Note 29. Government grants

The amount accrued under this item resulted primarily from grants for the promotion of investments in economically underdeveloped regions, for investments in environmental protection and for general investment support.

Investment grants are reported as liabilities and recognized in profit or loss on a straight-line basis over the useful life of the subsidized investments as “Income from the release of investment grants”.

Government grants for cost reimbursements are recognized as other income in the period in which the related costs are incurred, unless the receipt of the grant is contingent on conditions that are not yet sufficiently likely to occur.

Government grants of EUR 12,755 thousand were recognized to profit or loss in 2021 (2020: EUR 12,752 thousand), resulting predominantly from promotion of research activities. Any conditions attached to the grants were fulfilled and repayment, in full or in part, is there-fore considered unlikely.

Government grants also included EUR 42,254 thousand of emission certificates as at December 31, 2021 (December 31, 2020: EU 18,048 thousand). In accordance with Directive 2003/87/EC of the European Parliament and the European Council on a system for trading greenhouse gas emission certificates, a total of 369,863 EU-emission certificates and 30,589 UK-emission certificates were allocated free of charge to the relevant companies in the Lenzing Group for 2021 through national allocation plans (2020: 393,758 EU-emission certificates and 34,808 UK-emission certificates).

Emission certificates are capitalized at fair value on the allocation date. The difference between the fair value and the purchase price paid by the company for the emission certificates is recorded under government grants. At the end of each reporting period, a provision is recognized for the certificates used up to that date. The amount of the provision is based on the recognized asset value of the certificates if they are covered by certificates held by the company at this reporting date. If the certificates used exceed the certificates held, the provision is based on the fair value of the certificates (to be purchased subsequently) as at the relevant reporting date. Future laws and commitments on emissions, especially in the countries of the Lenzing Group’s production sites, could lead to further precautionary measures in the future.

In the 2021 financial year expenses for emission certificates amounted to EUR 6,557 thousand (2020: EUR 4,738 thousand).

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