Investor Presentaiton

111 A.P. Moller-Maersk Annual Report 2020 Financials Consolidated financial statements Notes index Note 24 Significant accounting estimates and judgements - continued In Terminals & Towage, management assesses impair- ment triggers and based on these, estimates recoverable amounts on the individual terminals. For APM Terminals' interest in Global Port Investments, being the share of equity and significant intangible assets acquired, manage- ment assesses the recoverable amount of its interest on an ongoing basis. Uncertain variables in the estimate are the economic outlook, local competition, effect on vol- umes, operating expenses and discount rate. The carrying amount of the investment may not be sustainable in the next few years if markets develop significantly adversely compared to current expectations. Estimates of recov- erable amounts were also prepared for other terminals where decreasing volumes triggered impairment tests. Key sensitivities are expected volumes, local port rates, concession right extensions as well as discount rate. The impairment tests showed headroom from fair value less cost of disposal and value in use calculations compared to carrying amount for all terminals in continued use. There- fore, no impairment was recognised in 2020 (USD Om in 2019) related to terminals in markets with challenging commercial conditions. For assets held for sale, USD 62m was recognised in impairments. Continued economic de- terioration and a lack of cash repatriation opportunities in certain oil-producing countries can potentially put pres- sure on carrying amounts of individual terminals. Reference is made to notes 6 and 7 for information about impairment losses, recoverable amounts and dis- count rates. Amortisation, depreciation and residual values Useful lives are estimated based on experience. Manage- ment decides from time to time to revise the estimates for individual assets or groups of assets with similar char- acteristics due to factors such as quality of maintenance and repair, technical development and environmental requirements. Please refer to note 23 for the useful lives typically used for new assets. Residual values are difficult to estimate given the long lives of vessels, the uncertainty as to future economic condi- tions and the future price of steel, which is considered the main determinant of the residual price. Generally, the residual values of vessels are initially estimated at 10% of the purchase price excluding dry-docking costs. The long- term view is prioritised to disregard, to the extent possible, temporary market fluctuations, which may be significant. Provisions for pension and other employee benefits For defined benefit schemes, management makes assump- tions about future remuneration and pension changes, employee attrition rates, life expectancy, inflation and discount rates. When setting these assumptions, manage- ment takes advice from the actuaries performing the valuation. The inflation and discount rates are determined centrally for the major plans on a country-by-country basis. All other assumptions are determined on a plan-by-plan basis. Refer to note 14 for information about key assump- tions and the sensitivity of the liability to changes in these assumptions. Plan assets are measured at fair value by fund adminis- trators. Provision for legal cases, disputes, uncertain tax positions etc. Management's estimate of the provisions regarding le- gal cases and disputes, including disputes on taxes and duties, is based on the knowledge available on the actual substance of the cases and a legal assessment of these. The resolution of legal disputes, through either negotia- tions or litigation, can take several years to complete and the outcome is subject to considerable uncertainty. A.P. Moller-Maersk is engaged in a number of disputes with tax authorities of varying scope. Appropriate pro- visions and recognition of uncertain tax positions have been made where the probability of the tax position being upheld in individual cases is considered less than 50%. Claims, for which the probability of A.P. Moller - Maersk's tax position being upheld is assessed by management to be at least 50%, are not provided for. Such risks are in- stead evaluated on a portfolio basis by geographical area, and country risk provisions and uncertain tax liabilities are recognised where the aggregated probability of the tax position being upheld is considered less than 50%. Deferred tax assets Judgement has been applied in the measurement of deferred tax assets with respect to A.P. Moller - Maersk's ability to utilise the assets. Management considers the likelihood of utilisation based on the latest business plans and recent financial performances of the individual entities. Net deferred tax assets recognised in entities having suffered an accounting loss in either the current or preceding period amount to USD 87m (USD 98m) for con- tinuing operations, excluding entities participating in joint taxation schemes. These assets mainly relate to unused tax losses or deductible temporary differences generated during the construction of terminals, where taxable prof- its have been generated either in the current period or are expected within a foreseeable future. Vessel-sharing agreements (Cost-sharing arrangements) Vessel-sharing agreements in shipping require that some vessels are committed towards specific service routes. The committed vessel's capacity is then shared with one or more container shipping providers in proportion to each party's contribution to the joint service service on multi-year agreements. In practice, it is not always possi- ble to provide tonnage precisely as agreed in the sharing arrangements, therefore financial settlement often takes place on the basis of relative capacity over/under utilised on a mutually agreed cycle. At A.P. Moller - Maersk, these capacity adjustments are settled as close to actual costs incurred as possible based on market rates applicable at that time. Amounts in USD million =

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