Page 39 - Annual Report KELAG Group 2018

In general, revenue is recognised in accordance with the five-step model in IFRS 15: first, the
contract(s) with customers is/are identified and thereafter the separate performance obligations
in order to then determine the transaction price and allocate it to the contractual obligations in
subsequent steps. In the fifth step, revenue is recognised when an entity satisfies a performance
obligation, i.e., either at a point in time or over time.

Most of the revenue is generated from the sale of electricity, gas and heat to industry, retail and
business customers, energy supply companies and electricity exchanges as well as from grid and
energy services. Revenue from grid services comprises income from national grid tariffs, which
are granted as per E-Control’s regulation to cover the costs of the grid. IFRS 15 did not entail any
major changes to revenue recognition, since in each case revenue recognition for the
performance obligations under IFRS 15 is in line with revenue recognition patterns under IAS 18,
either as a collective of performance obligations from a series of similar (supply) obligations or as
a stand-ready obligation.

Revenue from electricity, gas and heating as well as from grid services is generally recognised
throughout the performance period. Revenue is realised in the amount of which the KELAG Group
met its obligations in terms of supplying electricity and gas (i.e., the customer could and did use
its power at any time) and is entitled to charge the performance already rendered. The recognition
of revenue from the retail and business customer segment, which is generally invoiced once a
year, is based on an accrual in the statement of financial position and a simulation of volumes
which have been supplied but for which no meter reading is available yet nor which have been
invoiced. As part of an update to the methodology, this accrual was adjusted in 2018 based on a
year-end meter reading performed in the last quarter of 2018 for the customers in the company’s
own grid that are invoiced annually. Revenue is recognised net of any sales deductions and VAT
as well as after elimination of intercompany transactions. The payment terms for retail, business
and industry customers using electricity, gas and heat is typically 14 days. There are therefore no
significant financing components.

The practical expedients of IFRS 15 to recognise revenue in the amount invoiced by the KELAG
Group, to not include significant financing components with a term between rendering a service
and payment of up to one year and to expense the costs of obtaining a contract if the amortisation
period would have been one year or less, are exercised where possible.

Earnings from derivative financial instruments relating to energy whose primary purpose is a
physical delivery of energy are treated as revenue from contracts with customers and presented
in revenue.

Earnings from derivative contracts in energy trade whose primary purpose is not a physical
delivery of energy, but the management of an energy trade item, are recognised as revenue. The