Changes in accounting policies, changes in estimates

With the exception of the standards, interpretations, and amendments that are effective for the first time in the financial year, Deutsche Telekom did not make any major changes in its accounting policies.

The contractual grants receivable from public funding projects for the broadband build-out in Germany are recognized in full as of the start of the third quarter of 2019. This is due to the fact that the broadband build-out in Germany has now become a routine activity such that now, as soon as a grant agreement is concluded, it has to be assumed with the reasonable assurance required under IFRS that Deutsche Telekom will meet the conditions for the grant and that the public sector will pay out the grant. Consequently, the expected grants are now recognized in full as other financial assets upon conclusion of the agreement, with a matching non-financial other liability for the existing build-out obligation. Previously, the grant conditions were only deemed to be met with reasonable assurance upon acceptance after completion, and hence until now, only advance payments received were recognized as non-financial other liabilities. Consequently, the funded portion of the payments was initially capitalized as property, plant and equipment, as a result of which the corresponding carrying amount was higher. The grants receivable recognized as other financial assets in the second half of 2019 as a result of this change in estimate amounted to EUR 1.3 billion, and non-financial other liabilities of EUR 1.2 billion were newly recognized for the build-out obligations to be fulfilled. The difference is deducted from property, plant and equipment. The financial assets measured at amortized cost are reduced upon receipt of the grants. The non-financial other liabilities are derecognized on a pro rata basis as the build-out progresses, reducing the cost of the publicly funded property, plant and equipment. All grants received from funding projects and payments made for the build-out are recognized in net cash from/used in investing activities. Grants and payments for funding projects for which the reasonable assurance described above already exists are recognized separately in the items “Proceeds from public funds for investments in the broadband build-out” and “Payments for publicly funded investments in the broadband build-out.” Since the payments are not made at the same point in time as the proceeds are received, the net amounts can be positive or negative in the individual periods. These investments are not included in “Cash outflows for investments in property, plant and equipment,” because the payments made do not result in additions to property, plant and equipment.

For further information on this change in estimate, please refer to Note 35 “Notes to the consolidated statement of cash flows.”