General information

NV Nederlandse Spoorwegen has its registered office on Laan van Puntenburg in Utrecht, the Netherlands (Chamber of Commerce number 30012558). The company’s consolidated financial statements for the 2017 financial year include the company and its subsidiaries (hereinafter referred to as the ‘Group’) and the Group’s share in associates and companies that it controls jointly with third parties. NV Nederlandse Spoorwegen is the holding company of NS Groep NV, which in turn is the holding company of the operating companies that carry out the Group’s various business operations. The figures for the consolidated financial statements of NS Groep NV are the same as the consolidated figures for NV Nederlandse Spoorwegen. The operating companies of NS Groep NV are listed in note 32. The Group's activities consist mainly of passenger transport and the management and development of property and station locations.

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and their interpretations by the International Accounting Standards Board (IASB) and endorsed by the European Union. The Executive Board prepared the financial statements on 28 February 2018. In its preliminary report to the General Meeting of Shareholders, the Supervisory Board advised that the financial statements should be adopted unaltered. On 28 February 2018, the Executive Board and Supervisory Board approved the publication of the financial statements. Adoption of the financial statements is on the agenda of the General Meeting of Shareholders on 20 March 2018.

Acquisition and disposal of companies

Sale of Qbuzz B.V.

On 13 July 2017, NS and Busitalia signed the final sale agreement for the sale of Qbuzz. The assets and liabilities of Qbuzz had been classified as ‘held for sale’ as of 11 July 2016 and NS stopped depreciation of the non-current assets as of that date. No material profit was made on the sale, which took place on 31 August 2017. In 2017, Qbuzz contributed €129 million to revenue.

Equity interest in WestfalenBahn increased

On 11 July 2017, Abellio concluded an agreement with the remaining shareholders of WestfalenBahn to transfer their stake (75%) to Abellio. This increases the Group’s interest from 25% to 100%. The actual transfer took place on 6 December 2017. Since the increase in the stake in 2017, WestfalenBahn contributed €8 million to revenue and €0 to the result. The annual revenue of WestfalenBahn in 2017 was €146 million and it recorded a profit in 2017 of €5 million.

The following table gives a summary of the assets and liabilities that were acquired.

The goodwill arising from the transaction was €18 million. The revaluation of the existing interest in WestfalenBahn of 25% at its fair value resulted in income of €3 million. This income was included in ‘Share in result of equity accounted investees, accounted for using the equity method’.

Dilution of the share in Greater Anglia

Op 12 January 2017, the Group signed a contract in which it sold 40% of its interest in Greater Anglia to Mitsui. The interest in Greater Anglia is fully consolidated as of 21 March 2017, whereby the minority interest is recognised in the ‘Loans and other financial liabilities’ (see note 25) and measured at amortised cost.

Significant accounting policies

The section below gives details of the important accounting policies used for consolidation, valuation of assets and liabilities, and determining the Group’s result.

These policies have been applied consistently for all the periods presented in these consolidated financial statements, unless otherwise indicated.

Pursuant to Section 402 (paragraph 1), Part 9, Book 2 of the Dutch Civil Code, an abridged income statement is included in the company financial statements of NV Nederlandse Spoorwegen.

The financial statements are presented in euros (the functional currency), rounded to the nearest million. The financial statements have been prepared on the basis of historical cost, unless reported differently.

The figures for the previous year have been adjusted in order to make comparison possible.

The Group has applied the accounting policies for financial reporting as explained below consistently for 2017 in these consolidated financial statements.

As of 1 January 2017, the Group has adopted the following new standards and amendments to standards, including all consequent changes deriving from them in other standards. These new standards have not resulted in significant changes in the way the accounting policies are applied.

• Recognition of deferred tax assets for realised losses (amendments to IAS 12)

• Disclosure initiative (amendments to IAS 7)

New standards and amendments to standards that are mandatory from 2018 or later

The Group has not voluntarily opted for the early adoption of any new standards or amendments to existing standards or interpretations that are only mandatory with effect from the financial statements for 2018 or later.

The Group is currently investigating the consequences of the following new standards, interpretations and amendments to existing standards, the application of which is mandatory with effect from the 2018 financial statements, or later where specified.

IFRS 9 — Financial Instruments

IFRS 9, published in July 2016, replaces the current regulations of IAS 39, Financial Instruments: Inclusion and Valuation. IFRS 9 contains revised regulations relating to the classification and valuation of financial instruments, including a new anticipated credit loss model for calculating impairments of financial assets, plus new general hedge accounting requirements. The stipulations in IAS 39 on including and ceasing to include financial instruments have been taken on board in the new standard. IFRS 9 will be effective for financial years starting on or after 1 January 2018, with the option of implementing the standard earlier than that. The Group has analysed the potential impact on the consolidated financial statements of applying IFRS 9, and that impact will be limited.

IFRS 15 — Revenue from Contracts with Clients

IFRS 15 defines a comprehensive framework for determining whether, to what extent and when revenues have to be included. It replaces the existing regulations relating to the recognition of revenue, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 will be effective for financial years starting on or after 1 January 2018, with the option of implementing the standard earlier than that. The Group has analysed the potential impact on the consolidated financial statements of applying IFRS 15, and that impact is expected to be limited.

IFRS 16 — Leases

A new standard IFRS 16 (Leases) was published on 13 January 2017. Applying this standard will be mandatory as of 1 January 2019. The way lease contracts are dealt with in the accounts will change fundamentally. IFRS 16 eliminates the current recognition method, in which a distinction is made between financial leasing (on the balance sheet) and operational leasing (off the balance sheet). Instead, there will be a single model for recognition, comparable to the current financial lease accounting. The Group has started analysing the impact of the new standard. It is expected that this standard will have a major impact on the Group’s balance sheet and result, and that it will substantially expand the balance sheet.

Other matters

The following new or amended standards have no significant impact on the consolidated financial statements of the Group:

• Clarifications of IFRS 15 — Revenue from Contracts with Clients

• Uncertain tax positions (IFRIC interpretation 23)

• Classification and measurement of share based payment transactions (amendment to IFRS 2)

• Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (amendments to IFRS 4)

• Annual IFRS improvement cycle 2014-2016

• Foreign currency transactions and advance consideration (IFRIC interpretation 22)

• Transfers of investment property (amendments to IAS 40)

• Prepayment features with negative compensation (amendments to IFRS 9)

• Long-term interests in associates and joint ventures (amendments to IAS 28)

• Annual IFRS improvement cycle 2015-2017

Estimates and assessments

The preparation of the financial statements requires the Executive Board to make judgements, estimates and assumptions that affect the application of accounting policies and the reported value of assets and liabilities, and income and expenses. The estimates and corresponding assumptions are based on experiences from the past and various other factors that could be considered reasonable under the circumstances. The actual outcomes may differ from these estimates.

The estimates and underlying assumptions are reviewed on a regular basis. Revisions of estimates are recognised in the period in which the estimate is revised or in future periods if the revision has consequences for these periods.

The key estimates and evaluations largely involve estimates of provisions/claims relating to irregularities (notes 30 and 31) and the valuation of deferred tax assets (note 10).

The accounting policies described below have been applied consistently to the periods presented in these consolidated financial statements.

Principles of consolidation

Subsidiaries

The Group has control over an entity if its involvement with that entity means that the Group is exposed to or is entitled to variable returns and that it has the power to influence those returns by virtue of its say in that entity. The financial statements of the subsidiaries are incorporated in the consolidated financial statements as from the date on which control commences until the date on which control ceases.

In the event of a loss of control over the subsidiary, the subsidiary's assets and liabilities, any minority interests and other equity components associated with the subsidiary are no longer recognised in the balance sheet. Any surplus or shortfall is recognised in the income statement. If the Group retains an interest in the former subsidiary, that interest is recognised at the fair value on the date on which the Group ceased to exercise control.

Acquisition of subsidiaries

Business combinations are recognised according to the acquisition method as at the date on which control is transferred to the Group. The remuneration for the acquisition is assessed at its fair value, as are the net identifiable assets that are acquired. Any goodwill deriving from this is assessed annually for impairments. Any gain from a beneficial sale is recognised directly in the income statement. Transaction costs are recognised at the time when they are incurred.

Elimination of transactions on consolidation

Intra-group balances and transactions plus any unrealised gains and losses on transactions within the Group or income and expenses from such transactions are eliminated. Unrealised gains arising from transactions with investments that are recognised according to the equity method are eliminated in proportion to the Group's interest in the investment. Unrealised losses are eliminated in the same way as unrealised profits, but only insofar as there are no indications that they should be treated as an impairment.

Currency translation

Foreign currency transactions

Transactions denominated in foreign currency are converted to the functional currency of the Group entity in question at the exchange rate applying on the transaction date. Foreign currency monetary assets and liabilities are converted to the functional currency at the exchange rate applying on the balance-sheet date. Non-monetary assets and liabilities denominated in foreign currency that are assessed at fair value are converted to the functional currency using the exchange rates that applied on the dates when the fair values were determined. Non-monetary assets and liabilities denominated in foreign currency that are assessed at historical cost are not recalculated.

The exchange rate differences on conversion of the following items are recognised in the unrealised results:

• financial liabilities that are designated as a hedge of the net investment in a foreign operation

• qualifying cash-flow hedges, insofar as the hedging is effective

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into euros at the exchange rates applying at the reporting date. The revenues and costs of foreign operations are converted into euros at an average exchange rate that approximates to the exchange rate on the transaction date.

Currency conversion differences are included in the unrealised results and recognised in the translation reserve. If the sale of a foreign operation means that the Group ceases to exercise control, significant influence or joint control, then the cumulative amount in the translation reserve associated with that foreign operation will be transferred to the income statement when the profit or loss from the sale is recognised. If the Group only sells part of its interest in a subsidiary, while retaining control, then a proportionate share of the cumulative amount will be reassigned to the minority interest. If the Group only sells part of its interest in an associate or joint venture, while retaining significant influence or joint control, then a proportionate share of the cumulative amount will be transferred to the income statement.

Determination of fair value

A number of the Group's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values for measurement and/or disclosure purposes were determined using the following methods.

Property, plant and equipment

The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The fair value is calculated on the basis of up-to-date purchase prices, or is determined by the historic cost, using an index to convert to current prices.

Investment property

In view of the nature, diversity and locations (station areas), the fair value of the investment property portfolio is not determined on a regular basis unless impairment applies. The fair value is expected to be greater than the carrying amount of the investment property.

Investments in bonds and deposits

The fair value of held-to-maturity investments and available-for-sale financial assets is determined using the price on the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only.

Derivatives

The fair value of derivatives is based on the derived market prices, taking account of the current interest rates and estimated creditworthiness of the counterparties to the contract.

Non-derivative financial liabilities

The fair value of non-derivative financial liabilities is determined for disclosure purposes and is calculated based on the present value of future repayments and interest payments, discounted at the market interest rate as at the reporting date. For finance leases, the market interest rate is determined by reference to similar lease agreements.

Leasing

Operating lease payments

Lease agreements in which none or virtually none of the benefits and disadvantages associated with ownership lie with the lessee are designated operating leases. Operating lease payments are recognised in the income statement during the lease period using the straight-line method.

Finance lease payments

Lease agreements in which all or virtually all of the benefits and disadvantages associated with ownership lie with the lessee are designated ‘finance leases’. The minimum lease payments are recognised partly as financing costs and partly as repayments of the outstanding liability. The financing costs are attributed to the individual periods comprising the total lease term in such a way that this results in a constant interest rate for the remaining balance of the liability.

Segment information

The Group is under no obligation to comply with the requirements of IFRS 8 because it is not listed on a stock exchange. Segment information with a breakdown of revenue and FTEs by geographical area has been included in order to comply with the requirements of Dutch legislation and regulations.

Accounting policies for the consolidated cash flow statement

The cash flow statement is drawn up using the indirect method, using a comparison between the initial and final balances for the financial year in question. The result is then adjusted for changes that did not generate income or expenses during the financial year.