The accounting information in the financial statements is partly based on estimates and assumptions. The Group makes these estimates and makes assumptions about future developments, based on factors such as experience and expectations about future events that may reasonably be expected to occur given the current state of affairs. These estimates and assumptions are continually reassessed.
Revisions of estimates and assumptions, or differences between estimates and assumptions and actual outcomes, may lead to material adjustments to the carrying amounts of assets and liabilities.
The most significant uncertainties, judgements and estimates in the preparation of the consolidated financial statements are related to:
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determining the best estimate for the valuation of work in progress (both debit and credit), including the determination of the progress of the projects and the estimate of the total cost-to-come and related revenues;
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determining the best estimate for the valuation of the strategic land positions, including the determination of the net realisable value; and
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determining the lowest cash generating unit and the annual tests for impairment of goodwill.
In addition to the nature of the estimates already described in the financial statements, the key elements of estimation uncertainty are explained below.
Macro-economic developments and the nitrogen emissions problem
The Executive Board continuously monitors the consequences of macro-economic developments.
In 2024, the Dutch economy grew more strongly than in 2023, despite persistent inflationary pressure and an increasingly tight labour market. The European Central Bank (ECB) is endeavouring to achieve a neutral interest rate level, which has led to a less restrictive interest rate policy. Over the past year, incomes have risen faster than inflation, increasing purchasing power. Combined with falling interest rates, this has created favourable market conditions in the housing sector. Geopolitical developments, such as possible import duties, are casting a shadow over an initially positive economic outlook for 2025.
Despite rising construction costs, the Group managed to keep sales prices at a high level, partly thanks to clear indexation agreements with clients. Although we are seeing an upward trend in the number of building permits issued, we have also seen is that the problems related to permit procedures have now reached a new low (due to appeal and objection procedures on permits), which is having a negative impact on the speed of project realisation within the Group’s portfolio (approx. 4,000 homes).
Although the financial impact of the nitrogen emissions problem remained limited over the past year, recent rulings by the Council of State on internal netting may create further challenges in obtaining permits. In addition, the court has ruled in favour of Greenpeace in a case brought against the State, which could set a precedent and possibly influence the legal frameworks regarding biodiversity. This is increasing the uncertainty in the sector. Despite this, the Group’s outlook for the coming years is good due to its diversified order book, which is healthy in terms of both size and quality.
Impairment test for goodwill
Changes in market interest rates lead to movements in the discount rate (WACC) used in the annual impairment test for goodwill. Given the considerable headroom between the carrying amount and the value in use of the relevant cash-generating units, there is very limited risk of a future impairment as a result of potential increases in market interest rates (see note ‘6.12 Intangible assets’).
Climate-related matters
Climate change brings both risks and opportunities for the Group. These may have consequences for the medium-term forecasts that underlie the measurement of assets. The Sustainability Statement section of the annual report lists the opportunities and risks related to climate change. This statement shows that the opportunities are greater than the risks. The Group does not see any reason to adjust its medium-term projections downwards. The considerations for each type of asset in the consolidated statement of financial position (in the order in which they appear in the statement of financial position) are as follows:
Property, plant and equipment
There is a limited likelihood of an impairment because of climate-related risks. Property, plant and equipment comprises relatively new material that meets environmental standards and investments in, among other things, the electrification of equipment. The Group also has older equipment (with a low carrying amount), which eventually may be less useable, including older lorries with excessive greenhouse gas emissions. There is a second-hand market for the older material (at least for the time being), largely in second-world and third-world countries, which means that the current residual values can often still be realised. In addition, older material that cannot, for example, be used in town centres may still be used outside these areas. There is a plan to replace this equipment with cleaner equipment.
Right-of-use assets
There is a limited impact of climate-related risks on the measurement due to the short-term nature of the leases.
Intangible assets
As the opportunities are greater than the risks for all the Group’s segments (including the cash-generating units to which the intangible assets are allocated), climate-related risks do not lead to a greater risk of an impairment.
Joint ventures and associates
This item consists primarily of joint ventures and associates with land holdings. For a more detailed explanation, see ‘strategic land holdings’ below. As such, the risk of an impairment of joint ventures and associates with lands holdings is limited.
Joint ventures and associates also includes the 50% holding in AsfaltNu. It is not expected that the demand for roads will decline over the long term. A more environmentally friendly alternative for asphalt is currently not available. The requirements on greenhouse gas emissions and other hazardous materials will become more and more strict, so existing asphalt manufacturing plants will eventually require addition investments in cleaner solutions. There is therefore a medium-level risk of an impairment of the interest in the equity of AsfaltNu because of the impact of climate-related risks. The Group intends to mitigate this risk by investing in a new asphalt plant via AsfaltNu (the new European standard) in Utrecht.
Loans granted and other receivables
This item consists primarily of loans granted to joint ventures and associates with land holdings. As explained above, there is a limited likelihood of an impairment of these joint ventures and associates as a result of climate-related risks, and such the risk of impairment on the loans granted to these joint ventures and associates is also limited.
Strategic land holdings
All land holdings are located in the Netherlands. There is continuing high demand for housing and consequently also for land on which to build them. In the very long term there is a risk that land could become unusable because of the consequences of climate change, such as flooding. The Group is confident that the Netherlands, as a prosperous country, will take measures against this, as there is still enough time to do this. There is a limited likelihood of a write-down of land holdings because of the impact of climate-related risks.
Other inventories
Other inventories mainly concern unsold residential property and land holdings in preparation and under construction (including development and construction rights). Given the short realisation period, the likelihood of an impairment due to climate-related risks is modest.
Work in progress debit
There is a modest likelihood of an impairment because of the impact of climate-related risks given the short realisation period. Specific climate-related targets have been agreed with principals for certain projects. In some cases these are difficult to achieve because of the limited availability of low-emission equipment, which may result in penalties. Where necessary, these penalties have already been discounted in the measurement of work in progress
Deferred tax assets, income tax assets, trade and other receivables and cash and cash equivalents
Given the nature of these assets and the extremely short realisation period, the likelihood of an impairment due to climate-related risks is limited.
Measurement of projects
For more information on the key assumptions used in the measurement of projects, see note ‘6.17 Work in progress’.
Financing
Note ‘6.22 Interest-bearing loans and other financing liabilities’ discloses the conditions attached to the financing in greater detail. One important condition involves satisfying the banking covenant ratios, specifically the interest cover ratio, the leverage ratio and the solvency ratio. Proper management of project risks (see above) is crucial to complying with these ratios. The same applies to the realisation of the order book, the business plan and multi-year projections.
Pensions
The key actuarial assumptions for the calculation of the pension liabilities are outlined in note ‘6.23 Provision for employee benefits’. There is an increased risk that the Group will be required to make additional contributions to the insured schemes that follow the indexation of the Bpf Bouw pension fund. The Group will have to make additional contributions in 2025, due to the fact that Bpf Bouw has decided to index pensions. It is possible that further contributions may be required in the future
Deferred tax assets
See note ‘6.15 Deferred tax assets and liabilities’ for more information on the key assumptions used in the measurement of deferred tax assets.
Strategic land holdings
See note ‘6.16 Inventories’ for more information on the key assumptions used in the measurement of the strategic land holdings.
Intangible assets
See note ‘6.12 Intangible assets’ for the main principles used in the annual determination of the recoverable amount of intangible assets
Business combinations
The Group applies the acquisition method for the measurement of business combinations. The consideration transferred for the acquisition is generally measured at fair value, as are the net identifiable assets acquired. This is explained in more detail in note ‘6.2 Business combinations’.