3 Contract assets

Following the transition to IFRS 15, a remeasurement effect of EUR 1.6 billion was recognized directly in equity as of January 1, 2018 in relation to the initial recognition of contract assets. Under IFRS 15, these would have led to the earlier recognition of revenue, in particular from the sale of goods and merchandise. Further, as a result of the transition, receivables from long-term construction contracts in the amount of EUR 0.2 billion, which were previously recognized as trade and other receivables, were reclassified as contract assets. For further information on the new accounting standards, please refer to the section “Initial application of standards, interpretations, and amendments in the financial year”.

Of the total contract assets as of December 31, 2018 of EUR 1.8 billion, EUR 0.2 billion related to contract assets in connection with long-term construction contracts.

The contract assets increased by EUR 44 million in the reporting year, due to a change in the business model in Poland in September 2018. Whereas the previous business model did not provide for handsets to be sold at a discount, the terminal equipment business is now subsidized.

For information on allowances on contract assets, please refer to Note 40 “Financial instruments and risk management”.