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3 Contract assets

Contract assets stood at EUR 2.0 billion as of December 31, 2021, unchanged against the prior-year level. Contract assets relate to receivables that have not yet legally come into existence, which arise from the earlier – as compared to billing – recognition of revenue, in particular from the sale of goods and merchandise under long-term multiple-element arrangements (e.g., mobile contract plus handset). Receivables from long-term construction contracts are also recognized under contract assets. Of the total contract assets, EUR 0.2 billion related to contract assets in connection with long-term construction contracts (December 31, 2020: EUR 0.1 billion).

Contract assets were reduced by EUR 51 million in the reporting year due to a change in the business model in Poland from subsidized terminal equipment business to a business model that does not provide for handsets to be sold at a discount.

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