EUROPEAN COMMISSION Brussels, 30.6.2021 COM(2021) 382 final

Communication from the Commission to the European Parliament, the Coucil and the Court of Auditors - Annual Accounts of the European Commission 2020



CONTENTS CERTIFICATION OF THE ACCOUNTS FINANCIAL STATEMENTS AND EXPLANATORY NOTES BALANCE SHEET STATEMENT OF FINANCIAL PERFORMANCE CASHFLOW STATEMENT STATEMENT OF CHANGES IN NET ASSETS NOTES TO THE FINANCIAL STATEMENTS BUDGETARY IMPLEMENTATION REPORTS CERTIFICATION OF THE ACCOUNTS The annual accounts of the European Commission for the year 2020 have been prepared in accordance with the Financial Regulation applicable to the general budget of the European Union and the accounting rules adopted by myself in my capacity as the Commission's Accounting Officer, as are to be applied by all the institutions and Union bodies. I acknowledge my responsibility for the preparation and presentation of the annual accounts of the European Commission in accordance with Article 77 of the Financial Regulation. I have obtained from the authorising officers, who certified its reliability, all the information necessary for the production of the accounts that show the European Commission's assets and liabilities and the budgetary implementation. I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the accounts, I have a reasonable assurance that the accounts present fairly, in all material aspects, the financial position, the results of the operations and the cash flow of the European Commission.

Rosa ALDEA BUSQUETS Accounting Officer of the Commission 18 June 2021 EUROPEAN COMMISSION FINANCIAL YEAR 2020 FINANCIAL STATEMENTS AND EXPLANATORY NOTES

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up. CONTENTS BALANCE SHEET STATEMENT OF FINANCIAL PERFORMANCE CASHFLOW STATEMENT STATEMENT OF CHANGES IN NET ASSETS NOTES TO THE FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES 2. NOTES TO THE BALANCE SHEET 3. NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE 4. CONTINGENT LIABILITIES AND ASSETS 5. BUDGETARY AND LEGAL COMMITMENTS 6. FINANCIAL RISK MANAGEMENT 7. RELATED PARTY DISCLOSURES 8. EVENTS AFTER THE BALANCE SHEET DATE

BALANCE SHEET EUR million Note 31.12.2020 31.12.2019 NON-CURRENT ASSETS Intangible assets 2.1 256 209 Property, plant and equipment 2.2 8 499 8 180 Investments accounted for using the equity method 2.3 588 591 Financial assets 2.4 97 945 65 427 Pre-financing 2.5 34 361 26 011 Exchange receivables and non-exchange recoverables 2.6 45 928 3 585 187 577 104 004 CURRENT ASSETS Financial assets 2.4 13 591 4 220 Pre-financing 2.5 29 092 25 870 Exchange receivables and non-exchange recoverables 2.6 28 269 19 988 Inventories 2.7 74 62 Cash and cash equivalents 2.8 15 380 18 538 86 406 68 677 TOTAL ASSETS 273 984 172 681 NON-CURRENT LIABILITIES Pension and other employee benefits 2.9 (115 408) (97 050) Provisions 2.10 (3 730) (3 490) Financial liabilities 2.11 (83 734) (52 360) (202 872) (152 899) CURRENT LIABILITIES Provisions 2.10 (1 518) (1 097) Financial liabilities 2.11 (10 608) (1 390) Payables 2.12 (33 107) (27 793) Accrued charges and deferred income 2.13 (63 708) (66 374) (108 940) (96 654) TOTAL LIABILITIES (311 812) (249 553) NET ASSETS (37 828) (76 873) Reserves 2.14 3 501 3 306 Amounts to be called from Member States* 2.15 (41 329) (80 179) NET ASSETS (37 828) (76 873) * The European Parliament adopted a budget on 18 December 2020 which provides for the payment of the Commission's short-term liabilities from own resources to be collected by, or called up from, the Member States in 2021. Additionally, under article 83 of the Staff Regulations (Council Regulation 259/68 of 29 February 1968 as amended), the Member States shall jointly guarantee the liability for pensions. STATEMENT OF FINANCIAL PERFORMANCE EUR million Note 2020 2019 REVENUE Revenue from non-exchange transactions GNI resources 125 393 108 820 Traditional own resources 19 559 21 235 VAT 17 858 18 128 Fines 452 4 291 Recovery of expenses 3.1 1 355 2 627 UK Withdrawal Agreement 47 456 – Other 3.2 3 263 (2 288) 215 337 152 813 Revenue from exchange transactions Financial revenue 3.3 3 424 1 798 Other 3.4 687 725 4 111 2 522 Total Revenue 219 448 155 335 EXPENSES Implemented by Member States 3.5 European Agricultural Guarantee Fund (40 461) (43 951) European Agricultural Fund for Rural Development and other rural development instruments (14 467) (13 541) European Regional Development Fund & Cohesion Fund (41 118) (35 178) European Social Fund (13 677) (11 218) Other (2 701) (2 608) Implemented by the Commission, executive agencies and trust funds 3.6 (22 120) (18 965) Implemented by other EU agencies and bodies 3.7 (4 497) (3 820) Implemented by third countries and int. organisations 3.7 (4 178) (4 085) Implemented by other entities 3.7 (3 257) (2 878) Staff and pension costs 3.8 (8 485) (8 163) Finance costs 3.9 (2 160) (1 458) Other 3.10 (4 976) (4 866) Total Expenses (162 099) (150 730) ECONOMIC RESULT OF THE YEAR 57 349 4 605 CASHFLOW STATEMENT EUR million 2020 2019 Economic result of the year 57 349 4 605 Operating activities Amortisation 33 30 Depreciation 762 800 (Increase)/decrease in loans (40 631) 1 203 (Increase)/decrease in pre-financing (11 572) (1 572) (Increase)/decrease in exchange receivables and non-exchange recoverables (50 624) 745 (Increase)/decrease in inventories (13) 5 Increase/(decrease) in pension and other employee benefits 18 359 17 185 Increase/(decrease) in provisions 662 753 Increase/(decrease) in financial liabilities 40 592 (1 504) Increase/(decrease) in payables 5 314 (4 745) Increase/(decrease) in accrued charges and deferred income (2 667) 3 874 Prior year budgetary surplus taken as non-cash revenue (3 218) (1 803) Remeasurement of employee benefits liability (non-cash movement not included in statement of financial performance) (15 131) (14 073) Other non-cash movements 44 99 Investing activities (Increase)/decrease in intangible assets and property, plant and equipment (1 161) (952) (Increase)/decrease in investments accounted for using the equity method 3 (1) (Increase)/decrease in available for sale financial assets (1 196) (2 936) (Increase)/decrease in financial assets at fair value through surplus or deficit (62) (121) NET CASHFLOW (3 157) 1 592 Net increase/(decrease) in cash and cash equivalents (3 157) 1 592 Cash and cash equivalents at the beginning of the year 18 538 16 946 Cash and cash equivalents at year-end 15 380 18 538 STATEMENT OF CHANGES IN NET ASSETS EUR million Amounts to be called

from Member States Accumulated Surplus/(Deficit) Other reserves Fair value reserve Net Assets BALANCE AS AT 31.12.2018 (68 885) 2 957 229 (65 700) Movement in Guarantee Fund reserve (21) 21 – – Fair value movements – – 148 148 Remeasurements in employee benefits liability (14 073) – – (14 073) Other (1) (48) - (49) 2018 budget result credited to Member States (1 803) – – (1 803) Economic result of the year 4 605 – – 4 605 BALANCE AS AT 31.12.2019 (80 179) 2 930 377 (76 873) Movement in Guarantee Fund reserve (173) 173 – – Fair value movements – – 93 93 Remeasurements in employee benefits liability (15 131) – – (15 131) Other 22 (71) – (49) 2019 budget result credited to Member States (3 218) – – (3 218) Economic result of the year 57 349 – – 57 349 BALANCE AS AT 31.12.2020 (41 329) 3 031 470 (37 828)

NOTES TO THE FINANCIAL STATEMENTS For further information in addition to the notes below, please also see the 2020 EU consolidated annual accounts.

Note that in the following tables amounts concerning the UK are still shown under the heading Member States as although the UK departed the Union on 1 February 2020, during the transition period up to 31 December 2020 it continued to have a financial relationship with the Union equivalent to that of a Member State. 1.SIGNIFICANT ACCOUNTING POLICIES The European Commission (hereinafter referred to as the Commission) applies the accounting policies of the European Union (hereinafter referred to as the EU). A summary of the significant EU accounting policies is given below. 1.1.LEGAL BASIS AND ACCOUNTING RULES The accounts of the EU are kept in accordance with Regulation (EU, Euratom) No 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30 July 2018, p. 1) hereinafter referred to as the ‘Financial Regulation’ (FR). In accordance with article 80 of the Financial Regulation, the EU prepares its financial statements on the basis of accrual-based accounting rules that are based on International Public Sector Accounting Standards (IPSAS). These accounting rules, adopted by the Accounting Officer of the Commission, have to be applied by all the institutions and EU bodies falling within the scope of consolidation in order to ensure the internal consistency of the EU consolidated accounts. Application of new and amended European Union Accounting Rules (EAR) New EAR which are effective for annual periods beginning on or after 1 January 2020 There are no new EAR which became effective for annual periods beginning on or after 1 January 2020. New EAR adopted but not yet effective at 31 December 2020 On 17 December 2020 the Accounting Officer of the European Commission adopted the revised EAR 11 ‘Financial Instruments’, which is effective for accounting periods beginning on or after 1 January 2021. The revised EAR 11 has been updated in line with the new IPSAS 41 ‘Financial Instruments’ and establishes the principles for the financial reporting of the financial assets and financial liabilities held by the EU entities. The main changes and their expected impacts on the EU 2021 accounts are as follows: New classification and measurement principles for financial assets The revised EAR 11 introduces a principles-based approach to the classification of financial assets which is based on two criteria: the management model which an entity applies for managing its financial assets and the contractual cash-flow characteristics of those assets. Depending on these criteria, financial assets are classified in the categories financial assets at amortised cost (AC), financial assets at fair value through net assets/equity (FVNA), or financial assets at fair value through surplus and deficit (FVSD). Financial assets with contractual terms that represent solely principal and interests are classified as either AC (if the financial asset is held within a management model whose objective is to hold financial assets in order to collect contractual cash flows) or FVNA (if the financial asset is held within a management model whose objective is achieved by both collecting contractual cash flows and selling financial assets). Financial assets that do not meet the criteria to be classified as either AC or FVNA, in particular financial assets for which the contractual cashflows do not represent solely principal and interests or which are held within other management models, are classified as FVSD. In line with these principles, in the 2021 EU annual accounts all equity investments which are currently classified as ‘available for sale’ will be reclassified as FVSD. Debt securities are also expected to be reclassified as FVSD, given that the EU manages these asset portfolios and evaluates their performance on a fair value basis. The related fair value reserve will be released to Net Assets. New impairment model Whereas the current impairment model is based on incurred losses, the revised EAR 11 introduces a forward-looking impairment model based on expected credit losses, taking into account all possible default events and any credit enhancements that are integral to the contractual terms. As regards the applicable time horizon a staging approach applies: as long as there is no significant increase in credit risk, the impairment allowance is measured at an amount equal to the 12-months expected credit loss (stage 1). In case of a significant increase in credit risk (stage 2) and for credit-impaired financial assets, the impairment allowance equals the life time expected credit loss. The new impairment model applies to all financial assets measured at AC or at FVNA, loan commitments and financial guarantee contracts. It is expected that the new forward-looking impairment model will lead to a recognition of an additional impairment allowance in the 2021 EU annual accounts, in particular in relation to the loans for financial assistance provided to partner countries under the MFA and Euratom programmes. Financial guarantee accounting

Under the current EAR 11, most financial guarantees – in particular those provided at no or nominal consideration – are accounted for in accordance with the principles of EAR 10 ‘Provisions, contingent liabilities and contingent assets’, hence either recognised as provisions or disclosed as contingent liabilities depending on the probability of loss. The revised EAR 11 requires the application of the financial guarantee accounting requirements to all financial guarantee contracts, which should be initially recognised either at fair value or at the life time expected credit loss in case no reliable measure of fair value can be determined. At subsequent measurement, financial guarantee contracts should be measured at the higher of (i) the amount of the loss allowance, and (ii) the amount initially recognised less, when appropriate, the cumulative amount of amortisation recognised in accordance with the principles of EAR 4 ‘Revenue from exchange transactions’. As a consequence, in the 2021 EU accounts the existing financial guarantee contracts are expected to be reclassified from financial provisions to the financial guarantee liability categories and re-measured to the higher of the life time expected credit loss, and – if applicable – the amount initially recognised as provisions less accumulated amortisation. This change is expected to trigger an increase in the financial liabilities on the balance sheet, in particular in relation to the guarantees provided to the EIB Group under the External Lending Mandate. The new requirements shall be applied retrospectively and subject to the specific transitional provisions in the revised EAR 11. In particular, no restatement of comparatives is required. Hence, the impacts of any remeasurements will be recognised in Net Assets at the initial application date of the revised EAR 11. 1.2.ACCOUNTING PRINCIPLES The objective of financial statements is to provide information about the financial position, performance and cashflows of an entity that is useful to a wide range of users. For the EU as a public sector entity, the objectives are more specifically to provide information useful for decision-making, and to demonstrate the accountability of the entity for the resources entrusted to it. It is with these goals in mind that the present document has been drawn up. The overall considerations (or accounting principles) to be followed when preparing the financial statements are laid down in EU accounting rule 1 ‘Financial Statements’ and are the same as those described in IPSAS 1: fair presentation, accrual basis, going concern, consistency of presentation, materiality, aggregation, offsetting and comparative information. The qualitative characteristics of financial reporting are relevance, faithful representation (reliability), understandability, timeliness, comparability and verifiability. 1.3.CONSOLIDATION Scope of consolidation The consolidated financial statements of the EU comprise all significant controlled entities, joint arrangements and associates. The complete list of entities falling under the scope of consolidation, which now comprises 52 controlled entities and 1 associate, can be found in note 9. Among the controlled entities are the EU institutions (including the Commission, but not the European Central Bank) and the EU agencies (except those of the former 2nd pillar, i.e. the Common and Foreign Security Policy). The European Coal and Steel Community in Liquidation (ECSC i.L.) is also considered as a controlled entity. The EU’s only associate is the European Investment Fund (EIF). Entities falling under the scope of consolidation but immaterial to the EU consolidated financial statements as a whole need not be consolidated or accounted for using the equity method where to do so would result in excessive time or cost to the EU. These entities are referred to as ‘Minor entities’ and are separately listed in note 9. In 2020, 8 entities have been classified as such minor entities. Controlled entities In order to determine the scope of consolidation, the control concept is applied. Controlled entities are entities for which the EU is exposed, or has right, to variable benefits from its involvement and has the ability to affect the nature and amount of those benefits through its power over the other entity. This power must be presently exercisable and must relate to the relevant activities of the entity. Controlled entities are fully consolidated. The consolidation begins at the first date on which control exists, and ends when such control no longer exists. The most common indicators of control within the EU are: creation of the entity through founding treaties or secondary legislation, financing of the entity from the EU budget, the existence of voting rights in the governing bodies, audit by the European Court of Auditors and discharge by the European Parliament. An individual assessment for each entity is made in order to decide whether one or all of the criteria listed above are sufficient to result in control. All material inter-entity transactions and balances between EU controlled entities are eliminated, while unrealised gains and losses on such transactions are not material and so have not been eliminated. Joint Arrangements A joint arrangement is an agreement of which the EU and one or more parties have joint control. Joint control is the agreed sharing of control of an arrangement by way of a binding arrangement, which exists only when decisions about the relevant activities require the unanimous consent of parties sharing control. Joint agreements can be either joint ventures or joint operations. A joint venture is a joint arrangement that is structured through a separate vehicle and whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Participations in joint ventures are accounted for using the equity method (see note 1.5.4). A joint operation is a joint arrangement whereby the parties that have joint control of the arrangements have rights to the assets, and obligations for the liabilities, related to the arrangement. Participations in joint operations are accounted for by recognising in the EU’s financial statements its assets and liabilities, revenues and expenses, as well as its share of assets, liabilities, revenues and expenses jointly held or incurred. Associates Associates are entities over which the EU has, directly or indirectly, significant influence but not exclusive or joint control. It is presumed that significant influence exists if the EU holds directly or indirectly 20 % or more of the voting rights. Participations in associates are accounted for using the equity method (see note 1.5.4).

Non-consolidated entities the funds of which are managed by the Commission The funds of the Joint Sickness Insurance Scheme for staff of the EU, the European Development Fund and the Participants Guarantee Fund are managed by the Commission on the behalf of these entities. However, since these entities are not controlled by the EU, they are not consolidated in its financial statements. 1.4.BASIS OF PREPARATION Financial statements are presented annually. The accounting year begins on 1 January and ends on 31 December.



1.4.1.Currency and basis for conversion Functional and reporting currency The financial statements are presented in millions of euros, unless stated otherwise, the euro being the EU’s functional currency. Transactions and balances Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the re-translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance. Translation differences on non-monetary financial instruments classified as available for sale financial assets are included in the fair value reserve. Different conversion methods apply to property, plant and equipment and intangible assets, which retain their value in euros at the rate that applied at the date when they were purchased. Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December: Euro exchange rates Currency 31.12.2020 31.12.2019 Currency 31.12.2020 31.12.2019 BGN 1.9558 1.9558 PLN 4.5597 4.2568 CZK 26.2420 25.4080 RON 4.8683 4.783 DKK 7.4409 7.4715 SEK 10.0343 10.4468 GBP 0.8990 0.8508 CHF 1.0802 1.0854 HRK 7.5519 7.4395 JPY 126.4900 121.9400 HUF 363.8900 330.5300 USD 1.2271 1.1234 1.4.2.Use of estimates In accordance with IPSAS and generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management based on the most reliable information available. Significant estimates include, but are not limited to: amounts for employee benefit liabilities, financial risk of accounts receivable and the amounts disclosed in the notes concerning financial instruments, accrued revenue and charges, provisions, degree of impairment of intangible assets and property, plant and equipment, net realisable value of inventories, contingent assets and liabilities. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known, if the change affects the period only, or that period and future periods, if the change affects both. 1.5.BALANCE SHEET 1.5.1.Intangible assets An intangible asset is an identifiable non-monetary asset without physical substance. An asset is identifiable if it is either separable (i.e. it is capable of being separated or divided from the entity, e.g. by being sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so), or arises from binding arrangements (including rights from contracts or other legal rights), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations). Acquired intangible assets are stated at historical cost less accumulated amortisation and impairment losses. Internally developed intangible assets are capitalised when the relevant criteria of the EU Accounting Rules are met and the expenses relate solely to the development phase of the asset. The capitalisable costs include all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Costs associated with research

activities, non-capitalisable development costs and maintenance costs are recognised as expenses as incurred. Intangible assets are amortised on a straight-line basis over their estimated useful lives (3 to 11 years). The estimated useful lives of intangible assets depend on their specific economic life time or legal life time determined by an agreement. 1.5.2.Property, plant and equipment All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition, construction or transfer of the asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits or service potential associated with the item will flow to the EU and its cost can be measured reliably. Repairs and maintenance costs are charged to the statement of financial performance during the financial period in which they are incurred. Land is not depreciated as it is deemed to have an indefinite useful life. Assets under construction are not depreciated, as these assets are not yet available for use. Depreciation on other assets is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows: Type of asset Straight line depreciation rate Buildings 4 % to 10 % Space assets 8 % to 25 % Plant and equipment 10 % to 25 % Furniture and vehicles 10 % to 25 % Computer hardware 25 % to 33 % Other 10 % to 33 % Gains or losses on disposals are determined by comparing proceeds less selling expenses with the carrying amount of the disposed asset and are included in the statement of financial performance. Leases A lease is an agreement whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time. Leases are classified as either finance leases or operating leases. Finance leases are leases where substantially all the risks and rewards incidental to ownership are transferred to the lessee. When entering a finance lease as a lessee, the assets acquired under the finance lease are recognised as assets and the associated lease obligations as liabilities as from the commencement of the lease term. The assets and liabilities are recognised at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Over the period of the lease term, the assets held under finance leases are depreciated over the shorter of the asset’s useful life and the lease term. The minimum lease payments are apportioned between the finance charge (the interest element) and the reduction of the outstanding liability (the capital element). The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability, which is presented as current/non-current, as applicable. Contingent rents are charged as expenses in the period in which they are incurred. An operating lease is a lease other than a finance lease, i.e. a lease where the lessor retains substantially all the risks and rewards incidental to ownership of an asset. When entering an operating lease as a lessee, the operating lease payments are recognised as an expense in the statement of financial performance on a straight-line basis over the lease term with neither a leased asset nor a leasing liability presented in the statement of financial position. 1.5.3.Impairment of non-financial assets An impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset's future economic benefits or service potential through amortisation or depreciation (as applicable). Assets that have an indefinite useful life are not subject to amortisation/depreciation and are tested annually for impairment. Assets that are subject to amortisation/depreciation are tested for impairment whenever there is an indication at the reporting date that an asset may be impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable (service) amount. The recoverable (service) amount is the higher of an asset’s fair value less costs to sell and its value in use. Intangible assets and property, plant and equipment residual values and useful lives are reviewed, and adjusted if appropriate, at least once per year. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly. 1.5.4.Investments accounted for using the equity method Participations in associates and joint ventures Investments accounted for using the equity method are initially recognised at cost, with the initial carrying amount subsequently being increased or decreased to recognise further contributions, the EU’s share of the surplus or deficit of the investee, any impairments and dividends. The initial cost together with all movements give the carrying amount of the investment in the financial statements at the balance sheet date. The EU’s share of the investee’s surplus or deficit is recognised in the statement of financial performance, and its share of investee’s movements in equity is recognised in the reserves within net assets. Distributions received from the investment reduce the carrying amount of the asset.

If the EU's share of deficits of an investment accounted for using the equity method equals or exceeds its interest in the investment, the EU discontinues recognising its share of further losses (‘unrecognised losses’). After the EU’s interest is reduced to zero, additional losses are provided for and a liability is recognised only to the extent that the EU has incurred legal or constructive obligation or made payments on behalf of the entity. If there are indications of impairment, a write-down to the lower recoverable amount is necessary. The recoverable amount is determined as described under note 1.5.3. If the reason for impairment ceases to apply at a later date, the impairment loss is reversed to the carrying amount that would have been determined had no impairment loss been recognised. In cases where the EU holds 20 % or more of an investment capital fund, it does not seek to exert significant influence. Such funds are therefore treated as financial instruments and categorised as available for sale financial assets. Associates and joint ventures classified as minor entities (see note 1.3) are not accounted for under the equity method. EU contributions to those entities are accounted for as an expense of the period. 1.5.5.Financial assets Classification The EU classifies their financial assets in the categories ‘financial assets at fair value through surplus or deficit’, ‘loans and receivables’, ‘held-to-maturity investments’ and ‘available for sale financial assets’. The classification of financial instruments is determined at initial recognition and re-evaluated at each balance sheet date. (I)Financial assets at fair value through surplus or deficit A financial asset is classified in the category ‘fair value through surplus or deficit’ if acquired principally for the purpose of being sold in the short term, or if so designated by the entity. Derivatives are also presented in this category. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the balance sheet date. (II)Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the EU provides money, goods or services directly to a debtor with no intention of trading the receivable, or in case the EU is subrogated to the rights of the original lender following a payment made by the EU under a guarantee contract. Payments due within 12 months of the balance sheet date are classified as current assets. Payments due after 12 months from the balance sheet date are classified as non-current assets. Loans and receivables include term deposits with the original maturity above three months. (III)Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the EU has the positive intention and ability to hold to maturity. During this financial year, the EU did not hold any investments in this category. (IV)Available for sale financial assets Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are classified as either current or non-current assets, depending on the period of time the EU expects to hold them. Investments in entities that are neither consolidated nor accounted for using the equity method and other equity-type investments (e.g. Risk Capital Operations) are also classified as available for sale financial assets. Initial recognition and measurement Purchases and sales of financial assets classified as ‘at fair value through surplus or deficit’, ‘held-to-maturity’ or ‘available for sale’, are recognised on their trade-date – the date on which the EU commits to purchase or sell the asset. Cash equivalents and loans are recognised when cash is deposited in a financial institution or advanced to borrowers. Financial instruments are initially recognised at fair value. For all financial assets not carried at fair value through surplus or deficit, transactions costs are added to the fair value at initial recognition. Financial assets carried at fair value through surplus or deficit are initially recognised at fair value and transaction costs are expensed in the statement of financial performance. The fair value of a financial asset on initial recognition is normally the transaction price (i.e. the fair value of the consideration received), unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets (e.g. in case of some derivative contracts). However, when a long-term loan that carries no interest or an interest below market conditions is granted, its fair value can be estimated as the present value of all future cash receipts discounted using the prevailing market rate of interest for a similar instrument with a similar credit rating. Loans granted are measured at their nominal amount, which is considered to be the fair value of the loan. The reasoning for this is as follows: ·The ‘market environment’ for EU lending is very specific and different from the capital market used to issue commercial or government bonds. As lenders in these markets have the opportunity to choose alternative investments, the opportunity of doing so is factored into market prices. However, this opportunity for alternative investments does not exist for the EU, which is not allowed to invest money on the capital markets; it only borrows funds for the purpose of lending at the same rate. This means that there is no alternative lending or investment option available to the EU for the sums borrowed. Thus, there is no opportunity cost and therefore no basis of comparison with market rates. In fact, the EU lending operation itself represents the market. Essentially, since the opportunity cost ‘option’ is not applicable, the market price does not fairly reflect the substance of the EU lending transactions. Therefore, it is not appropriate to determine the fair value of EU lending with reference to commercial or government bonds.

·Furthermore, as there is no active market or similar transactions to compare with, the interest rate to be used by the EU for fair valuing its lending operations under the EFSM, BOP and other such loans, should be the interest rate charged. ·In addition, for these loans, there are compensating effects between loans and borrowings due to their back-to-back character. Thus, the effective interest for the loan equals the effective interest rate for the related borrowings. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance. Financial instruments are derecognised when the rights to receive cashflows from the investments have expired or the EU has transferred substantially all risks and rewards of ownership to another party. Subsequent measurement a)Financial assets at fair value through surplus or deficit are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the ‘financial instruments at fair value through surplus or deficit’ category are included in the statement of financial performance in the period in which they arise. b)Loans and receivables are carried at amortised cost using the effective interest method. In the case of loans granted on borrowed funds, the same effective interest rate is applied to both the loans and borrowings since these loans have the characteristics of ‘back-to-back operations’ and the differences between the loan and the borrowing conditions and amounts are not material. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance. c)Held to maturity assets are carried at amortised cost using the effective interest method. The EU currently holds no held to maturity investments. d)Available for sale financial assets are subsequently carried at fair value. Gains and losses arising from changes in the fair value of available for sale financial assets are recognised in the fair value reserve, except for translation differences on monetary assets, which are recognised in the statement of financial performance. When assets classified as available for sale financial assets are derecognised or impaired, the cumulative fair value adjustments previously recognised in the fair value reserve are recognised in the statement of financial performance. Interest on available for sale financial assets calculated using the effective interest method is recognised in the statement of financial performance. Dividends on available for sale equity instruments are recognised when the EU’s right to receive payment is established. The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities and over-the–counter derivatives), the EU establishes a fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cashflow analysis, option pricing models and other valuation techniques commonly used by market participants. Investments in Venture Capital Funds, classified as available for sale financial assets, which do not have a quoted market price in an active market are valued at the attributable net asset value, which is considered as an equivalent of their fair value. In cases where the fair value of investments in equity instruments that do not have a quoted market price in an active market cannot be reliably measured, these investments are valued at cost less impairment losses. Impairment of financial assets A financial asset is impaired and a loss is recognised if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss event (or events) has an impact on the estimated future cashflows of the financial asset that can be reliably estimated. The EU assesses at each reporting date whether there is objective evidence that a financial asset is impaired. (a)Assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cashflows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of financial performance. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation of the present value of the estimated future cashflows of a collateralised financial asset reflects the cashflows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the statement of financial performance. (b)Assets carried at fair value In the case of equity investments classified as available for sale financial assets, a significant or permanent (prolonged) decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the statement of financial performance – is removed from reserves and recognised in the statement of financial performance. Impairment losses recognised in the statement of financial performance on equity instruments are not reversed through the statement of financial performance. If, in a subsequent period, the fair value of a debt instrument classified as available for sale financial asset increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the statement of financial performance. 1.5.6.Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other directly attributable costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. When inventories are held for distribution at no charge or for a nominal charge, they are measured at the lower of cost and current replacement cost. Current replacement cost is the cost the EU would incur to acquire the asset on the reporting date. 1.5.7.Pre-financing amounts

Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular contract, decision, agreement or basic legal act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, they have the obligation to return the pre-financing advance to the EU. As the EU retains control over the pre-financing and is entitled to a refund for the ineligible part, the amount is presented as an asset. Pre-financing is initially recognised on the balance sheet when cash is transferred to the recipient. It is measured at the amount of the consideration given. In subsequent periods pre-financing is measured at the amount initially recognised on the balance sheet less the eligible expenses (including estimated amounts where necessary) incurred during the period. Interest on pre-financing is recognised as it is earned in accordance with the provisions of the relevant agreement. An estimate of the accrued interest revenue, based on the most reliable information, is made at the year-end and included in the balance sheet. Other advances to Member States, which originate from reimbursement by the EU of amounts paid as advances by the Member States to their beneficiaries (including ‘financial instruments under shared management’), are recognised as assets and presented under the heading ‘Pre-financing’. Other advances to Member States are subsequently measured at the amount initially recognised on the balance sheet less a best estimate of the eligible expenses incurred by final beneficiaries, calculated on the basis of reasonable and supportable assumptions. The contributions to EU trust funds not consolidated in the European Commission, or to other unconsolidated entities, are classified as pre-financing since their purpose is to give a float to the trust fund to allow it to finance specific actions defined under the trust fund’s objectives. The EU contributions to trust funds are measured at the initial amount of the EU contribution less eligible expenses, including estimated amounts where necessary, incurred by the trust fund during the reporting period and allocated to the EU contribution in accordance with the underlying agreement. 1.5.8.Exchange receivables and non-exchange recoverables The EU Accounting Rules require a separate presentation of exchange and non-exchange transactions. To distinguish between the two categories, the term ‘receivables’ is reserved for exchange transactions, whereas for ‘non-exchange transactions’, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange, the term ‘recoverables’ is used (e.g. recoverables from Member States related to own resources). Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly (see note 1.5.5). The financial instruments notes disclosures concerning receivables from exchange transactions include accrued revenue and deferred charges from exchange transactions, as they are not material. A general write-down based on past experience is made for outstanding recovery orders not already subject to a specific write-down. Recoverables from non-exchange transactions are carried at fair value as at the date of acquisition (adjusted for interest and penalties) less write-down for impairment. A write-down for impairment of recoverables from non-exchange transactions is established when there is objective evidence that the EU will not be able to collect all amounts due according to the original terms of recoverables from non-exchange transactions. The amount of the write-down is the difference between the asset’s carrying amount and the recoverable amount. The amount of the write-down is recognised in the statement of financial performance. A general write-down, based on past experience, is also made for outstanding recovery orders not already subject to a specific write-down. See note 1.5.14 concerning the treatment of accrued revenue at year-end. Amounts displayed and disclosed as recoverables from non-exchange transactions are not financial instruments, as they do not arise from a contract that would give rise to a financial liability or equity instrument. However, in the notes to the financial statements recoverables from non-exchange transactions are disclosed together with receivables from exchange transactions where appropriate. 1.5.9.Cash and cash equivalents Cash and cash equivalents are financial instruments and include cash at hand, deposits held at call or at short notice with banks and other short-term highly liquid investments with original maturities of three months or less. 1.5.10.Employee benefits The EU provides a set of benefits (emoluments and social security) to employees. For accounting purposes these have to be classified into short-term and post-employment benefits. Short-term employee benefits Short-term employee benefits are those benefits due to be settled before twelve months after the end of the reporting period in which employees rendered the service, such as salaries, annual and paid sick leaves, and other short-term allowances. Short-term employee benefits are recognised as an expense when the related service is provided. A liability is recognised for the amount expected to be paid if the EU has a present legal or constructive obligation to pay as a result of past service provided by the employee and the obligation can be estimated reliably. Post-employment benefits The EU grants a set of post-employment benefits to employees, which include retirement, invalidity and survival pensions provided under the Pension Scheme of the European Officials (PSEO), as well as medical coverage provided under the Joint Sickness Insurance Scheme (JSIS) (see note 2.9). These benefits are provided under a single plan – although split in two schemes – and they must be treated similarly so as to give a fair presentation of the situation and reflect the economic reality:

I.Pension Scheme of European Officials (PSEO): The benefits granted under this notionally funded scheme relate to seniority, invalidity and survival, as well as, family allowances, death before retirement to those employees that work or worked in the EU Institutions, Agencies and other EU bodies or are survivors of deceased officials or pensioners. Staff contribute one third of the expected cost of these benefits from their salaries. II.Joint Sickness Insurance Scheme (JSIS): Under this scheme, the EU provides health coverage for staff of the European Commission, Institutions, Agencies and other EU bodies through the reimbursement of medical expenses. The benefits granted to the ‘inactives’ of this scheme (i.e. pensioners, orphans, etc.) are classified as post-employment benefits. The EU also provides post-employment benefits to members of the EU institutions via separate pension schemes. These are shown under the heading ‘Other retirement benefit schemes’. Under these schemes the EU provides pension benefits to members of the Commission, Court of Justice and General Court, Court of Auditors, Council, European Parliament, Ombudsman, Data Protection Supervisor, Civil Service Tribunal. The EU provides health coverage to the members of the EU Institutions via the JSIS. The above post-employment benefits qualify as defined benefit obligations of the EU and are calculated at each reporting date by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligation is performed annually 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 of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability. The post-employment benefits provided to EU staff are incorporated in a single plan comprising both a pension scheme (PSEO) and a sickness insurance scheme (JSIS), with the right to coverage under the JSIS scheme being dependent on having acquired the right to coverage under the PSEO scheme. Under the terms of this single plan, as set out in the Staff Regulation, certain entitlements, such as the right to a deferred and reduced pension under the PSEO scheme, are acquired after 10 years of service. However, the entitlements acquired under the single plan by the employee’s subsequent service are materially higher than those initial entitlements as reflected by subsequent annually accrued pension rights. Therefore, in order to depict the economic substance of the underlying transaction required by the faithful representation qualitative characteristic of financial reporting as outlined in both EAR 1 and the IPSAS Conceptual Framework, the service cost incurred is accrued on a straight-line basis over staff’s estimated active service period, i.e. the period from the date when service by the employee first leads to benefits under the plan (whether or not the benefits are conditional on further service) until the date when further service by the employee will lead to no material amount of further benefits under the plan, other than from further salary increases. This approach is applied consistently to the benefits provided for under the single plan. Remeasurements of the net defined benefit liability comprise actuarial gains and losses and the return on plan assets, and are recognised immediately in net assets. The EU recognises the net interest expense (income) and other expenses related to the defined benefit plans in the statement of financial performance within the heading ‘staff and pension costs’. When benefits provided are changed or curtailed, the resulting change in benefits that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of financial performance. Gains and losses on settlement are recognised when the settlement occurs. Past service cost is recognised immediately in the statement of financial performance, unless the changes are conditional on the employees remaining in service for a specified period of time.



1.5.11.Provisions Provisions are recognised when the EU has a present legal or constructive obligation towards third parties as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses. The amount of the provision is the best estimate of the expenses expected to be required to settle the present obligation at the reporting date. Where the provision involves a large number of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities (‘expected value’ method). Provisions for onerous contracts are measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. 1.5.12.Financial liabilities Financial liabilities are classified as financial liabilities at fair value through surplus or deficit, financial liabilities carried at amortised cost or as financial guarantee liabilities. Borrowings are composed of borrowings from credit institutions and debts evidenced by certificates. They are recognised initially at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs incurred, then subsequently carried at amortised cost using the effective interest method; any difference between proceeds, net of transaction costs, and the redemption value is recognised in the statement of financial performance over the period of the borrowings using the effective interest method. In the case of loans granted on borrowed funds, the effective interest method may not be applied to loans and borrowings, based on materiality considerations. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance. Financial liabilities categorised at fair value through surplus or deficit include derivatives where fair value is negative. They follow the same accounting treatment as financial assets at fair value through surplus or deficit, see note 1.5.5. Financial guarantee liabilities are initially recognised at fair value, being the premium received. Subsequently, financial guarantee liabilities are measured at the higher of the best estimate of the expenses expected to be required to settle the financial guarantee liability and the amount initially recognised less, when appropriate, cumulative amortisation. The EU recognises a financial guarantee liability when it receives consideration for granting of the guarantee, that is at market terms, or when the fair value of the guarantee can be measured reliably. In case no active market for a directly equivalent guarantee contract exists, the EU discloses the guarantee given as a contingent liability (see note 1.7.2) or – when it is more likely than not that an outflow of resources will be required to settle the obligation – the EU recognises a provision (see note 1.5.11). Financial liabilities are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date. EU trust funds that are considered as part of the Commission’s operational activities (i.e. trust funds Madad and Colombia) are accounted for in the Commission accounts and further consolidated in the EU annual accounts. Therefore, contributions from other donors to the EU trust funds fulfil the criteria of revenues from non-exchange transactions under conditions and they are presented as financial liabilities until the conditions attached to the contributions transferred are met, i.e. eligible costs are incurred by the trust fund. The trust fund is required to finance specific projects and return remaining funds at the time of winding-up. At the balance sheet date the outstanding contribution liabilities are measured at contributions received less the expenses incurred by the trust fund, including estimated amounts when necessary. For reporting purposes the net expenses are allocated to the contributions of other donors in proportion to net contributions paid as at 31 December. This allocation of contributions is only indicative. When the trust fund is wound up the actual split of remaining resources will be decided by the trust fund board.





1.5.13.Payables A significant amount of the payables of the EU are unpaid cost claims from beneficiaries of grants or other EU funding (non-exchange transactions). They are recorded as payables for the requested amount when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are valued at the eligible amount. Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount and the corresponding eligible expenses are entered in the accounts when the supplies or services are delivered and accepted by the EU. 1.5.14.Accrued and deferred revenue and charges Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, the supplies have been delivered by the EU or a contractual agreement exists (e.g. by reference to a treaty), an accrued revenue will be recognised in the financial statements. In addition, at year-end, if an invoice is issued but the services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period. Expenses are also accounted for in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. The calculation of accrued expenses is done in accordance with detailed operational and practical guidelines issued by the Commission which aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if a payment has been made in advance for services or goods that have not yet been received, the expense will be deferred and recognised in the subsequent accounting period. 1.6.STATEMENT OF FINANCIAL PERFORMANCE 1.6.1.Revenue REVENUE FROM NON-EXCHANGE TRANSACTIONS The vast majority of the EU’s revenue relates to non-exchange transactions as follows: GNI based resources and VAT resources Revenue is recognised for the period for which the Commission sends out a call for funds to the Member States claiming their contribution. They are measured at their ‘called amount’. As VAT and GNI resources are based on estimates of the data for the budgetary year concerned, they may be revised as changes occur until the final data are issued by the Member States. The effect of a change in estimate is included when determining the net surplus or deficit for the period in which the change occurred. Traditional own resources Recoverables from non-exchange transactions and related revenues are recognised when the relevant monthly ‘A’ statements (including duties collected and amounts due that are guaranteed and not contested) are received from the Member States. At the reporting date, revenue collected by the Member States for the period but not yet paid to the Commission is estimated and recognised as accrued revenue. The quarterly ‘B’ statements (including duties neither collected nor guaranteed, as well as guaranteed amounts that have been contested by the debtor) received from the Member States are recognised as revenue less the collection costs to which they are entitled. In addition, a value reduction is recognised for the amount of the estimated recovery gap. Fines Revenue from fines is recognised when the EU’s decision imposing a fine has been taken and it is officially notified to the addressee. After the decision to impose a fine, the undertakings have two months from the date of notification: a)either to accept the decision, in which case they must pay the fine within the time limit laid down and the amount is definitively collected by the EU; or b)not to accept the decision, in which case they lodge an appeal under EU law. Even if appealed, the fine must be paid within the time limit of three months laid down, as the appeal does not have suspensory effect (Article 278 TFEU). The cash received is used to clear the recoverable. However, subject to the agreement of the Commission’s Accounting Officer, the undertaking may present a bank guarantee for the amount instead. In that case the fine remains as a recoverable. If neither cash nor a guarantee is received and there are doubts about the undertaking’s solvency, a value reduction on the entitlement is recognised.

If the undertaking appeals against the decision, and has already provisionally paid the fine, the amount is disclosed as a contingent liability, or, if it appears probable that the General Court may not rule in favour of the EU, a provision is recognised to cover this risk. If a guarantee is given instead, the outstanding recoverable is written down. The accumulated interest received by the Commission on the bank accounts where received payments are deposited is recognised as revenue, and any contingent liability is increased accordingly. Since 2010, all provisionally cashed fines are managed by the Commission in a specifically created fund (BUFI) and invested in financial instruments. REVENUE FROM EXCHANGE TRANSACTIONS Revenue from the sale of goods and services is recognised when the significant risk and rewards of ownership of the goods are transferred to the purchaser. Revenue associated with a transaction involving the provision of services is recognised by reference to the stage of completion of the transaction at the reporting date. Interest revenue and expense Interest revenue and expense are recognised in the statement of financial performance using the effective interest method. This is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest revenue or interest expense over the relevant period. When calculating the effective interest rate, the EU estimates cashflows considering all contractual terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees and interest rate points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest revenue is recognised using the rate of interest to discount the future cashflows for the purpose of measuring the impairment loss. Revenue from dividends Revenue from dividends and similar distributions is recognised when the right to receive payment is established. 1.6.2.Expenses Expenses from non-exchange transactions account for the majority of the EU’s expenses. They relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, contributions and donations. Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation (Financial Regulation, Staff Regulations, or other regulation) or an agreement has been signed authorising the transfer, any eligibility criteria have been met by the beneficiary, and a reasonable estimate of the amount can be made. When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expenses. Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the EU. They are valued at their original invoice amount. Furthermore, at the balance sheet date, expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are estimated and recognised in the statement of financial performance. 1.7.CONTINGENT ASSETS AND LIABILITIES 1.7.1.Contingent assets A contingent asset is a possible asset that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the EU. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable. 1.7.2.Contingent liabilities A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the EU, or a present obligation that arises from past events but is not recognised, either because it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation, or in the rare circumstances where the amount of the obligation cannot be measured with sufficient reliability. A contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.

1.8.CASHFLOW STATEMENT Cashflow information is used to provide a basis for assessing the ability of the EU to generate cash and cash equivalents, and its needs to utilise those cashflows. The cashflow statement is prepared using the indirect method. This means that the economic result for the financial year is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of revenue or expense associated with investing cashflows. Cashflows arising from transactions in a foreign currency are recorded in the EU’s reporting currency (Euro), by applying to the foreign currency amount the exchange rate between the euro and the foreign currency at the date of the cashflow. The cashflow statement reports cashflows during the period classified by operating and investing activities (the EU does not have financing activities). Operating activities are the activities of the EU that are not investing activities. These are the majority of the activities performed. Loans granted to beneficiaries (and the related borrowings, when applicable) are not considered as investing (or financing) activities as they are part of the general objectives and thus daily operations of the EU. Investing activities are the acquisition and disposal of intangible assets and property, plant and equipment and of other investments which are not included in cash equivalents. Investing activities do not include loans granted to beneficiaries. The objective is to show the real investments made by the EU. 2.NOTES TO THE BALANCE SHEET ASSETS 2.1.INTANGIBLE ASSETS EUR million Gross carrying amount at 31.12.2019 394 Additions 80 Disposals (4) Transfer between asset categories 0 Other changes – Gross carrying amount at 31.12.2020 470 Accumulated amortisation at 31.12.2019 (185) Amortisation charge for the year (33) Amortisation written back – Disposals 4 Transfer between asset categories 0 Other changes – Accumulated amortisation at 31.12.2020 (214) NET CARRYING AMOUNT AT 31.12.2020 256 NET CARRYING AMOUNT AT 31.12.2019 209 2.2.PROPERTY, PLANT AND EQUIPMENT EUR million Land and buildings Space assets Plant and equipment Furniture and vehicles Computer hardware Other Finance leases Assets under construction Total Gross carrying amount at 31.12.2019 1 464 5 680 260 67 226 154 1 549 3 172 12 572 Additions 7 6 11 2 17 3 4 1 048 1 100 Disposals (20) (16) (7) (2) (20) (7) (2) – (72) Transfer between asset categories 19 – (0) – 3 1 (3) (21) (0) Other changes – – – – – – – 0 0 Gross carrying amount at 31.12.2020 1 471 5 670 264 66 227 153 1 548 4 201 13 600 Accumulated depreciation at 31.12.2019 (917) (2 000) (240) (58) (196) (131) (850) – (4 392) Depreciation charge for the year (35) (635) (10) (3) (18) (8) (53) – (762) Depreciation written back – – – – – – – – – Disposals 7 10 7 2 20 6 1 – 53 Transfer between asset categories – – 0 – (2) (0) 2 – (0) Accumulated depreciation at 31.12.2020 (945) (2 625) (243) (59) (197) (133) (899) – (5 101) NET CARRYING AMOUNT AT 31.12.2020 526 3 045 20 8 29 20 649 4 201 8 499 NET CARRYING AMOUNT AT 31.12.2019 547 3 680 20 9 30 23 699 3 172 8 180 2.3.INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD The participation of the EU - represented by the Commission - in the European Investment Fund (EIF) is treated as an associate using the equity method of accounting. At 31 December 2020, the EU holds 29.7 % of the ownership interest in EIF (2019: 29.7 %). EUR million European Investment Fund Participation at 31.12.2019 591 Contributions – Dividends received – Share of net result 38 Share in the net assets (42) Participation at 31.12.2020 588 EIF summarised financial information:

EUR million 31.12.2020 31.12.2019 Total EIF Total EIF Assets 3 256 2 965 Liabilities (1 277) (975) Revenue 322 337 Expenses (194) (161) Surplus/(deficit) 129 176 Reconciliation of the above summarised financial information to the carrying amount of the interest held in the EIF is as follows: EUR million 31.12.2020 31.12.2019 Net assets of the associate 1 979 1 990 EC ownership interests in EIF 29.7% 29.7% Carrying amount 588 591 The Commission has paid-in 20 % of its subscribed shares in the EIF capital at 31 December 2020, the amount uncalled being as follows: EUR million Total EIF capital EU subscription Total share capital 4 500 1 337 Paid-in (900) (267) Uncalled 3 600 1 070 2.4.FINANCIAL ASSETS EUR million Note 31.12.2020 31.12.2019 Non-current Available for sale financial assets 2.4.1 14 906 13 941 Financial assets at fair value through surplus or deficit 2.4.2 193 134 Loans 2.4.3 82 846 51 352 97 945 65 427 Current Available for sale financial assets 2.4.1 3 163 2 932 Financial assets at fair value through surplus or deficit 2.4.2 6 3 Loans 2.4.3 10 421 1 285 13 591 4 220 Total 111 536 69 647 2.4.1.Available for sale financial assets EUR million 31.12.2020 31.12.2019 BUFI investments 1 598 1 863 European Bank for Reconstruction and Development 188 188 1 786 2 051 Guarantee Funds for budgetary guarantees: EFSI Guarantee Fund 7 526 6 654 Guarantee Fund for external actions 2 794 2 545 EFSD Guarantee Fund 692 595 11 012 9 794 Financial instruments supported by the EU budget: Horizon 2020 3 097 2 455 Connecting Europe Facility 764 699 EU SME Equity Facilities 533 507 European Fund for South East Europe 163 166 Green for Growth Fund 143 70 Energy Efficiency Finance Facility 104 105 Risk Sharing Finance Facility 96 597 Risk Capital Operations 82 112 Other 289 317 5 271 5 028 Total 18 069 16 873 Non-current 14 906 13 941 Current 3 163 2 932 2.4.2.Financial assets at fair value through surplus or deficit EUR million Type of derivative 31.12.2020 31.12.2019 Notional amount Fair value Notional amount Fair value Foreign currency forward contract 417 6 393 3 Guarantee on equity portfolio 3 197 193 1 439 134 Total 3 614 199 1 832 137 Non-current 3 197 193 1 439 134 Current 417 6 393 3 Fair value hierarchy of financial assets measured at fair value EUR million 31.12.2020 31.12.2019 Level 1: Quoted prices in active markets 13 865 13 949 Level 2: Observable inputs other than quoted prices 2 712 1 543 Level 3: Valuation techniques with inputs not based on observable market data 1 691 1 518 Total 18 268 17 010 Reconciliation of financial assets measured using valuation techniques with inputs not based on observable market data (level 3) EUR million Opening balance at 1.1.2020 1 518 Purchases, sales, issues and settlements 179 Gains or losses for the period in financial income or finance costs 10 Gains or losses in net assets (17) Transfers into level 3 – Transfers out of level 3 – Other 1 Closing balance at 31.12.2020 1 691 2.4.3.Loans EUR million Note 31.12.2020 31.12.2019 Loans for financial assistance 2.4.3.1 93 193 52 564 Loans for budget programmes 2.4.3.2 75 73 Total 93 268 52 637 Non-current 82 846 51 352 Current 10 421 1 285





2.4.3.1.Loans for financial assistance EUR million EFSM SURE BOP MFA Euratom Total Total at 31.12.2019 47 394 – 201 4 754 214 52 564 New loans – 39 500 – 1 675 100 41 275 Repayments – – – (617) (35) (651) Exchange differences – – – – – – Changes in carrying amount 2 3 0 0 0 6 Impairment – – – – – – Total at 31.12.2020 47 396 39 503 201 5 813 279 93 193 Non-current 37 050 39 500 200 5 783 250 82 783 Current 10 346 3 1 30 29 10 410 The change in carrying amount corresponds to the change in accrued interests. Nominal value of loans for financial assistance at 31 December 2020 total EUR 92 565 million (2019: EUR 51 941 million). Loans effective interest rates (expressed as a range of interest rates) 31.12.2020 31.12.2019 European Financial Stabilisation Mechanism (EFSM) 0.50% - 3.75% 0.50% - 3.75% Support to mitigate Unemployment Risks in an Emergency (SURE) 0.00% - 0.30% - Balance of Payment (BOP) 2.88% 2.88% Macro Financial Assistance (MFA) 0.00% - 3.69% 0.00% - 3.82% Euratom 0.00% - 5.76% 0.08% - 5.76% 2.4.3.2.Loans for budget programmes Impairment on loans for budget programmes EUR million 31.12.2019 Additions Reversals Write-off Other 31.12.2020 Loans for budget programmes 10 3 – – – 13 Subrogated loans 658 73 – – (4) 726 Total 668 75 – – (4) 739 Nominal value of loans for budget programmes at 31 December 2020 total EUR 728 million (2019: EUR 680 million). 2.5.PRE-FINANCING EUR million Note 31.12.2020 31.12.2019 Non-current Pre-financing 2.5.1 30 417 21 906 Other advances to Member States 2.5.2 3 825 4 045 Contribution to Trust Funds 119 60 34 361 26 011 Current Pre-financing 2.5.1 25 765 22 978 Other advances to Member States 2.5.2 3 327 2 892 29 092 25 870 Total 63 453 51 881 2.5.1.Pre-financing EUR million Gross amount Cleared via accruals Net amount at 31.12.2020 Gross amount Cleared via accruals Net amount at 31.12.2019 Shared Management EAFRD & other rural development instruments 3 193 3 193 3 193 3 193 ERDF & CF 23 074 (3 846) 19 229 17 985 (3 540) 14 444 ESF 8 222 (1 348) 6 874 6 830 (1 530) 5 301 Other 4 192 (1 520) 2 672 3 549 (1 463) 2 086 Direct Management Implemented by: Commission 17 368 (10 940) 6 428 13 162 (8 633) 4 529 EU executive agencies 18 567 (10 931) 7 636 16 522 (10 339) 6 184 Trust funds 1 121 (843) 278 858 (665) 194 Indirect Management Implemented by: Other EU agencies & bodies 4 770 (3 659) 1 110 4 038 (3 158) 880 Third countries 1 515 (1 043) 471 1 491 (861) 630 International organisations 9 068 (6 020) 3 048 8 289 (5 317) 2 972 Other entities 11 675 (6 433) 5 242 10 574 (6 104) 4 471 Total 102 764 (46 583) 56 181 86 493 (41 609) 44 884 Non-current 30 417 – 30 417 21 906 – 21 906 Current 72 347 (46 583) 25 765 64 587 (41 609) 22 978 2.5.2.Other advances to Member States EUR million 31.12.2020 31.12.2019 Advances to Member States for financial instruments under shared management 3 520 3 304 Aid Schemes 3 633 3 634 Total 7 153 6 937 Non-current 3 825 4 045 Current 3 327 2 892 2.6.EXCHANGE RECEIVABLES AND NON-EXCHANGE RECOVERABLES

EUR million Note 31.12.2020 31.12.2019 Non-current Recoverables from non-exchange transactions 2.6.1 44 279 2 436 Receivables from exchange transactions 2.6.2 1 649 1 150 45 928 3 585 Current Recoverables from non-exchange transactions 2.6.1 26 779 19 172 Receivables from exchange transactions 2.6.2 1 490 816 28 269 19 988 Total 74 197 23 573 2.6.1.Recoverables from non-exchange transactions EUR million Note 31.12.2020 31.12.2019 Non-current Member States 2.6.1.1 2 231 2 422 UK Withdrawal Agreement 2.6.1.2 40 629 – Accrued income and deferred charges 2.6.1.4 1 261 – Other recoverables 158 14 44 279 2 436 Current Member States 2.6.1.1 7 163 6 117 UK Withdrawal Agreement 2.6.1.2 6 827 – Competition fines 2.6.1.3 11 295 11 301 Accrued income and deferred charges 2.6.1.4 572 1 581 Other recoverables 922 173 26 779 19 172 Total 71 058 21 607 2.6.1.1.Recoverables from Member States EUR million 31.12.2020 31.12.2019 TOR A accounts 5 297 5 478 TOR separate accounts 1 460 1 591 Own resources to be received 2 188 7 Impairment (892) (931) Other – – Own resource recoverables 8 053 6 145 European Agricultural Guarantee Fund (EAGF) 1 378 1 722 European Agricultural Fund for Rural Development (EAFRD) and other rural development instruments 720 879 Impairment (837) (822) EAGF and rural development recoverables 1 260 1 779 Pre-financing recovery 53 443 VAT paid and recoverable 10 11 Other recoverables from Member States 17 161 Total 9 393 8 539 Non-current 2 231 2 422 Current 7 163 6 117 2.6.1.2.UK Withdrawal agreement EUR million Article 140 Article 142 Other 31.12.2020 Due from the UK 34 966 14 338 275 49 579 Due to the UK – – (2 122) (2 122) Total 34 966 14 338 (1 847) 47 456 Non-current 28 196 14 327 (1 894) 40 629 Current 6 769 11 47 6 827 Article 140 – Outstanding Commitments EUR million 31.12.2020 Outstanding budgetary commitments at 31.12.2020 as reported in the budgetary implementation reports 303 197 Commitments on non-differentiated budget lines: amount of payment appropriations carried over automatically (1 196) Commitments where the UK has an opt-out (1 826) Commitments financed by assigned revenue (4 709) Payment appropriations available from internal assigned revenue (1 128) Other adjustments (non-automatic carryovers of commitment appropriations) 10 Adjusted budgetary commitments at 31.12.2020 on which UK share is applied 294 347 UK share of the adjusted budgetary commitments 36 376 Net financial corrections related to 2014-2020 or previous programme periods (0) TOR relating to 2020 and made available to the Union in 2021 (402) Amounts owed by the UK under Article 140 35 973 Estimated non-implementation (1 008) Total 34 966 Non-current 28 196 Current 6 769 Article 142 – Union liabilities at end 2020 EUR million Pension Scheme of European Officials Joint Sickness Insurance Scheme Other retirement schemes 31.12.2020 Unpaid 31.12.2020 Liability 100 741 12 935 2 344 116 020 UK Share 12 450 1599 290 14 338 Non-current 12 450 1 599 279 14 327 Current – – 11 11



Other amounts EUR million 31.12.2020 Due from the UK: Article 136 230 Article 147 46 275 Due to the UK: Article 141 (1 766) Article 143 (93) Article 144 (46) Article 145 (183) Article 146 (33) (2 122) Total (1 847) Non-current (1 894) Current 47 2.6.1.3.Recoverables from competition fines EUR million 31.12.2020 31.12.2019 Recoverable from fines gross amount 14 503 14 606 Provisional payments (3 023) (3 125) Impairment (186) (180) Total 11 295 11 301 Non-current – – Current 11 295 11 301 2.6.1.4.Accrued income and deferred charges

EUR million 31.12.2020 31.12.2019 Other accrued income 1 754 1 502 Deferred charges relating to non-exchange transactions 79 79 Total 1 833 1 581 Non-current 1 261 – Current 572 1 581



2.6.2.Receivables from exchange transactions EUR million 31.12.2020 31.12.2019 Non-current Late payment interest 1 641 1 137 Other receivables 8 13 1 649 1 150 Current Customers 243 205 Impairment on receivables from customers (181) (148) Deferred charges relating to exchange transactions 202 142 Other 1 226 617 1 490 816 Total 3 139 1 966 2.7.INVENTORIES EUR million 31.12.2020 31.12.2019 Scientific materials 59 47 Other 15 15 Total 74 62 2.8.CASH AND CASH EQUIVALENTS EUR million 31.12.2020 31.12.2019 Accounts with Treasuries and Central Banks 11 342 15 519 Current accounts 80 91 Imprest accounts 8 7 Transfers (cash in transit) 0 0 Bank accounts for budget implementation 11 430 15 617 Cash belonging to financial instruments 2 446 1 567 Cash relating to fines 1 458 1 258 Cash relating to trust funds 46 97 Total 15 380 18 538 LIABILITIES 2.9.PENSION AND OTHER EMPLOYEE BENEFITS Net employee benefit scheme liability EUR million Pension Scheme of European Officials Other retirement benefit schemes Joint Sickness Insurance Scheme 31.12.2020 Total 31.12.2019 Total Defined Benefit Obligation 100 741 1 732 13 289 115 762 97 359 Plan assets N/A N/A (354) (354) (309) Net liability 100 741 1 732 12 935 115 408 97 050 Actuarial assumptions - employee benefits Pension Scheme of European Officials Joint Sickness Insurance Scheme 2020 Nominal discount rate 0.4% 0.5% Expected inflation rate 1.2% 1.3% Real discount rate (0.8)% (0.8)% Expected rate of salary increases 1.8% 1.8% Medical cost trend rates N/A 2.6% Retirement age 63/64/66 63/64/66 2019 Nominal discount rate 1.1% 1.2% Expected inflation rate 1.3% 1.3% Real discount rate (0.2)% (0.1)% Expected rate of salary increases 1.8% 1.8% Medical cost trend rates N/A 3.0% Retirement age 63/64/66 63/64/66

Movement in present value of employee benefits defined benefit obligation EUR million Pension Scheme of European Officials Other retirement benefit Schemes Joint Sickness Insurance Scheme Total Present value as at 31.12.2019 83 842 1 446 12 071 97 359 Recognised in statement of financial performance Current service cost 3 441 94 348 3 883 Interest expense 919 14 145 1 077 Recognised in net assets Remeasurements in employee benefits liabilities Actuarial (gains)/losses from experience 2 348 4 (141) 2 211 Actuarial (gains)/losses from demographic assumptions – – – – Actuarial (gains)/losses from financial assumptions 11 896 209 964 13 069 Other Benefits paid (1 706) (34) (97) (1 837) Present value as at 31.12.2020 100 741 1 732 13 289 115 762



Movement in present value of plan assets of the Joint Sickness Insurance Scheme EUR million Present value as at 31.12.2019 309 Net movement in plan assets 45 Present value as at 31.12.2020 354 Pension Scheme of European Officials sensitivity A ten basis points change in the assumed discount rate would have the following effects: EUR million 2020 2019 Increase 0.1% Decrease 0.1% Increase 0.1% Decrease 0.1% Defined benefit obligation (2 247) 2 319 (1 797) 1 854 A ten basis points change in the expected salary increases rate would have the following effects: EUR million 2020 2019 Increase 0.1% Decrease 0.1% Increase 0.1% Decrease 0.1% Defined benefit obligation 2 206 (2 143) 1 774 (1 724) A one year change in the assumed retirement age would have the following effects: EUR million 2020 2019 One year increase One year decrease One year increase One year decrease Defined benefit obligation (1 104) 1 417 (620) 771 Joint Sickness Insurance Scheme sensitivity

A ten basis points change in the assumed medical cost trend rates would have the following effects: EUR million 2020 2019 Increase 0.1% Decrease 0.1% Increase 0.1% Decrease 0.1% The aggregate of the current service cost and interest cost components of net periodic post-employment medical costs 15 (14) 8 (8) Defined benefit obligation 397 (385) 352 (341) A ten basis points change in the assumed discount rate would have the following effects: EUR million 2020 2019 Increase 0.1% Decrease 0.1% Increase 0.1% Decrease 0.1% Defined benefit obligation (348) 361 (311) 322 A ten basis points change in the expected salary increases rate would have the following effects: EUR million 2020 2019 Increase 0.1% Decrease 0.1% Increase 0.1% Decrease 0.1% Defined benefit obligation (38) 37 (30) 29 A one year change in the assumed retirement age would have the following effects: EUR million 2020 2019 One year increase One year decrease One year increase One year decrease Defined benefit obligation (401) 421 (363) 383 2.10.PROVISIONS EUR million Amount at 31.12.2019 Additional provisions Unused amounts reversed Amounts used Transfer between categories Change in estimation Amount at 31.12.2020 Legal cases: Agriculture 440 168 (4) (435) – – 170 Other 5 13 (1) (1) – – 17 Nuclear site dismantling 2 132 – – (30) – 325 2 426 Financial 1 938 812 (1) (225) – (2) 2 523 Other 71 59 (10) (8) – – 112 Total 4 586 1 053 (16) (699) – 323 5 248 Non-current 3 490 743 (4) (435) (392) 329 3 730 Current 1 097 310 (12) (263) 392 (6) 1 518 2.11.FINANCIAL LIABILITIES EUR million Note 31.12.2020 31.12.2019 Non-current Financial liabilities at amortised cost 2.11.1 83 730 52 351 Financial liabilities at fair value through surplus or deficit 2.11.2 4 9 83 734 52 360 Current Financial liabilities at amortised cost 2.11.1 10 518 1 367 Financial liabilities at fair value through surplus or deficit 2.11.2 0 4 Financial guarantee liabilities 90 20 10 608 1 390 Total 94 342 53 750 2.11.1.Financial liabilities at amortised cost EUR million Note 31.12.2020 31.12.2019 Borrowings for financial assistance 2.11.1.1 93 192 52 564 Other financial liabilities 2.11.1.2 1 055 1 154 Total 94 248 53 718 Non-current 83 730 52 351 Current 10 518 1 367





2.11.1.1.Borrowings for financial assistance EUR million EFSM SURE BOP MFA Euratom Total Total at 31.12.2019 47 394 – 201 4 754 214 52 564 New loans – 39 500 – 1 675 100 41 275 Repayments – – (617) (35) (651) Exchange differences – – – – – Changes in carrying amount 2 3 0 0 (0) 5 Total at 31.12.2020 47 396 39 503 201 5 813 279 93 192 Non-current 37 050 39 500 200 5 783 250 82 782 Current 10 346 3 1 30 29 10 410 Borrowings effective interest rates (expressed as a range of interest rates) 31.12.2020 31.12.2019 European Financial Stabilisation Mechanism (EFSM) 0.50% - 3.75% 0.50% - 3.75% Support to mitigate Unemployment Risks in an Emergency (SURE) 0.00% - 0.30% – Balance of Payment (BOP) 2.88% 2.88% Macro Financial Assistance (MFA) 0.00% - 3.69% 0.00% - 3.82% Euratom 0.00% - 5.68% 0.00% - 5.68% 2.11.1.2.Other financial liabilities EUR million 31.12.2020 31.12.2019 Non-current Finance lease liabilities 729 800 Buildings paid for in instalments 184 210 Other 35 51 948 1 061 Current Finance lease liabilities 72 67 Buildings paid for in instalments 26 24 Fines to be reimbursed 8 – Other 2 1 108 93 Total 1 055 1 154 Finance lease liabilities EUR million Future amounts to be paid < 1 year 1 - 5 years > 5 years Total Liability Land and buildings 67 303 419 789 Other fixed assets 5 7 – 12 Total at 31.12.2020 72 310 419 801 Interest element 44 133 76 253 Total future minimum lease payments at 31.12.2020 116 443 495 1 054 Total future minimum lease payments at 31.12.2019 115 451 602 1 168



2.11.2.Financial liabilities at fair value through surplus or deficit EUR million Type of derivative 31.12.2020 31.12.2019 Notional amount Fair value Notional amount Fair value Guarantee on equity portfolio 215 1 752 10 FX option (put spread) 14 4 13 2 Total 229 4 765 12 Non-current 229 4 148 9 Current 0 0 617 4 Fair value hierarchy of financial liabilities measured at fair value EUR million 31.12.2020 31.12.2019 Level 1: Quoted prices in active markets – – Level 2: Observable inputs other than quoted prices 4 2 Level 3: Valuation techniques with inputs not based on observable market data 1 10 Total 4 12 2.12.PAYABLES EUR million Gross Amount Adjustments* Net Amount at 31.12.2020 Gross Amount Adjustments* Net Amount at 31.12.2019 Cost claims and invoices received from: Member States EAFRD & other rural development instruments 17 (0) 17 21 (0) 20 ERDF & CF 12 651 (2 698) 9 954 8 068 (2 437) 5 631 ESF 3 479 (370) 3 109 2 882 (558) 2 325 Other 796 (90) 706 854 (45) 809 Private and public entities 1 485 (182) 1 302 1 562 (180) 1 381 Total costs claims & invoices received 18 428 (3 341) 15 088 13 386 (3 220) 10 166 EAGF 16 160 N/A 16 160 16 255 N/A 16 255 Sundry Payables 1 859 N/A 1 859 1 372 N/A 1 372 Total 36 447 (3 341) 33 107 31 014 (3 220) 27 793 * Estimated non-eligible amounts and pending other advances to Member States.

2.13.ACCRUED CHARGES AND DEFERRED INCOME EUR million 31.12.2020 31.12.2019 Accrued charges 63 667 66 185 Deferred income 1 138 Other 39 52 Total 63 708 66 374 The split of accrued charges is as follows: EUR million 31.12.2020 31.12.2019 EAGF 24 599 28 193 EAFRD and other rural development instruments 18 622 18 583 ERDF and CF 8 766 9 525 ESF 3 009 3 016 Other 8 670 6 867 Total 63 667 66 185 NET ASSETS 2.14.RESERVES EUR million Note 31.12.2020 31.12.2019 Fair value reserve 2.14.1 470 377 Guarantee Fund reserve 3 043 2 870 Other reserves (12) 59 Total 3 501 3 306 2.14.1.Fair value reserve Movements during the period of fair value reserve related to the available for sale financial assets: EUR million 31.12.2020 31.12.2019 Included in fair value reserve 71 176 Included in statement of financial performance 22 (28) Total 93 148 2.15.AMOUNTS TO BE CALLED FROM MEMBER STATES EUR million Amounts to be called from Member States at 31.12.2019 80 179 Return of 2019 budget surplus to Member States 3 218 Movement in Guarantee Fund reserve 173 Remeasurements in employee benefits liability 15 131 Other reserve movements (22) Economic result of the year (57 349) Total amounts to be called from Member States at 31.12.2020 41 329 3.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE REVENUE REVENUE FROM NON-EXCHANGE TRANSACTIONS:

TRANSFERS 3.1.RECOVERY OF EXPENSES EUR million 2020 2019 Shared management 1 281 2 547 Direct management 53 65 Indirect management 21 16 Total 1 355 2 627 3.2.OTHER REVENUE FROM NON-EXCHANGE TRANSACTIONS

EUR million 2020 2019 Contribution from Member States to the Innovation Fund 2 080 – Contribution of third countries and accession countries 1 254 1 451 Contribution from Member States for external aid 1 075 331 Staff taxes and contributions 983 966 Transfer of assets 317 47 Budgetary adjustments 214 (1 719) Adjustment of provisions 15 16 Agricultural levies 1 2 Funding of institutions (3 411) (3 725) Other 735 343 Total 3 263 (2 288)



REVENUE FROM EXCHANGE TRANSACTIONS 3.3.FINANCIAL REVENUE EUR million 2020 2019 Interest on: Late payments 1 129 133 Loans 1 167 1 178 Other 60 67 Issue premiums 674 2 Premium on financial guarantee liability 258 193 Dividend 22 29 Financial revenue from financial assets or liabilities at fair value through surplus or deficit 70 125 Realised gains on sale of available for sale financial assets 41 69 Other 2 2 Total 3 424 1 798 3.4.OTHER REVENUE FROM EXCHANGE TRANSACTIONS EUR million 2020 2019 Foreign exchange gains 356 335 Share of net result of EIF 38 53 Fee and premium revenue related to financial instruments 34 43 Sales of goods 17 16 Fixed assets related revenue 2 4 Other 240 274 Total 687 725 EXPENSES 3.5.SHARED MANAGEMENT EUR million Implemented by Member States 2020 2019 European Agricultural Guarantee Fund 40 461 43 951 European Agricultural Fund for Rural Development and other rural development instruments 14 467 13 541 European Regional Development Fund and Cohesion Fund 41 118 35 178 European Social Fund 13 677 11 218 Other 2 701 2 608 Total 112 425 106 495



3.6.DIRECT MANAGEMENT EUR million 2020 2019 Implemented by the Commission 11 455 8 458 Implemented by EU Executive Agencies 10 029 10 095 Implemented by Trust funds 636 412 Total 22 120 18 965 3.7.INDIRECT MANAGEMENT EUR million 2020 2019 Implemented by other EU agencies and bodies 4 497 3 820 Implemented by third countries 559 637 Implemented by international organisations 3 620 3 448 Implemented by other entities 3 257 2 878 Total 11 933 10 783

3.8.STAFF AND PENSION COSTS EUR million 2020 2019 Staff costs 3 524 3 442 Pension costs 4 960 4 721 Total 8 485 8 163 3.9.FINANCE COSTS EUR million 2020 2019 Interest expenses: Borrowings 1 160 1 172 Other 22 21 Issue costs 672 1 Finance leases 47 52 Impairment losses on available for sale financial assets 41 19 Impairment loss on loans and receivables 110 105 Realised loss on sale of available for sale financial assets 5 5 Loss on financial assets or liabilities at fair value through surplus or deficit 21 57 Other 81 25 Total 2 160 1 458

3.10.OTHER EXPENSES EUR million 2020 2019 Adjustment of provisions 1 386 1 294 Administrative and IT expenses 940 883 Fixed assets related expenses 832 825 Foreign exchange losses 561 328 Funding and contributions to other EU bodies 511 491 Land and buildings management expenses 230 220 Operating lease expenses 152 188 Reduction of fines by the Court of Justice 6 91 Other 358 544 Total 4 976 4 866 The aggregate amount of research and development expenditure recognised as an expense during 2020 is as follows: EUR million 2020 2019 Research costs 391 381 Non-capitalised development costs 85 69 Total 476 449 3.11.SEGMENT REPORTING BY MULTIANNUAL FINANCIAL FRAMEWORK HEADING (MFF) EUR million Smart and inclusive growth Sustainable growth Security and citizenship Global Europe Administration Not assigned to MFF headings* Total GNI resources – – – – – 125 393 125 393 Traditional own resources – – – – – 19 559 19 559 VAT – – – – – 17 858 17 858 Fines – – – – – 452 452 Recovery of expenses 610 713 17 14 0 – 1 355 UK Withdrawal Agreement – – – – – 47 456 47 456 Other 1 470 2 113 794 248 816 (2 177) 3 263 Revenue from non-exchange transactions 2 080 2 826 811 262 816 208 542 215 337 Financial revenue 331 0 0 9 0 3 084 3 424 Other 135 (19) (5) (3) 221 359 687 Revenue from exchange transactions 466 (19) (5) 5 221 3 443 4 111 Total revenue 2 546 2 807 806 267 1 036 211 985 219 448 Expenses implemented by Member States: EAGF – (40 461) – – – – (40 461) EAFRD & other rural develop. instruments – (14 467) – – – – (14 467) ERDF & CF (41 118) – – – – – (41 118) ESF (13 677) – – – – – (13 677) Other (594) (641) (1 325) (141) – – (2 701) Implemented by the Commission, executive agencies and trust funds (12 743) (728) (2 943) (5 693) (12) (1) (22 120) Implemented by other EU agencies and bodies (3 287) (67) (1 114) (29) – – (4 497) Implemented by third countries and international organisations (543) (6) (195) (3 435) – – (4 178) Implemented by other entities (2 457) (11) (2) (787) (0) – (3 257) Staff and pension costs (1 767) (387) (500) (706) (5 125) – (8 485) Finance costs (40) (38) (0) (37) (66) (1 979) (2 160) Other expenses (2 676) (229) (162) (135) (1 215) (559) (4 976) Total expenses (78 902) (57 035) (6 241) (10 962) (6 418) (2 540) (162 099) Economic result of the year (76 356) (54 228) (5 435) (10 695) (5 382) 209 446 57 349 * ‘Not assigned to MFF headings’ includes off-budget operations and unallocated programmes with individually immaterial amounts. 4.CONTINGENT LIABILITIES AND ASSETS 4.1.CONTINGENT LIABILITIES 4.1.1.Budgetary guarantees EUR million 31.12.2020 31.12.2019 Ceiling Signed Disbursed Ceiling Signed Disbursed EIB external lending mandate guarantees 35 372 32 530 20 050 37 929 31 521 20 014 EFSI guarantee 25 543 23 831 18 590 25 797 21 889 17 634 EFSD guarantee 1 370 438 34 50 – – Total 62 285 56 799 38 673 63 775 53 410 37 648

4.1.2.Guarantees relating to financial assistance (borrowing and lending activities) EUR million 31.12.2020 31.12.2019 Drawn Undrawn Total Drawn Undrawn Total EFSM 47 396 – 47 396 47 394 – 47 394 SURE 39 503 46 363 85 867 - - - BOP 201 – 201 201 – 201 MFA 5 813 1 335 7 148 4 754 560 5 314 Euratom 279 100 379 214 200 414 Total 93 193 47 798 140 991 52 564 760 53 324 4.1.3.Guarantees given for EU financial instruments EUR million 31.12.2020 31.12.2019 Horizon 2020 1 860 1 584 Connecting Europe Facility 579 684 Risk Sharing Finance Facility 37 110 Other 49 38 Total 2 524 2 416 4.1.4.Legal cases EUR million 31.12.2020 31.12.2019 Fines 2 985 3 128 Agriculture 66 199 Cohesion 341 341 Other 2 164 2 123 Total 5 556 5 791



4.2.CONTINGENT ASSETS EUR million 31.12.2020 31.12.2019 Guarantees received: Performance guarantees 74 75 Other guarantees 2 6 Other contingent assets 58 31 Total 133 113 5.BUDGETARY AND LEGAL COMMITMENTS EUR million Note 31.12.2020 31.12.2019 Outstanding budgetary commitments not yet expensed 5.1 248 788 249 357 Shared management legal commitments under the current MFF pending implementation 5.2 – 72 832 Significant legal commitments in other areas 5.3 5 620 10 227 Total 254 408 332 416 5.1.OUTSTANDING BUDGETARY COMMITMENTS NOT YET EXPENSED EUR million 31.12.2020 31.12.2019 Outstanding budgetary commitments not yet expensed 248 788 249 357 5.2.SHARED MANAGEMENT LEGAL COMMITMENTS UNDER THE CURRENT MFF PENDING IMPLEMENTATION EUR million Funds Financial framework 2014-2020 (A) Legal commitments according to latest Commission Decision (B) Budget commitments including decommitments (C) Legal commitments pending implementation (B-C) European Regional Development Fund and Cohesion Fund 261 889 261 690 261 690 – European Social Fund 93 642 93 498 93 498 0 European Neighbourhood Policy Instrument – – – – Fund for European Aid to the most Deprived 3 814 3 813 3 813 – HEADING 1B: COHESION POLICY FUNDS 359 345 359 000 359 000 0 European Agricultural Fund for Rural Development 126 909 100 063 100 063 (0) European Maritime and Fisheries Fund 5 749 5 655 5 655 – HEADING 2: NATURAL RESOURCES 132 658 105 718 105 718 (0) Asylum and Migration Fund 4 576 4 576 4 576 (0) Internal Security Fund 3 172 3 172 3 172 (0) HEADING 3: SECURITY & CITIZENSHIP 7 747 7 747 7 747 (0) Total 499 750 472 466 472 466 0





5.3.SIGNIFICANT LEGAL COMMITMENTS IN OTHER AREAS EUR million Note 31.12.2020 31.12.2019 Connecting Europe Facility 4 140 7 680 Copernicus – 601 Galileo – 438 Fisheries agreements 172 223 Operating lease commitments 5.3.1 894 844 Other contractual commitments 414 440 Total 5 620 10 227 5.3.1.Operating lease commitments EUR million Future amounts to be paid < 1 year 1- 5 years > 5 years Total Buildings 123 352 410 885 IT materials and other equipment 3 6 – 9 Total 126 358 410 894 6.FINANCIAL RISK MANAGEMENT 6.1.CURRENCY RISK Exposure of the EC to currency risk at year-end – net position EUR million 31.12.2020 USD GBP DKK SEK EUR Other Total Financial assets Available for sale financial assets 593 42 15 14 17 386 20 18 069 Financial assets at fair value through surplus or deficit (417) – – – 616 – 199 Loans* 21 – – – 46 9 75 Receivables and recoverables 1 1 201 114 176 72 050 656 74 197 Cash and cash equivalents 106 61 153 367 13 146 1 548 15 380 303 1 303 282 556 103 243 2 233 107 921 Financial liabilities Financial liabilities at fair value through surplus or deficit – – – – (1) (4) (4) Payables 0 (0) (0) (1) (33 101) (5) (33 107) 0 (0) (0) (1) (33 101) (9) (33 111) Total 303 1 303 281 556 70 142 2 225 74 810 EUR million 31.12.2019 USD GBP DKK SEK EUR Other Total Financial asse