Note 3. Consolidation

Scope of consolidation

The consolidated financial statements of the Lenzing Group include Lenzing AG, as the parent company, and its subsidiaries, all on the basis of financial statements as at December 31, 2021.

The number of companies included in the scope of consolidation developed as follows:

A list of the group companies as at December 31, 2021 is provided in note 43. The most important group companies produce and market wood-based cellulosic fibers (Segment Division Fiber) and, in some cases, pulp (Segment Division Pulp).

In March 2021, the interest in the joint venture Hygiene Austria LP GmbH, Wiener Neudorf, Austria, which was previously accounted for using the equity method (see note 22), was divested and deconsolidated.

In October 2021, the subsidiary Nanjing Fabor Waste Water Treatment Co., Ltd, Nanjing, China, was merged with Lenzing (Nanjing) Fibers Co., Ltd, Nanjing, China.

In November 2021, the previously fully consolidated subsidiaries Avit Investments Limited, Providenciales, Turks & Caicos, and Penique S.A., Panama, Panama, were liquidated and deconsolidated.

In January 2020, the Dexco-Group (formerly known as Duratex Group) acquired a 49 percent share in LD Celulose S.A., Sao Paulo, Brazil as agreed. Lenzing AG holds a majority of 51 percent and thus exercise control over LD Celulose S.A. The change in shareholdings was the result of an asymmetric capital increase, which was conducted by both parties. The pro-rata equity (49 percent) of LD Celulose S.A. amounted to EUR 100,205 thousand at the time the Duratex Group acquired the shares and corresponds to the amount recognized under non-controlling interests. The proportionate contribution by Duratex amounted to EUR 102,362 thousand. The difference of EUR 2,158 thousand was recognized directly in equity under retained earnings. As part of the capital increase, the Duratex Group contributed biological assets and property, plant and equipment to LD Celulose and carried out further cash capital increases.

The Dexco-Group has a put option for its shares (puttable non-controlling interests). Lenzing AG applies the present access method for the accounting of this liability deriving from puttable non-controlling interests. Accordingly, the Dexco Group’s non-controlling interest in LD Celulose S.A. continues to be recognized in equity and a financial liability is recognized for its puttable interest. The initial recognition and subsequent measurement of the liability is at fair value through retained earnings (not affecting net income).

In February 2020, all shares held in the associate WWE Wohn- und Wirtschaftspark Entwicklungsgesellschaft m.b.H., Vienna were sold and deconsolidated.

In April 2020, the joint venture Hygiene Austria LP GmbH, Wiener Neudorf, Austria was founded for the production of protective masks and consolidated at-equity.

In July 2020, 100 percent of the shares in Nanjing Fabor Waste Water Treatment Co., Ltd, Nanjing, China, were acquired and fully consolidated. The assets sold to the Lenzing Group were predominantly assets which in their entirety form a wastewater treatment plant. The purchase price amounted to EUR 16,060 thousand and was paid in cash. The acquisition was therefore recognized as an asset deal in the consolidated financial statements. The payment is recognized in the consolidated statement of cash flows under acquisition of intangible assets, property, plant and equipment and biological assets (CAPEX). The purchase price was allocated proportionately to the individual identifiable assets and liabilities on the basis of their fair values at the acquisition date.

The assets and liabilities at the date of initial consolidation are shown below:

In September 2020, the subsidiary Lenzing Technik GmbH, Lenzing, Austria, was merged with Lenzing AG.

In December 2020, the subsidiary Lenzing Fibers India Private Limited, Coimbatore, India, was founded and included in the scope of fully consolidated companies.

Basis of consolidation

Subsidiaries are companies controlled by the parent company. The Lenzing Group decides individually for each acquisition whether the non-controlling interests in the acquired subsidiary will be recognized at fair value or based on the proportional share of the acquired net assets. On acquisition, non-controlling interests are measured at fair value or the corresponding share of recognized net assets and are reported under equity and comprehensive income as “non-controlling interests”.

The investments in associates and joint ventures are accounted for by applying the equity method.

In January 2021, the Lenzing Group acquired 100 percent of the shares in an insurance cell of White Rock Insurance (Europe) Protected Cell Company Limited, La Valletta, Malta. This company has an insurance concession and enables the Lenzing Group to administer its operationally necessary insurance policies more effectively. As of the acquisition date, the insurance cell did not have any significant assets or liabilities. It is classified as a structured entity from acquisition date and fully consolidated.

Until March 2021, Lenzing AG controlled assets in the GF 82 wholesale fund, a special fund pursuant to Section 20a of the Austrian Investment Fund Act (öInvFG), on the basis of its comprehensive co-determination rights. The fund was classified as a structured entity and fully consolidated. The securities held by the fund were intended, above all, to fulfill the securities coverage requirements for the pension provisions related to Austrian pension plans as required by Section 14 of the Austrian Income Tax Act (öEStG). The material risks to which the fund wass exposed were unchanged and represented traditional investment risks (especially default and market price risks). In March 2021, the shares in wholesale fund GF 82 were sold and deconsolidated.

The structured entities include those assets and liabilities that are held by the Lenzing Group.

The reporting currency of Lenzing AG and the Lenzing Group is the euro. The subsidiaries prepare their annual financial statements in their respective functional currency. The following key exchange rates were used for translation into the reporting currency: