EUROPEAN COMMISSION Brussels, 26.6.2019 COM(2019) 312 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION FOR THE FINANCIAL YEAR 2018



Annual accounts

of the European Commission Financial year 2018 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 2018 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. [signed] Rosa ALDEA BUSQUETS Accounting Officer of the Commission 21 June 2019 EUROPEAN COMMISSION FINANCIAL YEAR 2018 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 INSTRUMENTS DISCLOSURES 7.RELATED PARTIES 8.EVENTS AFTER THE BALANCE SHEET DATE BALANCE SHEET EUR million Note 31.12.2018 31.12.2017 NON-CURRENT ASSETS Intangible assets 2.1 168 149 Property, plant and equipment 2.2 8 098 7 544 Investments accounted for using the equity method 2.3 591 581 Financial assets 2.4 63 917 58 533 Pre-financing 2.5 25 807 24 745 Exchange receivables and non-exchange recoverables 2.6 415 619 98 997 92 172 CURRENT ASSETS Financial assets 2.4 3 875 8 339 Pre-financing 2.5 24 502 24 552 Exchange receivables and non-exchange recoverables 2.6 23 903 11 421 Inventories 2.7 67 62 Cash and cash equivalents 2.8 16 946 23 113 69 293 67 488 TOTAL ASSETS 168 290 159 659 NON-CURRENT LIABILITIES Pension and other employee benefits 2.9 (79 865) (72 495) Provisions 2.10 (3 013) (2 617) Financial liabilities 2.11 (52 764) (49 414) (135 642) (124 526) CURRENT LIABILITIES Provisions 2.10 (820) (645) Financial liabilities 2.11 (2 489) (6 813) Payables 2.12 (32 539) (39 376) Accrued charges and deferred income 2.13 (62 500) (63 314) (98 348) (110 148) TOTAL LIABILITIES (233 990) (234 674) NET ASSETS (65 700) (75 014) Reserves 2.14 3 186 3 062 Amounts to be called from Member States* 2.15 (68 885) (78 077) NET ASSETS (65 700) (75 014) * The European Parliament adopted a budget on 12 December 2018 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 2019. 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 2018 2017 REVENUE Revenue from non-exchange transactions GNI resources 105 780 78 620 Traditional own resources 3.1 22 767 20 520 VAT 17 624 16 947 Fines 6 740 4 664 Recovery of expenses 3.2 2 213 1 879 Other 3.3 (674) 6 515 154 450 129 145 Revenue from exchange transactions Financial revenue 3.4 3 103 1 820 Other 3.5 716 692 3 819 2 511 Total Revenue 158 270 131 657 EXPENSES Implemented by Member States 3.6 European Agricultural Guarantee Fund (43 527) (44 289) European Agricultural Fund for Rural Development and other rural development instruments (13 149) (11 359) European Regional Development Fund & Cohesion Fund (30 230) (17 650) European Social Fund (11 935) (7 353) Other (2 826) (1 253) Implemented by the Commission, executive agencies and trust funds 3.7 (17 576) (15 763) Implemented by other EU agencies and bodies 3.8 (3 622) (3 429) Implemented by third countries and int. organisations 3.8 (4 016) (4 115) Implemented by other entities 3.8 (3 569) (1 478) Staff and pension costs 3.9 (7 789) (6 995) Changes in employee benefits actuarial assumptions – (3 581) Finance costs 3.10 (1 640) (1 849) Other 3.11 (4 019) (4 642) Total Expenses (143 897) (123 756) ECONOMIC RESULT OF THE YEAR 14 372 7 901 CASHFLOW STATEMENT EUR million 2018 2017 Economic result of the year 14 372 7 901 Operating activities Amortisation 29 27 Depreciation 705 630 (Increase)/decrease in loans 1 037 395 (Increase)/decrease in pre-financing (1 012) (3 557) (Increase)/decrease in exchange receivables and non-exchange recoverables (12 278) (705) (Increase)/decrease in inventories (5) 13 Increase/(decrease) in pension and other employee benefits 7 369 5 945 Increase/(decrease) in provisions 571 850 Increase/(decrease) in financial liabilities (974) (313) Increase/(decrease) in payables (6 837) (864) Increase/(decrease) in accrued charges and deferred income (814) (3 713) Prior year budgetary surplus taken as non-cash revenue (556) (6 405) Remeasurement of employee benefits liability (non-cash movement not included in statement of financial performance) (4 432) – Other non-cash movements (70) 4 Investing activities (Increase)/decrease in intangible assets and property, plant and equipment (1 307) (1 382) (Increase)/decrease in investments accounted for using the equity method (9) (53) (Increase)/decrease in available for sale financial assets (1 964) (3 217) (Increase)/decrease in financial assets at fair value through surplus or deficit 7 (22) NET CASHFLOW (6 167) (4 467) Net increase/(decrease) in cash and cash equivalents (6 167) (4 467) Cash and cash equivalents at the beginning of the year 23 113 27 579 Cash and cash equivalents at year-end 16 946 23 113 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 31.12.2016 (79 546) 2 720 311 (76 515) Movement in Guarantee Fund reserve (20) 20 – – Fair value movements – – 10 10 Other (7) 47 (46) (6) 2016 budget result credited to Member States (6 405) – – (6 405) Economic result of the year 7 901 – – 7 901 BALANCE AS AT 31.12.2017 (78 077) 2 788 275 (75 014) Movement in Guarantee Fund reserve (186) 186 – – Fair value movements – – (46) (46) Remeasurements in employee benefits liability (4 432) – – (4 432) Other (7) (17) – (24) 2017 budget result credited to Member States (556) – – (556) Economic result of the year 14 372 – – 14 372 BALANCE AS AT 31.12.2018 (68 885) 2 957 229 (65 700) NOTES TO THE FINANCIAL STATEMENTS

For further information in addition to the notes below, please also see the 2018 EU consolidated annual accounts. 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. 2.LEGAL BASIS AND ACCOUNTING RULES The accounts of the EU are kept in accordance with Regulation (EU, Euratom) No 1046/2018 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 establish a uniform set of rules for accounting, valuation and presentation of the accounts with a view to harmonising the process for drawing up the financial statements and consolidation. Application of new and amended European Union accounting rules (EAR) Revised EAR which is effective for annual periods beginning on or after 1 January 2018 The following accounting rules, adopted by the Accounting Officer of the Commission, became mandatorily effective in the current year: ·Revision of EAR 12 "Employee Benefits": The revised EAR 12 was adopted by the Accounting Officer in 2017 which is based on the new IPSAS 39 “Employee Benefits” published in July 2016. For the first application of the revised EAR 12 there were no significant impacts on the EU consolidated financial statements, aside from the recognition of any gain or loss resulting from changes in the actuarial assumptions, which under the revised EAR is recognised directly in net assets, in contrast with the previous requirement to recognise in surplus or deficit. New EAR adopted but not yet effective at 31 December 2018 The EU has not applied the following new EAR, which have been adopted by the Accounting Officer of the Commission, but which is not yet effective: ·New EAR 20 "Public Sector Combinations" (effective for annual periods beginning on or after 1 January 2019): The EAR 20, which is based on the IPSAS 40 "Public Sector Combinations", establishes the classification of a public sector combination into two different types depending on whether the transaction takes place under common control or not: (i) amalgamation, in which the transaction is based on the carrying amounts of the entity combined with the EU; and (ii) acquisition, in which the transaction is based on the acquisition date fair values of the entity acquired by the EU. Both have distinct requirements and levels of disclosure, in order to provide a better understanding of its effects to users of the financial statements of the EU.

The impact on the EU financial statements in the year of initial application will depend on whether in that period the EU would enter into a public sector combination transaction. 3.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. 4.CONSOLIDATION Scope of consolidation The consolidated financial statements of the EU comprise all significant controlled entities (i.e. the EU institutions (including the Commission) and the EU agencies), associates and joint ventures. The complete list of consolidated entities can be found in note 9 of the EU financial statements. It now comprises 52 controlled entities and 1 associate. Entities that fall under the consolidation scope, but which are immaterial to the EU consolidated financial statements as a whole, need not be consolidated or accounted for using equity method where to do so would result in excessive time or cost to the EU. Those entities are referred to as 'Minor entities' and are separately listed in note 9. In 2018, 7 entities have been classified as minor entities. Controlled entities The decision to include an entity in the scope of consolidation is based on the control concept. Controlled entities are all 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. Under this approach, the EU's institutions (except the European Central Bank) and agencies (excluding the agencies of the former 2nd pillar) are considered as under the exclusive control of the EU and are therefore included in the consolidation scope. Furthermore the European Coal and Steel Community (ECSC) in Liquidation is also considered as a controlled entity. 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 over which the EU and one or more parties have joint control. Joint control is contractually agreed sharing of control over an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of parties sharing control. Joint agreements can be either joint operations or joint ventures. In case a joint arrangement is structured through a separate vehicle and parties to the joint arrangement have rights to the net assets of the arrangement, this joint arrangement classifies as a joint venture. Participations in joint ventures are accounted for using the equity method (see note 1.5.4). In case the parties have rights to the assets, and obligations for the liabilities, related to the arrangement, this joint arrangement is classified as a joint operation. In relation to its interest in joint operations, the EU recognises in its financial statements: its assets and liabilities, revenue and expense, as well as its share of assets, liabilities, revenue and expense held or incurred jointly. Associates Associates are entities over which the EU has, directly or indirectly, significant influence but not 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 their behalf. However, since these entities are not controlled by the EU, they are not consolidated in its financial statements. 5.BASIS OF PREPARATION Financial statements are presented annually. The accounting year begins on 1 January and ends on 31 December.

6.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 and reporting 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 31.12.2018 31.12.2017 Currency 31.12.2018 31.12.2017 BGN 1.9558 1.9558 PLN 4.3014 4.177 CZK 25.7240 25.5350 RON 4.6635 4.6585 DKK 7.4673 7.4449 SEK 10.2548 9.8438 GBP 0.8945 0.8872 CHF 1.1269 1.1702 HRK 7.4125 7.4400 JPY 125.8500 135.01 HUF 320.9800 310.3300 USD 1.145 1.1993 7.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, provisions, financial risk on inventories and accounts receivable, accrued revenue and charges, contingent assets and liabilities, degree of impairment of intangible assets and property, plant and equipment and amounts disclosed in the notes concerning financial instruments. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known.



8.BALANCE SHEET 9.Intangible assets Acquired computer software licences are stated at historical cost less accumulated amortisation and impairment losses. The assets are amortised on a straight-line basis over their estimated useful lives (311 years). The estimated useful lives of intangible assets depend on their specific economic lifetime or legal lifetime determined by an agreement. 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 costs capitalisable 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. 10.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 and works of art are not depreciated as they are 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 0 % 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 Leases of tangible assets, where the EU has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The interest element of the finance lease payment is charged to expenditure over the period of the lease at a constant periodic rate in relation to the balance outstanding. The rental obligations, net of finance charges, are included in financial liabilities (non-current and current). The interest element of the finance cost is charged to the statement of financial performance over the lease period so as to produce a constant periodic interest rate on the remaining balance of the liability for each period. The assets held under finance leases are depreciated over the shorter of the asset's useful life and the lease term. Leases where the lessor retains a significant portion of the risks and rewards inherent to ownership are classified as operating leases. Operating lease payments are recognised as an expense in the statement of financial performance on a straight-line basis over the lease term.



11.Impairment of non-financial assets 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 reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 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. An asset’s carrying amount is written down immediately to its recoverable (service) amount if the asset’s carrying amount is greater than its estimated recoverable (service) amount. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly. 12.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, being the carrying amount subsequently increased or decreased to recognise the EU’s share of the surplus or deficit of the investee after the date of acquisition. 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. The initial cost together with all movements (further contributions, share of economic results and reserve movements, impairments and dividends) give the book value of the investment in the financial statements at the balance sheet date. 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 are not accounted for under the equity method. EU contributions to those entities are accounted for as an expense of the period. 13.Financial assets Classification The EU classifies their financial assets in the following 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 this category if acquired principally for the purpose of selling in the short term or if so designated by the entity. Derivatives are also categorised 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 at fair value through surplus or deficit, held-to-maturity and available for sale are recognised on 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 possibility 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. 14.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. 15.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. The amount of the pre-financing may be reduced (wholly or partially) by the acceptance of eligible costs (which are recognised as expenses). Pre-financing is, on subsequent balance sheet dates, measured at the amount initially recognised on the balance sheet less 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 on 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 pre-financing heading. 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 EU contributions to the trust funds of the European Development Fund or other unconsolidated entities are also 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.



16.Exchange receivables and non-exchange recoverables

As the EU accounting rules require a separate presentation of exchange and non-exchange transactions, for the purpose of drawing up the accounts, receivables are defined as stemming from exchange transactions and recoverables are defined as stemming from non-exchange transactions, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange (for example 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 original amount (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-exchanges 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. 17.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. 18.Employee benefits The accounting policy for employee benefits has been updated in line with the requirements of the revised accounting rule EAR 12 Employee Benefits, effective for periods beginning on or after 1 January 2018 which is based on the new IPSAS 39 (Employee Benefits) published in July 2016. The main change, arising from the revision of accounting rule 12, is the presentation of actuarial gains and losses as a movement in net assets instead of in the statement of financial performance. Accounting for defined benefit plans is complex because actuarial assumptions and judgement are required to measure the obligation. In applying the revised accounting rule, the EU has reassessed the judgements used, in particular, as regards to the estimate of the ultimate cost of the benefit attributed to the employees. As a result of this exercise, the appropriateness of the use of the estimated active service period of the employee as the basis for attributing benefits to periods of service was confirmed. The benefits which the EU’s employees are entitled to are given 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. 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, as well as medical coverage (see note 2.9). The EU provides its staff with a post-employment benefit plan that includes: 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 qualitiative 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 caption ‘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. 19.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. 20.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 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.



21.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 accepted and eligible amount. Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount and corresponding expenses are entered in the accounts when the supplies or services are delivered and accepted by the EU. 22.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 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.

23.STATEMENT OF FINANCIAL PERFORMANCE 24.Revenue REVENUE FROM NON-EXCHANGE TRANSACTIONS The vast majority of the EU's revenue relates to non-exchange transactions: 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. If there are doubts about the undertaking's solvency, a value reduction on the entitlement is recognised. After the decision to impose a fine, the debtors 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; b)or not to accept the decision, in which case they lodge an appeal under EU law. However, 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 of the EU Treaty) or, under certain circumstances and subject to the agreement of the Commission's Accounting Officer, the debtor may present a bank guarantee for the amount instead. If the undertaking appeals against the decision, and has already provisionally paid the fine, the amount is disclosed as a contingent liability. However, since an appeal against an EU decision by the addressee does not have suspensory effect, the cash received is used to clear the recoverable. If a guarantee is received instead of payment, the fine remains as a recoverable. 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 had been given instead, then the recoverable outstanding is written-down as required. 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 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. 25.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 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. 26.CONTINGENT ASSETS AND LIABILITIES 27.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. 28.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 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. 29.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.

30.NOTES TO THE BALANCE SHEET ASSETS 31.INTANGIBLE ASSETS EUR million Gross carrying amount at 31.12.2017 292 Additions 49 Disposals (9) Transfer between asset categories Other changes Gross carrying amount at 31.12.2018 333 Accumulated amortisation at 31.12.2017 (143) Amortisation charge for the year (29) Amortisation written back – Disposals 8 Transfer between asset categories – Other changes (1) Accumulated amortisation at 31.12.2018 (165) NET CARRYING AMOUNT AT 31.12.2018 168 NET CARRYING AMOUNT AT 31.12.2017 149 32.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 31.12.2017 1 448 4 264 260 71 248 156 1 552 2 544 10 544 Additions 12 14 9 1 15 7 8 1 198 1 263 Disposals (8) (0) (16) (2) (35) (3) (9) – (73) Transfer between asset categories (2) 982 0 – 5 0 (5) (983) (3) Other changes 1 0 12 0 2 0 1 0 16 Gross carrying amount at 31.12.2018 1 450 5 259 266 69 235 161 1 548 2 759 11 747 Accumulated depreciation at 31.12.2017 (840) (780) (240) (57) (207) (121) (756) – (3 000) Depreciation charge for the year (43) (561) (10) (3) (21) (11) (54) – (705) Depreciation written back – – – – – – – – – Disposals 8 0 9 2 33 3 7 – 63 Transfer between asset categories – – – – (5) (0) 5 – – Other changes (0) (0) (5) (0) (1) (0) (1) – (7) Accumulated depreciation at 31.12.2018 (875) (1 341) (246) (58) (200) (130) (798) – (3 649) NET CARRYING AMOUNT AT 31.12.2018 575 3 918 20 11 35 30 750 2 759 8 098 NET CARRYING AMOUNT AT 31.12.2017 608 3 484 21 14 41 35 797 2 544 7 544 33.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 2018, the EU holds 29.7 % of the ownership interest in EIF (2017: 29.7 %). EUR million European Investment Fund Participation at 31.12.2017 581 Contributions – Dividends received (3) Share of net result 37 Share in the net assets (24) Participation at 31.12.2018 591 EIF summarised financial information: EUR million 31.12.2018 31.12.2017 Total EIF Total EIF Assets 2 662 2 488 Liabilities (674) (532) Revenue 291 263 Expenses (167) (153) Surplus/(deficit) 124 110 Reconciliation of the above summarised financial information to the carrying amount of the interest held in the EIF is as follows: EUR million 31.12.2018 31.12.2017 Net assets of the associate 1 988 1 956 EC ownership interests in EIF 29.7% 29.7% Carrying amount 591 581 The Commission has paid-in 20 % of its subscribed shares in the EIF capital at 31 December 2018, 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 34.FINANCIAL ASSETS

EUR million Note 31.12.2018 31.12.2017 Non-current financial assets Available for sale financial assets 2.4.1 12 345 10 410 Financial assets at fair value through surplus or deficit 2.4.2 14 16 Loans 2.4.3 51 559 48 107 63 917 58 533 Current financial assets Available for sale financial assets 2.4.1 1 592 1 563 Financial assets at fair value through surplus or deficit 2.4.2 2 6 Loans 2.4.3 2 281 6 770 3 875 8 339 Total 67 793 66 872 35. Available for sale financial assets EUR million 31.12.2018 31.12.2017 BUFI investments 1 888 2 158 European Bank for Reconstruction and Development 188 188 2 076 2 346 Guarantee Funds for budgetary guarantees: EFSI Guarantee Fund 5 000 3 414 Guarantee Fund for external actions 2 465 2 199 EFSD Guarantee Fund 9 – 7 474 5 613 Financial instruments supported by the EU budget: Horizon 2020 2 031 1 730 Risk Sharing Finance Facility 679 665 Connecting Europe Facility 540 482 EU SME Equity Facilities 464 508 Risk Capital Operations 113 113 European Fund for South East Europe 115 119 Other 444 398 4 386 4 014 Total 13 937 11 973 Non-current 12 345 10 410 Current 1 592 1 563 36.Financial assets at fair value through surplus or deficit EUR million 31.12.2018 31.12.2017 Type of derivative Notional amount Fair value Notional amount Fair value Foreign currency forward contract 476 2 634 6 Guarantee on equity portfolio 674 14 258 16 Total 1 150 16 892 23 Non-current 674 14 258 16 Current 476 2 634 6



Fair value hierarchy of financial assets measured at fair value EUR million 31.12.2018 31.12.2017 Level 1: Quoted prices in active markets 12 487 10 325 Level 2: Observable inputs other than quoted prices 275 510 Level 3: Valuation techniques with inputs not based on observable market data 1 191 1 161 Total 13 953 11 996 Reconciliation of financial assets measured using valuation techniques with inputs not based on observable market data (level 3) EUR million Opening balance at 1.1.2018 1 161 Purchases, sales, issues and settlements 104 Gains or losses for the period in financial income or finance costs (36) Gains or losses in net assets (37) Transfers into level 3 – Transfers out of level 3 – Other – Closing balance at 31.12.2018 1 191 37. Loans EUR million Note 31.12.2018 31.12.2017 Loans for financial assistance 2.4.3.1 53 775 54 744 Other loans 2.4.3.2 64 133 Total 53 840 54 877 Non-current 51 559 48 107 Current 2 281 6 770 37.1.1.1.Loans for financial assistance EUR million EFSM BOP MFA Euratom Total Total at 31.12.2017 47 456 3 114 3 924 250 54 744 New loans 4 500 – 515 50 5 065 Repayments (4 500) (1 350) (56) (46) (5 952) Exchange differences – – – (0) (0) Changes in carrying amount (56) (30) 5 0 (82) Impairment – – – – – Total at 31.12.2018 47 400 1 734 4 388 254 53 775 Non-current 46 800 200 4 309 213 51 521 Current 600 1 534 79 41 2 254 The change in carrying amount corresponds to the change in accrued interests. Nominal value of loans for financial assistance at 31 December 2018 total EUR 53 114 million (2017: EUR 54 000 million). Loans effective interest rates (expressed as a range of interest rates)

31.12.2018 31.12.2017 Macro Financial Assistance (MFA) 0 % - 3.82 % 0 % - 4.54 % Euratom 0.08 % - 5.76 % 0.08 % - 5.76 % Balance of Payment (BOP) 2.88 % - 3.38 % 2.88 % - 3.38 % European Financial Stability Mechanism (EFSM) 0.50 % - 3.75 % 0.62 % - 3.75 % 37.1.1.2.Other loans EUR million 31.12.2018 31.12.2017 Loans with special conditions 64 78 Term deposits 0 55 Total 64 133 Non-current 37 59 Current 27 75 Nominal value of other loans at 31 December 2018 total EUR 615 million (2017: EUR 557 million). Impairment on other loans EUR million 31.12.2017 Additions Reversals Write-off Other 31.12.2018 Loans with special conditions 8 1 – (0) – 8 Subrogated loans 432 147 – – – 579 Total 440 148 – (0) – 587 38.PRE-FINANCING EUR million Note 31.12.2018 31.12.2017 Non-current pre-financing Pre-financing 2.5.1 21 615 21 663 Other advances to Member States 2.5.2 4 122 3 018 Contribution to Trust Funds 71 64 25 807 24 745 Current pre-financing Pre-financing 2.5.1 22 106 22 908 Other advances to Member States 2.5.2 2 396 1 645 24 502 24 552 Total 50 309 49 297



39.Pre-financing EUR million Gross amount Cleared via accruals Net amount at 31.12.2018 Gross amount Cleared via accruals Net amount at 31.12.2017 Shared Management EAFRD & other rural development instruments 3 743 3 743 3 735 3 735 ERDF & CF 18 088 (3 461) 14 627 20 561 (5 678) 14 883 ESF 6 548 (1 147) 5 401 6 792 (1 182) 5 610 Other 4 684 (2 498) 2 186 5 037 (2 267) 2 770 Direct Management Implemented by: Commission 12 827 (8 523) 4 304 12 454 (8 587) 3 867 EU executive agencies 15 012 (9 540) 5 472 13 845 (8 751) 5 094 Trust funds 585 (432) 152 440 (212) 228 Indirect Management Implemented by: Other EU agencies & bodies 3 830 (2 975) 856 3 767 (2 951) 816 Third countries 1 546 (879) 667 1 586 (956) 630 International organisations 7 684 (5 053) 2 631 9 001 (5 879) 3 121 Other entities 9 107 (5 426) 3 681 7 752 (3 936) 3 816 Total 83 655 (39 933) 43 721 84 969 (40 399) 44 570 Non-current 21 615 – 21 615 21 663 – 21 663 Current 62 040 (39 933) 22 106 63 307 (40 399) 22 908 40.Other advances to Member States EUR million 31.12.2018 31.12.2017 Advances to Member States for financial instruments under shared management 3 675 2 768 Aid Schemes 2 843 1 895 Total 6 518 4 663 Non-current 4 122 3 018 Current 2 396 1 645 41.EXCHANGE RECEIVABLES AND NON-EXCHANGE RECOVERABLES EUR million Note 31.12.2018 31.12.2017 Non-current Recoverables from non-exchange transactions 2.6.1 409 616 Receivables from exchange transactions 2.6.2 6 3 415 619 Current Recoverables from non-exchange transactions 2.6.1 22 075 10 924 Receivables from exchange transactions 2.6.2 1 828 497 23 903 11 421 Total 24 318 12 040 42. Recoverables from non-exchange transactions

EUR million Note 31.12.2018 31.12.2017 Non-current Member States 2.6.1.1 397 594 Other recoverables 12 22 409 616 Current Member States 2.6.1.1 10 836 6 123 Competition fines 2.6.1.2 9 727 4 225 Accrued income and deferred charges 2.6.1.3 1 291 384 Other recoverables 222 192 22 075 10 924 Total 22 485 11 540



42.1.1.1.Recoverables from Member States EUR million 31.12.2018 31.12.2017 Recoverables related to own resources: TOR A accounts 5 609 3 113 TOR separate accounts 1 612 1 617 Own resources to be received 2 758 46 Impairment (991) (997) Other 86 56 Own resource recoverables 9 075 3 836 Recoverables in the area of agriculture and rural development: European Agricultural Guarantee Fund (EAGF) 1 708 2 280 European Agricultural Fund for Rural Development (EAFRD) 859 955 Temporary Rural Development Instrument (TRDI) 13 16 Special Accession Programme for Agriculture and Rural Development (SAPARD) 82 136 Impairment (788) (804) EAGF and rural development recoverables 1 875 2 583 Pre-financing recovery expected 145 182 VAT paid and recoverable 12 22 Other recoverables from Member States 127 94 Total 11 232 6 717 Non-current 397 594 Current 10 836 6 123 42.1.1.2.Recoverables from competition fines EUR million 31.12.2018 31.12.2017 Recoverable from fines gross amount 13 022 7 679 Provisional payments (3 131) (3 282) Impairment (164) (172) Total 9 727 4 225 Non-current – – Current 9 727 4 225 42.1.1.3.Accrued income and deferred charges EUR million 31.12.2018 31.12.2017 Other accrued income 1 238 323 Deferred charges relating to non-exchange transactions 53 61 Total 1 291 384 Non-current – – Current 1 291 384



43.Receivables from exchange transactions EUR million 31.12.2018 31.12.2017 Non-current Other receivables 6 3 6 3 Current Customers 181 184 Impairment on receivables from customers (141) (136) Deferred charges relating to exchange transactions 157 172 Other 1 631 277 1 828 497 Total 1 834 501 44.INVENTORIES EUR million 31.12.2018 31.12.2017 Scientific materials 52 45 Other 16 18 Total 67 62 45.CASH AND CASH EQUIVALENTS EUR million 31.12.2018 31.12.2017 Accounts with Treasuries and Central Banks 12 932 20 078 Current accounts 79 152 Imprest accounts 5 5 Transfers (cash in transit) 0 0 Bank accounts for budget implementation 13 017 20 236 Cash belonging to financial instruments 2 377 1 608 Cash relating to fines 1 438 1 234 Cash relating to trust funds 114 34 Total 16 946 23 113 LIABILITIES

46.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 31.12.2018 Total 31.12.2017 Total Defined Benefit Obligation 70 017 1 154 8 990 80 160 72 796 Plan assets N/A N/A (296) (296) (301) Net liability 70 017 1 154 8 694 79 865 72 495 Actuarial assumptions - employee benefits Pension Scheme of European Officials Joint Sickness Insurance Scheme 2018 Nominal discount rate 1.9 % 2.0 % Expected inflation rate 1.4 % 1.5 % Real discount rate 0.5 % 0.5 % Expected rate of salary increases 1.9 % 1.8 % Medical cost trend rates N/A 3.0 % Retirement age 63/64/66 63/64/66 2017 Nominal discount rate 1.9 % 2.0 % Expected inflation rate 1.5 % 1.6 % Real discount rate 0.4 % 0.4 % Expected rate of salary increases 1.8 % 1.7 % 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 31.12.2017 63 951 1 089 7 756 72 796 Recognised in statement of financial performance Current service cost 2 716 84 270 3 070 Interest expense 1 215 20 155 1 391 Recognised in net assets Remeasurements in employee benefits liabilities Actuarial (gains)/losses from experience 3 380 6 4 3 390 Actuarial (gains)/losses from demographic assumptions – – – – Actuarial (gains)/losses from financial assumptions 251 (20) 901 1 132 Other Benefits paid (1 496) (27) (96) (1 619) Present value as at 31.12.2018 70 017 1 154 8 990 80 160



Movement in present value of plan assets of the Joint Sickness Insurance Scheme EUR million Present value as at 31.12.2017 301 Net movement in plan assets (5) Present value as at 31.12.2018 296 Joint Sickness Insurance Scheme sensitivity

A ten basis points change in the assumed medical cost trend rates would have the following effects: EUR million 2018 2017 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 12 (12) 11 (11) Defined benefit obligation 253 (246) 220 (213) A ten basis points change in the assumed discount rate would have the following effects: EUR million 2018 2017 Increase 0.1% Decrease 0.1% Increase 0.1% Decrease 0.1% Defined benefit obligation (219) 226 (188) 194 A ten basis points change in the expected salary increases rate would have the following effects: EUR million 2018 2017 Increase 0.1% Decrease 0.1% Increase 0.1% Decrease 0.1% Defined benefit obligation (26) 25 (25) 24 A one year change in the assumed retirement age would have the following effects: EUR million 2018 2017 One year increase One year decrease One year increase One year decrease Defined benefit obligation (91) 54 (82) 44 Pension Scheme of European Officials sensitivity A ten basis points change in the assumed discount rate would have the following effects: EUR million 2018 2017 Increase 0.1% Decrease 0.1% Increase 0.1% Decrease 0.1% Defined benefit obligation (1 434) 1 478 (1 281) 1 319 A ten basis points change in the expected salary increases rate would have the following effects: EUR million 2018 2017 Increase 0.1% Decrease 0.1% Increase 0.1% Decrease 0.1% Defined benefit obligation 1 427 (1 388) 1 313 (1 192) A one year change in the assumed retirement age would have the following effects:

EUR million 2018 2017 One year increase One year decrease One year increase One year decrease Defined benefit obligation (573) 645 (496) 639 47.PROVISIONS EUR million Amount at 31.12.2017 Additional provisions Unused amounts reversed Amounts used Transfer between categories Change in estimation Amount at 31.12.2018 Legal cases: Agriculture 49 270 (2) (47) – – 270 Cohesion 20 – (20) – – – – Other 29 1 (17) (1) – 0 11 Nuclear site dismantling 1 934 – – (34) – 32 1 933 Financial 1 115 590 (7) (149) – 2 1 551 Fines 27 – (27) – – – – Other 87 24 (30) (13) – – 68 Total 3 262 885 (105) (243) – 34 3 833 Non-current 2 617 693 (30) (52) (250) 36 3 013 Current 645 192 (74) (191) 250 (1) 820 48.FINANCIAL LIABILITIES EUR million Note 31.12.2018 31.12.2017 Non-current financial liabilities Financial liabilities at amortised cost 2.11.1 52 757 49 412 Financial liabilities at fair value through surplus or deficit 2.11.2 7 2 52 764 49 414 Current financial liabilities Financial liabilities at amortised cost 2.11.1 2 475 6 813 Financial liabilities at fair value through surplus or deficit 2.11.2 15 – 2 489 6 813 Total 55 253 56 227 49.Financial liabilities at amortised cost EUR million Note 31.12.2018 31.12.2017 Borrowings for financial assistance 2.11.1.1 53 775 54 744 Other financial liabilities 2.11.1.2 1 456 1 482 Total 55 231 56 225 Non-current 52 757 49 412 Current 2 475 6 813



49.1.1.1.Borrowings for financial assistance EUR million EFSM BOP MFA Euratom Total Total at 31.12.2017 47 456 3 114 3 924 250 54 744 New borrowings 4 500 – 515 50 5 065 Repayments (4 500) (1 350) (56) (46) (5 952) Exchange differences – – – (0) (0) Changes in carrying amounts (56) (30) 5 0 (82) Total at 31.12.2018 47 400 1 734 4 388 254 53 775 Non-current 46 800 200 4 309 213 51 521 Current 600 1 534 79 41 2 254 Borrowings effective interest rates (expressed as a range of interest rates) 31.12.2018 31.12.2017 Macro Financial Assistance (MFA) 0 % - 3.82 % 0 % - 4.54 % Euratom 0 % - 5.68 % 0 % - 5.68 % Balance of Payment (BOP) 2.88 % - 3.38 % 2.88 % - 3.38 % European Financial Stability Mechanism (EFSM) 0.50 % - 3.75 % 0.62 % - 3.75 % 49.1.1.2.Other financial liabilities EUR million 31.12.2018 31.12.2017 Non-current Finance lease liabilities 860 918 Buildings paid for in instalments 235 258 Other 141 188 1 235 1 363 Current Finance lease liabilities 64 58 Buildings paid for in instalments 23 22 Fines to be reimbursed 125 13 Other 9 25 221 118 Total 1 456 1 482 Finance lease liabilities EUR million Future amounts to be paid < 1 year 1 - 5 years > 5 years Total Liability Land and buildings 58 276 576 910 Other fixed assets 6 8 – 14 Total at 31.12.2018 64 283 576 924 Interest element 51 166 134 351 Total future minimum lease payments at 31.12.2018 115 450 710 1 275 Total future minimum lease payments at 31.12.2017 113 447 821 1 381





50.Financial liabilities at fair value through surplus and deficit EUR million 31.12.2018 31.12.2017 Type of derivative Notional amount Fair value Notional amount Fair value Guarantee on equity portfolio 536 20 – – FX option (put spread) 11 2 9 2 Total 546 22 9 2 Non-current 82 7 9 2 Current 464 15 – – Fair value hierarchy of financial liabilities measured at fair value EUR million 31.12.2018 31.12.2017 Level 1: Quoted prices in active markets – – Level 2: Observable inputs other than quoted prices 2 2 Level 3: Valuation techniques with inputs not based on observable market data 20 – Total 22 2 51.PAYABLES EUR million Gross Amount Adjust- ments* Net Amount at 31.12.2018 Gross Amount Adjust- ments* Net Amount at 31.12.2017 Cost claims and invoices received from: Member States EAFRD & other rural development instruments 247 247 481 481 ERDF & CF 10 761 (1 724) 9 037 12 602 (883) 11 719 ESF 5 195 (496) 4 699 4 183 (264) 3 919 Other 632 (75) 557 748 (280) 467 Private and public entities 1 461 (179) 1 282 1 563 (144) 1 419 Total costs claims & invoices received 18 296 (2 475) 15 822 19 577 (1 571) 18 006 EAGF 14 772 N/A 14 772 11 534 N/A 11 534 Own Resources Payables 769 N/A 769 8 836 N/A 8 836 Sundry Payables 1 176 N/A 1 176 1 000 N/A 1 000 Total 35 013 (2 475) 32 539 40 947 (1 571) 39 376 * Estimated non-eligible amounts and pending other advances to Member States. 52.ACCRUED CHARGES AND DEFERRED INCOME EUR million 31.12.2018 31.12.2017 Accrued charges 62 263 63 070 Deferred income 213 219 Other 24 24 Total 62 500 63 314 The split of accrued charges is as follows: EUR million 31.12.2018 31.12.2017 EAGF 29 387 33 303 EAFRD and other rural development instruments 18 687 17 464 ERDF and CF 5 863 4 249 ESF 2 321 2 870 Other 6 005 5 185 Total 62 263 63 070 NET ASSETS 53.RESERVES EUR million Note 31.12.2018 31.12.2017 Fair value reserve 2.14.1 229 275 Guarantee Fund reserve 2 849 2 663 Other reserves 108 125 Total 3 186 3 062

54. Fair value reserve Movements during the period of fair value reserve related to the available for sale financial assets: EUR million 2018 2017 Included in fair value reserve (68) (8) Included in statement of financial performance 22 18 Total (46) 10 55.AMOUNTS TO BE CALLED FROM MEMBER STATES EUR million Amounts to be called from Member States at 31.12.2017 78 077 Return of 2017 budget surplus to Member States 556 Movement in Guarantee Fund reserve 186 Remeasurements in employee benefits liability 4 432 Other reserve movements 7 Economic result of the year (14 372) Total amounts to be called from Member States at 31.12.2018 68 885 56.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE REVENUE REVENUE FROM NON-EXCHANGE TRANSACTIONS:

OWN RESOURCES 57.TRADITIONAL OWN RESOURCES EUR million 2018 2017 Customs duties 22 763 20 475 Sugar levies 4 45 Total 22 767 20 520 REVENUE FROM NON-EXCHANGE TRANSACTIONS: TRANSFERS 58.RECOVERY OF EXPENSES EUR million 2018 2017 Shared management 2 116 1 775 Direct management 65 81 Indirect management 31 23 Total 2 213 1 879 59.OTHER REVENUE FROM NON-EXCHANGE TRANSACTIONS EUR million 2018 2017 Contribution of third countries and accession countries 1 347 1 256 Staff taxes and contributions 954 923 Contribution from Member States for external aid 594 988 Transfer of assets 85 208 Adjustment of provisions 97 28 Agricultural levies 4 4 Budgetary adjustments (726) 5 806 Funding of institutions (3 493) (3 371) Other 465 672 Total (674) 6 515



REVENUE FROM EXCHANGE TRANSACTIONS 60.FINANCIAL REVENUE EUR million 2018 2017 Interest on: Late payments 1 458 217 Loans 1 259 1 371 Other 63 36 Premium on financial guarantee liability (EFSI) 121 61 Dividend 103 23 Financial revenue from financial assets or liabilities at fair value through surplus or deficit 29 57 Realised gains on sale of available for sale financial assets 23 26 Other 48 28 Total 3 103 1 820 61.OTHER REVENUE FROM EXCHANGE TRANSACTIONS EUR million 2018 2017 Foreign exchange gains 318 266 Fee and premium revenue related to financial instruments 54 51 Sales of goods 18 26 Share of net result of EIF 37 21 Fixed assets related revenue 7 6 Other 281 321 Total 716 692 EXPENSES 62.SHARED MANAGEMENT EUR million 2018 2017 European Agricultural Guarantee Fund 43 527 44 289 European Agricultural Fund for Rural Development and other rural development instruments 13 149 11 359 European Regional Development Fund and Cohesion Fund 30 230 17 650 European Social Fund 11 935 7 353 Other 2 826 1 253 Total 101 666 81 905 63. DIRECT MANAGEMENT EUR million 2018 2017 Implemented by the Commission 8 146 8 855 Implemented by EU Executive Agencies 8 962 6 700 Implemented by Trust funds 468 208 Total 17 576 15 763 64.INDIRECT MANAGEMENT EUR million 2018 2017 Implemented by other EU agencies and bodies 3 622 3 429 Implemented by third countries 679 1 101 Implemented by international organisations 3 337 3 014 Implemented by other entities 3 569 1 478 Total 11 208 9 022 65.STAFF AND PENSION COSTS EUR million 2018 2017 Staff costs 3 328 3 186 Pension costs 4 461 3 809 Total 7 789 6 995 66.FINANCE COSTS

EUR million 2018 2017 Interest expenses: Borrowings 1 252 1 363 Other 25 21 Finance leases 56 56 Impairment losses on available for sale financial assets 25 39 Impairment loss on loans and receivables 126 324 Realised loss on sale of available for sale financial assets 20 2 Loss on financial assets or liabilities at fair value through surplus or deficit 95 12 Other 41 33 Total 1 640 1 849 67.OTHER EXPENSES EUR million 2018 2017 Fixed assets related expenses 953 870 Administrative and IT expenses 831 790 Adjustment of provisions 919 1 371 Funding and contributions to other EU bodies 470 458 Foreign exchange losses 328 429 Operating lease expenses 195 160 Reduction of fines by the Court of Justice 1 67 Other 322 495 Total 4 019 4 642 Expenses relating to research and development are as follows: EUR million 2018 2017 Research costs 373 366 Non-capitalised development costs 58 58 Total 430 424 68.SEGMENT REPORTING BY MULTI ANNUAL FINANCIAL FRAMEWORK (MFF) HEADING EUR million Smart and inclusive growth Sustainable growth Security and citizenship Global Europe Administration Not assigned to MFF headings* Total GNI resources – – – – – 105 780 105 780 Traditional own resources – – – – – 22 767 22 767 VAT – – – – – 17 624 17 624 Fines – – – – – 6 740 6 740 Recovery of expenses 1 395 777 6 35 0 0 2 213 Other 1 223 48 109 228 985 (3 267) (674) Revenue from non-exchange transactions 2 619 825 115 262 985 149 644 154 450 Financial revenue 282 0 0 16 0 2 805 3 103 Other 170 (14) (8) 6 242 318 716 Revenue from exchange transactions 453 (13) (8) 23 242 3 123 3 819 Total revenue 3 072 812 107 285 1 227 152 767 158 270 Expenses implemented by Member States: EAGF – (43 527) – – – – (43 527) EAFRD & other rural develop. instruments – (13 149) – – – – (13 149) ERDF & CF (30 230) – – – – – (30 230) ESF (11 935) – – – – – (11 935) Other (437) (596) (1 762) (31) – – (2 826) Implemented by the Commission, executive agencies and trust funds (11 565) (571) (930) (4 496) (13) 0 (17 576) Implemented by other EU agencies and bodies (2 767) 2 (810) (48) – – (3 622) Implemented by third countries and international organisations (505) (74) (202) (3 236) (0) – (4 016) Implemented by other entities (2 696) (0) 2 (875) (0) – (3 569) Staff and pension costs (1 675) (369) (447) (699) (4 599) – (7 789) Finance costs (149) (22) (0) (16) (68) (1 385) (1 640) Other expenses (1 945) (313) (137) (109) (1 182) (332) (4 019) Total expenses (63 903) (58 620) (4 287) (9 510) (5 861) (1 717) (143 897) Economic result of the year (60 831) (57 808) (4 180) (9 225) (4 634) 151 049 14 372 * "Not assigned to MFF headings" includes off-budget operations and unallocated programmes with individually immaterial amounts. 69.CONTINGENT LIABILITIES AND ASSETS 70.CONTINGENT LIABILITIES 71.Budgetary guarantees EUR million 31.12.2018 31.12.2017 Ceiling Signed Disbursed Ceiling Signed Disbursed EIB external lending mandate guarantees 40 417 30 889 20 510 37 479 28 950 19 972 EFSI guarantee 25 898 19 842 15 764 16 000 13 473 10 128 Total 66 315 50 731 36 273 53 479 42 423 30 100 72.Guarantees relating to financial assistance (borrowing and lending activities) EUR million 31.12.2018 31.12.2017 Drawn Undrawn Total Drawn Undrawn Total EFSM 47 400 – 47 400 47 456 – 47 456 BOP 1 734 – 1 734 3 114 – 3 114 MFA 4 388 980 5 368 3 924 460 4 384 Euratom 254 200 454 250 250 500 Total 53 775 1 180 54 955 54 744 710 55 454 73.Guarantees given for EU financial instruments EUR million 31.12.2018 31.12.2017 Horizon 2020 1 467 1 297 Risk Sharing Finance Facility 642 654 Connecting Europe Facility 579 490 Other 29 32 Total 2 717 2 473

74.Legal cases EUR million 31.12.2018 31.12.2017 Fines 3 187 3 242 Agriculture 653 1 737 Cohesion 26 3 Other 1 823 438 Total 5 688 5 420

75.CONTINGENT ASSETS EUR million 31.12.2018 31.12.2017 Guarantees received: Performance guarantees 79 89 Other guarantees 7 5 Other contingent assets 25 32 Total 111 125 76.BUDGETARY AND LEGAL COMMITMENTS EUR million Note 31.12.2018 31.12.2017 Outstanding budgetary commitments not yet expensed 5.1 234 621 220 479 Shared management legal commitments under the current MFF pending implementation 5.2 143 883 211 688 Significant legal commitments in other areas 5.3 14 592 16 267 Total 393 097 448 434 77.OUTSTANDING BUDGETARY COMMITMENTS NOT YET EXPENSED EUR million 31.12.2018 31.12.2017 Outstanding budgetary commitments not yet expensed 234 621 220 479 78.SHARED MANAGEMENT LEGAL COMMITMENTS UNDER THE CURRENT MFF PENDING IMPLEMENTATION EUR million Funds Financial framework 2014-2020 (A) Legal commitments concluded (B) Budget commitments (C ) Legal commitments less budget commitments (B-C) European Regional Development Fund and Cohesion Fund 262 408 262 408 179 831 82 578 European Social Fund 92 935 92 819 65 230 27 588 European Neighbourhood Policy Instrument – Fund for European Aid to the most Deprived 3 814 3 814 2 670 1 144 HEADING 1B: COHESION POLICY FUNDS 359 157 359 041 247 731 111 310 European Agricultural Fund for Rural Development 100 079 100 079 70 748 29 331 European Maritime and Fisheries Fund 5 749 5 749 4 048 1 702 HEADING 2: NATURAL RESOURCES 105 828 105 828 74 795 31 033 Asylum and Migration Fund 5 028 4 393 3 577 816 Internal Security Fund 3 016 2 883 2 159 724 HEADING 3: SECURITY & CITIZENSHIP 8 044 7 276 5 736 1 540 Total 473 030 472 145 328 262 143 883 79.SIGNIFICANT LEGAL COMMITMENTS IN OTHER AREAS EUR million Note 31.12.2018 31.12.2017 Connecting Europe Facility 11 554 12 676 Copernicus 1 267 1 841 Galileo 493 253 Fisheries agreements 46 133 Operating lease commitments 5.3.1 796 868 Other contractual commitments 435 497 Total 14 592 16 267 80.Operating lease commitments

EUR million Future amounts to be paid < 1 year 1- 5 years > 5 years Total Buildings 139 351 298 787 IT materials and other equipment 3 6 – 9 Total 142 357 298 796 81.FINANCIAL INSTRUMENTS DISCLOSURES 82.CURRENCY RISKS Exposure of the EC to currency risk at year end – net position EUR million 31.12.2018 USD GBP DKK SEK EUR Other Total Financial assets Available for sale financial assets 619 57 18 7 13 220 17 13 937 Financial assets at fair value through surplus or deficit (475) – – – 491 – 16 Loans* 6 – – – 53 5 64 Receivables and recoverables – 4 109 98 108 19 777 226 24 318 Cash and cash equivalents 43 1 520 287 406 13 197 1 493 16 946 193 5 686 403 522 46 737 1 741 55 282 Financial liabilities Financial liabilities at fair value through surplus or deficit – – – – (20) (2) (22) Payables (0) – – – (32 538) (1) (32 539) (0) – – – (32 558) (2) (32 561) Total 193 5 686 403 522 14 179 1 738 22 721 EUR million 31.12.2017 USD GBP DKK SEK EUR Other Total Financial assets Available for sale financial assets 680 57 17 56 11 147 16 11 973 Financial assets at fair value through surplus or deficit (632) – – – 655 – 23 Loans* 6 – – – 120 7 133 Receivables and recoverables – 550 62 86 11 338 6 12 040 Cash and cash equivalents 42 3 178 27 693 17 509 1 664 23 113 97 3 785 105 834 40 768 1 693 47 282 Financial liabilities Financial liabilities at fair value through surplus or deficit – – – – – (2) (2) Payables (0) (0) – (1) (39 374) (1) (39 376) (0) (0) – (1) (39 374) (3) (39 378) Total 96 3 785 105 833 1 395 1 690 7 904 * Excluding back-to-back loans for financial assistance. If the EUR had strengthened against the currency concerned by 10 % then this would have had the following impact: EUR million Economic result USD GBP DKK SEK 2018 (5) (512) (35) (47) 2017 (3) (339) (8) (71) EUR million Net assets USD GBP DKK SEK 2018 (13) (5) (2) (1) 2017 (5) (5) (2) (5)



If the EUR had weakened against the currency concerned by 10 % then this would have had the following impact: EUR million Economic result USD GBP DKK SEK 2018 6 625 43 57 2017 4 414 10 86 EUR million Net assets USD GBP DKK SEK 2018 16 6 2 1 2017 7 6 2 6

83.INTEREST RATE RISK The following table illustrates the interest rate sensitivity of available for sale financial assets assuming possible change in interest rates of +/- 100 basis points (1 %). EUR million Increase (+) / decrease (-) in basis points Effect on net assets 2018: Available for sale financial assets +100 (303) -100 325 2017: Available for sale financial assets +100 (305) -100 324 84.CREDIT RISK Analysis of the age of financial assets that are not impaired EUR million Total Neither past due nor impaired Past due but not impaired < 1 year 1-5 years > 5 years Loans 53 840 53 840 – – – Receivables and recoverables 24 318 14 399 6 577 3 208 134 Financial assets at fair value through surplus or deficit 16 16 – – – Total at 31.12.2018 78 174 68 254 6 577 3 208 134 Loans 54 877 54 877 0 – – Receivables and recoverables 12 040 8 587 2 887 359 208 Financial assets at fair value through surplus or deficit 23 23 – – – Total at 31.12.2017 66 940 63 486 2 887 359 208



Credit quality of financial assets that are neither past due nor impaired EUR million 31.12.2018 Available for sale* Financial assets at FVSD** Loans Receivables and recoverables Cash Total Counterparties with external credit rating Prime and high grade 8 097 16 – 8 546 13 941 30 600 Upper medium grade 2 903 – 23 513 746 2 622 29 784 Lower medium grade 1 487 – 25 774 1 454 163 28 877 Non-investment grade – – 4 488 199 217 4 904 12 487 16 53 775 10 944 16 942 94 165 Counterparties without external credit rating Debtors without defaults in the past – – 62 3 455 3 3 520 Debtors with defaults in the past – – 2 0 – 2 – – 64 3 455 3 3 522 Total 12 487 16 53 840 14 399 16 946 97 687 EUR million 31.12.2017 Available for sale* Financial assets at FVSD** Loans Receivables and recoverables Cash Total Counterparties with external credit rating Prime and high grade 6 989 16 42 2 938 18 436 28 422 Upper medium grade 1 569 – 23 584 283 3 851 29 287 Lower medium grade 1 831 – 27 195 842 442 30 311 Non-investment grade – – 3 977 108 381 4 465 10 390 16 54 799 4 172 23 109 92 485 Counterparties without external credit rating Debtors without defaults in the past – 6 78 4 414 3 4 502 Debtors with defaults in the past – – – 1 – 1 – 6 78 4 415 3 4 503 Total 10 390 23 54 877 8 586 23 113 96 988 * Available for sale financial assets (excluding equity instruments and Unitary Fund). ** Financial assets at fair value through surplus or deficit. 85.LIQUIDITY RISK Maturity analysis of financial liabilities by remaining contractual maturity EUR million < 1 year 1-5 years > 5 years Total Borrowings (2 254) (17 363) (34 158) (53 775) Payables (32 539) – – (32 539) Other financial liabilities (221) (533) (702) (1 456) Total at 31.12.2018 (35 013) (17 897) (34 860) (87 770) Borrowings (6 695) (14 769) (33 279) (54 744) Payables (39 376) – – (39 376) Other financial liabilities (118) (556) (807) (1 482) Total at 31.12.2017 (46 189) (15 325) (34 087) (95 601) Financial instruments at fair value through surplus or deficit

EUR million < 1 year 1-5 years > 5 years Total Derivative pay leg (490) (2) (6) (498) Derivative receive leg 477 – – 477 Net cash flows at 31.12.2018 (14) (2) (6) (21) Derivative pay leg (634) (2) – (635) Derivative receive leg 638 – – 638 Net cash flows at 31.12.2017 5 (2) – 3 86.CARRYING AMOUNT AND FAIR VALUE OF FINANCIAL INSTRUMENTS The following classes of financial assets and liabilities are not measured at fair value: cash and cash equivalents, loans, exchange receivables and non-exchange recoverables, borrowings and other financial liabilities at amortised cost. The carrying amount of those financial assets and liabilities is considered as a reasonable approximation of their fair value. 87.RELATED PARTIES The related parties of the entity are the EU consolidated entities and the key management personnel of these entities. Transactions between these entities take place as part of the normal operations of the EU and as this is the case, no specific disclosure requirements are necessary for these transactions in accordance with the EU accounting rules. Details on key management entitlements are provided in note 7 of the EU consolidated annual accounts. 88.EVENTS AFTER THE BALANCE SHEET DATE At the date of signature of these accounts no material issues had come to the attention of, or were reported to, the Accounting Officer of the Commission that would require separate disclosure under this section. The accounts and related notes were prepared using the most recently available information and this is reflected in the information presented. EUROPEAN COMMISSION FINANCIAL YEAR 2018 BUDGETARY IMPLEMENTATION REPORTS

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 EU BUDGET RESULT STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS

1. IMPLEMENTATION OF EC BUDGET REVENUE 2. IMPLEMENTATION OF EC BUDGET EXPENDITURE 2.1.MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS 2.2.MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS 2.3.MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS 2.4.MFF: MOVEMENTS IN COMMITMENTS OUTSTANDING (RAL) 2.5.MFF: COMMITMENTS OUTSTANDING BY YEAR OF ORIGIN 2.6.POLICY AREA: BREAKDOWN AND CHANGES IN COMMITMENT AND PAYMENT APPROPRIATIONS 2.7.POLICY AREA: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS 2.8.POLICY AREA: IMPLEMENTATION OF PAYMENT APPROPRIATIO