u00a0 | 2021 | 650,000 | 463,944 | 526,584 | 152,525 | 14,814 | 1,807,867 |
| M.W.M. Snoep | 2022 | 653,250 | 354,872 | 550,466 | 126,138 | 29,814 | 1,714,540 |
| \u00a0 | 2021 | 650,000 | 463,944 | 462,514 | 117,328 | 30,070 | 1,723,856 |
| B. Fouladi | 2022 | 653,250 | 354,872 | 561,278 | 126,214 | 12,645 | 1,708,259 |
| \u00a0 | 2021 | 650,000 | 463,944 | 501,586 | 124,975 | 12,901 | 1,753,406 |
| H. Garssen | 2022 | 502,500 | 272,978 | 408,082 | 82,638 | 14,572 | 1,280,770 |
| \u00a0 | 2021 | 500,000 | 356,880 | 300,294 | 81,984 | 14,828 | 1,253,986 |
| Total current members | 2022 | 4,020,000 | 2,422,655 | 3,717,678 | 825,225 | 138,771 | 11,124,329 |
| \u00a0 | 2021 | 4,000,000 | 3,167,302 | 3,086,467 | 799,696 | 140,393 | 11,193,858 |
See the Remuneration Report for the number of shares under the share plans per individual board member.
See the Insider Transactions section for stock ownership of members of the Board of Management and Supervisory Board.
Please see the Remuneration Report for the actual fee received by each member of the Supervisory Board. The total fee for 2022 is EUR 648,215 (2021: EUR 652,889).
For equity-settled plans, the fair value of shares granted to employees is measured at grant date. For cash-settled plans, the fair value of the liability for the awards granted is remeasured at each reporting date and at settlement date.
The costs of share-based compensation plans are determined based on the fair value of the shares and the number of shares expected to vest. On each balance date, KPN determines whether it is necessary to revise the expectation of the number of shares that will vest. The fair value is recognized as personnel expense in profit or loss over the vesting period of the shares against an increase in equity in the case of equity-settled share-based compensation plans and against the recognition of a liability in the case of cash-settled share-based compensation plans.
KPN considers none of the related-party transactions to be material on an individual basis. Transactions between group companies are not included in the description below as these are eliminated in the Consolidated Financial Statements.
On 14 February 2023, Am\u00e9rica M\u00f3vil, S.A.B. de C.V. (AMX) published in its fourth quarter 2022 report that it owned 18.3% of KPN\u2019s ordinary share capital as at 31 December 2022. The total value of sales and purchase transactions by the continuing operations of KPN in 2022 with AMX, its subsidiaries and associated companies is estimated to be less than EUR 1m and less than EUR 2m respectively (2021: less than EUR 1m) and total trade receivables and payables as at 31 December 2021 and 2022 are estimated to be less than EUR 1m.
Other shareholdings equaling or exceeding 3% of the issued capital:
On 23 December 2022, BlackRock, Inc. notified the AFM that it held 4.91% of the shares and 5.98% of the voting rights related to KPN\u2019s ordinary share capital.
On 16 December 2022, Amundi Asset Management notified the AFM that it held 4.57% of the shares and voting rights related to KPN\u2019s ordinary share capital.
On 2 August 2022, Capital Research and Management Company notified the AFM that it held 9.70% of the voting rights related to KPN\u2019s ordinary share capital.
On 2 June 2022, The Income Fund of America notified the AFM that it held 4.97% of the shares and voting rights to KPN\u2019s ordinary share capital.
To KPN\u2019s knowledge, no other shareholder owned 3% or more of KPN\u2019s issued share capital as at 31 December 2022. KPN did not enter into agreements with AMX or other shareholders that could have a material impact on KPN\u2019s Financial Statements.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. and entered into a joint venture agreement with APG (see Note 12). As of 9 June 2021, KPN's remaining 50% interest in Glaspoort is classified as a joint venture and accounted for using the equity method. KPN is the anchor tenant on the network of Glaspoort and also supplies services to Glaspoort. The value of the services delivered to and acquired from Glaspoort amounted to EUR 15m and EUR 16m respectively in 2022 (EUR 5m and EUR 3m respectively in the period between completion of the sale and 31 December 2021). Furthermore, in December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) from Glaspoort for the sale of the additional scope projects. Of this amount, EUR 60m has been received in cash upon closing of the transaction and the remaining amount will be received in annual installments based on the fiber roll-out starting in 2023. Trade and other receivables with respect to Glaspoort as at 31 December 2022 amounted to EUR 1m (2021: EUR 36m), trade payables EUR 2m (2021: nil), non-current contract assets EUR 29m (2021: EUR 20m), current contract assets EUR 51m (2021: nil) and non-current contract liabilities EUR 16m (2021: EUR 49m).
The following table provides the total value of the transactions by KPN with other associated and non-consolidated companies for the relevant year:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Sales in the year | 39 | 23 |
| Purchases in the year | <1 | 1 |
| Trade receivables at 31 December | 2 | <1 |
| Trade payables at 31 December | <1 | <1 |
For details of the relationship between directors and the company, see the Remuneration Report section of this Integrated Annual Report. Directors in this respect are defined as key management and relate to those having authority and responsibility for planning, directing, and controlling the activities of an entity, either directly or indirectly. At KPN, key management consists of the members of the Board of Management and the Supervisory Board.
The members of KPN\u2019s Board of Management and Supervisory Board or close members of their families are also members of supervisory boards or management boards of other companies or are shareholders of other companies, without having (joint) control, with which KPN maintains relations in the ordinary course of business. All transactions with these companies are performed on an arm\u2019s length basis.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-549": { "value": "The following paragraphs detail the actual remuneration of the Board of Management. Please refer to the Remuneration Report for the executive pay policy. Details of actual remuneration The remuneration of the Board of Management, representing the costs incurred by the company measured under IFRS principles, is as follows: Name current member Year Salary STI1 LTI2 Pension Cost3 Social security and other compensation4 Total J.F.E. Farwerck 2022 879,375 716,568 1,108,118 219,036 30,022 2,953,119 \u00a02021 875,000 936,775 971,240 213,246 30,364 3,026,625 H.C. Figee 2022 678,375 368,493 528,456 116,895 37,160 1,729,379 \u00a02021 675,000 481,815 324,249 109,638 37,416 1,628,118 J.P.E. van Overbeke 2022 653,250 354,872 561,278 154,304 14,558 1,738,262 \u00a02021 650,000 463,944 526,584 152,525 14,814 1,807,867 M.W.M. Snoep 2022 653,250 354,872 550,466 126,138 29,814 1,714,540 \u00a02021 650,000 463,944 462,514 117,328 30,070 1,723,856 B. Fouladi 2022 653,250 354,872 561,278 126,214 12,645 1,708,259 \u00a02021 650,000 463,944 501,586 124,975 12,901 1,753,406 H. Garssen 2022 502,500 272,978 408,082 82,638 14,572 1,280,770 \u00a02021 500,000 356,880 300,294 81,984 14,828 1,253,986 Total current members 2022 4,020,000 2,422,655 3,717,678 825,225 138,771 11,124,329 \u00a02021 4,000,000 3,167,302 3,086,467 799,696 140,393 11,193,858 Actual STI relates to performance in the current year but paid out in the following financial year. Please see the \u2018Short-term incentives\u2019 section in the Remuneration Report for the actual pay-out levels per target The amounts in the table represent the cost recognized for shares in 2022 and 2021 based on their fair values at grant date. The fair value of the share-based award is recorded as cost over the vesting period. Please see the \u2018Long-term incentives\u2019 section in the Remuneration Report for a further explanation The pension costs include the costs for survivor\u2019s pension, disability coverage, administration as well as the gross allowances. The fixed gross allowance (for the base pay part above EUR 114,866) in 2022 was, EUR 159,047 for Mr. Farwerck (2021: EUR 153,991), EUR 80,273 for Mr. Figee (2021: EUR 75,095), EUR 112,117 for Mr. Van Overbeke (2021: EUR 110,922), EUR 88,578 for Ms. Snoep (2021: EUR 81,622), EUR 88,495 for Mr. Fouladi (2021: EUR 87,758) and EUR 53,706 for Ms. Garssen (2021: EUR 53,411) In addition to social security, the stated amounts include allowances that can be considered as indirect remuneration and relates to the value for the private use of the company car See the Remuneration Report for the number of shares under the share plans per individual board member. See the Insider Transactions section for stock ownership of members of the Board of Management and Supervisory Board. Please see the Remuneration Report for the actual fee received by each member of the Supervisory Board. The total fee for 2022 is EUR 648,215 (2021: EUR 652,889). Transactions with directors and related parties For details of the relationship between directors and the company, see the Remuneration Report section of this Integrated Annual Report. Directors in this respect are defined as key management and relate to those having authority and responsibility for planning, directing, and controlling the activities of an entity, either directly or indirectly. At KPN, key management consists of the members of the Board of Management and the Supervisory Board. The members of KPN\u2019s Board of Management and Supervisory Board or close members of their families are also members of supervisory boards or management boards of other companies or are shareholders of other companies, without having (joint) control, with which KPN maintains relations in the ordinary course of business. All transactions with these companies are performed on an arm\u2019s length basis. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-887": { "value": "Accounting policy: Share-based compensation For equity-settled plans, the fair value of shares granted to employees is measured at grant date. For cash-settled plans, the fair value of the liability for the awards granted is remeasured at each reporting date and at settlement date. The costs of share-based compensation plans are determined based on the fair value of the shares and the number of shares expected to vest. On each balance date, KPN determines whether it is necessary to revise the expectation of the number of shares that will vest. The fair value is recognized as personnel expense in profit or loss over the vesting period of the shares against an increase in equity in the case of equity-settled share-based compensation plans and against the recognition of a liability in the case of cash-settled share-based compensation plans. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-557": { "value": "Other operating expenses comprise, among others, a net addition to the restructuring provision (see Note 18).
The fees listed below relate to the services provided to KPN and its consolidated group entities by Ernst & Young Accountants LLP, as well as by other Dutch and foreign-based EY individual partnerships and legal entities, including their tax services and advisory groups:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Financial statements audit fees | 3.8 | 3.9 |
| Other assurance fees | 0.8 | 0.9 |
| Total audit fees, charged by Ernst & Young Accountants LLP | 4.7 | 4.7 |
| Tax fees | - | 0.2 |
| Total | 4.7 | 5.0 |
The financial statements audit fees include the fees for professional services rendered for the audit of KPN\u2019s annual financial statements and the annual statutory financial statements of subsidiaries or services that are normally provided by the auditor in connection with the audits.
The other assurance fees include the fees incurred for assurance and related services that are reasonably related to the performance of the audit or review of KPN\u2019s Financial Statements, such as revenue and IT-related assurance services and regulatory-related assurance services.
Operating expenses are divided into direct cost (cost of goods and services) and indirect cost (IT/TI, personnel expenses and other operating expenses).
Cost of goods and services are costs incurred in the context of a sales transaction and include subscriber acquisition and retention costs and traffic expenses. These costs are expensed as incurred, except handset fees paid to dealers and transaction-related dealer commissions that are capitalized and amortized over the contract term. The cost of a handset is expensed when the handset is sold (as incurred), both as an individual sale or as a component of a transaction in combination with a subscription.
Information technology (IT) expenses relate to KPN\u2019s IT environment and include licenses and maintenance expenses for software and/or IT hardware when not directly related to a sales transaction. Technical infrastructure (TI) expenses are expenses related to KPN\u2019s fixed and mobile networks.
Personnel expenses are all expenses related to KPN\u2019s workforce, both related to own employees and external personnel from employment agencies.
Other operating expenses include expenses related to marketing and communication, billing and collection, housing and facilities.
The fees listed below relate to the services provided to KPN and its consolidated group entities by Ernst & Young Accountants LLP, as well as by other Dutch and foreign-based EY individual partnerships and legal entities, including their tax services and advisory groups:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Financial statements audit fees | 3.8 | 3.9 |
| Other assurance fees | 0.8 | 0.9 |
| Total audit fees, charged by Ernst & Young Accountants LLP | 4.7 | 4.7 |
| Tax fees | - | 0.2 |
| Total | 4.7 | 5.0 |
The financial statements audit fees include the fees for professional services rendered for the audit of KPN\u2019s annual financial statements and the annual statutory financial statements of subsidiaries or services that are normally provided by the auditor in connection with the audits.
The other assurance fees include the fees incurred for assurance and related services that are reasonably related to the performance of the audit or review of KPN\u2019s Financial Statements, such as revenue and IT-related assurance services and regulatory-related assurance services.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-890": { "value": "Accounting policy: Operating expenses Operating expenses are divided into direct cost (cost of goods and services) and indirect cost (IT/TI, personnel expenses and other operating expenses). Cost of goods and services are costs incurred in the context of a sales transaction and include subscriber acquisition and retention costs and traffic expenses. These costs are expensed as incurred, except handset fees paid to dealers and transaction-related dealer commissions that are capitalized and amortized over the contract term. The cost of a handset is expensed when the handset is sold (as incurred), both as an individual sale or as a component of a transaction in combination with a subscription. Information technology (IT) expenses relate to KPN\u2019s IT environment and include licenses and maintenance expenses for software and/or IT hardware when not directly related to a sales transaction. Technical infrastructure (TI) expenses are expenses related to KPN\u2019s fixed and mobile networks. Personnel expenses are all expenses related to KPN\u2019s workforce, both related to own employees and external personnel from employment agencies. Other operating expenses include expenses related to marketing and communication, billing and collection, housing and facilities. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForExpensesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-891": { "value": "Personnel expenses are all expenses related to KPN\u2019s workforce, both related to own employees and external personnel from employment agencies.
The liability recognized in respect of all pension and early retirement plans that qualify as a defined benefit obligation is the present value of the defined benefit obligation less the fair value of plan assets. KPN uses actuarial calculations (projected unit credit method) to measure the obligations and the costs. For the calculation, actuarial assumptions are made about demographic variables (such as employee turnover and mortality) and financial variables (such as future indexation and the discount rate). The discount rate is determined by reference to market rates. These are interest rates of high-quality corporate bonds that are denominated in the currency in which the benefit will be paid and that have terms to maturity approximating the terms of the related liability. A net defined benefit asset may arise where a defined benefit plan has been overfunded. KPN recognizes a net defined benefit asset in such a case only when future economic benefits are available to KPN in the form of a reduction in future contributions or a cash refund. Actuarial gains and losses are recognized immediately in OCI.
Past service costs, curtailments and settlements are recognized immediately in the P&L.
The amount of pension costs included in operating expenses with respect to defined benefit plans consists of service cost, past service costs, curtailments and settlements, and administration costs. Net interest on the net defined benefit liability is presented as part of finance costs.
For pension plans that qualify as a defined contribution plan, KPN recognizes contributions as an expense when an employee has rendered service in exchange for those contributions.
Provisions for asset retirement obligations, restructuring costs and legal claims are recognized when KPN has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote.
Provisions are measured at the present value of management\u2019s best estimate of the expenditure required to settle the present obligation at balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.
| \u20ac\u00a0million | Notes | 2022 | 2021 |
|---|---|---|---|
| Finance income | \u00a0 | 8 | - |
| Interest on borrowings | \u00a0 | -192 | -192 |
| Interest expense lease liability | [19] | -18 | -20 |
| Interest on other provisions | \u00a0 | -1 | -3 |
| Other interest expenses | \u00a0 | -3 | -8 |
| Finance costs | \u00a0 | -213 | -223 |
| Hedge ineffectiveness | \u00a0 | 10 | - |
| Amortizable part of hedge reserve | \u00a0 | -15 | -15 |
| Amortization discontinued fair value hedges | \u00a0 | 18 | 22 |
| Derivative financial instruments not qualified for hedge accounting | [13.3] | -11 | -17 |
| Exchange rate differences | \u00a0 | 3 | 5 |
| Fair value loss on contingent cash receivable Glaspoort | [13.1 | -16 | -2 |
| Other | \u00a0 | -12 | -4 |
| Other financial results | \u00a0 | -22 | -11 |
| Total | \u00a0 | -227 | -234 |
Finance income in 2022 was EUR 8m (2021: EUR 0m), mainly due to interest income on the contingent cash receivable related to Glaspoort, partly offset by negative interest on cash balances.
Finance costs decreased by EUR 10m, which was mainly related to lower other interest expenses. Lower interest cost related to debt redemptions were largely offset by higher interest rates on floating rate debt. Interest on borrowings included a non-cash amount of EUR 6m (2021: EUR 6m) relating to debt issuance and similar costs, which are amortized over the remaining life of the respective bonds using the effective interest rate method.
Other financial results increased by EUR 11m (higher net cost), mainly due to a EUR 16m fair value loss on the contingent cash receivable related to Glaspoort (2021: EUR 2m loss), EUR 9m costs in 2022 related to the tender of the USD hybrid bond (included in Other), EUR 4m lower gains from amortization of discontinued fair value hedges and EUR 2m lower exchange rate gains, partly offset by EUR 10m gain on hedge ineffectiveness (2021: EUR 0m) and EUR 6m lower fair value loss on derivative financial instruments not qualified for hedge accounting due to maturing swaps.
| \u00a0 | \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|---|
| \u20ac\u00a0million | Notes | Carrying amount | Fair value | Carrying amount | Fair value |
| Financial assets at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Contingent cash receivable regarding sale Glaspoort | [13.1] | 197 | 197 | 218 | 218 |
| Other current financial assets | [13.1] | 100 | 100 | 300 | 300 |
| Derivatives | [13.3] | 148 | 148 | 212 | 212 |
| Cash and cash equivalents, including classified as held for sale | [15] | 399 | 399 | 793 | 793 |
| Financial assets at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Trade and other receivables1 | [14.1] | 455 | 455 | 641 | 641 |
| Financial assets at FVOCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Financial receivables handsets | [14.1] | 158 | 158 | - | - |
| Equity investments | [13.1] | 76 | 76 | 49 | 49 |
| Total financial assets | \u00a0 | 1,534 | 1,534 | 2,213 | 2,213 |
| Financial liabilities FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Derivatives | [13.3] | 366 | 366 | 64 | 64 |
| Financial liabilities at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Borrowings | [13.2] | 5,368 | 5,203 | 6,744 | 7,223 |
| Lease liabilities | [19] | 923 | 923 | 873 | 873 |
| Trade and other payables2 | [20] | 955 | 955 | 973 | 973 |
| Total financial liabilities | \u00a0 | 7,612 | 7,447 | 8,654 | 9,132 |
| \u20ac\u00a0million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Contingent cash receivable regarding sale Glaspoort | - | - | 197 | 197 |
| Derivatives (cross-currency interest rate swap) | - | 123 | - | 123 |
| Derivatives (interest rate swap) and other | - | 25 | - | 25 |
| Financial assets at FVOCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Financial receivables handsets | - | - | 158 | 158 |
| Equity investments: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Unlisted securities | - | - | 76 | 76 |
| Total assets | - | 148 | 431 | 579 |
| Financial liabilities at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Derivatives (cross-currency interest rate swap) | - | 100 | - | 100 |
| Derivatives (interest rate swap) | - | 266 | - | 266 |
| Total liabilities | - | 366 | - | 366 |
| \u20ac\u00a0million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Other financial asset at fair value through profit or loss | - | - | 218 | 218 |
| Derivatives (cross-currency interest rate swap) | - | 117 | - | 117 |
| Derivatives (interest rate swap) and other | - | 95 | - | 95 |
| Financial assets at FVOCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Equity investments: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Unlisted securities | - | - | 49 | 49 |
| Total assets | - | 212 | 267 | 479 |
| Financial liabilities at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Derivatives (cross-currency interest rate swap) | - | 47 | - | 47 |
| Derivatives (interest rate swap) | - | 17 | - | 17 |
| Total liabilities | - | 64 | - | 64 |
Level 1: Fair value of instruments traded in active markets and based on quoted market prices.
Level 2: Instrument is not traded in an active market and fair value is determined by using valuation techniques based on maximum use of observable market data for all significant inputs.
Level 3: One or more of the significant inputs is not based on observable market data; the fair value is estimated using models and other valuation methods. The valuation of available-for-sale unlisted securities is based on a discounted cash flow model.
Financial assets are classified at initial recognition.
The classification of financial assets at initial recognition depends on the financial asset\u2019s contractual cash flow characteristics and KPN\u2019s business model for managing them.
KPN initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
For the purposes of subsequent measurement, financial assets are classified into four categories:
Financial assets at amortized cost (debt instruments);
Financial assets at fair value through other comprehensive income (OCI) with recycling of cumulative gains and losses (debt instruments);
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments);
Financial assets at fair value through profit or loss.
Upon sale in 2021 of the 50% interest in Glaspoort B.V. to Drepana Investments Holding B.V. (see Note 21), KPN received a cash consideration upon deal close of EUR 233m and a contingent cash receivable of EUR 234m. The contingent cash receivable, to be received in annual installments based on the roll-out progress of Glaspoort, is classified as a financial asset measured at fair value through profit or loss. The contingent cash receivable was initially valued at EUR 218m. As at 31 December 2022, the carrying value is EUR 197m (2021: EUR 218m), of which EUR 28m is current (2021: EUR 14m). In 2022, the book value increased with interest income of EUR 8m (2021: EUR 3m) and decreased with EUR 16m (2021: EUR 2m) due to a fair value adjustment and EUR 14m (2021: EUR 0m) due to received deferred payment. The fair value adjustment was recognized as a loss in other financial results.
Based on Glaspoort's current roll-out plan, KPN expects the final payment in 2027. The fair value of this contingent receivable is deemed equal to the net present value of the full amount of the installments to be received using the expected roll-out schedule as included in Glaspoort's initial business plan. A weighted average discount rate of 5.68% has been used based on the following elements:
A base-rate using mid-swap rates to account for the time value of money, plus
A credit spread mark-up to account for the risk of non-payment based on AA-rated credit curves resulting in a weighted average spread of ~0.1% over a 5-year tenor, plus
A mark-up to reflect the roll-out risk (mostly the risk of delay).
This includes several minority stakes of KPN Ventures. In 2022, additional investments for an amount of EUR 26m were acquired (2021: EUR 7m) and EUR 9m investments were sold (2021: nil).
These investments were irrevocably designated at fair value through OCI because KPN believes that the fluctuations in the fair value of these investments do not give a fair view of KPN\u2019s performance. In 2022, fair value net gains of EUR 10m were recognized (2021: EUR 5m).
The fair value of the equity investments of KPN Ventures is based, where applicable, on the price of the last fundraising round of the equity investment, investment valuations or the bid made in mergers and acquisitions transactions. The investment valuations take into account forward-looking estimates and judgments about the underlying business, market conditions and other factors.
Other current financial assets include investments in short-term money market funds of EUR 100m (2021: EUR 300m), which are held at fair value through profit or loss (FVPL). These funds have a low volatility, with an investment objective of preservation of principal.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Carrying amount | Fair value | Carrying amount | Fair value |
| Senior eurobonds EUR | 2,678 | 2,509 | 3,638 | 3,667 |
| Senior eurobonds GBP | 1,401 | 1,408 | 1,478 | 1,762 |
| Senior global bonds USD | 641 | 628 | 620 | 751 |
| Subordinated hybrid bonds classified as liability | 136 | 136 | 529 | 558 |
| Other borrowings | 511 | 521 | 480 | 484 |
| Total borrowings | 5,368 | 5,203 | 6,744 | 7,223 |
| > of which: current | 196 | 196 | 677 | 681 |
| > of which: non-current | 5,171 | 5,007 | 6,067 | 6,542 |
The fair value for eurobonds, global bonds and hybrid bonds is based on the listed price of the bonds. Other borrowings include commercial paper, cash collateral received on derivatives, bank overdrafts and other loans.
KPN\u2019s weighted average interest rate on total outstanding borrowings on 31 December 2022 was 3.6% after swaps (2021: 2.9%). KPN\u2019s weighted average interest rate on senior debt on 31 December 2022 was 3.5% after swaps (2021: 2.7%).
| million | Nominal | Carrying amount \u20ac | Nominal after swap \u20ac | Number of bonds |
|---|---|---|---|---|
| Senior eurobonds EUR | 2,981 | 2,678 | 2,981 | 5 |
| Senior eurobonds GBP | 1,250 | 1,401 | 1,452 | 2 |
| Senior global bonds USD | 595 | 641 | 450 | 1 |
KPN has an unlimited Global Medium-Term Notes program which is used to meet medium- to long-term funding requirements. As at 31 December 2022, the total amounts outstanding under this program were EUR 2,981m across five bonds (carrying value EUR 2,678m) and GBP 1,250m across two bonds (carrying value EUR 1,401m, swapped to EUR 1,452m nominal). In addition, KPN has a senior global bond with USD 595m outstanding (carrying value EUR 641m, swapped to EUR 450m nominal) which was issued under standalone documentation.
On 1 March 2022, KPN redeemed the 4.25% EUR\u00a0616m senior bond in line with its scheduled maturity. No new senior bonds have been issued during the year.
| million | Nominal | Nominal \u20ac | Coupon | Classification | Final maturity | First reset date | Swapped | Credit rating1 |
|---|---|---|---|---|---|---|---|---|
| USD hybrid bond | 146 | 113 | 7,000% | Liability | 28 Mar 2073 | 28 Mar 2023 | Fixed 6.37% | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 2,000% | Equity | Perpetual | 8 Feb 2025 | N/a | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 6,000% | Equity | Perpetual | 21 Dec 20272 | N/a | BB+/BB+/N.a. |
As at 31 December 2022, three hybrid bonds are outstanding with an aggregate nominal amount of EUR 1,113m after swaps. The USD 146m hybrid bond (carrying value EUR 136m, swapped to EUR 113m nominal) is included in borrowings, while the EUR 1,000m perpetual hybrid bonds are classified as equity. Both EUR hybrid bonds are subordinated debt instruments and are treated for 50% as equity and 50% as debt in KPN\u2019s gross and net debt definitions.
On 21 September 2022, KPN issued a new 6% EUR\u00a0500m perpetual Green Hybrid Bond under KPN\u2019s Green Finance Framework. With the proceeds, KPN will finance or refinance projects with positive environmental impact in three areas: (i) energy efficiency (network transformation including roll-out of fiber and modernization of KPN\u2019s mobile network), (ii) circular economy (investments that extend product life and reduce waste) and (iii) clean transportation (reducing emissions by shifting to electric vehicles). KPN has committed, on a best effort basis, to allocate an amount at least equal to the net proceeds of this instrument to finance investments and expenditures in the above areas within 36\u00a0months of issuance (with a maximum look-back period of 24\u00a0months for all expenditures). This hybrid bond can, at KPN\u2019s discretion, be redeemed at any time between 21 September 2027 and 21 December 2027, and annually on 21 December thereafter at par. The ratings for the green hybrid bond are BB+ by S&P and BB+ by Fitch. The rating agencies recognize 50% of the hybrid bond as equity in line with the existing hybrid bonds. The green hybrid bond has been listed on Euronext Dublin GEM.
On 21 September 2022, KPN tendered the 7% USD 600m hybrid bond and repurchased USD 454m notional amount, with USD 146m remaining outstanding after the tender offer. The hybrid bond had been swapped to a principal amount of EUR 465m and KPN effectively retired EUR 352m notional amount. The remaining EUR 113m notional amount after swaps can be called in March 2023.
KPN may, at its discretion and subject to certain conditions, elect to defer payments of interest on the hybrid bonds. Arrears of interest must be paid if dividends are paid on ordinary shares, if payments are made on other hybrid bonds, in the event of early redemption, and for the USD hybrid bonds at final maturity. KPN does not recognize accruals for coupon payments on the EUR perpetual hybrid bonds of EUR 40m per annum. If an accrual had been recognized, the amount would have been EUR 10m on 31 December 2022.
KPN has a Euro-Commercial Paper Program under which KPN can issue short-term debt instruments for up to EUR 1 billion. As at 31 December 2022, the outstanding balance of commercial paper amounted to EUR 60m (2021: EUR 60m), issued at an average interest rate of 2.01%.
KPN has a EUR\u00a0300m credit facility from the European Investment Bank, which was fully drawn at year-end 2022 and 2021. This loan has a floating interest rate referenced to 3-month Euribor and a single repayment on 2 August 2027. The interest for the current interest period was fixed at 2.64% per annum.
As at 31 December 2022, other borrowings furthermore included EUR 103m of collateral received as security under derivative financial instruments and EUR 50m borrowings under private placements.
After initial recognition, loans and borrowings that are not part of a fair value hedge, are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the P&L over the period of the borrowings using the effective interest method. The amortized cost is calculated by taking into account any discounts or premiums on acquisition or issuance and transaction costs. The effective interest rate amortization is recognized in the P&L as finance costs.
| \u20ac\u00a0million | Borrowings | Derivative financial instruments | Net liability | Lease liabilities | Net liability, including lease liabilities |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 6,500 | -6 | 6,494 | 937 | 7,432 |
| Exchange differences | 177 | -178 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -613 | - | -613 | -135 | -748 |
| Issued bonds & loans2 | 689 | - | 689 | - | 689 |
| Fair value adjustments | -67 | 36 | -31 | - | -31 |
| Other movements3 | 59 | - | 59 | 70 | 130 |
| Balance at 31 December 2021 | 6,744 | -148 | 6,596 | 873 | 7,469 |
| Exchange differences | 20 | -23 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -1,075 | 80 | -995 | -124 | -1,119 |
| Issued bonds & loans | - | - | - | - | - |
| Fair value adjustments | -359 | 309 | -50 | - | -50 |
| Other movements3 | 37 | - | 37 | 174 | 211 |
| Balance at 31 December 2022 | 5,368 | 218 | 5,586 | 923 | 6,509 |
KPN uses derivatives solely for the purpose of hedging underlying exposures. The primary risks managed using derivative instruments are foreign currency risk and interest rate risk.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Assets (current and non-current) | 148 | 212 |
| Liabilities (current and non-current) | -366 | -64 |
| Total derivatives | -218 | 148 |
| of which: designated in a hedge relationship | -233 | 122 |
| of which: other derivatives not designated in a hedge relationship | 15 | 26 |
A total gain of EUR 10m due to hedge ineffectiveness was recognized in the P&L in 2022 (2021: EUR 0m). This was mainly due to differences in the valuation of hedging instruments and hedged items due to credit risk and valuation curves in combination with the cumulative change of the fair value of the hedging instrument becoming greater than the change in the fair value of the hedged item. Note that all hedges continue to be highly effective prospectively.
Derivatives positions are reported on a gross basis and include a credit value adjustment attributable to derivative counterparty default risk. As at 31 December 2022, this lowered the net liability by EUR 9m (2021: net effect of EUR 0m). The increase in the credit value adjustment was primarily driven by the increased mark-to-market value of interest rate swaps as a result of significantly higher interest rates. Part of the derivatives portfolio is subject to master netting agreements that allow netting under certain circumstances.
If netting had been applied, the total derivatives asset position would be EUR 52m and the total derivatives liability position would be EUR 270m as at 31 December 2022 (2021: EUR 155m and EUR 6m respectively).
Bonds denominated in foreign currencies are hedged with cross-currency swaps. The currency exposure is hedged by effectively fixing the countervalue in the foreign currency to EUR and by hedging the interest rate exposure by swapping the fixed interest rates in foreign currency to fixed interest rates in EUR. There is an economic relationship between the hedged items and hedging instruments as the terms of the cross-currency swaps match the terms of the bonds. KPN has established a hedge ratio of 1:1 for the hedging relationships as the quantity of hedged items equals the notional amount of the cross-currency swaps. The hedges are until maturity of the underlying senior bonds or until the first call date in the case of the USD hybrid bond. For these hedges, KPN meets the criteria of, and also applies, cash flow hedge accounting. The effectiveness of the hedges is determined at inception and on a quarterly basis. To test the hedge effectiveness, KPN uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against the changes in the fair value of the hedged items attributable to the hedged risks. If the cumulative change in fair value of the hedging instrument and hedged item are not equal in absolute terms, the difference will be reported in the P&L to the extent that, in absolute terms, the fair value change of the hedging instrument is greater than the fair value change of the hedged item. Hedge ineffectiveness can arise from:
Different curves linked to hedged items and hedging instruments
The counterparties\u2019 credit risk differently impacting the fair value movement of the hedging instruments and hedged items
Changes in the terms of the hedged item or hedge instrument
| Nominal (receive) | Coupon (receive) | Nominal (pay) (EUR m) | Coupon (pay) | Maturity date | Fair value 2022 (EUR m) | Fair value 2021 (EUR m) |
|---|---|---|---|---|---|---|
| USD 600m | 7.000% semi-annual | 465 | 6.344% semi-annual | 28-3-2023 | - | 66 |
| USD 143m | 7.000% semi-annual | 111 | 6.359% semi-annual | 28-3-2023 | 23 | - |
| GBP 400m | 5.000% annual | 480 | 4.138% (2021: 4.424%) annual | 18-11-2026 | -38 | -16 |
| GBP 850m | 5.750% annual | 971 | 5.432% annual | 17-9-2029 | -62 | -18 |
| USD 595m | 8.375% semi-annual | 450 | 8.517% semi-annual | 1-10-2030 | 100 | 38 |
| Total | 23 | 70 |
| \u20ac\u00a0million | Notional amount | Carrying amount | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 1,452 | -100 | Derivatives | -66 |
| Cross-currency swaps USD | 561 | 123 | Derivatives | 127 |
| Total | 2,013 | 23 | \u00a0 | 61 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 1,445 | -34 | Derivatives | 97 |
| Cross-currency swaps USD | 915 | 104 | Derivatives | 108 |
| Total | 2,361 | 70 | \u00a0 | 205 |
The change in fair value of the associated hedged items attributable to the hedged risks resulted in an ineffectiveness loss in 2022 of EUR 1m (2021: EUR 1m gain).
| \u20ac\u00a0million | Total hedging gain/(loss) recognized in OCI | Ineffectiveness recognized as a gain/(loss) in P&L | Line item in P&L | Amount reclassified from OCI as a gain/ (loss) in P&L | Line item in P&L |
|---|---|---|---|---|---|
| Year ended 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 68 | 1 | Other financial results | -78 | Other financial results |
| Cross-currency swaps USD | -129 | -2 | Other financial results | 101 | Other financial results |
| Total | -62 | -1 | \u00a0 | 23 | \u00a0 |
| Year ended 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | -96 | 2 | Other financial results | 97 | Other financial results |
| Cross-currency swaps USD | -108 | - | Other financial results | 81 | Other financial results |
| Total | -204 | 1 | \u00a0 | 178 | \u00a0 |
The 0.625% fixed-rate eurobond maturing on 9 April 2025 has also been swapped to a floating rate using fixed-to-floating interest rate swaps, where KPN receives a fixed rate of 0.920% and pays interest at a variable rate equal to six-month Euribor (fixed in arrears).
The 1.125% fixed-rate eurobond maturing on 11 September 2028 has been swapped to a floating rate using fixed-to-floating interest rate swaps, where KPN receives a fixed rate of 0.907% and pays interest at a variable rate equal to six-month Euribor.
In 2022, the 0.875% fixed rate Eurobond maturing on 15 November 2033 was also swapped to a floating rate using fixed-to-floating interest rate swaps, whereby KPN receives a fixed rate of 0.799% and pays interest at a variable rate equal to six-month Euribor (fixed in arrears). The swaps are used to hedge the exposure to changes in the fair value of these fixed rate eurobonds against changes in the EUR interest curve.
There is an economic relationship between the hedged item and the hedging instrument, as the terms of the interest rate swaps match the terms of the fixed-rate bonds (i.e. notional amount, maturity and payment dates). KPN has established a hedge ratio of 1:1 for the hedging relationships as the quantity of hedged item equals the notional amount of the hedging instrument. For these hedges, KPN meets the criteria of, and also applies, hedge accounting. If the cumulative change in the fair value of the hedging instrument and hedged item are not equal in absolute terms, the difference will be recorded in the P&L. The hedge ineffectiveness can arise from:
Different curves linked to the hedged items and hedging instruments
The counterparties\u2019 credit risk differently impacting the fair value movement of the hedging instruments and hedged items
Changes in the terms of the hedge item or hedge instrument
| \u20ac\u00a0million | Notional amount | Carrying amount | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Interest rate swaps | 1,950 | -256 | Derivatives | -331 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Interest rate swaps | 1,250 | 52 | Derivatives | -47 |
| \u20ac\u00a0million | Carrying amount | Change in fair value adjustments | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Fixed-rate eurobonds 2025, 2028 & 2033 | 1,643 | 308 | Borrowings | 341 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Fixed-rate eurobonds 2025 & 2028 | 1,308 | 47 | Borrowings | 45 |
The ineffectiveness recognized in the P&L for the year ended 31 December 2022 was a gain of EUR 11m (2021: EUR 1m loss).
In 2011, fixed-rate eurobonds with maturities on 30 September 2024 were swapped to a floating interest rate using fixed-to-floating interest rate swaps. Subsequently, in May 2015, KPN swapped the floating rate exposure on these bonds to a fixed rate for the remaining maturity of these bonds and discontinued fair value hedge accounting for the fixed-to-floating interest rate swaps. As a result, the cumulative gain until de-designation, which amounted to EUR 224m, is amortized to earnings until maturity of the associated bonds. This is offset by the change in fair value of the outstanding interest rate swaps. The amortization recognized in earnings for 2022 was a gain of EUR 7m (2021: EUR 11m) and the remaining balance of the unamortized gain was EUR 12m at 31 December 2022 (2021: EUR 19m). The fair value of the outstanding interest rate swaps was EUR 15m as at December 2022 (2021: EUR 26m) and the change in fair value of these swaps resulted in a P&L loss of EUR 11m in 2022 (2021: EUR 17m loss). The net interest income of these swaps was an additional loss of EUR 15m (2021: EUR 16m gain), which results in net earnings (including amortization and change in fair value) in 2022 of EUR 19m negative (2021: EUR 10m positive).
Derivatives are recognized at fair value. Gains and losses arising from changes in fair value are recognized as finance cost/income during the period in which they arise to the extent that the derivatives have no hedging designation or they are ineffective.
KPN applies IFRS 9 hedge accounting. Derivatives related to loans are designated as either cash flow or fair value hedges.
Offsetting effects are recognized in the P&L.
The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how KPN will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument;
The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that KPN actually hedges and the quantity of the hedging instrument that KPN actually uses to hedge that quantity of hedged item.
Changes in the fair value of an effective derivative, which is designated as a fair value hedge, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in the P&L as finance cost/ income. Changes in the fair value of an effective derivative, which is designated as a cash flow hedge, are recorded in OCI for the effective part, until the P&L is affected by the variability in cash flows of the designated hedged item. The ineffective part of the cash flow hedge is recognized as finance cost/income. If an underlying transaction has ceased to be an effective hedge or in case of early redemption of the hedged item, hedge accounting is discontinued prospectively which means that subsequent changes in fair value are recognized in the P&L as finance cost/income and the cumulative amount recorded in OCI is released in the P&L.
KPN strives for the right balance between investments in the business, shareholder remuneration and a prudent financing policy. It is KPN's policy to utilize excess cash for operational and financial flexibility and/or shareholder remuneration.
The net debt/EBITDA AL ratio is one of the drivers for KPN\u2019s credit rating. It is based on the nominal value of borrowings and takes 50% equity credit on hybrid bonds into account. KPN remains committed to an investment-grade credit profile and aims for a net debt/EBITDA AL ratio of below 2.5x in the medium term.
The difference between the carrying value and nominal value of borrowings includes: (1) carrying value adjustments resulting from fair value hedges; (2) in case of foreign currency bonds, the difference between the nominal amount at the prevailing spot rate and the swapped nominal amount in EUR; and (3) amortized debt issuance costs.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Borrowings | 5,368 | 6,744 |
| Perpetual hybrid bonds | 1,000 | 500 |
| 50% equity credit for hybrid bonds | -500 | -483 |
| Less: Cash collateral paid on derivatives | -75 | -56 |
| Difference between carrying value and nominal value | 141 | -305 |
| Adjusted gross debt | 5,935 | 6,400 |
| Net cash and cash equivalents | 399 | 793 |
| Short-term investments | 100 | 300 |
| Net debt1 | 5,435 | 5,307 |
| Adjusted EBITDA AL | 2,404 | 2,347 |
| Net debt/EBITDA AL | 2.3x | 2.3x |
KPN is exposed to a variety of financial risks. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on KPN\u2019s financial position and performance.
Derivatives are used to hedge certain risk exposures (see Note 13.3).
KPN\u2019s key financial risks are:
Credit and counterparty risk
Liquidity risk
Market risk
KPN\u2019s Treasury department manages the financial risks according to policies approved by the Board of Management and Supervisory Board. These policies are established to identify and analyze financial risks, set appropriate risk limits and controls, and monitor adherence to those limits.
The COVID-19 crisis, geopolitical tensions (including the war in Ukraine) and the impact of inflation, rising energy and raw material prices, have led to increased volatility in capital markets and periods of deteriorated market liquidity. In addition, the reversal of central banks' monetary policies led to a significant increase in (expected) interest rate levels. KPN\u2019s Treasury department monitored the situation closely and the impact on KPN\u2019s liquidity position, sources of financing and financial counterparties remained within acceptable risk limits. KPN did not suffer any material impact on its liquidity reserves and its ability to raise financing remained very strong, albeit at higher cost levels.
Credit risk arises from the possibility of asset impairment occurring when counterparties are unable to meet their obligations in transactions involving financial instruments. KPN\u2019s counterparty policy sets limits for the maximum exposure per counterparty, which are primarily based on credit ratings, investment periods and collateral. The minimum counterparty credit rating (Moody\u2019s equivalent) is Baa2 for cash balances and Baa1 for entering into new derivative transactions. Cash balances used for working capital purposes can also reside at banks with lower credit ratings. Capital preservation is KPN\u2019s main priority when investing excess cash.
As at 31 December 2022, KPN\u2019s cash balances and short-term investments were held in bank accounts, bank deposits and money market funds with maturities of up to three months. The majority of cash balances were invested with counterparties with a credit rating equivalent to A3 at Moody\u2019s or higher, and the counterparties of outstanding derivatives have a credit rating equivalent to Baa1 or higher with Moody\u2019s.
KPN mitigates credit risk on bank counterparties arising from derivative financial instruments through collateral support agreements, which results in cash being paid or received as security. This cash collateral is released when derivatives are settled and/or mature. In 2022, the net cash collateral movement was EUR 14m receipt (2021: EUR 115m). As at 31 December 2022, KPN held net cash collateral (liability) of EUR 28m (2021: EUR 14m).
Credit risk on trade receivables is controlled using restrictive policies for customer acceptance. Credit management is focused on mobile services. Before accepting certain new customers in this segment, the creditworthiness of prospective clients is checked. In addition, KPN keeps track of the payment performance of customers. If customers fail to meet set criteria, payment issues must be resolved before a new transaction will be entered into.
KPN\u2019s policy is to provide financial guarantees only to wholly-owned subsidiaries. As at 31 December 2022, KPN had parent guarantees and bank guarantees outstanding to third parties for various wholly-owned Dutch subsidiaries. The carrying amount of financial assets, including cash, and contract assets represents the maximum credit exposure, which amounts to EUR 1,643m as at 31 December 2022 (2021: EUR 2,265m). On 31 December 2022, the total outstanding bank guarantees amounted to EUR 6m (2021: EUR 6m), which were issued in the ordinary course of business.
See schedule of the allowances for expected losses in Note 14 for information about credit losses on trade and other receivables. There were no other credit losses.
| \u00a0 | Borrowings | \u00a0 | Derivatives | \u00a0 | \u00a0 | ||||
|---|---|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Bonds and loans | Interest on bonds and loans | Lease liabilities (undiscounted) | Other debt and cash collateral | \u00a0 | Derivatives inflow (including interest) | Derivatives outflow (including interest) | Trade and other payables1 | Total |
| 2023 | 1962 | 1873 | 178 | 36 | \u00a0 | -308 | 288 | 903 | 1,481 |
| 2024 | 431 | 181 | 139 | -4 | \u00a0 | -166 | 170 | - | 752 |
| 2025 | 625 | 157 | 129 | - | \u00a0 | -141 | 156 | - | 925 |
| 2026 | 451 | 153 | 122 | - | \u00a0 | -587 | 619 | - | 758 |
| 2027 | 300 | 128 | 93 | - | \u00a0 | -113 | 119 | - | 527 |
| 2028 and further | 3,491 | 330 | 399 | - | \u00a0 | -1,806 | 1,766 | - | 4,181 |
| Contractual cash flows | 5,495 | 1,136 | 1,060 | 32 | \u00a0 | -3,121 | 3,118 | 903 | 8,623 |
Liquidity risk is the risk that KPN will not be able to meet its financial obligations associated with financial instruments as they become due. KPN\u2019s approach to managing liquidity is to ensure sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage. Some of the derivatives contain reset clauses or collateral postings at pre-agreed dates, in order to mitigate counterparty exposure during the life of the swap. These reset clauses will result in early euro settlement obligations in cash with the swap counterparty, which could lead to additional cash inflows or outflows before maturity. In order to reduce liquidity risks, the reset clauses or collateral postings are spread over different points in time.
During 2022, KPN received net collateral of EUR 14m (2021: EUR 115m) according to pre-agreed settlement schedules.
In addition to the available cash and cash equivalents, short-term investments and cash flows from operations, KPN has the following committed financing resources available:
KPN has a sustainability-linked revolving credit facility for EUR 1.0 billion provided by twelve relationship banks, originally signed in August 2021. The facility can be used for general corporate purposes and does not contain any financial covenants. In August 2022, all banks agreed to a one year extension, which extends the maturity of the revolving credit facility to 4 August 2027. The facility contains another one-year extension option which can be exercised in August 2023 and which could extend the maturity to August 2028. The facility has a mechanism to adjust the margin based on KPN\u2019s performance on predefined sustainability targets on the roll-out of fiber, reduction in KPN\u2019s energy consumption and reduction of carbon emissions in the supply chain. The facility was undrawn as at 31 December 2022 resp. 31 December 2021.
KPN\u2019s existing capital resources contain the following covenants as at 31 December 2022, which could trigger additional financial obligations or early redemption of the outstanding indebtedness. All senior bonds issued after 1 January 2006 (EUR 4.4bn outstanding as at 31 December 2022) contain a change of control clause. KPN may be required to early redeem if certain changes of control occur and within this change of control period (maximum of 90 days) a rating downgrade to sub-investment grade occurs. The hybrid bonds also contain a change of control clause by means of which KPN has the possibility to repurchase the hybrid bonds at par. A 5% interest step-up applies if a rating downgrade occurs during the change of control period in respect of that change of control. In addition, many of KPN\u2019s capital resources contain a covenant prohibiting KPN from entering into any amalgamation, demerger, merger, corporate restructuring or reorganization, unless prior written consent has been given by a majority of the lenders or bondholders or the resulting company assumes all of the rights and obligations with respect to the loans or bonds.
KPN is exposed to various kinds of market risks in the ordinary course of business. These risks include foreign currency exchange rate risk and interest rate risk.
Foreign currency risks mainly result from settlement of international telecommunications traffic and purchase of assets and primarily consist of GBP and USD exposure. Foreign currency exchange rate risks related to bonds that are not denominated in EUR are hedged into EUR in line with KPN\u2019s hedging policies. Group companies and business operations are obliged to hedge their firm commitments and highly predictable anticipated transactions in non-functional currencies by forward exchange contracts.
Accordingly, KPN\u2019s Treasury department matches and manages the intercompany and external exposures using forward exchange contracts. No hedge accounting is applied for these hedge instruments.
As at 31 December 2022, more than 95% (2021: 98%) of cash and cash equivalents was denominated in the functional currency of the related entities. More than 99% of the net amount of trade receivables and more than 95% of the amount of trade payables was outstanding in the functional currency of the related entities as at 31 December 2022 (2021: more than 99% resp. 93%).
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. Borrowings, derivatives, cash and cash equivalents are subject to interest rate risk. With regard to interest rate risk exposure, KPN periodically evaluates the desired mix of fixed and floating interest rate liabilities, balancing the benefit of lower interest costs vs. the variability of cash flows. Any interest rate risk exposure longer than one year is considered to be fixed. KPN may use derivative financial instruments to adjust the desired interest rate risk exposure.
As at 31 December 2022, 64% of KPN\u2019s interest-bearing gross debt (after swaps, excluding bank overdrafts) was at fixed interest rates (2021: 77%).
With a view to the existing and forecasted debt structure, KPN could enter into additional future derivatives to further adjust the mix of fixed and floating interest rate liabilities.
A sensitivity analysis as at 31 December 2022 with regard to interest rate risk on floating interest-bearing liabilities showed that, ceteris paribus, each adverse change of 100 bps in Euribor would hypothetically result in EUR 23m higher interest costs per annum (2021: EUR 16m).
Interest rate benchmarks (Interbank Offered Rates, or IBORs) are reformed and/or replaced by alternative Risk-Free Rates (RFRs). This affects financial instruments on the derivatives and cash markets that operate with the impacted floating reference rates. The three most used IBORs are the European Interbank Offered Rate (Euribor), the London Interbank Offered Rate (Libor) and the EURO Overnight Index Average (Eonia). For each benchmark, the developments are at different stages and vary in scope and transition time. For example, GBP Libor is discontinued after 31 December 2021 whereas most tenors of USD Libor will continue until 1 July 2023. Euribor has been reformed and is not scheduled to be discontinued. As the Euribor benchmark remains, there is no impact for KPN on the used floating EUR interest rates. The transition of Eonia to Euro Short-Term Rate (ESTR) has a negligible impact for KPN, concerning interest on collateral paid and/or received under credit support agreements with swap counterparties. The relevant agreements have been amended to reflect the change to ESTR. The transition of GBP Libor to Secured Overnight Financing Rate (SOFR) may have a small impact on the valuation of KPN\u2019s cross-currency swaps as this benchmark is used to value the derivatives with a GBP currency leg.
KPN carried out a sensitivity analysis as at 31 December 2022 with regard to interest rate and currency risk on the cash flow hedges. KPN applies cash flow hedge accounting on all bonds not denominated in EUR. With all other variables held constant, KPN calculated the hypothetical impact of changes in interest rates based on various scenarios. This would hypothetically result in a higher or lower value of the hedge reserve, which is included in equity attributable to equity holders. In a similar way, KPN calculated the hypothetical impact of changes in the EUR/USD rate and the EUR/GBP rate, holding all other variables constant. The results of the analysis are shown in the table below, indicating the hypothetical impact on the fair value of the cross-currency swaps (excluding the partially offsetting impact on the hedged items).
| \u00a0 | \u00a0 | GBP | USD | Total | |||
|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million (before tax) | Change | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Change in interest rate | +1%-point | 6 | -3 | 6 | 3 | 12 | - |
| \u00a0 | -1%-point | -6 | 3 | -6 | -3 | -12 | - |
| Change in FX rate | +10%-point | 6 | 31 | -24 | 29 | -18 | 60 |
| \u00a0 | -10%-point | -7 | -42 | 30 | -36 | 22 | -78 |
Prospective effectiveness testing indicates that all cash flow hedges are expected to be highly effective. Consequently, the expected impact on the P&L is immaterial.
KPN carried out a sensitivity analysis on 31 December 2022 with regard to the fair value of interest rate swaps (excluding the partial offsetting impact on the hedged items):
| \u20ac\u00a0million | Change | 2022 | 2021 |
|---|---|---|---|
| Change in EUR interest rates | +1%-point | -120 | -63 |
| \u00a0 | -1%-point | 123 | 66 |
For the sensitivity analysis on interest rate risk regarding pensions, see Note 17.
| \u20ac\u00a0million | Gross amount | Financial liabilities offset | Net amount in balance sheet | Not offset: Financial instruments/Cash collateral | Net amount |
|---|---|---|---|---|---|
| 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cash and cash equivalents | 399 | - | 399 | - | 399 |
| Collateral1 | 53 | - | 53 | -53 | - |
| Derivatives | 148 | - | 148 | -148 | - |
| Total | 600 | - | 600 | -201 | 399 |
| 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cash and cash equivalents | 793 | - | 793 | - | 793 |
| Collateral1 | 56 | - | 56 | -15 | 41 |
| Derivatives | 212 | - | 212 | -88 | 124 |
| Total | 1,061 | - | 1,061 | -103 | 958 |
| \u20ac\u00a0million | Gross amount | Financial assets offset | Net amount in balance sheet | Not offset: Financial instruments/Cash collateral | Net amount |
|---|---|---|---|---|---|
| 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Collateral1 | 103 | - | 103 | -75 | 28 |
| Derivatives | 366 | - | 366 | -126 | 240 |
| Total | 469 | - | 469 | -201 | 268 |
| 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Collateral1 | 46 | - | 46 | -46 | - |
| Derivatives | 64 | - | 64 | -57 | 6 |
| Total | 110 | - | 110 | -103 | 6 |
For the financial assets and liabilities summarized above, each agreement between KPN and the counterparty allows for net settlement of the relevant financial assets and liabilities when both parties elect to settle on a net basis.
Financial assets and liabilities are offset and reported on a net basis on the balance sheet only when there is a current legally enforceable right to offset the recognized amounts, and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Trade receivables | 245 | - | 222 | - |
| Financial receivables handsets | 174 | - | 199 | - |
| Sales to be invoiced | 107 | - | 103 | - |
| Interest to be received | 9 | - | 17 | - |
| Prepayments | 93 | 16 | 95 | 16 |
| Accruals and other receivables | 5 | 79 | 40 | 61 |
| Total | 632 | 95 | 677 | 77 |
The financial receivables handsets consist of not yet invoiced installment payments on the handset loans, mainly issued by KPN Finance B.V. In 2022, KPN Finance B.V. assigned EUR 28m outstanding financial receivables handsets to a bank and removed these receivables from the balance sheet as the transfer of the receivables is characterized as a sale because the risks and rewards of ownership of the receivables have been substantially transferred. KPN has provided an indemnity to the bank in case the realized losses on the transferred receivables are exceptionally high. At 31 December 2022, the financial receivables handsets of KPN Finance B.V. (EUR 158m) are measured at FVOCI and at 31 December 2021 at amortized cost.
The non-current other receivables relate for EUR 75m to cash collateral received on derivatives (2021: EUR 56m).
Sales to be invoiced include accrued income related to usage of KPN\u2019s network, which is invoiced monthly in arrears.
The carrying amounts of trade and other receivables approximate their fair value. Trade and other receivables are non-interest bearing. Trade receivables are generally on payment terms of 14-30 days. The aging of the gross trade receivables is as follows:
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Trade receivables gross | \u00a0 | \u00a0 |
| Amounts undue | 189 | 169 |
| Past due 0\u201390 days | 50 | 48 |
| Past due 91\u2013360 days | 15 | 17 |
| More than one year | 8 | 10 |
| Total trade receivables gross | 262 | 244 |
| Provision for credit risk exposure | -17 | -21 |
| Total trade receivables net | 245 | 222 |
Movement schedule of the allowances for expected credit losses:
| \u20ac\u00a0million | Trade receivables | Financial receivables handsets | Contract assets | Total |
|---|---|---|---|---|
| Balance at 1 January 2021 | 20 | 3 | 1 | 24 |
| Additions/releases P&L | 9 | - | - | 9 |
| Usage | -8 | -1 | -1 | -10 |
| Balance at 31 December 2021 | 21 | 3 | - | 24 |
| Additions/releases P&L | 12 | -1 | - | 11 |
| Usage | -13 | - | - | -13 |
| Reclassification to FVOCI | -3 | -1 | - | -4 |
| Balance at 31 December 2022 | 17 | 1 | - | 18 |
The allowance for expected credit losses for trade receivables is based on the aging of the gross trade receivables and historic losses. For the largest customers, an assessment is done whether or not an additional allowance needs to be recognized.\u00a0The allowance for financial receivables handsets is also based on historic losses and is adjusted if there is an indication that customer payment behavior will deteriorate. The financial receivables handsets are the installments to be invoiced on average in approximately the next 12 months.\u00a0
Trade and other receivables and contract assets classify as financial assets and are measured at amortized cost if both of the following conditions are met:
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortized cost are subsequently measured using the effective interest method less provisions for impairment. An allowance for expected credit losses is recorded for all financial assets and contract assets at initial recognition. This allowance is regularly updated.
The amortized cost is calculated by taking into account any discounts or premiums on acquisition and transactions costs.
The effective interest rate amortization is recognized under finance income or finance costs.
If a financial asset is held within a business model with the objective of both collecting contractual cash flows and selling the financial asset, the financial asset is measured at fair value through other comprehensive income (FVOCI).
A financial asset is derecognized when the rights to receive cash flows from the asset have expired or KPN has transferred the rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (1) KPN has transferred substantially all the risk and rewards of the asset, or (2) KPN has neither transferred nor retained substantially all the risks and rewards\u00a0of the asset, but has transferred control of the asset.
When KPN has transferred the rights to receive cash flows from an asset or has entered into a pass-through arrangement, KPN evaluates if, and to what extent, KPN has retained the risks and rewards of ownership.\u00a0The risks and rewards are substantially transferred if more than 90% of the variability of the cash flows with respect to an asset is transferred.
See Note 4 for the accounting policy regarding contract costs.
Cash and cash equivalents consist of highly liquid instruments with initial maturities of three months or less, including balances on bank accounts, bank deposits and money market funds.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Cash | 144 | 258 |
| Short-term bank deposits and money market funds | 255 | 535 |
| Total cash and cash equivalents | 399 | 793 |
The decrease in cash and cash equivalents was mainly the result of EUR 571m dividend payments, EUR 300m share repurchases, EUR 468m of net debt redemptions (including EUR 500m bond proceeds and EUR 968m bond redemptions), EUR 71m net payments related to M&A and Glaspoort, and EUR 17m net investments Ventures, partly offset by EUR 862m free cash flow and EUR 200m change in short-term investments.
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, AAA-rated prime money market funds, and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included in borrowings in current liabilities.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Trade payables | 591 | - | 514 | - |
| Accrued interest | 52 | - | 77 | - |
| Accrued expenses | 286 | - | 338 | - |
| Social security and other taxes payable | 184 | - | 220 | - |
| Other payables | 28 | 8 | 26 | 8 |
| Total | 1,140 | 8 | 1,176 | 8 |
Some of KPN\u2019s suppliers participate in Supplier Finance Programs giving suppliers the opportunity to receive earlier payment (from a financial institution), without modifying KPN\u2019s payment terms, or providing KPN an extended payment period. As the payment terms under these programs do not materially deviate from customary payment terms in the industry or from the terms agreed with suppliers who do not participate in these programs, the relating liabilities are classified as trade and other payables, and payments are classified as operating cash flow. The Supplier Finance Programs do not impact covenants or KPN\u2019s access to (future) borrowings from financial institutions. As at 31 December 2022, the total amount of payables under the three Supplier Finance Programs amounted to EUR 205m (2021: EUR 141m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-563": { "value": "\u20ac\u00a0million Notes 2022 2021 Finance income \u00a08 - Interest on borrowings \u00a0-192 -192 Interest expense lease liability [19] -18 -20 Interest on other provisions \u00a0-1 -3 Other interest expenses \u00a0-3 -8 Finance costs \u00a0-213 -223 Hedge ineffectiveness \u00a010 - Amortizable part of hedge reserve \u00a0-15 -15 Amortization discontinued fair value hedges \u00a018 22 Derivative financial instruments not qualified for hedge accounting [13.3] -11 -17 Exchange rate differences \u00a03 5 Fair value loss on contingent cash receivable Glaspoort [13.1 -16 -2 Other \u00a0-12 -4 Other financial results \u00a0-22 -11 Total \u00a0-227 -234 Finance costs decreased by EUR 10m, which was mainly related to lower other interest expenses. Lower interest cost related to debt redemptions were largely offset by higher interest rates on floating rate debt. Interest on borrowings included a non-cash amount of EUR 6m (2021: EUR 6m) relating to debt issuance and similar costs, which are amortized over the remaining life of the respective bonds using the effective interest rate method. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-564": { "value": "\u20ac\u00a0million Notes 2022 2021 Finance income \u00a08 - Interest on borrowings \u00a0-192 -192 Interest expense lease liability [19] -18 -20 Interest on other provisions \u00a0-1 -3 Other interest expenses \u00a0-3 -8 Finance costs \u00a0-213 -223 Hedge ineffectiveness \u00a010 - Amortizable part of hedge reserve \u00a0-15 -15 Amortization discontinued fair value hedges \u00a018 22 Derivative financial instruments not qualified for hedge accounting [13.3] -11 -17 Exchange rate differences \u00a03 5 Fair value loss on contingent cash receivable Glaspoort [13.1 -16 -2 Other \u00a0-12 -4 Other financial results \u00a0-22 -11 Total \u00a0-227 -234 Finance costs decreased by EUR 10m, which was mainly related to lower other interest expenses. Lower interest cost related to debt redemptions were largely offset by higher interest rates on floating rate debt. Interest on borrowings included a non-cash amount of EUR 6m (2021: EUR 6m) relating to debt issuance and similar costs, which are amortized over the remaining life of the respective bonds using the effective interest rate method. Other financial results increased by EUR 11m (higher net cost), mainly due to a EUR 16m fair value loss on the contingent cash receivable related to Glaspoort (2021: EUR 2m loss), EUR 9m costs in 2022 related to the tender of the USD hybrid bond (included in Other), EUR 4m lower gains from amortization of discontinued fair value hedges and EUR 2m lower exchange rate gains, partly offset by EUR 10m gain on hedge ineffectiveness (2021: EUR 0m) and EUR 6m lower fair value loss on derivative financial instruments not qualified for hedge accounting due to maturing swaps. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-565": { "value": "Finance income in 2022 was EUR 8m (2021: EUR 0m), mainly due to interest income on the contingent cash receivable related to Glaspoort, partly offset by negative interest on cash balances. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-566": { "value": "Finance income in 2022 was EUR 8m (2021: EUR 0m), mainly due to interest income on the contingent cash receivable related to Glaspoort, partly offset by negative interest on cash balances. Other financial results increased by EUR 11m (higher net cost), mainly due to a EUR 16m fair value loss on the contingent cash receivable related to Glaspoort (2021: EUR 2m loss), EUR 9m costs in 2022 related to the tender of the USD hybrid bond (included in Other), EUR 4m lower gains from amortization of discontinued fair value hedges and EUR 2m lower exchange rate gains, partly offset by EUR 10m gain on hedge ineffectiveness (2021: EUR 0m) and EUR 6m lower fair value loss on derivative financial instruments not qualified for hedge accounting due to maturing swaps. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-571": { "value": "The book loss, which is recognized as a result of the sale of E-Plus in 2014 (see schedule net DTA book loss sale of E-Plus), was used to offset KPN\u2019s taxable income in the Netherlands in 2014 up to and including 2022, and will be used to offset a significant part of KPN\u2019s taxable income in the Netherlands in the coming years. KPN's unrealized losses as per 2021 are realized in 2022. Due to the realization in 2022, the current tax expense in 2022 is significantly lower compared to 2021.\u00a0
KPN has an agreement with the Dutch tax authorities with respect to the application of the Dutch innovation box tax regime. This is a facility under Dutch corporate income tax law where profits attributable to innovation are taxed at an effective rate of 9.0% (2021: 9.0%). The application of the innovation box resulted in a benefit of EUR 29m over 2022 (2021: EUR 40m). The higher iBox benefit in 2021 is a result of the bookgain related to the realization of the Glaspoort joint venture.
In 2021, the realization of the joint venture (Glaspoort) with APG triggered a taxable event, which has been discussed and agreed with the Dutch tax authorities (see Note 21). Also, the extension of the fiber roll-out between KPN, APG and Glaspoort, will follow the same principles for tax purposes as the initial transaction (see Note 12).
At the end of 2022, the German Tax Authorities finalized their tax audit of the remaining/former E-Plus companies. The overall net impact is zero. As all relevant tax years have been audited, KPN will now proceed to dissolve the respective legal entities.
See Note 21 for the impact of the acquisitions, which are separately liable for income taxes, and disposals of subsidiaries and business units.
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Current tax | 9 | -292 |
| Deferred taxes | -236 | -52 |
| Income tax (charge)/benefit from continuing operations | -227 | -344 |
The reconciliation from the Dutch statutory tax of 25.8% (2021: 25%) to the effective tax rate (ETR) of 23.0% (2021: 21.1%) is explained in the following table.
| \u00a0 | 2022 | 2021 - restated | ||
|---|---|---|---|---|
| \u00a0 | \u20ac\u00a0million | ETR | \u20ac\u00a0million | ETR |
| Profit before income tax from continuing operations excluding associates and joint ventures | 987 | \u00a0 | 1,628 | \u00a0 |
| Taxes at Dutch statutory tax rates | -255 | 25.8% | -407 | 25.0% |
| Dutch tax rate adjustment | - | 0.0% | 14 | -0.8% |
| Not taxable income, non deductible expenses and liquidation losses | -2 | 0.2% | 1 | -0.1% |
| Innovation tax facilities current year | 29 | -2.9% | 40 | -2.4% |
| Deferred tax related to prior years | - | 0.0% | 7 | -0.4% |
| Deferred tax related to current year | -3 | 0.3% | 4 | -0.2% |
| Tax benefit perpetual EUR instrument | 6 | -0.6% | 3 | -0.1% |
| Other | -1 | 0.1% | -5 | 0.3% |
| Income tax benefit/(charge) from continuing operations | -227 | 23.0% | -344 | 21.1% |
Changes in Dutch tax rates resulted in a benefit of EUR 14m in 2021 due to the valuation of our net deferred tax assets, while the tax exemption of the result on disposal of subsidiaries and business units resulted in a tax loss of EUR 2m in 2022 (2021: EUR 1m benefit). Furthermore, in 2021, a one-time tax benefit of EUR 7m has been claimed due to an update of tax calculations on real estate and lease property depreciation that relate to deferred tax positions reported in prior years.
| \u20ac\u00a0million | Tax loss & other carry forwards1 | Unrealized liquidation losses2 | Bonds & hedges3 | Restriction on depreciation4 | Fiscal goodwill5 | Lease Liabilities6 | Other | Offset against deferred tax liabilities | Total7 |
|---|---|---|---|---|---|---|---|---|---|
| Balance at 31 December 2020 | 81 | 501 | 64 | 94 | 4 | 206 | 61 | -446 | 567 |
| Income statement benefit/(charge) | -8 | - | -4 | -20 | -5 | -16 | 28 | 33 | 7 |
| Transfer to current tax | -73 | - | - | 1 | - | - | - | - | -72 |
| Tax charged to OCI | - | - | -10 | - | - | - | - | - | -10 |
| Tax rate changes8 | - | 16 | 2 | 6 | 1 | 11 | - | -22 | 14 |
| Balance at 31 December 2021 | - | 517 | 52 | 81 | - | 201 | 89 | -435 | 506 |
| Income statement benefit/(charge) | - | - | - | -13 | - | 11 | -18 | 6 | -14 |
| Transfer to current tax | -225 | - | - | - | - | - | 3 | - | -222 |
| Tax charged to OCI | - | - | -13 | - | - | - | - | 3 | -10 |
| Tax rate changes | - | - | - | - | - | - | - | - | - |
| Other | 517 | -517 | - | - | - | - | 7 | -7 | - |
| Balance at 31 December 2022 | 293 | - | 39 | 68 | - | 212 | 82 | -433 | 261 |
| \u20ac\u00a0million | Net DTA | Realized | Unrealized | Offset by DTL | Net Loss |
|---|---|---|---|---|---|
| Balance at 31 December 2020 | 547 | 46 | 501 | - | 2,188 |
| Movement 2021 | -30 | -46 | 16 | - | -184 |
| Balance at 31 December 2021 | 517 | - | 517 | - | 2,004 |
| Movement 2022 | -224 | 293 | -517 | - | -870 |
| Balance at 31 December 2022 | 293 | 293 | - | - | 1,134 |
| \u20ac\u00a0million | Software development1 | Goodwill depreciation2 | PPA3 | Right of use assets4 | Other | Offset against deferred tax assets | Total |
|---|---|---|---|---|---|---|---|
| Balance at 31 December 2020 | 100 | 102 | 44 | 189 | 11 | -446 | - |
| Income statement benefit/(charge) | -24 | 10 | -7 | -14 | 2 | 33 | - |
| Tax rate changes | 7 | 4 | 1 | 10 | - | -22 | - |
| Balance at 31 December 2021 | 83 | 116 | 38 | 185 | 13 | -435 | - |
| Income statement benefit/(charge) | -10 | 1 | -8 | 10 | 1 | 6 | - |
| Tax charged to OCI | - | - | - | - | -3 | 3 | - |
| Tax rate changes | - | - | - | - | - | - | - |
| Other | - | - | 9 | - | - | -7 | 2 |
| Balance at 31 December 2022 | 73 | 117 | 39 | 195 | 11 | -433 | 2 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| \u00a0 | 31 December 2022 | 31 December 2021 - restated | ||||
|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset |
| Koninklijke KPN \u2013 corporate tax1 | 1,134 | 293 | 293 | - | - | - |
| Other | 1042 | 22 | - | 723 | 15 | - |
| Total KPN Group | 1,238 | 315 | 293 | 72 | 15 | - |
| \u00a0 | 31 December 2022 | 31 December 2021 - restated | ||||
|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset |
| 2023 | - | - | - | - | - | - |
| 2024 | - | - | - | - | - | - |
| 2025 | - | - | - | - | - | - |
| 2026 | 4 | 1 | - | 3 | 1 | - |
| Later | 57 | 12 | - | 54 | 11 | - |
| Unlimited | 1,177 | 302 | 293 | 15 | 3 | - |
| Total | 1,238 | 315 | 293 | 72 | 15 | - |
The current income tax charge is calculated in accordance with the prevailing tax regulations and rates, taking into account non-taxable income and non-deductible expenses. The current income tax expense reflects the amount for the current reporting period that KPN expects to recover from or pay to the tax authorities. Income tax related to items recognized directly in equity/OCI is recorded in equity/OCI and not in profit or loss, with an exception for (hybrid) financial instruments classified as equity.
KPN\u2019s management periodically evaluates positions taken in the tax returns regarding situations in which uncertainty on a tax position exists over whether the relevant taxation authority will accept the tax treatment under law. These uncertain tax positions (\u2018UTP\u2019) will be recognized if the amount can be reliably estimated and when the chance of a cash outflow is estimated as probable. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote.
Deferred income tax positions are recognized for temporary differences between the tax basis of assets and liabilities and their carrying values. DTAs are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. DTAs are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Both the recognized and unrecognized DTAs are reassessed on each reporting date based on available projections. If future taxable profits are insufficiently available, derecognition may become inevitable unless certain exceptions can be applied. DTAs are recorded for deductible temporary differences associated with investments in subsidiaries and associates. They are recorded only to the extent that it is probable that the temporary differences will reverse in the foreseeable future, and taxable profit will be available against which the temporary differences can be utilized.
DTLs are recognized for all taxable temporary differences except when they arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the profit or loss reported in the Statement of Profit or Loss nor the taxable profit or loss. Also, no DTLs are recorded for taxable temporary differences associated with investments in subsidiaries and associates when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax positions are stated at nominal value and are measured at the corporate income tax rates KPN expects to be applicable in the year when the asset is realized or liability is settled based on enacted or substantially enacted tax laws.
If a tax provision is recognized for a UTP that relates to deferred taxes, the UTP will be netted against these deferred taxes. DTAs and DTLs are netted if there is a legally enforceable right to offset current tax assets against current tax liabilities and the DTAs/DTLs relate to income taxes levied by the same taxation authority on the same taxable entity or if, in the case of different taxable entities, there is an intention either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-575": { "value": "| \u20ac\u00a0million | Tax loss & other carry forwards1 | Unrealized liquidation losses2 | Bonds & hedges3 | Restriction on depreciation4 | Fiscal goodwill5 | Lease Liabilities6 | Other | Offset against deferred tax liabilities | Total7 |
|---|---|---|---|---|---|---|---|---|---|
| Balance at 31 December 2020 | 81 | 501 | 64 | 94 | 4 | 206 | 61 | -446 | 567 |
| Income statement benefit/(charge) | -8 | - | -4 | -20 | -5 | -16 | 28 | 33 | 7 |
| Transfer to current tax | -73 | - | - | 1 | - | - | - | - | -72 |
| Tax charged to OCI | - | - | -10 | - | - | - | - | - | -10 |
| Tax rate changes8 | - | 16 | 2 | 6 | 1 | 11 | - | -22 | 14 |
| Balance at 31 December 2021 | - | 517 | 52 | 81 | - | 201 | 89 | -435 | 506 |
| Income statement benefit/(charge) | - | - | - | -13 | - | 11 | -18 | 6 | -14 |
| Transfer to current tax | -225 | - | - | - | - | - | 3 | - | -222 |
| Tax charged to OCI | - | - | -13 | - | - | - | - | 3 | -10 |
| Tax rate changes | - | - | - | - | - | - | - | - | - |
| Other | 517 | -517 | - | - | - | - | 7 | -7 | - |
| Balance at 31 December 2022 | 293 | - | 39 | 68 | - | 212 | 82 | -433 | 261 |
| \u20ac\u00a0million | Net DTA | Realized | Unrealized | Offset by DTL | Net Loss |
|---|---|---|---|---|---|
| Balance at 31 December 2020 | 547 | 46 | 501 | - | 2,188 |
| Movement 2021 | -30 | -46 | 16 | - | -184 |
| Balance at 31 December 2021 | 517 | - | 517 | - | 2,004 |
| Movement 2022 | -224 | 293 | -517 | - | -870 |
| Balance at 31 December 2022 | 293 | 293 | - | - | 1,134 |
| \u20ac\u00a0million | Software development1 | Goodwill depreciation2 | PPA3 | Right of use assets4 | Other | Offset against deferred tax assets | Total |
|---|---|---|---|---|---|---|---|
| Balance at 31 December 2020 | 100 | 102 | 44 | 189 | 11 | -446 | - |
| Income statement benefit/(charge) | -24 | 10 | -7 | -14 | 2 | 33 | - |
| Tax rate changes | 7 | 4 | 1 | 10 | - | -22 | - |
| Balance at 31 December 2021 | 83 | 116 | 38 | 185 | 13 | -435 | - |
| Income statement benefit/(charge) | -10 | 1 | -8 | 10 | 1 | 6 | - |
| Tax charged to OCI | - | - | - | - | -3 | 3 | - |
| Tax rate changes | - | - | - | - | - | - | - |
| Other | - | - | 9 | - | - | -7 | 2 |
| Balance at 31 December 2022 | 73 | 117 | 39 | 195 | 11 | -433 | 2 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| \u00a0 | 31 December 2022 | 31 December 2021 - restated | ||||
|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset |
| Koninklijke KPN \u2013 corporate tax1 | 1,134 | 293 | 293 | - | - | - |
| Other | 1042 | 22 | - | 723 | 15 | - |
| Total KPN Group | 1,238 | 315 | 293 | 72 | 15 | - |
| \u00a0 | 31 December 2022 | 31 December 2021 - restated | ||||
|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset | Tax loss carry forward | Maximum deferred tax asset | Recognized deferred tax asset |
| 2023 | - | - | - | - | - | - |
| 2024 | - | - | - | - | - | - |
| 2025 | - | - | - | - | - | - |
| 2026 | 4 | 1 | - | 3 | 1 | - |
| Later | 57 | 12 | - | 54 | 11 | - |
| Unlimited | 1,177 | 302 | 293 | 15 | 3 | - |
| Total | 1,238 | 315 | 293 | 72 | 15 | - |
Deferred income tax positions are recognized for temporary differences between the tax basis of assets and liabilities and their carrying values. DTAs are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. DTAs are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Both the recognized and unrecognized DTAs are reassessed on each reporting date based on available projections. If future taxable profits are insufficiently available, derecognition may become inevitable unless certain exceptions can be applied. DTAs are recorded for deductible temporary differences associated with investments in subsidiaries and associates. They are recorded only to the extent that it is probable that the temporary differences will reverse in the foreseeable future, and taxable profit will be available against which the temporary differences can be utilized.
DTLs are recognized for all taxable temporary differences except when they arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the profit or loss reported in the Statement of Profit or Loss nor the taxable profit or loss. Also, no DTLs are recorded for taxable temporary differences associated with investments in subsidiaries and associates when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax positions are stated at nominal value and are measured at the corporate income tax rates KPN expects to be applicable in the year when the asset is realized or liability is settled based on enacted or substantially enacted tax laws.
If a tax provision is recognized for a UTP that relates to deferred taxes, the UTP will be netted against these deferred taxes. DTAs and DTLs are netted if there is a legally enforceable right to offset current tax assets against current tax liabilities and the DTAs/DTLs relate to income taxes levied by the same taxation authority on the same taxable entity or if, in the case of different taxable entities, there is an intention either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-893": { "value": "Accounting policy: Taxation Current income tax The current income tax charge is calculated in accordance with the prevailing tax regulations and rates, taking into account non-taxable income and non-deductible expenses. The current income tax expense reflects the amount for the current reporting period that KPN expects to recover from or pay to the tax authorities. Income tax related to items recognized directly in equity/OCI is recorded in equity/OCI and not in profit or loss, with an exception for (hybrid) financial instruments classified as equity. KPN\u2019s management periodically evaluates positions taken in the tax returns regarding situations in which uncertainty on a tax position exists over whether the relevant taxation authority will accept the tax treatment under law. These uncertain tax positions (\u2018UTP\u2019) will be recognized if the amount can be reliably estimated and when the chance of a cash outflow is estimated as probable. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote. Deferred income tax Deferred income tax positions are recognized for temporary differences between the tax basis of assets and liabilities and their carrying values. DTAs are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. DTAs are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Both the recognized and unrecognized DTAs are reassessed on each reporting date based on available projections. If future taxable profits are insufficiently available, derecognition may become inevitable unless certain exceptions can be applied. DTAs are recorded for deductible temporary differences associated with investments in subsidiaries and associates. They are recorded only to the extent that it is probable that the temporary differences will reverse in the foreseeable future, and taxable profit will be available against which the temporary differences can be utilized. DTLs are recognized for all taxable temporary differences except when they arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the profit or loss reported in the Statement of Profit or Loss nor the taxable profit or loss. Also, no DTLs are recorded for taxable temporary differences associated with investments in subsidiaries and associates when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax positions are stated at nominal value and are measured at the corporate income tax rates KPN expects to be applicable in the year when the asset is realized or liability is settled based on enacted or substantially enacted tax laws. If a tax provision is recognized for a UTP that relates to deferred taxes, the UTP will be netted against these deferred taxes. DTAs and DTLs are netted if there is a legally enforceable right to offset current tax assets against current tax liabilities and the DTAs/DTLs relate to income taxes levied by the same taxation authority on the same taxable entity or if, in the case of different taxable entities, there is an intention either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-894": { "value": "Deferred income tax Deferred income tax positions are recognized for temporary differences between the tax basis of assets and liabilities and their carrying values. DTAs are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. DTAs are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Both the recognized and unrecognized DTAs are reassessed on each reporting date based on available projections. If future taxable profits are insufficiently available, derecognition may become inevitable unless certain exceptions can be applied. DTAs are recorded for deductible temporary differences associated with investments in subsidiaries and associates. They are recorded only to the extent that it is probable that the temporary differences will reverse in the foreseeable future, and taxable profit will be available against which the temporary differences can be utilized. DTLs are recognized for all taxable temporary differences except when they arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the profit or loss reported in the Statement of Profit or Loss nor the taxable profit or loss. Also, no DTLs are recorded for taxable temporary differences associated with investments in subsidiaries and associates when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax positions are stated at nominal value and are measured at the corporate income tax rates KPN expects to be applicable in the year when the asset is realized or liability is settled based on enacted or substantially enacted tax laws. If a tax provision is recognized for a UTP that relates to deferred taxes, the UTP will be netted against these deferred taxes. DTAs and DTLs are netted if there is a legally enforceable right to offset current tax assets against current tax liabilities and the DTAs/DTLs relate to income taxes levied by the same taxation authority on the same taxable entity or if, in the case of different taxable entities, there is an intention either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-583": { "value": " 9 Earnings per share The following table shows the income and share data used in the calculations of the basic and diluted EPS. \u20ac\u00a0million 2022 2021 Profit for the year from continuing operations 766 1,283 Profit for the year from discontinued operations -5 5 Profit for the year 761 1,288 Profit attributable to non-controlling interests - - Deduction for perpetual capital securities -18 -10 Adjusted profit (loss) attributable to ordinary shareholders of the company 743 1,278 Weighted average number of subscribed ordinary shares 4,080,828,686 4,178,961,845 Dilution effects: non-vested shares 5,615,541 4,363,596 Weighted average number of subscribed ordinary shares including dilution effects 4,086,444,227 4,183,325,441 Earnings per ordinary share after taxes attributable to equity holders of the company for the year: \u20ac 2022 2021 Basic (continuing operations) 0.18 0.30 Diluted (continuing operations) 0.18 0.30 Basic (discontinued operations) - - Diluted (discontinued operations) - - Basic (total, including discontinued operations) 0.18 0.31 Diluted (total, including discontinued operations) 0.18 0.31 Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Non-vested shares are regarded to have potential dilutive effects on the ordinary shares. Coupons and carrying amount adjustments on the perpetual capital securities were deducted from the profit attributable to equity holders, since the perpetual hybrid bonds represent equity but do not constitute profit attributable to ordinary shareholders. The total basic earnings per share include EUR 0.06 (2021: EUR 0.08) tax expenses. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-897": { "value": "Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Non-vested shares are regarded to have potential dilutive effects on the ordinary shares. Coupons and carrying amount adjustments on the perpetual capital securities were deducted from the profit attributable to equity holders, since the perpetual hybrid bonds represent equity but do not constitute profit attributable to ordinary shareholders. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-585": { "value": "10 Property, plant and equipment Statement of changes in property, plant and equipment \u20ac\u00a0million Land and buildings Plant and equipment Other tangible non-current assets Assets under construction Total Balance at 1 January 2021 405 4,863 38 116 5,422 Investments1 44 937 13 3 997 Depreciation -46 -872 -15 - -933 Impairments and retirements - -8 - -1 -10 Other -2 -9 -2 - -13 Closing net book value 401 4,912 34 118 5,463 Cost 1,569 9,756 79 118 11,521 Accumulated depreciation/impairments -1,168 -4,845 -45 - -6,058 Balance at 31 December 2021 401 4,912 34 118 5,463 Investments 25 881 3 32 942 Depreciation -44 -767 -12 - -823 Impairments and retirements -2 -8 - -2 -12 Other -2 - - - -2 Closing net book value 377 5,018 24 148 5,568 Cost 1,580 9,280 56 148 11,064 Accumulated depreciation/impairments -1,202 -4,262 -32 - -5,496 Balance at 31 December 2022 377 5,018 24 148 5,568 Investments in Plant and equipment include the acquisitions of fiber networks not qualifying as a business under IFRS 3 of EUR 17m Estimated useful lives of the principal PPE categories PPE category Depreciation period Land No depreciation Buildings 14-33 years Network equipment 3-7 years Fiber network infrastructure 30 years Copper network infrastructure 5-10 years Office equipment 4-10 years The assets\u2019 residual values and useful lives are reviewed at least annually and adjusted if appropriate. KPN's strategy includes, among others, accelerating the roll-out of fiber, which affects the depreciation period of all new investments in copper infrastructure. As of 1 January 2019, depreciations of these investments were capped at 10 years. In early 2020, KPN announced its plans to phase out its copper network after three years starting in early 2023 for existing addresses where fiber service delivery is available as per early 2020, and for the addresses in every then already announced fiber roll-out project under construction. Together with the current fiber roll-out these overlay addresses receive an announcement that copper will be phased out after three years. The depreciation of this part of the copper network was accelerated for an additional amount of EUR 18m in 2022 (2021: EUR 17m). As of 1 October 2022, the depreciation period of switching equipment (IP routers) was revised from four to seven years. The impact on the depreciation expenses in 2022 was EUR -7m (expected impact 2023 is estimated at around EUR -27m). Accounting policy: PPE PPE are valued at cost less depreciation and impairment. The cost include direct costs (materials, direct labor and work contracted out) and directly attributable overhead costs. Asset retirement obligations are capitalized as part of the cost of tangible fixed assets and expensed as either depreciation over the assets\u2019 estimated useful life or as impairment charges. PPE are depreciated using the straight-line method, based on estimated useful life, taking into account residual value. Land is not depreciated. PPE are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the assets concerned may not be recoverable. An impairment loss is recognized for the amount by which the assets\u2019 book value exceeds its recoverable amount. Impairments are reversed if and to the extent that the impairment no longer exists. The recoverable amount is defined as the higher of an assets\u2019 fair value less costs of disposal and its value in use. Interest is capitalized as an increase in PPE if the construction of assets takes a substantial period of time and the amount is material. ", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-586": { "value": "| \u20ac\u00a0million | Land and buildings | Plant and equipment | Other tangible non-current assets | Assets under construction | Total |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 405 | 4,863 | 38 | 116 | 5,422 |
| Investments1 | 44 | 937 | 13 | 3 | 997 |
| Depreciation | -46 | -872 | -15 | - | -933 |
| Impairments and retirements | - | -8 | - | -1 | -10 |
| Other | -2 | -9 | -2 | - | -13 |
| Closing net book value | 401 | 4,912 | 34 | 118 | 5,463 |
| Cost | 1,569 | 9,756 | 79 | 118 | 11,521 |
| Accumulated depreciation/impairments | -1,168 | -4,845 | -45 | - | -6,058 |
| Balance at 31 December 2021 | 401 | 4,912 | 34 | 118 | 5,463 |
| Investments | 25 | 881 | 3 | 32 | 942 |
| Depreciation | -44 | -767 | -12 | - | -823 |
| Impairments and retirements | -2 | -8 | - | -2 | -12 |
| Other | -2 | - | - | - | -2 |
| Closing net book value | 377 | 5,018 | 24 | 148 | 5,568 |
| Cost | 1,580 | 9,280 | 56 | 148 | 11,064 |
| Accumulated depreciation/impairments | -1,202 | -4,262 | -32 | - | -5,496 |
| Balance at 31 December 2022 | 377 | 5,018 | 24 | 148 | 5,568 |
| PPE category | Depreciation period |
|---|---|
| Land | No depreciation |
| Buildings | 14-33 years |
| Network equipment | 3-7 years |
| Fiber network infrastructure | 30 years |
| Copper network infrastructure | 5-10 years |
| Office equipment | 4-10 years |
The assets\u2019 residual values and useful lives are reviewed at least annually and adjusted if appropriate.
KPN's strategy includes, among others, accelerating the roll-out of fiber, which affects the depreciation period of all new investments in copper infrastructure. As of 1 January 2019, depreciations of these investments were capped at 10 years.
In early 2020, KPN announced its plans to phase out its copper network after three years starting in early 2023 for existing addresses where fiber service delivery is available as per early 2020, and for the addresses in every then already announced fiber roll-out project under construction. Together with the current fiber roll-out these overlay addresses receive an announcement that copper will be phased out after three years. The depreciation of this part of the copper network was accelerated for an additional amount of EUR 18m in 2022 (2021: EUR 17m).
As of 1 October 2022, the depreciation period of switching equipment (IP routers) was revised from four to seven years. The impact on the depreciation expenses in 2022 was EUR -7m (expected impact 2023 is estimated at around EUR -27m).
PPE are valued at cost less depreciation and impairment. The cost include direct costs (materials, direct labor and work contracted out) and directly attributable overhead costs.
Asset retirement obligations are capitalized as part of the cost of tangible fixed assets and expensed as either depreciation over the assets\u2019 estimated useful life or as impairment charges.
PPE are depreciated using the straight-line method, based on estimated useful life, taking into account residual value. Land is not depreciated. PPE are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the assets concerned may not be recoverable. An impairment loss is recognized for the amount by which the assets\u2019 book value exceeds its recoverable amount.
Impairments are reversed if and to the extent that the impairment no longer exists. The recoverable amount is defined as the higher of an assets\u2019 fair value less costs of disposal and its value in use.
Interest is capitalized as an increase in PPE if the construction of assets takes a substantial period of time and the amount is material.
| \u20ac\u00a0million | Goodwill | Customer relationships | Software acquired from third parties | Software internally generated | Software in development | Licenses | Other | Total |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 1,496 | 175 | 100 | 305 | 27 | 1,132 | 3 | 3,238 |
| Investments | - | - | 31 | 182 | 9 | - | 4 | 226 |
| Changes in consolidation1 | -64 | - | - | - | - | - | - | -64 |
| Amortization | - | -26 | -61 | -199 | - | -100 | -1 | -387 |
| Impairments | - | - | -1 | -6 | - | - | - | -8 |
| Reclassifications | - | -1 | -1 | 1 | - | - | 1 | - |
| Closing net book value | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Cost | 2,089 | 326 | 177 | 650 | 35 | 1,779 | 17 | 5,074 |
| Accumulated amortization/impairments | -657 | -178 | -108 | -367 | - | -747 | -11 | -2,068 |
| Balance at 31 December 2021 | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Investments | 7 | - | 20 | 192 | 29 | - | - | 247 |
| Changes in consolidation2 | - | 9 | - | - | - | - | - | 9 |
| Amortization | - | -25 | -45 | -189 | - | -100 | -1 | -361 |
| Impairments | - | -4 | -1 | -7 | -8 | - | - | -19 |
| Reclassifications | - | - | 2 | -1 | 1 | - | - | 2 |
| Closing net book value | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| Cost | 2,096 | 335 | 136 | 604 | 57 | 1,779 | 17 | 5,025 |
| Accumulated amortization/impairments | -657 | -207 | -92 | -326 | - | -847 | -12 | -2,141 |
| Balance at 31 December 2022 | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| \u20ac\u00a0million | Mobile network | Fixed network & data centers | Real estate | Vehicles | Other | Total |
|---|---|---|---|---|---|---|
| Accumulated cost | 995 | 119 | 493 | 137 | 4 | 1,749 |
| Accumulated depreciation & impairment | -429 | -96 | -288 | -76 | -3 | -892 |
| Balance as at 1 January 2021 | 566 | 23 | 205 | 61 | 1 | 857 |
| Additions | 8 | - | 3 | 7 | 8 | 27 |
| Remeasurement & lease modifications | 35 | 3 | 9 | 1 | 1 | 48 |
| Depreciation | -57 | -10 | -31 | -28 | -2 | -127 |
| Impairments | - | - | - | - | - | - |
| Closing net book value | 553 | 17 | 186 | 40 | 9 | 804 |
| Accumulated cost | 997 | 89 | 458 | 119 | 14 | 1,677 |
| Accumulated depreciation & impairment | -445 | -71 | -272 | -80 | -5 | -872 |
| Balance as at 31 December 2021 | 553 | 17 | 186 | 40 | 9 | 804 |
| Additions | 26 | 0 | 3 | 25 | 4 | 58 |
| Remeasurement & lease modifications | 87 | 4 | 27 | 4 | 1 | 123 |
| Depreciation | -57 | -7 | -31 | -24 | -3 | -121 |
| Impairments | - | - | -161 | - | - | -16 |
| Closing net book value | 608 | 14 | 169 | 45 | 11 | 848 |
| Accumulated cost | 1,060 | 76 | 472 | 111 | 19 | 1,737 |
| Accumulated depreciation & impairment | -451 | -61 | -303 | -66 | -7 | -889 |
| Balance as at 31 December 2022 | 608 | 14 | 169 | 45 | 11 | 848 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Total estimated lease term at commencement of a lease (in years) | 5-15 | 5-20 | 5-20 | 5-7 | <5 | \u00a0 |
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Depreciation right-of-use assets | -121 | -127 |
| Impairment (-) or impairment reversal right-of-use assets | -16 | - |
| Gain or loss (-) on early terminations | 7 | 5 |
| Total depreciation & impairments presented in the P&L | -131 | -123 |
| Interest on lease liabilities | -18 | -20 |
| Total amount recognized in profit or loss | -149 | -142 |
| \u20ac\u00a0million | Goodwill | Customer relationships | Software acquired from third parties | Software internally generated | Software in development | Licenses | Other | Total |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 1,496 | 175 | 100 | 305 | 27 | 1,132 | 3 | 3,238 |
| Investments | - | - | 31 | 182 | 9 | - | 4 | 226 |
| Changes in consolidation1 | -64 | - | - | - | - | - | - | -64 |
| Amortization | - | -26 | -61 | -199 | - | -100 | -1 | -387 |
| Impairments | - | - | -1 | -6 | - | - | - | -8 |
| Reclassifications | - | -1 | -1 | 1 | - | - | 1 | - |
| Closing net book value | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Cost | 2,089 | 326 | 177 | 650 | 35 | 1,779 | 17 | 5,074 |
| Accumulated amortization/impairments | -657 | -178 | -108 | -367 | - | -747 | -11 | -2,068 |
| Balance at 31 December 2021 | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Investments | 7 | - | 20 | 192 | 29 | - | - | 247 |
| Changes in consolidation2 | - | 9 | - | - | - | - | - | 9 |
| Amortization | - | -25 | -45 | -189 | - | -100 | -1 | -361 |
| Impairments | - | -4 | -1 | -7 | -8 | - | - | -19 |
| Reclassifications | - | - | 2 | -1 | 1 | - | - | 2 |
| Closing net book value | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| Cost | 2,096 | 335 | 136 | 604 | 57 | 1,779 | 17 | 5,025 |
| Accumulated amortization/impairments | -657 | -207 | -92 | -326 | - | -847 | -12 | -2,141 |
| Balance at 31 December 2022 | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Consumer | 743 | 743 |
| Business1 | 661 | 654 |
| Wholesale | 35 | 35 |
| Total | 1,439 | 1,432 |
In accordance with IAS 36, KPN assesses goodwill for impairment at the end of each year and when a triggering event occurs. The annual impairment tests as at 31 December 2022 did not indicate that the book value of KPN\u2019s goodwill is not recoverable. KPN\u2019s market capitalization on 31 December 2022 was higher than the book value of its equity. A test was performed of the recoverable amount of the book value of each cash-generating unit (CGU), based on their value-in-use, which was determined by using the discounted cash flow method.
Key assumptions used in the cash flow projections are estimated EBITDA, Capex, change in working capital and pre-tax weighted average cost of capital (WACC). The cash flow projections are management\u2019s best estimate based on the updated strategic plan and extrapolation to terminal values. Housing and facilities expenses, which includes energy costs, are expected to increase by around 50% in 2023 and 10% in 2024. After 2024, energy costs are expected to normalize. The WACC is calculated using a capital asset pricing model. The terminal growth rate for the period after 10 years is updated consistently in line with the changes in the discount rate. In 2022, the WACC and the terminal growth rate were higher compared to 2021.
For all three CGUs, the annual impairment tests in 2022 and 2021 resulted in significant positive headroom as at 31 December 2022 and 31 December 2021.
| CGU | EBITDA margin | Capex intensity | Discount rate | Terminal sales growth1 |
|---|---|---|---|---|
| Consumer 2022 | 49% \u2013 51% | 24% \u2013 28% | 7% \u2013 8% | 0.5% |
| Consumer 2021 | 53% \u2013 56% | 25% \u2013 30% | 6% \u2013 7% | -0.6% |
| Business 2022 | 31% \u2013 32% | 14% \u2013 16% | 7% \u2013 8% | 0.5% |
| Business 2021 | 30% \u2013 33% | 14% \u2013 16% | 6% \u2013 7% | -0.6% |
| Wholesale 2022 | 67% \u2013 73% | 34% \u2013 37% | 7% \u2013 8% | 0.5% |
| Wholesale 2021 | 69% \u2013 75% | 35% \u2013 39% | 6% \u2013 7% | -0.6% |
The sensitivity analyses on the impairment test, resulting from a change in the key assumptions, showed that the headroom of the CGUs is more than sufficient. The analyses were performed for each key assumption separately. For example, a 1% higher discount rate, a 20% higher Capex, a 1% lower terminal growth rate or a 20% lower EBITDA in each of the CGUs would not lead to a goodwill impairment.
The excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination is recorded as goodwill. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is allocated to CGUs for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the synergies of the business combination. Goodwill is carried at cost less accumulated impairment losses and tested for impairment annually or whenever there is an indication that goodwill may be impaired. Goodwill is impaired if the recoverable amount is lower than the book value. The recoverable amount is defined as the higher of the fair value less costs of disposal and the value in use of the CGU concerned. Impairment losses on goodwill are not reversed in the event that circumstances that triggered the impairment have changed.
Licenses and software are valued at cost less amortization and impairment. Amortization is calculated using the straight-line method over the economic useful life and commences at the date that services can be offered (available for use). Internally developed and acquired software which is not an integral part of PPE, is capitalized on the basis of the costs incurred, which includes direct costs and directly attributable overhead costs incurred.
Other intangible assets, such as customer relationships and trade names acquired in business combinations, are capitalized at their fair values at acquisition date and are amortized using the straight-line method over the economic useful life.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. An impairment loss is recognized for the amount by which the book value of the licenses exceeds its recoverable amount. Impairments are reversed if and to the extent that the impairment no longer exists. Intangible assets not yet available for use are tested annually for impairment or whenever KPN has an indication that the intangible fixed assets may be impaired. For example, licenses are tested as part of a CGU as licenses do not generate independent cash flows.
The amortization periods of the intangible assets with finite lives are 5-20 years for licenses, 3-5 years for software and 4-20 years for other intangible assets.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
Due to the limited relative size of Glaspoort to the KPN Group, Glaspoort did not qualify as a discontinued operation. Therefore, the results and cash flows of Glaspoort remained included in KPN\u2019s consolidated income and cash flow statements until the date of completion of the transaction, whereas its assets and liabilities were classified on KPN\u2019s consolidated balance sheet as part of the \u2018assets held for sale\u2019.
The transaction was subject to closing conditions and the regulatory approvals were obtained on 12 May 2021. The transaction resulted in a net book gain of EUR 639m, consisting of a book gain on the transaction of EUR 830m, included in other income (see Note 4.2), and a tax expense of EUR 190m. KPN\u2019s 50% share in the result of Glaspoort in the period between the transaction and 31 December 2021 was EUR -2m.
The transaction resulted in a net cash inflow of EUR 196m in 2021, classified as cash flow from investing activities in the Consolidated Statement of Cash Flows. This amount consists of the cash consideration received for the shares (EUR 233m), the transferred assets at closing (EUR 24m), less the share premium contribution (EUR 39m), transaction costs paid (EUR 8m) and EUR 15m for invoices paid by KPN regarding transferred assets.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
| \u20ac\u00a0million | Goodwill | Customer relationships | Software acquired from third parties | Software internally generated | Software in development | Licenses | Other | Total |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 1,496 | 175 | 100 | 305 | 27 | 1,132 | 3 | 3,238 |
| Investments | - | - | 31 | 182 | 9 | - | 4 | 226 |
| Changes in consolidation1 | -64 | - | - | - | - | - | - | -64 |
| Amortization | - | -26 | -61 | -199 | - | -100 | -1 | -387 |
| Impairments | - | - | -1 | -6 | - | - | - | -8 |
| Reclassifications | - | -1 | -1 | 1 | - | - | 1 | - |
| Closing net book value | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Cost | 2,089 | 326 | 177 | 650 | 35 | 1,779 | 17 | 5,074 |
| Accumulated amortization/impairments | -657 | -178 | -108 | -367 | - | -747 | -11 | -2,068 |
| Balance at 31 December 2021 | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Investments | 7 | - | 20 | 192 | 29 | - | - | 247 |
| Changes in consolidation2 | - | 9 | - | - | - | - | - | 9 |
| Amortization | - | -25 | -45 | -189 | - | -100 | -1 | -361 |
| Impairments | - | -4 | -1 | -7 | -8 | - | - | -19 |
| Reclassifications | - | - | 2 | -1 | 1 | - | - | 2 |
| Closing net book value | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| Cost | 2,096 | 335 | 136 | 604 | 57 | 1,779 | 17 | 5,025 |
| Accumulated amortization/impairments | -657 | -207 | -92 | -326 | - | -847 | -12 | -2,141 |
| Balance at 31 December 2022 | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Consumer | 743 | 743 |
| Business1 | 661 | 654 |
| Wholesale | 35 | 35 |
| Total | 1,439 | 1,432 |
In accordance with IAS 36, KPN assesses goodwill for impairment at the end of each year and when a triggering event occurs. The annual impairment tests as at 31 December 2022 did not indicate that the book value of KPN\u2019s goodwill is not recoverable. KPN\u2019s market capitalization on 31 December 2022 was higher than the book value of its equity. A test was performed of the recoverable amount of the book value of each cash-generating unit (CGU), based on their value-in-use, which was determined by using the discounted cash flow method.
Key assumptions used in the cash flow projections are estimated EBITDA, Capex, change in working capital and pre-tax weighted average cost of capital (WACC). The cash flow projections are management\u2019s best estimate based on the updated strategic plan and extrapolation to terminal values. Housing and facilities expenses, which includes energy costs, are expected to increase by around 50% in 2023 and 10% in 2024. After 2024, energy costs are expected to normalize. The WACC is calculated using a capital asset pricing model. The terminal growth rate for the period after 10 years is updated consistently in line with the changes in the discount rate. In 2022, the WACC and the terminal growth rate were higher compared to 2021.
For all three CGUs, the annual impairment tests in 2022 and 2021 resulted in significant positive headroom as at 31 December 2022 and 31 December 2021.
| CGU | EBITDA margin | Capex intensity | Discount rate | Terminal sales growth1 |
|---|---|---|---|---|
| Consumer 2022 | 49% \u2013 51% | 24% \u2013 28% | 7% \u2013 8% | 0.5% |
| Consumer 2021 | 53% \u2013 56% | 25% \u2013 30% | 6% \u2013 7% | -0.6% |
| Business 2022 | 31% \u2013 32% | 14% \u2013 16% | 7% \u2013 8% | 0.5% |
| Business 2021 | 30% \u2013 33% | 14% \u2013 16% | 6% \u2013 7% | -0.6% |
| Wholesale 2022 | 67% \u2013 73% | 34% \u2013 37% | 7% \u2013 8% | 0.5% |
| Wholesale 2021 | 69% \u2013 75% | 35% \u2013 39% | 6% \u2013 7% | -0.6% |
The sensitivity analyses on the impairment test, resulting from a change in the key assumptions, showed that the headroom of the CGUs is more than sufficient. The analyses were performed for each key assumption separately. For example, a 1% higher discount rate, a 20% higher Capex, a 1% lower terminal growth rate or a 20% lower EBITDA in each of the CGUs would not lead to a goodwill impairment.
The excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination is recorded as goodwill. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is allocated to CGUs for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the synergies of the business combination. Goodwill is carried at cost less accumulated impairment losses and tested for impairment annually or whenever there is an indication that goodwill may be impaired. Goodwill is impaired if the recoverable amount is lower than the book value. The recoverable amount is defined as the higher of the fair value less costs of disposal and the value in use of the CGU concerned. Impairment losses on goodwill are not reversed in the event that circumstances that triggered the impairment have changed.
Licenses and software are valued at cost less amortization and impairment. Amortization is calculated using the straight-line method over the economic useful life and commences at the date that services can be offered (available for use). Internally developed and acquired software which is not an integral part of PPE, is capitalized on the basis of the costs incurred, which includes direct costs and directly attributable overhead costs incurred.
Other intangible assets, such as customer relationships and trade names acquired in business combinations, are capitalized at their fair values at acquisition date and are amortized using the straight-line method over the economic useful life.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. An impairment loss is recognized for the amount by which the book value of the licenses exceeds its recoverable amount. Impairments are reversed if and to the extent that the impairment no longer exists. Intangible assets not yet available for use are tested annually for impairment or whenever KPN has an indication that the intangible fixed assets may be impaired. For example, licenses are tested as part of a CGU as licenses do not generate independent cash flows.
The amortization periods of the intangible assets with finite lives are 5-20 years for licenses, 3-5 years for software and 4-20 years for other intangible assets.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
Due to the limited relative size of Glaspoort to the KPN Group, Glaspoort did not qualify as a discontinued operation. Therefore, the results and cash flows of Glaspoort remained included in KPN\u2019s consolidated income and cash flow statements until the date of completion of the transaction, whereas its assets and liabilities were classified on KPN\u2019s consolidated balance sheet as part of the \u2018assets held for sale\u2019.
The transaction was subject to closing conditions and the regulatory approvals were obtained on 12 May 2021. The transaction resulted in a net book gain of EUR 639m, consisting of a book gain on the transaction of EUR 830m, included in other income (see Note 4.2), and a tax expense of EUR 190m. KPN\u2019s 50% share in the result of Glaspoort in the period between the transaction and 31 December 2021 was EUR -2m.
The transaction resulted in a net cash inflow of EUR 196m in 2021, classified as cash flow from investing activities in the Consolidated Statement of Cash Flows. This amount consists of the cash consideration received for the shares (EUR 233m), the transferred assets at closing (EUR 24m), less the share premium contribution (EUR 39m), transaction costs paid (EUR 8m) and EUR 15m for invoices paid by KPN regarding transferred assets.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
| \u20ac\u00a0million | Goodwill | Customer relationships | Software acquired from third parties | Software internally generated | Software in development | Licenses | Other | Total |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 1,496 | 175 | 100 | 305 | 27 | 1,132 | 3 | 3,238 |
| Investments | - | - | 31 | 182 | 9 | - | 4 | 226 |
| Changes in consolidation1 | -64 | - | - | - | - | - | - | -64 |
| Amortization | - | -26 | -61 | -199 | - | -100 | -1 | -387 |
| Impairments | - | - | -1 | -6 | - | - | - | -8 |
| Reclassifications | - | -1 | -1 | 1 | - | - | 1 | - |
| Closing net book value | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Cost | 2,089 | 326 | 177 | 650 | 35 | 1,779 | 17 | 5,074 |
| Accumulated amortization/impairments | -657 | -178 | -108 | -367 | - | -747 | -11 | -2,068 |
| Balance at 31 December 2021 | 1,432 | 148 | 69 | 283 | 35 | 1,032 | 7 | 3,006 |
| Investments | 7 | - | 20 | 192 | 29 | - | - | 247 |
| Changes in consolidation2 | - | 9 | - | - | - | - | - | 9 |
| Amortization | - | -25 | -45 | -189 | - | -100 | -1 | -361 |
| Impairments | - | -4 | -1 | -7 | -8 | - | - | -19 |
| Reclassifications | - | - | 2 | -1 | 1 | - | - | 2 |
| Closing net book value | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| Cost | 2,096 | 335 | 136 | 604 | 57 | 1,779 | 17 | 5,025 |
| Accumulated amortization/impairments | -657 | -207 | -92 | -326 | - | -847 | -12 | -2,141 |
| Balance at 31 December 2022 | 1,439 | 127 | 45 | 278 | 57 | 932 | 5 | 2,884 |
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Consumer | 743 | 743 |
| Business1 | 661 | 654 |
| Wholesale | 35 | 35 |
| Total | 1,439 | 1,432 |
In accordance with IAS 36, KPN assesses goodwill for impairment at the end of each year and when a triggering event occurs. The annual impairment tests as at 31 December 2022 did not indicate that the book value of KPN\u2019s goodwill is not recoverable. KPN\u2019s market capitalization on 31 December 2022 was higher than the book value of its equity. A test was performed of the recoverable amount of the book value of each cash-generating unit (CGU), based on their value-in-use, which was determined by using the discounted cash flow method.
Key assumptions used in the cash flow projections are estimated EBITDA, Capex, change in working capital and pre-tax weighted average cost of capital (WACC). The cash flow projections are management\u2019s best estimate based on the updated strategic plan and extrapolation to terminal values. Housing and facilities expenses, which includes energy costs, are expected to increase by around 50% in 2023 and 10% in 2024. After 2024, energy costs are expected to normalize. The WACC is calculated using a capital asset pricing model. The terminal growth rate for the period after 10 years is updated consistently in line with the changes in the discount rate. In 2022, the WACC and the terminal growth rate were higher compared to 2021.
For all three CGUs, the annual impairment tests in 2022 and 2021 resulted in significant positive headroom as at 31 December 2022 and 31 December 2021.
| CGU | EBITDA margin | Capex intensity | Discount rate | Terminal sales growth1 |
|---|---|---|---|---|
| Consumer 2022 | 49% \u2013 51% | 24% \u2013 28% | 7% \u2013 8% | 0.5% |
| Consumer 2021 | 53% \u2013 56% | 25% \u2013 30% | 6% \u2013 7% | -0.6% |
| Business 2022 | 31% \u2013 32% | 14% \u2013 16% | 7% \u2013 8% | 0.5% |
| Business 2021 | 30% \u2013 33% | 14% \u2013 16% | 6% \u2013 7% | -0.6% |
| Wholesale 2022 | 67% \u2013 73% | 34% \u2013 37% | 7% \u2013 8% | 0.5% |
| Wholesale 2021 | 69% \u2013 75% | 35% \u2013 39% | 6% \u2013 7% | -0.6% |
The sensitivity analyses on the impairment test, resulting from a change in the key assumptions, showed that the headroom of the CGUs is more than sufficient. The analyses were performed for each key assumption separately. For example, a 1% higher discount rate, a 20% higher Capex, a 1% lower terminal growth rate or a 20% lower EBITDA in each of the CGUs would not lead to a goodwill impairment.
The excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination is recorded as goodwill. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is allocated to CGUs for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the synergies of the business combination. Goodwill is carried at cost less accumulated impairment losses and tested for impairment annually or whenever there is an indication that goodwill may be impaired. Goodwill is impaired if the recoverable amount is lower than the book value. The recoverable amount is defined as the higher of the fair value less costs of disposal and the value in use of the CGU concerned. Impairment losses on goodwill are not reversed in the event that circumstances that triggered the impairment have changed.
Licenses and software are valued at cost less amortization and impairment. Amortization is calculated using the straight-line method over the economic useful life and commences at the date that services can be offered (available for use). Internally developed and acquired software which is not an integral part of PPE, is capitalized on the basis of the costs incurred, which includes direct costs and directly attributable overhead costs incurred.
Other intangible assets, such as customer relationships and trade names acquired in business combinations, are capitalized at their fair values at acquisition date and are amortized using the straight-line method over the economic useful life.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. An impairment loss is recognized for the amount by which the book value of the licenses exceeds its recoverable amount. Impairments are reversed if and to the extent that the impairment no longer exists. Intangible assets not yet available for use are tested annually for impairment or whenever KPN has an indication that the intangible fixed assets may be impaired. For example, licenses are tested as part of a CGU as licenses do not generate independent cash flows.
The amortization periods of the intangible assets with finite lives are 5-20 years for licenses, 3-5 years for software and 4-20 years for other intangible assets.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
Due to the limited relative size of Glaspoort to the KPN Group, Glaspoort did not qualify as a discontinued operation. Therefore, the results and cash flows of Glaspoort remained included in KPN\u2019s consolidated income and cash flow statements until the date of completion of the transaction, whereas its assets and liabilities were classified on KPN\u2019s consolidated balance sheet as part of the \u2018assets held for sale\u2019.
The transaction was subject to closing conditions and the regulatory approvals were obtained on 12 May 2021. The transaction resulted in a net book gain of EUR 639m, consisting of a book gain on the transaction of EUR 830m, included in other income (see Note 4.2), and a tax expense of EUR 190m. KPN\u2019s 50% share in the result of Glaspoort in the period between the transaction and 31 December 2021 was EUR -2m.
The transaction resulted in a net cash inflow of EUR 196m in 2021, classified as cash flow from investing activities in the Consolidated Statement of Cash Flows. This amount consists of the cash consideration received for the shares (EUR 233m), the transferred assets at closing (EUR 24m), less the share premium contribution (EUR 39m), transaction costs paid (EUR 8m) and EUR 15m for invoices paid by KPN regarding transferred assets.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
The excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination is recorded as goodwill. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is allocated to CGUs for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the synergies of the business combination. Goodwill is carried at cost less accumulated impairment losses and tested for impairment annually or whenever there is an indication that goodwill may be impaired. Goodwill is impaired if the recoverable amount is lower than the book value. The recoverable amount is defined as the higher of the fair value less costs of disposal and the value in use of the CGU concerned. Impairment losses on goodwill are not reversed in the event that circumstances that triggered the impairment have changed.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
KPN holds several equity investments accounted for using the equity method of which Glaspoort (see below) is the most significant. Other equity investments are not material, individually nor in aggregate. Their combined carrying value at 31 December 2022 is EUR 7m (31 December 2021: EUR 8m) and KPN's share in their net result amounted to a loss of EUR -1m in 2022 (2021: nil).
Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. See Note 21 for more information on the sale of 50% of the shares of Glaspoort B.V. in 2021.
Glaspoort is classified as a joint venture based on the assessment of ownership and voting power (50/50 with the joint venture partner) and the joint control established through the joint venture agreement between the shareholders. The assessment includes, among others, the following:
KPN's option to purchase one additional share in Glaspoort. This option is exercisable between the 5th and the 8th anniversary of the transaction (9 June 2021) provided certain criteria are met, and in any case after the 8th anniversary.
KPN's influence on Glaspoort's relevant activities through KPN's presence in the governance structure.
KPN is anchor tenant on Glaspoort's network and will also be one of its suppliers through a number of operational contracts between KPN and Glaspoort.
The assessment whether joint control remains in place is reviewed annually.
KPN accounts for its interest in Glaspoort using the equity method in the Consolidated Financial Statements. KPN initially recognized its interest in the joint venture at its fair value (EUR 451m), based on the total consideration received (see Note 21). The initial fair value has been allocated to equity of Glaspoort, determined under application of KPN's accounting policies, and goodwill. In determining equity, intangible assets of EUR 878m have been recognized in the initial balance sheet of Glaspoort, which mostly relate to contractual relationships held by Glaspoort, with - among others - KPN. The sale of the additional scope projects to Glaspoort in December 2021 (refer below), which is treated as a sale of assets, has been used as an input to determine the fair value of the intangible assets. The intangible assets are amortized over a period of 30 years.
In December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) for the sale of the additional scope from Glaspoort. Of this amount, EUR 60m has been received in cash upon closing of the transaction in 2021. The remaining amount (EUR 110m) will be received in annual installments based on progress of the roll-out. Upon start of the roll-out activities of the additional scope projects by Glaspoort, KPN deems its obligations regarding the realization of the additional scope projects fulfilled. Until such time, KPN recognizes the amount received as contract liability. Upon start of the roll-out activities by Glaspoort, KPN recognizes the related deferred consideration as receivable (contract asset), releases the related prepayment (from contract liabilities) and recognized 50% of the agreed consideration as other income. The remaining 50% is recognized over time as part of the result from joint ventures following the requirements of IAS 28 on downstream transactions.
At 31 December 2022, projects with a transaction value of EUR 124m have started (31 December 2021: EUR 30m). During 2022, KPN recognized EUR 47m in other income related to the sale of these additional scope projects (2021: EUR 15m). As at 31 December 2022, the deferred gain of EUR 59m is included in the net book value of the joint venture (31 December 2021: EUR 15m). The deferred consideration to be received for these projects is EUR 80m at 31 December 2022, of which EUR 51m is considered current (31 December 2021: EUR 20m, fully non-current). Of the prepayment received from Glaspoort at transaction date, EUR 16m remains as current contract liability (31 December 2021: EUR 49m).
On the closing date of the initial transaction (9 June 2021), both shareholders paid a share premium contribution of EUR 39m to Glaspoort's equity. In December 2021, both shareholders contributed an additional share premium of EUR 30m as part of the scope extension. During 2022, both shareholders contributed additional share premiums of EUR 24m each. KPN added the share premium payments to the carrying value of KPN's interest in the joint venture.
Summarized financial information of the joint venture, based on IFRS as applied by KPN, and reconciliation with the carrying amount of the investment in the consolidated financial statements, is set out below:
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Tangible fixed assets | 217 | 77 |
| Intangible assets | 989 | 908 |
| Other non-current assets | 43 | 11 |
| Current assets | 24 | 90 |
| Net cash and cash equivalents | 19 | 28 |
| Non-current liabilities | -158 | -99 |
| Current liabilities | -67 | -11 |
| Equity | 1,067 | 1,004 |
| KPN's share in equity | 533 | 502 |
| Goodwill from initial valuation at fair value | 15 | 15 |
| Carrying amount of the investment Equity Method | 548 | 517 |
| Less: Deferred gain on downstream transactions | -59 | -15 |
| Carrying amount of the investment | 489 | 503 |
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Revenue | 16 | 2 |
| Operating expenses | -7 | -6 |
| Depreciation, amortization & impairment expenses | -16 | -1 |
| Net finance result | 27 | - |
| Profit before tax | 19 | -5 |
| Income tax expense | -5 | 2 |
| Profit for the year | 14 | -3 |
| Total comprehensive income for the year | 14 | -3 |
| KPN's share of profit for the year | 7 | -2 |
| Adjustment PY | -1 | - |
| Release deferred gain on downstream transactions (net of tax) | 2 | - |
| KPN's total reported result from JV GP | 8 | -2 |
Both shareholders have committed to additional share premium contributions. On 31 December 2022, the remaining maximum commitment of each shareholder is EUR 163m, payable to Glaspoort based on funding requirements following its annual budget (31 December 2021; EUR 187m). Neither shareholder has additional funding obligations regarding Glaspoort. Glaspoort has entered into funding agreements with financial institutions to cover its financial commitments, which include its fiber roll-out activities. These funding agreements have been entered into on a non-recourse basis without any guarantees from the shareholders.
For information on transactions between Glaspoort and KPN and unsettled positions between Glaspoort and KPN, see Note 23. Glaspoort cannot distribute its profits without the consent from the two joint venture partners and not before 2026. After 2026, Glaspoort can distribute dividends only if specific criteria are met.
Equity investments accounted for using the equity method include associates and joint ventures.
Associates are entities over which KPN has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in KPN\u2019s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.
The statement of profit or loss reflects KPN\u2019s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of KPN\u2019s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, KPN recognizes its share of any change, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between KPN and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture through KPN's share of the profit (or loss) of associates and joint ventures.
The aggregate of KPN\u2019s share of profit or loss of an associate and a joint venture is shown in the statement of profit or loss.
The financial statements of the associate or joint venture are prepared for the same reporting period as KPN. When necessary, adjustments are made to bring the accounting policies in line with those of KPN.
After application of the equity method, KPN determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, KPN determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, KPN calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within \u2018share of profit/loss (-) of associates and joint ventures\u2019 in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control, and the fair value of the retained investment and proceeds from disposal, is recognized in profit or loss.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. and entered into a joint venture agreement with APG (see Note 12). As of 9 June 2021, KPN's remaining 50% interest in Glaspoort is classified as a joint venture and accounted for using the equity method. KPN is the anchor tenant on the network of Glaspoort and also supplies services to Glaspoort. The value of the services delivered to and acquired from Glaspoort amounted to EUR 15m and EUR 16m respectively in 2022 (EUR 5m and EUR 3m respectively in the period between completion of the sale and 31 December 2021). Furthermore, in December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) from Glaspoort for the sale of the additional scope projects. Of this amount, EUR 60m has been received in cash upon closing of the transaction and the remaining amount will be received in annual installments based on the fiber roll-out starting in 2023. Trade and other receivables with respect to Glaspoort as at 31 December 2022 amounted to EUR 1m (2021: EUR 36m), trade payables EUR 2m (2021: nil), non-current contract assets EUR 29m (2021: EUR 20m), current contract assets EUR 51m (2021: nil) and non-current contract liabilities EUR 16m (2021: EUR 49m).
The following table provides the total value of the transactions by KPN with other associated and non-consolidated companies for the relevant year:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Sales in the year | 39 | 23 |
| Purchases in the year | <1 | 1 |
| Trade receivables at 31 December | 2 | <1 |
| Trade payables at 31 December | <1 | <1 |
KPN holds several equity investments accounted for using the equity method of which Glaspoort (see below) is the most significant. Other equity investments are not material, individually nor in aggregate. Their combined carrying value at 31 December 2022 is EUR 7m (31 December 2021: EUR 8m) and KPN's share in their net result amounted to a loss of EUR -1m in 2022 (2021: nil).
Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. See Note 21 for more information on the sale of 50% of the shares of Glaspoort B.V. in 2021.
Glaspoort is classified as a joint venture based on the assessment of ownership and voting power (50/50 with the joint venture partner) and the joint control established through the joint venture agreement between the shareholders. The assessment includes, among others, the following:
KPN's option to purchase one additional share in Glaspoort. This option is exercisable between the 5th and the 8th anniversary of the transaction (9 June 2021) provided certain criteria are met, and in any case after the 8th anniversary.
KPN's influence on Glaspoort's relevant activities through KPN's presence in the governance structure.
KPN is anchor tenant on Glaspoort's network and will also be one of its suppliers through a number of operational contracts between KPN and Glaspoort.
The assessment whether joint control remains in place is reviewed annually.
KPN accounts for its interest in Glaspoort using the equity method in the Consolidated Financial Statements. KPN initially recognized its interest in the joint venture at its fair value (EUR 451m), based on the total consideration received (see Note 21). The initial fair value has been allocated to equity of Glaspoort, determined under application of KPN's accounting policies, and goodwill. In determining equity, intangible assets of EUR 878m have been recognized in the initial balance sheet of Glaspoort, which mostly relate to contractual relationships held by Glaspoort, with - among others - KPN. The sale of the additional scope projects to Glaspoort in December 2021 (refer below), which is treated as a sale of assets, has been used as an input to determine the fair value of the intangible assets. The intangible assets are amortized over a period of 30 years.
In December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) for the sale of the additional scope from Glaspoort. Of this amount, EUR 60m has been received in cash upon closing of the transaction in 2021. The remaining amount (EUR 110m) will be received in annual installments based on progress of the roll-out. Upon start of the roll-out activities of the additional scope projects by Glaspoort, KPN deems its obligations regarding the realization of the additional scope projects fulfilled. Until such time, KPN recognizes the amount received as contract liability. Upon start of the roll-out activities by Glaspoort, KPN recognizes the related deferred consideration as receivable (contract asset), releases the related prepayment (from contract liabilities) and recognized 50% of the agreed consideration as other income. The remaining 50% is recognized over time as part of the result from joint ventures following the requirements of IAS 28 on downstream transactions.
At 31 December 2022, projects with a transaction value of EUR 124m have started (31 December 2021: EUR 30m). During 2022, KPN recognized EUR 47m in other income related to the sale of these additional scope projects (2021: EUR 15m). As at 31 December 2022, the deferred gain of EUR 59m is included in the net book value of the joint venture (31 December 2021: EUR 15m). The deferred consideration to be received for these projects is EUR 80m at 31 December 2022, of which EUR 51m is considered current (31 December 2021: EUR 20m, fully non-current). Of the prepayment received from Glaspoort at transaction date, EUR 16m remains as current contract liability (31 December 2021: EUR 49m).
On the closing date of the initial transaction (9 June 2021), both shareholders paid a share premium contribution of EUR 39m to Glaspoort's equity. In December 2021, both shareholders contributed an additional share premium of EUR 30m as part of the scope extension. During 2022, both shareholders contributed additional share premiums of EUR 24m each. KPN added the share premium payments to the carrying value of KPN's interest in the joint venture.
Summarized financial information of the joint venture, based on IFRS as applied by KPN, and reconciliation with the carrying amount of the investment in the consolidated financial statements, is set out below:
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Tangible fixed assets | 217 | 77 |
| Intangible assets | 989 | 908 |
| Other non-current assets | 43 | 11 |
| Current assets | 24 | 90 |
| Net cash and cash equivalents | 19 | 28 |
| Non-current liabilities | -158 | -99 |
| Current liabilities | -67 | -11 |
| Equity | 1,067 | 1,004 |
| KPN's share in equity | 533 | 502 |
| Goodwill from initial valuation at fair value | 15 | 15 |
| Carrying amount of the investment Equity Method | 548 | 517 |
| Less: Deferred gain on downstream transactions | -59 | -15 |
| Carrying amount of the investment | 489 | 503 |
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Revenue | 16 | 2 |
| Operating expenses | -7 | -6 |
| Depreciation, amortization & impairment expenses | -16 | -1 |
| Net finance result | 27 | - |
| Profit before tax | 19 | -5 |
| Income tax expense | -5 | 2 |
| Profit for the year | 14 | -3 |
| Total comprehensive income for the year | 14 | -3 |
| KPN's share of profit for the year | 7 | -2 |
| Adjustment PY | -1 | - |
| Release deferred gain on downstream transactions (net of tax) | 2 | - |
| KPN's total reported result from JV GP | 8 | -2 |
Both shareholders have committed to additional share premium contributions. On 31 December 2022, the remaining maximum commitment of each shareholder is EUR 163m, payable to Glaspoort based on funding requirements following its annual budget (31 December 2021; EUR 187m). Neither shareholder has additional funding obligations regarding Glaspoort. Glaspoort has entered into funding agreements with financial institutions to cover its financial commitments, which include its fiber roll-out activities. These funding agreements have been entered into on a non-recourse basis without any guarantees from the shareholders.
For information on transactions between Glaspoort and KPN and unsettled positions between Glaspoort and KPN, see Note 23. Glaspoort cannot distribute its profits without the consent from the two joint venture partners and not before 2026. After 2026, Glaspoort can distribute dividends only if specific criteria are met.
Equity investments accounted for using the equity method include associates and joint ventures.
Associates are entities over which KPN has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in KPN\u2019s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.
The statement of profit or loss reflects KPN\u2019s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of KPN\u2019s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, KPN recognizes its share of any change, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between KPN and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture through KPN's share of the profit (or loss) of associates and joint ventures.
The aggregate of KPN\u2019s share of profit or loss of an associate and a joint venture is shown in the statement of profit or loss.
The financial statements of the associate or joint venture are prepared for the same reporting period as KPN. When necessary, adjustments are made to bring the accounting policies in line with those of KPN.
After application of the equity method, KPN determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, KPN determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, KPN calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within \u2018share of profit/loss (-) of associates and joint ventures\u2019 in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control, and the fair value of the retained investment and proceeds from disposal, is recognized in profit or loss.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
Due to the limited relative size of Glaspoort to the KPN Group, Glaspoort did not qualify as a discontinued operation. Therefore, the results and cash flows of Glaspoort remained included in KPN\u2019s consolidated income and cash flow statements until the date of completion of the transaction, whereas its assets and liabilities were classified on KPN\u2019s consolidated balance sheet as part of the \u2018assets held for sale\u2019.
The transaction was subject to closing conditions and the regulatory approvals were obtained on 12 May 2021. The transaction resulted in a net book gain of EUR 639m, consisting of a book gain on the transaction of EUR 830m, included in other income (see Note 4.2), and a tax expense of EUR 190m. KPN\u2019s 50% share in the result of Glaspoort in the period between the transaction and 31 December 2021 was EUR -2m.
The transaction resulted in a net cash inflow of EUR 196m in 2021, classified as cash flow from investing activities in the Consolidated Statement of Cash Flows. This amount consists of the cash consideration received for the shares (EUR 233m), the transferred assets at closing (EUR 24m), less the share premium contribution (EUR 39m), transaction costs paid (EUR 8m) and EUR 15m for invoices paid by KPN regarding transferred assets.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. and entered into a joint venture agreement with APG (see Note 12). As of 9 June 2021, KPN's remaining 50% interest in Glaspoort is classified as a joint venture and accounted for using the equity method. KPN is the anchor tenant on the network of Glaspoort and also supplies services to Glaspoort. The value of the services delivered to and acquired from Glaspoort amounted to EUR 15m and EUR 16m respectively in 2022 (EUR 5m and EUR 3m respectively in the period between completion of the sale and 31 December 2021). Furthermore, in December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) from Glaspoort for the sale of the additional scope projects. Of this amount, EUR 60m has been received in cash upon closing of the transaction and the remaining amount will be received in annual installments based on the fiber roll-out starting in 2023. Trade and other receivables with respect to Glaspoort as at 31 December 2022 amounted to EUR 1m (2021: EUR 36m), trade payables EUR 2m (2021: nil), non-current contract assets EUR 29m (2021: EUR 20m), current contract assets EUR 51m (2021: nil) and non-current contract liabilities EUR 16m (2021: EUR 49m).
The following table provides the total value of the transactions by KPN with other associated and non-consolidated companies for the relevant year:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Sales in the year | 39 | 23 |
| Purchases in the year | <1 | 1 |
| Trade receivables at 31 December | 2 | <1 |
| Trade payables at 31 December | <1 | <1 |
KPN holds several equity investments accounted for using the equity method of which Glaspoort (see below) is the most significant. Other equity investments are not material, individually nor in aggregate. Their combined carrying value at 31 December 2022 is EUR 7m (31 December 2021: EUR 8m) and KPN's share in their net result amounted to a loss of EUR -1m in 2022 (2021: nil).
Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. See Note 21 for more information on the sale of 50% of the shares of Glaspoort B.V. in 2021.
Glaspoort is classified as a joint venture based on the assessment of ownership and voting power (50/50 with the joint venture partner) and the joint control established through the joint venture agreement between the shareholders. The assessment includes, among others, the following:
KPN's option to purchase one additional share in Glaspoort. This option is exercisable between the 5th and the 8th anniversary of the transaction (9 June 2021) provided certain criteria are met, and in any case after the 8th anniversary.
KPN's influence on Glaspoort's relevant activities through KPN's presence in the governance structure.
KPN is anchor tenant on Glaspoort's network and will also be one of its suppliers through a number of operational contracts between KPN and Glaspoort.
The assessment whether joint control remains in place is reviewed annually.
KPN accounts for its interest in Glaspoort using the equity method in the Consolidated Financial Statements. KPN initially recognized its interest in the joint venture at its fair value (EUR 451m), based on the total consideration received (see Note 21). The initial fair value has been allocated to equity of Glaspoort, determined under application of KPN's accounting policies, and goodwill. In determining equity, intangible assets of EUR 878m have been recognized in the initial balance sheet of Glaspoort, which mostly relate to contractual relationships held by Glaspoort, with - among others - KPN. The sale of the additional scope projects to Glaspoort in December 2021 (refer below), which is treated as a sale of assets, has been used as an input to determine the fair value of the intangible assets. The intangible assets are amortized over a period of 30 years.
In December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) for the sale of the additional scope from Glaspoort. Of this amount, EUR 60m has been received in cash upon closing of the transaction in 2021. The remaining amount (EUR 110m) will be received in annual installments based on progress of the roll-out. Upon start of the roll-out activities of the additional scope projects by Glaspoort, KPN deems its obligations regarding the realization of the additional scope projects fulfilled. Until such time, KPN recognizes the amount received as contract liability. Upon start of the roll-out activities by Glaspoort, KPN recognizes the related deferred consideration as receivable (contract asset), releases the related prepayment (from contract liabilities) and recognized 50% of the agreed consideration as other income. The remaining 50% is recognized over time as part of the result from joint ventures following the requirements of IAS 28 on downstream transactions.
At 31 December 2022, projects with a transaction value of EUR 124m have started (31 December 2021: EUR 30m). During 2022, KPN recognized EUR 47m in other income related to the sale of these additional scope projects (2021: EUR 15m). As at 31 December 2022, the deferred gain of EUR 59m is included in the net book value of the joint venture (31 December 2021: EUR 15m). The deferred consideration to be received for these projects is EUR 80m at 31 December 2022, of which EUR 51m is considered current (31 December 2021: EUR 20m, fully non-current). Of the prepayment received from Glaspoort at transaction date, EUR 16m remains as current contract liability (31 December 2021: EUR 49m).
On the closing date of the initial transaction (9 June 2021), both shareholders paid a share premium contribution of EUR 39m to Glaspoort's equity. In December 2021, both shareholders contributed an additional share premium of EUR 30m as part of the scope extension. During 2022, both shareholders contributed additional share premiums of EUR 24m each. KPN added the share premium payments to the carrying value of KPN's interest in the joint venture.
Summarized financial information of the joint venture, based on IFRS as applied by KPN, and reconciliation with the carrying amount of the investment in the consolidated financial statements, is set out below:
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Tangible fixed assets | 217 | 77 |
| Intangible assets | 989 | 908 |
| Other non-current assets | 43 | 11 |
| Current assets | 24 | 90 |
| Net cash and cash equivalents | 19 | 28 |
| Non-current liabilities | -158 | -99 |
| Current liabilities | -67 | -11 |
| Equity | 1,067 | 1,004 |
| KPN's share in equity | 533 | 502 |
| Goodwill from initial valuation at fair value | 15 | 15 |
| Carrying amount of the investment Equity Method | 548 | 517 |
| Less: Deferred gain on downstream transactions | -59 | -15 |
| Carrying amount of the investment | 489 | 503 |
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Revenue | 16 | 2 |
| Operating expenses | -7 | -6 |
| Depreciation, amortization & impairment expenses | -16 | -1 |
| Net finance result | 27 | - |
| Profit before tax | 19 | -5 |
| Income tax expense | -5 | 2 |
| Profit for the year | 14 | -3 |
| Total comprehensive income for the year | 14 | -3 |
| KPN's share of profit for the year | 7 | -2 |
| Adjustment PY | -1 | - |
| Release deferred gain on downstream transactions (net of tax) | 2 | - |
| KPN's total reported result from JV GP | 8 | -2 |
Both shareholders have committed to additional share premium contributions. On 31 December 2022, the remaining maximum commitment of each shareholder is EUR 163m, payable to Glaspoort based on funding requirements following its annual budget (31 December 2021; EUR 187m). Neither shareholder has additional funding obligations regarding Glaspoort. Glaspoort has entered into funding agreements with financial institutions to cover its financial commitments, which include its fiber roll-out activities. These funding agreements have been entered into on a non-recourse basis without any guarantees from the shareholders.
For information on transactions between Glaspoort and KPN and unsettled positions between Glaspoort and KPN, see Note 23. Glaspoort cannot distribute its profits without the consent from the two joint venture partners and not before 2026. After 2026, Glaspoort can distribute dividends only if specific criteria are met.
Equity investments accounted for using the equity method include associates and joint ventures.
Associates are entities over which KPN has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in KPN\u2019s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.
The statement of profit or loss reflects KPN\u2019s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of KPN\u2019s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, KPN recognizes its share of any change, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between KPN and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture through KPN's share of the profit (or loss) of associates and joint ventures.
The aggregate of KPN\u2019s share of profit or loss of an associate and a joint venture is shown in the statement of profit or loss.
The financial statements of the associate or joint venture are prepared for the same reporting period as KPN. When necessary, adjustments are made to bring the accounting policies in line with those of KPN.
After application of the equity method, KPN determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, KPN determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, KPN calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within \u2018share of profit/loss (-) of associates and joint ventures\u2019 in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control, and the fair value of the retained investment and proceeds from disposal, is recognized in profit or loss.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
Due to the limited relative size of Glaspoort to the KPN Group, Glaspoort did not qualify as a discontinued operation. Therefore, the results and cash flows of Glaspoort remained included in KPN\u2019s consolidated income and cash flow statements until the date of completion of the transaction, whereas its assets and liabilities were classified on KPN\u2019s consolidated balance sheet as part of the \u2018assets held for sale\u2019.
The transaction was subject to closing conditions and the regulatory approvals were obtained on 12 May 2021. The transaction resulted in a net book gain of EUR 639m, consisting of a book gain on the transaction of EUR 830m, included in other income (see Note 4.2), and a tax expense of EUR 190m. KPN\u2019s 50% share in the result of Glaspoort in the period between the transaction and 31 December 2021 was EUR -2m.
The transaction resulted in a net cash inflow of EUR 196m in 2021, classified as cash flow from investing activities in the Consolidated Statement of Cash Flows. This amount consists of the cash consideration received for the shares (EUR 233m), the transferred assets at closing (EUR 24m), less the share premium contribution (EUR 39m), transaction costs paid (EUR 8m) and EUR 15m for invoices paid by KPN regarding transferred assets.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. and entered into a joint venture agreement with APG (see Note 12). As of 9 June 2021, KPN's remaining 50% interest in Glaspoort is classified as a joint venture and accounted for using the equity method. KPN is the anchor tenant on the network of Glaspoort and also supplies services to Glaspoort. The value of the services delivered to and acquired from Glaspoort amounted to EUR 15m and EUR 16m respectively in 2022 (EUR 5m and EUR 3m respectively in the period between completion of the sale and 31 December 2021). Furthermore, in December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) from Glaspoort for the sale of the additional scope projects. Of this amount, EUR 60m has been received in cash upon closing of the transaction and the remaining amount will be received in annual installments based on the fiber roll-out starting in 2023. Trade and other receivables with respect to Glaspoort as at 31 December 2022 amounted to EUR 1m (2021: EUR 36m), trade payables EUR 2m (2021: nil), non-current contract assets EUR 29m (2021: EUR 20m), current contract assets EUR 51m (2021: nil) and non-current contract liabilities EUR 16m (2021: EUR 49m).
The following table provides the total value of the transactions by KPN with other associated and non-consolidated companies for the relevant year:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Sales in the year | 39 | 23 |
| Purchases in the year | <1 | 1 |
| Trade receivables at 31 December | 2 | <1 |
| Trade payables at 31 December | <1 | <1 |
KPN holds several equity investments accounted for using the equity method of which Glaspoort (see below) is the most significant. Other equity investments are not material, individually nor in aggregate. Their combined carrying value at 31 December 2022 is EUR 7m (31 December 2021: EUR 8m) and KPN's share in their net result amounted to a loss of EUR -1m in 2022 (2021: nil).
Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. See Note 21 for more information on the sale of 50% of the shares of Glaspoort B.V. in 2021.
Glaspoort is classified as a joint venture based on the assessment of ownership and voting power (50/50 with the joint venture partner) and the joint control established through the joint venture agreement between the shareholders. The assessment includes, among others, the following:
KPN's option to purchase one additional share in Glaspoort. This option is exercisable between the 5th and the 8th anniversary of the transaction (9 June 2021) provided certain criteria are met, and in any case after the 8th anniversary.
KPN's influence on Glaspoort's relevant activities through KPN's presence in the governance structure.
KPN is anchor tenant on Glaspoort's network and will also be one of its suppliers through a number of operational contracts between KPN and Glaspoort.
The assessment whether joint control remains in place is reviewed annually.
KPN accounts for its interest in Glaspoort using the equity method in the Consolidated Financial Statements. KPN initially recognized its interest in the joint venture at its fair value (EUR 451m), based on the total consideration received (see Note 21). The initial fair value has been allocated to equity of Glaspoort, determined under application of KPN's accounting policies, and goodwill. In determining equity, intangible assets of EUR 878m have been recognized in the initial balance sheet of Glaspoort, which mostly relate to contractual relationships held by Glaspoort, with - among others - KPN. The sale of the additional scope projects to Glaspoort in December 2021 (refer below), which is treated as a sale of assets, has been used as an input to determine the fair value of the intangible assets. The intangible assets are amortized over a period of 30 years.
In December 2021, KPN, Drepana and Glaspoort signed an agreement to extend the scope of the fiber roll-out of Glaspoort. KPN will receive EUR 170m (pre-tax) for the sale of the additional scope from Glaspoort. Of this amount, EUR 60m has been received in cash upon closing of the transaction in 2021. The remaining amount (EUR 110m) will be received in annual installments based on progress of the roll-out. Upon start of the roll-out activities of the additional scope projects by Glaspoort, KPN deems its obligations regarding the realization of the additional scope projects fulfilled. Until such time, KPN recognizes the amount received as contract liability. Upon start of the roll-out activities by Glaspoort, KPN recognizes the related deferred consideration as receivable (contract asset), releases the related prepayment (from contract liabilities) and recognized 50% of the agreed consideration as other income. The remaining 50% is recognized over time as part of the result from joint ventures following the requirements of IAS 28 on downstream transactions.
At 31 December 2022, projects with a transaction value of EUR 124m have started (31 December 2021: EUR 30m). During 2022, KPN recognized EUR 47m in other income related to the sale of these additional scope projects (2021: EUR 15m). As at 31 December 2022, the deferred gain of EUR 59m is included in the net book value of the joint venture (31 December 2021: EUR 15m). The deferred consideration to be received for these projects is EUR 80m at 31 December 2022, of which EUR 51m is considered current (31 December 2021: EUR 20m, fully non-current). Of the prepayment received from Glaspoort at transaction date, EUR 16m remains as current contract liability (31 December 2021: EUR 49m).
On the closing date of the initial transaction (9 June 2021), both shareholders paid a share premium contribution of EUR 39m to Glaspoort's equity. In December 2021, both shareholders contributed an additional share premium of EUR 30m as part of the scope extension. During 2022, both shareholders contributed additional share premiums of EUR 24m each. KPN added the share premium payments to the carrying value of KPN's interest in the joint venture.
Summarized financial information of the joint venture, based on IFRS as applied by KPN, and reconciliation with the carrying amount of the investment in the consolidated financial statements, is set out below:
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Tangible fixed assets | 217 | 77 |
| Intangible assets | 989 | 908 |
| Other non-current assets | 43 | 11 |
| Current assets | 24 | 90 |
| Net cash and cash equivalents | 19 | 28 |
| Non-current liabilities | -158 | -99 |
| Current liabilities | -67 | -11 |
| Equity | 1,067 | 1,004 |
| KPN's share in equity | 533 | 502 |
| Goodwill from initial valuation at fair value | 15 | 15 |
| Carrying amount of the investment Equity Method | 548 | 517 |
| Less: Deferred gain on downstream transactions | -59 | -15 |
| Carrying amount of the investment | 489 | 503 |
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Revenue | 16 | 2 |
| Operating expenses | -7 | -6 |
| Depreciation, amortization & impairment expenses | -16 | -1 |
| Net finance result | 27 | - |
| Profit before tax | 19 | -5 |
| Income tax expense | -5 | 2 |
| Profit for the year | 14 | -3 |
| Total comprehensive income for the year | 14 | -3 |
| KPN's share of profit for the year | 7 | -2 |
| Adjustment PY | -1 | - |
| Release deferred gain on downstream transactions (net of tax) | 2 | - |
| KPN's total reported result from JV GP | 8 | -2 |
Both shareholders have committed to additional share premium contributions. On 31 December 2022, the remaining maximum commitment of each shareholder is EUR 163m, payable to Glaspoort based on funding requirements following its annual budget (31 December 2021; EUR 187m). Neither shareholder has additional funding obligations regarding Glaspoort. Glaspoort has entered into funding agreements with financial institutions to cover its financial commitments, which include its fiber roll-out activities. These funding agreements have been entered into on a non-recourse basis without any guarantees from the shareholders.
For information on transactions between Glaspoort and KPN and unsettled positions between Glaspoort and KPN, see Note 23. Glaspoort cannot distribute its profits without the consent from the two joint venture partners and not before 2026. After 2026, Glaspoort can distribute dividends only if specific criteria are met.
Equity investments accounted for using the equity method include associates and joint ventures.
Associates are entities over which KPN has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in KPN\u2019s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.
The statement of profit or loss reflects KPN\u2019s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of KPN\u2019s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, KPN recognizes its share of any change, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between KPN and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture through KPN's share of the profit (or loss) of associates and joint ventures.
The aggregate of KPN\u2019s share of profit or loss of an associate and a joint venture is shown in the statement of profit or loss.
The financial statements of the associate or joint venture are prepared for the same reporting period as KPN. When necessary, adjustments are made to bring the accounting policies in line with those of KPN.
After application of the equity method, KPN determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, KPN determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, KPN calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within \u2018share of profit/loss (-) of associates and joint ventures\u2019 in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control, and the fair value of the retained investment and proceeds from disposal, is recognized in profit or loss.
On 9 June 2021, KPN sold 50% of the shares of its subsidiary Glaspoort B.V. to Drepana Investments Holding B.V., an investment entity managed by APG. At the same time, KPN entered into a joint venture agreement with Drepana Investments Holding B.V. regarding Glaspoort. Glaspoort is a network company, pursuing an open-access wholesale strategy based on non-discriminatory terms, fostering competition and innovation in the Netherlands. The total consideration upon sale of the 50% interest in Glaspoort consists of a cash consideration received upon deal close of EUR 238m (later adjusted to EUR 233m) and a contingent cash receivable of EUR 234m to be received in annual installments based on the roll-out progress of Glaspoort. The contingent cash receivable classifies as a financial asset initially recognized at fair value (EUR 218m) and is subsequently measured at fair value through profit or loss (see Note 13.1). On the closing date, both joint venture partners paid a share premium contribution of EUR 39m to Glaspoort\u2019s equity.
Following the requirements of IFRS, KPN initially recognized its interest in the joint venture at its fair value (EUR 456m), based on the total consideration, consisting of the initial cash consideration (EUR 238m) and the fair value of the deferred consideration (EUR 218m), and corroborated by internal valuation models. In December 2021, the initial cash consideration was adjusted by EUR 5m to EUR 233m and the fair value of KPN's interest in the joint venture was adjusted for the same amount to EUR 451m. See Note 12 for further information on Glaspoort.
Due to the limited relative size of Glaspoort to the KPN Group, Glaspoort did not qualify as a discontinued operation. Therefore, the results and cash flows of Glaspoort remained included in KPN\u2019s consolidated income and cash flow statements until the date of completion of the transaction, whereas its assets and liabilities were classified on KPN\u2019s consolidated balance sheet as part of the \u2018assets held for sale\u2019.
The transaction was subject to closing conditions and the regulatory approvals were obtained on 12 May 2021. The transaction resulted in a net book gain of EUR 639m, consisting of a book gain on the transaction of EUR 830m, included in other income (see Note 4.2), and a tax expense of EUR 190m. KPN\u2019s 50% share in the result of Glaspoort in the period between the transaction and 31 December 2021 was EUR -2m.
The transaction resulted in a net cash inflow of EUR 196m in 2021, classified as cash flow from investing activities in the Consolidated Statement of Cash Flows. This amount consists of the cash consideration received for the shares (EUR 233m), the transferred assets at closing (EUR 24m), less the share premium contribution (EUR 39m), transaction costs paid (EUR 8m) and EUR 15m for invoices paid by KPN regarding transferred assets.
Due to the specific nature, this transaction is not tax exempt. The total tax paid on the transaction during 2021 was EUR 197m based on preliminary tax assessments. As these tax payments are directly related to the transaction, KPN presents these taxes paid as part of the cash flows from investing activities due to separate identifiability.
KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.
| Name of significant subsidiaries and other principal interests | Country of incorporation |
|---|---|
| KPN B.V. | \u00a0 |
| - Broadband Hosting B.V. | Netherlands |
| - CAM IT Solutions B.V. | Netherlands |
| - E-Zorg B.V. | Netherlands |
| - Glaspoort B.V. | Netherlands |
| - GroupIT B.V. | Netherlands |
| - Inspark Holding B.V. | Netherlands |
| - KPN Finance B.V. | Netherlands |
| - Reggefiber Group B.V. | Netherlands |
| - Solcon Internetdiensten B.V. | Netherlands |
| - XS4ALL Internet B.V. | Netherlands |
| KPN Mobile N.V. | Netherlands |
| - KPN Mobile International B.V. | Netherlands |
| KPN Ventures B.V. | Netherlands |
| Getronics B.V. | Netherlands |
| - Getronics Finance Holdings B.V. | Netherlands |
| - Getronics Pensions UK Ltd. | UK |
| - Getronics US Operations, Inc. | US |
| KPN Insurance Company DAC | Ireland |
The percentage ownership/voting interest of these entities is 100%, except the joint venture Glaspoort B.V. in which KPN has an interest of 50%.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-618": { "value": "Joint venture Glaspoort Both shareholders have committed to additional share premium contributions. On 31 December 2022, the remaining maximum commitment of each shareholder is EUR 163m, payable to Glaspoort based on funding requirements following its annual budget (31 December 2021; EUR 187m). Neither shareholder has additional funding obligations regarding Glaspoort. Glaspoort has entered into funding agreements with financial institutions to cover its financial commitments, which include its fiber roll-out activities. These funding agreements have been entered into on a non-recourse basis without any guarantees from the shareholders. Commitments \u20ac\u00a0million Less than 1 year 1-5 years More than 5 years Total 31 December 2022 Total 31 December 2021 Capital and purchase commitments 799 268 7 1,074 1,291 Guarantees and other 3 - 132 135 131 Total commitments 802 269 139 1,209 1,422 The capital and purchase commitments mainly relate to minimum contractual obligations with regard to network operations, mobile handsets and telco services, and lease contracts that have not yet commenced. Guarantees consist of financial obligations of group companies under certain contracts guaranteed by KPN. A total amount of EUR 135m relates to parent guarantees (2021: EUR 131m). The table presented above does not include KPN's commitment on share premium contributions regarding Glaspoort of EUR 163m (31 December 2021: EUR 187m). See Note 12. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-619": { "value": "Joint venture Glaspoort Both shareholders have committed to additional share premium contributions. On 31 December 2022, the remaining maximum commitment of each shareholder is EUR 163m, payable to Glaspoort based on funding requirements following its annual budget (31 December 2021; EUR 187m). Neither shareholder has additional funding obligations regarding Glaspoort. Glaspoort has entered into funding agreements with financial institutions to cover its financial commitments, which include its fiber roll-out activities. These funding agreements have been entered into on a non-recourse basis without any guarantees from the shareholders. Asset retirement obligations The provision for asset retirement obligations (ARO) is based on assumptions of the estimated costs of removal, discount rate and estimated period of removal, which vary per type of asset. In 2022, EUR 20m was released from the ARO provision, mainly because of changes in the discount rates. Of this release, EUR 19m was recognised as a reduction of the carrying value of the activated asset retirement costs, which is included in plant and equipment. As defined in the Telecommunications Act, the obligation for landlords to tolerate cables terminates as soon as those cables have been idle for a continuous period of 10 years. Because the date when the cables will become idle is uncertain and KPN is not able to predict whether and when a landlord will place a request for removal, KPN is not able to make a reliable estimate of the impact and therefore no provision was recognized at 31 December 2022 nor at 31 December 2021. Accounting policy: Provisions for other liabilities and charges Provisions for asset retirement obligations, restructuring costs and legal claims are recognized when KPN has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote. 22 Commitments, contingencies and legal proceedings Commitments \u20ac\u00a0million Less than 1 year 1-5 years More than 5 years Total 31 December 2022 Total 31 December 2021 Capital and purchase commitments 799 268 7 1,074 1,291 Guarantees and other 3 - 132 135 131 Total commitments 802 269 139 1,209 1,422 The capital and purchase commitments mainly relate to minimum contractual obligations with regard to network operations, mobile handsets and telco services, and lease contracts that have not yet commenced. Guarantees consist of financial obligations of group companies under certain contracts guaranteed by KPN. A total amount of EUR 135m relates to parent guarantees (2021: EUR 131m). The table presented above does not include KPN's commitment on share premium contributions regarding Glaspoort of EUR 163m (31 December 2021: EUR 187m). See Note 12. Contingent liabilities KPN is involved in a number of legal and tax proceedings that have arisen in the ordinary course of its business and in discontinued operations, including commercial, regulatory or other proceedings. KPN periodically carefully assesses the likelihood that legal and tax proceedings may lead to a cash outflow and recognizes provisions in such matters if and when the chance of a cash outflow is estimated as probable and a reliable estimate of the cash outflow can be made. When these criteria are not met, such matters are classified as contingent liabilities, unless the cash outflow is considered remote. However, the outcome of such proceedings can be difficult to predict with certainty and KPN can offer no assurances in this regard. In some cases, the impact of a legal proceeding may be more strategic than financial and such impact cannot properly be quantified. Below is a description of legal related contingent liabilities that could have a material impact for KPN. Idle cables See Note 18 for a contingent liability related to idle cables and the accounting policy of provisions. Indemnification In KPN\u2019s Articles of Association and in a further decision by the Board of Management, which was approved by the Supervisory Board, KPN has indemnified the members and former members of KPN\u2019s Board of Management and Supervisory Board, as well as a number of KPN\u2019s officers and directors and former officers and directors, against liabilities, claims, judgments, fines and penalties incurred by such officer or director as a result of any threatened, pending or completed action, investigation or proceeding (whether civil, criminal or administrative) brought by a third party in relation to acts or omissions in or related to their capacity as officer or director. The indemnification does not apply to claims and expenses reimbursed by insurers nor to an officer or a director adjudged to be liable for willful misconduct (\u2018opzet\u2019) or intentional recklessness (\u2018bewuste roekeloosheid\u2019). ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-918": { "value": "Accounting policy: Equity investments accounted for using the equity method Equity investments accounted for using the equity method include associates and joint ventures. Associates are entities over which KPN has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in KPN\u2019s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of profit or loss reflects KPN\u2019s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of KPN\u2019s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, KPN recognizes its share of any change, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between KPN and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture through KPN's share of the profit (or loss) of associates and joint ventures. The aggregate of KPN\u2019s share of profit or loss of an associate and a joint venture is shown in the statement of profit or loss. The financial statements of the associate or joint venture are prepared for the same reporting period as KPN. When necessary, adjustments are made to bring the accounting policies in line with those of KPN. After application of the equity method, KPN determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, KPN determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, KPN calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within \u2018share of profit/loss (-) of associates and joint ventures\u2019 in the statement of profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control, and the fair value of the retained investment and proceeds from disposal, is recognized in profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-920": { "value": "Accounting policy: Equity investments accounted for using the equity method Equity investments accounted for using the equity method include associates and joint ventures. Associates are entities over which KPN has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in KPN\u2019s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of profit or loss reflects KPN\u2019s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of KPN\u2019s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, KPN recognizes its share of any change, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between KPN and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture through KPN's share of the profit (or loss) of associates and joint ventures. The aggregate of KPN\u2019s share of profit or loss of an associate and a joint venture is shown in the statement of profit or loss. The financial statements of the associate or joint venture are prepared for the same reporting period as KPN. When necessary, adjustments are made to bring the accounting policies in line with those of KPN. After application of the equity method, KPN determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, KPN determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, KPN calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within \u2018share of profit/loss (-) of associates and joint ventures\u2019 in the statement of profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control, and the fair value of the retained investment and proceeds from disposal, is recognized in profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-921": { "value": "Accounting policy: Equity investments accounted for using the equity method Equity investments accounted for using the equity method include associates and joint ventures. Associates are entities over which KPN has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in KPN\u2019s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of profit or loss reflects KPN\u2019s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of KPN\u2019s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, KPN recognizes its share of any change, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between KPN and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture through KPN's share of the profit (or loss) of associates and joint ventures. The aggregate of KPN\u2019s share of profit or loss of an associate and a joint venture is shown in the statement of profit or loss. The financial statements of the associate or joint venture are prepared for the same reporting period as KPN. When necessary, adjustments are made to bring the accounting policies in line with those of KPN. After application of the equity method, KPN determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, KPN determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, KPN calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within \u2018share of profit/loss (-) of associates and joint ventures\u2019 in the statement of profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control, and the fair value of the retained investment and proceeds from disposal, is recognized in profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-638": { "value": "Summary of the financial assets and liabilities at carrying amount and fair value, classified per category \u00a0\u00a031 December 2022 31 December 2021 \u20ac\u00a0million Notes Carrying amount Fair value Carrying amount Fair value Financial assets at FVPL \u00a0\u00a0\u00a0\u00a0\u00a0Contingent cash receivable regarding sale Glaspoort [13.1] 197 197 218 218 Other current financial assets [13.1] 100 100 300 300 Derivatives [13.3] 148 148 212 212 Cash and cash equivalents, including classified as held for sale [15] 399 399 793 793 Financial assets at amortized cost \u00a0\u00a0\u00a0\u00a0\u00a0Trade and other receivables1 [14.1] 455 455 641 641 Financial assets at FVOCI \u00a0\u00a0\u00a0\u00a0\u00a0Financial receivables handsets [14.1] 158 158 - - Equity investments [13.1] 76 76 49 49 Total financial assets \u00a01,534 1,534 2,213 2,213 Financial liabilities FVPL \u00a0\u00a0\u00a0\u00a0\u00a0Derivatives [13.3] 366 366 64 64 Financial liabilities at amortized cost \u00a0\u00a0\u00a0\u00a0\u00a0Borrowings [13.2] 5,368 5,203 6,744 7,223 Lease liabilities [19] 923 923 873 873 Trade and other payables2 [20] 955 955 973 973 Total financial liabilities \u00a07,612 7,447 8,654 9,132 Excluding prepayments and in 2022 the financial receivables handsets measured at FVOCI Excluding social security and other taxes payable Fair value measurement hierarchy at 31 December 2022 \u20ac\u00a0million Level 1 Level 2 Level 3 Total Financial assets at FVPL \u00a0\u00a0\u00a0\u00a0Contingent cash receivable regarding sale Glaspoort - - 197 197 Derivatives (cross-currency interest rate swap) - 123 - 123 Derivatives (interest rate swap) and other - 25 - 25 Financial assets at FVOCI \u00a0\u00a0\u00a0\u00a0Financial receivables handsets - - 158 158 Equity investments: \u00a0\u00a0\u00a0\u00a0Unlisted securities - - 76 76 Total assets - 148 431 579 Financial liabilities at FVPL \u00a0\u00a0\u00a0\u00a0Derivatives (cross-currency interest rate swap) - 100 - 100 Derivatives (interest rate swap) - 266 - 266 Total liabilities - 366 - 366 Fair value measurement hierarchy at 31 December 2021 \u20ac\u00a0million Level 1 Level 2 Level 3 Total Financial assets at FVPL \u00a0\u00a0\u00a0\u00a0Other financial asset at fair value through profit or loss - - 218 218 Derivatives (cross-currency interest rate swap) - 117 - 117 Derivatives (interest rate swap) and other - 95 - 95 Financial assets at FVOCI \u00a0\u00a0\u00a0\u00a0Equity investments: \u00a0\u00a0\u00a0\u00a0Unlisted securities - - 49 49 Total assets - 212 267 479 Financial liabilities at FVPL \u00a0\u00a0\u00a0\u00a0Derivatives (cross-currency interest rate swap) - 47 - 47 Derivatives (interest rate swap) - 17 - 17 Total liabilities - 64 - 64 13.2 Financial liabilities \u00a031 December 2022 31 December 2021 \u20ac\u00a0million Carrying amount Fair value Carrying amount Fair value Senior eurobonds EUR 2,678 2,509 3,638 3,667 Senior eurobonds GBP 1,401 1,408 1,478 1,762 Senior global bonds USD 641 628 620 751 Subordinated hybrid bonds classified as liability 136 136 529 558 Other borrowings 511 521 480 484 Total borrowings 5,368 5,203 6,744 7,223 > of which: current 196 196 677 681 > of which: non-current 5,171 5,007 6,067 6,542 The fair value for eurobonds, global bonds and hybrid bonds is based on the listed price of the bonds. Other borrowings include commercial paper, cash collateral received on derivatives, bank overdrafts and other loans. KPN\u2019s weighted average interest rate on total outstanding borrowings on 31 December 2022 was 3.6% after swaps (2021: 2.9%). KPN\u2019s weighted average interest rate on senior debt on 31 December 2022 was 3.5% after swaps (2021: 2.7%). ", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-639": { "value": "| \u00a0 | \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|---|
| \u20ac\u00a0million | Notes | Carrying amount | Fair value | Carrying amount | Fair value |
| Financial assets at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Contingent cash receivable regarding sale Glaspoort | [13.1] | 197 | 197 | 218 | 218 |
| Other current financial assets | [13.1] | 100 | 100 | 300 | 300 |
| Derivatives | [13.3] | 148 | 148 | 212 | 212 |
| Cash and cash equivalents, including classified as held for sale | [15] | 399 | 399 | 793 | 793 |
| Financial assets at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Trade and other receivables1 | [14.1] | 455 | 455 | 641 | 641 |
| Financial assets at FVOCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Financial receivables handsets | [14.1] | 158 | 158 | - | - |
| Equity investments | [13.1] | 76 | 76 | 49 | 49 |
| Total financial assets | \u00a0 | 1,534 | 1,534 | 2,213 | 2,213 |
| Financial liabilities FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Derivatives | [13.3] | 366 | 366 | 64 | 64 |
| Financial liabilities at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Borrowings | [13.2] | 5,368 | 5,203 | 6,744 | 7,223 |
| Lease liabilities | [19] | 923 | 923 | 873 | 873 |
| Trade and other payables2 | [20] | 955 | 955 | 973 | 973 |
| Total financial liabilities | \u00a0 | 7,612 | 7,447 | 8,654 | 9,132 |
| \u20ac\u00a0million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Contingent cash receivable regarding sale Glaspoort | - | - | 197 | 197 |
| Derivatives (cross-currency interest rate swap) | - | 123 | - | 123 |
| Derivatives (interest rate swap) and other | - | 25 | - | 25 |
| Financial assets at FVOCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Financial receivables handsets | - | - | 158 | 158 |
| Equity investments: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Unlisted securities | - | - | 76 | 76 |
| Total assets | - | 148 | 431 | 579 |
| Financial liabilities at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Derivatives (cross-currency interest rate swap) | - | 100 | - | 100 |
| Derivatives (interest rate swap) | - | 266 | - | 266 |
| Total liabilities | - | 366 | - | 366 |
| \u20ac\u00a0million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Other financial asset at fair value through profit or loss | - | - | 218 | 218 |
| Derivatives (cross-currency interest rate swap) | - | 117 | - | 117 |
| Derivatives (interest rate swap) and other | - | 95 | - | 95 |
| Financial assets at FVOCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Equity investments: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Unlisted securities | - | - | 49 | 49 |
| Total assets | - | 212 | 267 | 479 |
| Financial liabilities at FVPL | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Derivatives (cross-currency interest rate swap) | - | 47 | - | 47 |
| Derivatives (interest rate swap) | - | 17 | - | 17 |
| Total liabilities | - | 64 | - | 64 |
Upon sale in 2021 of the 50% interest in Glaspoort B.V. to Drepana Investments Holding B.V. (see Note 21), KPN received a cash consideration upon deal close of EUR 233m and a contingent cash receivable of EUR 234m. The contingent cash receivable, to be received in annual installments based on the roll-out progress of Glaspoort, is classified as a financial asset measured at fair value through profit or loss. The contingent cash receivable was initially valued at EUR 218m. As at 31 December 2022, the carrying value is EUR 197m (2021: EUR 218m), of which EUR 28m is current (2021: EUR 14m). In 2022, the book value increased with interest income of EUR 8m (2021: EUR 3m) and decreased with EUR 16m (2021: EUR 2m) due to a fair value adjustment and EUR 14m (2021: EUR 0m) due to received deferred payment. The fair value adjustment was recognized as a loss in other financial results.
Based on Glaspoort's current roll-out plan, KPN expects the final payment in 2027. The fair value of this contingent receivable is deemed equal to the net present value of the full amount of the installments to be received using the expected roll-out schedule as included in Glaspoort's initial business plan. A weighted average discount rate of 5.68% has been used based on the following elements:
A base-rate using mid-swap rates to account for the time value of money, plus
A credit spread mark-up to account for the risk of non-payment based on AA-rated credit curves resulting in a weighted average spread of ~0.1% over a 5-year tenor, plus
A mark-up to reflect the roll-out risk (mostly the risk of delay).
Other current financial assets include investments in short-term money market funds of EUR 100m (2021: EUR 300m), which are held at fair value through profit or loss (FVPL). These funds have a low volatility, with an investment objective of preservation of principal.
KPN uses derivatives solely for the purpose of hedging underlying exposures. The primary risks managed using derivative instruments are foreign currency risk and interest rate risk.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Assets (current and non-current) | 148 | 212 |
| Liabilities (current and non-current) | -366 | -64 |
| Total derivatives | -218 | 148 |
| of which: designated in a hedge relationship | -233 | 122 |
| of which: other derivatives not designated in a hedge relationship | 15 | 26 |
A total gain of EUR 10m due to hedge ineffectiveness was recognized in the P&L in 2022 (2021: EUR 0m). This was mainly due to differences in the valuation of hedging instruments and hedged items due to credit risk and valuation curves in combination with the cumulative change of the fair value of the hedging instrument becoming greater than the change in the fair value of the hedged item. Note that all hedges continue to be highly effective prospectively.
Derivatives positions are reported on a gross basis and include a credit value adjustment attributable to derivative counterparty default risk. As at 31 December 2022, this lowered the net liability by EUR 9m (2021: net effect of EUR 0m). The increase in the credit value adjustment was primarily driven by the increased mark-to-market value of interest rate swaps as a result of significantly higher interest rates. Part of the derivatives portfolio is subject to master netting agreements that allow netting under certain circumstances.
If netting had been applied, the total derivatives asset position would be EUR 52m and the total derivatives liability position would be EUR 270m as at 31 December 2022 (2021: EUR 155m and EUR 6m respectively).
Bonds denominated in foreign currencies are hedged with cross-currency swaps. The currency exposure is hedged by effectively fixing the countervalue in the foreign currency to EUR and by hedging the interest rate exposure by swapping the fixed interest rates in foreign currency to fixed interest rates in EUR. There is an economic relationship between the hedged items and hedging instruments as the terms of the cross-currency swaps match the terms of the bonds. KPN has established a hedge ratio of 1:1 for the hedging relationships as the quantity of hedged items equals the notional amount of the cross-currency swaps. The hedges are until maturity of the underlying senior bonds or until the first call date in the case of the USD hybrid bond. For these hedges, KPN meets the criteria of, and also applies, cash flow hedge accounting. The effectiveness of the hedges is determined at inception and on a quarterly basis. To test the hedge effectiveness, KPN uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against the changes in the fair value of the hedged items attributable to the hedged risks. If the cumulative change in fair value of the hedging instrument and hedged item are not equal in absolute terms, the difference will be reported in the P&L to the extent that, in absolute terms, the fair value change of the hedging instrument is greater than the fair value change of the hedged item. Hedge ineffectiveness can arise from:
Different curves linked to hedged items and hedging instruments
The counterparties\u2019 credit risk differently impacting the fair value movement of the hedging instruments and hedged items
Changes in the terms of the hedged item or hedge instrument
| Nominal (receive) | Coupon (receive) | Nominal (pay) (EUR m) | Coupon (pay) | Maturity date | Fair value 2022 (EUR m) | Fair value 2021 (EUR m) |
|---|---|---|---|---|---|---|
| USD 600m | 7.000% semi-annual | 465 | 6.344% semi-annual | 28-3-2023 | - | 66 |
| USD 143m | 7.000% semi-annual | 111 | 6.359% semi-annual | 28-3-2023 | 23 | - |
| GBP 400m | 5.000% annual | 480 | 4.138% (2021: 4.424%) annual | 18-11-2026 | -38 | -16 |
| GBP 850m | 5.750% annual | 971 | 5.432% annual | 17-9-2029 | -62 | -18 |
| USD 595m | 8.375% semi-annual | 450 | 8.517% semi-annual | 1-10-2030 | 100 | 38 |
| Total | 23 | 70 |
| \u20ac\u00a0million | Notional amount | Carrying amount | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 1,452 | -100 | Derivatives | -66 |
| Cross-currency swaps USD | 561 | 123 | Derivatives | 127 |
| Total | 2,013 | 23 | \u00a0 | 61 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 1,445 | -34 | Derivatives | 97 |
| Cross-currency swaps USD | 915 | 104 | Derivatives | 108 |
| Total | 2,361 | 70 | \u00a0 | 205 |
The change in fair value of the associated hedged items attributable to the hedged risks resulted in an ineffectiveness loss in 2022 of EUR 1m (2021: EUR 1m gain).
| \u20ac\u00a0million | Total hedging gain/(loss) recognized in OCI | Ineffectiveness recognized as a gain/(loss) in P&L | Line item in P&L | Amount reclassified from OCI as a gain/ (loss) in P&L | Line item in P&L |
|---|---|---|---|---|---|
| Year ended 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 68 | 1 | Other financial results | -78 | Other financial results |
| Cross-currency swaps USD | -129 | -2 | Other financial results | 101 | Other financial results |
| Total | -62 | -1 | \u00a0 | 23 | \u00a0 |
| Year ended 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | -96 | 2 | Other financial results | 97 | Other financial results |
| Cross-currency swaps USD | -108 | - | Other financial results | 81 | Other financial results |
| Total | -204 | 1 | \u00a0 | 178 | \u00a0 |
The 0.625% fixed-rate eurobond maturing on 9 April 2025 has also been swapped to a floating rate using fixed-to-floating interest rate swaps, where KPN receives a fixed rate of 0.920% and pays interest at a variable rate equal to six-month Euribor (fixed in arrears).
The 1.125% fixed-rate eurobond maturing on 11 September 2028 has been swapped to a floating rate using fixed-to-floating interest rate swaps, where KPN receives a fixed rate of 0.907% and pays interest at a variable rate equal to six-month Euribor.
In 2022, the 0.875% fixed rate Eurobond maturing on 15 November 2033 was also swapped to a floating rate using fixed-to-floating interest rate swaps, whereby KPN receives a fixed rate of 0.799% and pays interest at a variable rate equal to six-month Euribor (fixed in arrears). The swaps are used to hedge the exposure to changes in the fair value of these fixed rate eurobonds against changes in the EUR interest curve.
There is an economic relationship between the hedged item and the hedging instrument, as the terms of the interest rate swaps match the terms of the fixed-rate bonds (i.e. notional amount, maturity and payment dates). KPN has established a hedge ratio of 1:1 for the hedging relationships as the quantity of hedged item equals the notional amount of the hedging instrument. For these hedges, KPN meets the criteria of, and also applies, hedge accounting. If the cumulative change in the fair value of the hedging instrument and hedged item are not equal in absolute terms, the difference will be recorded in the P&L. The hedge ineffectiveness can arise from:
Different curves linked to the hedged items and hedging instruments
The counterparties\u2019 credit risk differently impacting the fair value movement of the hedging instruments and hedged items
Changes in the terms of the hedge item or hedge instrument
| \u20ac\u00a0million | Notional amount | Carrying amount | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Interest rate swaps | 1,950 | -256 | Derivatives | -331 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Interest rate swaps | 1,250 | 52 | Derivatives | -47 |
| \u20ac\u00a0million | Carrying amount | Change in fair value adjustments | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Fixed-rate eurobonds 2025, 2028 & 2033 | 1,643 | 308 | Borrowings | 341 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Fixed-rate eurobonds 2025 & 2028 | 1,308 | 47 | Borrowings | 45 |
The ineffectiveness recognized in the P&L for the year ended 31 December 2022 was a gain of EUR 11m (2021: EUR 1m loss).
In 2011, fixed-rate eurobonds with maturities on 30 September 2024 were swapped to a floating interest rate using fixed-to-floating interest rate swaps. Subsequently, in May 2015, KPN swapped the floating rate exposure on these bonds to a fixed rate for the remaining maturity of these bonds and discontinued fair value hedge accounting for the fixed-to-floating interest rate swaps. As a result, the cumulative gain until de-designation, which amounted to EUR 224m, is amortized to earnings until maturity of the associated bonds. This is offset by the change in fair value of the outstanding interest rate swaps. The amortization recognized in earnings for 2022 was a gain of EUR 7m (2021: EUR 11m) and the remaining balance of the unamortized gain was EUR 12m at 31 December 2022 (2021: EUR 19m). The fair value of the outstanding interest rate swaps was EUR 15m as at December 2022 (2021: EUR 26m) and the change in fair value of these swaps resulted in a P&L loss of EUR 11m in 2022 (2021: EUR 17m loss). The net interest income of these swaps was an additional loss of EUR 15m (2021: EUR 16m gain), which results in net earnings (including amortization and change in fair value) in 2022 of EUR 19m negative (2021: EUR 10m positive).
Derivatives are recognized at fair value. Gains and losses arising from changes in fair value are recognized as finance cost/income during the period in which they arise to the extent that the derivatives have no hedging designation or they are ineffective.
KPN applies IFRS 9 hedge accounting. Derivatives related to loans are designated as either cash flow or fair value hedges.
Offsetting effects are recognized in the P&L.
The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how KPN will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument;
The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that KPN actually hedges and the quantity of the hedging instrument that KPN actually uses to hedge that quantity of hedged item.
Changes in the fair value of an effective derivative, which is designated as a fair value hedge, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in the P&L as finance cost/ income. Changes in the fair value of an effective derivative, which is designated as a cash flow hedge, are recorded in OCI for the effective part, until the P&L is affected by the variability in cash flows of the designated hedged item. The ineffective part of the cash flow hedge is recognized as finance cost/income. If an underlying transaction has ceased to be an effective hedge or in case of early redemption of the hedged item, hedge accounting is discontinued prospectively which means that subsequent changes in fair value are recognized in the P&L as finance cost/income and the cumulative amount recorded in OCI is released in the P&L.
Cash and cash equivalents consist of highly liquid instruments with initial maturities of three months or less, including balances on bank accounts, bank deposits and money market funds.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Cash | 144 | 258 |
| Short-term bank deposits and money market funds | 255 | 535 |
| Total cash and cash equivalents | 399 | 793 |
The decrease in cash and cash equivalents was mainly the result of EUR 571m dividend payments, EUR 300m share repurchases, EUR 468m of net debt redemptions (including EUR 500m bond proceeds and EUR 968m bond redemptions), EUR 71m net payments related to M&A and Glaspoort, and EUR 17m net investments Ventures, partly offset by EUR 862m free cash flow and EUR 200m change in short-term investments.
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, AAA-rated prime money market funds, and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included in borrowings in current liabilities.
Financial assets are classified at initial recognition.
The classification of financial assets at initial recognition depends on the financial asset\u2019s contractual cash flow characteristics and KPN\u2019s business model for managing them.
KPN initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
For the purposes of subsequent measurement, financial assets are classified into four categories:
Financial assets at amortized cost (debt instruments);
Financial assets at fair value through other comprehensive income (OCI) with recycling of cumulative gains and losses (debt instruments);
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments);
Financial assets at fair value through profit or loss.
After initial recognition, loans and borrowings that are not part of a fair value hedge, are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the P&L over the period of the borrowings using the effective interest method. The amortized cost is calculated by taking into account any discounts or premiums on acquisition or issuance and transaction costs. The effective interest rate amortization is recognized in the P&L as finance costs.
Financial assets and liabilities are offset and reported on a net basis on the balance sheet only when there is a current legally enforceable right to offset the recognized amounts, and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, AAA-rated prime money market funds, and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included in borrowings in current liabilities.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Carrying amount | Fair value | Carrying amount | Fair value |
| Senior eurobonds EUR | 2,678 | 2,509 | 3,638 | 3,667 |
| Senior eurobonds GBP | 1,401 | 1,408 | 1,478 | 1,762 |
| Senior global bonds USD | 641 | 628 | 620 | 751 |
| Subordinated hybrid bonds classified as liability | 136 | 136 | 529 | 558 |
| Other borrowings | 511 | 521 | 480 | 484 |
| Total borrowings | 5,368 | 5,203 | 6,744 | 7,223 |
| > of which: current | 196 | 196 | 677 | 681 |
| > of which: non-current | 5,171 | 5,007 | 6,067 | 6,542 |
The fair value for eurobonds, global bonds and hybrid bonds is based on the listed price of the bonds. Other borrowings include commercial paper, cash collateral received on derivatives, bank overdrafts and other loans.
KPN\u2019s weighted average interest rate on total outstanding borrowings on 31 December 2022 was 3.6% after swaps (2021: 2.9%). KPN\u2019s weighted average interest rate on senior debt on 31 December 2022 was 3.5% after swaps (2021: 2.7%).
| million | Nominal | Carrying amount \u20ac | Nominal after swap \u20ac | Number of bonds |
|---|---|---|---|---|
| Senior eurobonds EUR | 2,981 | 2,678 | 2,981 | 5 |
| Senior eurobonds GBP | 1,250 | 1,401 | 1,452 | 2 |
| Senior global bonds USD | 595 | 641 | 450 | 1 |
KPN has an unlimited Global Medium-Term Notes program which is used to meet medium- to long-term funding requirements. As at 31 December 2022, the total amounts outstanding under this program were EUR 2,981m across five bonds (carrying value EUR 2,678m) and GBP 1,250m across two bonds (carrying value EUR 1,401m, swapped to EUR 1,452m nominal). In addition, KPN has a senior global bond with USD 595m outstanding (carrying value EUR 641m, swapped to EUR 450m nominal) which was issued under standalone documentation.
On 1 March 2022, KPN redeemed the 4.25% EUR\u00a0616m senior bond in line with its scheduled maturity. No new senior bonds have been issued during the year.
| million | Nominal | Nominal \u20ac | Coupon | Classification | Final maturity | First reset date | Swapped | Credit rating1 |
|---|---|---|---|---|---|---|---|---|
| USD hybrid bond | 146 | 113 | 7,000% | Liability | 28 Mar 2073 | 28 Mar 2023 | Fixed 6.37% | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 2,000% | Equity | Perpetual | 8 Feb 2025 | N/a | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 6,000% | Equity | Perpetual | 21 Dec 20272 | N/a | BB+/BB+/N.a. |
As at 31 December 2022, three hybrid bonds are outstanding with an aggregate nominal amount of EUR 1,113m after swaps. The USD 146m hybrid bond (carrying value EUR 136m, swapped to EUR 113m nominal) is included in borrowings, while the EUR 1,000m perpetual hybrid bonds are classified as equity. Both EUR hybrid bonds are subordinated debt instruments and are treated for 50% as equity and 50% as debt in KPN\u2019s gross and net debt definitions.
On 21 September 2022, KPN issued a new 6% EUR\u00a0500m perpetual Green Hybrid Bond under KPN\u2019s Green Finance Framework. With the proceeds, KPN will finance or refinance projects with positive environmental impact in three areas: (i) energy efficiency (network transformation including roll-out of fiber and modernization of KPN\u2019s mobile network), (ii) circular economy (investments that extend product life and reduce waste) and (iii) clean transportation (reducing emissions by shifting to electric vehicles). KPN has committed, on a best effort basis, to allocate an amount at least equal to the net proceeds of this instrument to finance investments and expenditures in the above areas within 36\u00a0months of issuance (with a maximum look-back period of 24\u00a0months for all expenditures). This hybrid bond can, at KPN\u2019s discretion, be redeemed at any time between 21 September 2027 and 21 December 2027, and annually on 21 December thereafter at par. The ratings for the green hybrid bond are BB+ by S&P and BB+ by Fitch. The rating agencies recognize 50% of the hybrid bond as equity in line with the existing hybrid bonds. The green hybrid bond has been listed on Euronext Dublin GEM.
On 21 September 2022, KPN tendered the 7% USD 600m hybrid bond and repurchased USD 454m notional amount, with USD 146m remaining outstanding after the tender offer. The hybrid bond had been swapped to a principal amount of EUR 465m and KPN effectively retired EUR 352m notional amount. The remaining EUR 113m notional amount after swaps can be called in March 2023.
KPN may, at its discretion and subject to certain conditions, elect to defer payments of interest on the hybrid bonds. Arrears of interest must be paid if dividends are paid on ordinary shares, if payments are made on other hybrid bonds, in the event of early redemption, and for the USD hybrid bonds at final maturity. KPN does not recognize accruals for coupon payments on the EUR perpetual hybrid bonds of EUR 40m per annum. If an accrual had been recognized, the amount would have been EUR 10m on 31 December 2022.
KPN has a Euro-Commercial Paper Program under which KPN can issue short-term debt instruments for up to EUR 1 billion. As at 31 December 2022, the outstanding balance of commercial paper amounted to EUR 60m (2021: EUR 60m), issued at an average interest rate of 2.01%.
KPN has a EUR\u00a0300m credit facility from the European Investment Bank, which was fully drawn at year-end 2022 and 2021. This loan has a floating interest rate referenced to 3-month Euribor and a single repayment on 2 August 2027. The interest for the current interest period was fixed at 2.64% per annum.
As at 31 December 2022, other borrowings furthermore included EUR 103m of collateral received as security under derivative financial instruments and EUR 50m borrowings under private placements.
After initial recognition, loans and borrowings that are not part of a fair value hedge, are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the P&L over the period of the borrowings using the effective interest method. The amortized cost is calculated by taking into account any discounts or premiums on acquisition or issuance and transaction costs. The effective interest rate amortization is recognized in the P&L as finance costs.
| \u20ac\u00a0million | Borrowings | Derivative financial instruments | Net liability | Lease liabilities | Net liability, including lease liabilities |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 6,500 | -6 | 6,494 | 937 | 7,432 |
| Exchange differences | 177 | -178 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -613 | - | -613 | -135 | -748 |
| Issued bonds & loans2 | 689 | - | 689 | - | 689 |
| Fair value adjustments | -67 | 36 | -31 | - | -31 |
| Other movements3 | 59 | - | 59 | 70 | 130 |
| Balance at 31 December 2021 | 6,744 | -148 | 6,596 | 873 | 7,469 |
| Exchange differences | 20 | -23 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -1,075 | 80 | -995 | -124 | -1,119 |
| Issued bonds & loans | - | - | - | - | - |
| Fair value adjustments | -359 | 309 | -50 | - | -50 |
| Other movements3 | 37 | - | 37 | 174 | 211 |
| Balance at 31 December 2022 | 5,368 | 218 | 5,586 | 923 | 6,509 |
| \u00a0 | Borrowings | \u00a0 | Derivatives | \u00a0 | \u00a0 | ||||
|---|---|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Bonds and loans | Interest on bonds and loans | Lease liabilities (undiscounted) | Other debt and cash collateral | \u00a0 | Derivatives inflow (including interest) | Derivatives outflow (including interest) | Trade and other payables1 | Total |
| 2023 | 1962 | 1873 | 178 | 36 | \u00a0 | -308 | 288 | 903 | 1,481 |
| 2024 | 431 | 181 | 139 | -4 | \u00a0 | -166 | 170 | - | 752 |
| 2025 | 625 | 157 | 129 | - | \u00a0 | -141 | 156 | - | 925 |
| 2026 | 451 | 153 | 122 | - | \u00a0 | -587 | 619 | - | 758 |
| 2027 | 300 | 128 | 93 | - | \u00a0 | -113 | 119 | - | 527 |
| 2028 and further | 3,491 | 330 | 399 | - | \u00a0 | -1,806 | 1,766 | - | 4,181 |
| Contractual cash flows | 5,495 | 1,136 | 1,060 | 32 | \u00a0 | -3,121 | 3,118 | 903 | 8,623 |
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Carrying amount | Fair value | Carrying amount | Fair value |
| Senior eurobonds EUR | 2,678 | 2,509 | 3,638 | 3,667 |
| Senior eurobonds GBP | 1,401 | 1,408 | 1,478 | 1,762 |
| Senior global bonds USD | 641 | 628 | 620 | 751 |
| Subordinated hybrid bonds classified as liability | 136 | 136 | 529 | 558 |
| Other borrowings | 511 | 521 | 480 | 484 |
| Total borrowings | 5,368 | 5,203 | 6,744 | 7,223 |
| > of which: current | 196 | 196 | 677 | 681 |
| > of which: non-current | 5,171 | 5,007 | 6,067 | 6,542 |
The fair value for eurobonds, global bonds and hybrid bonds is based on the listed price of the bonds. Other borrowings include commercial paper, cash collateral received on derivatives, bank overdrafts and other loans.
KPN\u2019s weighted average interest rate on total outstanding borrowings on 31 December 2022 was 3.6% after swaps (2021: 2.9%). KPN\u2019s weighted average interest rate on senior debt on 31 December 2022 was 3.5% after swaps (2021: 2.7%).
| million | Nominal | Carrying amount \u20ac | Nominal after swap \u20ac | Number of bonds |
|---|---|---|---|---|
| Senior eurobonds EUR | 2,981 | 2,678 | 2,981 | 5 |
| Senior eurobonds GBP | 1,250 | 1,401 | 1,452 | 2 |
| Senior global bonds USD | 595 | 641 | 450 | 1 |
KPN has an unlimited Global Medium-Term Notes program which is used to meet medium- to long-term funding requirements. As at 31 December 2022, the total amounts outstanding under this program were EUR 2,981m across five bonds (carrying value EUR 2,678m) and GBP 1,250m across two bonds (carrying value EUR 1,401m, swapped to EUR 1,452m nominal). In addition, KPN has a senior global bond with USD 595m outstanding (carrying value EUR 641m, swapped to EUR 450m nominal) which was issued under standalone documentation.
On 1 March 2022, KPN redeemed the 4.25% EUR\u00a0616m senior bond in line with its scheduled maturity. No new senior bonds have been issued during the year.
| million | Nominal | Nominal \u20ac | Coupon | Classification | Final maturity | First reset date | Swapped | Credit rating1 |
|---|---|---|---|---|---|---|---|---|
| USD hybrid bond | 146 | 113 | 7,000% | Liability | 28 Mar 2073 | 28 Mar 2023 | Fixed 6.37% | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 2,000% | Equity | Perpetual | 8 Feb 2025 | N/a | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 6,000% | Equity | Perpetual | 21 Dec 20272 | N/a | BB+/BB+/N.a. |
As at 31 December 2022, three hybrid bonds are outstanding with an aggregate nominal amount of EUR 1,113m after swaps. The USD 146m hybrid bond (carrying value EUR 136m, swapped to EUR 113m nominal) is included in borrowings, while the EUR 1,000m perpetual hybrid bonds are classified as equity. Both EUR hybrid bonds are subordinated debt instruments and are treated for 50% as equity and 50% as debt in KPN\u2019s gross and net debt definitions.
On 21 September 2022, KPN issued a new 6% EUR\u00a0500m perpetual Green Hybrid Bond under KPN\u2019s Green Finance Framework. With the proceeds, KPN will finance or refinance projects with positive environmental impact in three areas: (i) energy efficiency (network transformation including roll-out of fiber and modernization of KPN\u2019s mobile network), (ii) circular economy (investments that extend product life and reduce waste) and (iii) clean transportation (reducing emissions by shifting to electric vehicles). KPN has committed, on a best effort basis, to allocate an amount at least equal to the net proceeds of this instrument to finance investments and expenditures in the above areas within 36\u00a0months of issuance (with a maximum look-back period of 24\u00a0months for all expenditures). This hybrid bond can, at KPN\u2019s discretion, be redeemed at any time between 21 September 2027 and 21 December 2027, and annually on 21 December thereafter at par. The ratings for the green hybrid bond are BB+ by S&P and BB+ by Fitch. The rating agencies recognize 50% of the hybrid bond as equity in line with the existing hybrid bonds. The green hybrid bond has been listed on Euronext Dublin GEM.
On 21 September 2022, KPN tendered the 7% USD 600m hybrid bond and repurchased USD 454m notional amount, with USD 146m remaining outstanding after the tender offer. The hybrid bond had been swapped to a principal amount of EUR 465m and KPN effectively retired EUR 352m notional amount. The remaining EUR 113m notional amount after swaps can be called in March 2023.
KPN may, at its discretion and subject to certain conditions, elect to defer payments of interest on the hybrid bonds. Arrears of interest must be paid if dividends are paid on ordinary shares, if payments are made on other hybrid bonds, in the event of early redemption, and for the USD hybrid bonds at final maturity. KPN does not recognize accruals for coupon payments on the EUR perpetual hybrid bonds of EUR 40m per annum. If an accrual had been recognized, the amount would have been EUR 10m on 31 December 2022.
KPN has a Euro-Commercial Paper Program under which KPN can issue short-term debt instruments for up to EUR 1 billion. As at 31 December 2022, the outstanding balance of commercial paper amounted to EUR 60m (2021: EUR 60m), issued at an average interest rate of 2.01%.
KPN has a EUR\u00a0300m credit facility from the European Investment Bank, which was fully drawn at year-end 2022 and 2021. This loan has a floating interest rate referenced to 3-month Euribor and a single repayment on 2 August 2027. The interest for the current interest period was fixed at 2.64% per annum.
As at 31 December 2022, other borrowings furthermore included EUR 103m of collateral received as security under derivative financial instruments and EUR 50m borrowings under private placements.
After initial recognition, loans and borrowings that are not part of a fair value hedge, are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the P&L over the period of the borrowings using the effective interest method. The amortized cost is calculated by taking into account any discounts or premiums on acquisition or issuance and transaction costs. The effective interest rate amortization is recognized in the P&L as finance costs.
| \u20ac\u00a0million | Borrowings | Derivative financial instruments | Net liability | Lease liabilities | Net liability, including lease liabilities |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 6,500 | -6 | 6,494 | 937 | 7,432 |
| Exchange differences | 177 | -178 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -613 | - | -613 | -135 | -748 |
| Issued bonds & loans2 | 689 | - | 689 | - | 689 |
| Fair value adjustments | -67 | 36 | -31 | - | -31 |
| Other movements3 | 59 | - | 59 | 70 | 130 |
| Balance at 31 December 2021 | 6,744 | -148 | 6,596 | 873 | 7,469 |
| Exchange differences | 20 | -23 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -1,075 | 80 | -995 | -124 | -1,119 |
| Issued bonds & loans | - | - | - | - | - |
| Fair value adjustments | -359 | 309 | -50 | - | -50 |
| Other movements3 | 37 | - | 37 | 174 | 211 |
| Balance at 31 December 2022 | 5,368 | 218 | 5,586 | 923 | 6,509 |
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Carrying amount | Fair value | Carrying amount | Fair value |
| Senior eurobonds EUR | 2,678 | 2,509 | 3,638 | 3,667 |
| Senior eurobonds GBP | 1,401 | 1,408 | 1,478 | 1,762 |
| Senior global bonds USD | 641 | 628 | 620 | 751 |
| Subordinated hybrid bonds classified as liability | 136 | 136 | 529 | 558 |
| Other borrowings | 511 | 521 | 480 | 484 |
| Total borrowings | 5,368 | 5,203 | 6,744 | 7,223 |
| > of which: current | 196 | 196 | 677 | 681 |
| > of which: non-current | 5,171 | 5,007 | 6,067 | 6,542 |
| million | Nominal | Nominal \u20ac | Coupon | Classification | Final maturity | First reset date | Swapped | Credit rating1 |
|---|---|---|---|---|---|---|---|---|
| USD hybrid bond | 146 | 113 | 7,000% | Liability | 28 Mar 2073 | 28 Mar 2023 | Fixed 6.37% | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 2,000% | Equity | Perpetual | 8 Feb 2025 | N/a | BB+/BB+/Ba2 |
| EUR perpetual hybrid bond | 500 | 500 | 6,000% | Equity | Perpetual | 21 Dec 20272 | N/a | BB+/BB+/N.a. |
As at 31 December 2022, three hybrid bonds are outstanding with an aggregate nominal amount of EUR 1,113m after swaps. The USD 146m hybrid bond (carrying value EUR 136m, swapped to EUR 113m nominal) is included in borrowings, while the EUR 1,000m perpetual hybrid bonds are classified as equity. Both EUR hybrid bonds are subordinated debt instruments and are treated for 50% as equity and 50% as debt in KPN\u2019s gross and net debt definitions.
On 21 September 2022, KPN issued a new 6% EUR\u00a0500m perpetual Green Hybrid Bond under KPN\u2019s Green Finance Framework. With the proceeds, KPN will finance or refinance projects with positive environmental impact in three areas: (i) energy efficiency (network transformation including roll-out of fiber and modernization of KPN\u2019s mobile network), (ii) circular economy (investments that extend product life and reduce waste) and (iii) clean transportation (reducing emissions by shifting to electric vehicles). KPN has committed, on a best effort basis, to allocate an amount at least equal to the net proceeds of this instrument to finance investments and expenditures in the above areas within 36\u00a0months of issuance (with a maximum look-back period of 24\u00a0months for all expenditures). This hybrid bond can, at KPN\u2019s discretion, be redeemed at any time between 21 September 2027 and 21 December 2027, and annually on 21 December thereafter at par. The ratings for the green hybrid bond are BB+ by S&P and BB+ by Fitch. The rating agencies recognize 50% of the hybrid bond as equity in line with the existing hybrid bonds. The green hybrid bond has been listed on Euronext Dublin GEM.
On 21 September 2022, KPN tendered the 7% USD 600m hybrid bond and repurchased USD 454m notional amount, with USD 146m remaining outstanding after the tender offer. The hybrid bond had been swapped to a principal amount of EUR 465m and KPN effectively retired EUR 352m notional amount. The remaining EUR 113m notional amount after swaps can be called in March 2023.
KPN may, at its discretion and subject to certain conditions, elect to defer payments of interest on the hybrid bonds. Arrears of interest must be paid if dividends are paid on ordinary shares, if payments are made on other hybrid bonds, in the event of early redemption, and for the USD hybrid bonds at final maturity. KPN does not recognize accruals for coupon payments on the EUR perpetual hybrid bonds of EUR 40m per annum. If an accrual had been recognized, the amount would have been EUR 10m on 31 December 2022.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSubordinatedLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-664": { "value": "The fair value for eurobonds, global bonds and hybrid bonds is based on the listed price of the bonds. Other borrowings include commercial paper, cash collateral received on derivatives, bank overdrafts and other loans. As at 31 December 2022, other borrowings furthermore included EUR 103m of collateral received as security under derivative financial instruments and EUR 50m borrowings under private placements. KPN mitigates credit risk on bank counterparties arising from derivative financial instruments through collateral support agreements, which results in cash being paid or received as security. This cash collateral is released when derivatives are settled and/or mature. In 2022, the net cash collateral movement was EUR 14m receipt (2021: EUR 115m). As at 31 December 2022, KPN held net cash collateral (liability) of EUR 28m (2021: EUR 14m). During 2022, KPN received net collateral of EUR 14m (2021: EUR 115m) according to pre-agreed settlement schedules. The non-current other receivables relate for EUR 75m to cash collateral received on derivatives (2021: EUR 56m). ", "dimensions": { "concept": "ifrs-full:DisclosureOfCollateralExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-928": { "value": "After initial recognition, loans and borrowings that are not part of a fair value hedge, are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the P&L over the period of the borrowings using the effective interest method. The amortized cost is calculated by taking into account any discounts or premiums on acquisition or issuance and transaction costs. The effective interest rate amortization is recognized in the P&L as finance costs.
After initial recognition, loans and borrowings that are not part of a fair value hedge, are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the P&L over the period of the borrowings using the effective interest method. The amortized cost is calculated by taking into account any discounts or premiums on acquisition or issuance and transaction costs. The effective interest rate amortization is recognized in the P&L as finance costs.
Derivatives are recognized at fair value. Gains and losses arising from changes in fair value are recognized as finance cost/income during the period in which they arise to the extent that the derivatives have no hedging designation or they are ineffective.
KPN applies IFRS 9 hedge accounting. Derivatives related to loans are designated as either cash flow or fair value hedges.
Offsetting effects are recognized in the P&L.
The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how KPN will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument;
The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that KPN actually hedges and the quantity of the hedging instrument that KPN actually uses to hedge that quantity of hedged item.
Changes in the fair value of an effective derivative, which is designated as a fair value hedge, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in the P&L as finance cost/ income. Changes in the fair value of an effective derivative, which is designated as a cash flow hedge, are recorded in OCI for the effective part, until the P&L is affected by the variability in cash flows of the designated hedged item. The ineffective part of the cash flow hedge is recognized as finance cost/income. If an underlying transaction has ceased to be an effective hedge or in case of early redemption of the hedged item, hedge accounting is discontinued prospectively which means that subsequent changes in fair value are recognized in the P&L as finance cost/income and the cumulative amount recorded in OCI is released in the P&L.
Financial assets and liabilities are offset and reported on a net basis on the balance sheet only when there is a current legally enforceable right to offset the recognized amounts, and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Trade and other payables are classified as \u2018borrowings\u2019 within KPN\u2019s financial liabilities. For the accounting policy, see Note 13.
For the accounting policy regarding contract liabilities, see Note 4.
After initial recognition, loans and borrowings that are not part of a fair value hedge, are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the P&L over the period of the borrowings using the effective interest method. The amortized cost is calculated by taking into account any discounts or premiums on acquisition or issuance and transaction costs. The effective interest rate amortization is recognized in the P&L as finance costs.
| \u20ac\u00a0million | Borrowings | Derivative financial instruments | Net liability | Lease liabilities | Net liability, including lease liabilities |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 6,500 | -6 | 6,494 | 937 | 7,432 |
| Exchange differences | 177 | -178 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -613 | - | -613 | -135 | -748 |
| Issued bonds & loans2 | 689 | - | 689 | - | 689 |
| Fair value adjustments | -67 | 36 | -31 | - | -31 |
| Other movements3 | 59 | - | 59 | 70 | 130 |
| Balance at 31 December 2021 | 6,744 | -148 | 6,596 | 873 | 7,469 |
| Exchange differences | 20 | -23 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -1,075 | 80 | -995 | -124 | -1,119 |
| Issued bonds & loans | - | - | - | - | - |
| Fair value adjustments | -359 | 309 | -50 | - | -50 |
| Other movements3 | 37 | - | 37 | 174 | 211 |
| Balance at 31 December 2022 | 5,368 | 218 | 5,586 | 923 | 6,509 |
KPN uses derivatives solely for the purpose of hedging underlying exposures. The primary risks managed using derivative instruments are foreign currency risk and interest rate risk.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Assets (current and non-current) | 148 | 212 |
| Liabilities (current and non-current) | -366 | -64 |
| Total derivatives | -218 | 148 |
| of which: designated in a hedge relationship | -233 | 122 |
| of which: other derivatives not designated in a hedge relationship | 15 | 26 |
A total gain of EUR 10m due to hedge ineffectiveness was recognized in the P&L in 2022 (2021: EUR 0m). This was mainly due to differences in the valuation of hedging instruments and hedged items due to credit risk and valuation curves in combination with the cumulative change of the fair value of the hedging instrument becoming greater than the change in the fair value of the hedged item. Note that all hedges continue to be highly effective prospectively.
Derivatives positions are reported on a gross basis and include a credit value adjustment attributable to derivative counterparty default risk. As at 31 December 2022, this lowered the net liability by EUR 9m (2021: net effect of EUR 0m). The increase in the credit value adjustment was primarily driven by the increased mark-to-market value of interest rate swaps as a result of significantly higher interest rates. Part of the derivatives portfolio is subject to master netting agreements that allow netting under certain circumstances.
If netting had been applied, the total derivatives asset position would be EUR 52m and the total derivatives liability position would be EUR 270m as at 31 December 2022 (2021: EUR 155m and EUR 6m respectively).
Bonds denominated in foreign currencies are hedged with cross-currency swaps. The currency exposure is hedged by effectively fixing the countervalue in the foreign currency to EUR and by hedging the interest rate exposure by swapping the fixed interest rates in foreign currency to fixed interest rates in EUR. There is an economic relationship between the hedged items and hedging instruments as the terms of the cross-currency swaps match the terms of the bonds. KPN has established a hedge ratio of 1:1 for the hedging relationships as the quantity of hedged items equals the notional amount of the cross-currency swaps. The hedges are until maturity of the underlying senior bonds or until the first call date in the case of the USD hybrid bond. For these hedges, KPN meets the criteria of, and also applies, cash flow hedge accounting. The effectiveness of the hedges is determined at inception and on a quarterly basis. To test the hedge effectiveness, KPN uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against the changes in the fair value of the hedged items attributable to the hedged risks. If the cumulative change in fair value of the hedging instrument and hedged item are not equal in absolute terms, the difference will be reported in the P&L to the extent that, in absolute terms, the fair value change of the hedging instrument is greater than the fair value change of the hedged item. Hedge ineffectiveness can arise from:
Different curves linked to hedged items and hedging instruments
The counterparties\u2019 credit risk differently impacting the fair value movement of the hedging instruments and hedged items
Changes in the terms of the hedged item or hedge instrument
| Nominal (receive) | Coupon (receive) | Nominal (pay) (EUR m) | Coupon (pay) | Maturity date | Fair value 2022 (EUR m) | Fair value 2021 (EUR m) |
|---|---|---|---|---|---|---|
| USD 600m | 7.000% semi-annual | 465 | 6.344% semi-annual | 28-3-2023 | - | 66 |
| USD 143m | 7.000% semi-annual | 111 | 6.359% semi-annual | 28-3-2023 | 23 | - |
| GBP 400m | 5.000% annual | 480 | 4.138% (2021: 4.424%) annual | 18-11-2026 | -38 | -16 |
| GBP 850m | 5.750% annual | 971 | 5.432% annual | 17-9-2029 | -62 | -18 |
| USD 595m | 8.375% semi-annual | 450 | 8.517% semi-annual | 1-10-2030 | 100 | 38 |
| Total | 23 | 70 |
| \u20ac\u00a0million | Notional amount | Carrying amount | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 1,452 | -100 | Derivatives | -66 |
| Cross-currency swaps USD | 561 | 123 | Derivatives | 127 |
| Total | 2,013 | 23 | \u00a0 | 61 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 1,445 | -34 | Derivatives | 97 |
| Cross-currency swaps USD | 915 | 104 | Derivatives | 108 |
| Total | 2,361 | 70 | \u00a0 | 205 |
The change in fair value of the associated hedged items attributable to the hedged risks resulted in an ineffectiveness loss in 2022 of EUR 1m (2021: EUR 1m gain).
| \u20ac\u00a0million | Total hedging gain/(loss) recognized in OCI | Ineffectiveness recognized as a gain/(loss) in P&L | Line item in P&L | Amount reclassified from OCI as a gain/ (loss) in P&L | Line item in P&L |
|---|---|---|---|---|---|
| Year ended 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | 68 | 1 | Other financial results | -78 | Other financial results |
| Cross-currency swaps USD | -129 | -2 | Other financial results | 101 | Other financial results |
| Total | -62 | -1 | \u00a0 | 23 | \u00a0 |
| Year ended 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cross-currency swaps GBP | -96 | 2 | Other financial results | 97 | Other financial results |
| Cross-currency swaps USD | -108 | - | Other financial results | 81 | Other financial results |
| Total | -204 | 1 | \u00a0 | 178 | \u00a0 |
The 0.625% fixed-rate eurobond maturing on 9 April 2025 has also been swapped to a floating rate using fixed-to-floating interest rate swaps, where KPN receives a fixed rate of 0.920% and pays interest at a variable rate equal to six-month Euribor (fixed in arrears).
The 1.125% fixed-rate eurobond maturing on 11 September 2028 has been swapped to a floating rate using fixed-to-floating interest rate swaps, where KPN receives a fixed rate of 0.907% and pays interest at a variable rate equal to six-month Euribor.
In 2022, the 0.875% fixed rate Eurobond maturing on 15 November 2033 was also swapped to a floating rate using fixed-to-floating interest rate swaps, whereby KPN receives a fixed rate of 0.799% and pays interest at a variable rate equal to six-month Euribor (fixed in arrears). The swaps are used to hedge the exposure to changes in the fair value of these fixed rate eurobonds against changes in the EUR interest curve.
There is an economic relationship between the hedged item and the hedging instrument, as the terms of the interest rate swaps match the terms of the fixed-rate bonds (i.e. notional amount, maturity and payment dates). KPN has established a hedge ratio of 1:1 for the hedging relationships as the quantity of hedged item equals the notional amount of the hedging instrument. For these hedges, KPN meets the criteria of, and also applies, hedge accounting. If the cumulative change in the fair value of the hedging instrument and hedged item are not equal in absolute terms, the difference will be recorded in the P&L. The hedge ineffectiveness can arise from:
Different curves linked to the hedged items and hedging instruments
The counterparties\u2019 credit risk differently impacting the fair value movement of the hedging instruments and hedged items
Changes in the terms of the hedge item or hedge instrument
| \u20ac\u00a0million | Notional amount | Carrying amount | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Interest rate swaps | 1,950 | -256 | Derivatives | -331 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Interest rate swaps | 1,250 | 52 | Derivatives | -47 |
| \u20ac\u00a0million | Carrying amount | Change in fair value adjustments | Line item in Statement of Financial Position | Change in fair value used for measuring ineffectiveness for the period |
|---|---|---|---|---|
| As at 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Fixed-rate eurobonds 2025, 2028 & 2033 | 1,643 | 308 | Borrowings | 341 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| As at 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Fixed-rate eurobonds 2025 & 2028 | 1,308 | 47 | Borrowings | 45 |
The ineffectiveness recognized in the P&L for the year ended 31 December 2022 was a gain of EUR 11m (2021: EUR 1m loss).
In 2011, fixed-rate eurobonds with maturities on 30 September 2024 were swapped to a floating interest rate using fixed-to-floating interest rate swaps. Subsequently, in May 2015, KPN swapped the floating rate exposure on these bonds to a fixed rate for the remaining maturity of these bonds and discontinued fair value hedge accounting for the fixed-to-floating interest rate swaps. As a result, the cumulative gain until de-designation, which amounted to EUR 224m, is amortized to earnings until maturity of the associated bonds. This is offset by the change in fair value of the outstanding interest rate swaps. The amortization recognized in earnings for 2022 was a gain of EUR 7m (2021: EUR 11m) and the remaining balance of the unamortized gain was EUR 12m at 31 December 2022 (2021: EUR 19m). The fair value of the outstanding interest rate swaps was EUR 15m as at December 2022 (2021: EUR 26m) and the change in fair value of these swaps resulted in a P&L loss of EUR 11m in 2022 (2021: EUR 17m loss). The net interest income of these swaps was an additional loss of EUR 15m (2021: EUR 16m gain), which results in net earnings (including amortization and change in fair value) in 2022 of EUR 19m negative (2021: EUR 10m positive).
Derivatives are recognized at fair value. Gains and losses arising from changes in fair value are recognized as finance cost/income during the period in which they arise to the extent that the derivatives have no hedging designation or they are ineffective.
KPN applies IFRS 9 hedge accounting. Derivatives related to loans are designated as either cash flow or fair value hedges.
Offsetting effects are recognized in the P&L.
The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how KPN will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument;
The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that KPN actually hedges and the quantity of the hedging instrument that KPN actually uses to hedge that quantity of hedged item.
Changes in the fair value of an effective derivative, which is designated as a fair value hedge, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in the P&L as finance cost/ income. Changes in the fair value of an effective derivative, which is designated as a cash flow hedge, are recorded in OCI for the effective part, until the P&L is affected by the variability in cash flows of the designated hedged item. The ineffective part of the cash flow hedge is recognized as finance cost/income. If an underlying transaction has ceased to be an effective hedge or in case of early redemption of the hedged item, hedge accounting is discontinued prospectively which means that subsequent changes in fair value are recognized in the P&L as finance cost/income and the cumulative amount recorded in OCI is released in the P&L.
| \u20ac\u00a0million | Gross amount | Financial liabilities offset | Net amount in balance sheet | Not offset: Financial instruments/Cash collateral | Net amount |
|---|---|---|---|---|---|
| 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cash and cash equivalents | 399 | - | 399 | - | 399 |
| Collateral1 | 53 | - | 53 | -53 | - |
| Derivatives | 148 | - | 148 | -148 | - |
| Total | 600 | - | 600 | -201 | 399 |
| 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Cash and cash equivalents | 793 | - | 793 | - | 793 |
| Collateral1 | 56 | - | 56 | -15 | 41 |
| Derivatives | 212 | - | 212 | -88 | 124 |
| Total | 1,061 | - | 1,061 | -103 | 958 |
| \u20ac\u00a0million | Gross amount | Financial assets offset | Net amount in balance sheet | Not offset: Financial instruments/Cash collateral | Net amount |
|---|---|---|---|---|---|
| 31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Collateral1 | 103 | - | 103 | -75 | 28 |
| Derivatives | 366 | - | 366 | -126 | 240 |
| Total | 469 | - | 469 | -201 | 268 |
| 31 December 2021 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Collateral1 | 46 | - | 46 | -46 | - |
| Derivatives | 64 | - | 64 | -57 | 6 |
| Total | 110 | - | 110 | -103 | 6 |
For the financial assets and liabilities summarized above, each agreement between KPN and the counterparty allows for net settlement of the relevant financial assets and liabilities when both parties elect to settle on a net basis.
Financial assets and liabilities are offset and reported on a net basis on the balance sheet only when there is a current legally enforceable right to offset the recognized amounts, and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.
| \u20ac\u00a0million | Borrowings | Derivative financial instruments | Net liability | Lease liabilities | Net liability, including lease liabilities |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 6,500 | -6 | 6,494 | 937 | 7,432 |
| Exchange differences | 177 | -178 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -613 | - | -613 | -135 | -748 |
| Issued bonds & loans2 | 689 | - | 689 | - | 689 |
| Fair value adjustments | -67 | 36 | -31 | - | -31 |
| Other movements3 | 59 | - | 59 | 70 | 130 |
| Balance at 31 December 2021 | 6,744 | -148 | 6,596 | 873 | 7,469 |
| Exchange differences | 20 | -23 | -2 | - | -2 |
| Movements recorded as net cash flows arising from/used in financing activities: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Repayments of borrowings and settlement of derivatives and repayments of lease liabilities1 | -1,075 | 80 | -995 | -124 | -1,119 |
| Issued bonds & loans | - | - | - | - | - |
| Fair value adjustments | -359 | 309 | -50 | - | -50 |
| Other movements3 | 37 | - | 37 | 174 | 211 |
| Balance at 31 December 2022 | 5,368 | 218 | 5,586 | 923 | 6,509 |
The decrease in cash and cash equivalents was mainly the result of EUR 571m dividend payments, EUR 300m share repurchases, EUR 468m of net debt redemptions (including EUR 500m bond proceeds and EUR 968m bond redemptions), EUR 71m net payments related to M&A and Glaspoort, and EUR 17m net investments Ventures, partly offset by EUR 862m free cash flow and EUR 200m change in short-term investments.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-677": { "value": "KPN uses derivatives solely for the purpose of hedging underlying exposures. The primary risks managed using derivative instruments are foreign currency risk and interest rate risk.
KPN strives for the right balance between investments in the business, shareholder remuneration and a prudent financing policy. It is KPN's policy to utilize excess cash for operational and financial flexibility and/or shareholder remuneration.
The net debt/EBITDA AL ratio is one of the drivers for KPN\u2019s credit rating. It is based on the nominal value of borrowings and takes 50% equity credit on hybrid bonds into account. KPN remains committed to an investment-grade credit profile and aims for a net debt/EBITDA AL ratio of below 2.5x in the medium term.
The difference between the carrying value and nominal value of borrowings includes: (1) carrying value adjustments resulting from fair value hedges; (2) in case of foreign currency bonds, the difference between the nominal amount at the prevailing spot rate and the swapped nominal amount in EUR; and (3) amortized debt issuance costs.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Borrowings | 5,368 | 6,744 |
| Perpetual hybrid bonds | 1,000 | 500 |
| 50% equity credit for hybrid bonds | -500 | -483 |
| Less: Cash collateral paid on derivatives | -75 | -56 |
| Difference between carrying value and nominal value | 141 | -305 |
| Adjusted gross debt | 5,935 | 6,400 |
| Net cash and cash equivalents | 399 | 793 |
| Short-term investments | 100 | 300 |
| Net debt1 | 5,435 | 5,307 |
| Adjusted EBITDA AL | 2,404 | 2,347 |
| Net debt/EBITDA AL | 2.3x | 2.3x |
KPN is exposed to a variety of financial risks. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on KPN\u2019s financial position and performance.
Derivatives are used to hedge certain risk exposures (see Note 13.3).
KPN\u2019s key financial risks are:
Credit and counterparty risk
Liquidity risk
Market risk
KPN\u2019s Treasury department manages the financial risks according to policies approved by the Board of Management and Supervisory Board. These policies are established to identify and analyze financial risks, set appropriate risk limits and controls, and monitor adherence to those limits.
The COVID-19 crisis, geopolitical tensions (including the war in Ukraine) and the impact of inflation, rising energy and raw material prices, have led to increased volatility in capital markets and periods of deteriorated market liquidity. In addition, the reversal of central banks' monetary policies led to a significant increase in (expected) interest rate levels. KPN\u2019s Treasury department monitored the situation closely and the impact on KPN\u2019s liquidity position, sources of financing and financial counterparties remained within acceptable risk limits. KPN did not suffer any material impact on its liquidity reserves and its ability to raise financing remained very strong, albeit at higher cost levels.
Credit risk arises from the possibility of asset impairment occurring when counterparties are unable to meet their obligations in transactions involving financial instruments. KPN\u2019s counterparty policy sets limits for the maximum exposure per counterparty, which are primarily based on credit ratings, investment periods and collateral. The minimum counterparty credit rating (Moody\u2019s equivalent) is Baa2 for cash balances and Baa1 for entering into new derivative transactions. Cash balances used for working capital purposes can also reside at banks with lower credit ratings. Capital preservation is KPN\u2019s main priority when investing excess cash.
As at 31 December 2022, KPN\u2019s cash balances and short-term investments were held in bank accounts, bank deposits and money market funds with maturities of up to three months. The majority of cash balances were invested with counterparties with a credit rating equivalent to A3 at Moody\u2019s or higher, and the counterparties of outstanding derivatives have a credit rating equivalent to Baa1 or higher with Moody\u2019s.
KPN mitigates credit risk on bank counterparties arising from derivative financial instruments through collateral support agreements, which results in cash being paid or received as security. This cash collateral is released when derivatives are settled and/or mature. In 2022, the net cash collateral movement was EUR 14m receipt (2021: EUR 115m). As at 31 December 2022, KPN held net cash collateral (liability) of EUR 28m (2021: EUR 14m).
Credit risk on trade receivables is controlled using restrictive policies for customer acceptance. Credit management is focused on mobile services. Before accepting certain new customers in this segment, the creditworthiness of prospective clients is checked. In addition, KPN keeps track of the payment performance of customers. If customers fail to meet set criteria, payment issues must be resolved before a new transaction will be entered into.
KPN\u2019s policy is to provide financial guarantees only to wholly-owned subsidiaries. As at 31 December 2022, KPN had parent guarantees and bank guarantees outstanding to third parties for various wholly-owned Dutch subsidiaries. The carrying amount of financial assets, including cash, and contract assets represents the maximum credit exposure, which amounts to EUR 1,643m as at 31 December 2022 (2021: EUR 2,265m). On 31 December 2022, the total outstanding bank guarantees amounted to EUR 6m (2021: EUR 6m), which were issued in the ordinary course of business.
See schedule of the allowances for expected losses in Note 14 for information about credit losses on trade and other receivables. There were no other credit losses.
| \u00a0 | Borrowings | \u00a0 | Derivatives | \u00a0 | \u00a0 | ||||
|---|---|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Bonds and loans | Interest on bonds and loans | Lease liabilities (undiscounted) | Other debt and cash collateral | \u00a0 | Derivatives inflow (including interest) | Derivatives outflow (including interest) | Trade and other payables1 | Total |
| 2023 | 1962 | 1873 | 178 | 36 | \u00a0 | -308 | 288 | 903 | 1,481 |
| 2024 | 431 | 181 | 139 | -4 | \u00a0 | -166 | 170 | - | 752 |
| 2025 | 625 | 157 | 129 | - | \u00a0 | -141 | 156 | - | 925 |
| 2026 | 451 | 153 | 122 | - | \u00a0 | -587 | 619 | - | 758 |
| 2027 | 300 | 128 | 93 | - | \u00a0 | -113 | 119 | - | 527 |
| 2028 and further | 3,491 | 330 | 399 | - | \u00a0 | -1,806 | 1,766 | - | 4,181 |
| Contractual cash flows | 5,495 | 1,136 | 1,060 | 32 | \u00a0 | -3,121 | 3,118 | 903 | 8,623 |
Liquidity risk is the risk that KPN will not be able to meet its financial obligations associated with financial instruments as they become due. KPN\u2019s approach to managing liquidity is to ensure sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage. Some of the derivatives contain reset clauses or collateral postings at pre-agreed dates, in order to mitigate counterparty exposure during the life of the swap. These reset clauses will result in early euro settlement obligations in cash with the swap counterparty, which could lead to additional cash inflows or outflows before maturity. In order to reduce liquidity risks, the reset clauses or collateral postings are spread over different points in time.
During 2022, KPN received net collateral of EUR 14m (2021: EUR 115m) according to pre-agreed settlement schedules.
In addition to the available cash and cash equivalents, short-term investments and cash flows from operations, KPN has the following committed financing resources available:
KPN has a sustainability-linked revolving credit facility for EUR 1.0 billion provided by twelve relationship banks, originally signed in August 2021. The facility can be used for general corporate purposes and does not contain any financial covenants. In August 2022, all banks agreed to a one year extension, which extends the maturity of the revolving credit facility to 4 August 2027. The facility contains another one-year extension option which can be exercised in August 2023 and which could extend the maturity to August 2028. The facility has a mechanism to adjust the margin based on KPN\u2019s performance on predefined sustainability targets on the roll-out of fiber, reduction in KPN\u2019s energy consumption and reduction of carbon emissions in the supply chain. The facility was undrawn as at 31 December 2022 resp. 31 December 2021.
KPN\u2019s existing capital resources contain the following covenants as at 31 December 2022, which could trigger additional financial obligations or early redemption of the outstanding indebtedness. All senior bonds issued after 1 January 2006 (EUR 4.4bn outstanding as at 31 December 2022) contain a change of control clause. KPN may be required to early redeem if certain changes of control occur and within this change of control period (maximum of 90 days) a rating downgrade to sub-investment grade occurs. The hybrid bonds also contain a change of control clause by means of which KPN has the possibility to repurchase the hybrid bonds at par. A 5% interest step-up applies if a rating downgrade occurs during the change of control period in respect of that change of control. In addition, many of KPN\u2019s capital resources contain a covenant prohibiting KPN from entering into any amalgamation, demerger, merger, corporate restructuring or reorganization, unless prior written consent has been given by a majority of the lenders or bondholders or the resulting company assumes all of the rights and obligations with respect to the loans or bonds.
KPN is exposed to various kinds of market risks in the ordinary course of business. These risks include foreign currency exchange rate risk and interest rate risk.
Foreign currency risks mainly result from settlement of international telecommunications traffic and purchase of assets and primarily consist of GBP and USD exposure. Foreign currency exchange rate risks related to bonds that are not denominated in EUR are hedged into EUR in line with KPN\u2019s hedging policies. Group companies and business operations are obliged to hedge their firm commitments and highly predictable anticipated transactions in non-functional currencies by forward exchange contracts.
Accordingly, KPN\u2019s Treasury department matches and manages the intercompany and external exposures using forward exchange contracts. No hedge accounting is applied for these hedge instruments.
As at 31 December 2022, more than 95% (2021: 98%) of cash and cash equivalents was denominated in the functional currency of the related entities. More than 99% of the net amount of trade receivables and more than 95% of the amount of trade payables was outstanding in the functional currency of the related entities as at 31 December 2022 (2021: more than 99% resp. 93%).
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. Borrowings, derivatives, cash and cash equivalents are subject to interest rate risk. With regard to interest rate risk exposure, KPN periodically evaluates the desired mix of fixed and floating interest rate liabilities, balancing the benefit of lower interest costs vs. the variability of cash flows. Any interest rate risk exposure longer than one year is considered to be fixed. KPN may use derivative financial instruments to adjust the desired interest rate risk exposure.
As at 31 December 2022, 64% of KPN\u2019s interest-bearing gross debt (after swaps, excluding bank overdrafts) was at fixed interest rates (2021: 77%).
With a view to the existing and forecasted debt structure, KPN could enter into additional future derivatives to further adjust the mix of fixed and floating interest rate liabilities.
A sensitivity analysis as at 31 December 2022 with regard to interest rate risk on floating interest-bearing liabilities showed that, ceteris paribus, each adverse change of 100 bps in Euribor would hypothetically result in EUR 23m higher interest costs per annum (2021: EUR 16m).
Interest rate benchmarks (Interbank Offered Rates, or IBORs) are reformed and/or replaced by alternative Risk-Free Rates (RFRs). This affects financial instruments on the derivatives and cash markets that operate with the impacted floating reference rates. The three most used IBORs are the European Interbank Offered Rate (Euribor), the London Interbank Offered Rate (Libor) and the EURO Overnight Index Average (Eonia). For each benchmark, the developments are at different stages and vary in scope and transition time. For example, GBP Libor is discontinued after 31 December 2021 whereas most tenors of USD Libor will continue until 1 July 2023. Euribor has been reformed and is not scheduled to be discontinued. As the Euribor benchmark remains, there is no impact for KPN on the used floating EUR interest rates. The transition of Eonia to Euro Short-Term Rate (ESTR) has a negligible impact for KPN, concerning interest on collateral paid and/or received under credit support agreements with swap counterparties. The relevant agreements have been amended to reflect the change to ESTR. The transition of GBP Libor to Secured Overnight Financing Rate (SOFR) may have a small impact on the valuation of KPN\u2019s cross-currency swaps as this benchmark is used to value the derivatives with a GBP currency leg.
KPN carried out a sensitivity analysis as at 31 December 2022 with regard to interest rate and currency risk on the cash flow hedges. KPN applies cash flow hedge accounting on all bonds not denominated in EUR. With all other variables held constant, KPN calculated the hypothetical impact of changes in interest rates based on various scenarios. This would hypothetically result in a higher or lower value of the hedge reserve, which is included in equity attributable to equity holders. In a similar way, KPN calculated the hypothetical impact of changes in the EUR/USD rate and the EUR/GBP rate, holding all other variables constant. The results of the analysis are shown in the table below, indicating the hypothetical impact on the fair value of the cross-currency swaps (excluding the partially offsetting impact on the hedged items).
| \u00a0 | \u00a0 | GBP | USD | Total | |||
|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million (before tax) | Change | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Change in interest rate | +1%-point | 6 | -3 | 6 | 3 | 12 | - |
| \u00a0 | -1%-point | -6 | 3 | -6 | -3 | -12 | - |
| Change in FX rate | +10%-point | 6 | 31 | -24 | 29 | -18 | 60 |
| \u00a0 | -10%-point | -7 | -42 | 30 | -36 | 22 | -78 |
Prospective effectiveness testing indicates that all cash flow hedges are expected to be highly effective. Consequently, the expected impact on the P&L is immaterial.
KPN carried out a sensitivity analysis on 31 December 2022 with regard to the fair value of interest rate swaps (excluding the partial offsetting impact on the hedged items):
| \u20ac\u00a0million | Change | 2022 | 2021 |
|---|---|---|---|
| Change in EUR interest rates | +1%-point | -120 | -63 |
| \u00a0 | -1%-point | 123 | 66 |
For the sensitivity analysis on interest rate risk regarding pensions, see Note 17.
Movement schedule of the allowances for expected credit losses:
| \u20ac\u00a0million | Trade receivables | Financial receivables handsets | Contract assets | Total |
|---|---|---|---|---|
| Balance at 1 January 2021 | 20 | 3 | 1 | 24 |
| Additions/releases P&L | 9 | - | - | 9 |
| Usage | -8 | -1 | -1 | -10 |
| Balance at 31 December 2021 | 21 | 3 | - | 24 |
| Additions/releases P&L | 12 | -1 | - | 11 |
| Usage | -13 | - | - | -13 |
| Reclassification to FVOCI | -3 | -1 | - | -4 |
| Balance at 31 December 2022 | 17 | 1 | - | 18 |
The allowance for expected credit losses for trade receivables is based on the aging of the gross trade receivables and historic losses. For the largest customers, an assessment is done whether or not an additional allowance needs to be recognized.\u00a0The allowance for financial receivables handsets is also based on historic losses and is adjusted if there is an indication that customer payment behavior will deteriorate. The financial receivables handsets are the installments to be invoiced on average in approximately the next 12 months.\u00a0
The Getronics US and UK operations were divested in 2008 and 2012, respectively. The closed and frozen pension plans of the former US and UK operations remained with KPN and are accounted for as a defined benefit plan. The assets of the plans are held separately from KPN in independently administered funds. The UK plan operates under the regulations of the UK Pensions Regulator and the US plan under the provisions of the Employee Retirement Income Security Act (ERISA). The deficit in the plans\u2019 funding must be recovered by the investment returns in the plans\u2019 assets and contributions by KPN. The pension plans in the UK and US expose KPN to a number of risks, which can have an impact on the future contributions by KPN and the liability recorded in its balance sheet. The most significant risks are summarized below:
Asset volatility risk: the pension plans\u2019 assets are partially invested in equity securities and other return-seeking assets, so the plans\u2019 funding levels are exposed to equity market risks. The war in the Ukraine and increases in interest rates, for example caused significant volatility in 2022.
Interest rate risk: a decrease in interest rates will increase the plans\u2019 liabilities, although this will be partially offset by an increase in the value of the plans\u2019 bond holdings.
Inflation risk: the indexation of part of the accrued benefits in the UK is based on a combination of consumer and retail price indices, so the UK plan is exposed to inflation risk although the indexation is capped.
Life expectancy risk: the plans provide benefits for the life of the participants, so increases in life expectancy will result in an increase in the plans\u2019 liabilities.
In the UK, guaranteed minimum pension (GMP) is a portion of pension that was accrued by individuals who were contracted out of the state second pension prior to 6 April 1997. At present there is an inequality of benefits between male and female members who have GMP. The High Court in the UK ruled in 2018 that equalization will be required for affected defined benefit pension schemes. A number of options can be used to equalize, which had not been finalized as at 31 December 2022. The estimated cost of equalization as at 31 December 2022 and 2021 for the UK plan is EUR 6m, which has been recognized as a past service cost in 2018. However, the cost to the UK plan for equalizing heavily depends on a complex interaction between the benefit design and membership profile as well as the method used to equalize, which must be determined by the trustees.
In 2022, an additional voluntary pension contribution of EUR 23m into the US plan was made. This will lead to lower contributions going forward and brings the plan closer to full funding and an eventual buyout.
The strategic asset allocations of the defined benefit plans at year-end 2022 were as follows:
| \u20ac\u00a0million | Getronics UK | Getronics US | Other plans |
|---|---|---|---|
| Equity securities | 20% | 0% | 0% |
| Fixed-income securities (including inflation-linked bonds) | 55% | 100% | 0% |
| Other | 25% | 0% | 100% |
| Total | 100% | 100% | 100% |
In both the UK and the US, a roadmap is in place to move to more fixed-income exposure as the funded status improves. The Getronics UK pension fund partially hedges interest rate and inflation risks. The Getronics US pension fund fully hedges interest rate risks. As the UK pension fund invests in global investment funds, a minor part of these investments could be related to KPN equities. The pension funds do not have direct investments in KPN equities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-933": { "value": "Derivatives are recognized at fair value. Gains and losses arising from changes in fair value are recognized as finance cost/income during the period in which they arise to the extent that the derivatives have no hedging designation or they are ineffective.
KPN applies IFRS 9 hedge accounting. Derivatives related to loans are designated as either cash flow or fair value hedges.
Offsetting effects are recognized in the P&L.
The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how KPN will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument;
The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that KPN actually hedges and the quantity of the hedging instrument that KPN actually uses to hedge that quantity of hedged item.
Changes in the fair value of an effective derivative, which is designated as a fair value hedge, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in the P&L as finance cost/ income. Changes in the fair value of an effective derivative, which is designated as a cash flow hedge, are recorded in OCI for the effective part, until the P&L is affected by the variability in cash flows of the designated hedged item. The ineffective part of the cash flow hedge is recognized as finance cost/income. If an underlying transaction has ceased to be an effective hedge or in case of early redemption of the hedged item, hedge accounting is discontinued prospectively which means that subsequent changes in fair value are recognized in the P&L as finance cost/income and the cumulative amount recorded in OCI is released in the P&L.
Derivatives are recognized at fair value. Gains and losses arising from changes in fair value are recognized as finance cost/income during the period in which they arise to the extent that the derivatives have no hedging designation or they are ineffective.
KPN applies IFRS 9 hedge accounting. Derivatives related to loans are designated as either cash flow or fair value hedges.
Offsetting effects are recognized in the P&L.
The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how KPN will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument;
The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that KPN actually hedges and the quantity of the hedging instrument that KPN actually uses to hedge that quantity of hedged item.
Changes in the fair value of an effective derivative, which is designated as a fair value hedge, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in the P&L as finance cost/ income. Changes in the fair value of an effective derivative, which is designated as a cash flow hedge, are recorded in OCI for the effective part, until the P&L is affected by the variability in cash flows of the designated hedged item. The ineffective part of the cash flow hedge is recognized as finance cost/income. If an underlying transaction has ceased to be an effective hedge or in case of early redemption of the hedged item, hedge accounting is discontinued prospectively which means that subsequent changes in fair value are recognized in the P&L as finance cost/income and the cumulative amount recorded in OCI is released in the P&L.
Derivatives are recognized at fair value. Gains and losses arising from changes in fair value are recognized as finance cost/income during the period in which they arise to the extent that the derivatives have no hedging designation or they are ineffective.
KPN applies IFRS 9 hedge accounting. Derivatives related to loans are designated as either cash flow or fair value hedges.
Offsetting effects are recognized in the P&L.
The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how KPN will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument;
The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that KPN actually hedges and the quantity of the hedging instrument that KPN actually uses to hedge that quantity of hedged item.
Changes in the fair value of an effective derivative, which is designated as a fair value hedge, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in the P&L as finance cost/ income. Changes in the fair value of an effective derivative, which is designated as a cash flow hedge, are recorded in OCI for the effective part, until the P&L is affected by the variability in cash flows of the designated hedged item. The ineffective part of the cash flow hedge is recognized as finance cost/income. If an underlying transaction has ceased to be an effective hedge or in case of early redemption of the hedged item, hedge accounting is discontinued prospectively which means that subsequent changes in fair value are recognized in the P&L as finance cost/income and the cumulative amount recorded in OCI is released in the P&L.
Credit risk arises from the possibility of asset impairment occurring when counterparties are unable to meet their obligations in transactions involving financial instruments. KPN\u2019s counterparty policy sets limits for the maximum exposure per counterparty, which are primarily based on credit ratings, investment periods and collateral. The minimum counterparty credit rating (Moody\u2019s equivalent) is Baa2 for cash balances and Baa1 for entering into new derivative transactions. Cash balances used for working capital purposes can also reside at banks with lower credit ratings. Capital preservation is KPN\u2019s main priority when investing excess cash.
As at 31 December 2022, KPN\u2019s cash balances and short-term investments were held in bank accounts, bank deposits and money market funds with maturities of up to three months. The majority of cash balances were invested with counterparties with a credit rating equivalent to A3 at Moody\u2019s or higher, and the counterparties of outstanding derivatives have a credit rating equivalent to Baa1 or higher with Moody\u2019s.
KPN mitigates credit risk on bank counterparties arising from derivative financial instruments through collateral support agreements, which results in cash being paid or received as security. This cash collateral is released when derivatives are settled and/or mature. In 2022, the net cash collateral movement was EUR 14m receipt (2021: EUR 115m). As at 31 December 2022, KPN held net cash collateral (liability) of EUR 28m (2021: EUR 14m).
Credit risk on trade receivables is controlled using restrictive policies for customer acceptance. Credit management is focused on mobile services. Before accepting certain new customers in this segment, the creditworthiness of prospective clients is checked. In addition, KPN keeps track of the payment performance of customers. If customers fail to meet set criteria, payment issues must be resolved before a new transaction will be entered into.
KPN\u2019s policy is to provide financial guarantees only to wholly-owned subsidiaries. As at 31 December 2022, KPN had parent guarantees and bank guarantees outstanding to third parties for various wholly-owned Dutch subsidiaries. The carrying amount of financial assets, including cash, and contract assets represents the maximum credit exposure, which amounts to EUR 1,643m as at 31 December 2022 (2021: EUR 2,265m). On 31 December 2022, the total outstanding bank guarantees amounted to EUR 6m (2021: EUR 6m), which were issued in the ordinary course of business.
See schedule of the allowances for expected losses in Note 14 for information about credit losses on trade and other receivables. There were no other credit losses.
Movement schedule of the allowances for expected credit losses:
| \u20ac\u00a0million | Trade receivables | Financial receivables handsets | Contract assets | Total |
|---|---|---|---|---|
| Balance at 1 January 2021 | 20 | 3 | 1 | 24 |
| Additions/releases P&L | 9 | - | - | 9 |
| Usage | -8 | -1 | -1 | -10 |
| Balance at 31 December 2021 | 21 | 3 | - | 24 |
| Additions/releases P&L | 12 | -1 | - | 11 |
| Usage | -13 | - | - | -13 |
| Reclassification to FVOCI | -3 | -1 | - | -4 |
| Balance at 31 December 2022 | 17 | 1 | - | 18 |
The allowance for expected credit losses for trade receivables is based on the aging of the gross trade receivables and historic losses. For the largest customers, an assessment is done whether or not an additional allowance needs to be recognized.\u00a0The allowance for financial receivables handsets is also based on historic losses and is adjusted if there is an indication that customer payment behavior will deteriorate. The financial receivables handsets are the installments to be invoiced on average in approximately the next 12 months.\u00a0
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-703": { "value": "| \u00a0 | Borrowings | \u00a0 | Derivatives | \u00a0 | \u00a0 | ||||
|---|---|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million | Bonds and loans | Interest on bonds and loans | Lease liabilities (undiscounted) | Other debt and cash collateral | \u00a0 | Derivatives inflow (including interest) | Derivatives outflow (including interest) | Trade and other payables1 | Total |
| 2023 | 1962 | 1873 | 178 | 36 | \u00a0 | -308 | 288 | 903 | 1,481 |
| 2024 | 431 | 181 | 139 | -4 | \u00a0 | -166 | 170 | - | 752 |
| 2025 | 625 | 157 | 129 | - | \u00a0 | -141 | 156 | - | 925 |
| 2026 | 451 | 153 | 122 | - | \u00a0 | -587 | 619 | - | 758 |
| 2027 | 300 | 128 | 93 | - | \u00a0 | -113 | 119 | - | 527 |
| 2028 and further | 3,491 | 330 | 399 | - | \u00a0 | -1,806 | 1,766 | - | 4,181 |
| Contractual cash flows | 5,495 | 1,136 | 1,060 | 32 | \u00a0 | -3,121 | 3,118 | 903 | 8,623 |
| \u20ac\u00a0million | Mobile network | Fixed network & data centers | Real estate | Vehicles | Other | Total |
|---|---|---|---|---|---|---|
| Accumulated cost | 995 | 119 | 493 | 137 | 4 | 1,749 |
| Accumulated depreciation & impairment | -429 | -96 | -288 | -76 | -3 | -892 |
| Balance as at 1 January 2021 | 566 | 23 | 205 | 61 | 1 | 857 |
| Additions | 8 | - | 3 | 7 | 8 | 27 |
| Remeasurement & lease modifications | 35 | 3 | 9 | 1 | 1 | 48 |
| Depreciation | -57 | -10 | -31 | -28 | -2 | -127 |
| Impairments | - | - | - | - | - | - |
| Closing net book value | 553 | 17 | 186 | 40 | 9 | 804 |
| Accumulated cost | 997 | 89 | 458 | 119 | 14 | 1,677 |
| Accumulated depreciation & impairment | -445 | -71 | -272 | -80 | -5 | -872 |
| Balance as at 31 December 2021 | 553 | 17 | 186 | 40 | 9 | 804 |
| Additions | 26 | 0 | 3 | 25 | 4 | 58 |
| Remeasurement & lease modifications | 87 | 4 | 27 | 4 | 1 | 123 |
| Depreciation | -57 | -7 | -31 | -24 | -3 | -121 |
| Impairments | - | - | -161 | - | - | -16 |
| Closing net book value | 608 | 14 | 169 | 45 | 11 | 848 |
| Accumulated cost | 1,060 | 76 | 472 | 111 | 19 | 1,737 |
| Accumulated depreciation & impairment | -451 | -61 | -303 | -66 | -7 | -889 |
| Balance as at 31 December 2022 | 608 | 14 | 169 | 45 | 11 | 848 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Total estimated lease term at commencement of a lease (in years) | 5-15 | 5-20 | 5-20 | 5-7 | <5 | \u00a0 |
| \u20ac\u00a0million | Mobile network | Fixed network & data centers | Real estate | Vehicles | Other | Total |
|---|---|---|---|---|---|---|
| Non-current lease liability | 531 | 19 | 202 | 35 | - | 787 |
| Current lease liability | 88 | 9 | 30 | 23 | - | 150 |
| Balance as at 1 January 2021 | 618 | 27 | 232 | 58 | 1 | 937 |
| Additions | 8 | 1 | 3 | 7 | 8 | 27 |
| Remeasurement & lease modifications | 30 | 3 | 8 | - | 1 | 42 |
| Interest | 13 | 1 | 5 | 1 | - | 20 |
| Redemptions | -73 | -11 | -40 | -28 | -2 | -154 |
| Closing net book value | 597 | 20 | 210 | 37 | 9 | 873 |
| Non-current lease liability | 515 | 14 | 180 | 20 | 7 | 736 |
| Current lease liability | 83 | 6 | 30 | 17 | 2 | 137 |
| Balance as at 31 December 2021 | 598 | 20 | 209 | 37 | 9 | 873 |
| Additions | 26 | - | 3 | 25 | 3 | 57 |
| Remeasurement & lease modifications | 81 | 4 | 27 | 4 | 2 | 117 |
| Interest | 12 | 1 | 5 | - | - | 18 |
| Redemptions | -68 | -9 | -39 | -24 | -3 | -142 |
| Closing net book value | 649 | 16 | 205 | 43 | 11 | 923 |
| Non-current lease liability | 551 | 10 | 174 | 27 | 8 | 770 |
| Current lease liability | 97 | 6 | 31 | 16 | 3 | 153 |
| Balance as at 31 December 2022 | 649 | 16 | 205 | 43 | 11 | 923 |
The redemptions reflect the total payments made during the year for the lease fees included in the lease liability. The redemption consists of the repayments of the lease liabilities which are presented in the cash flow from financing activities (2022: EUR 124m, 2021: EUR 135m) and the interest paid during the year (2022: EUR 18m, 2021: EUR 20m), which is part of the cash flow from operating activities.
The maturity analysis of the lease liabilities can be found in Note 13.4.
KPN\u2019s lease portfolio consists of mobile network (mostly site rentals and mobile towers), fixed network & data centers (technical buildings), real estate (offices and shops), vehicles and other leased assets.
The following amounts are recognized in the profit or loss:
| \u20ac\u00a0million | 2022 | 2021 |
|---|---|---|
| Depreciation right-of-use assets | -121 | -127 |
| Impairment (-) or impairment reversal right-of-use assets | -16 | - |
| Gain or loss (-) on early terminations | 7 | 5 |
| Total depreciation & impairments presented in the P&L | -131 | -123 |
| Interest on lease liabilities | -18 | -20 |
| Total amount recognized in profit or loss | -149 | -142 |
In 2022, KPN entered into sale and leaseback transactions for some of its technical buildings. The transactions resulted in a gain of EUR 2m in both 2022 and 2021, included in Other income. The leaseback periods are limited to a period of five years. The impact on the lease liability and right-of-use asset (fixed network) was limited.
The expenses related to short-term vehicle leases (included in Personnel expenses) are not material. KPN does not apply the low-value exemption and does not have contracts with variable lease payments other than variable lease payments dependent on an index or a rate.
Most of KPN\u2019s lease contracts include extension (renewal) or termination options. KPN exercises significant judgment in determining whether these options are reasonably certain to be exercised (see Note 2). The assessments are updated annually or when a significant change in the economic circumstances occurs. Periods covered by renewal options deemed reasonably certain or early termination options that are reasonably certain not to be exercised are included in the total lease liability.
A significant number of KPN\u2019s contracts have an unlimited number of extension options. Only those deemed reasonably certain are included in the lease term and therefore the lease liability. A reliable estimate of the potential future lease payments related to periods beyond the lease terms reflected on the balance sheet cannot be provided. This affects mostly the mobile and fixed network, as well as real estate. Vehicles are generally returned by the end of their term.
KPN acts as a lessor in a limited number of real estate, mobile site contracts and some specific types of customer premises equipment, all classified as operating leases. These lessor contracts are not material to KPN Group, individually nor in aggregate. The terms are 1-10 years. All leases include a clause to enable upward revision of the lease fees (annual indexation). Rental income recognized in 2022 amounted to EUR 2m (2021: EUR 2m). The future minimum lease receivable under the non-cancellable operating leases as at 31 December 2022 is EUR 6m (31 December 2021: EUR 7m).
At the commencement date of a lease (i.e. the date on which the underlying asset of the lease is available for use by KPN), KPN recognizes a lease liability measured at the present value of future lease payments to be made over the term of the lease. This includes fixed fees (including in-substance fixed payments), lease incentives (such as rent-free periods or fee discounts), variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. KPN does not have purchase options to be taken into account. Penalties for early termination of a lease are not included when KPN is reasonably certain that the related early termination will not take place.
All contracts of KPN that contain variable lease payments depend on a consumer price index or a rate. However, should other types of fees occur, these variable fees will be accounted for in the operating expenses.
After the commencement date, the lease liabilities increase due to the accrual of interest and decrease due to the payments of the fees due. The lease liabilities are remeasured when a change occurs in the fees due, the lease term deemed reasonably certain and/or changes to the scope of a lease. Upon remeasurement of the lease liability of a contract, the applied discount rate (incremental borrowing rate) is revised unless the remeasurement relates to a fee change following a change in consumer price index or rate.
The total lease liability recognized is split into a non-current and a current portion. The current lease liabilities reflect only the part of the payments due within one year related to the repayment of the total lease liabilities.
KPN determined the lease term as the non-cancellable term of a contract together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised.
KPN applies judgment when assessing if the use of an option is reasonably certain. Factors included are KPN\u2019s asset and network strategy, technological developments, and other circumstances that may impose an economic incentive affecting the expected use of an underlying asset. For vehicles, renewal options are not included in the initial assessment of the lease term as KPN\u2019s policy prescribes the return of vehicles to the lessor at the end of the lease term.
After the commencement of a lease, KPN reassesses the lease term if there is a significant event or change in circumstances that is within KPN\u2019s control and effects KPN\u2019s ability to exercise or not to exercise the option to renew or to terminate a lease.
The implicit discount rates of KPN\u2019s leases are not readily available, with the exception for vehicles. KPN applies its applicable incremental borrowing rate to determine the discounted value of the lease liabilities. Upon modification of a lease, the lease liability is remeasured using the applicable discount rate at the date of the remeasurement. KPN\u2019s incremental borrowing rates are mainly determined using a risk-free rate combined with a spread reflecting KPN\u2019s credit risk. The applicable rate per contract is primarily dependent on the total expected term of a lease at its commencement date (new leases) or the total expected remaining lease term in case of a remeasurement of a lease.
Right-of-use assets are recognized at commencement date of a lease as counterpart to the lease liabilities. The right-of-use assets are measured at cost, less accumulated depreciation and impairment losses, and adjusted for any remeasurement in the corresponding lease liabilities. The cost of the right-of-use assets includes the initially recognized amount of the corresponding lease liabilities, initial direct costs incurred in obtaining the lease (if any) and lease payments made at or before commencement of the lease. Lease incentives received are deducted from the carrying value of the right-of-use assets.
The right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life of the underlying asset and the lease term. Right-of-use assets are subject to impairment.
KPN does not apply the practical expedients for low-value leases (leases of an underlying asset with a value of less than EUR 5,000) and short-term leases (leases with a total expected term of less than 12 months) except for short-term rental vehicles.
Regarding vehicle leases, KPN applies the practical expedient not to separate non-lease components from lease components. Therefore, the full monthly lease fees are reflected in KPN\u2019s Statement of Financial Position. For all types of leased assets, electricity and fuel-related expenses remain part of operating expenses.
Leases where KPN as lessor retains a significant portion of the risk and rewards of ownership of the lease asset are classified as operating leases. The assets remain on the balance sheet and are depreciated over the assets\u2019 useful life.
Lease payments received from lessees are recognized as revenue on a straight-line basis over the lease period.
If KPN acts as a lessor in a finance lease, the transaction is accounted for as a normal sale and the present value of the lease payments is recognized as a receivable. The difference between the gross receivable and the present value of the receivable is deferred and recognized as interest over the lease term.
KPN is exposed to various kinds of market risks in the ordinary course of business. These risks include foreign currency exchange rate risk and interest rate risk.
Foreign currency risks mainly result from settlement of international telecommunications traffic and purchase of assets and primarily consist of GBP and USD exposure. Foreign currency exchange rate risks related to bonds that are not denominated in EUR are hedged into EUR in line with KPN\u2019s hedging policies. Group companies and business operations are obliged to hedge their firm commitments and highly predictable anticipated transactions in non-functional currencies by forward exchange contracts.
Accordingly, KPN\u2019s Treasury department matches and manages the intercompany and external exposures using forward exchange contracts. No hedge accounting is applied for these hedge instruments.
As at 31 December 2022, more than 95% (2021: 98%) of cash and cash equivalents was denominated in the functional currency of the related entities. More than 99% of the net amount of trade receivables and more than 95% of the amount of trade payables was outstanding in the functional currency of the related entities as at 31 December 2022 (2021: more than 99% resp. 93%).
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. Borrowings, derivatives, cash and cash equivalents are subject to interest rate risk. With regard to interest rate risk exposure, KPN periodically evaluates the desired mix of fixed and floating interest rate liabilities, balancing the benefit of lower interest costs vs. the variability of cash flows. Any interest rate risk exposure longer than one year is considered to be fixed. KPN may use derivative financial instruments to adjust the desired interest rate risk exposure.
As at 31 December 2022, 64% of KPN\u2019s interest-bearing gross debt (after swaps, excluding bank overdrafts) was at fixed interest rates (2021: 77%).
With a view to the existing and forecasted debt structure, KPN could enter into additional future derivatives to further adjust the mix of fixed and floating interest rate liabilities.
A sensitivity analysis as at 31 December 2022 with regard to interest rate risk on floating interest-bearing liabilities showed that, ceteris paribus, each adverse change of 100 bps in Euribor would hypothetically result in EUR 23m higher interest costs per annum (2021: EUR 16m).
Interest rate benchmarks (Interbank Offered Rates, or IBORs) are reformed and/or replaced by alternative Risk-Free Rates (RFRs). This affects financial instruments on the derivatives and cash markets that operate with the impacted floating reference rates. The three most used IBORs are the European Interbank Offered Rate (Euribor), the London Interbank Offered Rate (Libor) and the EURO Overnight Index Average (Eonia). For each benchmark, the developments are at different stages and vary in scope and transition time. For example, GBP Libor is discontinued after 31 December 2021 whereas most tenors of USD Libor will continue until 1 July 2023. Euribor has been reformed and is not scheduled to be discontinued. As the Euribor benchmark remains, there is no impact for KPN on the used floating EUR interest rates. The transition of Eonia to Euro Short-Term Rate (ESTR) has a negligible impact for KPN, concerning interest on collateral paid and/or received under credit support agreements with swap counterparties. The relevant agreements have been amended to reflect the change to ESTR. The transition of GBP Libor to Secured Overnight Financing Rate (SOFR) may have a small impact on the valuation of KPN\u2019s cross-currency swaps as this benchmark is used to value the derivatives with a GBP currency leg.
KPN carried out a sensitivity analysis as at 31 December 2022 with regard to interest rate and currency risk on the cash flow hedges. KPN applies cash flow hedge accounting on all bonds not denominated in EUR. With all other variables held constant, KPN calculated the hypothetical impact of changes in interest rates based on various scenarios. This would hypothetically result in a higher or lower value of the hedge reserve, which is included in equity attributable to equity holders. In a similar way, KPN calculated the hypothetical impact of changes in the EUR/USD rate and the EUR/GBP rate, holding all other variables constant. The results of the analysis are shown in the table below, indicating the hypothetical impact on the fair value of the cross-currency swaps (excluding the partially offsetting impact on the hedged items).
| \u00a0 | \u00a0 | GBP | USD | Total | |||
|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million (before tax) | Change | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Change in interest rate | +1%-point | 6 | -3 | 6 | 3 | 12 | - |
| \u00a0 | -1%-point | -6 | 3 | -6 | -3 | -12 | - |
| Change in FX rate | +10%-point | 6 | 31 | -24 | 29 | -18 | 60 |
| \u00a0 | -10%-point | -7 | -42 | 30 | -36 | 22 | -78 |
Prospective effectiveness testing indicates that all cash flow hedges are expected to be highly effective. Consequently, the expected impact on the P&L is immaterial.
KPN carried out a sensitivity analysis on 31 December 2022 with regard to the fair value of interest rate swaps (excluding the partial offsetting impact on the hedged items):
| \u20ac\u00a0million | Change | 2022 | 2021 |
|---|---|---|---|
| Change in EUR interest rates | +1%-point | -120 | -63 |
| \u00a0 | -1%-point | 123 | 66 |
For the sensitivity analysis on interest rate risk regarding pensions, see Note 17.
The Getronics US and UK operations were divested in 2008 and 2012, respectively. The closed and frozen pension plans of the former US and UK operations remained with KPN and are accounted for as a defined benefit plan. The assets of the plans are held separately from KPN in independently administered funds. The UK plan operates under the regulations of the UK Pensions Regulator and the US plan under the provisions of the Employee Retirement Income Security Act (ERISA). The deficit in the plans\u2019 funding must be recovered by the investment returns in the plans\u2019 assets and contributions by KPN. The pension plans in the UK and US expose KPN to a number of risks, which can have an impact on the future contributions by KPN and the liability recorded in its balance sheet. The most significant risks are summarized below:
Asset volatility risk: the pension plans\u2019 assets are partially invested in equity securities and other return-seeking assets, so the plans\u2019 funding levels are exposed to equity market risks. The war in the Ukraine and increases in interest rates, for example caused significant volatility in 2022.
Interest rate risk: a decrease in interest rates will increase the plans\u2019 liabilities, although this will be partially offset by an increase in the value of the plans\u2019 bond holdings.
Inflation risk: the indexation of part of the accrued benefits in the UK is based on a combination of consumer and retail price indices, so the UK plan is exposed to inflation risk although the indexation is capped.
Life expectancy risk: the plans provide benefits for the life of the participants, so increases in life expectancy will result in an increase in the plans\u2019 liabilities.
In the UK, guaranteed minimum pension (GMP) is a portion of pension that was accrued by individuals who were contracted out of the state second pension prior to 6 April 1997. At present there is an inequality of benefits between male and female members who have GMP. The High Court in the UK ruled in 2018 that equalization will be required for affected defined benefit pension schemes. A number of options can be used to equalize, which had not been finalized as at 31 December 2022. The estimated cost of equalization as at 31 December 2022 and 2021 for the UK plan is EUR 6m, which has been recognized as a past service cost in 2018. However, the cost to the UK plan for equalizing heavily depends on a complex interaction between the benefit design and membership profile as well as the method used to equalize, which must be determined by the trustees.
In 2022, an additional voluntary pension contribution of EUR 23m into the US plan was made. This will lead to lower contributions going forward and brings the plan closer to full funding and an eventual buyout.
The following table shows the approximate impact on the defined benefit obligation of a change in the key actuarial assumptions of 0.5% and in the case of life expectancy of a change of one year.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Increase | Decrease | Increase | Decrease |
| Discount rate | -18 | 20 | -35 | 39 |
| Expected salary increases | - | - | - | - |
| Expected benefit increases | 7 | -8 | 16 | -19 |
| Life expectancy | 13 | -14 | 26 | -26 |
The strategic asset allocations of the defined benefit plans at year-end 2022 were as follows:
| \u20ac\u00a0million | Getronics UK | Getronics US | Other plans |
|---|---|---|---|
| Equity securities | 20% | 0% | 0% |
| Fixed-income securities (including inflation-linked bonds) | 55% | 100% | 0% |
| Other | 25% | 0% | 100% |
| Total | 100% | 100% | 100% |
In both the UK and the US, a roadmap is in place to move to more fixed-income exposure as the funded status improves. The Getronics UK pension fund partially hedges interest rate and inflation risks. The Getronics US pension fund fully hedges interest rate risks. As the UK pension fund invests in global investment funds, a minor part of these investments could be related to KPN equities. The pension funds do not have direct investments in KPN equities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-727": { "value": "Cash flow hedges KPN carried out a sensitivity analysis as at 31 December 2022 with regard to interest rate and currency risk on the cash flow hedges. KPN applies cash flow hedge accounting on all bonds not denominated in EUR. With all other variables held constant, KPN calculated the hypothetical impact of changes in interest rates based on various scenarios. This would hypothetically result in a higher or lower value of the hedge reserve, which is included in equity attributable to equity holders. In a similar way, KPN calculated the hypothetical impact of changes in the EUR/USD rate and the EUR/GBP rate, holding all other variables constant. The results of the analysis are shown in the table below, indicating the hypothetical impact on the fair value of the cross-currency swaps (excluding the partially offsetting impact on the hedged items). \u00a0\u00a0GBP USD Total \u20ac\u00a0million (before tax) Change 2022 2021 2022 2021 2022 2021 Change in interest rate +1%-point 6 -3 6 3 12 - \u00a0-1%-point -6 3 -6 -3 -12 - Change in FX rate +10%-point 6 31 -24 29 -18 60 \u00a0-10%-point -7 -42 30 -36 22 -78 ", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-938": { "value": "Accounting policy: Offsetting financial assets and liabilities Financial assets and liabilities are offset and reported on a net basis on the balance sheet only when there is a current legally enforceable right to offset the recognized amounts, and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-738": { "value": "| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Current | Non-current | Current | Non-current |
| Trade receivables | 245 | - | 222 | - |
| Financial receivables handsets | 174 | - | 199 | - |
| Sales to be invoiced | 107 | - | 103 | - |
| Interest to be received | 9 | - | 17 | - |
| Prepayments | 93 | 16 | 95 | 16 |
| Accruals and other receivables | 5 | 79 | 40 | 61 |
| Total | 632 | 95 | 677 | 77 |
The financial receivables handsets consist of not yet invoiced installment payments on the handset loans, mainly issued by KPN Finance B.V. In 2022, KPN Finance B.V. assigned EUR 28m outstanding financial receivables handsets to a bank and removed these receivables from the balance sheet as the transfer of the receivables is characterized as a sale because the risks and rewards of ownership of the receivables have been substantially transferred. KPN has provided an indemnity to the bank in case the realized losses on the transferred receivables are exceptionally high. At 31 December 2022, the financial receivables handsets of KPN Finance B.V. (EUR 158m) are measured at FVOCI and at 31 December 2021 at amortized cost.
The non-current other receivables relate for EUR 75m to cash collateral received on derivatives (2021: EUR 56m).
Sales to be invoiced include accrued income related to usage of KPN\u2019s network, which is invoiced monthly in arrears.
The carrying amounts of trade and other receivables approximate their fair value. Trade and other receivables are non-interest bearing. Trade receivables are generally on payment terms of 14-30 days. The aging of the gross trade receivables is as follows:
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Trade receivables gross | \u00a0 | \u00a0 |
| Amounts undue | 189 | 169 |
| Past due 0\u201390 days | 50 | 48 |
| Past due 91\u2013360 days | 15 | 17 |
| More than one year | 8 | 10 |
| Total trade receivables gross | 262 | 244 |
| Provision for credit risk exposure | -17 | -21 |
| Total trade receivables net | 245 | 222 |
Movement schedule of the allowances for expected credit losses:
| \u20ac\u00a0million | Trade receivables | Financial receivables handsets | Contract assets | Total |
|---|---|---|---|---|
| Balance at 1 January 2021 | 20 | 3 | 1 | 24 |
| Additions/releases P&L | 9 | - | - | 9 |
| Usage | -8 | -1 | -1 | -10 |
| Balance at 31 December 2021 | 21 | 3 | - | 24 |
| Additions/releases P&L | 12 | -1 | - | 11 |
| Usage | -13 | - | - | -13 |
| Reclassification to FVOCI | -3 | -1 | - | -4 |
| Balance at 31 December 2022 | 17 | 1 | - | 18 |
The allowance for expected credit losses for trade receivables is based on the aging of the gross trade receivables and historic losses. For the largest customers, an assessment is done whether or not an additional allowance needs to be recognized.\u00a0The allowance for financial receivables handsets is also based on historic losses and is adjusted if there is an indication that customer payment behavior will deteriorate. The financial receivables handsets are the installments to be invoiced on average in approximately the next 12 months.\u00a0
Trade and other receivables and contract assets classify as financial assets and are measured at amortized cost if both of the following conditions are met:
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortized cost are subsequently measured using the effective interest method less provisions for impairment. An allowance for expected credit losses is recorded for all financial assets and contract assets at initial recognition. This allowance is regularly updated.
The amortized cost is calculated by taking into account any discounts or premiums on acquisition and transactions costs.
The effective interest rate amortization is recognized under finance income or finance costs.
If a financial asset is held within a business model with the objective of both collecting contractual cash flows and selling the financial asset, the financial asset is measured at fair value through other comprehensive income (FVOCI).
A financial asset is derecognized when the rights to receive cash flows from the asset have expired or KPN has transferred the rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (1) KPN has transferred substantially all the risk and rewards of the asset, or (2) KPN has neither transferred nor retained substantially all the risks and rewards\u00a0of the asset, but has transferred control of the asset.
When KPN has transferred the rights to receive cash flows from an asset or has entered into a pass-through arrangement, KPN evaluates if, and to what extent, KPN has retained the risks and rewards of ownership.\u00a0The risks and rewards are substantially transferred if more than 90% of the variability of the cash flows with respect to an asset is transferred.
See Note 4 for the accounting policy regarding contract costs.
Movement schedule of the allowances for expected credit losses:
| \u20ac\u00a0million | Trade receivables | Financial receivables handsets | Contract assets | Total |
|---|---|---|---|---|
| Balance at 1 January 2021 | 20 | 3 | 1 | 24 |
| Additions/releases P&L | 9 | - | - | 9 |
| Usage | -8 | -1 | -1 | -10 |
| Balance at 31 December 2021 | 21 | 3 | - | 24 |
| Additions/releases P&L | 12 | -1 | - | 11 |
| Usage | -13 | - | - | -13 |
| Reclassification to FVOCI | -3 | -1 | - | -4 |
| Balance at 31 December 2022 | 17 | 1 | - | 18 |
The allowance for expected credit losses for trade receivables is based on the aging of the gross trade receivables and historic losses. For the largest customers, an assessment is done whether or not an additional allowance needs to be recognized.\u00a0The allowance for financial receivables handsets is also based on historic losses and is adjusted if there is an indication that customer payment behavior will deteriorate. The financial receivables handsets are the installments to be invoiced on average in approximately the next 12 months.\u00a0
", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-945": { "value": "Accounting policy: Trade and other receivables, contract assets and contract costs Trade and other receivables and contract assets classify as financial assets and are measured at amortized cost if both of the following conditions are met: The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortized cost are subsequently measured using the effective interest method less provisions for impairment. An allowance for expected credit losses is recorded for all financial assets and contract assets at initial recognition. This allowance is regularly updated. The amortized cost is calculated by taking into account any discounts or premiums on acquisition and transactions costs. The effective interest rate amortization is recognized under finance income or finance costs. If a financial asset is held within a business model with the objective of both collecting contractual cash flows and selling the financial asset, the financial asset is measured at fair value through other comprehensive income (FVOCI). A financial asset is derecognized when the rights to receive cash flows from the asset have expired or KPN has transferred the rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (1) KPN has transferred substantially all the risk and rewards of the asset, or (2) KPN has neither transferred nor retained substantially all the risks and rewards\u00a0of the asset, but has transferred control of the asset. When KPN has transferred the rights to receive cash flows from an asset or has entered into a pass-through arrangement, KPN evaluates if, and to what extent, KPN has retained the risks and rewards of ownership.\u00a0The risks and rewards are substantially transferred if more than 90% of the variability of the cash flows with respect to an asset is transferred. See Note 4 for the accounting policy regarding contract costs. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-946": { "value": "Accounting policy: Trade and other receivables, contract assets and contract costs Trade and other receivables and contract assets classify as financial assets and are measured at amortized cost if both of the following conditions are met: The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortized cost are subsequently measured using the effective interest method less provisions for impairment. An allowance for expected credit losses is recorded for all financial assets and contract assets at initial recognition. This allowance is regularly updated. The amortized cost is calculated by taking into account any discounts or premiums on acquisition and transactions costs. The effective interest rate amortization is recognized under finance income or finance costs. If a financial asset is held within a business model with the objective of both collecting contractual cash flows and selling the financial asset, the financial asset is measured at fair value through other comprehensive income (FVOCI). A financial asset is derecognized when the rights to receive cash flows from the asset have expired or KPN has transferred the rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (1) KPN has transferred substantially all the risk and rewards of the asset, or (2) KPN has neither transferred nor retained substantially all the risks and rewards\u00a0of the asset, but has transferred control of the asset. When KPN has transferred the rights to receive cash flows from an asset or has entered into a pass-through arrangement, KPN evaluates if, and to what extent, KPN has retained the risks and rewards of ownership.\u00a0The risks and rewards are substantially transferred if more than 90% of the variability of the cash flows with respect to an asset is transferred. See Note 4 for the accounting policy regarding contract costs. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-948": { "value": "A financial asset is derecognized when the rights to receive cash flows from the asset have expired or KPN has transferred the rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (1) KPN has transferred substantially all the risk and rewards of the asset, or (2) KPN has neither transferred nor retained substantially all the risks and rewards\u00a0of the asset, but has transferred control of the asset. When KPN has transferred the rights to receive cash flows from an asset or has entered into a pass-through arrangement, KPN evaluates if, and to what extent, KPN has retained the risks and rewards of ownership.\u00a0The risks and rewards are substantially transferred if more than 90% of the variability of the cash flows with respect to an asset is transferred. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-754": { "value": "Cash and cash equivalents consist of highly liquid instruments with initial maturities of three months or less, including balances on bank accounts, bank deposits and money market funds.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Cash | 144 | 258 |
| Short-term bank deposits and money market funds | 255 | 535 |
| Total cash and cash equivalents | 399 | 793 |
The decrease in cash and cash equivalents was mainly the result of EUR 571m dividend payments, EUR 300m share repurchases, EUR 468m of net debt redemptions (including EUR 500m bond proceeds and EUR 968m bond redemptions), EUR 71m net payments related to M&A and Glaspoort, and EUR 17m net investments Ventures, partly offset by EUR 862m free cash flow and EUR 200m change in short-term investments.
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, AAA-rated prime money market funds, and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included in borrowings in current liabilities.
Total distributable reserves as at 31 December 2022 amounted to EUR 2,818m, which includes the perpetual capital securities (2021: EUR 2,545m). For further details on non-distributable reserves, see Note C to the Corporate Financial Statements.
Authorized capital stock totals EUR 720m divided into nine billion ordinary shares of EUR 4ct each and nine billion preference shares B of EUR 4ct each. At 31 December 2022, a total of 4,037,319,593 ordinary shares were outstanding and fully paid-in. Dutch law prohibits KPN from casting a vote on shares KPN holds (treasury shares). The ordinary shares and preference shares B carry the right to cast one vote each. The ordinary shares are registered or payable to the bearer.
Shareholders may request the company to convert their registered shares to bearer shares, but not vice versa.
In 2021, KPN repurchased 73,684,157 ordinary shares at an average price of EUR 2.71, and in 2022 92,840,654 ordinary shares at an average price of EUR 3.23. Of these shares, 165,524,811 were cancelled in 2022, reducing the number of outstanding shares to 4,037,319,593.
At the 13 April 2022 AGM, shareholders granted the Board of Management the authority to acquire the company\u2019s own ordinary shares for a period of 18 months - starting on 13 April 2022 and ending on 13 October 2023. The number of ordinary shares to be acquired is limited to a maximum of 10% of the issued capital per 13 April 2022. The shares may be acquired, by or on behalf of the company, on the stock exchange or through other means at a price per share of at least the par value and at most the quoted share price plus 10%. The quoted share price is defined as the average of the closing prices of KPN shares as reported in the official price list of Euronext Amsterdam over the five trading days prior to the acquisition date. Resolutions by the Board of Management to acquire the company\u2019s own shares are subject to the approval of the Supervisory Board.
Ordinary shares purchased by the company will either be cancelled or held in treasury. At the 13 April 2022 AGM, shareholders granted the Board of Management the authority to reduce the issued capital by cancelling own shares with the approval of the Supervisory Board. The number of shares that may be cancelled is restricted to a maximum of 10% of the issued capital as at 13 April 2022 and may, if desired, be cancelled in one or more phases.
| \u20ac\u00a0million, unless indicated otherwise | Number of treasury shares | Treasury shares reserve | Hedge reserve | Currency translation reserve | Total Other reserves |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 5,609,432 | -65 | -156 | 22 | -199 |
| Movements recorded in OCI (net) | - | - | 31 | -7 | 24 |
| Share buyback | 73,684,157 | -200 | - | - | -200 |
| Sold treasury shares | -1,643,571 | 17 | - | - | 17 |
| Balance at 31 December 2021 | 77,650,018 | -248 | -125 | 15 | -358 |
| Movements recorded in OCI (net) | - | - | 39 | 2 | 41 |
| Share buyback | 92,840,654 | -300 | - | - | -300 |
| Shares canceled | -165,524,811 | 492 | - | - | 492 |
| Sold treasury shares | -1,343,847 | 14 | - | - | 14 |
| Other | - | 5 | - | - | 5 |
| Balance at 31 December 2022 | 3,622,014 | -37 | -86 | 17 | -106 |
The additional paid-in capital is exempt from Dutch tax up to an amount of EUR 8,802m at 31 December 2022 (2021: EUR 9,282m).
Movements in the hedge reserve recorded in OCI are net of a tax loss of EUR 14m in 2022 (2021: EUR 9m loss) and in the currency translation reserve net of a tax gain of EUR 1m (2021: EUR 1m gain).
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Effective portion cash flow hedges1 | -23 | -61 |
| Amortizable part2 | -93 | -107 |
| Hedge reserve | -116 | -168 |
| Tax effect | 30 | 43 |
| Hedge reserve, net of tax | -86 | -125 |
KPN purchased shares in its own capital for delivery upon vesting of equity-settled share plans for management (see Note 5). Votes on purchased shares may not be cast and do not count in determining the number of votes required at a General Meeting of Shareholders. In 2022, 1 million shares were purchased for the equity-settled share plans (none in 2021). In 2022 and 2021, shares were sold in connection with vesting of these plans.
Treasury shares are accounted for at cost, representing the market price on the acquisition date. The proceeds at delivery of the treasury shares are recognized directly in the other reserves.
On 8 November 2019, KPN issued a EUR 500m hybrid bond with a 2.00% coupon and on 21 September 2022 a EUR 500m hybrid bond with a 6.00% coupon, both with a perpetual maturity. These bonds are classified as equity in the Consolidated Statement of Financial Position and valued at net proceeds (see Note 13.2).
KPN has granted a call option, which is not limited in time, to the Foundation Preference Shares B KPN (the Foundation) to acquire preference shares B. For further information about the Foundation, see chapter \u2018Corporate governance\u2019.
In KPN\u2019s opinion, the call option does not represent a significant fair value due to the fact that the preference shares B, issued after exercise of the call option, bear interest linked to Euribor.
At the AGM of Shareholders on 12 April 2023, a final dividend of EUR 9.5ct per share will be proposed in respect of 2022. In August 2022, KPN paid an interim dividend in respect of 2022 of EUR 4.8ct per share, in total EUR 196m, bringing the total regular dividend in respect of 2022 to EUR 14.3ct per share (in total EUR 579m based on the number of outstanding shares at 31 December 2022 less Treasury shares held by KPN).
These Financial Statements do not reflect the proposal for the remaining dividend payable. In April 2022, KPN paid a final dividend of EUR 9.1ct per share in respect of 2021, in total EUR 375m. The total dividend in respect of 2021 was EUR 13.6ct per ordinary share.
", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-759": { "value": "Total distributable reserves as at 31 December 2022 amounted to EUR 2,818m, which includes the perpetual capital securities (2021: EUR 2,545m). For further details on non-distributable reserves, see Note C to the Corporate Financial Statements.
| \u20ac\u00a0million, unless indicated otherwise | Number of treasury shares | Treasury shares reserve | Hedge reserve | Currency translation reserve | Total Other reserves |
|---|---|---|---|---|---|
| Balance at 1 January 2021 | 5,609,432 | -65 | -156 | 22 | -199 |
| Movements recorded in OCI (net) | - | - | 31 | -7 | 24 |
| Share buyback | 73,684,157 | -200 | - | - | -200 |
| Sold treasury shares | -1,643,571 | 17 | - | - | 17 |
| Balance at 31 December 2021 | 77,650,018 | -248 | -125 | 15 | -358 |
| Movements recorded in OCI (net) | - | - | 39 | 2 | 41 |
| Share buyback | 92,840,654 | -300 | - | - | -300 |
| Shares canceled | -165,524,811 | 492 | - | - | 492 |
| Sold treasury shares | -1,343,847 | 14 | - | - | 14 |
| Other | - | 5 | - | - | 5 |
| Balance at 31 December 2022 | 3,622,014 | -37 | -86 | 17 | -106 |
The additional paid-in capital is exempt from Dutch tax up to an amount of EUR 8,802m at 31 December 2022 (2021: EUR 9,282m).
Movements in the hedge reserve recorded in OCI are net of a tax loss of EUR 14m in 2022 (2021: EUR 9m loss) and in the currency translation reserve net of a tax gain of EUR 1m (2021: EUR 1m gain).
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Effective portion cash flow hedges1 | -23 | -61 |
| Amortizable part2 | -93 | -107 |
| Hedge reserve | -116 | -168 |
| Tax effect | 30 | 43 |
| Hedge reserve, net of tax | -86 | -125 |
KPN purchased shares in its own capital for delivery upon vesting of equity-settled share plans for management (see Note 5). Votes on purchased shares may not be cast and do not count in determining the number of votes required at a General Meeting of Shareholders. In 2022, 1 million shares were purchased for the equity-settled share plans (none in 2021). In 2022 and 2021, shares were sold in connection with vesting of these plans.
Treasury shares are accounted for at cost, representing the market price on the acquisition date. The proceeds at delivery of the treasury shares are recognized directly in the other reserves.
On 8 November 2019, KPN issued a EUR 500m hybrid bond with a 2.00% coupon and on 21 September 2022 a EUR 500m hybrid bond with a 6.00% coupon, both with a perpetual maturity. These bonds are classified as equity in the Consolidated Statement of Financial Position and valued at net proceeds (see Note 13.2).
", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-760": { "value": " Share capital Authorized capital stock totals EUR 720m divided into nine billion ordinary shares of EUR 4ct each and nine billion preference shares B of EUR 4ct each. At 31 December 2022, a total of 4,037,319,593 ordinary shares were outstanding and fully paid-in. Dutch law prohibits KPN from casting a vote on shares KPN holds (treasury shares). The ordinary shares and preference shares B carry the right to cast one vote each. The ordinary shares are registered or payable to the bearer. Shareholders may request the company to convert their registered shares to bearer shares, but not vice versa. Share buyback In 2021, KPN repurchased 73,684,157 ordinary shares at an average price of EUR 2.71, and in 2022 92,840,654 ordinary shares at an average price of EUR 3.23. Of these shares, 165,524,811 were cancelled in 2022, reducing the number of outstanding shares to 4,037,319,593. At the 13 April 2022 AGM, shareholders granted the Board of Management the authority to acquire the company\u2019s own ordinary shares for a period of 18 months - starting on 13 April 2022 and ending on 13 October 2023. The number of ordinary shares to be acquired is limited to a maximum of 10% of the issued capital per 13 April 2022. The shares may be acquired, by or on behalf of the company, on the stock exchange or through other means at a price per share of at least the par value and at most the quoted share price plus 10%. The quoted share price is defined as the average of the closing prices of KPN shares as reported in the official price list of Euronext Amsterdam over the five trading days prior to the acquisition date. Resolutions by the Board of Management to acquire the company\u2019s own shares are subject to the approval of the Supervisory Board. Ordinary shares purchased by the company will either be cancelled or held in treasury. At the 13 April 2022 AGM, shareholders granted the Board of Management the authority to reduce the issued capital by cancelling own shares with the approval of the Supervisory Board. The number of shares that may be cancelled is restricted to a maximum of 10% of the issued capital as at 13 April 2022 and may, if desired, be cancelled in one or more phases. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-763": { "value": "\u20ac\u00a0million, unless indicated otherwise Number of treasury shares Treasury shares reserve Hedge reserve Currency translation reserve Total Other reserves Balance at 1 January 2021 5,609,432 -65 -156 22 -199 Movements recorded in OCI (net) - - 31 -7 24 Share buyback 73,684,157 -200 - - -200 Sold treasury shares -1,643,571 17 - - 17 Balance at 31 December 2021 77,650,018 -248 -125 15 -358 Movements recorded in OCI (net) - - 39 2 41 Share buyback 92,840,654 -300 - - -300 Shares canceled -165,524,811 492 - - 492 Sold treasury shares -1,343,847 14 - - 14 Other - 5 - - 5 Balance at 31 December 2022 3,622,014 -37 -86 17 -106 Treasury shares reserve KPN purchased shares in its own capital for delivery upon vesting of equity-settled share plans for management (see Note 5). Votes on purchased shares may not be cast and do not count in determining the number of votes required at a General Meeting of Shareholders. In 2022, 1 million shares were purchased for the equity-settled share plans (none in 2021). In 2022 and 2021, shares were sold in connection with vesting of these plans. Treasury shares are accounted for at cost, representing the market price on the acquisition date. The proceeds at delivery of the treasury shares are recognized directly in the other reserves. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-954": { "value": "Treasury shares are accounted for at cost, representing the market price on the acquisition date. The proceeds at delivery of the treasury shares are recognized directly in the other reserves. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-767": { "value": " Dividend per share At the AGM of Shareholders on 12 April 2023, a final dividend of EUR 9.5ct per share will be proposed in respect of 2022. In August 2022, KPN paid an interim dividend in respect of 2022 of EUR 4.8ct per share, in total EUR 196m, bringing the total regular dividend in respect of 2022 to EUR 14.3ct per share (in total EUR 579m based on the number of outstanding shares at 31 December 2022 less Treasury shares held by KPN). These Financial Statements do not reflect the proposal for the remaining dividend payable. In April 2022, KPN paid a final dividend of EUR 9.1ct per share in respect of 2021, in total EUR 375m. The total dividend in respect of 2021 was EUR 13.6ct per ordinary share. 25 Proposed appropriation of result On outstanding Class B preferred shares, a dividend is paid out equal to the average of the 12-month Euribor increased by 1%. If the 12-month Euribor is no longer determined, the dividend on preference shares will be calculated based on the yield on state loans. Subsequently, subject to the approval of the Supervisory Board, the Board of Management will determine what proportion of net income remaining after payment of the dividend on any Class B preferred shares will be appropriated to the reserves. The part of the profit remaining after the appropriation to the reserves shall be at the disposal of the AGM. No Class B preferred shares were outstanding on 31 December 2022. The profit of the financial year 2022 that is attributable to equity holders of the company amounts to EUR 760m. On 4 August 2022, a regular interim dividend of EUR 4.8ct per ordinary share was paid (total amount of EUR 196m). On 23 February 2023, the Board of Management, with the approval of the Supervisory Board, appropriated EUR 181m of the profit 2022 to the other reserves. Taking into account the interim dividend that was paid in August 2022, the remaining part of the profit is available for payment of a final dividend in respect of 2022. The Board of Management, with the approval of the Supervisory Board, will propose to the AGM to pay a final regular dividend of EUR 9.5ct per ordinary share in respect of 2022 (in total EUR 383m based on the number of outstanding shares at 31 December 2022 less Treasury shares held by KPN). ", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-494": { "value": "0.095", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:EUR/xbrli:shares" } }, "ixv-495": { "value": "0.048", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:EUR/xbrli:shares" } }, "ixv-496": { "value": "0.091", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:EUR/xbrli:shares" } }, "ixv-769": { "value": "The Getronics US and UK operations were divested in 2008 and 2012, respectively. The closed and frozen pension plans of the former US and UK operations remained with KPN and are accounted for as a defined benefit plan. The assets of the plans are held separately from KPN in independently administered funds. The UK plan operates under the regulations of the UK Pensions Regulator and the US plan under the provisions of the Employee Retirement Income Security Act (ERISA). The deficit in the plans\u2019 funding must be recovered by the investment returns in the plans\u2019 assets and contributions by KPN. The pension plans in the UK and US expose KPN to a number of risks, which can have an impact on the future contributions by KPN and the liability recorded in its balance sheet. The most significant risks are summarized below:
Asset volatility risk: the pension plans\u2019 assets are partially invested in equity securities and other return-seeking assets, so the plans\u2019 funding levels are exposed to equity market risks. The war in the Ukraine and increases in interest rates, for example caused significant volatility in 2022.
Interest rate risk: a decrease in interest rates will increase the plans\u2019 liabilities, although this will be partially offset by an increase in the value of the plans\u2019 bond holdings.
Inflation risk: the indexation of part of the accrued benefits in the UK is based on a combination of consumer and retail price indices, so the UK plan is exposed to inflation risk although the indexation is capped.
Life expectancy risk: the plans provide benefits for the life of the participants, so increases in life expectancy will result in an increase in the plans\u2019 liabilities.
In the UK, guaranteed minimum pension (GMP) is a portion of pension that was accrued by individuals who were contracted out of the state second pension prior to 6 April 1997. At present there is an inequality of benefits between male and female members who have GMP. The High Court in the UK ruled in 2018 that equalization will be required for affected defined benefit pension schemes. A number of options can be used to equalize, which had not been finalized as at 31 December 2022. The estimated cost of equalization as at 31 December 2022 and 2021 for the UK plan is EUR 6m, which has been recognized as a past service cost in 2018. However, the cost to the UK plan for equalizing heavily depends on a complex interaction between the benefit design and membership profile as well as the method used to equalize, which must be determined by the trustees.
In 2022, an additional voluntary pension contribution of EUR 23m into the US plan was made. This will lead to lower contributions going forward and brings the plan closer to full funding and an eventual buyout.
KPN has a number of other funded (insured) plans in the Netherlands which are all closed to new entrants. Based on Dutch law, KPN could be required to make contributions if participants of these plans require a value transfer to another pension fund or insurer. However, the risk related to these value transfers is limited and therefore no provision has been recognized for these plans.
In 2021, a final payment of EUR 7m for the unfunded transitional early retirement plan was made. In 2022, a new early retirement plan was implemented for a limited group of employees for which an expense of EUR 1m was recorded in 2022.
The provisions for retirement benefit obligations consist of the net defined benefit liability regarding pension plans and early retirement plans, which are accounted for as defined benefit plans as described above. See the table below for a specification of the balance sheet position.
| \u00a0 | \u00a0 | Defined benefit obligation1 | Fair value of assets | Net defined benefit liability (asset) | |||
|---|---|---|---|---|---|---|---|
| \u20ac\u00a0million | \u00a0 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Balance at 1 January | \u00a0 | 574 | 651 | -482 | -499 | 92 | 152 |
| Included in profit or loss | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Operating expense2 | \u00a0 | -33 | -56 | 37 | 58 | 4 | 2 |
| Interest expense (income) | \u00a0 | 12 | 9 | -10 | -7 | 2 | 2 |
| Included in OCI | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Remeasurements loss (gain): | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Actuarial loss (gain)3 | \u00a0 | -141 | -32 | - | - | -141 | -32 |
| Return on plan assets excluding interest income | \u00a0 | - | - | 137 | -20 | 137 | -20 |
| Effect of movements in exchange rates | \u00a0 | -4 | 40 | 3 | -31 | -1 | 9 |
| Total | \u00a0 | -145 | 8 | 140 | -51 | -5 | -43 |
| Other | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Employer\u2019s contribution | \u00a0 | - | - | -43 | -21 | -43 | -21 |
| Benefits paid | \u00a0 | -28 | -38 | 28 | 38 | - | - |
| Balance at 31 December | \u00a0 | 380 | 574 | -330 | -482 | 49 | 92 |
The key actuarial assumptions used in the calculation of the defined benefit obligations are as follows:
| \u00a0 | 31 December 2022 | 31 December 2021 | ||||
|---|---|---|---|---|---|---|
| \u00a0 | Getronics UK | Getronics US | Other | Getronics UK | Getronics US | Other |
| Discount rate (%) | 4.8 | 4.9 | 3.7 | 2.0 | 2.6 | 1.0 |
| Expected salary increases (%) | N/a | N/a | 2.0 | N/a | N/a | 2.0 |
| Expected benefit increases/indexation (%) | 2.3-2.9 | N/a | 0.0 | 2.5-3.1 | N/a | 0.0 |
| Life expectancy for pensioners at retirement age: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| Male | 21.8 | 20.7 | 21.7 | 22.1 | 20.6 | 21.4 |
| Female | 23.8 | 22.6 | 23.8 | 24.1 | 22.6 | 23.4 |
The discount rate is based on yield curves of AA corporate bonds with maturities equal to the duration of the benefit obligations and in the applicable currency. As at 31 December 2022, the (weighted) average duration of the defined benefit obligation was 10 years.
Assumptions regarding life expectancy are based on published statistics and mortality tables that include allowances for future improvement in mortality. The mortality table used in the Netherlands is the projected table AG 2022, which includes projected improvement rates varying by year of birth, corrected for fund-specific circumstances. The mortality table used in the UK is the 102% for males and 107% for females of the SAPS S3PXA tables with CMI 2021 projection with a 1.25% long-term improvement, and in the US the Pri-2012 Total Dataset with Scale MP-2021. The life expectancy at the age of 65 is expected to increase in the next 20 years by between one and two years in the UK and the US.
The following table shows the approximate impact on the defined benefit obligation of a change in the key actuarial assumptions of 0.5% and in the case of life expectancy of a change of one year.
| \u00a0 | 31 December 2022 | 31 December 2021 | ||
|---|---|---|---|---|
| \u20ac\u00a0million | Increase | Decrease | Increase | Decrease |
| Discount rate | -18 | 20 | -35 | 39 |
| Expected salary increases | - | - | - | - |
| Expected benefit increases | 7 | -8 | 16 | -19 |
| Life expectancy | 13 | -14 | 26 | -26 |
The assets of all defined benefit pension plans as at 31 December 2022 and 2021 comprise of:
| \u00a0 | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Quoted in active markets: | \u00a0 | \u00a0 |
| Equity securities | 14% | 21% |
| Fixed-income securities | 55% | 41% |
| Real estate1 | 0% | 0% |
| Commodities2 | 1% | 1% |
| Other | 5% | 2% |
| Other: | \u00a0 | \u00a0 |
| Equity securities | 0% | 6% |
| Fixed-income securities | 0% | 10% |
| Real estate1 | 5% | 3% |
| Other3 | 20% | 16% |
The strategic asset allocations of the defined benefit plans at year-end 2022 were as follows:
| \u20ac\u00a0million | Getronics UK | Getronics US | Other plans |
|---|---|---|---|
| Equity securities | 20% | 0% | 0% |
| Fixed-income securities (including inflation-linked bonds) | 55% | 100% | 0% |
| Other | 25% | 0% | 100% |
| Total | 100% | 100% | 100% |
In both the UK and the US, a roadmap is in place to move to more fixed-income exposure as the funded status improves. The Getronics UK pension fund partially hedges interest rate and inflation risks. The Getronics US pension fund fully hedges interest rate risks. As the UK pension fund invests in global investment funds, a minor part of these investments could be related to KPN equities. The pension funds do not have direct investments in KPN equities.
In 2022, the total employer\u2019s contributions and benefit payments for all defined benefit and defined contribution plans amounted to EUR 122m, consisting of EUR 78m employer\u2019s premiums for defined contribution plans, EUR 43m contributions for funded defined benefit plans and EUR 1m payments for unfunded plans.
The amount of employer\u2019s contributions in 2023 for the remaining defined benefit pension plans is estimated to be EUR 17m for the funded plans. The total amount of employer\u2019s premiums to be paid in 2023 for the defined contribution plans is estimated to be EUR 81m.
The liability recognized in respect of all pension and early retirement plans that qualify as a defined benefit obligation is the present value of the defined benefit obligation less the fair value of plan assets. KPN uses actuarial calculations (projected unit credit method) to measure the obligations and the costs. For the calculation, actuarial assumptions are made about demographic variables (such as employee turnover and mortality) and financial variables (such as future indexation and the discount rate). The discount rate is determined by reference to market rates. These are interest rates of high-quality corporate bonds that are denominated in the currency in which the benefit will be paid and that have terms to maturity approximating the terms of the related liability. A net defined benefit asset may arise where a defined benefit plan has been overfunded. KPN recognizes a net defined benefit asset in such a case only when future economic benefits are available to KPN in the form of a reduction in future contributions or a cash refund. Actuarial gains and losses are recognized immediately in OCI.
Past service costs, curtailments and settlements are recognized immediately in the P&L.
The amount of pension costs included in operating expenses with respect to defined benefit plans consists of service cost, past service costs, curtailments and settlements, and administration costs. Net interest on the net defined benefit liability is presented as part of finance costs.
For pension plans that qualify as a defined contribution plan, KPN recognizes contributions as an expense when an employee has rendered service in exchange for those contributions.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Restructuring provision | 13 | 19 |
| Asset retirement obligations | 75 | 98 |
| Other provisions | 66 | 60 |
| Total provisions for other liabilities and charges | 154 | 177 |
| of which: non-current | 131 | 150 |
| of which: current | 23 | 27 |
| \u20ac\u00a0million | Personnel | Contractual | Total restructuring | Asset retirement obligation | Other provisions | Total provisions |
|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 18 | 2 | 19 | 94 | 76 | 189 |
| of which: current portion | 18 | - | 18 | 4 | 17 | 38 |
| Additions | 38 | - | 38 | 8 | 8 | 54 |
| Releases | - | - | - | -1 | -7 | -7 |
| Usage | -38 | - | -38 | -4 | -13 | -55 |
| Other movements, incl. discontinued operations | - | - | - | 1 | -5 | -3 |
| Balance at 31 December 2021 | 18 | 1 | 19 | 98 | 60 | 177 |
| of which: current portion | 18 | - | 18 | 2 | 7 | 27 |
| Transition impact IAS 371 | - | - | - | - | 14 | 14 |
| Additions | 23 | 1 | 24 | - | 1 | 25 |
| Releases | - | - | - | -20 | -3 | -24 |
| Usage | -29 | - | -30 | -2 | -7 | -40 |
| Other movements, incl. discontinued operations and new business combinations | - | - | - | -1 | 2 | 1 |
| Balance at 31 December 2022 | 11 | 2 | 13 | 75 | 66 | 154 |
| < 1 year | 11 | - | 12 | 3 | 8 | 23 |
| 1-5 years | - | 2 | 2 | 11 | - | 13 |
| > 5 years | - | - | - | 61 | 58 | 119 |
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts redundancy in exchange for these benefits.
Termination benefits are recognized when KPN is demonstrably committed either to terminating the employment according to a detailed formal plan without the possibility of withdrawal or to providing termination benefits as a result of an individual and accepted offer made to encourage redundancy. Benefits falling due more than 12 months after 31 December are discounted to present value.
The provision for asset retirement obligations (ARO) is based on assumptions of the estimated costs of removal, discount rate and estimated period of removal, which vary per type of asset. In 2022, EUR 20m was released from the ARO provision, mainly because of changes in the discount rates. Of this release, EUR 19m was recognised as a reduction of the carrying value of the activated asset retirement costs, which is included in plant and equipment.
As defined in the Telecommunications Act, the obligation for landlords to tolerate cables terminates as soon as those cables have been idle for a continuous period of 10 years. Because the date when the cables will become idle is uncertain and KPN is not able to predict whether and when a landlord will place a request for removal, KPN is not able to make a reliable estimate of the impact and therefore no provision was recognized at 31 December 2022 nor at 31 December 2021.
Includes provisions for claims and litigations, onerous contracts and warranties and provisions for long-term employee obligations related to jubilee or other long-service employee benefits, long-term disability benefits and, if they are not fully payable within 12 months after the end of the period, bonuses and deferred compensation. The expected costs of these benefits are accrued over the period of employment using an accounting method similar to that for defined benefit pension plans, except that actuarial gains and losses and past-service costs are recognized immediately in the P&L.
Provisions for asset retirement obligations, restructuring costs and legal claims are recognized when KPN has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote.
Provisions are measured at the present value of management\u2019s best estimate of the expenditure required to settle the present obligation at balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.
The liability recognized in respect of all pension and early retirement plans that qualify as a defined benefit obligation is the present value of the defined benefit obligation less the fair value of plan assets. KPN uses actuarial calculations (projected unit credit method) to measure the obligations and the costs. For the calculation, actuarial assumptions are made about demographic variables (such as employee turnover and mortality) and financial variables (such as future indexation and the discount rate). The discount rate is determined by reference to market rates. These are interest rates of high-quality corporate bonds that are denominated in the currency in which the benefit will be paid and that have terms to maturity approximating the terms of the related liability. A net defined benefit asset may arise where a defined benefit plan has been overfunded. KPN recognizes a net defined benefit asset in such a case only when future economic benefits are available to KPN in the form of a reduction in future contributions or a cash refund. Actuarial gains and losses are recognized immediately in OCI.
Past service costs, curtailments and settlements are recognized immediately in the P&L.
The amount of pension costs included in operating expenses with respect to defined benefit plans consists of service cost, past service costs, curtailments and settlements, and administration costs. Net interest on the net defined benefit liability is presented as part of finance costs.
For pension plans that qualify as a defined contribution plan, KPN recognizes contributions as an expense when an employee has rendered service in exchange for those contributions.
Provisions for asset retirement obligations, restructuring costs and legal claims are recognized when KPN has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote.
Provisions are measured at the present value of management\u2019s best estimate of the expenditure required to settle the present obligation at balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.
| \u20ac\u00a0million | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Restructuring provision | 13 | 19 |
| Asset retirement obligations | 75 | 98 |
| Other provisions | 66 | 60 |
| Total provisions for other liabilities and charges | 154 | 177 |
| of which: non-current | 131 | 150 |
| of which: current | 23 | 27 |
| \u20ac\u00a0million | Personnel | Contractual | Total restructuring | Asset retirement obligation | Other provisions | Total provisions |
|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 18 | 2 | 19 | 94 | 76 | 189 |
| of which: current portion | 18 | - | 18 | 4 | 17 | 38 |
| Additions | 38 | - | 38 | 8 | 8 | 54 |
| Releases | - | - | - | -1 | -7 | -7 |
| Usage | -38 | - | -38 | -4 | -13 | -55 |
| Other movements, incl. discontinued operations | - | - | - | 1 | -5 | -3 |
| Balance at 31 December 2021 | 18 | 1 | 19 | 98 | 60 | 177 |
| of which: current portion | 18 | - | 18 | 2 | 7 | 27 |
| Transition impact IAS 371 | - | - | - | - | 14 | 14 |
| Additions | 23 | 1 | 24 | - | 1 | 25 |
| Releases | - | - | - | -20 | -3 | -24 |
| Usage | -29 | - | -30 | -2 | -7 | -40 |
| Other movements, incl. discontinued operations and new business combinations | - | - | - | -1 | 2 | 1 |
| Balance at 31 December 2022 | 11 | 2 | 13 | 75 | 66 | 154 |
| < 1 year | 11 | - | 12 | 3 | 8 | 23 |
| 1-5 years | - | 2 | 2 | 11 | - | 13 |
| > 5 years | - | - | - | 61 | 58 | 119 |
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts redundancy in exchange for these benefits.
Termination benefits are recognized when KPN is demonstrably committed either to terminating the employment according to a detailed formal plan without the possibility of withdrawal or to providing termination benefits as a result of an individual and accepted offer made to encourage redundancy. Benefits falling due more than 12 months after 31 December are discounted to present value.
The provision for asset retirement obligations (ARO) is based on assumptions of the estimated costs of removal, discount rate and estimated period of removal, which vary per type of asset. In 2022, EUR 20m was released from the ARO provision, mainly because of changes in the discount rates. Of this release, EUR 19m was recognised as a reduction of the carrying value of the activated asset retirement costs, which is included in plant and equipment.
As defined in the Telecommunications Act, the obligation for landlords to tolerate cables terminates as soon as those cables have been idle for a continuous period of 10 years. Because the date when the cables will become idle is uncertain and KPN is not able to predict whether and when a landlord will place a request for removal, KPN is not able to make a reliable estimate of the impact and therefore no provision was recognized at 31 December 2022 nor at 31 December 2021.
Includes provisions for claims and litigations, onerous contracts and warranties and provisions for long-term employee obligations related to jubilee or other long-service employee benefits, long-term disability benefits and, if they are not fully payable within 12 months after the end of the period, bonuses and deferred compensation. The expected costs of these benefits are accrued over the period of employment using an accounting method similar to that for defined benefit pension plans, except that actuarial gains and losses and past-service costs are recognized immediately in the P&L.
Provisions for asset retirement obligations, restructuring costs and legal claims are recognized when KPN has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote.
Provisions are measured at the present value of management\u2019s best estimate of the expenditure required to settle the present obligation at balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.
| \u20ac\u00a0million | Less than 1 year | 1-5 years | More than 5 years | Total 31 December 2022 | Total 31 December 2021 |
|---|---|---|---|---|---|
| Capital and purchase commitments | 799 | 268 | 7 | 1,074 | 1,291 |
| Guarantees and other | 3 | - | 132 | 135 | 131 |
| Total commitments | 802 | 269 | 139 | 1,209 | 1,422 |
The capital and purchase commitments mainly relate to minimum contractual obligations with regard to network operations, mobile handsets and telco services, and lease contracts that have not yet commenced.
Guarantees consist of financial obligations of group companies under certain contracts guaranteed by KPN. A total amount of EUR 135m relates to parent guarantees (2021: EUR 131m). The table presented above does not include KPN's commitment on share premium contributions regarding Glaspoort of EUR 163m (31 December 2021: EUR 187m). See Note 12.
KPN is involved in a number of legal and tax proceedings that have arisen in the ordinary course of its business and in discontinued operations, including commercial, regulatory or other proceedings. KPN periodically carefully assesses the likelihood that legal and tax proceedings may lead to a cash outflow and recognizes provisions in such matters if and when the chance of a cash outflow is estimated as probable and a reliable estimate of the cash outflow can be made. When these criteria are not met, such matters are classified as contingent liabilities, unless the cash outflow is considered remote.
However, the outcome of such proceedings can be difficult to predict with certainty and KPN can offer no assurances in this regard. In some cases, the impact of a legal proceeding may be more strategic than financial and such impact cannot properly be quantified. Below is a description of legal related contingent liabilities that could have a material impact for KPN.
See Note 18 for a contingent liability related to idle cables and the accounting policy of provisions.
In KPN\u2019s Articles of Association and in a further decision by the Board of Management, which was approved by the Supervisory Board, KPN has indemnified the members and former members of KPN\u2019s Board of Management and Supervisory Board, as well as a number of KPN\u2019s officers and directors and former officers and directors, against liabilities, claims, judgments, fines and penalties incurred by such officer or director as a result of any threatened, pending or completed action, investigation or proceeding (whether civil, criminal or administrative) brought by a third party in relation to acts or omissions in or related to their capacity as officer or director.
The indemnification does not apply to claims and expenses reimbursed by insurers nor to an officer or a director adjudged to be liable for willful misconduct (\u2018opzet\u2019) or intentional recklessness (\u2018bewuste roekeloosheid\u2019).
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-958": { "value": " Restructuring provisions Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts redundancy in exchange for these benefits. Termination benefits are recognized when KPN is demonstrably committed either to terminating the employment according to a detailed formal plan without the possibility of withdrawal or to providing termination benefits as a result of an individual and accepted offer made to encourage redundancy. Benefits falling due more than 12 months after 31 December are discounted to present value. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTerminationBenefits", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-787": { "value": " Asset retirement obligations The provision for asset retirement obligations (ARO) is based on assumptions of the estimated costs of removal, discount rate and estimated period of removal, which vary per type of asset. In 2022, EUR 20m was released from the ARO provision, mainly because of changes in the discount rates. Of this release, EUR 19m was recognised as a reduction of the carrying value of the activated asset retirement costs, which is included in plant and equipment. As defined in the Telecommunications Act, the obligation for landlords to tolerate cables terminates as soon as those cables have been idle for a continuous period of 10 years. Because the date when the cables will become idle is uncertain and KPN is not able to predict whether and when a landlord will place a request for removal, KPN is not able to make a reliable estimate of the impact and therefore no provision was recognized at 31 December 2022 nor at 31 December 2021. Accounting policy: Provisions for other liabilities and charges Provisions for asset retirement obligations, restructuring costs and legal claims are recognized when KPN has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote. Contingent liabilities KPN is involved in a number of legal and tax proceedings that have arisen in the ordinary course of its business and in discontinued operations, including commercial, regulatory or other proceedings. KPN periodically carefully assesses the likelihood that legal and tax proceedings may lead to a cash outflow and recognizes provisions in such matters if and when the chance of a cash outflow is estimated as probable and a reliable estimate of the cash outflow can be made. When these criteria are not met, such matters are classified as contingent liabilities, unless the cash outflow is considered remote. However, the outcome of such proceedings can be difficult to predict with certainty and KPN can offer no assurances in this regard. In some cases, the impact of a legal proceeding may be more strategic than financial and such impact cannot properly be quantified. Below is a description of legal related contingent liabilities that could have a material impact for KPN. Idle cables See Note 18 for a contingent liability related to idle cables and the accounting policy of provisions. Indemnification In KPN\u2019s Articles of Association and in a further decision by the Board of Management, which was approved by the Supervisory Board, KPN has indemnified the members and former members of KPN\u2019s Board of Management and Supervisory Board, as well as a number of KPN\u2019s officers and directors and former officers and directors, against liabilities, claims, judgments, fines and penalties incurred by such officer or director as a result of any threatened, pending or completed action, investigation or proceeding (whether civil, criminal or administrative) brought by a third party in relation to acts or omissions in or related to their capacity as officer or director. The indemnification does not apply to claims and expenses reimbursed by insurers nor to an officer or a director adjudged to be liable for willful misconduct (\u2018opzet\u2019) or intentional recklessness (\u2018bewuste roekeloosheid\u2019). ", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-962": { "value": "Accounting policy: Provisions for other liabilities and charges Provisions for asset retirement obligations, restructuring costs and legal claims are recognized when KPN has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When these criteria are not met, these positions are classified as contingent liabilities, unless the cash outflow is considered remote. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-965": { "value": "Accounting policy: Leases KPN as lessee Lease liabilities At the commencement date of a lease (i.e. the date on which the underlying asset of the lease is available for use by KPN), KPN recognizes a lease liability measured at the present value of future lease payments to be made over the term of the lease. This includes fixed fees (including in-substance fixed payments), lease incentives (such as rent-free periods or fee discounts), variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. KPN does not have purchase options to be taken into account. Penalties for early termination of a lease are not included when KPN is reasonably certain that the related early termination will not take place. All contracts of KPN that contain variable lease payments depend on a consumer price index or a rate. However, should other types of fees occur, these variable fees will be accounted for in the operating expenses. After the commencement date, the lease liabilities increase due to the accrual of interest and decrease due to the payments of the fees due. The lease liabilities are remeasured when a change occurs in the fees due, the lease term deemed reasonably certain and/or changes to the scope of a lease. Upon remeasurement of the lease liability of a contract, the applied discount rate (incremental borrowing rate) is revised unless the remeasurement relates to a fee change following a change in consumer price index or rate. The total lease liability recognized is split into a non-current and a current portion. The current lease liabilities reflect only the part of the payments due within one year related to the repayment of the total lease liabilities. Lease term KPN determined the lease term as the non-cancellable term of a contract together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised. KPN applies judgment when assessing if the use of an option is reasonably certain. Factors included are KPN\u2019s asset and network strategy, technological developments, and other circumstances that may impose an economic incentive affecting the expected use of an underlying asset. For vehicles, renewal options are not included in the initial assessment of the lease term as KPN\u2019s policy prescribes the return of vehicles to the lessor at the end of the lease term. After the commencement of a lease, KPN reassesses the lease term if there is a significant event or change in circumstances that is within KPN\u2019s control and effects KPN\u2019s ability to exercise or not to exercise the option to renew or to terminate a lease. Incremental borrowing rate The implicit discount rates of KPN\u2019s leases are not readily available, with the exception for vehicles. KPN applies its applicable incremental borrowing rate to determine the discounted value of the lease liabilities. Upon modification of a lease, the lease liability is remeasured using the applicable discount rate at the date of the remeasurement. KPN\u2019s incremental borrowing rates are mainly determined using a risk-free rate combined with a spread reflecting KPN\u2019s credit risk. The applicable rate per contract is primarily dependent on the total expected term of a lease at its commencement date (new leases) or the total expected remaining lease term in case of a remeasurement of a lease. Right-of-use assets Right-of-use assets are recognized at commencement date of a lease as counterpart to the lease liabilities. The right-of-use assets are measured at cost, less accumulated depreciation and impairment losses, and adjusted for any remeasurement in the corresponding lease liabilities. The cost of the right-of-use assets includes the initially recognized amount of the corresponding lease liabilities, initial direct costs incurred in obtaining the lease (if any) and lease payments made at or before commencement of the lease. Lease incentives received are deducted from the carrying value of the right-of-use assets. The right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life of the underlying asset and the lease term. Right-of-use assets are subject to impairment. Short-term leases and leases of low-value assets KPN does not apply the practical expedients for low-value leases (leases of an underlying asset with a value of less than EUR 5,000) and short-term leases (leases with a total expected term of less than 12 months) except for short-term rental vehicles. Regarding vehicle leases, KPN applies the practical expedient not to separate non-lease components from lease components. Therefore, the full monthly lease fees are reflected in KPN\u2019s Statement of Financial Position. For all types of leased assets, electricity and fuel-related expenses remain part of operating expenses. KPN as lessor Leases where KPN as lessor retains a significant portion of the risk and rewards of ownership of the lease asset are classified as operating leases. The assets remain on the balance sheet and are depreciated over the assets\u2019 useful life. Lease payments received from lessees are recognized as revenue on a straight-line basis over the lease period. If KPN acts as a lessor in a finance lease, the transaction is accounted for as a normal sale and the present value of the lease payments is recognized as a receivable. The difference between the gross receivable and the present value of the receivable is deferred and recognized as interest over the lease term. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-807": { "value": "Trade and other payables \u00a031 December 2022 31 December 2021 \u20ac\u00a0million Current Non-current Current Non-current Trade payables 591 - 514 - Accrued interest 52 - 77 - Accrued expenses 286 - 338 - Social security and other taxes payable 184 - 220 - Other payables 28 8 26 8 Total 1,140 8 1,176 8 Some of KPN\u2019s suppliers participate in Supplier Finance Programs giving suppliers the opportunity to receive earlier payment (from a financial institution), without modifying KPN\u2019s payment terms, or providing KPN an extended payment period. As the payment terms under these programs do not materially deviate from customary payment terms in the industry or from the terms agreed with suppliers who do not participate in these programs, the relating liabilities are classified as trade and other payables, and payments are classified as operating cash flow. The Supplier Finance Programs do not impact covenants or KPN\u2019s access to (future) borrowings from financial institutions. As at 31 December 2022, the total amount of payables under the three Supplier Finance Programs amounted to EUR 205m (2021: EUR 141m). Accounting policy: Contract liabilities, trade and other payables Trade and other payables are classified as \u2018borrowings\u2019 within KPN\u2019s financial liabilities. For the accounting policy, see Note 13. For the accounting policy regarding contract liabilities, see Note 4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-808": { "value": "Trade and other payables \u00a031 December 2022 31 December 2021 \u20ac\u00a0million Current Non-current Current Non-current Trade payables 591 - 514 - Accrued interest 52 - 77 - Accrued expenses 286 - 338 - Social security and other taxes payable 184 - 220 - Other payables 28 8 26 8 Total 1,140 8 1,176 8 Accounting policy: Contract liabilities, trade and other payables Trade and other payables are classified as \u2018borrowings\u2019 within KPN\u2019s financial liabilities. For the accounting policy, see Note 13. For the accounting policy regarding contract liabilities, see Note 4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-970": { "value": "Accounting policy: Contract liabilities, trade and other payables Trade and other payables are classified as \u2018borrowings\u2019 within KPN\u2019s financial liabilities. For the accounting policy, see Note 13. For the accounting policy regarding contract liabilities, see Note 4. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:549300YO0JZHAL7FVP81", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "ixv-972": { "value": "KPN uses the acquisition method to account for business combinations. The consideration paid is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. When a business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in the P&L.
Contingent considerations are recognized at fair value at acquisition date and subsequent changes to the fair value are recognized in the P&L. Contingent considerations classified as equity are not remeasured and subsequent settlement is counted for within equity.
For each business combination, KPN elects to recognize any non-controlling interest in the acquiree either at fair value or at the proportionate share in the acquiree\u2019s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration paid, non-controlling interests recognized and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of KPN\u2019s share of the net assets acquired is recorded as goodwill. If negative goodwill occurs (bargain purchase), the difference is recognized directly in the P&L.