3. Summary of significant accounting policies

Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which NORMA Group has control. NORMA Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of an investee begins on the date on which the Group obtains control over the Company. It ends when the Group loses control over the investee.

Intercompany transactions, balances and unrealized gains or losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The Group uses the acquisition method of accounting to account for business combinations. The initial value for the acquisition of a subsidiary is recognized at fair value of the assets transferred, the liabilities incurred on the acquisition date and the equity interests issued by the Group. The initial value recognized includes the fair value of any asset or liability resulting from a contingent consideration arrangement. On the acquisition date, the fair value of the contingent consideration is recognized as part of the consideration transferred in exchange for the acquiree. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the acquisition date. In accordance with IFRS 3, for every business combination there is an option to measure all non-controlling interests in the acquired company either at fair value, i.e., including the goodwill attributable to these interests (“fair value option”), or at the corresponding proportion of the identifiable net assets of the acquired company. The Group

measures the non-controlling interest in the acquiree at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired, is recognized as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized in profit or loss immediately in the Consolidated Statement of Comprehensive Income.

In a business combination achieved in stages, the Group remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in profit or loss.

(b) Non-controlling interests

Non-controlling interests have a share in the earnings of the reporting period. Their interests in the shareholders’ equity of subsidiaries are reported separately from the equity of the Group.

The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying amount of net assets of the subsidiary is recognized in equity.

(c) Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the subsidiary is remeasured at its fair value, with the change in the carrying amount recognized in profit or loss. The initial carrying amount is the fair value for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This means that an amount previously recognized in the currency translation reserve is reclassified to profit or loss as part of the gain or loss on disposal. In the case of only partial disposal without loss of control of a subsidiary that includes a foreign operation, the corresponding portion of the cumulative translation difference is allocated to non-controlling interests.

Valuation methods

The following table shows the most important valuation methods that form the basis for the preparation of the Consolidated Financial Statements:

Fair value estimation

For financial instruments that are measured in the Statement of Financial Position at fair value in accordance with IFRS 13, IFRS 7 requires a disclosure of fair value measurements by level using the following fair value measurement hierarchy. This comprises three levels:

Level 1:

Level 2:

Level 3:

The level in the fair value hierarchy within which the fair value measurement is categorized in total is determined on the basis of the lowest level input that is significant to the fair value measurement in total. The different hierarchy levels demand different amounts of disclosure.

Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The Consolidated Financial Statements are prepared in euros (EUR), which is the functional currency for NORMA Group SE and the presentation currency for the Group.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the actual exchange rates on the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within “financial income/costs”. All other foreign exchange gains and losses are presented in profit or loss within “other operating income/expenses”.

(c) Group companies

The financial position, financial performance and cash flows of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

•Assets and liabilities for each Consolidated Statement of Financial Position presented are translated at the closing rate on the date of that Consolidated Statement of Financial Position;

•Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the actual rate on the dates of the transactions); and

•All resulting exchange differences are recognized as a separate component of equity.

Goodwill and fair value adjustments arising through the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary on the date of acquisition. Goodwill from the acquisition of subsidiaries is included in the statement of financial position under “Goodwill”. It is tested for impairment at least once a year and additionally when there are indications of possible impairment (trigger events) and recognized at cost less any impairment losses. Impairment losses on goodwill may not be reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

(b) Development costs

Costs of research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are expensed as incurred.

Costs for development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, are capitalized if:

•Development costs can be measured reliably

•The product or process is technically and commercially feasible, and

•Future economic benefits are probable.

In addition, NORMA Group must have the intention and sufficient resources to complete the development and to use or sell the asset. Capitalized costs include the cost of materials, direct labor and other directly attributable costs if these serve to prepare for the use of the asset. The capitalized costs are reported in the statement of comprehensive income under “Other own work capitalized”. The company recognizes capitalized development costs at production cost less accumulated amortization and impairment losses with an amortization period of generally three to five years. Development costs that do not meet the criteria are expensed as incurred.

(c) Other intangible assets

Other intangible assets acquired separately are recognized at acquisition or production cost less accumulated amortization. Intangible assets acquired in a business combination are recognized at fair value at the time of acquisition. Other intangible assets with a finite useful life are amortized over their expected useful life. Amortization is calculated using the straight-line method to allocate the cost of acquisition or production. Other intangible assets with an indefinite useful life and intangible assets not yet ready for use are not amortized but tested for impairment at least once a year. Furthermore, other intangible assets with an indefinite useful life are reviewed annually to determine whether the events and circumstances that justify the assessment of an indefinite useful life continue to exist for these assets.

In general, the Group’s other intangibles are not qualifying assets in accordance with IAS 23 and there are therefore no borrowing costs eligible for capitalization.

The useful lives of other intangible assets acquired in a business combination are estimates based on the economics of each specific asset, which were determined in the process of the purchase price allocation. The major part of these assets are brand names and customer lists.

Other intangible assets with indefinite useful lives are primarily brand names, for which the end of usability is not foreseeable and therefore indeterminable. These brand names are assumed from a market perspective to have an indefinite useful life, as they are well-established in the market and there is no foreseeable end to their usefulness, making it impossible to determine their useful life.

Property, plant and equipment

Property, plant and equipment is recognized at cost less depreciation and any impairment losses. Acquisition or production costs include the costs directly attributable to the acquisition or production of the item of property, plant and equipment as well as appropriate portions of production-related overheads. It also includes the present value of the estimated costs of dismantling and removing the asset and restoring the site on which it is located, if any. There were no borrowing costs to be capitalized as defined in IAS 23.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is foreseeable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. Costs of major overhauls that meet certain recognition criteria are capitalized as a component of property, plant and equipment or right-of-use assets and depreciated over the appropriate maintenance cycle. All other repairs and maintenance expenses are charged to profit or loss during the financial period in which they are incurred.

Land is not depreciated. Other assets are depreciated using the straight-line method, under which the acquisition or production costs are distributed over the estimated useful life until the residual value is reached.

The residual value and useful life of the assets are reviewed on the reporting date and adjusted if necessary.

Leasing activities of the Group and their accounting treatment

Leases are recognized as a right-of-use asset and corresponding lease liability at the time the leased asset is available for use by the Group. The lease installment is divided into repayment and financing expenses. The financing expenses are recognized in profit or loss over the term of the lease. The right-of-use asset is depreciated on a straight-line basis over the shorter of the useful life and the term of the lease.

Right-of-use assets and lease liabilities are initially recognized at present value. The lease liabilities generally include the present value of the following lease payments:

•Fixed payments (including de facto fixed payments, less any leasing incentives to be received)

•Variable lease payments linked to an index or interest rate

•Expected residual value payments from residual value guarantees of the lessee

•The exercise price of a purchase option, if it is sufficiently certain that the lessee will exercise it

•Penalties for terminating the lease, if the lease term takes into account that the lessee will exercise a termination option

The lease payments are discounted at the interest rate underlying the lease if this can be determined. Otherwise, they are discounted at the lessee’s incremental borrowing rate. Right-of-use assets are measured at cost, which is composed as follows:

•Amount of the initial measurement of the lease liability

•All lease payments made at or before the commencement date, less any lease incentives received

•All initial direct costs incurred by the lessee, and

•The estimated costs incurred by the lessee in dismantling or removing the underlying asset, restoring the site on which it is located, or returning the underlying asset to the condition required by the lease agreement

Exceptions in the form of accounting options exist for short-term leases (maximum term of twelve months if no purchase option has been agreed) and for low-value assets. The lease payments resulting from these leases will therefore remain operating expenses in the future. Furthermore, lessees are granted an accounting option not to separate lease and non-lease components.

i. Extension and termination options

When determining the term of leases, all facts and circumstances that provide an economic incentive to exercise extension options or not to exercise termination options are taken into account. Term changes resulting from the exercise of extension and termination options are only included in the lease term if an extension or non-exercise of a termination option is reasonably certain.

The following considerations are taken into account when determining the term of the leases or the inclusion or non-inclusion of extension and termination options:

Contract-related

•Existence of renewal or purchase options and their conditions

•An obligation to dismantle installations or return them to their original condition

•Amount of lease payments (including all variable payments) for an optional period compared to customary market payments

Asset-based/Company-based

•The existence of significant leasehold improvements that would be lost in the event of (premature) termination or non-extension of the contract

•Costs in connection with a loss of production upon termination of the lease

•Costs associated with the acquisition of an alternative asset

•Dependence of the business activity (core business) on the continued use of the asset

•Financial consequences of the extension or termination of the lease

•Nature of the leased asset (specific vs. generic/general leased asset; extent to which the leased asset is critical to the lessee’s operations)

Market-related

•Legal and local regulations to be observed for the (permanent) obligation

•Alternative lease payments for comparable assets

The assessment will be reviewed if a material event or material change in circumstances occurs that could influence the previous assessment, provided this is within the lessee’s control.

Impairment of non-financial assets

(a) Assets with determinable useful lives

Assets with a determinable useful life must be tested for impairment if there are indications of possible impairment. If there are indications of impairment, the amortized carrying amount of the asset is compared with the recoverable amount, which represents the higher of fair value less costs to sell and value in use. The value in use equates to the present value of the future cash flows expected to arise from the continuing use of the asset. In order to test for impairment, assets are grouped into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows from other assets or cash-generating units. In the event of impairment, the difference between the amortized carrying amount and the lower recoverable amount is recognized as an expense. As soon as there are indications that the reasons for impairment no longer exist, impairment losses are reversed. These may not exceed the amortized cost.

(b) Goodwill and assets with indefinite useful lives

Other intangible assets with an indefinite useful life, other intangible assets not yet ready for use or advance payments on them and acquired goodwill are subject to an annual impairment test. An impairment test is also carried out if events or circumstances arise that indicate a possible impairment. If the reasons for impairment no longer exist, impairment losses are reversed – except in the case of goodwill. The recoverable amount is determined for each individual asset, unless an asset generates cash inflows that are not largely independent of those from other assets or other groups of assets or cash-generating units. In these cases, the impairment test is carried out at the relevant level of cash-generating units to which the asset is allocated.

Goodwill acquired in a business combination is allocated at the acquisition date to the cash-generating unit or group of cash-generating units that is expected to benefit from the synergies of the business combination. This also represents the lowest level at which goodwill is monitored for internal corporate management purposes. These are the operating and reportable segments EMEA, Americas and Asia-Pacific.

The Group normally determines the recoverable amount using measurement methods based on discounted cash flows.

Brand names with indefinite useful lives acquired in business combinations are tested for impairment at the level at which there is a recoverable amount. This is based on the fair value less the costs of sale, which is determined using the relief-from-royalty method.

For cash-generating units, NORMA Group first determines the relevant recoverable amount as fair value less costs to sell, which it compares with the respective carrying amounts, including allocated goodwill in the case of impairment tests on goodwill. For further information regarding the calculation of the fair value less the costs of sale and the underlying key assumptions, please refer to NOTE 18 – GOODWILL AND OTHER INTANGIBLE ASSETS.

Inventories

Inventories are recognized at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost is determined using the average cost method. The cost of finished goods and work in progress comprises the cost of product design, raw materials and supplies, direct labor, other directly attributable costs and attributable production overheads (at normal operating capacity). The Group’s inventories are not qualifying assets in accordance with IAS 23, meaning that the acquisition or production costs do not include any borrowing costs to be capitalized.

Financial instruments

(a) Financial assets

Classification

The Group classifies its financial assets in the following measurement categories:

•Debt instruments measured at amortized cost (AC)

•Debt instruments measured at fair value through other comprehensive income (FVOCI), with cumulative gains and losses reclassified to the income statement when the financial asset is derecognized

•Debt, derivative and equity instruments measured at fair value through profit or loss (FVTPL)

•Equity instruments classified as FVOCI, with gains and losses remaining in other comprehensive income (OCI) (without reclassification)

The classification of debt instruments depends on the business model NORMA Group uses to manage its financial assets and the characteristics of the contractual cash flows of these financial assets.

NORMA Group reclassifies debt instruments only when the business model for managing such financial assets changes.

Recognition and derecognition

Regular purchases and sales of financial assets are recognized on the trade date – the date on which the Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows have expired or been transferred and the Group has transferred substantially all risks and rewards of ownership.

Measurement

Financial assets are initially recognized at fair value plus transaction costs for all financial assets not measured at fair value through profit or loss.

Debt instruments

The subsequent remeasurement of debt instruments depends on the Group’s business model for managing the financial asset and on the cash flow characteristics of the financial asset.

A debt instrument is measured at amortized cost if the objective of the business model is to hold the financial asset in order to collect the contractual cash flows and the contractual cash flows from the financial asset represent only principal and interest payments and the fair value option is not exercised at initial recognition. Interest income from these financial assets is recognized in financial income using the effective interest method. Gains and losses from derecognition, impairment and currency translation are recognized directly in the Consolidated Statement of Comprehensive Income and reported in other operating income/expenses.

A debt instrument that is held in a business model in which both the contractual cash flows of financial assets are collected and financial assets are sold and in which the contractual cash flows include only principal and interest payments is measured at fair value through other comprehensive income unless the fair value option is exercised at initial recognition. Changes in the carrying amounts are recognized in other comprehensive income, with the exception of impairment income or expenses, interest income and gains and losses from currency translation, which are recognized directly in the Consolidated Statement of Comprehensive Income. When the financial asset is derecognized, the cumulative gain or loss recognized in other comprehensive income is reclassified from equity to the Consolidated Statement of Comprehensive Income. Interest income from these financial assets is recognized in financial income using the effective interest method. Gains and losses from currency translation are recognized

directly in the Consolidated Statement of Comprehensive Income and reported under other operating income/expenses.

The impairment losses recognized in the Consolidated Statement of Comprehensive Income are disclosed separately in the section “Notes to the Consolidated Statement of Financial Position.”

All other debt instruments that do not meet these two conditions must be measured at fair value through profit or loss (FVTPL).

Equity instruments

All equity instruments are subsequently measured at fair value. If an equity instrument is not held for trading purposes, NORMA Group may, at the time of initial recognition, make the irrevocable decision to measure it at fair value with recognition of changes in value in other comprehensive income (FVTOCI), whereby only income from dividends is recognized in profit or loss for the period unless it represents a capital repayment.

Changes in the fair value of financial assets at fair value through profit or loss are recognized in the Consolidated Statement of Comprehensive Income under other operating income/expenses.

Impairments

NORMA Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments, which are measured at amortized cost or at fair value through other comprehensive income.

The Group has three types of financial assets subject to this model:

•Trade receivables from the sale of goods and the rendering of services,

•Contract assets from research and development activities; and

•Other debt instruments measured at amortized cost.

In the case of trade receivables and contract assets, NORMA Group applies the simplified approach provided for in IFRS 9, which requires the recognition of expected credit losses over the term of the receivables from their initial recognition; further details can be found in NOTE 21 (A) – TRADE AND OTHER RECEIVABLES.

Receivables that are significantly overdue, that can be more than 180 days due to the customer structure, or those whose debtors were subject to insolvency or similar proceedings, are individually tested for impairment.

The criteria that the Group uses to determine if there is objective evidence of impairment include:

•A breach of contract, such as a default or delinquency in interest or principal payments

•The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider

•It becomes probable that the borrower will enter bankruptcy or other financial reorganization

Receivables that are not reasonably expected to be realized in full or in part are written down accordingly, which directly reduces the gross carrying amount. NORMA Group excludes cash and cash equivalents, other debt instruments measured at amortized cost such as receivables from the ABS program and factoring (both due to purchase price retentions) and other receivables, mainly bills guaranteed by banks, from the application of the three-stage credit risk provisioning model, as these are exclusively high-quality assets from issuers with a minimum investment grade rating in order to minimize the risk of credit losses. These assets are therefore

allocated to the first stage of the credit risk provisioning model and, if material, valuation allowances are recognized in the amount of the twelve-month expected credit losses. These allowances are calculated on the basis of the risk position on the respective reporting date, the loss ratio for this risk position and the credit default swap spread as a measure of the probability of default. Although NORMA Group only invests in assets with at least an investment grade rating, the development of credit default swap premiums is monitored by market participants as a measure of a debtor’s credit rating. In this way, changing risk structures of contractual partners can be recognized and any changes can be responded to promptly.

(b) Financial liabilities

Financial liabilities primarily include trade and other payables, liabilities to banks, derivative financial liabilities and other liabilities.

Financial liabilities that are measured at amortized cost

After initial recognition, financial liabilities are carried at amortized cost using the effective interest method. Trade and other payables, liabilities to banks and other financial liabilities, in particular, are assigned to this category.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include derivative financial instruments and contingent purchase price liabilities. Gains or losses on financial liabilities that are measured at fair value through profit or loss are included in profit or loss.

(c) Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date the derivative contract is entered into and subsequently remeasured at fair value. The method for recognizing the resulting gain or loss depends on whether the derivative is held for hedging purposes and – in this case – on the type of underlying transaction being hedged.

Derivative financial instruments not designated as hedges

Gains and losses from derivatives that are not designated as hedges (trading derivatives) are recognized in profit or loss. Trading derivatives are classified as non-current assets or liabilities in accordance with IAS 1.68 and IAS 1.71 if they have a remaining term of more than one year; otherwise, they are classified as current.

Derivative financial instruments designated as hedges

Derivatives included in hedge accounting are generally designated as either:

•Hedges of the fair value of recognized assets or liabilities or firm commitments (fair value hedge)

•Hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge)

•Hedges of a net investment in a foreign operation (net investment hedge)

At the inception of the transaction, NORMA Group documents the relationship between the hedging instruments and the hedged item, including whether changes in the cash flows of the hedging instruments offset changes in the cash flows of the hedged item. The Group documents the risk management objectives and strategies for undertaking the hedging transaction.

Further information on the hedging instruments used by the Group can be found in NOTE 5 – FINANCIAL RISK MANAGEMENT and NOTE 21 (F) – DERIVATIVE FINANCIAL INSTRUMENTS.

The development of the hedging reserve in equity can be found in NOTE 21 (F) – DERIVATIVE FINANCIAL INSTRUMENTS.

(d) Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount is reported in the Consolidated Statement of Financial Position when there is a legally enforceable right to offset the recognized amounts and an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. At NORMA Group, arrangements exist which do not meet the criteria for netting in the Consolidated Statement of Financial Position according to IAS 32.42, as they allow netting only in the case of future events such as default or insolvency on the part of the Group or the counterparty.

Current and deferred income tax

Income tax is recognized in profit or loss unless it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

The current income tax expense is determined on the basis of the tax regulations applicable on the reporting date in the countries in which the Company’s subsidiaries operate. Management regularly assesses the items reported in the tax returns with regard to situations in which the relevant tax regulations are subject to interpretation. Where necessary, management recognizes provisions based on the amounts expected to be payable to the tax authorities. The amount of the expected tax liability or tax receivable reflects the amount that is the best estimate, taking into account tax uncertainties, if any.

Deferred income taxes are recognized using the balance sheet liability method for temporary differences between the tax base of assets and liabilities and their carrying amounts in the Consolidated Financial Statements as well as for tax loss carryforwards and unused tax credits. Deferred income taxes are measured using the tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. A surplus of deferred income tax assets is recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, unless the Group is able to determine the timing of the reversal of the temporary differences and it is probable that the temporary differences will not be reversed in the foreseeable future.

The Group applies the temporary simplification rules with regard to the tax calculation method resulting from the introduction of global minimum taxation. The calculated tax expense for the supplementary tax in connection with the global minimum taxation, which will be payable for 2025, therefore amounts to EUR 0 thousand (2024: EUR 0 thousand).

Employee benefits

(a) Pension obligations

The Group companies maintain various pension plans. NORMA Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions to an independent entity. The Group has no legal or constructive obligation to pay further amounts if the funds do not have sufficient assets to pay all the benefits relating to employee service in the reporting period and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. The largest defined benefit plan is the German Pension Plan, under which the amount of pension benefit that employees receive in retirement is based on factors such as years of service and remuneration.

The liability for defined benefit plans recognized in the Consolidated Statement of Financial Position is the present value of the defined benefit obligation on the reporting date less the fair value of the plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates for high-quality fixed-interest corporate bonds that are denominated in the currency in which the benefits are paid and whose remaining terms to maturity approximate the terms of the related pension obligations.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions, as well as returns on plan assets, which are not included within the net interest on the defined benefit liability, are recognized within retained earnings in other comprehensive income (OCI).

Past service costs are recognized fully in the period of the related plan amendment.

As part of defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Once the contributions have been paid, the Group has no further payment obligations. The contributions are recognized as employee benefit expenses when they fall due. Contributions already paid are recognized as an asset if the prepayment will result in a cash refund or a reduction in future payments.

(b) Termination benefits

Termination benefits are payable if the employment relationship is terminated by the Group before the normal retirement date or if an employee voluntarily agrees to redundancy in exchange for these benefits. The Group recognizes termination benefits as a liability and expense at the earlier of: (a) when the Group can no longer withdraw the offer of such benefits or (b) when the Group recognizes restructuring costs that fall within the scope of IAS 37 and include the payment of termination benefits. If material, benefits that fall due more than twelve months after the reporting date are discounted to present value.

(c) Short-term employee benefits

Employee benefits with short-term payment dates include wages and salaries, social security contributions, vacation pay and sickness benefits and are recognized as liabilities at the repayment amount as soon as the associated job has been performed.

(d) Provisions for other long-term employee benefits

Provisions for obligations similar to pensions (such as anniversary bonuses) comprise the present value of future payments to be made to employees less any related assets measured at fair value. The amount of the provisions is determined using actuarial reports in accordance with IAS 19. Gains and losses from remeasurement are recognized in profit or loss in the period in which they arise.

Share-based payment

NORMA Group’s share-based payment plans are reported in accordance with IFRS 2: “Share-based Payment”. In accordance with IFRS 2, NORMA Group generally distinguishes between equity-settled and cash-settled plans. The financial interest in equity-settled plans granted at the grant date is generally recognized during the expected vesting period with an increase in equity. Expenses for cash-settled plans are generally recognized as a provision during the expected vesting period until the exit event occurs. For the plans existing on the reporting date, please refer to NOTE 25 – SHARE-BASED REMUNERATION.

Provisions

Provisions are recognized when the Group has a present legal or constructive obligation to third parties as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

If the interest effect is material, the obligations are recognized at the present value of the expected expenses.

In addition to the amount of the expected cash outflows, there are also uncertainties with regard to the timing of the outflows. If the outflows are expected to occur within one year, the corresponding amounts are reported under current assets.

If the Group is virtually certain to receive a refund for a provision carried as a liability, the refund is capitalized as a separate asset in accordance with IAS 37.53. If the reimbursement has a close economic connection with the obligation, the expense from the provision obligation is offset against the income from the corresponding reimbursement claim in the income statement.

Income from the release of non-utilized provisions from prior years is recognized in other operating income.

Revenue from contracts with customers (revenue recognition)

NORMA Group recognizes revenue when control of distinct goods or services is transferred to the customer, i.e., when the customer has the ability to direct the use of the transferred goods or services and obtains substantially all of the remaining benefits from them. The prerequisite for this is that a contract with enforceable rights and obligations exists and, among other things, receipt of the consideration – taking into account the customer’s creditworthiness – is probable. The sales revenue corresponds to the transaction price to which NORMA Group is expected to be entitled. Variable consideration is included in the transaction price if it is highly probable that there will not be a significant reversal of revenue once the uncertainty associated with the variable consideration no longer exists. The amount of the variable consideration is determined using either the expected value method or the most likely amount, depending on which value most accurately estimates the variable consideration. If the

period between the transfer of the goods or services and the payment date exceeds twelve months and a significant benefit results from the financing for the customer or NORMA Group, the consideration is adjusted by the time value of money. If a contract comprises several distinct goods or services, the transaction price is allocated to the performance obligations on the basis of the relative stand-alone selling prices. If stand-alone selling prices are not directly observable, NORMA Group makes an appropriate estimate. For each performance obligation, revenue is recognized either at a point in time or over a period of time.

NORMA Group makes use of the relief provisions of IFRS 15 and no disclosure is made with regard to performance obligations not yet fulfilled as of the reporting date, as the outstanding performance obligations are part of a contract with an original term of up to twelve months.

(a) Sale of goods

Revenue is recognized at the point in time at which control is transferred to the buyer in accordance with the agreed Incoterms and there are no unfulfilled obligations. Invoices are issued at this time; the payment terms usually provide for payment within 30 to 90 days of invoicing. Retrospective volume discounts are often agreed for the sale of goods, which are generally valid for one calendar year. The revenue from these sales is recognized in the amount of the consideration specified in the contract less the estimated volume discounts. The estimate of the refund liability recognized for these volume rebates is based on past experience and the revenue recognized up to the fiscal year.

(b) Provision of engineering services

Revenue in connection with engineering services is not recognized on a straight-line basis, but is based on the ratio of costs already incurred to the estimated total costs. The determination of the percentage of completion is decisive and also includes estimates regarding the scope of delivery and services as well as the total contract costs, revenue and risks, including technical risks.

Invoices are issued in accordance with the contractual conditions, whereby a payment period of 30 to 90 days after invoicing usually applies.

Contract assets, contract liabilities, refund liabilities and considerations payable to a customer

When either party to a contract with customers has performed its contractual obligations, NORMA Group presents a contract asset, a contract liability or a trade receivable depending on the relationship between NORMA’s performance and the customer’s payment.

A contract asset represents NORMA Group’s right to consideration in exchange for goods or services transferred to the customer. The impairment of contract assets is measured, presented and disclosed on the same basis as for financial assets within the scope of IFRS 9.

Trade receivables are recognized when the right to receive the consideration is no longer subject to a condition (unconditional claim).

Amounts already received (or to be received) that are expected to be refunded to the customer are recognized as refund liabilities. These liabilities are included in the Statement of Financial Position under “Trade and other payables”. These amounts generally relate to expected volume discounts and annual bonuses for customers.

Considerations payable to a customer that cannot be directly allocated to a service or good received by NORMA Group are recognized as a reduction of the transaction price. If this reduction relates to future revenue, this part is recognized in other non-financial assets as consideration payable to a customer.

Government grants

Government grants are not recognized until there is reasonable assurance that the conditions attached to them are complied with and that the grants will be received.

Government grants for the compensation of expenses incurred are recognized in profit or loss as part of the other operating income on a systematic basis over the periods in which the related costs are expensed that the grants are intended to compensate for.

Government grants related to non-depreciable assets are recognized in profit or loss as part of the other operating income over the periods that bear the cost of meeting the obligations.

Government grants received in connection with depreciable assets are recognized as deferred income in the Statement of Financial Position. This is released to the income statement on a straight-line basis over the expected useful life of the assets concerned within other operating income.

Dividends

Dividends are recognized as a financial liability in the Statement of Financial Position at the time the shareholders approve the resolution to distribute them. At the same time, they are recognized in equity as a profit distribution from retained earnings.

Assets held for sale, liabilities and discontinued operation

A discontinued operation is a component of the Group’s business whose operations and cash flows can be clearly distinguished from the rest of the Group.

A discontinued operation is recognized as soon as a component of the Company is classified as held for sale or has already been disposed of and the component represents a separate major line of business or geographical area of operations and is part of a coordinated overall plan for disposal.

Assets and liabilities that meet the criteria of IFRS 5 are reported as a disposal group and presented separately in the Consolidated Statement of Financial Position as “assets held for sale” and “liabilities associated with assets held for sale”.

Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. From the time of classification as held for sale, the assets in question are no longer depreciated or amortized. Impairment losses and reversals of impairment losses are recognized in accordance with the provisions of IFRS 5.

Comparative information is adjusted accordingly. Further information on the discontinued operation and the resulting effects on the Group’s financial position, financial performance and cash flows can be found in NOTE 33 – DISCONTINUED OPERATION.