FINANCIAL STATEMENTS AND EXPLANATORY NOTES (1)

Balance Sheet

(euro) Note 31 December 2017 31 December 2016 Non — Current Assets Intangible assets 3.1. 1 977 442 3 530 432 Property, plant and equipment 3.2. 74 664 292 78 146 338 Receivables — — 76 641 734 81 676 770 Current Assets Receivables 3.3. 655 198 691 455 Cash and cash equivalents 3.4. 7 110 125 8 356 341 7 765 323 9 047 796 Total Assets 84 407 057 90 724 566 Current Liabilities Provisions — — Payables 3.5. 6 042 069 5 354 888 6 042 069 5 354 888 Total Liabilities 6 042 069 5 354 888 Net Assets 78 364 988 85 369 678 Accumulated surplus / deficit 85 369 678 88 953 458 Economic result for the year (7 004 690 ) (3 583 780 ) Net Assets 78 364 988 85 369 678

Statement of Financial Performance

(euro) Note 2017 2016 Funds transferred from the Commission to other institutions 4.1. 115 900 000 116 700 000 Revenue from administrative operations 4.2. 20 918 724 20 234 812 Other operating revenue 4.3. 10 460 49 328 Total operating revenue 4.4. 136 829 184 136 984 140 Staff expenses 4.5. (115 939 175 ) (112 410 058 ) Assets related expenses 4.6. (7 512 025 ) (7 764 105 ) Other administrative expenses 4.7. (20 366 931 ) (20 351 775 ) Operational expenses 4.8. (7 168 ) (25 270 ) Total operating expenses (143 825 299 ) (140 551 208 ) Surplus/(deficit) from operating activities (6 996 115 ) (3 567 068 ) Financial expenses 4.9. (8 575 ) (16 712 ) Surplus/(deficit) from non operating activities (8 575 ) (16 712 ) Economic result of the year (7 004 690 ) (3 583 780 )

Cash Flow Statement

(euro) 2017 2016 Economic result of the year (7 004 690 ) (3 583 780 ) Operating activities — Adjustments Amortisation 1 566 045 1 600 449 Depreciation 5 927 200 6 146 461 Increase/(decrease) in Provisions — (50 000 ) (Increase)/decrease in Receivables 36 257 (87 142 ) Increase/(decrease) in Payables 687 182 (1 627 120 ) Net cash flow from operating activities 1 211 994 2 398 868 Cash flows from investing activities Purchase of property, plant and equipment and intangible assets (-) (2 476 990 ) (1 274 770 ) Proceeds from property, plant and equipment and intangible assets (+) 18 780 17 195 Net cash flow from investing activities (2 458 210 ) (1 257 575 ) Increase/(decrease) in Employee benefits — — Net increase/(decrease) in cash and cash equivalents (1 246 216 ) 1 141 293 Cash and cash equivalents at the beginning of the year 8 356 341 7 215 048 Cash and cash equivalents at the end of the year 7 110 125 8 356 341

Statement of changes in Net Assets

(euro) Net assets Accumulated Surplus / (Deficit) Economic result of the year Total Balance as at 31.12.2016 88 953 458 (3 583 780 ) 85 369 678 Allocation of the prior year economic result (3 583 780 ) 3 583 780 — Economic result of the year — (7 004 690 ) (7 004 690 ) Balance as at 31.12.2017 85 369 678 (7 004 690 ) 78 364 988

Accounting policies and notes to the financial statements

1. General

The European Court of Auditors (hereafter the ‘Court’) was established by the Treaty of Brussels of 22 July 1975 and started operating in October 1977, with its headquarters in Luxembourg.

Mission of the European Court of Auditors The European Court of Auditors mission is to contribute to improving EU financial management, promote accountability and transparency, and act as the independent guardian of the financial interests of the citizens of the Union. The ECA’s role as the EU’s independent external auditor is to check that EU funds are correctly accounted for, are raised and spent in accordance with the relevant rules and regulations and have achieved value for money. The ECA checks if the budget of the European Union has been implemented correctly, and that EU funds have been raised and spent legally and in accordance with the principles of sound financial management. The ECA is the EU institution for auditing the EU’s finances and is committed to being an efficient organisation at the forefront of developments in public audit and administration.

The financial year of the Court runs from 1 January to 31 December.

2. Legal basis and accounting rules

2.1. Basis of presentation

The financial statements of the Court are drawn up in accordance with Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (1), hereinafter referred to as the ‘Financial Regulation’, and Commission Delegated Regulation (EU) No 1268/2012 (2) on the rules of application of this Financial Regulation and their subsequent amendments.

2.2. Accounting principles

The financial statements are prepared on the basis of accrual-based accounting rules that are based on International Public Sector Accounting Standards (IPSAS). These EU Accounting Rules are adopted by the Accounting Officer of the Commission after a consultation of the other institutions.

The 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, that is: fair presentation, accrual basis, going concern, consistency of presentation, aggregation, offsetting and comparative information. The qualitative characteristics of financial reporting according to article 144 of the Financial Regulation are relevance, reliability, understandability and comparability.

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.

2.3. Currency and basis for conversion

The financial statements are presented in euro, the euro being the EU’s functional and reporting currency.

Foreign currency transactions are translated into euro using the exchange rate prevailing at the date of the transaction.

Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance.

Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euro on the basis of the exchange rates on 31 December.

2.4. 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 four years. Internally developed intangible assets are capitalised when the relevant criteria of the EU accounting rules are met. The costs that can be capitalised include all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by the Court management. Costs associated with research activities, not capitalised development costs and maintenance costs are recognised as expenses as incurred.

2.5. Property, plant and equipment

All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition or construction 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 Court 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. As the Court does not borrow money to fund the acquisition of property, plant and equipment, there are no borrowing costs related to such purchases.

Assets that are subject to 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 amount.

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 to their residual values over their estimated useful lives, as follows:

Buildings 4 % Plant, machinery and tools 12,5 % to 25 % Furniture and vehicle fleet 10 % to 25 % Computer hardware 25 % Other fixtures and fittings 12,5 % to 25 %

2.6. Provisions

Provisions are recognised when the Court 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 expenditures expected to be required to settle the present obligation at the reporting date.

2.7. Recognition of expenses

According to the EU accounting rules, transactions and events are recognised in the financial statements 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 Accounting Officer which aim at ensuring that the financial statements reflect a true and fair view.

2.8. 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.

3. Notes to the Balance Sheet

NON-CURRENT ASSETS

3.1. Intangible assets

The movements in intangible assets during the year 2017 were:

(euro) Gross carrying amounts at 31.12.2016 7 777 459 Additions 13 055 Disposals — Transfer between asset categories — Other changes — Gross carrying amounts 31.12.2017 7 790 514 Accumulated amortisation at 31.12.2016 (4 247 027 ) Amortisation charge for the year (1 566 045 ) Amortisation written back — Disposals — Transfer between asset categories — Accumulated amortisation at 31.12.2017 (5 813 072 ) Net carrying amounts 31.12.2017 1 977 442 Net carrying amounts 31.12.2016 3 530 432

In 2017 no costs associated with research activities were recognised.

3.2. Property, Plant and Equipment

The movements in Property, plant and equipment during the year 2017 were:

(euro) Land and Buildings Plant and equipments Furniture and vehicle Computer hardware Other fixtures and fittings Land and Buildings under construction Tangible assets under construction Total Gross carrying amounts at 31.12.2016 125 179 306 939 260 5 222 855 4 421 414 2 262 957 — 9 000 138 034 792 Additions 4 392 154 788 168 683 619 164 30 729 1 480 179 6 000 2 463 935 Disposals — (12 972 ) (92 257 ) (674 347 ) (33 397 ) — — (812 973 ) Transfer between asset categories — — — — — — — — Other changes — — — — — — — — Gross carrying amounts 31.12.2017 125 183 698 1 081 076 5 299 281 4 366 231 2 260 289 1 480 179 15 000 139 685 754 Accumulated amortisation at 31.12.2016 (51 061 631 ) (754 282 ) (2 904 255 ) (3 402 841 ) (1 765 444 ) — — (59 888 453 ) Depreciation charge for the year (4 609 285 ) (80 599 ) (474 560 ) (546 806 ) (215 950 ) — — (5 927 200 ) Depreciation written back — 12 971 84 959 664 725 31 536 — — 794 191 Disposals — — — — — — — — Transfer between asset categories — — — — — — — — Accumulated amortisation at 31.12.2017 (55 670 916 ) (821 910 ) (3 293 856 ) (3 284 922 ) (1 949 858 ) — — (65 021 462 ) Net carrying amounts 31.12.2017 69 512 782 259 166 2 005 425 1 081 309 310 431 1 480 179 15 000 74 664 292 Net carrying amounts 31.12.2016 74 117 675 184 978 2 318 600 1 018 573 497 513 — 9 000 78 146 339

CURRENT ASSETS

3.3. Receivables

(euro) 31 December 2017 31 December 2016 Current receivables (5 770 ) (4 123 ) Sundry receivables mainly related to payroll and mission advances 82 724 134 738 Deferred charges for building rentals and IT contracts 578 244 551 166 Receivables from EU entities — 9 674 Total 655 198 691 455

3.4. Cash and cash equivalents

(euro) 31 December 2017 31 December 2016 Petty cash 1 122 1 000 Bank current account 206 765 1 447 332 Fiduciary account 6 902 238 6 908 009 Total 7 110 125 8 356 341

A fiduciary account was opened on 27 January 2010 by the European Court of Auditors with the Banque et Caisse d’Épargne de l’État, Luxembourg. This fiduciary account allowed the Court to manage the budget granted by the budgetary authority in relation to the K3 building project (see Note 5.3). On 14 March 2014, the Court requested the European Parliament and Council to allow the use of the estimated remaining budget of the K3 project (7 million euro) for the necessary and compulsory technical upgrade of the Court’s K2 building. This proposal was approved by the European Parliament and Council on 1 April 2014. On 23 March 2015, the Court announced to the European Parliament and Council that the final remaining budget of the K3 project amounted to 9,4 million euro and, as the estimated cost for the K2 upgrade was 7 million euro, on 12 May 20152,4 million euro were returned to the EU budget. The payments effected in 2017 amount to 5 756,78 euro. The Court expects that the implementation of the works will take place in 2019-2020.

CURRENT LIABILITIES

3.5. Payables

(euro) 31 December 2017 31 December 2016 Current payables 65 297 88 815 Sundry payables related to payroll and staff (18 589 ) (14 199 ) Accrued charges 5 866 734 5 148 263 Accounts payable to consolidated EU entities 128 627 132 009 Total 6 042 069 5 354 888

4. Notes to the Statement of Financial Performance

4.1. ‘Funds transferred from the Commission to other institutions’: the amount corresponds to the monthly calls for funds made by the Court to the Commission to replenish its bank account.

4.2. ‘Revenue from administrative operations’: for the most part, this heading is made up of deductions from the salaries of members and staff in respect of tax and social contributions.

4.3. ‘Other operating revenue’ arises among others from exchange rate gains.

4.4. Revenues were generated from exchange and non-exchange transactions as follows: (euro) 2017 2016 Revenue from exchange transactions 27 791 59 002 Revenue from non-exchange transactions 136 801 393 136 925 138 Total revenue 136 829 184 136 984 140

4.5. ‘Staff expenses’ include the salaries of members, statutory staff, contractual agents and temporary staff.

4.6. The ‘Assets related expenses’ consist of the depreciation/amortisation of the tangible and intangible assets.

4.7. The most significant items of the ‘other administrative expenses’ were:

— IT and telecommunications

— Missions expenses

— Cleaning and security services.

4.8. ‘Operational expenses’ arise among others from exchange rate losses.

4.9. ‘Financial expenses’ are bank charges levied on the Court’s current and fiduciary accounts.

5. Other significant disclosures

5.1. Contingent assets

The following bank guarantees have been given by suppliers following contractual obligations:

(euro) 31 December 2017 31 December 2016 Renovation building 230 264 251 139 Project management building K3 10 339 10 339 Insurance company 1 361 1 361 Telecommunication 20 000 20 000 EMAS (*1) methodological support — 4 680 Total 261 964 287 519

5.2. Commitments for future funding

(euro) 31 December 2017 31 December 2016 Operational lease for Buildings 475 000 875 000 Operational lease for IT material, cars and other equipments 1 760 453 2 156 313 Subtotal 2 235 453 3 031 313 Commitments against appropriations not yet consumed — RAL (‘Restant à liquider’) -, after deduction of accruals for 2017 5 959 568 8 166 271 Total 8 195 021 11 197 584

The RAL is an element of budgetary accounting representing the value of outstanding commitments. This is the difference between commitments entered into and payments, which is due to the time-lag between entering into a commitment and proceeding to the related payment.

5.3. The Court’s buildings projects

The Court occupied its headquarters building (the ‘K1’ building) in 1988 and purchased it and the land it stands on outright in 1990. In 1999, the Court signed a framework agreement with the Luxembourg State through which it was given the right to use a second parcel of land for 49 years (renewable once) for the construction of an extension (the ‘K2’ building) in return for a payment of one euro. However for the second extension, the ‘K3’ building, due to different arrangements for carrying out the project it was necessary that the Luxembourg State and the Court concluded a new framework agreement on 22 February 2008.

As regards the two pieces of land relative to the two extensions (‘K2’ and ‘K3’) mentioned above, the state has sold these to the Court for a symbolic one euro.

For its part should the Court ever consider ceding one or other of the buildings to a third party other than the Union body or institution, the Court will return the land to the ownership of the State in return for a symbolic one euro, the latter disposing also of an option to buy the building at a price to be determined by an independent expert. In case the state decides not to exercise this option, it would provide a right to use the land to the purchasers of the building.

5.4. Contingent liabilities

There are no contingent liabilities.

(1) The accompanying notes form an integral part of these financial statements.

(1) OJ L 298, 26.10.2012, p. 1.

(2) OJ L 362, 31.12.2012, p. 1.

(*1) EMAS ‘Eco Management and Audit System’.