General disclosures

1. Company information

The Lufthansa Group is a global aviation group whose subsidiaries and equity investments were organised into three operating segments in the 2023 financial year: Passenger Airlines, Logistics and MRO. The sale of the Catering segment was agreed in April 2023 and completed on 31 October 2023.

Deutsche Lufthansa AG has its head office in Cologne, Germany, and is filed in the Commercial Register of Cologne District Court under HRB 2168.

The declaration on the German Corporate Governance Code required by Section 161 of the German Stock Corporation Act (AktG) was issued and made available to shareholders on the internet at  www.lufthansagroup.com/declaration-of-compliance.

The consolidated financial statements of Deutsche Lufthansa AG, Cologne, and its subsidiaries have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), taking account of interpretations by the IFRS Interpretations Committee as applicable in the European Union (EU).

The commercial law provisions of Section 315e Paragraph 1 of the German Commercial Code (HGB) have also been applied. All IFRSs issued by the IASB in effect at the time that these financial statements were prepared and applied by Deutsche Lufthansa AG have been adopted by the European Commission for application in the EU. The consolidated financial statements of Deutsche Lufthansa AG are prepared in millions of euros. The financial year is the calendar year.

The accounting policies applied in the previous year have been retained. The first-time application from 1 January 2023 of the mandatory accounting standards had no or no material effect on the presentation of the net assets, financial and earnings position or on earnings per share.

In connection with the sale of the LSG group to Aurelius, which was completed in the fourth quarter of 2023, the individual items for the business activities of the Catering business segment in the income statement were reclassified to the item “Profit/loss for the year from discontinued operations” and the comparative figures for the previous year were adjusted accordingly. ↗ Note 18 

The Executive Board of Deutsche Lufthansa AG prepared and approved the 2023 consolidated financial statements for publication on 26 February 2024.

2. Going concern

In 2023, the business activities of the Lufthansa Group companies continued to be shaped by a significant rise in the level of demand for flights. In the prior-year period, especially in the first quarter, business activities were still impacted by the effects of the coronavirus pandemic and the related restrictions and quarantine regulations. Ticket sales prices continued to edge up on the back of a return in demand and the simultaneous shortage of capacity on the passenger market. Overall, this increased revenue considerably compared with the prior-year period. Logistics was the only business segment to report a significant decline in revenue due to the normalisation across the industry.

All Passenger Airlines and the MRO segment were able to improve their Adjusted EBIT compared with the previous year. This pushed earnings for the Lufthansa Group up to EUR 2.7bn. Earnings for the Logistics segment declined, however, as the cargo business returned to normal.

Higher business volumes and positive earnings performance resulted in an operating cash flow of EUR 4.9bn in the reporting period. The year-on-year decline stems mainly from lower cash inflows due to the change in working capital. In the previous year, the inflow from changes in working capital was exceptionally high due to the strong increase in business activity and the resulting escalation in advance payments for fares.

As of 31 December 2023, Deutsche Lufthansa AG had centrally available liquidity of EUR 7.7bn. Decentralised bank and cash balances came to a further EUR 0.6bn. Free credit lines of EUR 2.1bn (of which EUR 2.0bn on a revolving basis) are still available as of the reporting date. Altogether, the Lufthansa Group’s available liquidity therefore comes to EUR 10.4bn.

Recent global developments in the area of security policy, including the Russian war of aggression against Ukraine, the conflict between Israel and Hamas, various coups d’état in Africa and continuing tensions between China and Taiwan, and other potential effects on international economic relations represent a risk for future business development. The same applies to activities and developments related to climate protection.

The earnings performance in the 2024 financial year and beyond will continue to depend on the extent of the economic impact of the crises mentioned above. Other significant secondary effects over and above the loss of some destinations for the Lufthansa Group airlines, increases in the oil price and additional expenses for climate protection measures are also conceivable. High inflation rates, rising interest rates and volatile energy prices are already a burden on macroeconomic performance in Germany. The management of operational problems due to supply chain bottlenecks and staff shortages in the airline industry is a further material risk factor.

Current corporate planning forecasts Adjusted EBIT for 2024 at the same level as the previous year. However, the potential impact of the conflicts and risks mentioned above constitute factors of uncertainty for the future earnings performance. Company management confirms the medium-term targets for return on capital and expects profitable growth.

Taking into account the corporate planning and the resulting liquidity planning, the further potential funding measures and the uncertainties about the future course of business, the Company’s Executive Board considers the Group’s liquidity to be secure for the next 18 months. In the management’s opinion, the uncertainties in connection with the public and political debate on climate protection are not a threat to this forecast either. The consolidated financial statements have therefore been prepared on a going concern basis.

3. New international accounting standards in accordance with IFRS and interpretations and summary of the material accounting policies

International Financial Reporting Standards (IFRS) and Interpretations (IFRIC) to be applied for the first time in the financial year and amendments to standards and interpretations

Amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction
The IASB published amendments to IAS 12 in May 2021, which define how an entity accounts for income taxes, including deferred taxes. Under certain circumstances, entities are exempt from recognising deferred taxes when they recognise assets or liabilities for the first time (initial recognition exemption). To date there has been a degree of uncertainty about whether the exemption applies to transactions in connection with leases (when a lessee recognises an asset and a liability at the beginning of a lease) and decommissioning obligations (when an entity recognises a liability and includes the costs of decommissioning in the cost of the asset). The amendments clarify that this exemption does not apply and that entities must recognise deferred taxes on such transactions. This is stated in the new clause of IAS 12.22A. The amendments are applicable for financial years beginning on or after 1 January 2023.

Amendments to IAS 12, International Tax Reform – Pillar Two Model Rules
The OECD released technical guidance on its global minimum tax of 15% in March 2022. This is the second pillar of a project to manage the tax challenges resulting from the digitalisation of the economy. The guidance explains the application and methods of the Global Anti-Base Erosion (GloBE) rules that were agreed and published in December 2021. The rules provide for a coordinated system that is intended to ensure that multinational companies with revenues of more than EUR 750m pay a tax of at least 15% on their local income in every jurisdiction in which they operate. In 2023, the IASB created a mandatory temporary exemption in IAS 12 for the recognition of deferred taxes to the extent that they relate to the OECD Pillar Two Model Rules. The implementation of minimum taxation rules in the countries concerned has resulted in uncertainty and questions about application, particularly regarding deferred taxes, which prompted the IASB to make the amendment. Disclosures are required, however. These are intended to help the users of financial statements to better understand a company’s income tax risks in connection with the implementation of the Pillar Two rules and already apply in periods before the legislation to implement these rules has taken effect. This amendment is applicable for annual reporting periods beginning on or after 1 January 2023. (↗ Note 15).

IFRS 17, Insurance Contracts
In May 2017, the IASB published IFRS 17, Insurance Contracts, which defines the principles of recognition, measurement, presentation and disclosures relating to insurance contracts. IFRS 17 is applicable to all types of insurance contract (i.e. life insurance, property insurance, direct insurance and reinsurance), regardless of the type of entity, and to certain guarantees and financial instruments with discretionary participation. There are some exemptions in terms of the scope of application. For the IFRS 17 standard applicable from 1 January 2023, a review revealed that existing contracts with customers are not deemed insurance contracts, but rather contracts for the provision of services and products. This is also the case for Lufthansa Technik’s current business model, which comprises the provision of maintenance, repair and overhaul services (MRO).

The first-time application from 1 January 2023 of the mandatory accounting standards had no or no material effect on the presentation of the net assets, financial and earnings position or on earnings per share.

Published International Financial Reporting Standards (IFRS) and Interpretations (IFRIC) not yet applied/applicable and amendments to standards and interpretations

The following standards and amendments have already been adopted by the European Union but are only mandatory for financial statements after 31 December 2023:

Amendments to IFRS 16, Lease Liability in a Sale and Leaseback Transaction
The IASB published amendments to IFRS 16 in September 2022. The amendments mean that the seller/lessee recognises a lease liability from the leaseback obligation under IFRS 16 on the sale date, even if all the lease payments are variable and do not depend on an index or rate. No gain or loss is recognised on subsequent measurement of the right-of-use asset retained by the seller/lessee. Subsequent measurement of the right-of-use asset under the leaseback is carried out according to the general rules of IFRS 16.29–35. The amendments are applicable retrospectively for financial years beginning on or after 1 January 2024.

Amendments to IAS 1, Classification of Liabilities as Current or Non-current
In October 2022, the IASB published amendments to IAS 1, Presentation of Financial Statements to clarify the guidance for classifying liabilities as current or non-current. The amendments clarify that liabilities are to be classified as non-current if, as of the reporting date, the reporting entity has the right to defer settlement of the liability for at least twelve months. The assessment of this right depends on the circumstances at the end of the reporting period. Covenants to be met in future are not considered. The amendments are applicable retrospectively for financial years beginning on or after 1 January 2024.

The Lufthansa Group also does not expect the remaining endorsed but not yet effective amendments to have any material impact on its consolidated financial statements.

The IASB has adopted the following amendments to standards which are not yet mandatory for financial year 2023:

Amendments to IAS 7 and IFRS Practice Statement 7: Supplier Finance Arrangements
In May 2023, the IASB published amendments to IAS 7 and IFRS 7 to clarify the features of supplier finance arrangements and require additional disclosures on such arrangements. The disclosure obligations in the amendments are intended to help the users of financial statements to understand the effects of supplier finance arrangements on the entity’s liabilities, cash flows and liquidity risk.

The amendments are applicable for annual reporting periods beginning on or after 1 January 2024. Early application is allowed.

Amendment to IAS 21, Lack of Exchangeability
This amendment describes how the exchange rate is to be determined if a currency is not exchangeable over a long period, since IAS 21 previously did not offer any guidance in this respect. The standard is also supplemented by requirements for determining whether a currency can be exchanged for another currency, guidance on determining the exchange rate if this is not the case and additional disclosure obligations in this context.

Currently, the new or amended IFRS pronouncements listed in the table are not considered to have any or any material effect on the presentation of the net assets, financial and earnings position.

The Lufthansa Group has not voluntarily applied any of the new or amended regulations mentioned above before their binding date of application. If the effective dates of the standards and interpretations mentioned above fall within the year, they are applied as of 1 January of the following financial year. This is subject to the endorsement of these standards by the EU.

Summary of significant accounting policies

The companies included in the consolidated financial statements use uniform accounting policies to prepare their financial statements.

The application of the accounting policies prescribed by IFRS and IFRIC requires making a large number of estimates and assumptions with regard to the future that may, naturally, not coincide with actual future conditions. All of these estimates and assumptions are, however, reviewed continuously and are based either on past experience and/or expectations of future events that seem reasonable in the circumstances on the basis of sound business judgement. Estimates and assumptions that are of material importance in determining the carrying amounts for assets and liabilities are explained in the following description of the accounting policies applied to material balance sheet items.

The uncertainties resulting from the crisis are vital for the general assessment of the Company’s status as a going concern, but also for specific accounting judgements and estimates. Above all, geopolitical uncertainties, as described in the comments on the going concern basis of preparation, and their economic consequences represent a material risk for the performance of the world economy, the continued recovery of the entire aviation industry and the Lufthansa Group. The costs of energy, particularly of kerosene, are of material importance for the Lufthansa Group, in addition to their impact on the economy as a whole. The main assumptions and estimates were therefore based on the Group’s liquidity and profit forecasts (↗ Note 2). Critical accounting areas that may be affected most severely by the ongoing uncertainty about the crises mentioned above are:

"Carrying amounts of goodwill (↗ Note 18) and equity investments (↗ Note 24), which depend to a large degree on achieving the planned earnings."

"Carrying amounts for the aircraft (↗ Note 20), which particularly depend on profitable fleet operations."

"Repairable spare parts (↗ Note 21) and inventories (↗ Note 27) require measurement assumptions about the extent to which future overcapacities will result from reducing particular fleet models or from a potential decline in business in the MRO segment, despite the currently positive business environment."

"In view of the crisis-related uncertainties described above, measurement of the carrying amount for deferred tax assets (↗ Note 15), particularly on the tax loss carry-forwards, took the longer-term opportunities for using them into account."

"Accounting for obligations under customer loyalty programmes and unused flight documents (↗ Note 41) also depends on how customers redeem miles or use tickets. Estimates about customers’ redemption and use behaviour are subject to uncertainty and play a role in the measurement of miles accounts and the estimate of amounts expected from unused flight documents and miles."

The accounting areas mentioned above could also be affected by declines in demand for air travel or higher costs due to climate-related aspects. In particular, there is uncertainty about the extent to which regulatory efforts in connection with discussions about climate protection could lead to higher costs for the Lufthansa Group. Public debate is currently focused on carbon emissions. In this context, corporate planning has factored in the additional costs for emissions trading and sustainable aviation fuel, amongst other things, which were thus included when applying IAS 36 and in the impairment considerations for deferred tax assets. Other core elements of the drive to reduce carbon emissions are the planned modernisation of the fleet and opportunities to buy carbon offsets when booking tickets. In connection with the planning mentioned above, the assumption is that sufficient quantities of sustainable aviation fuel will be available and that a certain proportion of customers will make use of carbon offsets. The Lufthansa Group does not currently see any climate-related indications for material changes in the expected useful lives of aircraft and reserve engines. However, the debate about the influence of aviation on climate change could have a negative long-term impact on air travel and thus on planned revenue. No explicit assumptions have been made in the corporate planning for want of reliable indicators. For the medium- and long-term period, the impairment testing did not adopt the further market growth assumed by the industry association IATA (forecast up to 2035; as of September 2023), however, but only included the effects of inflation.

The measurement method in the consolidated financial statements is based on historical cost. Where IFRSs stipulate that other methods of measurement should be applied, these are used instead, and are referred to specifically in the following comments on measuring assets and liabilities.

Amendments to accounting policies as a result of revised and new standards are applied retrospectively unless provided otherwise for a specific standard. In this case, the income statement for the previous year and the opening statement of financial position for the comparable period are adjusted as if the new accounting policies had always been applied.

Recognition of income and expenses

Revenue and other operating income are recognised when the service has been provided.

Passenger transport and ancillary services

The Lufthansa Group sells flight tickets and related ancillary services primarily via agents, its own websites or other airlines in the case of interlining. The payments are received by the Lufthansa Group via credit card billing companies, agents or other airlines, generally before the corresponding service is provided. Receivables from the sale of flight tickets and related ancillary services are only amounts payable by the business partners mentioned above.

The Lufthansa Group initially recognises all ticket sales as liabilities from unused flight documents. These are presented as contract liabilities in accordance with IFRS 15. Depending on the terms of the selected fare, the contract liabilities reflect a range of possibilities for refunding services that have not yet been provided. Liabilities include both the deferred income for future flights and ancillary services that are recognised as revenue when the flight documents are used, and the liabilities for award miles credited to the passenger when the flight documents are used. The Lufthansa Group allocates the transaction price to all of the performance obligations identified on the flight ticket on the basis of their individual transaction prices. The individual transaction prices for flight segments are determined using the IATA rules, which allocate the total price payable to individual flight segments using what is known as a prorate calculation. Amounts calculated in this way meet the IFRS 15 definition of a relative individual transaction price. The individual transaction prices for ancillary services that are not included in the fare are directly observable prices within the meaning of IFRS 15. On average, it takes 2.3 months (previous year: 2.2 months) for a flight coupon to be realised.

The Lufthansa Group reduces liabilities from unused flight documents and recognises revenue for each flight segment (including the related ancillary revenue) when the respective document is used. For tickets that cover more than one flight segment, each flight segment is identified as a distinct performance obligation, since each one is independent and can be distinguished in the context of the contract.

Interlining means that the passenger is carried by another airline for one (or more) flight segment(s). Only the commission paid by the other airline is recognised as revenue for these flight segments, since the Lufthansa Group acts solely as an agent in terms of these performance obligations. If passengers with tickets sold by other airlines are carried partly or fully by the Lufthansa Group, the Lufthansa Group shows the pro rata ticket income received from the other airlines less the commission retained by the ticketing airline as revenue.

Generally speaking, the Lufthansa Group does not expect to receive any amount if a flight document is not used (or does not expect the amount to be material) and so for this reason does not anticipate the possibility that documents for a flight segment will not be used. The expected amount if flight documents are not used is only recognised as revenue if the probability that the passengers will exercise their remaining rights is low, and no later than when the expiry of flight documents is certain and known. This is done on the basis of defined passenger groups.

IFRS 15 requires that income from the expiry of miles is recognised in parallel with revenue from the performance obligations that do not expire. A period of three years is therefore assumed for revenue recognition, and the revenue from miles expected to expire is recognised on a straight-line basis over this time, as a rule. Changes in how passengers redeemed their miles in prior years and the restricted opportunities to use them for flights due to the coronavirus pandemic meant that the realisation rate was adjusted accordingly.

Revenue for award miles is recognised at the point in time or over the time at which the goods and services purchased with the award miles are transferred.

Logistics

Lufthansa Cargo markets the freight capacities of passenger aircraft at Lufthansa German Airlines, Austrian Airlines, Eurowings and Brussels Airlines and operates a fleet of cargo aircraft. In addition to income from standard cargo services, Lufthansa Cargo generates part of its revenue from ancillary services that are closely connected to the freight service.

In its cargo business, the Lufthansa Group has identified the entire freight service as a distinct performance obligation. The contracting party
receives the benefit of the transport service with each transport segment that is completed by the airline. In this case, the customer takes control of the Company’s output while the carrier provides its service. The corresponding cargo revenue is therefore recognised at the prorated value when the documents for each individual freight segment are used.

Lufthansa Cargo typically receives the consideration for performing its service once the transport has been carried out.

MRO

The main distinct performance obligations in the MRO segment are the provision of maintenance and aircraft and engine overhaul services, for which revenue is recognised over time since the condition of IFRS 15.35 (b) is generally met. Profit recognition for these performance obligations takes place on the basis of an input-oriented percentage of completion method, based on the services rendered as a proportion of the total volume of the customer order. Contract assets and contract liabilities are therefore both recognised. As a basic principle, the revenue is realised taking into consideration the margin shown in the business plans, which are updated annually.

In some cases, the contracts in the MRO segment make it necessary not to recognise distinct services as individual performance obligations but rather as a series, as described in IFRS 15.22 (b).

Access to Lufthansa Technik’s pool of spare parts and components is another key performance obligation, which is satisfied either over time or at a point in time, depending on the contract model agreed. Furthermore, some of the contracts include standby obligations that require the recognition of revenue over time. This is particularly the case with component contracts in which remuneration is paid in the form of a fixed rate per hour of flying time. For such contracts, the percentage of completion is primarily measured on the basis of the hours invoiced to the customer each month.

A significant portion of the contracts in the MRO business segment run for several years and so have price adjustment clauses, which are only considered in the transaction price when the event that triggers a price adjustment (a wage increase, for example) has occurred.

Catering

The LSG group mainly offers products and services related to in-flight service. Its in-flight service comprises catering, in-flight sales and the related logistics.

Airline catering is the main business of the LSG group as far as revenue is concerned. Taking the business model and the value chain for airline catering into account, the preparation of meals and the logistics related to this catering have been identified as distinct performance obligations. The performance obligation to prepare meals is generally fulfilled when the meals are delivered to the contract partners. The catering logistics performance obligation is fulfilled over the time between the transport of the meals to the airport and the disposal of the waste, depending on the services ordered. For performance obligations over time, the percentage of completion is measured on an output basis in accordance with IFRS 15.B15 in conjunction with IFRS 15.B16.

Billing and payment in the Catering segment generally take place one to two months after the performance obligation has been fulfilled. This gives rise to trade receivables, but no significant contract liabilities or contract assets from catering contracts.

Variable consideration (e.g. volume discounts) must be taken into account when determining the transaction price in the catering business. The majority of the variable consideration is estimated using the expected value method on the basis of historical data and current developments. The LSG group updates the estimated transaction price at the end of each reporting period and accounts for the resulting changes in accordance with IFRS 15.87–90.

Further disclosures on the Lufthansa Group’s revenue from contracts with customers can be found in ↗ Notes 4 and 5.

Operating expenses are recognised when the product or service is used or the expense arises. Provisions for warranties are generally accounted for when the corresponding revenue is recognised, while provisions for onerous contracts are generally set up when they are identified.

Interest income and expenses are accrued in the appropriate period. Dividends from shareholdings not accounted for using the equity method are recognised when a legal claim to them arises.

Initial consolidation and goodwill

The initial consolidation of Group companies takes place using the purchase method. This involves measuring the fair value of the assets, liabilities and contingent liabilities identified, in accordance with the provisions of IFRS 3, of the company acquired at the acquisition date, and allocating the acquisition costs to them (purchase price allocation). The proportion of fair value of assets and liabilities not acquired is shown under non-controlling interests. The ancillary acquisition costs are recognised as expenses in the periods in which they occur.

Any excess of cost over the value of equity acquired is capitalised as goodwill. If the value of the acquirer’s interest in the shareholders’ equity exceeds the purchase price paid by the acquiring company, the difference is recognised immediately in profit or loss.

Differences from non-controlling interests acquired after control has been gained are set off directly against equity.

Goodwill is not amortised, but is tested at least annually for impairment. Impairment testing of goodwill is carried out using recognised discounted cash flow methods. This is done on the basis of expected future cash flows from the latest business plan, which are extrapolated on the basis of long-term revenue growth rates and assumptions with regard to margin development and are discounted for the capital costs of the business unit. Tests are performed at the level of the cash-generating unit (CGU). For the individual assumptions on which impairment tests were based in financial year 2023, see ↗ Note 18.

Additional impairment tests are also applied during the course of the year if events give reason to believe that goodwill could be permanently impaired.

Once an impairment loss has been recognised on goodwill, it is not reversed in subsequent periods.

Notwithstanding the principles described above, Group companies that have no material impact on the Lufthansa Group’s net assets, financial and earnings position are not consolidated, but rather recognised in the consolidated financial statements at cost less any impairments.

Currency translation and consolidation methods

The financial statements of the foreign Group companies are prepared in the relevant functional currency and translated into euros before consolidation. The functional currency is mainly the currency of the country in which the company concerned is located. Occasionally, the functional currency differs from the national currency. Assets and liabilities are translated at the middle rates on the balance sheet date. Income statements are translated at the average exchange rates for the year. Any translation differences are recognised directly in equity without effect on profit and loss and are only recognised in profit or loss when control is lost or the equity investment is disposed of.

Goodwill from capital consolidation of foreign subsidiaries prior to 2005 is carried at historical cost net of amortisation accumulated by the end of 2004. Goodwill acquired after 2005 is held in the functional currency of the purchased company and translated at the middle rates on the reporting date.

Transaction differences, however, are recognised in profit or loss. These differences arise in the financial statements of consolidated companies from the measurement of assets and liabilities denominated in a currency other than the company’s functional currency. Exchange rate differences here are included in revenue (exchange rate gains and losses on trade receivables) and in other operating income (other exchange rate gains) or other operating expenses (other exchange rate losses).

Translation differences relating to items whose fair value changes are recognised in equity are also recognised in equity without effect on profit and loss.

The most important exchange rates used in the consolidated financial statements have developed in relation to the euro as follows:

The effects of intra-Group transactions are completely eliminated in the course of consolidation. Receivables and liabilities between consolidated companies are offset against one another and intra-Group provisions are reversed through profit or loss. Intra-Group profits and losses in non-current assets and inventories are eliminated – mostly in connection with the internal resale of aircraft and maintenance inspections. Intra-Group income is set off against the corresponding expenses. Tax accruals and deferrals are made as required by IAS 12 for temporary differences arising from consolidation.

Other intangible assets (except goodwill)

Acquired intangible assets are shown at cost, while internally generated intangible assets from which the Lufthansa Group expects to derive future benefit and that can be measured reliably are capitalised at cost of production and amortised regularly using the straight-line method over an estimated useful life. The cost of production includes all costs directly attributable to the production process, including borrowing costs as required under IAS 23, as well as appropriate portions of production-related overheads.

Intangible assets with an indefinite useful life are not amortised but, like goodwill, are subjected to a regular annual impairment test. These essentially include brands and resellable take-off and landing rights acquired individually or as part of company acquisitions. The latter are generally allotted for an indefinite period, provided they are used regularly.

Property, plant and equipment

Tangible assets used in business operations for longer than one year are valued at their acquisition or production cost less regular straight-line depreciation. The cost of production includes all costs directly attributable to the manufacturing process as well as appropriate portions of production-related overheads. Borrowing costs in close connection with the financing of the purchase or production of a qualifying asset are also capitalised.

Key components of property, plant and equipment that have different useful lives are recognised and depreciated separately. Seats and in-flight entertainment systems installed in commercial aircraft are recognised separately. If costs are incurred in connection with regular extensive maintenance work (e.g. overhauling aircraft and major engine overhauls), these costs are recognised as a separate component insofar as they meet the criteria for recognition. The useful lives and remaining carrying amounts of assets are reviewed regularly and adjusted as necessary in line with the forecast.

The following useful lives and residual carrying amounts are applied throughout the Group:

Buildings, fixtures and fittings on rented premises are depreciated according to the terms of the leases or over a shorter useful life.

Assets acquired second-hand are depreciated over their expected remaining useful life.

When assets are sold or scrapped, the difference between the net proceeds and the net carrying amount of the assets is recognised as a gain or loss in other operating income or expenses, respectively.

In addition to the impairment tests for goodwill, slots and brands, individual items of property, plant and equipment and intangible assets are also tested for impairment if they are no longer intended for future use, either because they are damaged, retired or due to be sold. In this case, the assets are measured individually in line with the applicable standard (full write-down to scrap value, or disposal proceeds less costs to sell). When commercial aircraft are held for service in the Lufthansa Group fleet and there is no immediate intention to sell them, they are combined with the assets of the respective operating unit for the purposes of impairment testing. The smallest separable CGU in the passenger business is the airlines’ flight operations (Lufthansa German Airlines, SWISS, etc.). For the MRO segment, it is the entire MRO operation because of the alliance effects between the MRO business units. The Logistics segment also consists of just one CGU.

Impairment losses on intangible assets and property, plant and equipment

The Lufthansa Group tests intangible assets and property, plant and equipment for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In addition to depreciation and amortisation, impairment losses are also recognised on the balance sheet date if the recoverable amount of an asset to which independent cash flows can be attributed has fallen below its carrying amount. The recoverable amount is determined as the higher of an asset’s fair value less costs to sell and the present value of the estimated net future cash flows from continued use of the asset (value in use).

Fair value less costs to sell is derived from recently observed market transactions – insofar as they are available – or in the case of aircraft, from general external information on current market prices.

If it is impossible to forecast expected cash flows for an individual asset, the cash flows for the next larger asset unit are estimated, discounted at a rate reflecting the risk involved, and the recoverable amount allocated to the individual assets in proportion to their respective carrying amounts.

If the reason for an impairment loss recognised in previous years should cease to exist wholly or in part in subsequent periods, the impairment loss is reversed up to the amount of the asset’s amortised acquisition or production cost.

Repairable spare parts for aircraft

Initial fittings of spare parts for aircraft that can be reused after repair are classified as non-current assets.

The MRO segment accounts for most of the Group’s repairable spare parts. They are replaced and repaired on an ongoing basis to carry out customer orders and for the Group’s own purposes and are held in stock to support the Group’s long-term business. A valuation-relevant subdivision essentially distinguishes between replacement components for aircraft (“pool material”), which is provided continuously for customer orders and which is measured at production/acquisition cost less depreciation, and spare parts that are exchanged and repaired on an ongoing basis for overhaul orders (“non-pool material”), which is measured at the lower of production/acquisition cost and net realisable value. The starting point for the depreciated carrying amounts is the rolling average price of the materials. Pool material is depreciated over five to 20 years, depending on the expected useful life of the corresponding aircraft model. Valuation allowances for non-pool materials reflect their expected future marketability. All depreciation and impairment is recognised within the cost of materials and services, since this best reflects the business model.

Leases

The Lufthansa Group is a lessee for certain assets, particularly property and aircraft. In terms of property, the Group mainly leases airport infrastructure, including hangars, parking and handling spaces, lounges and offices. Other office buildings and production and warehouse spaces are also leased. In addition, the Group uses aircraft and other operating and office equipment on the basis of leases. To the extent that these contracts include payments for non-leased components, they are not included when accounting for the right-of-use asset. The Lufthansa Group assesses whether the contract contains a lease at the start of the contract in accordance with IFRS 16. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use assets are measured at cost less accumulated depreciation and impairment losses and adjusted for any change in the remeasurement of the lease liability. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.

The Lufthansa Group has opted not to apply IFRS 16 to intangible assets. Payments under leases with a term of no more than twelve months and leases for assets of low value are recognised as expenses on a straight-line basis over the term of the lease. For contracts that include non-lease components alongside lease components, these components are separated.

Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease terms or the estimated useful life of the leased item. The lease term consists of the basic fixed term and the term of any renewal options, to the extent that it is sufficiently probable that the lessee will exercise this option, or the term of a cancellation option if it is sufficiently probable that the lessee will not exercise the option.

If ownership of the leased asset passes to the Lufthansa Group at the end of the lease term or is included in the costs of exercising a purchase option, the right-of-use asset is depreciated on a straight-line basis over the expected useful life of the leased asset.

Impairment testing for right-of-use assets is carried out as described above for intangible assets and property, plant and equipment subject to depreciation.

At the commencement date of the lease, the Lufthansa Group recognises lease liabilities measured at the present value of the lease payments to be made over the term of the lease. The lease payments include fixed payments less any lease incentives owed, variable lease payments that depend on an index or a rate, and any amounts that are expected to be paid in the context of residual value guarantees. Lease payments also include the exercise price of a purchase option or penalties for early termination if the exercise of the purchase or termination option by the lessee is reasonably certain.

The Lufthansa Group has leases that include renewal and termination options, particularly for properties. Judgement is used when assessing the reasonable probability that the option to renew or terminate the lease will be exercised. When determining lease terms, all the facts and circumstances that offer an economic incentive to exercise renewal options or not to exercise termination options are taken into account. After the commencement date of the lease, the Lufthansa Group remeasures the lease liability if a significant event occurs or if circumstances change.

Variable lease payments that do not depend on an index or a reference rate are recognised as expenses in the period in which the event or condition triggering the payment occurs.

Lease payments are generally discounted at the incremental borrowing rate. Reference interest rates based on congruent, risk-free rates in major countries and currencies were used to calculate the incremental borrowing rate. A credit risk premium was added to the respective reference rates.

When the Lufthansa Group is a lessor, it classifies leases as operating leases or finance leases. A lease is classified as a finance lease if it transfers essentially all the risks and rewards associated with ownership of the leased asset. If this is not the case, the lease is classified as an operating lease.

As the lessor in an operating lease, the Lufthansa Group presents the leased item as an asset at amortised cost in property, plant and equipment. Lease payments received in the period are shown as other operating income. The Lufthansa Group leases some of its properties and engines to other entities. There are currently no finance leases at the Lufthansa Group.

The accounting for sale-and-lease-back transactions depends on whether a sale has taken place or not. To judge whether this is the case, the criteria of IFRS 15 are used to determine if a performance obligation has been satisfied. If a sale has taken place, the lessee derecognises the leased item and replaces it with a right-of-use asset. Its carrying amount depends on the percentage that the right-of-use asset represents of the original carrying amount of the derecognised lease item. A disposal gain or loss may only be recognised for the amount that relates to the rights transferred to the lessee. If the sales price does not represent the fair value of the leased item or the subsequent payments are not on market terms, corrections must be made. If the terms are below market, the difference is treated as an early lease payment; if they are above market, the difference is accounted for as a loan from the lessor. If there has been no sale according to the IFRS 15 criteria, the lessee continues to carry the asset unchanged and recognises a financial liability for the amount of the transfer price, which is accounted for in line with IFRS 9.

Equity investments accounted for using the equity method

Equity investments accounted for using the equity method are capitalised at cost at the time of acquisition.

In subsequent periods, the carrying amounts are either increased or reduced annually by changes in the shareholders’ equity of the associated company or joint venture that is held by the Lufthansa Group. The principles of purchase price allocation that apply to full consolidation are applied accordingly to the initial measurement of any difference between the acquisition cost of the investment and the pro rata share of shareholders’ equity of the company in question. An impairment test is only carried out in subsequent periods if there are indications of a potential impairment in the entire investment valuation.

Financial instruments

Financial assets are classified within the Lufthansa Group in accordance with IFRS 9 as “at amortised cost”, “at fair value through profit or loss”, “at fair value through other comprehensive income (with and without recycling)” and “derivative financial instruments as an effective part of a hedging relationship”.

The category “at amortised cost” consists of financial assets that are debt instruments and are intended to be held to maturity on the basis of the company’s business model. Furthermore, these instruments have fixed payment terms and meet the criteria for cash flow characteristics, i.e. contractual payments of principal and interest. For the Lufthansa Group, this item particularly includes loans and receivables, cash in hand and bank balances. They are classified as non-current or current assets according to their remaining maturity.

The category “at fair value through profit or loss” comprises debt instruments for which the business model is neither to hold nor to sell them, or which do not pass the cash flow characteristics test. This is generally not the case for the Lufthansa Group. Equity instruments are also allocated to this category as a rule. The Lufthansa Group generally recognises shares and equity investments that are financial instruments in this category. Derivatives that do not meet the criteria for hedge accounting are also classified in this category.

Debt instruments are classified as “at fair value through other comprehensive income (with recycling)” when the business model is to both hold and sell these instruments and they pass the cash flow characteristics test. For the Lufthansa Group, this particularly applies to securities held as strategic liquidity.

An option can be exercised to classify specific equity instruments as “at fair value through other comprehensive income (without recycling)”. The Lufthansa Group exercises this option for individual share positions.

In both cases, the relevant deferred taxes are recognised directly in equity.

The Lufthansa Group uses derivatives for hedging, which are classified as “derivative financial instruments as an effective part of a hedging relationship” if all the requirements for hedge accounting are satisfied.

Financial instruments are recognised at fair value on the settlement date, i.e. on the date that they are created or transferred. Financial assets, with the exception of trade receivables and financial assets at fair value through profit or loss, are capitalised at fair value plus transaction costs. Trade receivables are measured at the transaction price. The transaction costs of financial assets at fair value through profit or loss are recognised through profit or loss.

Long-term low or non-interest-bearing loans are recognised at net present value using the effective interest method. Subsequent measurement of the financial instrument depends on the classification, either at amortised cost using the effective interest method, or at fair value, through profit or loss or in equity without effect on profit and loss.

A financial asset is derecognised when the rights to payment expire or the financial asset is transferred to a third party. A significant change in the contractual conditions of a financial instrument at amortised cost results in its derecognition and the recognition of a new financial asset. Insignificant changes result in an adjustment to the carrying amount and the financial asset is not derecognised.

Receivables denominated in foreign currencies are measured at the closing rate.

The fair value of securities is determined by the price quoted on an active market. For unlisted fixed-interest securities, the fair value is determined from the difference between the effective and the market interest rate at the measurement date.

If there are doubts as to the recoverability of receivables, then impairment losses are recognised and these receivables are recognised at the lower recoverable amount. Subsequent reversals (write-backs) are recognised in profit or loss. IFRS 9 requires that when a receivable is recognised for the first time, an expected loss is provided for that reflects the credit risk of the receivable before a default event occurs. An external credit risk exists for the Lufthansa Group, especially in its portfolio of trade receivables, for which an expected credit loss is recognised.

Derivative financial instruments are measured at fair value on the basis of published market prices. If there is no quoted price on an active market, other appropriate valuation methods are applied. Appropriate valuation methods take all factors into account that independent, knowledgeable market participants would consider in arriving at a price and that constitute recognised, established economic models for calculating the price of financial instruments.

In accordance with its internal guidelines, the Lufthansa Group uses derivative financial instruments to hedge interest rate and exchange rate risks and to hedge fuel price risks. This is based on the hedging policy defined by the Executive Board and monitored by a committee. ↗ Note 46.

Interest rate swaps and interest rate/currency swaps are used to manage interest rate risks. Interest rate/currency swaps also hedge exchange rate risks arising from borrowing in foreign currencies.

Fuel price hedging takes the form of spread options and other hedging combinations for crude oil and gas oil. To a limited extent, hedging may also be undertaken for other products, such as jet fuel or gas oil futures.

Hedging transactions are used to secure either fair values (fair value hedge) or future cash flows (cash flow hedge).

To the extent that the financial instruments used qualify as effective cash flow hedging instruments within the scope of a hedging relationship, in accordance with the provisions of IFRS 9, the fluctuations in market value will not affect the result for the period during the term of the derivative. They are recognised without effect on profit or loss in the corresponding reserves. If the hedged cash flow is an investment, the result of the hedging transaction that has previously been recognised in equity is set off against the cost of the capital expenditure at the time the underlying transaction matures. In all other cases, the cumulative gain or loss previously stated in equity is included in net profit or loss for the period on maturity of the hedged cash flow.

In the case of effective hedging of fair values that are designated as a fair value hedge, the changes in the market value of the hedged asset or the hedged debt and those of the financial instrument will balance out almost completely in the income statement.

Derivatives that do not meet the criteria for hedge accounting are presented in the category “at fair value through profit or loss”. Changes in fair value are then recognised directly in the income statement. For the Lufthansa Group, this generally occurs when the exposure or item being hedged cannot be measured reliably or the exposure ceases to exist prematurely over the course of the hedge.

Embedded derivatives – to the extent that they should, but cannot, be separated from the financial host contract – are also considered with these as trading transactions for measurement purposes. Changes in market value are also recognised directly as profit or loss in the income statement. Both types must be classified as financial assets stated at fair value through profit or loss.

It is the Lufthansa Group’s hedging policy (↗ Note 46) only to acquire effective derivatives for the purpose of hedging interest rate, exchange rate and fuel price risks.

Initial recognition of financial guarantees to third parties is at fair value. Thereafter, financial guarantees are either measured in the category “at fair value through profit or loss” or at the higher of the originally recognised amount, less any cumulative amortisation through profit or loss in line with IFRS 15, and the value of the contractual obligation measured in line with IAS 37.

Emissions certificates

CO₂ emissions certificates are recognised as intangible assets and presented under other receivables. Rights, both those purchased and those allocated free of charge, are measured at cost and not amortised.

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which was agreed with the ICAO in October 2016, has been offsetting growth-related carbon emissions in international aviation through the purchase of certificates since 2021. CORSIA is designed to compensate for all emissions from the aviation sector that exceed the baseline carbon emissions defined by the ICAO. This is based on the 2019 emissions for the pilot phase (2021 to 2023) and, for the years 2024 to 2035, on 85% of the emissions from 2019. In 2021 and 2022, the Lufthansa Group did not make any CORSIA carbon offset payments due to the crisis-related global decline in traffic. The same is expected for 2023. CORSIA offsets are expected to arise in 2024 for the first time. This primarily depends on the pace of the recovery of the aviation sector in the countries participating in the CORSIA pilot phase.

Contract assets and receivables

Contract assets represent contractual claims to receive payments from customers where the contractual performance obligations have already been fulfilled but no unconditional payment claim has yet been incurred. Receivables are recognised if the right to receive consideration is no longer subject to conditions. This is generally the case when the Group is contractually entitled to send the customer an invoice. Contract assets mainly relate to production or service contracts for MRO and IT services. Valuation allowances are made on the respective gross amounts of expected payment defaults.

Inventories

Inventories comprise non-repairable spare parts and assets used in production or the provision of services (raw materials, consumables and supplies), purchased merchandise, finished and unfinished goods and related advance payments. They are measured at cost, determined on the basis of average prices, or at production costs. The cost of production includes all costs directly attributable to the production process, including borrowing costs as required under IAS 23, as well as appropriate portions of production-related overheads at normal productivity rates. Measurement on the balance sheet date is at the lower of acquisition/production cost and net realisable value. Net realisable value is defined as the estimated selling price less the estimated cost until completion and the estimated costs necessary to make the sale. If there are indicators for future inability to pay, corresponding valuation allowances are made.

Assets classified as held for sale and discontinued operations

Individual, formerly non-current assets or groups of assets that are expected to be sold within the next twelve months are measured at the lower of their carrying amount at the time they are reclassified and fair value less costs to sell. Fair value less costs to sell is derived from recent market transactions, if available.

Property, plant and equipment and intangible assets are no longer depreciated or amortised and measurement of the carrying amount of affiliated companies accounted for using the equity method is suspended once they are classified as held for sale or distribution. While the impairment charge from the last measurement before reclassification is recognised as an impairment loss, all subsequent changes in the measurement of current assets held for sale, for instance due to exchange rate movements, are shown in other operating expenses or income.

Discontinued operations are not included in the result of continuing operations, but are presented in the income statement in a separate item as result from discontinued operations after taxes.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, cheques received and credit balances at banks. Cash equivalents are financial investments that can be liquidated at short notice. At the time of purchase or investment, they have a maturity of three months or less.

Pension provisions

The pension provisions for defined benefit plans correspond to the present value of the defined benefit obligations (DBO) on the reporting date less the fair value of plan assets, if necessary taking the rules on the maximum surplus of plan assets over the obligation (asset ceiling) into account.

The DBO is calculated annually by independent actuaries using the projected unit credit method prescribed in IAS 19 for defined benefit pension plans. The measurement of pension provisions within the statement of financial position is based on a number of actuarial assumptions.

Capital account plans are measured using the market value of the assets assigned to the individual capital accounts as of the reporting date. The present value of the minimum benefit payable when the beneficiary becomes entitled to the benefit is compared with the amount of contributions already paid in, measured using the assumptions for the benefit plans. Additional risk premiums that the employer contributes to insure against early entitlements are included in the current service cost.

Their measurement particularly requires assumptions about long-term salary and pension trends as well as average life expectancy. The assumptions about salary and pension trends are based on developments observed in the past and take into account national interest and inflation rates and labour market trends. The estimate of average life expectancy is based on recognised biometric calculation formulas.

The interest rate used to discount the individual future payment obligations is based on the return from investment grade corporate bonds in the same currency. The discount rate for the euro zone is determined by reference to bonds with an issue volume of at least EUR 100m and an AA rating from at least one of the rating agencies Moody’s Investor Service, Fitch Ratings or Standard & Poor’s Rating Services. Bonds from public sector issuers in the euro zone have been included in the extrapolation since 2022 to improve the estimation method, particularly for long maturities.

Actuarial gains and losses arising from the regular adjustment of actuarial assumptions are recognised directly in equity in the period in which they arise, taking deferred taxes into account. Also presented without effect on profit and loss are differences between the interest income at the beginning of the period calculated on plan assets based on the interest rate used to discount the pension obligations and the earnings from plan assets actually recorded at the end of the period. The actuarial gains and losses and any difference between the forecast result and the actual result from plan assets form part of the remeasurement.

Past service cost and effects of plan settlements are recognised immediately in profit and loss.

Payments to pension providers for defined contribution retirement commitments for which the pension provider or the beneficiary assumes the financial risks are recognised in staff costs as they fall due.

Other provisions

Other provisions are recognised for present legal and constructive obligations to third parties arising from past events that will probably give rise to a future outflow of resources provided that a reliable estimate can be made of the amount of the obligations as of the reporting date.

The amount of the provision is determined using the best estimate. Past experience, current cost and price information as well as estimates from internal and external experts are used to determine the amount of provisions.

Provisions for maintenance obligations under leases are recognised on the basis of the contractual maintenance or compensation obligations, taking into account the current maintenance condition, compared with the agreed condition on return.

Provisions for obligations to submit emissions certificates are measured on the basis of the average acquisition costs of the certificates intended for submission to the respective register. If forward contracts for emission rights are taken out to cover the submission obligation, they are included in the measurement of the provision at the agreed forward rates. Any additional shortfalls are included in the provision at the market rate on the reporting date.

The management regularly analyses the current information on legal risks and makes provisions for probable obligations. These provisions cover estimated payments to the claimant, court and procedural costs, the costs of lawyers and of any out-of-court settlement. Internal and external lawyers assist with the estimate. When deciding on the necessity of a provision for litigation, the management takes into account the probability of an unfavourable outcome and the chance of making a sufficiently accurate estimate of the amount of the obligation. The commencement of legal proceedings, the formal assertion of a claim against the Group or the disclosure of certain litigation in the Notes does not automatically mean that a provision was created for the risk concerned. A ruling in court proceedings, a decision by a public authority or an out-of-court settlement may cause the Group to incur expenses for which no provision was made because the amount could not be reliably determined or for which the provision created and the insurance coverage is not sufficient.

Provisions for restructuring and severance payments are only recognised when there is a constructive obligation. A constructive obligation exists if a formal restructuring plan has been adopted that includes the affected business unit or the affected part of a business unit, the location and number of employees affected, the detailed estimate of the associated costs and the time schedule. In addition, the key points of the plan must have been communicated to the employees concerned. The restructuring provisions only include expenses directly attributable to the restructuring measures that are necessary for the restructuring and are not related to the future operating business. This includes, for example, expenses for severance payments to employees.

Provisions for onerous contracts are recognised on the basis of the directly attributable costs and income expected, as well as any opportunities to terminate the relevant contracts early.

Provisions for obligations that are not expected to lead to an outflow of resources in the following year are recognised to the amount of the present value of the expected outflow, taking foreseeable price rises into account.

The assigned value of provisions is reviewed on each balance sheet date. Provisions in foreign currencies are translated at the closing rate.

If no provision could be recognised because one of the stated criteria was not fulfilled, the corresponding obligations are shown as contingent liabilities and discussed in the relevant section.

Liabilities and provisions

Trade and other payables are initially recognised at fair value. Fair value is approximately equivalent to the carrying amount.

Measurement in subsequent periods is at amortised cost using the effective interest method.

Liabilities denominated in foreign currencies are measured at the closing rate.

Obligations from cash-settled share-based payment transactions are measured at fair value in accordance with IFRS 2. Fair value is measured on initial recognition, at every reporting date and on the settlement date. Fair value is derived using a Monte Carlo simulation. The liability is recognised on the basis of the resulting fair value, taking the remaining term of the programme into account. Changes are recognised as staff costs in profit or loss.

The costs of equity-settled transactions are measured at fair value using a suitable valuation model at the time of the award. These costs, together with a corresponding increase in equity (other neutral reserves) are recognised in expenses for employee benefits over the period in which the service and performance conditions are satisfied. The dilutive effect of the outstanding share options is taken into account when calculating earnings per share (diluted). Details of the assumptions used for the model and the structure of the share programmes can be found in ↗ Note 40.

Contract liabilities

A contract liability is an obligation on the part of the Group towards a customer to provide goods or services for which the customer has already performed an obligation, e.g. by making an advance payment. Contractual liabilities are recognised as revenue as soon as the Group fulfils its contractual obligations. The Group’s contract liabilities consist of liabilities from unused flight documents, unredeemed miles from customer loyalty programmes, construction contracts and other contract liabilities.

Until they are used, sold flight documents are recognised as an obligation from unused flight documents. Coupons that are unlikely to be used any more are recognised as traffic revenue in the income statement at their estimated value. The estimate is based on past statistical data. Due to the coronavirus pandemic and the associated increased number of tickets for cancelled and rebookable flights, the parameters for the use of expired flight coupons were adjusted in prior years.

The Lufthansa Group uses various bonus miles programmes with the aim of ensuring long-term customer loyalty. Participants in the Miles & More programme, which is the biggest bonus miles programme in the Lufthansa Group, can collect and redeem bonus miles for flights with the airlines in the Lufthansa Group as well as with numerous partners (including other airlines, hotels, global car hire companies, financial and insurance providers, telecommunications companies, retailers, automobile clubs, etc.). Miles expire three years after they are collected, in accordance with the terms of membership, unless they are protected by frequent flyer status or credit card use.

Observable past redemption patterns are used to measure the premium claims that are collected on flights with the airlines in the Lufthansa Group. Miles that are expected to be used for flights with airlines of the Lufthansa Group are measured based on the average price of the premium flight or upgrade for the average number of miles used. The price is calculated on the basis of past redemption patterns, weighted for the various geographic regions and booking classes. This is then corrected to allow for the reduced flexibility of premium flights and the award miles granted for normal flights. Miles that are expected to be redeemed for other bonuses are measured at the average price for these bonuses and the average number of miles redeemed. The prices for additional miles are recalculated every year and applied to all additions in that year. Consumption of miles is measured using the average rate for total miles at the beginning of the year (same as previous year).

Premium points collected from other partners are measured at the amounts paid by these partners in relation to the average number of miles collected and redeemed.

The calculation method for the legal and economic expiry rate entails calculating the expiry rate from the values observed in prior years, increased or decreased as necessary by reference to past trends or future enhancements to the programme.

Government grants

Government grants are recognised at fair value when there is reasonable assurance that the grant will be received and that the Group will fulfil all conditions attached to such grants.

Government grants for the acquisition of property, plant and equipment are included in other liabilities as deferred income and recognised in other operating income on a straight-line basis over the estimated useful life of the corresponding asset. Non-monetary assets are only recognised in the income statement when the necessary eligibility criteria have been fulfilled. Until then, the corresponding amounts must also be shown under deferred income.

Tax assets/liabilities

Claims and obligations in respect of tax authorities that are uncertain with regard to their probability of occurrence and/or amount are recorded as tax assets or liabilities on the basis of best estimates or expectations. Any contingent liabilities or assets existing in this context are addressed separately as needed.

Deferred tax items

In accordance with IAS 12, deferred taxes are recognised for all temporary differences between the statements of financial position with regard to tax of individual companies and the consolidated financial statements. Tax loss carry-forwards are recognised to the extent that the deferred tax assets are likely to be used in the future. Company earnings forecasts and specific, realisable tax strategies are used to determine whether deferred tax assets are usable or not, i.e. whether they have a value that can be realised. The planning period used to assess this probability is determined by the individual Group company according to the specific circumstances and is generally four years unless there is convincing evidence of possible prolonged use beyond the general horizon of the official Group planning. Other factors in the assessment include the reason for losses, the existence of a history of losses and prudence in considering future risks in the respective plans. In terms of the high losses in Germany resulting from the coronavirus pandemic, longer planning periods and a balance of qualitative indicators were used for the analysis. For entities with a history of losses not due to the pandemic, no deferred taxes were generally recognised for tax loss carry-forwards ↗ Note 15.

Current income taxes

The Lufthansa Group is liable for income tax in various countries. Material assumptions are necessary to calculate the income tax liabilities. For certain transactions and calculations, the final taxation cannot be assessed definitively in the course of normal business. The amount of the liability that may arise from the findings of expected future tax audits is based on estimates of whether additional income taxes will be owed, and if so, at which amount. The assumptions underlying the estimates are reviewed on an ongoing basis and adjusted as necessary. Nevertheless, different tax payments may occur in the period the final tax determination is made.