AFRAC Technical Note

The Austrian Financial Reporting and Auditing Committee (AFRAC) has published a technical information supplement to the existing COVID-19 technical information on the topic of "Current issues in connection with the accounting of the energy cost subsidy and the recovery of COVID-19 aid (UGB)" as of 28 February 2023 (= state of knowledge)

(https://www.afrac.at/wp-content/uploads/AFRAC-Fachinformation_EKZ_Maerz-2023.pdf).

In the following, we will provide you with information on the accounting and reporting of energy cost subsidies and recoveries of COVID-19 aid in the group of companies.

Energy cost subsidy

In order to recognise energy cost subsidies as a receivable in the balance sheet, the following must:

1. the relevant factual requirements must be met on the balance sheet date and

2. an approval without reservation of disbursement (in practice mostly through disbursement of the subsidy) from the responsible authority must be available at the latest by the time the financial statements are prepared.

If these cumulative and usually staggered requirements are not met by the balance sheet date, the energy cost subsidies cannot be recognised in the balance sheet.

In contrast to the other COVID 19 subsidies, there is no legal entitlement to a subsidy for the energy cost subsidy (see point 11.6 of the guideline on the energy cost subsidy for companies) and, in principle, no entitlement with a probability bordering on certainty to receive it. This could change under certain circumstances as a result of corresponding Supreme Court rulings, but is not the case at present.

If there is an overwhelming probability of a possible obligation to repay the subsidies after they have been granted (e.g. due to mandatory energy-saving measures that have not been implemented), this must also be recognised in the balance sheet (if the amount is still unknown, as a provision).

Recovery of COVID-19 aid

COFAG intends to recover excess subsidies in the group of companies. For this reason, it should be considered whether any repayments could arise, which would have to be recognised either as a value adjustment of existing receivables or as a liability or provision (depending on the certainty at the time of preparation). In summary, however, it can be stated that this is a value enhancing event.

However, various difficulties and legal uncertainties may arise in the case of possible repayment obligations of companies in a group, such as the effect of international group interdependencies, different maximum subsidy limits, determination of the excess subsidy in the case of different subsidy instruments, significance of the first-come-first-served principle and other constellations.

Notwithstanding the absence of conclusive corresponding regulations, possible repayment obligations should be taken into account in the annual financial statements depending on the probability, amount and internal group agreements, insofar as conditions justifying repayment exist on the reporting date and are known on the date of preparation. In summary, however, it can be stated that this is a value-enhancing event.

These imponderables would have to be eliminated by COFAG (COVID-19 Finanzierungsagentur des Bundes GmbH) by way of corresponding application guidelines in order to create certainty with regard to any repayment obligations that may arise. We will keep you informed in this regard.