3. Accounting and valuation principles and new accounting standards

3.1 Principal accounting and valuation methods

The accounting and valuation methods used for the preparation of the Condensed Interim Consolidated Financial Statements correspond to the methods used in the preparation of the Consolidated Financial Statements as of 31 December 2023. When calculating the income tax expense during the year, the currently applicable tax rate is used for the domestic companies. For certain domestic companies, a tax rate is determined in order to calculate the income tax expense. This involves extrapolating the interim earnings before tax (EBT) of these companies for the calendar year and then applying the tax rate applicable in Hamburg of 32.28 %. The effective tax rate of the entire Group for the interim reporting period to 30 June 2024 was 35.7 % (30 June 2023: 39.1 %).

Based on the latest figures in the condensed interim consolidated financial statements for the constituent entities, an indicative assessment of the potential minimum tax rate taking into account the Safe Harbour guidelines was conducted for the 30 June 2024 balance sheet date in accordance with Section 84 et seqq. of the German Minimum Taxation Law (MinStG). With the exception of Hungary, all the countries in the assessment meet at least one of the preconditions for the Safe Harbour guidelines as per Section 84 MinStG. As a result, the minimum tax expense for the Hungarian entities amounting to € 145 thousand is included in the total income tax expense and was recognised at the Group level on 30 June 2024.

For property, plant and equipment, the economic useful lives of certain assets in the asset class “Technical equipment and machinery” were remeasured during the reporting period based on an analysis of the historic useful lives of such items, as well as past and anticipated replacement investments. The range of the useful lives of this asset class remains unchanged at 5 to 25 years compared with 31 December 2023. The positive effect arising from the restatement of useful lives amounts to € 4.6 million as of 30 June 2024. The positive restatement effect of € 9.1 millionwill apply for the 2024 reporting year as a whole. The adjustment does not have a material impact on the Group’s results of operations, net assets and financial position.

Based on the current degree of implementation for the organisational restructuring in the Container segment, HHLA remeasured the restructuring provision as of 30 June 2024. The remeasurement was primarily based on an updated estimate of the measures to be implemented, in conjunction with a shift in the time they will be implemented. As a result of this remeasurement, the provision decreased by approximately € 6.5 million compared with 31 December 2023.

Impairment of assets

On the measurement date of 31 December 2023, the goodwill for the cash-generating unit HHLA TK Estonia AS, Tallinn, Estonia (HHLA TK Estonia CGU), underwent mandatory impairment testing. The discount rate after taxes was 6.7 %. Based on the estimate used for cash flow in the detailed planning period and the growth factor of 1.0 percent, the recoverable amount was € 4.3 million higher than the carrying amount for valuation purposes.

Management therefore still considered it possible that there could be a change in material assumptions that could lead to the carrying amount exceeding the recoverable amount.

The overview below shows the necessary change in the various material valuation parameters as at 31 December 2023 which would lead to the recoverable amount being the same as the carrying amount on 31 December 2023:

As of 31 March 2024, there was a minimal increase of 0.06 percentage points in the discount rate after tax (still 6.7 %). As a result of this, the recoverable amount would have decreased in isolation but would have remained above the carrying amount for valuation purposes. Based on the performance in the first quarter of 2024, there was no indication of the necessity to carry out further impairment testing for the other valuation parameters as of 31 March 2024. As of 30 June 2024, the discount rate after tax rose to 7.0 %. Taking into account the company’s performance during the second quarter of 2024, management confirmed its estimates until 2028 and set out a detailed forecast for 2029. A growth factor of 1 % continued to be applied. The recoverable amount was slightly above the carrying amount. Even a minimal change in the above valuation parameters would lead to the recoverable amount being the same as the carrying amount. Goodwill attributable to the HHLA TK Estonia CGU amounts to € 7,587 thousand.

Due to the Russia-Ukraine war, management conducted an impairment test of the assets of SC Container Terminal Odessa, Odessa, Ukraine ( CTO CGU), as of 31 December 2023. There was no need to recognise an impairment loss because the recoverable amount was sufficiently higher than the carrying amount for valuation purposes.

As a result of the ongoing war between Russia and Ukraine, management once again updated its estimates as of 31 March 2024 with regard to the future performance of the CTO CGU. The assumption is that the container terminal will continue to exist. In the baseline scenario, which is considered likely, we envisage a medium-term recovery and a return to the original volumes planned before the Russia-Ukraine war. With a likelihood of 20 %, we assume a deviating positive development, particularly in terms of the time required to return to original volumes. A less favourable development than the baseline scenario, in which a delayed recovery in the volumes planned before the Russia-Ukraine war is expected, is also estimated with a likelihood of 20 %. Weighted accordingly, the cash flows were discounted at a rate of 12.6 % after taxes as of 31 March 2024, while a growth factor of 1.0 % was applied. Based on the assumptions described, there was no need to recognise an impairment loss as of 31 March 2024; the recoverable amount was sufficiently higher than the carrying amount for valuation purposes.

Based on the performance in the second quarter of 2024 and the development of the discount rate after taxes, there were no new indications of an impairment of assets. The impairment calculations were therefore not updated.

Material risks (expropriation, destruction, breach of contract) continue to be largely hedged by German government guarantees. It has been possible to expand hedging to include shareholder loans additionally granted in the meantime.

In the case of other cash-generating units, there are no indications of an impairment of assets, with the result that the Executive Board did not update the respective impairment calculations.

Earnings from associates accounted for using the equity method in the amount of­ € 2,902 thousand of the HHLA Group’s income statement include an impairment of € 382 thousand on an investment in a company allocated to the Logistics segment.

3.2 New Accounting Standards

HHLA started applying the following new standards on 1 January 2024:

• Amendments to IFRS 16 Leases: Lease Liabilities from Sale and Leaseback Transactions
• Amendments to IAS 1 Presentation of Financial Statements: Classification of Debt with Covenants as Current or Non-current
• Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements

No effects on the Interim Consolidated Financial Statements arose from the application of these new provisions.