A. Accounting Framework

The consolidated financial statements of the Company have been prepared in accordance with, and comply with International Financial Reporting Standards (’IFRS’) and interpretations adopted by the European Union, where effective, for financial years beginning January 1, 2021 and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code.

The Company financial statements included in section 4.4 are part of the 2021 financial statements of SBM Offshore N.V.

NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS APPLICABLE AS OF JANUARY 1, 2021

The Company has adopted the following new standards as of January 1, 2021:

  • Amendments to IFRS 7, IFRS 9 and IAS 39 − ’Interest Rate Benchmark Reform Phase 2’;
  • Amendment to IFRS 16 Leases − ’COVID-19-Related Rent Concessions’ including 'IFRS 16 and COVID-19 beyond 30 June 2021';
  • IFRIC Interpretation of IAS 19 Employee Benefits − 'Attributing Benefit to Periods of Service'

IFRS 7, IFRS 9 and IAS 39 – Interest Rate Benchmark Reform Phase 2

The Phase 2 amendments that were published in August 2020 address issues that arise during the reform of an interest rate benchmark when the replacement of IBOR with an alternative one is necessary. The key reliefs provided by the Phase 2 amendments are as follows:

  • When changing the reference rate used to determine contractual cash flows for financial assets and liabilities (including lease liabilities), the relief has the effect that changes in the reference rate will not result in immediate gains and losses in the income statement.
  • The hedge accounting reliefs will allow most hedge relationships that are directly affected by the reform to continue. However, additional hedge ineffectiveness could possibly arise.

On the Interest rate benchmark reform, the Company is managing its IBOR transition plan. All impacted contracts and financial instruments have been identified. As of December 31, 2021 the Company has amended all contracts referring to the USD LIBOR 1 Week and 2 Months, outstanding book value of borrowings are disclosed in the note 24 Borrowings and Lease Liabilities.

New financial instruments being issued already include wordings to address the transition to alternative benchmark rates. As the counterparties to the Company’s interest rate swaps are also counterparties to the floating loans which are being hedged, it is expected that the result of the negotiations with external banks and the implementation of Secured Overnight Financing Rate (SOFR) will not have material impacts on the Company’s future financial results.

The adoption of the amendments did not have a material accounting impact on the financial statements for the year ended December 31, 2021. The Company intends to use the practical expedients in future periods if they become applicable.

There will however be operational impacts affecting systems, processes and potentially risk and valuation models. To limit those, the Company is studying best practices and feedback from banks and peers in the market who are facing the same challenges.

IFRS 16 - COVID-19-Related Rent Concessions

The amendment to IFRS 16 permits lessees, as a practical expedient, not to assess whether particular rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and instead to account for those rent concessions as if they are not lease modifications. The amendment does not affect lessors.

This amendment had no impact on the consolidated financial statements for the year ended December 31, 2021.

IAS 19 Employee Benefits − 'Attributing Benefit to Periods of Service'

During May 2021 the IFRIC received a request to clarify the accounting treatment of attributing the defined benefit cost in relation to the periods of service. The request focused on the attribution of defined benefit cost when (i) employees are entitled to a lump sum payment when they reach a specified retirement age provided they are employed by the entity when they reach that retirement age, and (ii) the amount of the retirement benefit to which an employee is entitled depends on the length of employee service with the entity before the retirement age and is capped at a specified number of consecutive years of service.

The Committee concluded that the current standard provides sufficient guidance regarding the appropriate treatment. This clarification did not have a material impact on the consolidated financial statements for the year ended December 31, 2021.

STANDARDS AND INTERPRETATIONS NOT MANDATORILY APPLICABLE TO THE COMPANY AS OF JANUARY 1, 2021

The following standards and amendments published by the IASB and endorsed by the European Union are not mandatorily applicable as of January 1, 2021:

  • Amendments to IFRS 3 − ’Reference to the Conceptual Framework for Financial Reporting’;
  • Amendments to IAS 16 − ’Property, Plant and Equipment - Proceeds before Intended Use’;
  • Amendments to IAS 37 − ’Onerous Contracts - Cost of Fulfilling a Contract’; and
  • Annual Improvements to IFRS Standards 2018-2020.

Other new standards and amendments have been published by the IASB but have not been endorsed yet by the European Commission. Early adoption is not possible until European Commission endorsement. Those which may be relevant to the Company are set out below:

  • Amendments to IAS 1 − ’Presentation of Financial Statements: Classification of Liabilities as Current or Non-current’;
  • Amendments to IAS 1 − ’Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies’;
  • Amendments to IAS 8 − 'Definition of Accounting Estimates'; and
  • Amendments to IAS 12 − 'Deferred Tax related to Assets and Liabilities arising from a Single Transaction';

Regarding the IAS 12 'Deferred Tax related to Assets and Liabilities arising from a Single Transaction', the Company determined that amendment could have possible implications related to the demobilization provisions, right-of-use assets and related lease liabilities. During 2021, the Company performed an assessment regarding the impact of this amendment. The Company determined that the impact on the statement of financial position and retained earnings is not material due to the fact that currently enacted tax rates are low in the jurisdictions where the related balances are recognized.

The IAS 12 amendment is effective as of 1 January 2023 and the Company will continue to monitor the impact of the amendment during the preceding financial periods in order to assess whether the expected impact could change due to assumptions such as the enacted tax rates and accounting treatment per location identified.

The Company does not expect a significant effect on the financial statements due to the adoption of the remaining amendments. Other standards and amendments are not relevant to the Company.