HŽ INFRASTRUKTURA d.o.o., Zagreb Annual separate financial statements and Independent Auditor's Report for the year 2022 RESTATED STATEMENTS Zagreb, September 2023 CONTENT Responsibility for the Annual Separate Financial Statements 1 Independent Auditor's Report 2-10 Separate Income Statement and Statement of Other Comprehensive Income 11-12 Separate Statement of financial position / Balance sheet 13-15 Separate Statement of Changes in Equity 16 Separate Statement of Cash Flows 17-18 Notes to the Annual Separate Financial Statements 19-107 Moore Audit Zagreb INDEPENDENT AUDITOR’S REPORT To the Owner of company HŽ INFRASTRUKTURA d.o.o., Zagreb Report on the Audit of the restated Annual Separate Financial Statements Qualified opinion We have audited the enclosed restated annual separate financial statements of HŽ INFRASTRUKTURA d.o.o., Zagreb, Mihanovićeva 12, (the “Company") for the year ended 31 December 2022, which comprise the separate Statement of financial position (Balance Sheet) as at 31 December 2022, the separate Income statement and the Statement of other comprehensive income, the separate Statement of changes in equity and the separate Statement of cash flows for the year then ended, and Notes to the annual separate financial statements including significant accounting policies. In our opinion, except for the effects of the matter described in the Basis for qualified opinion, the accompanying restated annual separate financial statements, give a fair view in all significant aspects of the separate financial position of the Company as at 31 December 2022, and of the separate financial performance and the separate cash flows of the Company for the year then ended in accordance with the International Financial Reporting Standards adopted by the European Union (the “IFRS"). Basis for qualified opinion /i/ Real estate ownership The Company does not have regulated ownership by over a significant number of real estates stated in the separate Statement of financial position/Balance sheet as at 31 December 2022., ie the ownership status over the real estate used by the Company has not been resolved. Procedures for regulation of ownership status over these real estates are in progress. Following the above, we are not able to determine the effects of the possible corrections to the Company's annual separate financial statements for the year 2022. We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the annual separate financial statements section of our Independent Auditor’s report. 2 Moore Audit Zagreb INDEPENDENT AUDITOR’S REPORT (continued) Report on the Audit of the restated Annual Separate Financial Statements (continued) Basis for qualified opinion (continued) We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants, including the International Standards of Independence issued by the International Ethics Standards Board for Accountants (IESBA) (the IESBA Code)), as well as in accordance with the ethical requirements relevant to our audit of the annual separate financial statements and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained are sufficient and appropriate to provide a basis for our qualified opinion. (IESBA Code) Emphasis of matter /i/ In Note 1 General information about the company, the Company announced that on June 21, 2023, it compiled the annual separate financial statements for 2022, which were published publicly. They were revised and a qualified opinion was issued on June 21, 2022. On September 22, 2023, the Company's management passed the Decision withdrawing, amending and adopting new annual separate financial statements for the year 2022 and the Decision withdrawing, amending and determining the new distribution of profits for the year 2022, given that the Ministry of Finance , the Tax Administration, Office for Large Taxpayers, despite the Company's explanations, submitted an Invitation to correct the DPD form submitted on May 2, 2023. for the tax period January 1, 2022 to December 31, 2022. Based on this, a correction was made to the Declaration on additional income tax (DPD form) for the year 2022, by increasing the tax base by 231,288 thousand kuna, which is why the additional income tax increased from the amount of 4,470 thousand kuna to the amount of 80,794 thousand kuna (increase – correction of additional income tax for HRK 76,325 thousand). Due to the aforementioned correction, new amended annual separate financial statements for 2022 were prepared, with amended positions of income tax (Note 17), results of the financial year and capital (Note 34) and short-term liabilities (Note 43). We emphasize that in the Invitation to amend the Additional Income Tax, the Tax Administration interprets that the amount of HRK 231,288 thousand, which the Company did not include in the basis of the additional income tax, is not the result of the write-off of liabilities by creditors in bankruptcy and pre-bankruptcy proceedings, but rather income from collected doubtful and disputed receivables and interest income, which is the result of posting business changes based on the Settlement, Agreement and Agreement on Assignment concluded between the Republic of Croatia represented by MMPI. HŽ Cargo d.o.o. and HŽ Infrastruktura d.o.o., which is why the taxpayer HŽ Infrastruktura, according to the interpretation of the Tax Administration, cannot show a reduction in taxable profit by HRK 231,288 thousand when determining the base of additional income tax. Our qualified opinion has not been modified on this matter. 3 Moore Audit Zagreb INDEPENDENT AUDITOR’S REPORT (continued) Report on the Audit of the restated Annual Separate Financial Statements (continued) Basis for qualified opinion (continued) /ii/ We draw attention to Note 16, which describes the impact of the Settlement between the Republic of Croatia and HŽ Cargo d.o.o. on the results of the Company's operations in 2022. On the basis of the aforementioned settlement, a tripartite debt settlement agreement was concluded, which included the entire resolution of the relationship between the company HŽ Cargo d.o.o. and HŽ Infrastruktura, in such a way that the Republic of Croatia took over the payment of the agreed debt of HŽ Cargo d.o.o. according to HŽ Infrastruktura until the day of the Settlement, which affected the presentation of the Company's gross profit in 2022 in the amount of HRK 231,320 thousand. Our qualified opinion has not been modified on this matter. /iii/ On August 31, 2022, between HŽ Infrastruktura d.o.o., HŽ Cargo d.o.o. and HŽ Putnički prijevoz d.o.o. an Agreement was concluded on the regulation of property relations, by which the parties to the agreement regulated the property relations, in relation to the real estate that belonged to them after the division of HŽ and the company HŽ Vuča Vlakova d.o.o.. On the basis of the aforementioned Agreement, a correction was made in the business books of HŽ Infrastruktura - annual separate financial report by amending the initial balances by increasing the value of construction facilities on January 1, 2021 for acquired real estate in the amount of HRK 67,151 thousand, and on December 31, 2021 by HRK 54,047 thousand (note 2.25 and 18.1). Our qualified opinion has not been modified on this matter. /iv/ Based on the concluded Agreement on the transfer of the Railway Maintenance business area with the related company Pružne Građevine d.o.o. on June 30, 2022, took over the performance of a part of the economic activity, i.e. the Railway Maintenance business area, whereby the employment contracts of all workers whose employment contracts were concluded for the performance of work in the relevant organizational unit were transferred to the Company. Our qualified opinion has not been modified on this matter. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the annual separate financial statements of the current period We have dealt with these matters in the context of our audit of the annual separate financial statements as a whole and in forming our opinion about them, and we do not give a separate opinion on these issues. We have identified that the matters listed below are the key audit matters to be disclosed in our Independent Auditor's Report. 4 Moore Audit Zagreb INDEPENDENT AUDITOR’S REPORT (continued) Report on the Audit of the restated Annual Separate Financial Statements (continued) Key audit matters (continued) Revenue recognition In the separate Income statement and Statement of other comprehensive income for 2022, the Company stated the amount of HRK 1,518,324 thousand of sales revenue. A description of the key revenue recognition policies and information is provided in Notes 2.9, 3 and 4 to the annual separate financial statements. Key audit matter How we addressed key audit matter Significant revenues of the Company are We evaluated the design and implementation of key revenues from the state budget for maintenance controls in the invoicing system. and regulation of traffic as well as revenues from We analysed the adequacy and consistency of the excise duties, revenues from fees for access to Company's adopted revenue recognition policies. railway infrastructure, revenues from IT services, revenues from train formation and dismantling We have reviewed contracts and procedures for services, revenues from lease of business understanding internal control and information premises (open and closed), revenues from sales security systems and we have also reviewed how of goods and materials. transactional data integrity controls were performed. Regarding the complexity of revenue collection We confirmed the calculated balances and turnover and recording in the financial statements, in with independent customer confirmations on the general, the following assertions related to reference sample. revenue recognition are relevant: According to the sample, we checked the accuracy of - the accuracy of the recognition of revenue revenue stating for the respective periods. recognized on a transaction basis, We also assessed the adequacy of the disclosures in - completeness of stating of revenue, the annual separate financial statements. Given the complexity of revenue calculation and Through our audit procedures, we have verified that its diversity, we concluded that revenue revenue in material items has been recorded in recognition is a key audit matter. accordance with International Financial Reporting Standards and disclosed accordingly in the annual separate financial statements. 5 Moore Audit Zagreb INDEPENDENT AUDITOR’S REPORT (continued) Report on the Audit of the restated Annual Separate Financial Statements (continued) Key audit matters (continued) Valuation of trade receivables Trade receivables as at 31 December 2022 (short-term) are stated in the separate Statement of financial position (Balance Sheet) in the amount of HRK 111,835 thousand and value adjustment in the amount of HRK 59,843 thousand. See notes 2.9, 21 and 22 for detailed information. Key audit matter How we addressed key audit matter Our audit procedures related to this issue included: In accordance with accounting policies, trade we have obtained audit evidence on key controls receivables are stated at nominal value less value related to customer acceptance and entering into a adjustment for estimated irrecoverable amounts business, monitoring customer receivables and their as described in Note 2.15. Key estimates and collection; uncertainty estimates, along with separate annual we reviewed significant contracts with clients financial statements. understanding the processes related to estimating Due to the significant amount of trade receivables and posting impairment of trade receivables; in the separate Statement of financial position we analysed the collectability of trade receivables (Balance Sheet), the complexity of recording and assessed the possible impairment, given the age impairment and the categorization of customers structure, and for significant amounts through the of which value adjustments of receivables are dynamics of payments and public financial made, this is one of the key issues we addressed information about customers; in our audit. sending, receiving and analysing external customer confirmations and discussing specific issues with them; Through our audit procedures, we have verified that trade receivables in material items have been recorded in accordance with International Financial Reporting Standards and published accordingly in the annual separate financial statements. Other Information in the Annual Report The Management Board of the Company is responsible for other information. Other information include Annual Report, but do not include the annual separate financial statements and our Auditor's Report on them. Our qualified opinion on the annual separate financial statements does not include other information. 6 Moore Audit Zagreb INDEPENDENT AUDITOR’S REPORT (continued) Report on the Audit of the restated Annual Separate Financial Statements (continued) Other Information in the Annual Report (continued) In connection with our audit of the annual separate financial statements, it is our responsibility to read the other information and in carryng that out to consider whether other information have significant contradictions to annual separate financial statements or our knowledge gained while performing the audit, or otherwise appear to be materially misstated. Regarding the Management Report and the Non-Financial Report, we performed the procedures prescribed by the Accounting Act. These procedures include checking whether the Management Report is prepared in accordance with Article 21 of the Accounting Act and whether the Non-Financial Report is prepared in accordance with Article 21a of the Accounting Act. Based on the performed procedures, to the extent that we are able to assess it, we report that: 1. is the information in the attached Management Report harmonized, in all significant aspects, with the attached financial statements; 2. Attached is the Management Report compiled in accordance with Article 21 of the Accounting Act; 3. the non-financial report compiled in accordance with Article 21.a of the Accounting Act is attached. Based on the knowledge and understanding of the Company's operations and its environment acquired within the audit of the annual non-consolidated financial statements, we are obliged to report if we have established that there are significant misstatements in the attached Management Report and Non-Financial Report. In this regard, we have nothing to report. Responsibilities of the Management Board of the Company and Those Charged with Governance for the Annual Separate Financial Statements The Management Board is responsible for the preparation of annual separate financial statements that give a true and fair view in accordance with IFRS and for those internal controls that the Management Board deems necessary to enable annual separate financial statements that are free from material misstatement due to fraud or error. In preparing the annual separate financial statements, the Management Board is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. 7 Moore Audit Zagreb INDEPENDENT AUDITOR’S REPORT (continued) Report on the Audit of the restated Annual Separate Financial Statements (continued) Auditor’s Responsibilities for the Audit of the Annual Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the annual separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Independent Auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual separate financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the annual separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management Board. • Conclude on the appropriateness of the Management’s Board use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our Independent Auditor’s report to the related disclosures in the annual separate financial statements or, if such disclosures are inadequate, to modify our opinion. 8 Moore Audit Zagreb INDEPENDENT AUDITOR’S REPORT (continued) Report on the Audit of the restated Annual Separate Financial Statements (continued) Auditor’s Responsibilities for the Audit of the Annual Separate Financial Statements (continued) Our conclusions are based on the audit evidence obtained up to the date of our Independent Auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the annual separate financial statements, including the disclosures, and whether the annual separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control if we identify them during our audit. We also give a statement to those charged with governance that we have complied with relevant ethical requirements regarding independence and will communicate with them about any relationships and other matters that may reasonably be considered to affect our independence, and where is applicable, on actions taken to address threats to independence, and related safeguards. Among the matters communicated with those charged with governance, we determine those matters that are of greatest importance in the audit of the current period's annual separate financial statements and are therefore key audit matters. We describe those matters in our Auditor's report, unless law or regulation prevents public disclosure of the matter or when we decide, in extremely rare circumstances, that the matter should not be disclosed in our Auditor's report because the adverse consequences of disclosure would reasonably be expected to outweigh the benefits to the public interest from such communication. 9 HŽ INFRASTRUKTURA d.o.o., ZAGREB SEPARATE INCOME STATEMENT AND STATEMENT OF OTHER COMPREHENSIVE INCOME for the year ended 31 December 2022 2022 2021 Note HRK000 HRK000 Sales revenue – related parties 3 112,939 115,650 Sales revenue 3 65,506 64,599 Revenues based on the use of own products, goods 4 and services 8,349 9,632 Other operating revenue – related parties 4 1,208 1,240 Revenue from the Croatian Budget for Railway 4 Infrastructure 1,062,391 968,960 Other operating revenues 4 267,931 107,881 Operating revenues 1,518,324 1,267,962 Raw material and material costs 5 (102,710) (116,596) Costs of goods sold 6 (6,574) (10,558) Other external costs 7 (184,613) (221,412) Material costs (293,897) (348,566) Net salaries and wages 8 (435,053) (406,247) Costs of taxes and contributions from salaries (157,913) (142,123) Wage contributions (98,201) (91,362) Staff costs (691,167) (639,732) Depreciation 9 (28,901) (31,502) Other expenses 10 (160,592) (142,969) Value adjustment 11 (86,847) (18,311) Provisions 12 (73,640) (63,419) Other operating expenses 13 (33,840) (13,897) Operating expenses (1,368,884) (1,258,396) Other interest income – related parties 91,230 1,042 Other interest income 393 637 Exchange differences and other financial income 623 961 Financial income 14 92,246 2,640 Interest expenses and similar expenses – related parties (1,029) (502) Interest expenses and similar expenses (6,792) (4,247) Exchange differences and other expenses (1,609) (2,842) Other financial expenses (936) (1,155) Financial expenses 15 (10,366) (8,746) 11 HŽ INFRASTRUKTURA d.o.o., ZAGREB SEPARATE INCOME STATEMENT AND STATEMENT OF OTHER COMPREHENSIVE INCOME - continued for the year ended 31 December 2022 2022 2021 Note HRK000 HRK000 TOTAL INCOME 1,610,570 1,270,602 TOTAL EXPENSES (1,379,250) (1,267,142) PROFIT BEFORE TAXATION 231,320 3,460 Corporate income tax 17 110,187 - PROFIT FOR THE PERIOD 16/34 121,133 3,460 COMPREHENSIVE PROFIT/ (LOSS) FOR THE PERIOD 121,133 3,460 The accompanying notes set out below form an inseparable part of these annual separate financial statements. 12 HŽ INFRASTRUKTURA d.o.o., ZAGREB SEPARATE STATEMENT OF FINANCIAL POSITION / BALANCE SHEET – continued for the year ended 31 December 2022 31 Dec 01 Jan 31 Dec 2021 - 2021 - 2022 restated restated ASSETS Note HRK'000 HRK'000 HRK'000 Concessions, patents, licenses, goods and services, trademarks, software and other rights 18,490 25,061 27,551 Intangible assets 18 18,490 25,061 27,551 Land 1,997,818 1,937,403 1,937,682 Buildings 7,105,458 6,851,048 7,084,327 Plant and equipment 99,414 101,408 124,360 Assets with the right of use 15,690 22,508 28,637 Tools, operating inventory and transport assets 34,713 34,264 39,952 Advances for property, plant and equipment 537,995 419,189 493,033 Property, plant and equipment in preparation 4,526,717 4,005,231 3,015,863 Other tangible assets 69,502 67,457 49,873 Tangible assets 18 14,387,307 13,438,508 12,773,727 Investments in shares of entrepreneurs within the group 60,684 60,684 60.976 Investments in securities 402 611 469 Other financial assets 0 0 32 Financial assets 19 61,086 61,295 61.477 Other receivables 5,959 9,632 13,611 Receivables 20 5.959 9,632 13,611 Prepaid expenses and accrued income 29 10,691 12,004 5,396 LONG-TERM ASSETS 14,483,533 13,546,500 12,881,762 Inventories 21 146,808 175,800 160,205 Receivables from related parties 22 37,504 211,042 208,412 Trade receivables 23 14,488 16,088 23,787 13 HŽ INFRASTRUKTURA d.o.o., ZAGREB SEPARATE INCOME STATEMENT AND STATEMENT OF OTHER COMPREHENSIVE INCOME - continued for the year ended 31 December 2022 31 Dec 01 Jan 31 Dec 2021 - 2021 - 2022 restated restated ASSETS Note HRK'000 HRK'000 HRK'000 Receivables from employees and members 24 6,614 6,595 6,742 Receivables from State and other institutions 25 389,612 13,125 10,748 Other receivables 26 20,699 21,510 16,909 Receivables 468,917 268,360 266,598 Loans, deposits 7,007 7,462 8,333 Financial assets 27 7,007 7,462 8,333 Cash and cash equivalents 28 399,674 94,223 236,972 Prepaid expenses and accrued income 29 26 156 3,064 SHORT-TERM ASSETS 1,022,432 546,001 675,172 TOTAL ASSETS 15,505,965 14,092,501 13,556,934 OFF BALANCE SHEET ITEMS 46 18,049,516 16,055,616 14,102.528 31 Dec 01 Dec 31 Dec 2021 - 2021 - 2022 restated restated Note HRK'000 HRK'000 HRK'000 CAPITAL AND RESERVES Subscribed capital 30 224,188 224,188 224,188 Capital reserves 31 7,469,395 6,978,641 7,133,462 Revaluation reserves 32 20,869 - - Retained earnings 33 166,993 157,541 4,057 Profit for the current year 16/34 121,133 3,460 706 CAPITAL AND RESERVES 8,002,578 7,363,830 7,362,413 Provisions 35 165,086 187,837 156,125 14 HŽ INFRASTRUKTURA d.o.o., ZAGREB SEPARATE INCOME STATEMENT AND STATEMENT OF OTHER COMPREHENSIVE INCOME - continued for the year ended 31 December 2022 31 Dec 31 Dec 01 Dec 2022 2021 - 2021 - restated restated HRK' 000 HRK' 000 HRK' 000 Liabilities for loans and deposits 36 16,363 23,119 28,937 Liabilities toward banks and other financial institutions 36 1,937,624 1,603,340 1,279,153 Other long-term liabilities 36 9,363 9,170 15,247 Deferred tax liability 36 2,480 - - Accrued expenses and deferred income 45 2,711,586 2,742,369 2,658,855 Long-term liabilities 4,677,416 4,377,998 3,982,192 Liabilities to related parties 37 77,012 92,713 105,873 Liabilities for loans, deposits, etc.-related parties 38 14 - - Liabilities for loans, deposits, etc. 38 195,867 194,218 194,427 Liabilities toward banks and other financial institutions 39 547,912 191,482 196,664 Prepayments received 40 3,845 1,756 2,199 Trade payables 41 262,647 334,149 303,288 Liabilities toward employees 42 47,019 38,213 36,895 Liabilities for taxes, contributions and similar fees 43 135,747 20,289 21,335 Other liabilities 44 14,381 2,870 3,365 Liabilities to the Ministry of Finance 44 1,332,446 1,256,386 1,166,937 Accrued expenses and deferred income 45 43,995 30,760 25,221 Short-term liabilities 2,660,885 2,162,836 2,056,204 TOTAL CAPITAL AND LIABILITIES 15,505,965 14,092,501 13,556,934 OFF BALANCE SHEET ITEMS 46 18,049,516 16,055,616 14,102,528 The accompanying notes set out below form an inseparable part of these annual separate financial statements. 15 HŽ INFRASTRUKTURA d.o.o., ZAGREB SEPARATE STATEMENT OF CHANGES IN EQUITY or the year ended 31 December 2022 Subscribed Revaluation Capital Public Retained Profit for the DESCRIPTION capital reserves reserves good earnings current year TOTAL HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 Balance as at 31 december 2020 224.188 - 3.074 7.063.237 4.057 706 7.295.262 Correction of prior period error - - - 67.151 - - 67.151 Balance as at 1 January 2021 224.188 - 3.074 7.130.388 4.057 706 7.362.413 Profit allocation for 2020 - - - - 706 (706) - Opening balanace correction - - - - 152.778 - 152.778 Activated fixed assets from the budget - - - 163.625 - - 163.625 Fixed assets depreciation - - - (368.286) - - (368.286) Activation of previously value adjusted (VA) assets in preparation - - - 103.761 - - 103.761 Present value of expended assets - - - (12.874) - - (12.874) Investments financed from loans - - - (27.943) - - (27.943) Profit for the year - - - - - 3.460 3.460 Balance as at 31 December 2021 224.188 - 3.074 6.988.671 157.541 3.460 7.376.934 Correction of prior period error - - - (13.104) - - (13.104) Balance as at 1 January 2022 224.188 - 3.074 6.975.567 157.541 3.460 7.363.830 Fixed assets revaluation - 21.005 - - - - 21.005 Revaluation reserve realization - (136) - - 136 - - Profit allocation for 2021 - - - - 1.384 (3.460) (2.076) Other non-ownership changes - - - 493 7.932 - 8.425 Activated fixed assets from the budget - - - 742.971 - - 742.971 Fixed assets depreciation - - - (426.705) - - (426.705) Activation of previously value adjusted (VA) assets in preparation - - - 207.794 - - 207.794 Present value of expended assets - - - (33.799) - - (33.799) Profit for the year - - - - - 121,133 121,133 Balance as at 31 December 2022 224.188 20.869 3.074 7.466.321 166.993 121,133 8.002,578 The accompanying notes set out below, form an inseparable part of these annual separate financial statements. 16 HŽ INFRASTRUKTURA d.o.o., ZAGREB SEPARATE STATEMENT OF CASH FLOWS for the year ended 31 December 2022 Position 2022 2021 HRK'000 HRK'000 Cash flow from operating activities Profit before tax 231,320 3,460 Adjustments (18,145) 52,846 Depreciation 28,901 31,502 Profit and losses on sales and value adjustments of tangible and - - intangible fixed assets Interest and dividend income (91,623) (1,679) Value adjustments 72,567 18,311 Income from state aid (34,426) (34,426) Interest expense 7,821 4,749 Provisions 73,640 63,418 Foreign exchange differences (unrealized) (7) 10 Other adjustments for non-monetary transactions and unrealized (75,018) (29,039) gains and losses Increase or decrease in cash flows before changes in working 213,175 56,306 capital Changes in working capital 541,333 416,894 Increase or decrease in short-term liabilities 504,121 428,783 (Increase) or decrease in short-term receivables 17,245 (10,499) (Increase) or decrease in inventories 19,967 (1,390) Other increases or decreases in working capital Cash from operating activities 754,508 473,200 Cash paid for interest (960) (1,347) NET CASH FLOWS FROM OPERATING ACTIVITIES 753,548 471,853 Cash flow from investing activities Cash proceeds from the sale of long-term tangible and intangible 1,325 - assets Cash proceeds from the sale of financial instruments - - Proceeds from interest 1,330 1,679 Proceeds from dividend 6 3 Other proceeds from investing activities 455 - Total cash proceeds from investing activities 3,116 1,682 Purchase of tangible and intangible assets (1,068,852) (993,100) Other cash outflows from investing activities (118,806) (4,854) Total cash outflows from investing activities (1,187,658) (997,954) 17 HŽ INFRASTRUKTURA d.o.o., ZAGREB SEPARATE INCOME STATEMENT AND STATEMENT OF OTHER COMPREHENSIVE INCOME - continued for the year ended 31 December 2022 Position 2022 2021 HRK'000 HRK'000 NET CASH FLOWS FROM INVESTING ACTIVITIES (1,184,542) (996,272) Proceeds from principal of loans, loans and other borrowings 872,957 491,871 Other proceeds from financing activities 618 - Total proceeds from financing activities 873,575 491,871 Repayment of loans, borrowings and other debt instruments (129,724) (102,985) Cash outflows for operating leases (7,406) (7,216) Total cash outflows from financing activities (137,130) (110,201) NET CASH FLOWS FROM FINANCING ACTIVITIES 736,445 381,670 NET INCREASE OR DECREASE IN CASH AND CASH EQUIVALENTS 305,451 (142,749) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 94,223 236,972 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 399,674 94,223 The accompanying notes set out below form an inseparable part of these annual separate financial statements. 18 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS for the year ended 31 December 2022 1. GENERAL 1.1. Activity HŽ INFRASTRUKTURA d.o.o., Zagreb, Mihanovićeva 12, (''the Company'') is engaged in managing, maintenance and building of railroad infrastructure as its basic activity. 1.2. Employees The number of staff employed by the Company at 31 December 2022 was 5,005 employees (31 December 2021: 4,663 employees). The structure of the staff by qualification level is presented below: 31 Dec 2022 31 Dec 2021 Doctor’s degree 1 1 Master's degree 18 19 University degree 700 741 Two-year post secondary diploma 394 403 Secondary school certificate 2,719 2,930 Skilled workers 92 105 Unskilled workers 16 142 High skilled workers 67 58 Low-skilled qualification 648 589 Semi-skilled workers 7 18 Total 5,005 4,663 1.3. HŽI founder The share capital of the Group amounts to HRK 224,188,000.00 / EUR 29,754,860.97 and consists of one basic role, and the sole founder of the Company is the Republic of Croatia. After the introduction of the euro on January 1, 2023, as the official currency in the Republic of Croatia with the application of a fixed kuna to euro conversion rate (HRK 7.53450 for 1 euro), Group members are obliged to harmonize the share capital and the value of the business share with the rules defined by the Law on Companies and to submit an application to the competent registration court for registration of changes - adjustments. 19 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 1. GENERAL - continued 1.4. The management structure of HŽI in 2022 consists of Group Assembly: Oleg Butković, Minister of the Sea, Transport and Infrastructure, since January 22, 2016 The Supervisory Board of the Group in 2022 was as follows: - Jasna Divić, president, from 23 August 2022 - Anto Iličić, (worker representative), since 30 December 2019, deputy president since 19 June, 2020 - Irena Gerovac Zrnić, member since 12 August 2022 In the first quarter of 2022, the Company's Management Board operated in the following composition: - Ivan Kršić, president - Krunoslav Papić, member The members of the Company's Management Board as of 1 April 2022 are: - Ivan Kršić, president - Darko Barišić, member - Marijan Ćužić, member - Damir Lončarić, member - Subhi Tawfiq, member The amount of compensation to members of the Management Board and Supervisory Board of the Group is stated in Note 8 of the annual separate financial statements. 1.5. Restated financial statements On June 21, 2023 the Company has compiled the financial statements for 2022, which were publicly published on June 28, 2023. On August 21, 2023 the Company received an invitation to submit corrections to the Declaration on Additional Income Tax (form DPD) for the year 2022 from the Ministry of Finance, the Tax Administration, the Office for Large Taxpayers. Given that a decision was made to correct the Declaration on additional income tax (DPD form) for 2022, a correction was made - an increase in additional income tax for 2022 by HRK 76,325 thousand, i.e. the total additional income tax after the correction amounts to HRK 80,795 thousand. In accordance with the above, new amended financial statements for 2022 were prepared, which affected changes in the positions of income tax (Note 17), results of the financial year (Note 34) and capital, and short-term liabilities (Note 43). 20 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1. Statement of compliance and basis of presentation The Group's annual separate financial statements have been compiled in accordance with the financial reporting framework applicable in the Republic of Croatia to large entrepreneurs and entrepreneurs whose shares or debt securities are listed or are being prepared for their listing on the organized securities market, based on the Accounting Act ("Act"). Pursuant to this Law, these annual consolidated financial statements of the Group have been compiled in accordance with International Financial Reporting Standards (IFRS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) based on Regulation (EC) no. 1606/2002 of the European Parliament and the Council of July 19, 2002 on the application of international accounting standards, applied in companies that report in accordance with IFRS within the E.U. and which, after having passed the procedure of adoption as EU financial reporting standards, were published in the official gazette of the EU. Namely, amendments to existing financial reporting standards (IFRS) or international accounting standards (IAS) and amendments to their interpretation, as well as the adoption of new IFRS and IFRIC, are under the authority of the International Accounting Standards Board (IASB) and its International Financial Reporting Standards Interpretation Committee (IFRIC). To become applicable in EU companies after being issued by the mentioned independent international body, they are reviewed by the European Financial Reporting Advisory Group (EFRAG). After receiving a positive assessment from EFRAG, the European Commission proposes a Regulation proposing their adoption by the European Parliament and the Council. Upon acceptance by these authorities and the publication of the Regulation in the official gazette of the EU, they shall enter into force on the day defined by the provisions of the Regulation. 2.2. Basics of measurement The annual separate financial statements have been prepared under the going concern basis, in which the effects of transactions are recognized when they occur and are disclosed in the financial statements for the period to which they relate, and under the going concern basis. The financial statements are prepared on the basis of historical cost, with the exception of financial assets at fair value through other comprehensive income. 2.3. Functional and reporting currency The official currency in the Republic of Croatia until December 31, 2022 was the Croatian kuna, and from January 1, 2023, the euro. Pursuant to Article 26, Paragraph 2 of the Accounting Act, the amounts in annual non-consolidated financial statements and annual consolidated financial statements until December 31, 2022 are expressed in kuna, and from January 1, 2023, in euros. The annual consolidated financial statements are presented in thousands of Croatian kunas ('000 HRK), which, given that this is the currency in which most of the Group's business events are reported, is also the functional currency of the Group as of December 31, 2022. 21 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued 2.4. Use of estimates and judgments The preparation of annual separate financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and amounts disclosed for assets and liabilities, income and expenses. Estimates and related assumptions are based on historical experience and a variety of other factors, which are reasonable in the circumstances, resulting in a basis for making estimates of the value of assets and liabilities that cannot be obtained from other sources. Actual results may differ from such estimates. These estimates and related assumptions are subject to regular review. The impact of an adjustment to an estimate is recognized in the period in which the estimate is adjusted if the adjustment affects only the period in which it is made or in the period in which the adjustment is made and future periods if the adjustment affects current and future periods. Judgments made by the Management Board in applying IFRS, which have a significant impact on the annual separate financial statements and judgments where the risk of material adjustments in the next year is high, are stated in Note 2.24. Key accounting judgments and estimates. 2.5. Continuation of business The Management Board believes that the Company will have adequate resources to continue its business in the foreseeable future. Therefore, the Company continues to apply the going concern assumption in preparing its financial statements. 2.6. Application of International Financial Reporting Standard 16 Leases The Company applies the International Financial Reporting Standard 16 Leases (IFRS 16) from January 1, 2019 and the Company's accounting policies are in accordance with it. IFRS 16 introduces a single accounting model for lessees, and requires the recognition of assets and liabilities for all leases, with possible exceptions for leases of 12 months or less, or when the subject of lease has small value. The lessee recognizes the property in the form of the right to use the property which represents the right to use the property which is the subject of the lease and the adequate liability for the lease, which represents the obligation to pay the rent. In accordance with IFRS-16, the Company recognizes property with a right of use and a lease liability related to the use of office space and official cars. The lease liability is measured at the present value of all future lease payments, discounted using the Company's incremental borrowing rate. The Company's incremental borrowing rate is the rate at which a similar lease may be contracted, by an independent lessor, under comparable terms and conditions. Assets with the right of use are stated in the amount equal to the lease liability. 22 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.7. New standards and interpretations of published standards that have not yet been adopted Several new standards and guidelines have been published that are mandatory for reporting periods beginning on or after January 2022. The new standards and guidelines did not and will not have a material impact on the Company's financial statements: Standards and amendments that came into force on January 1, 2022 Standard Effective date Application Dec 31, 2022 Reference to the Conceptual Framework (Amendments to IFRS Annual reporting periods mandatory 3) beginning on or after The amendments update the outdated reference to the January 1, 2022 Conceptual Framework in IFRS 3 without significantly changing the requirements in the standard. Real estate, plant and equipment - Income before intended use Annual reporting periods mandatory (Amendments to IAS 16) beginning on or after January 1, 2022 The amendments prohibit the deduction from the purchase value of items of real estate, plant and equipment, of any proceeds from the sale of items produced during the bringing of such property to the location and condition necessary for it to be capable of operating in the manner planned by management. Instead, the entity recognizes revenue from the sale of such items and the cost of manufacturing those items in profit or loss. Harmful contracts - Cost of contract fulfillment (Additions to IAS Annual reporting periods mandatory 37) beginning on or after January 1, 2022 The amendments specify that the "cost of fulfilling" the contract includes "costs directly related to the contract". Costs directly related to a contract can be incremental costs of fulfilling that contract (examples would be labor, materials) or the allocation of other costs directly related to fulfilling the contract (an example would be the allocation of depreciation calculations for property, plant and equipment used for fulfillment of the contract). Annual improvements to IFRS standards 2018-2020 include Annual reporting periods mandatory amendments to the following standards: beginning on or after - IFRS 1 – The amendment allows a subsidiary applying paragraph January 1, 2022 D16(a) of IFRS 1 to measure cumulative exchange differences using the amounts reported by the parent, based on the date of transition to the parent's IFRS. - IFRS 9 – Amendment clarifies which fees the entity includes when applying the "10 percent" test from point B3.3.6 of IFRS 9 when assessing the derecognition of a financial liability. Subject includes only fees paid or 23 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.7. New standards and interpretations of published standards that have not yet been adopted - continued Standards and amendments that came into force on January 1, 2022 Standard Effective date Application 31 Dec, 2022 - received between the subject (borrower) and the lender, including fees paid or received by the subject or the lender on behalf of another. - IFRS 16 – Addendum to Illustrative Example 13 accompanying IFRS 16 removes from the example the illustration of compensation by a lessor for investments in another's property made by a lessee, in order to resolve any potential confusion regarding the treatment of lease incentives that might arise as a result as rental incentives are shown. - IAS 41 – Amendment removes the obligation from paragraph 22 of IAS 41 for entities to exclude cash flows from taxation when measuring the fair value of biological assets using present value techniques. Lease concessions related to Covid-19 after 30 June 2021 Annual reporting periods mandatory (Amendments to IFRS 16) beginning on or after April 1, 2021 The amendments extend for one year the May 2020 amendments that exempt tenants from assessing whether a rent concession related to COVID-19 is a lease modification. Application of IFRS 9 'Financial Instruments' with IFRS 4 The overlay approach will optional 'Insurance Contracts' (Amendments to IFRS 4) be applied when IFRS 9 is first applied. Deferral Complements IFRS 4 Insurance contracts provide two access is effective for options for entities issuing insurance contracts within the annual periods beginning scope of IFRS 4: on or after 1 January - an option that allows entities to reclassify, from profit or 2018 and is only available loss to other comprehensive income, some income or for five years after that expenses arising from certain financial assets; this is the so- date. called overlap approach; - optional temporary exemption from the application of IFRS 9 for entities whose predominant activity is the issuing of contracts within the framework of IFRS 4; this is the so- called delay approach. - The application of both approaches is optional and the entity is allowed to stop applying them before the application of the new insurance contract standard. 24 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.7. New standards and interpretations of published standards that have not yet been adopted – continued Standards and amendments that came into force on January 1, 2023 Standard Effective date Application 31 Dec, 2022 IFRS 17 Insurance contracts Applicable to annual optional IFRS 17 requires insurance liabilities to be measured at the reporting periods current settlement value and provides a more uniform beginning on or after 1 approach to the measurement and presentation of all January 2023. Approved for insurance contracts. These requirements are designed to use in the EU, albeit with achieve the goal of consistent, principles-based an optional exemption accounting for insurance contracts. IFRS 17 replaces IFRS from the application of the 4 Insurance contracts from 1 January 2023. group with a common characteristic requirement on an annual basis (cohort). Initial Application of IFRS 17 and IFRS 9 — Comparative An entity that decides to optional Data (Amendment to IFRS 17) apply the amendments The amendments allow entities upon first-time applies them when it application of IFRS 17 and IFRS 9 to present comparative applies IFRS 17 for the first information about financial assets at the same time as if time the classification and measurement requirements of IFRS 9 had been applied to those financial assets before. Amendments to IFRS 17 Annual reporting periods optional IFRS 17 is being amended to address implementation beginning on or after issues and challenges identified after IFRS 17 Insurance January 1, 2023 Contracts was published in 2017. Extension of the temporary exemption from the Available immediately optional application of IFRS 9 (Amendments to IFRS 4) The amendment changes the fixed expiry date for the temporary exemption in IFRS 4 Insurance contracts from the application of IFRS 9 Financial instruments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after 1 January 2023 . 25 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.7. New standards and interpretations of published standards that have not yet been adopted – continued Standards and amendments that came into force on January 1, 2023 Standard Effective date Application 31 Dec, 2022 Publication of accounting policies (Amendments to IAS 1 Annual reporting periods optional and IFRS Statement of Practice 2) beginning on or after The amendments require an entity to disclose its material January 1, 2023. accounting policies, rather than significant accounting Approved for use in the EU, policies. Further appendices explain how an entity can however Amendments to identify a material accounting policy. Added examples of IFRS Statement of Practice when an accounting policy is likely to be material. To 2 have not been approved. support the amendment, the Board also developed guidance and examples to explain and demonstrate the application of the "four-step materiality process" described in IFRS Practice Statement 2 Definition of accounting estimates (Amendments to IAS Annual reporting periods optional 8) beginning on or after The amendments replace the definition of change in January 1, 2023. accounting estimates with the definition of accounting estimates. According to the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty." Entities develop accounting estimates if accounting policies require that items in the financial statements be measured in a manner that involves measurement uncertainty. The amendments clarify that a change in accounting estimate resulting from new information or new events is not a correction of an error. Deferred tax related to assets and liabilities arising from Annual reporting periods optional one transaction (Amendments to IAS 12) beginning on or after The amendments clarify that the exemption from initial January 1, 2023. recognition does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise upon initial recognition. 26 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.7. New standards and interpretations of published standards that have not yet been adopted – continued Standards and amendments that will come into force on January 1, 2024 Standard Effective date Application 31 Dec, 2022 Classification of liabilities as current or non-current Annual reporting optional (Amendments to IAS 1) periods beginning The aim of the amendments is to promote consistency in the on or after January application of the requirements by helping companies to 1, 2024. determine whether, in the statement of financial position, debts Not yet approved and other liabilities with an uncertain settlement date should be for use in the EU. classified as current (due or potentially due that must be settled within one year) or non-current. Classification of liabilities as current or long-term — Available optional postponement of the effective date (Amendment to IAS 1) immediately. The amendment delays the effective date of the January 2020 Not yet approved amendment by one year, so that entities would be required to for use in the EU. apply the amendment for annual periods beginning on or after January 1, 2024. Lease obligation upon sale and leaseback (Amendments to IFRS Annual reporting optional 16) periods beginning The amendments clarify how a seller-lessee subsequently on or after January measures sale and leaseback transactions that meet the 1, 2024. requirements of IFRS 15 so that they are accounted for as sales. Long-term liabilities with covenants (Amendments to IAS 1) Annual reporting optional The amendments clarify how the conditions that the entity must periods beginning meet within twelve months after the reporting period affect the on or after January classification of the liability. 1, 2024. 27 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.7. New standards and interpretations of published standards that have not yet been adopted – continued New and amended accounting standards and interpretations with application in the reporting year and impact on accounting policies The following new standards, amended and supplemented existing standards issued by the IASB (International Accounting Standards Board) and interpretations issued by the International Financial Reporting Interpretations Committee after having undergone the acceptance procedure by EFRAG have been published in the Official Journal of the EU: Mandatory application Impact on accounting policies Standards and amendments day and financial statements Reference to the Conceptual Framework It had no impact on the (Amendments to IFRS 3) Jan 01, 2022 Company Real estate, plant and equipment - Income It had no impact on the before intended use (Amendments to IAS 16) Jan 01, 2022 Company Harmful contracts - Cost of contract It had no impact on the fulfillment (Additions to IAS 37) Jan 01, 2022 Company Annual improvements to IFRS standards 2018–2020 - amendments to the following standards: - IFRS 1 - IFRS 9 - IFRS 16 It had no impact on the - IAS 41 Jan 01, 2022 Company Lease concessions related to Covid-19 after 30 It had no impact on the June 2021 (Amendments to IFRS 16) Jan 01, 2022 Company /i/All posts are reviewed and only relevant posts are posted Company has reviewed all significant new accounting standards announcements and concluded that, other than those specifically noted, no significant impact on the financial statements is expected as a result of future adoptions. 28 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.8. Consolidation obligation The company is owner of other legal entities - subsidiaries, which are entities that it controls. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity to obtain benefits from those activities. The consolidated financial statements present the results of the Company and its subsidiaries (the “Group”) as if they were a whole. These separate financial statements have been prepared because there is a legal obligation for the Company to prepare them. However, for a more complete understanding of the Company's operations, these annual separate financial statements need to be read in conjunction with the annual consolidated financial statements prepared and publicly disclosed by the Company. The annual consolidated financial statements present the results of the Company and its subsidiaries (the “Group”) as if they form a whole. 2.9. Revenue recognition Revenues from the sale of goods and services are recognized at the time of delivery of goods and services and transfer of control over the goods. Significant revenues of HŽ Infrastruktura d.o.o. are revenues from fees for access to railway infrastructure, revenues from informatics services, revenues from services of formation and dismantling of the train composition, rental revenues (open and closed), revenues from sale of goods and materials and revenues from the budget for maintenance and regulation of traffic and revenues from excise. In accordance with the new IFRS 15, relating to the recognition of contracts with customers, the Company applies the model of five steps: 1) Identify the contract with the customer 2) Establish the obligation of delivery in the contract 3) Determine the price of transaction 4) Allocate the transaction price in the contract delivery obligations 5) Recognize revenue when a subject fulfils the obligation of delivery Revenue is recognized as transaction price for each delivery obligation in the contract. Transaction price is the amount of compensation in the contract in which the Company expects to be entitled in exchange for transferring promised goods to the customer. Revenues are stated in the amounts deducted for value added tax. 29 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.9. Revenue recognition - continued Changes in Accounting policies in Type of products Fulfilment of obligations accordance with the new standard The customer takes control over the product, Revenue is recognized when the completely has the same and there is no unfulfilled products are delivered to the customer Sales of goods obligation that could affect its acceptance Agreed maturity of payment in most cases is 30 IFRS 15 had no impact on the Accounting days policies of the Company According to the above, revenue recognition takes place at the same time as when IAS 18 - Revenue was effective and no significant impact of IFRS 15 is determined. Interest income Interest income is accrued on the basis of outstanding and at the applicable effective interest rate. Interest income is recognized as a financial income in the separate statement of profit or loss only after collection. Dividend income Income from dividends and profit shares is recognized at the time the rights to receive the dividend or the profit share have been established. 2.10. Borrowing costs Borrowing costs are charged to the statement of comprehensive income in the period in which they were incurred. 2.11. Transactions in foreign currencies Foreign currency transactions are initially translated into Croatian kuna using the exchange rates on the date of the transaction. Cash, receivables and payables denominated in foreign currencies are subsequently translated at exchange rates on the date of the separate statement of financial position/ balance sheet. Gains and losses arising from translation are included in the separate statement of comprehensive income for the current year. At 31 December 2022 HRK / EUR exchange rate amounted to 7.53 (31 December 2021: 7.52) and HRK / USD exchange rate amounted to 47,06 (31 December 2021: 6.64). 30 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.12. Corporate income tax The corporate income tax liability for the current year is determined on the basis of the results achieved in that year, adjusted for amounts not included in the tax base or tax deductible costs (50% of the costs of entertainment, 50% of the cost of using personal vehicles, etc.). Income tax is calculated by applying tax rates that were effective at the separate statement of financial/balance sheet date. (reference to Note 17). Deferred tax assets and deferred tax liabilities arise from temporary differences between the value of assets and liabilities disclosed in the separate financial statements and the values disclosed for the purpose of determining the profit tax base. Deferred tax assets are recognized for unused deferred tax losses if there is a probability that future taxable profit will be realized on the basis of which deferred tax assets will be utilized. Deferred tax assets and deferred tax liabilities are accounted for using the profit tax rate applicable to the future period when the asset or liability is to be realized. The liability for profit tax (current tax) is determined in accordance with the applicable provisions of the Law on Profit Tax and affects the result of the financial year. (reference to Note 34) The current tax liability is based on the taxable profit of the current year. Taxable profit differs from pre-tax profit reported in the income statement because it does not include items of income and expenses that are taxable and deductible in other years, as well as items that are never taxable or deductible. The Company's current tax liability is calculated using the tax rates that are in effect at the end of the reporting period. Based on the Law on Additional Income Tax, which entered into force on December 23, 2022 and applies only for the year 2022, a taxpayer of additional profit tax is a taxpayer of profit tax determined according to the regulation on profit taxation who, in the tax period for which the obligation of additional profit tax is determined, has generated income of more than HRK 300.000 thousand. Additional income tax is calculated and paid at the rate of 33%, regardless of income tax liability. Additional income tax is paid on the established tax base, which is the positive difference between the taxable profit of the tax period and the average taxable profit of the previous tax periods from 2018- 2021 increased by 20% and affects the result of the financial year. (reference to Note 34) 2.13. Long – term intangible assets, property, plant and equipment Non-current intangible and tangible assets are initially stated at purchase value, which includes the purchase price, including import duties and non-refundable taxes, net of trade discounts and rebates, and any costs directly attributable to bringing the asset to its working condition for its intended use. Long-term intangible and tangible assets are recognized if it is probable that future economic benefits that are attributable to the asset will flow to the Company, if the cost of the asset can be measured reliably, and if the individual cost of the asset exceeds HRK 3,500. Subsequent to initial recognition, an asset is carried at cost less accumulated depreciation and accumulated impairment losses. 31 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.13. Long – term intangible assets, property, plant and equipment - continued Costs of current maintenance and repairs, replacements, and small-scale investment maintenance are recognized as an expense in the period in which they are incurred. In situations where it is clear that the costs have resulted in an increase in the future expected economic benefits to be derived from the use of the asset above its originally estimated capacity, they are capitalized or included in the carrying amount of the asset. Gains and losses on disposals or sales of assets are recognized in the separate statement of comprehensive income in the period in which they arise. Depreciation of assets begins when the assets are ready for use, ie when they are located and in the conditions necessary for use. Depreciation of an asset ceases when the asset is classified as held for sale. Depreciation is calculated by writing off the cost of each individual asset, except for land and long- term intangible and tangible assets in preparation, over the estimated useful life of the asset using the straight-line method, as follows: Depreciation rate (from – do %) Concessions, patents, licenses, trade and service brands, software and other rights 20 Buildings 1 – 10 Plant and equipment 7 – 50 Tools, plant inventories and transportation assets 5 – 25 Other material assets 2 – 10 2.14. Financial assets The Company has adopted IFRS 9 Financial Instruments as at 1 January 2019 and its implementation did not have a significant impact on the financial statements. The Company recognizes financial assets in its financial statements when it becomes party to the contractual provisions of the instrument. Depending on the business model for asset management and contractual features cash flows for the said asset, the Company measures financial assets at amortized cost, fair value through other comprehensive income or fair value through statement of profit and loss. 32 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.14. Financial assets – continued Asset items are classified and measured as follows: DESCRIPTION Classification and measurement Non-current asset Financial assets through other Equity instruments / fair value through other comprehensive income comprehensive income Long-term receivables Hold to collect / amortized cost Current asset Given loans Hold to collect / amortized cost Cash and cash equivalents Hold to collect / amortized cost Trade and other receivables Hold to collect / amortized cost i) Financial assets through other comprehensive income Financial assets carried at fair value through profit or loss are stated at fair value, with each gain and loss being recognized in profit or loss. Net profit and net loss recognized in profit or loss include dividends and interest earned on the financial asset and are included in other profit and loss. Initial recognition The Company recognizes a financial asset or liability when and only when it becomes a party to the contractual provisions of the instrument. The Company initially recognizes financial assets at fair value plus transaction costs that are directly attributable to the acquisition or issue of financial assets. Subsequent measurement After initial recognition, the Company measures financial assets at fair value through other comprehensive income. ii) Trade receivables Trade receivables that do not have a significant financial component at initial recognition have been measured in accordance with IFRS 15 at their transaction price. 33 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.14. Financial assets – continued iii) Impairment The Company on the basis of expected credit losses, recognizes impairment of financial assets. At each reporting date, the Company measures the expected credit losses and recognizes the same in the financial statements. The company analysed the age structure by reducing trade receivables for all those receivables older than one year. For those receivables that are overdue and due within one year, the Company conducted the analysis as follows; Based on historical data for the last three years, the share of value adjustments in relation to reported customer turnover was analysed. The analysis showed a percentage of expected credit losses of 6,81%, which is adjusted for future macroeconomic trends, and the percentage of reduction totals 14,19%. Expected credit losses are estimated at HRK 9,645 thousand. Expected credit losses are recorded in the income statement in the stated amount (reference to Note 11) The Company derecognises financial assets when; • Contractual rights to cash flows from financial assets expire, • Financial assets are transferred and the transfer fulfils conditions for termination of derecognition. The Company transfers financial assets if, and only if, either: (a) Transfers contractual rights to receive cash flows from financial assets, or (b) Retains contractual rights to receive cash flows from a financial asset but assumes a contractual obligation to pay cash flows to one or more recipients in the arrangement. When the Company transfers financial assets, it is required to estimate the extent to which it retains the risks and rewards of ownership of the financial asset. In this case, when all risks and rewards of ownership are transferred, the Company ceases to recognize financial assets and recognizes separately, as assets or liabilities, all rights and obligations that have arisen or are retained in the transfer. If almost all the risks and rewards of ownership of financial assets are retained, the Company continues to recognize financial assets. 34 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.14. Financial assets – continued If the Company neither transfers nor retains almost all the risks and rewards of ownership of financial assets, the Company determines whether it has retained control of the financial asset. If no control over financial assets is retained, the Company derecognises financial assets and recognizes separately as assets or liabilities and all rights and obligations that have arisen or are retained in the transfer. If control is retained, the Company continues to recognize financial assets to the extent that it continues to participate in that financial asset. 2.15. Equity (shares) in related companies Subsidiaries are companies in which the Company has control over the adoption and implementation of financial and business policies. Associated companies are companies in which the Company has significant influence but not control over the adoption and implementation of financial and business policies. Investments are expressed at cost method. 2.16. Inventories Inventories are stated at cost or net selling value, whichever is lower. Cost of inventory should include all purchase, conversion, and other costs incurred by bringing inventory to current location and current state. Net selling value is the estimated selling price during the ordinary course of business less estimated cost of completion and the estimated costs that are necessary for the sale. The calculation of the consumption of raw materials and spare parts is determined by applying the weighted average price method. In cases where it is necessary to reduce the value of the inventory to the net selling value, an adjustment to the value of the inventory is made in the separate statement of comprehensive income for the current year. Sleek inventory, packaging and auto-tires are written off 100% when they are put into use. 2.17. Long – term assets held for sale Property held for sale constitutes long-term intangible and tangible assets that are expected to be sold within one year from the date of classification due to termination or discontinuation of operations. Assets held for sale are stated at their carrying value or fair value less costs of sale, whichever is lower. 35 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.18. Cash and cash equivalents Cash includes sight deposits in banks, cash in hand, and deposits and securities receivable on a call or at the latest within three months. 2.19. Impairments At each separate statement of financial position/Balance sheet date, the Company checks the carrying amounts of its assets to determine whether there are any indications that impairment losses have been incurred. If there are such indications, the recoverable amount of the asset is estimated in order to determine any loss incurred by impairment. If the recoverable amount of an asset is estimated to be less than the carrying amount, the carrying amount of the asset is reduced to the recoverable amount. Impairment loss is recognized as an expense in the separate statement of comprehensive income. 2.20. Assets with the right of use and rent obligations a) Assets with the right of use All leases are recognized by recognizing the right to use and the lease obligations, except for: - rents of small assets and - leases whose lease term ends within a period of 12 months from the date of first application or less. Assets with the right of use are shown separately in the separate Statement of financial position/Balance sheet. Assets with the right of use are initially measured at the amount of the lease obligation, less all lease incentives received and increased by: - all lease payments made on or before the start date of the lease - all initial direct costs and - the amount of the provision recognized in the event that the Group bears the contractual costs of dismantling, removing or rebuilding the site. The right to use is reduced by the accumulated depreciation calculated on a straight-line basis over the term of the lease, or the remaining economic life of the asset, if it is considered to be shorter than the lease term. 36 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.20. Assets with the right of use and rent obligations - continued a) Assets with the right of use - continued The useful life of the asset with the right of use is shown as follows: 2022 year Land 24 – 50 years Plant and equipment 3 years Vehicles 4-5 years b) Lease liability The lease liability is measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as at 1 January 2022. The Group's incremental borrowing rate is the rate at which it would pay, within a similar period and on the basis of a similar guarantee, to borrow assets necessary to acquire assets whose value is similar to the value of the right to use in a similar economic environment, under comparable terms and conditions. At the date of initial recognition, the carrying amount of the lease obligation includes: - the amounts expected to be paid by the lessee on the basis of the residual value guarantees - the cost of executing the purchase option if it is certain that the lessee will use that option and - payment of penalties for termination of the lease if the lease period reflects that the lessee will use the possibility of termination of the lease. After the initial measurement, the lease liability increases to reflect interest on lease obligations and decreases to reflect the lease payments made. The lease liability is subsequently measured when there is a change in future lease payments resulting from a change in the index or rate or when there is a change in the estimate of the term of any lease. 2.21. Provisions Provision is then recognized only if the Company has a present obligation as a result of the past event and if it is probable that settling the obligation will require the outflow of resources with economic benefits and if a reliable estimate can determine the amount of the liability. Provisions are reviewed at each statement of financial position/ balance sheet date and adjusted to the latest best estimates. 37 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.21. Provisions - continued Provisions are set for the costs of court disputes and rewards for employees for long-term employment and retirement (regular jubilee awards and severance payments) and for the cost of unused annual leave. (reference to Notes 12. and 35.) The provision of long-term employee reward and retirement benefits (regular jubilee awards and severance payments) is established as the present value of future cash outflows using a discount rate corresponding to the interest rate on government bonds. (reference to Notes 12. and 35.) 2.22. Contingent liabilities and potential assets Contingent liabilities are not recognized in the separate financial statements but are only disclosed in the notes to the separate financial statements. Potential assets are not recognized in the financial statements but are recognized at a time when an inflow of economic benefits becomes probable. 2.23. Events after the Balance sheet date Events after the separate statement of financial position/balance sheet date, providing additional information about the Company's position at the separate statement of financial position / balance sheet date (events that have the effect of adjustment) are recognized in the separate financial statements. Those events that do not result in adjustment are disclosed in the notes to the financial statements if they are of material significance. 2.24. Key accounting judgments and estimates In preparing the Company's annual separate financial statements, the Management Board has used certain estimates and assumptions that affect the reported income, expenses, assets and liabilities and the disclosure of contingent liabilities during and at the reporting date. However, uncertainty regarding these assumptions and estimates may result in significant changes in the carrying amount of the related asset or liability in future periods. The key assumptions relating to the future and other key sources of estimation uncertainty at the statement of financial position date that carry a significant risk of material changes in the carrying amounts of assets and liabilities within the next financial year are as follows: (i) Useful life of intangible assets and property, plant and equipment Determining the useful life of an asset is based on historical experience with similar assets as well as projected technological developments. The adequacy of the estimated useful lives is reviewed annually, or whenever there is an indication of significant changes in assumptions. 38 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.24. Key accounting judgments and estimates - continued Given the significant share of the Company's assets that are depreciated in total assets, the impact of major changes in these assumptions could be significant for the financial position and results of operations of the Company. (ii) Actuarial estimates used to calculate retirement benefits The cost of defined planned fees is determined using actuarial estimates. Actuarial estimates include making assumptions about discounted rates, future increases in income and mortality or fluctuation rates. Due to the long-term nature of these plans, these estimates contain an element of uncertainty (see note 27). (iii) Consequences of certain litigation The Company is involved in a number of lawsuits arising from ordinary activities. Provisions are recorded if there is a present liability as a result of a past event (taking into account all available evidence including the opinion of legal experts) where it is probable that an outflow of resources will be required to settle the liability and the amount of the liability can be estimated reliably. (reference to Notes 12., 28. and 35.) (iv) Ownership of land and buildings Restrictions related to ownership of land and buildings apply to real estate that is not officially registered as the property of the Company. (v) Expected loss model With the application of IFRS 9, the expected loss model (ECL) is introduced. Measurement of expected impairment losses is based on reasonable and supportive information that is available without undue cost and effort, and that includes information about past events, current and projected future conditions and circumstances. In determining the expected future impairment needs, historical probabilities of default are usually used, which are supplemented. Trade receivables are stated at the invoiced amount. Impairment of doubtful and disputed receivables is based on the best assessment of the Company's Management Board on the uncollectibility of receivables. Overdue receivables with uncertain collection are subject to value adjustment in accordance with IFRS - 9, where the need for impairment is based on the model of expected credit losses. At the end of each business year, the Company, as appropriate, develops a model according to which the assessment of expected credit losses will be performed, applying its useful experience on credit losses from previous periods. 39 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued 2.24. Key accounting judgments and estimates - continued Based on the analysis, the Company's Management Board made a decision to adjust the value of short- term receivables from customers that are not paid, and are older than 1 year, at the expense of the statement of comprehensive income, except for receivables for which payment is confirmed after the balance sheet date. 2.25. Correction of errors of previous periods The Company's annual separate financial statements for 2021 have been revised as follows Balance sheet Previous amount Restatemet Restated amount 31 Dec 2021 31 Dec 2021 HRKˊ000 HRKˊ000 HRKˊ000 Buildings 6,797,001 54,047 6,851,048 Capital reserves 6,924,594 54,047 6,978,641 Bilanca Prethodno stanje Izmjena Prepravljeno stanje 01 Jan 2021 01 Jan 2021 HRKˊ000 HRKˊ000 HRKˊ000 Buildings 7,017,176 67,151 7,084,327 Capital reserves 7,066,311 67,151 7,133,462 On August 31, 2022, the Agreement on the regulation of property relations between the companies HŽ Infrastruktura d.o.o., HŽ Cargo d.o.o. and HŽ Putnički prijevoz d.o.o. was concluded. On the basis of the Agreement in question, the company HŽ Infrastruktura d.o.o., as the railway infrastructure manager, took over the real estate listed in Article 4, Table 1 and the real estate listed in Article 6., table 4 of the Agreement, the real estate in question is registered as a public good and as such should remain part of the railway infrastructure - the public good of the Republic of Croatia in general use under the management of the company HŽ Infrastruktura, and the same are divided between HŽ and HŽ Vuča Vlakova d.o.o. belonged to the company HŽ Cargo d.o.o. and HŽ Putnički prijevoz d.o.o. For the taken over real estate, the Company has increased the value of long-term tangible assets (buildings) and the capital of the public good (capital reserves) in its business books, as it is a matter of public good property in general use. 40 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 3. SALES REVENUE Sales revenue – related parties I-XII 2022 I-XII 2021 HRK'000 HRK'000 Income from fees for access to railway infrastructure 88,301 86,259 Revenue from informatics services 961 3,278 Revenue from the formation and dissolution of the composition train 8,995 10,843 Revenue from using railway stations 6,902 6,972 Income from using the garage track 1,185 1,005 Revenue from fees for capacity reservations 897 1,009 Income from rent of premises 4,339 4,487 Income from rent of optical equipment 789 902 Income from rent of machines and equipment to related parties 45 149 Income from secondary activities 108 183 Revenue from other services and works 417 563 Total 112,939 115,650 Sales revenues – non-related parties I-XII 2022 I-XII 2021 HRK'000 HRK'000 Income from fees for access to railway infrastructure 29,893 26,698 Revenue from the formation and dissolution of the composition train 4,322 3,511 Income from using the garage track 885 1,196 Revenue from IT services 84 84 Revenue from fees for capacity reservations 720 650 Income from rent of premises 13,865 13,477 Income from the lease of pumping facilities 3,829 3,827 Income from rent of optical equipment 59 57 Income from rent - other 4,244 3,844 Income from secondary activities 686 337 Revenue from the sale of material 6,827 10,858 Revenue from other services and works 92 60 Total 65,506 64,599 41 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 4. OTHER OPERATING INCOME Other operating income – related parties I-XII 2022 I-XII 2021 HRK'000 HRK'000 Income from telecommunication services 346 517 Income from reimbursement of damages 173 561 Other income 689 162 Total 1,208 1,240 Other operating income – non-related parties I-XII 2022 I-XII 2021 HRK'000 HRK'000 Income from the Budget of the Republic of Croatia for the railroad infrastructure 531,000 475,497 Income from the Budget of the Republic of Croatia for the railroad infrastructure – excise 520,000 485,045 Income from the Budget of the Republic of Croatia for repayment of the IBRD loan 11,391 8,418 Income from the Budget of the Republic of Croatia at the level of proportional part of depreciation 34,426 34,426 Income from consumption of own products 8,347 9,618 Income from cassation 11,462 23,713 Income from rent of flats 2,255 2,368 Income from the sale of flats (35%) 3,540 6,598 Income from reimbursement of damages 982 998 Income from co-financing 1,780 939 Income from release of provisions 57,952 21,937 Income from collection of value adjusted receivables 144,808 4,223 Income from sale of assets 1,325 - Penalty income 1,369 41 Value adjustment of obsolete inventories - 7,102 Other income 8,034 5,550 Total 1,338,671 1,086,473 Income from calculation of utility costs on 31 December 2022 amount to HRK 8,246 thousand and the same have been reversed in the annual financial statements of the Company with costs of other companies (calculation of utility costs by receipted invoices of suppliers) in the same amount. Income from calculation of energy costs for train traction on 31 December 2022 amount to HRK 122,671 thousand and the same have been reversed with energy costs (reference to note Note 5.). 42 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 5. COST OF RAW MATERIALS AND SUPPLIES Cost of raw materials and supplies I-XII 2022 I-XII 2021 HRK'000 HRK'000 Cost of raw material and supplies 47,421 71,240 Cost of spare parts 7,347 8,104 Cost of small inventory, car-tires and protective equipment 5,529 5,712 Energy costs 21,549 7,965 Energy costs – related parties 20,864 23,575 Total 102,710 116,596 The energy costs for train traction on 31 December 2022 amount to HRK 115,331 thousand and the same have been reversed with income from calculation of energy for train traction (reference to Note 4.). 6. COST OF GOODS SOLD Costs of goods sold in the amount of HRK 6,574 thousand (2021: HRK 10,558 thousand) relate to the purchase value of goods sold. 7. OTHER EXTERNAL EXPENSES I-XII 2022 I-XII 2021 Other external expenses HRK'000 HRK'000 Telephone, postal services and transportation costs 10,267 12,381 Transport costs – related parties 1,328 2,345 Maintenance services 55,741 51,938 Maintenance services – related parties 92,035 129,869 Rental costs and lease 1,677 1,097 Rental costs and lease – related parties 103 4 Cleaning services 14,103 14,294 Cost of property safe-keeping 3,778 4,732 Municipal services 4,962 4,328 Other external expenses 619 424 Total 184,613 221,412 43 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 8. STAFF COSTS Net salaries in the amount of HRK 435,053 thousand (2021 in the amount of HRK 406,247 thousand) also include the Company's Management Board's income in the amount of HRK 1,400 thousand (2021 in the amount of HRK 1,350 thousand), and are an integral part of the stated staff costs. 9. DEPRECIATION I-XII 2022 I-XII 2021 HRK'000 HRK'000 Depreciation of intangible assets 7,277 7,937 Depreciation of property, plant and equipment 21,624 23,565 Total 28,901 31,502 10. OTHER EXPENSES I-XII 2022 I-XII 2021 HRK'000 HRK'000 Per diems and travelling expenses 3,505 2,119 Transportation on a business trip - related companies 336 250 Compensation of costs to employees (support and severance payment) 97,484 76,961 Employee costs – transportation (related companies) 1,975 2,423 Representation costs 147 64 Compensation to Supervisory Board members 95 70 Compensation to Audit Board members - 34 Consulting services 236 268 Lawyer services 617 523 Intellectual services 675 760 Cost of education and scholarships 1,456 1,642 Health services 495 770 Insurance premiums 95 130 SAP system maintenance 4,232 4,951 Cost of banking services and payment transactions 363 268 Contributions, membership fees and similar expenses 41,477 40,493 Water management fees – related companies 4,626 4,621 Other expenses 2,415 6,218 Other expenses –related parties 363 404 Total 160,592 142,969 In 2022 the amount of HRK 329 thousand was paid to auditing company for audit of the annual financial statements for 2021 while other auditing services amount to HRK 91 thousand. 44 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 11. VALUE ADJUSTMENT I-XII 2022 I-XII 2021 HRK'000 HRK'000 Value adjustments of short-term receivables 55,299 3,754 Value adjustments of short-term receivables – related companies 8,219 7,421 Value adjustments of short-term receivables - IFRS 9 26 7,136 Value adjustment of claims from the state 23,303 - Total 86,847 18,311 12. PROVISIONS I-XII 2022 I-XII 2021 HRK'000 HRK'000 Provisions for incentive severance payments - 558 Provisions for court disputes 39,581 5,143 Provisions for tax liabilities - 413 Provisions for unused annual leave 32,750 24,822 Costs of provisions for other costs 1,309 32,483 Total 73,640 63,419 13. OTHER OPERATING EXPENSES I-XII 2022 I-XII 2021 HRK'000 HRK'000 Net book value of disposed assets 540 139 Deficits 1,482 75 Fees - traffic delay 147 10 Fees for traffic delays 1,357 1,465 Value of cracked and disposed material 5,212 2,280 Value of obsolete inventory 9,024 - Cost related to compensation of damages 7,874 1,597 Costs related to compensation of damages – related parties 2,163 2,386 Court expenses and penalties 2,744 2,432 Other operating expenses 560 2,282 Other operating expenses – related parties 2,737 1,231 Total 33,840 13,897 45 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 14. FINANCIAL INCOME I-XII 2022 I-XII 2021 HRK'000 HRK'000 From related parties Interest income 91,230 1,042 91,230 1,042 From non-related parties and other entities Interest income 393 637 Foreign exchange gains 617 958 Dividend income 6 3 1,016 1,598 Total 92,246 2,640 15. FINANCIAL EXPENSES I-XII 2022 I-XII 2021 HRK'000 HRK'000 From related parties Interest expense 1,029 502 1,029 502 From non-related parties and other entities Interest expense 6,792 4,247 Foreign exchange losses 1,609 2,842 8,401 7,089 Other financial expenses – cost of borrowings 936 1,155 Total 10,366 8,746 46 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 16. NON-RECURRING ITEMS The company has decided to present normalized business results without the influence of items that management treats as non-recurring, along with the reported results. An overview and explanation of the items that management treats as non-recurring and an overview of the methodology for calculating the normalized result is given in the continuation of this point of the note. On December 22, 2022, a settlement was concluded between the Republic of Croatia and HŽ Cargo d.o.o. for the purpose of restructuring HŽ Cargo d.o.o. The Agreement in question covers the entire settlement of relations between the companies HŽ Cargo d.o.o. and the company HŽ Infrastruktura d.o.o., in such a way that the Republic of Croatia takes over the payment of the agreed debt that the company HŽ Cargo d.o.o. has according to the company HŽ Infrastruktura d.o.o. on December 31, 2020, which was agreed on on March 31, 2022 until which date (March 31, 2022) was the calculation of late interest. Total agreed debt of HŽ Cargo d.o.o. according to the company HŽ Infrastruktura d.o.o. as of December 31, 2020, including the calculation of default interest until March 31, 2022 year is HRK 401.707 thousand. The Republic of Croatia is in the name and on behalf of the company HŽ Cargo d.o.o., based on the Agreement between the Republic of Croatia and the company HŽ Cargo d.o.o. and the Decision on giving consent to the text of the Agreement between the Republic of Croatia and the company HŽ Cargo d.o.o., assumed the obligation to pay the company HŽ Infrastruktura d.o.o. the amount of HRK 401,707 thousand in 5 annual installements as follows: - 1st installment in the amount of HRK 80,000 thousand (EUR 10,618 thousand) until January 31, 2023 - 2nd installment in the amount of HRK 80,000 thousand (EUR 10,618 thousand) until January 31, 2024 - 3rd installment in the amount of HRK 80,000 thousand (EUR 10,618 thousand) until January 31, 2025 - 4th installment in the amount of HRK 80,000 thousand (EUR 10,618 thousand) until January 31, 2026 - 5th installment in the amount of HRK 81,707 thousand (EUR 10,844 thousand) until January 31, 2027 As a result of the above, the Company made appropriate accounting entries in its business books, which were reflected in the following positions of the annual separate financial statements: Balance Sheet HRK'000 Receivables from related companies - decrease (Note 22) (248,063) Receivables from related companies (doubtful receivables) - reduction (167,570) Receivables from the state and other institutions - increase (Note 25) 401,707 Liabilities to related companies - reduction (Note 37) 13,926 - 47 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 16. NON-RECURRING ITEMS - continued P&L HRK'000 Other business income with entrepreneurs outside the group (charged doubtful and disputed claims) – increase (Note 4) 140,995 Financial income from relations with related entrepreneurs (interest) - increase (interests) – increase (Note 14) 90,293 Other business expenses (damages) – increase (Note 13) (2,629) 228,659 The reported profit of the Company before taxation amounts to HRK 231,320 thousand, and the same is the result of non-recurring items, as previously described. By excluding these items, we arrive at the Company's normalized profit before taxation in the amount of HRK 2,661 thousand. Reported separate profit in 2022 (including non-recurring items) HRK'000 Total income 1,610,570 Total expenditures 1,379,250 Profit before tax 231,320 Profit tax (110,187) Reported profit after tax 121,133 Normalized profit in 2022 before tax HRK'000 Total income 1,610,570 Total expenditures 1,379,250 Profit before tax 231,320 Other business income with entrepreneurs outside the group (140,995) Financial income from relations with related entrepreneurs (90,293) Other business expenses 2,629 Normalized profit after tax 2,661 The estimated impact of non-recurring items on taxes is positive, in other words they reduce it, due to the right to use the tax loss carried forward. In case of normalized profit, the Company would not pay profit tax or additional profit tax for the year 2022. 48 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 17. CORPORATE INCOME TAX 17.1. The reconciliation between the income tax and profit and loss account presented in the Income Statement is presented as follows: I-XII 2022 I-XII 2021 HRK'000 HRK'000 Accounting profit 231,320 3,460 Profit increase 16,501 4,475 Profit decrease (23) (7,105) Profit after increase 247,798 830 Tax loss carried forward 84,342 85,172 Tax loss to be carried forward - 84,342 Taxable profit (163,456) - After total increases and decreases in accounting profit, on December 31, 2022, the Company determined taxable profit in the amount of HRK 247,798 thousand and exercised the right to reduce it by carrying forward tax loss in the amount of HRK 84,342 thousand, after which the taxable profit was reported in the amount of HRK 163,456 thousand kunas. The applicable corporate tax rate for 2022, 2021 and 2020 is 18%. Based on the calculation of profit tax and additional profit tax for the year 2022, the Company has an obligation based on profit tax in the amount of HRK 29,392 thousand, and additional profit tax in the amount of HRK 80,795 thousand. The Company has paid established income tax liability as of December 31, 2022, together with the added profit tax (HRK 110,187) in accordance with the law on profit tax from April 30, 2023 in the amount of HRK 33,862 thousand, and additional profit tax in the amount of HRK 76,325 thousand established after the change - increase of additional profit tax on August 23, 2023. (reference to Notes 34 and 43) In 2021, the Company did not declare profit tax, the taxable profit in the amount of HRK 830 thousand was fully reduced by the tax loss carried forward. 49 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE SEPARATE FINANCIAL STATEMENTS - continued for the year ended 31 December 2022 17. CORPORATE INCOME TAX – continued 17.2. The Company is able to carry forward tax losses in future periods for the purpose of impairing taxable profits over the next five (5) years. At 31 December 2022 the total net losses transferred were fully utilized. Overview of tax losses carried forward by year (HRK'000) Usable for Tax loss for the Tax profit for the Year up to a Used Unused current year current year year 2012 262,372 2017 105,173 157,199 2013 783,555 2018 - 783,555 2014 133,918 2019 5,282 128,636 2015 50,299 - - - 2016 8,043 - - - 2017 46,831 - - - 2018 86,476 2023 86.476 2019 5,282 - - - 2020 1,304 - - - 2021 830 - - - 2022 247,798 - - - On December 31, 2022, tax loss for transfer to the next tax period was used in full (tax loss realized in in 2018.) 17.3. As of December 31, 2022, the Company has a declared deferred tax liability in the amount of HRK 2,480,000, which arose based on the stated revaluation reserve. (reference to Note 36) Based on the realized revaluation reserve (in the amount of increased depreciation) on December 31, 2022, the deferred tax liability in the amount of HRK 30 thousand was cancelled. (reference to Note 32) 50 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 18. LONG-TERM INTANGIBLE AND TANGIBLE ASSETS - RESTATED Tools, operating Plant and Road resources- Other tangible Tangible assets in Advances for TOTAL HRK'000 Intangible assets Land Buildings inventory and TANGIBLE equipment IFRS 16 assets preparation tangible assets transport ASSETS resources COST Balance at 01 Jan, 2021 256,393 1,937,682 21,252,916 718,813 427,378 33,085 148,625 4,092,750 499,759 29,111,008 Correction of prior period error 147,661 147,661 Balance at 01 Jan, 2021 - 256,393 1,937,682 21,400,577 718,813 427,378 33,085 148,625 4,092,750 499,759 29,258,669 restated New purchase and investments - - - - - 1,159 - 1,058,561 (73,844) 985,876 Transfer from assets in 5,446 - 163,625 199 3,683 - - (172,953) - (5,446) preparation Correction (wrong postings) - - - - - - 207,979 - - 207,979 Shortage and free of charge - - (1,433) (156) - - - - - (1,589) property Expenditure, sale and liquidation (55) (279) (189,182) (8,143) (15,546) (824) (126,027) - - (340,001) Balance at 31 Dec, 2021 - 261,784 1,937,403 21,373,587 710,713 415,515 33,420 230,577 4,978,358 425,915 30,105,488 restated New purchase and investments 706 50,813 683,099 12,339 2,658 - - 1,063,306 172,531 1,984,746 Transfer from assets in - - - - - - - (749,614) - (749,614) preparation Transfer of business area PG - - - 10,967 6,028 - - - - 16,995 Reclassification of positions - - (1,851) - 11 - 1,851 - - 11 Revaluation of fixed assets - 9,570 13,945 - - - - - - 23,515 Other non-ownership changes - 32 320 - - - - - - 352 Surplus and free received - - 1,373 - - - - - - 1,373 property Shortage and free of charge - - (336) (8) (11) - - - - (355) property Expenditure, sale and liquidation - - (172,715) (15,933) (4,898) (208) 31,711 - - (162,043) Balance at 31 Dec, 2022 262,490 1,997,818 21,897,422 718,078 419,303 33,212 264,139 5,292,050 598,446 31,220,468 51 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 18. LONG-TERM INTANGIBLE AND TANGIBLE ASSETS – RESTATED - continued DEPRECIATION Balance at 01 Jan 2021 228,842 - 14,235,740 594,453 387,426 4,448 98,752 1,076,887 6,726 16,404,432 Correction of prior period 80,510 80,510 error Balance at 01 Jan 2021 - 228,842 - 14,316,250 594,453 387,426 4,448 98,752 1,076,887 6,726 16,484,942 restated Previous period error - - 13,104 13,104 correction - - - - - - Depreciation during the year 7,936 - 352,256 23,118 9,063 6,807 609 391,853 - - Correction (wrong postings) - - - - - - - - - - Deficit and free property given - - (848) (156) (1,004) - - - - - Activation of previously corrected (VU) assets in - - (103,760) (103,760) - - - - - - preparation Expenditure, sale and (55) - (158,223) (8,110) (15,238) (343) 63,759 (118,155) liquidation - - Balance at 31 Dec, 2021 - 236,723 - 14,522,539 609,305 381,251 10,912 163,120 973,127 6,726 16,666,980 restated Depreciation during the year 7,277 - 407,550 25,187 8,209 6,786 596 448,328 - - Reclassification of positions - - 5 5 - - - - - - Other non-ownership changes - - (74) (74) - - - - - - Surplus and property received - - - for free - - - - - - - Deficit and free property given - - (336) (8) (8) (352) - - - - Value adjustment of assets in - - (207,794) 53,725 (154,069) preparation - - - - - Expenditure, sale and - - (137,715) (15,820) (4,867) (176) 30,921 (127,657) liquidation - - Balance at 31 Dec, 2022 244,000 - 14,791,964 618,664 384,590 17,522 194,637 765,333 60,451 16,833,161 NET CARRYING AMOUNT Balance at 31 Dec, 2022 18,490 1,997,818 7,105,458 99,414 34,713 15,690 69,502 4,526,717 537,995 14,387,307 Balance at 31 Dec, 2021 - 25,061 1,937,403 6,851,048 101,408 34,264 22,508 67,457 4,005,231 419,189 13,438,508 restated Balance at 01 Jan, 2021 - 27,551 1,937,682 7,084,327 124,360 39,952 28,637 49,873 3,015,863 493,033 12,773,727 restated 52 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 18. LONG-TERM INTANGIBLE AND TANGIBLE ASSETS – RESTATED - continued On 31 December, 2022 the total value of assets in preparation amounts to HRK 4,526,717 thousand. The Company continuously assesses the recoverable amount of property, plant and equipment reported in accordance with the requirements of IAS 36 Impairment of Assets and in accordance with the above the Company performed value adjustment of assets in preparation in the total amount of HRK 1,100,506 thousand at the expense of public capital (in 2017 in the amount of HRK 600,669 thousand HRK and in 2020 in the amount of HRK 499,837 thousand). The following is an overview of the value adjustment of assets in preparation by year with the associated activations: Value adjustment of assets in preparation 2017 - 2022 HRK'000 Value adjustment of assets in preparation (AiP) on 1 January 2017 - Value adjustment of assets in preparation Lička pruga - 2017 535,611 Value adjustment of assets in preparation Other projects - 2017 65,058 Balance of value adjustment of AiP on 31 December 2017 600,669 Activation of the previously value-adjusted AiP Lička pruga - 2018 (1,631) Activation of the previously value-adjusted AiP Other projects- 2018 (19,653) Balance of value adjustment of AiP on 31 December 2018 579,385 Activation of the previously value-adjusted AiP Lička pruga - 2019 (758) Activation of the previously value-adjusted AiP Other projects- 2019 (70) Balance of value adjustment of AiP on 31 December 2019 578,557 Activation of the previously value-adjusted AiP Lička pruga - 2020 (1,506) Value adjustment of assets in preparation Lička pruga - 2020 66,105 Value adjustment of assets in preparation Other projects - 2020 433,732 Balance of value adjustment of AiP on 31 December 2020 1,076,888 Activation of the previously value-adjusted AiP Lička pruga - 2021 (84,541) Activation of the previously value-adjusted Other projects - 2021 (19,220) Balance of value adjustment of AiP on 31 December 2021 973,127 Activation of the previously value-adjusted AiP Lička pruga – 2022 (38,333) Activation of the previously value-adjusted Other projects - 2022 (169,462) Balance of value adjustment of AiP on 31 December 2022 765,332 53 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 18. LONG-TERM INTANGIBLE AND TANGIBLE ASSETS – RESTATED - continued On 31 December 2022 the Company has activated previously value-adjusted assets in preparation in the amount of HRK 207,794 thousand and by the same amount reduced value adjustment of assets in preparation and increased the capital of the public good as at 31 December 2022. On 31 December 2022 total value adjustment of tangible assets in preparation amounts to HRK 765,333 thousand, and as at 31 December 2021 amounted to HRK 973,127 thousand. As at 31 December 2022, assets in preparation also include investments in progress older than 3 years and more in the amount of HRK 1,111,830 thousand. Of this amount, the value of assets in the amount of HRK 765,333 was adjusted at the expense of public capital. 54 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 18.1. Movements of the Public goods assets: Tools, operating Road Plant and Other tangible Tangible assets Advances for PUBLIC GOOD HRK'000 Intangible assets Land Buildings inventory and resources- IFRS equipment assets in preparation tangible assets TANGIBLE ASSETS transport 16 resources COST Balance at 01 Jan, 2021 - 1,744,816 20,808,339 540,817 314 - 52,666 - - 23,146,952 Correction of prior period error 147,661 147,661 Balance at 01 Jan, 2021 - - 1,744,816 20,956,000 540,817 314 - 52,666 - - 23,294,613 restated New purchase and investments - - - - - - - 163,625 - 163,625 Transfer from assets in - - 163,625 - - - - (163,625) - - preparation Correction (wrong postings) - - - - - - - - - - Shortage and free of charge - - (1,432) - - - - - - (1,432) property Expenditure, sale and - - (186,385) (4,920) (7) - 71,070 - - (120,242) liquidation Balance at 31 Dec, 2021 - - 1,744,816 20,931,808 535,897 307 - 123,736 - - 23,336,564 restated New purchase and investments - 50,813 681,560 10,597 - - - - - 742,970 Transfer from assets in - - - - - - - (742,970) - (742,970) preparation Transfer of business area PG - - - - - - - - - - Reclassification of positions - - (1,851) - 14 - 1,851 - - 14 Revaluation of fixed assets - - - - - - - - - - Other non-ownership changes - 34 459 - - - - - - 493 Transfer from HŽ Infrastruktura/ - - - - - - - 742,970 - 742,970 EU to Public Good Surplus and free received - - - - - - - - - - property Shortage and free of charge - - (141) - - - - - - (141) property Expenditure, sale and - - (172,269) (13,232) - - 34,962 - - (150,539) liquidation Balance at 31 Dec, 2022 - 1,795,663 21,439,566 533,262 321 - 160,549 - - 23,929,361 55 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 Tools, operating Road Plant and Other tangible Tangible assets Advances for PUBLIC GOOD HRK'000 Intangible assets Land Buildings inventory and resources- IFRS equipment assets in preparation tangible assets TANGIBLE ASSETS transport 16 resources DEPRECIATION Balance at 01 Jan, 2021 - - 13,913,751 417,843 235 - 50,921 - - 14,382,750 Correction of prior period error 80,510 80,510 Balance at 01 Jan, 2021 - - - 13,994,261 417,843 235 - 50,921 - - 14,463,260 restated New purchase and investments - - 13,104 - - - - - - 13,104 Depreciation during the year - - 345,480 22,772 35 - - - - 368,287 Correction (wrong postings) - - - - - - 160,483 - - 160,483 Shortage and free of charge - - - - - - - - - - property Activation of previously corrected (VU) assets in - - - - - - - - - - preparation Expenditure, sale and - - (157,071) (4,887) (8) - (106,681) - - (268,647) liquidation Balance at 31 Dec, 2021 - - - 14,195,774 435,728 262 - 104,723 - - 14,736,487 restated Depreciation during the year - - 402,367 24,303 35 - - - - 426,705 Reclassification of positions - - - - 15 - - - - 15 Revaluation of fixed assets - - - - - - - - - - Shortage and free of charge - - (141) - - - - - - (141) property Value adjustment of assets in - - - - - - - - - - preparation Expenditure, sale and - - (137,388) (13,120) - - 33,768 - - (116,740) liquidation Balance at 31 Dec, 2022 - - 14,460,612 446,911 312 - 138,491 - - 15,046,326 NET CARRYING AMOUNT Balance at 31 Dec, 2022 - 1,795,663 6,978,954 86,351 9 - 22,058 - - 8,883,035 Balance at 31 Dec, 2021 - - 1,744,816 6,736,034 100,169 45 - 19,013 - - 8,600,077 restated Balance at 01 Jan, 2021 - - 1,744,816 6,961,739 122,974 79 - 1,745 - - 8,831,353 restated 56 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 18.2. Movements of the Company's assets, as well as assets acquired through the use of EU funds, without public goods assets Tools, Intangible Plant and population eq. Road resources- Other tangible Tangible assets Advances for INFRASTRUKTURA + EU HRK'000 Land Buildings assets equipment and transport IFRS 16 assets in preparation tangible assets TOTAL ASSETS resources COST Balance at 01 Jan, 2021 256,393 192,866 444,577 177,996 427,064 33,085 95,959 4,092,750 499,759 5,964,056 Correction of prior period error Balance at 01 Jan, 2021 - restated 256,393 192,866 444,577 177,996 427,064 33,085 95,959 4,092,750 499,759 5,964,056 New purchase and investments - - - - - 1,159 - 894,936 (73,844) 822,251 Transfer from assets in preparation 5,446 - - 199 3,683 - - (9,328) - (5,446) Correction (wrong postings) - - - - - - 207,979 - - 207,979 Shortage and free of charge property - - - (156) - - - - - (156) Expenditure, sale and liquidation (55) (279) (2,798) (3,223) (15,539) (824) (197,097) - - (219,760) Balance at 31 Dec, 2021 - restated 261,784 192,587 441,779 174,816 415,208 33,420 106,841 4,978,358 425,915 6,768,924 Depreciation during the year 706 - 1,539 1,742 2,658 - - 1,063,306 172,531 1,241,776 Transfer from PG to Infra - - - - - - - (6,644) - (6,644) Reclassification of positions - - - 10,967 6,028 - - - - 16,995 Revaluation of fixed assets - - - - (3) - - - - (3) Surplus and free received property - 9,570 13,945 - - - - - - 23,515 Other non-ownership changes - (2) (139) - - - - - - (141) Value adjustment of assets in - - - - - - - (742,970) - (742,970) preparation Transfer from HŽ Infrastruktura/ EU to - - 1,373 - - - - - - 1,373 Public Good Surplus and free received property - - (195) (8) (11) - - - - (214) Shortage and free of charge property - - (446) (2,701) (4,898) (208) (3,251) - - (11,504) Balance at 31 Dec, 2022 262,490 202,155 457,856 184,816 418,982 33,212 103,590 5,292,050 598,446 7,291,107 57 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 Tools, operating Road Plant and Other tangible Tangible assets Advances for INFRASTRUKTURA + EU HRK'000 Intangible assets Land Buildings inventory and resources- equipment assets in preparation tangible assets TANGIBLE ASSETS transport resources IFRS 16 DEPRECIATION Balance at 01 Jan, 2021 228,842 - 321,989 176,610 387,191 4,448 47,831 1,076,887 6,726 2,021,682 Correction of prior period error Balance at 01 Jan, 2021 - 228,842 - 321,989 176,610 387,191 4,448 47,831 1,076,887 6,726 2,021,682 restated New purchase and investments - - - - - - - - - - Depreciation during the year 7,937 - 6,776 346 9,028 6,807 609 - - 23,566 Correction (wrong postings) - - - - - (160,483) - - (160,483) - Shortage and free of charge - - (848) (156) - - - - (1,004) property - Activation of previously corrected (VU) assets in - - - - - - (103,760) - (103,760) - preparation Expenditure, sale and liquidation (56) - (1,152) (3,223) (15,230) (343) 170,440 - - 150,492 Balance at 31 Dec, 2021 - 236,723 - 326,765 173,577 380,989 10,912 58,397 973,127 6,726 1,930,493 restated Depreciation during the year 7,277 - 5,183 884 8,174 6,786 596 - - 21,623 Reclassification of positions - - - - (10) - - - (10) - Revaluation of fixed assets - - - - - - - - - - Other non-ownership changes - - (74) - - - - - (74) - Surplus and free received - - - - - - - - - property - Shortage and free of charge - - (194) (8) (8) - - - (210) property - Value adjustment of assets in - - - - - - (207,794) 53,725 (154,069) preparation - Expenditure, sale and liquidation - - (328) (2,700) (4,867) (176) (2,847) - - (10,918) Balance at 31 Dec, 2022 244,000 - 331,352 171,753 384,278 17,522 56,146 765,333 60,451 1,786,835 NET CARRYING AMOUNT Balance at 31 Dec, 2022 18,490 202,155 126,504 13,063 34,704 15,690 47,444 4,526,717 537,995 5,504,272 Balance at 31 Dec, 2021 - 25,061 192,587 115,014 1,239 34,219 22,508 48,444 4,005,231 419,189 4,838,431 restated Balance at 01 Jan, 2021 - 27,551 192,866 122,588 1,386 39,873 28,637 48,128 3,015,863 493,033 3,942,374 restated 58 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 18.3. Assets with the right of use - IFRS 16 The Company has recognized property, plant and equipment and lease liability relating to the use of passenger cars and lorries, which were previously classified as operating leases. Present value of the assets with the right of use as at 31 December 2022 amounts to HRK 15,690 thousand. The Company recognized lease obligations as follows: 31 Dec 2022 31 Dec 2021 31 Dec 2020 01 Jan 2020 HRKˊ000 HRKˊ000 HRKˊ000 HRKˊ000 Increase in long - term lease liabilities 37,282 36,306 34,210 6,368 Decrease in long - term lease liabilities (20,919) (13,187) (5,273) (1,046) 16,363 23,119 28,937 5,322 Interest expenses included in financial expenses in 2022 amounted to HRK 699 thousand. The total cash outflow for rent in 2022 amounts to HRK 7,406 thousand (in 2021: HRK 7,405 thousand), the amount of HRK 6,707 thousand refers to the rental principal (in 2021: HRK 6,476 thousand) and the amount of HRK 699 thousand refers to the interest (in 2021: HRK 929 thousand). 59 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 19. LONG - TERM FINANCIAL ASSETS 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Shares (stocks) in related parties Subsidiary companies Pružne građevine d.o.o. 60,684 60,684 60,684 60,684 Associated companies Proizvodnja-regeneracija d.o.o. 4,522 4,522 Less: value adjustment (4,522) (4,522) - - 60,684 60,684 Investment in securities Shares - Đuro Đaković 1 1 Shares - Končar 401 417 Shares - OT - Optima telekom - 193 402 611 Total 61,086 61,295 Investments in securities in companies in the country and banks were made available to the Croatian Privatization Fund (now the Center for Restructuring and Sale), based on the Conclusion of the Government of the Republic of Croatia dated 25 June 2001 for the purpose of resolving debts and receivables of state- owned and predominantly state-owned companies. 60 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 20. LONG - TERM RECEIVABLES 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Receivables for flats sold 6,980 10,643 Less: current maturity (Note 26) (1,330) (1,450) 5,650 9,193 Other receivables Housing loans to employees 309 439 309 439 Total 5,959 9,632 Within long-term receivables, bonds for sold apartments for old foreign currency savings were recorded in the amount of HRK 5,762 thousand. Old foreign currency savings were kept in the banks where they were located at the time of the purchase of the apartment and were converted into a public debt for which the state issued bonds in accordance with the Act (Official Gazette No. 71/91). Receivables from bonds in the amount of HRK 5,762 thousand are netted in the Company's financial statements with liabilities from the purchase of apartments (old and new foreign currency savings, reference to Note 44). 21. INVENTORIES 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Raw material and supplies 133,039 153,469 Spare parts 302,492 301,705 Small inventory and packing 2,375 2,699 Balance of inventories 437,906 457,873 Material in others’ warehouses 3,958 3,958 Material in process 229 229 Small inventories and packaging in use 42,112 41,820 Less: Value adjustment of raw material, supplies spare parts, small inventory and packaging (337,397) (328,080) Total 146,808 175,800 61 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 21. INVENTORIES - continued 21.1. Inventories without a turnover in 2022 in the amount of HRK 297,072 thousand were subject of review for the purpose of their eventual correction at the expense of the statement of comprehensive income. Following judgments on their usability, a value adjustment was made in the amount of HRK 9,024 thousand to the separate profit and loss account and the statement of other comprehensive income, which is explained below. By reviewing the planned needs of the expenditure plan in 2023 for the material that is the subject of review of inventories without turnover, a total of HRK 14,527 thousand is planned to be spent, and the calculation of the value adjustment is shown as follows: HRKˊ000 Stock of regular maintenance without turnover for 2 years (without minimum) from 01 January 2021 to 31 December 2022 24,885 Planned material needs according to the Consumption Plan in 2023 (14,527) Difference 10,358 VA of inventories on 31 December 2022 in the business books of the Company before VA on 31 December 2022 1,334 Increase of VA of inventories needed on December 31, 2022 9,024 Total value of inventories of regular operations without turnover in the observation period from 01 January 2021-31 December 2022 amounted to HRK 50,282 thousand, from which the value of minimum stock that had no turnover amounted to HRK 12,942 thousand, the planned consumption of inventories in the coming years amounts to HRK 12,455 thousand, and the stock of non-current goods located in CS Zagreb amounted to HRK 292 thousand (the same is stated in the VA on 31 December 2022). Total value of investment stock without turnover in the observation period from 01 January 2021 to 31 December 2022 amounts to HRK 246,789 thousand. The value of HRK 234,507 thousand refers to inventories acquired for the purpose of modernization of the Oštarije-Knin-Split railway, which makes 83.46 % of the total value of the project inventory of HRK 280,966 thousand. 62 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 22. SHORT – TERM RECEIVABLES FROM RELATED PARTIES Receivables from related parties for delivered goods and services and customers relate to receivables from related customers for the sale of materials, lease of optical equipment, rental of machinery and equipment, infrastructure access services, IT services, cost recalculation, damages, etc. 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Receivables from related parties Subsidiaries Pružne građevine d.o.o., Zagreb 13,409 9,441 Less: value adjustment (3,652) (3,652) 9,757 5,789 Associated company Proizvodnja i regeneracija d.o.o. u stečaju, Zagreb 8,851 8,851 Less: value adjustment (8,851) (8,851) - - Other state-owned railroad companies HŽ Putnički prijevoz d.o.o., Zagreb 29,396 29,245 Less: value adjustment (11,339) (4,982) HŽ Cargo d.o.o., Zagreb (Note 16) 19,989 370,602 Less: value adjustment (Note 16) (13,591) (192,289) Tehnički servisi željezničkih vozila d.o.o., Zagreb 1,145 906 Less: value adjustment (852) (716) Održavanje vagona d.o.o., Zagreb 3,291 2,499 Less: value adjustment (399) (399) TŽV Gredelj d.o.o. u stečaju, Zagreb 108 106 Less: value adjustment (99) (99) 27,649 204,873 Other state-owned companies Odašiljači i veze d.o.o., Zagreb 86 369 HEP ODS d.o.o.,Zagreb 5 - Hrvatske šume d.o.o., Zagreb 7 11 98 380 Total 37,504 211,042 63 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 22. SHORT – TERM RECEIVABLES FROM RELATED PARTIES - continued 22.1. Ageing structure of receivables from related parties is as follows: Due More 90- than Up to 30 30-60 60-90 120 120 Not due days days days days days Total 31 December 2022 24,649 1,012 333 418 410 10,682 37,504 31 December 2021 65,990 4,163 3,998 7,569 14,645 114,677 211,042 Based on the requirements of IFRS 9, the Company has developed a model of expected credit losses according to which the Company decreased Value adjustment of receivables from related parties in the amount of HRK 10,734 thousand on 31 December 2022, and increased income in separate Profit and loss account and the Statement of other comprehensive income. The table below shows the calculation of expected credit losses, which includes receivables from related parties and receivables from other customers. The effect of calculating these losses amounts to HRK 9,645 thousand of decreasing of Value adjustment, and increasing of income in the separate Profit and loss account and the Statement of other comprehensive income (as at 31 December 2021 in the amount of HRK 6,760 thousand as the expense in the separate Profit and loss account and the Statement of other comprehensive income). The amount consists of HRK 10,734 thousand of impairment of expected credit losses for receivables from related parties and HRK 1,089 thousand of additional provisions as the expanse in the separate Profit and loss account and the Statement of other comprehensive income which refers to receivables from other customers (reference to Note 23.2) Calculation of expected credit losses as at 31 December 2022 HRKˊ000 Due Total Non due <= 60 61 - 120 121 - 365 366 - 730 > 731 60,590 42,807 3,550 1,189 5,329 4,518 3,197 Impairment (14,19%) 6,074 504 169 756 641 454 Total calculation of credit losses 8,598 As shown in the table above, the impairment of value adjustment of receivables from related parties and other customers was reduced by the amount of HRK 9,645 thousand to the amount of HRK 8,598 thousand as at 31 December 2022. (in the amount of HRK 18,243 thousand as at 31 December 2021). 64 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 22. SHORT – TERM RECEIVABLES FROM RELATED PARTIES - continued 22.2. Receivables from related parties uncertain to charge in the amount of HRK 8,211 thousand were subject to re-examination for their possible adjustment to the separate Statement of Comprehensive Income. Consequently, a value adjustment of receivables from related parties was performed in accordance with the estimates of the uncertainty of their collection in the amount of HRK 8,211 thousand. In accordance with the Accounting Policies of the Company on December 31, 2022, the Company carried out value adjustment of short – term receivables which are not collected and are older than one year in the amount of HRK 1,024 thousand. RECEIVABLES OLDER THAN 1 YEAR Customer HRK'000 HŽ Putnički prijevoz d.o.o. 7,906 HŽ Cargo d.o.o. 169 Tehnički servisi želj. vozila d.o.o. 136 Other customers 1,024 TOTAL 9,235 65 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 23. TRADE RECEIVABLES 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Trade receivables Domestic customers 35,387 41,994 Less: value adjustment (21,032) (26,101) 14,355 15,893 Foreign customers 161 216 Less: value adjustment (28) (21) 133 195 Total 14,488 16,088 23.1. Trade receivables doubtful for charge in the amount of HRK 1,024 thousand were subject to review, with the aim of the possible correction to the separate Statement of profit and loss comprehensive income. Consequently, a value adjustment of trade receivables was made according to estimates of the uncertainty of their charge in the amount of HRK 1,024 thousand. 23.2. Ageing structure of trade receivables is as follows: Due Undue Up to 30 30-60 60-90 90-120 More than Total days days days days 120 days 31 December 2022 9,075 2,302 411 248 91 2,361 14,488 31 December 2021 918 1,077 218 101 1,953 11,821 16,088 Guided by the requirements of IFRS 9, the Company has developed the so-called model of expected credit losses according to which on December 31, 2022 the Company made additional value adjustment of receivables from related parties in the amount of HRK 1,089 thousand at the expanse of the separate Statement of comprehensive income (reference to Note 22.1). 66 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 24. RECEIVABLES FROM EMPLOYEES AND MEMBERS 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Receivables from employees and members Receivables for deficits 6,774 6,774 Other receivables from employees (160) (180) Total 6,614 6,594 Receivables from employees and members refers to receivables for advance for a business trip, receivables for shortages and damage incurred, receivables for costs of mobile phones and other. 25. RECEIVABLES FROM STATE AND OTHER INSTITUTIONS 31 Dec 31 Dec 2022 2021 HRK'000 HRK'000 Receivables from state and other institutions Receivables from state for the remission of debt 300,923 300,923 Receivables from the state to take over the debt of HŽ Cargo d.o.o. (note 16) 401,707 - Less: value adjustment of receivable from state (324,227) (300,923) Receivables for VAT 8,024 9,377 Receivables from the budget for EU projects (see Note 44) 3,185 3,748 Total 389,612 13,125 In the context of receivables from state and other institutions, receivables from state for taking loans are recorded in the amount of HRK 300,923 thousand. Following the Decision of the Assembly number: S-12/13 from April 26, 2013. Management Board of the Company on April 30, 2013. passed Decisions number: UI-73-12/13 and UI-73-13/13 by which HŽ Infrastruktura d.o.o. fully forgives receivables from HŽ Putnički prijevoz d.o.o. and HŽ Cargo d.o.o. created until December 31, 2012, and unpaid until April 26, 2013, except for claims arising from the use of electricity. The business occurrence was recorded in the Company's Financial Statements for the business year 2012. 67 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 25. RECEIVABLES FROM STATE AND OTHER INSTITUTIONS - continued The Management Board of the Company is following the aforementioned Decision of the Assembly Board proposed to the Assembly Board to decide on the Croatian Government submitting a proposal on the decision on the intention of taking over the following loan obligations: - credit indebtedness at OTP banka d.d. No. 130213357791 concluded on February 13, 2013 with state guarantee for security of current liquidity in the amount of HRK 170,000 thousand, - credit indebtedness at Erste & Steiermaerkische Bank d.d. – (at the time of adoption of the proposal was in the process of implementation, meanwhile, the debt was realized and is intended for financing the Business Plan for 2013 on the maintenance of the railway infrastructure and traffic management) in the amount of HRK 650,000 thousand. - credit indebtedness for financial funds for the redundant workers in 2012 and 2013 in the amount of HRK 250,000 thousand (the procurement procedure was in progress during adoption of proposals). On the suggestions, the Assembly Board of the Company gave approval of Decision No. S-14-1/13 from June 14, 2013, but until the day of preparation of the financial statements for 2013 loans were not taken. Consequently, in 2013 was made the value adjustment of receivables. On December 23, 2014, the Government of the Republic of Croatia adopted the Decision on granting approval for the debt takeover of the Company on the basis of the given guarantees and unpaid mandatory debts of the Debtors by increasing the capital of the public good to reduce the indebtedness and financial consolidation of the railway infrastructure operator in the total amount of HRK 1,915,791 thousand (HRK 1,770,963 thousand on behalf of the principal, HRK 63,902 thousand on behalf of regular interest, HRK 73,386 thousand on behalf of paid principal and HRK 7,540 thousand on behalf of accrued default interest). This approval relates to the takeover of long – term at Erste & Steiermaerkische Bank d.d., Erste & Steiermaerkische Bank d.d. and Sberbank d.d. and short-term debt with OTP banka d.d. On 31 Dec, 2022, in the Company's business books, a receivable from the state for taking over the debt of HŽ Cargo d.o.o. was stated, according to the Settlement, Agreement and Agreement on Assignment concluded between the Republic of Croatia, represented by MMPI, HŽ Carga d.o.o. and HŽ Infrastruktura d.o.o. in the amount of HRK 401,707 thousand. In the balance sheet of the Company in the position of receivables from state, receivables from the budget for EU projects have been reversed in the amount of HRK 602,270 thousand on December 31, 2022 and HRK 228,094 thousand on December 31, 2021 with the payables for the return of infrastructure (see Note 44). Receivables from the budget for EU projects in the amount of HRK 602,270 thousand refer to: - project Reconstruction of the existing and construction of 2nd railway track section Dugo Selo - Križevci in the amount of HRK 62,146 thousand, - project related to the works on the reconstruction of the railway station Rijeka - Brajdica and the construction of the intermodal container terminal Brajdica in the amount of HRK 11,998 thousand - project related to the modernization and electrification of the railway Zaprešić - Čakovec on the section Zaprešić - Zabok in the amount of HRK 69,090 thousand 68 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 25. RECEIVABLES FROM STATE AND OTHER INSTITUTIONS - continued - project of railway connection within the functional region Central Croatia - Lepoglava junction in the amount of HRK 2,745 thousand - project related to works on the reconstruction of the railway section Oštarije - Škrljevo (technical documentation) in the amount of HRK 6,881 thousand - project of upgrading and electrification of the existing railway line of importance for international traffic M601 Vinkovci - Vukovar in the amount of HRK 58,349 thousand - project of preparation of study and project documentation for modernization of wishes. railway M202 ZG-GK-Rijeka, section Karlovac-Oštarije in the amount of HRK 2,528 thousand - project Reconstruction of the existing and construction of the second track on the section Križevci- Koprivnica - state border in the amount of HRK 388,277 thousand - project of creating project documentation for the modernization of the railway line on the section Zagreb Main Station - Hrvatski Leskovac in the amount of HRK 1 thousand - project of creating study documentation for the modernization of the railway line M104 Novska – Tovarnik – DG, section Okučani – Novska in the amount of HRK 118 thousand - project for the creation of project documentation for the construction of the second track, modernization and renovation on the railway section Škrljevo - Rijeka - Jurdani in the amount of HRK 137 thousand 26. OTHER RECEIVABLES 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Other receivables Domestic prepayments 13,995 13,863 Prepayments to related parties 1,083 1,782 Less: value adjustment of prepayments (1,356) (1,356) Current maturity of long-term receivables (flats sold) (Note 20) 1,330 1,450 Other current receivables 7,096 7,220 Less: value adjustment of other current receivables (1,449) (1,449) Total 20,699 21,510 In the context of other receivables, the biggest item of receivables are receivables for flats sold for the new foreign currency savings in the amount of HRK 67,954 thousand (receivables for flats sold for the old foreign currency savings amounted to 123 thousand). The same is retained in Privredna banka Zagreb d.d. as an income of the Budget of the Republic of Croatia (Official Gazette No. 43/92. Art. 44) for which the State should issue bonds through Privredna banka Zagreb d.d. These receivables have been reversed in the separate Statement of financial position/ Balance sheet with receivables based on repurchasing flats (old and new foreign currency savings, reference to Note 44). 69 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 27. FINANCIAL ASSETS 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Loans given to related parties Proizvodnja-regeneracija d.o.o., Zagreb 14,234 14,234 Less: value adjustment (14,234) (14,234) - - Given loans, deposits, etc. Deposits 6,867 7,322 Other 140 140 7,007 7,462 Total 7,007 7,462 As a co-debtor for the long-term loan of Pro-Reg in Zagrebačka banka d.d., the Company paid loans installments and interests in the amount of HRK 17,719 thousand of which HRK 3,485 thousand were compensated. The rest of receivables of Pro-Reg for paid loans installments amount to HRK 14,234 thousand. For the same amount in 2013 the Company made value adjustment. During 2019, seven loans were given to the subsidiary Croatia expres putnička agencija d.o.o. in bankruptcy in the total amount of HRK 793 thousand (principal and interest), considering that the company was subject of bankruptcy proceedings and the recoverability of the amount of given loans during 2021 was uncertain, the Company made value adjustment in the amount of HRK 1,072 thousand relating to loans and other borrowings. On 30 Septemebr, 2021 daughter company Croatia express travel agency d.o.o. was deleted from the Commercial Court register in Zagreb. Deposits (term deposits) stated at this position refer to deposits for land expropriation to: a) Lika railway line in the amount of HRK 879 thousand, b) Railway line Gradec – Sv. Ivan Žabno in the amount of HRK 146 thousand, c) Railway line Plavno – Buzin in the amount of HRK 116 thousand, d) Railway line Dugo Selo – Križevci in the amount of HRK 2,758 thousand, e) Railway line Križevi – Koprivnica – State border in the amount of HRK 94 thousand, f) Railway line Zaprešić – Čakovec in the amount of HRK 557 thousand, g) Railway line Dugo Selo – Novska in the amount of HRK 559 thousand, h) Railway line Vinkovci – Vukovar in the amount of HRK 10 thousand and i) Railway line Hrvatski Leskovac – Karlovac in the amount of HRK 1,748 thousand. 70 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 28. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash at bank and are stated in the balance sheet. Foreign currency assets in banks are stated in Croatian kuna at the middle exchange rate of the Croatian National Bank at the balance sheet date. Exchange differences on foreign currency adjustments with the middle exchange rate of the Croatian National Bank are recorded in the separate income statement. 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Gyro account balance 330,027 53,378 Foreign currency account balance 69,647 40,845 Total 399,674 94,223 Minus: Overdraft on transaction accounts (Note 39) (9,111) (10,250) On 31 December 2022 in the annual separate Statement of Financial Position / Balance Sheet, there is a minus on the bank account in the amount of HRK 9,111 thousand which refers to the allowed overdraft on the transaction account in accordance with Agreement no. 1100651303 concluded with Erste & Steiermaerkische Bank d.d. and Agreement no. 679/20 concluded with OTP bank d.d. Overdraft on transaction accounts (revolving credit) in the annual separate financial statements as at 31 December 2022 has been reclassified to short-term liabilities to banks and other financial institutions (reference to Note 39) 71 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 29. PREPAID EXPENSES AND ACCRUED INCOME 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Prepaid expenses and accrued income (long-term) Paid expenses for railroad accidents 5,317 5,317 Other accruals 3,041 4,068 Other accruals – related 283 274 Calculation of MMPI costs - IBRD 8500 loan 2,050 2,345 10,691 12,004 Prepaid expenses and accrued income (long-term) Recalculated expenses to other companies 26 156 26 156 Total 10,717 12,160 Accrual in the amount of HRK 10,717 thousand (31 December 2021 in the amount of HRK 12,161 thousand) relate to deferred costs. In the context of accruals are recorded prepaid expenses for the railway accident in Rudine in the amount of HRK 5,317 thousand (31 December 2021: HRK 5,317 thousand). Other accruals to related parties mostly refer to the value adjustment of receivables based on interest, and which are recorded after payment as a financial income increasing the statement of other comprehensive income. Investments that are financed by loans that increased the capital of public good on 31 December 2022 and 31 December 2021 amount to HRK 1,666,981 thousand. In 2013 and 2014, the Government of the Republic of Croatia adopted the Decision on granting approval for the debt take over of the Company on the basis of the given guarantees and unpaid mandatory debts of the Debtors by increasing the capital of the public good to reduce the indebtedness and financial consolidation of the railway infrastructure operator in the total amount of HRK 3,334,166 thousand (2013: HRK 1,418,375 thousand and 2014: HRK 1,915,791 thousand). This approval relates to the takeover of long-term borrowing at Erste & Steiermaerkische Bank d.d., Erste & Steiermaerkische Bank d.d. and Sberbank d.d., Privredna banka Zagreb d.d., Zagrebačka banka d.d. and short-term debt with OTP banka d.d.. These loans are used to finance investments of public good. After taking over of the loan, the Company increased the capital of the public good for the mentioned amount and made correction of the capital for the amount of capitalized investments. 72 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 30. CAPITAL The subscribed capital of the Company amounts to HRK 224,188 thousand (31 December 2021 in the same amount). The only member of the Company is the Republic of Croatia. 31. CAPITAL RESERVES - restated Capital reserves amounts to HRK 7,469,395 thousand (31 December 2021 in the amount of HRK 6,978,641 thousand). Of this amount, HRK 7,466,321 thousand refers to public property in general use owned by the Republic of Croatia (31 December 2021 in the amount of HRK 6,975,567 thousand) and HRK 3,074 thousand relates to the reserves of HŽ Infrastruktura doo, Zagreb as at 31 December 2022 and 31 December 2021 (reference to Note 52). Movements in capital reserves are as follows: Public good HRK'000 Balance at 1 January 2022 6,921,520 Correction of prior period error 54,047 Balance at 1 January 2022 - restated 6,975,567 Other non-ownership changes 493 Activated fixed assets from the Budget of the Republic of Croatia 528,127 Activated fixed assets from the EU funds 214,844 Depreciation of the Public good assets (426,705) Activation of previously corrected assets in preparation 207,794 Net book value of the written-off Public good assets (33,799) Balance at 31 December 2022 7,466,321 Company Balance at 1 January 2022 3,074 Balance at 31 December 2022 3,074 32. REVALUATION RESERVES 31 Dec 2022 31 Dec 2021 HRKˊ000 HRKˊ000 Revalorizacijska rezerva Revalorizacija dugotrajne materijalne imovine 21,005 - Realizacija revalorizacijske rezerve (Bilješka 33.) (136) - 20,869 - 73 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 32. REVALUATION RESERVES - continued During 2022, the Company carried out an assessment of the market value of the real estate for the purposes of the lien on it. The basis of the assessment carried out in the Company's books is the increase in the value of long-term tangible assets (reference to Note 18) and the creation of revaluation reserves in the amount of HRK 21,005 thousand. The effect of the revaluation of long-term tangible assets amounted to HRK 23,515 thousand, after which the revaluation reserves were reduced by the deferred tax liability in the amount of HRK 2,510 thousand. (reference to Note 36) Transfer of revaluation reserve to retained earnings through the calculation of depreciation of long-term tangible assets as of 31 Dec, 2022 is HRK 136 thousand. (reference to Note 33). 33. RETAINED EARNINGS HRK'000 31 December 2022 157,541 Other non-ownership changes 7,932 Revaluation reserve realization 136 Payment of 60% of the profit for 2021 to the state budget of the Republic of Croatia (2,076) Profit for 2021 (Note 34) 3,460 31 December 2022 166,993 34. PROFIT OF THE BUSINESS YEAR For the period from January 1 to December 31, 2022, the Company, based on the difference between income and expenses, achieved a result of operations for the financial year in the amount of HRK 121,133 thousand (2021 in the amount of HRK 3,460 thousand). (reference to note 16) 31 Dec 2022 31 Dec 2021 Dobit financijske godine Ukupni prihodi 1,610,570 1,270,602 Ukupni rashodi 1,379,250 1,267,142 Dobit prije oporezivanja (Bilješka 16.) 231,320 3,460 Porez na dobit prije oporezivanja (Bilješka 17.) (29,392) - Dodatni porez na dobit (Bilješka 17.) (80,795) - Dobit financijske godine 121,133 3,460 Efektivna stopa poreza na dobit 47.63% 0.00% 74 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 34. PROFIT OF THE BUSINESS YEAR - continued The Company's operating profit for the year 2022 before taxation amounts to HRK 231,320 thousand, and is the result of non-reccuring and non-repeated transactions resulting from the concluded Settlement, Agreement and Agreement on Cession between the Republic of Croatia, represented by the Ministry of the Sea, Transport and Infrastructure, HŽ Carga d.o.o. and HŽ Infrastruktura d.o.o. The Republic of Croatia, the Ministry of Finance, the Tax Administration, the Office for Large Taxpayers, despite the explanations of the taxpayer HŽ Infrastruktura, had submitted on August 21, 2023, an invitation to correct the DPD form submitted on May 2, 2023 for the tax period 01 January, 2022 -31 December, 2022, for the reported decrease in taxable profit in the amount of HRK 231,288 thousand in 2022. In the invitation to amend the DPD, it is stated that the amount of HRK 231,288 thousand that HŽ Infrastruktura reported in the income of 2022 is not the result of the write-off of liabilities by creditors in bankruptcy and pre-bankruptcy proceedings, but of income from collected doubtful and disputed claims and interest income, which are the result of recording business changes based on the Settlement, Agreement and Assignment Agreement concluded between the Republic of Croatia represented by MMPI, HŽ Cargo d.o.o. and HŽ Infrastruktura d.o.o., which is why the taxpayer HŽ Infrastruktura cannot, when determining the base of additional income tax, show a decrease in taxable profit by HRK 231,288 thousand. Given that the decision was made to correct the Declaration on additional income tax (DPD form) for 2022, by increasing the tax base by HRK 231,288 thousand for 2022, the additional income tax amounts to HRK 80,795 thousand (increase - correction of additional tax on profit for HRK 76,325 thousand). (reference to Note 43) The aforementioned correction of the additional income tax affected the profit of the financial year 2022, which, after the correction, amounts to HRK 121,133 thousand. 35. PROVISIONS Provisions of jubilee Provisions Provisions awards and based on of court retirement tax Other disputes benefits liabilities provisions Total HRK'000 HRK'000 HRK'000 HRK'000 31 December 2021 96,270 37,654 21,430 32,483 187,837 Additional provisions 63,505 - - 1,310 64,815 Reversal of provisions (28,382) (6,374) (21,430) (31,380) (87,566) 31 December 2022 131,393 31,280 - 2,413 165,086 Liability of provisions for employee benefits is resulting from the collective agreement, and the provisions are determined in accordance with IAS 19 "Employee benefits" using the appraisal of a certified actuary. Provisions for employee benefits include provisions for retirement and jubilee awards. 75 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 35. PROVISIONS - continued Provisions are measured at the present value of expenses which are expected to be required to settle the obligation; using a discount rate of 4.14%. Actuarial estimates are derived based on the following main assumptions and according to the following calculation: 31 December 2022 Discount rate 4.14% Fluctuation rate 2.82% 76 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 36. LONG – TERM LIABILITIES 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Liabilities to banks and other financial institutions Zagrebačka banka d.d., Privredna banka Zagreb d.d., HBOR, Splitska banka d.d. and Hrvatska poštanska banka d.d. i Erste & Steiermaerkische Bank d.d. 258,325 309,278 Erste & Steiermaerkische Bank d.d. i Privredna banka Zagreb d.d. 130,000 - Erste & Steiermaerkische bank d.d., OTP banka d.d. i Privredna banka Zagreb d.d. 220,000 - OTP banka d.d. 354,896 354,080 HBOR loan 1100749 300,000 300,000 HBOR loan 1101416 400,000 400,000 HBOR loan 1101751 200,000 - HBOR loan1101752 245,000 - European Bank for Reconstruction and Development (EBRD) 125,163 101,940 World bank (IBRD) 243,041 319,273 2,476,425 1,784,571 Less: Current maturity (see Note 39) (538,801) (181,231) 1,937,624 1,603,340 Other long-term liabilities Liabilities for flats sold 5,627 9,170 Obligation according to tax supervision 14,945 - Minus: Current maturity (Note 44) (11,209) - 3,736 9,363 9,170 Deferred tax liability Tax liability for revaluation of tangible fixed assets 2,480 - 2,480 - Liabilities for loans, deposits Long - term operating lease liabilities - IFRS 16 16,363 23,119 16,363 23,119 Total 1,965,830 1,635,629 In accordance with the Railway Act, Republic of Croatia took over the repayment of long-term loan and related interests liabilities concluded until 1 January 2006 and the obligations for loans are removed from the records in favour of state aid. After activation of fixed assets of public good purchased from the loan, equity of public good is increased. Depreciation of public good long-term assets is not recognized as an expense and it is charged to public good equity. 77 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 36. LONG – TERM LIABILITIES - continued Foreign exchange differences and interest upon long-term loan liabilities are stated by charging / crediting state subsidies. Loans concluded with domestic banks have a fixed interest rate, while those concluded with foreign financial institutions have a variable interest rate: Zagrebačka banka d.d., Privredna banka Zagreb d.d., HBOR, Splitska banka d.d., Hrvatska poštanska banka d.d. i Erste & Steiermaerkische bank d.d. 2.92% Fixed Erste & Steiermaerkische bank d.d. i Privredna banka Zagreb d.d. 0.59% Fixed Erste & Steiermaerkische bank d.d., OTP banka d.d. i Privredna banka Zagreb d.d. 0.15% Fixed OTP banka d.d. 1.67% Fixed HBOR loan 1100749 1.48% Fixed HBOR loan 1101416 1.65% Fixed HBOR loan1101751 0.80% Fixed HBOR loan 1101752 0.26% Fixed European Bank for Reconstruction and Development (EBRD) 1.00% Variable World bank (IBRD) 2.92% Variable Other long-term liabilities relate to long-term loans to employees for the purchase of HZ flats. Pursuant to the Law on Sale of Flats with Tenancy Right (Official Gazette 43/1992), the flats sold were removed from the Company's assets and capital and posted as employee claims and at the same time an obligation towards the seller of the apartment was created. In addition to liabilities for long-term loans to workers for the purchase of apartments, the rest of the other long-term liabilities relate to liabilities for tax supervision in the amount of HRK 3,736 thousand. In previous years, the liability was shown on the provisions for expenses on the basis of tax liabilities. (reference to Notes 35 and Note 44) Within long-term liabilities as of December 31, 2022. a deferred tax liability in the amount of HRK 2,480 thousand was recorded. (reference to Notes 17 and 32) 78 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 36. LONG – TERM LIABILITIES - continued 36.1. The changes in liabilities to banks and other financial institutions during the year may be summarized as follows: HRK'000 Balance at 1 January 2022 1,784,571 New loans 863,846 Repayment (174,600) Foreign exchange differences 2,608 2,476,425 Less: current maturity (538,801) Balance at 31 December 2022 1,937,624 The repayment schedule of long-term liabilities to banks and other financial institutions become due for the repayment: HRK'000 Due in one to two years 733,070 Due in two to three years 318,071 Due in three to four years 248,693 Due in four to five years 272,264 Due in more than five years 365,526 Total 1,937,624 79 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 37. LIABILITIES TO RELATED PARTIES In the context of short – term liabilities are stated liabilities to related parties for purchased materials, works performed, services and other liabilities (calculation of utility costs (electricity, water, network fee, etc), calculation of rent and other according to section 6.2. Plan of division of HŽ Hrvatske željeznice d.o.o. (obligations and other rights are defined by court decisions, administrative decisions, notaries and out of court settlement), per diems, costs of official car and business travel costs, damage claims, rail, P-2d tickets, subsidies P-7, etc). 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Liabilities to related parties Subsidiaries Pružne građevine d.o.o., Zagreb 32,499 54,520 32,499 54,520 Associated company Proizvodnja i regeneracija d.o.o. u stečaju, Zagreb 2,699 2,699 Other state-owned railroad companies HŽ Putnički prijevoz d.o.o., Zagreb 1,175 986 HŽ Cargo d.o.o., Zagreb (Note 16) 937 776 Tehnički servisi željezničkih vozila d.o.o., Zagreb 1,523 917 Održavanje vagona d.o.o., Zagreb 1,526 1,362 TŽV Gredelj d.o.o. u stečaju, Zagreb 215 1,751 5.376 5,792 Other state-owned companies Hrvatski operator prijenosnog sustava d.o.o.,Zagreb 1,097 1,805 HEP ODS d.o.o., Zagreb 992 933 HEP Opskrba d.o.o., Zagreb 33,485 26,349 HEP Toplinarstvo d.o.o., Zagreb 511 409 HP - Hrvatska pošta d.d., Zagreb 77 149 Narodne novine d.d., Zagreb 65 29 Hrvatske vode d.o.o., Zagreb 211 28 36,438 29,702 Total 77,012 92,713 80 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 37. LIABILITIES TO RELATED PARTIES - continued 37.1. Ageing structure toward related parties is as follows: Due HRK'000 Undue Up to 30 30-60 60-90 90-120 More than days days days days 120 days Total 31 December 2022 72,803 1,185 3 - 57 2,964 77,012 31 December 2021 87,383 2,082 23 105 183 2,937 92,713 38. LIABILITIES FOR BORROWINGS, DEPOSITS, ETC. 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Liabilities for borrowings and deposits Liabilities for received deposits 5,728 4,065 Other 99 99 5,827 4,164 Public good Liabilities toward CERP 190,054 190,054 Liabilities for borrowings and deposits 195,881 194,218 The amount of HRK 190,054 refers to liabilities to the Croatian Privatization Fund (now the Center for Restructuring and Sale) on the basis of settlement of the debt to INA and HEP. According to the conclusion of the Croatian Government, class: 305-01/01-02 /06, Regulation No. 503114- 01-3 from 25 June 2001, the Croatian Privatization Fund settled the debt of Hrvatske željeznice in the amount of HRK 283,833 thousand to INA and HEP Zagreb. Hrvatske željeznice settled liabilities to INA and HEP for a total amount and submitted to the Croatian Privatization Fund shares and properties that are not the core business activities. CPF is charged interest on the outstanding amount after which the debt of the company amounted to HRK 319,415 thousand. Part of the debt was settled in 2013 and 2014, as follows • by offsetting receivables in the amount of HRK 15,360 thousand (receivables for shares sold of Privredna banka Zagreb and previously paid dividend by Privredna banka and by Končar d.d. on qyro account of CPF), • by transferring shares of the Hotel Miror d.o.o. to the Republic of Croatia in the amount of HRK 75,544 thousand, 81 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 38. LIABILITIES FOR BORROWINGS, DEPOSITS, ETC. - continued • by transferring shares of the Hotel Mursa d.o.o. to the Republic of Croatia in the amount of HRK 42,682 thousand, • by transferring real estate in Vinkovci („Hungarian school“), Kozala („lodging Rijeka“) and Koprivnica („lodging Koprivnica“) to the Republic of Croatia in the amount of HRK 56,586 thousand. In the Decision of the Croatian Government, Class No.: 022-03/13-04/266, No.: 50301-05/20-13-2 from 13 June 2013 under No. I. Article. 3, is stated that for the rest of the debt in the amount of HRK 304,055 thousand (debt balance after completion of set-off in the amount of HRK 15,360 thousand) will be made transfer of shares and real estate owned by the Company whose market value must be 20% higher than the mentioned amount or in the amount of HRK 364,866 thousand. Considering that the Company, according to the previously mentioned Decision of the Croatian Government should make the transfer of shares and real estate owned by the Company whose market price should be in the amount of HRK 364,866 thousand, and so far has been carried out the amount of HRK 174,812 thousand, the remaining amount to be settled is HRK 190,054 thousand, in accordance with the Decision of the Croatian Government on amendments to the Decision on the mutual settlement of debt between the Company, Agency for State Property Management and the Republic of Croatia from 19 March 2014, Class No.: 022 -03/14-04/69, No. 50301-05/18-14-2. According to these, existing debt to CERP was necessary to increase by 20% or for HRK 60,811 thousand in the business books of the Company, after that the same amounts to 190,054 thousand. 39. LIABILITIES TO BANKS AND OTHER FINANCIAL INSTITUTIONS 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Liabilities to banks and other financial institutions Current maturity: domestic loans (Note 36) 366,299 51,546 Current maturity: foreign loans (Note 36) 172,502 129,686 Current maturity: Transaction account overdraft (revolving loan /i/ 9,111 10,250 Total 547,912 191,482 /i/ Liabilities for loans related to the allowed overdraft on the transaction account (revolving loans) are stated on the basis of the agreed allowed overdraft with OTP banka d.d. and Erste & Steiermaerkische Bank d.d., all contracted for up to HRK 5,000 thousand. On 31 December 2022 the Company used the overdraft in the amount of HRK 9,111 thousand. (reference to Note 28) 82 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 39. LIABILITIES TO BANKS AND OTHER FINANCIAL INSTITUTIONS - continued Changes in liabilities to banks and other financial institutions during the year are as follows: HRKˊ000 Balance at 1 January 2022 191,482 Repayment of principal of credit indebtedness - EBRD (15,719) Repayment of principal of credit indebtedness – EBRD- due in 2023 34,342 Repayment of principal of credit indebtedness – IBRD (114,006) Repayment of principal of credit indebtedness – IBRD- due in 2023 138,198 Repayment of principal of credit indebtedness - Zagrebačka banka d.d., Privredna banka Zagreb d.d., HBOR, Splitska banka d.d., Hrvatska poštanska banka d.d. i Erste & Steiermaerkische bank d.d. (51,699) Repayment of principal of credit indebtedness – Zagrebačka banka d.d., Privredna banka Zagreb d.d., HBOR, Splitska banka d.d., Hrvatska poštanska banka d.d. i Erste & Steiermaerkische bank d.d. - due in 2023 51,819 Repayment of principal of credit debt HBOR loan 1100749 - due in 2023 21,428 Repayment of principal of credit debt HBOR loan 1101752 - due in 2023 245,000 Repayment of principal of credit debt OTP - due in 2023 48,206 Repayment of revolving loan (transaction account overdraft) (10,250) Repayment of revolving loan (transaction account overdraft) - due in 2023 9,111 Balance at 31 December 2022 547,912 40. LIABILITIES FOR PREPAYMENTS 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Liabilities for prepayments From domestic customers 372 298 From foreign customers 3,473 1,458 Total 3,845 1,756 41. TRADE PAYABLES 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Trade payables Domestic 260,126 329,725 Foreign 2,521 4,424 Total 262,647 334,149 83 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 41. TRADE PAYABLES - continued 41.1. Ageing structure of trade payables is as follows: Due Up to Total 30-60 60-90 90-120 More than 120 30 days days days days HRK'000 Undue days 31 December 2022 242,759 4,933 351 - - 14,604 262,647 31 December 2021 312,431 5,800 3,204 302 152 12,260 334,149 42. LIABILITIES TO EMPLOYEES 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Liabilities to employees Liabilities for net salaries 37,513 32,228 Severance payments 2,601 1,945 Other liabilities 6,905 4,040 Total 47,019 38,213 43. LIABILITIES FOR TAXES, CONTRIBUTIONS AND SIMILAR FEES 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Liabilities for taxes, contributions and similar fees Contributions from salaries 11,446 9,412 Contributions on salaries 9,486 7,818 Tax and surtax 4,534 3,068 Income tax (Notes 17 and 34) 29,422 - Additional income tax (Notes 17 and 34) 80,795 - Other liabilities 64 (9) Total 135,747 20,289 84 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 44. OTHER SHORT – TERM LIABILITIES 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Other short-term liabilities Liabilities for invoiced goods 415 445 Current maturity of long-term liability (obligation under supervision) 11,209 - (Note 36) Liabilities to the Ministry of Finance /i/ 1,332,446 1,256,386 Other liabilities 2,757 2,425 Total 1,346,827 1,259,256 /i/ Liabilities to the Ministry of Finance in the amount of HRK 1,332,446 thousand relate to liabilities for interest, principal and fee on loan liabilities of the Company paid by the Ministry of Finance (as at 31 December 2021 liabilities amount to HRK 1,256,386 thousand). Liabilities to the Ministry of Finance 31 Dec 2022 HRK'000 For credit at Erste & Steiermarkische Bank d.d., SG - Splitska banka d.d. and OTP banka d.d. 974,732 - principal 843,619 - due interest 127,637 - fee 3,476 For credit at Privredna banka Zagreb d.d., Istarska kreditna banka Umag d.d. and OTP banka d.d. 178,379 - principal 149,965 - due interest 28,354 - fee 60 For credit at Zagrebačka banka d.d., Privredna banka Zagreb d.d., HBOR, Splitska banka d.d., Hrvatska poštanska banka d.d. and Erste & Steiermaerkische Bank d.d. 148,234 - principal 103,263 - due interest 44,393 - fee 578 For loan at HBOR 1100749 8,342 - principal 8,342 For loan at HBOR 1101416 6,379 -due interest and fee 6,379 For loan at HBOR 1101751 230 -due interest and fee 230 For loan at Privredna banka Zagreb d.d., Erste & Steiermaerkische Bank d.d. 108 -principal 108 For credit at OTP bank d.d. 16,042 - due interest and fee 16,042 Total 1,332,446 85 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 44. OTHER SHORT – TERM LIABILITIES - continued Other short-term liabilities in the amount of HRK 73,840 thousand include liabilities to the seller of the apartment on the basis of redemption for foreign currency savings, which will be closed after the collection of foreign currency from banks. The previously stated short-term liabilities in the Company's Balance Sheet are offset with trade receivables in the amount of HRK 73,840 thousand (see Notes 20 and 26). On the 31 December 2022 the Company has stated liabilities for the return of funds on the basis of incurred liabilities under EU projects paid from own sources in the amount of HRK 602,270 thousand related to works/services under the following contracts: 31 Dec 2022 HRK'000 RECONSTRUCTION OF THE EXISTING AND CONSTRUCTION II. RAILROAD TRACK AT THE 62,146 DUGO SELO - KRIŽEVCI RAILWAY CONNECTION WITHIN THE FUNCTIONAL REGION OF CENTRAL CROATIA - LEPOGLAVSKA CONNECTION 2,745 WORKS ON RECONSTRUCTION OF OŠTARIJE-ŠKRLJEVO RAILWAY STATION 6,881 WORKS ON RECONSTRUCTION OF RIJEKA- BRAJDICA RAILWAY STATION 11,998 UPGRADE AND ELECTRIFICATION OF THE EXISTING RAILWAY RAIL OF SIGNIFICANCE FOR INTERNATIONAL TRAFFIC 58,349 VINKOVCI - VUKOVAR MODERNIZATION AND ELECTRIFICATION OF ZAPREŠIĆ - ČAKOVEC RAILWAY 69,090 RECONSTRUCTION OF THE EXISTING AND CONSTRUCTION OF THE SECOND RAILWAY ON THE SECTION KRIŽEVCI- 388,277 KOPRIVNICA-STATE BORDER PROJECT OF CREATION OF STUDY AND PROJECT DOCUMENTATION FOR MODERNIZATION DESIRE. RAILWAYS M202 ZG 2,528 GK-RIJEKA, KARLOVAC-OŠTARIJE SECTION PROJECT FOR THE CREATION OF PROJECT DOCUMENTATION FOR THE MODERNIZATION OF ŽELJ RAILWAY ON THE ZG- 1 GLAVNI KOLODVOR-CRO. LESKOVAC RAILWAY SECTION PROJECT OF CREATION OF STUDY DOCUMENTATION OF THE MODERNIZATION OF THE DESIRE RAILWAY ON THE 118 OKUČANI-NOVSKA SECTION PROJECT FOR THE CREATION OF PROJECT DOCUMENTATION FOR THE CONSTRUCTION OF THE SECOND TRACK, 137 MODERNIZATION AND RENOVATION ON THE SKRLJEVO-RIJEKA-JURDANI RAILWAY SECTION TOTAL 602,270 In the separate Statement of financial position/Balance sheet, these liabilities have been reversed with receivables from the budget for EU projects in the amount of 602,270 thousand (reference to Note 25). 86 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 45. ACCRUED EXPENSES AND DEFERRED INCOME 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Accrued expenses and deferred income (long term) State subsidies for modernisation of railways /i/ 1,473,659 1,802,556 Deferred income 4,125 4,125 Dividends from investments 954 954 Foreign exchange differences on loans 47 2,633 Deferred payment of costs - EU 95,026 92,797 Grants – CEF /ii/ 903,543 700,654 Grants – EU (ESF) /iii/ 230,964 134,856 Other 3,268 3,794 2,711,586 2,742,369 Accrued expenses and deferred income (short term) Interest and loan fee - PG (2,609) (6,112) Grants - EU (ESF) - 6,791 Other 46,604 30,081 43,995 30,760 Total 2,755,581 2,773,129 Accrual in the amount of HRK 2,755,581 thousand (31 December 2021: HRK 2,773,129 thousand) refers to: /i/ State subventions related to the modernization of the public good and loan repayments relate to the funds of the Republic of Croatia for the purchase of fixed assets. The capital of the public good is increased by activating the funds. Amount of amortization of fixed assets of the public good is charged to the capital of the public good. /ii/ In the amount of HRK 903,543 thousand grants for projects funded from the CEF - Connecting Europe Facility were reported as follows: - Grant Agreement for the Project "Development of Project and Other Documentation for Construction of Another Track, Modernization and Renovation of Railway Section Škrljevo - Rijeka - Jurdani ”(Contract No. INEA / CEF / TRAN / M2014 / 1044654 - signed in November 2015) - grant received on 31 December 2022 amount to HRK 34,659 thousand - Grant Agreement for the Project "Multimodal Platform for the Development of the Port of Rijeka and Interconnection with the Container Terminal of the Adriatic Gate", works on the reconstruction of the railway station Rijeka - Brajdica and the construction of the intermodal container terminal Brajdica (Contract INEA / CEF / TRAN / M2014 / 1044613 - signed in November 2015) - Grants received on 31 December 2022 amounted to HRK 201,748 thousand; 87 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 45. ACCRUED EXPENSES AND DEFERRED INCOME - continued - Grant Agreement for the Project "Technical Assistance to Improve the Capacity Building of Railway Infrastructure Manager in Croatia" (Contract MOVE / B4 / SUB / 2014-705 / CEF / PSA2 / 2 / SI2.714460 - signed in December 2015) - Grants received on 31 December 2022 amounted to HRK 730 thousand; - Grant Agreement for the project "Reconstruction of the existing and construction II. railroad track at the Križevci-Koprivnica-State border" (contract No. INEA / CEF / TRAN / M2015 / 1126931 - signed in October 2016) - Grant received on 31 December 2022 amounted to HRK 600,045 thousand; - Grant Agreement on the Project "Feasibility Study and Economic Financial Analysis of the Modernization of the Railway Line M104 Novska-Tovarnik-DG, Okučani-Novska" - Receipt of Grants as of 31 December 2022 amounted to HRK 16,545 thousand; - Grant Agreement on the Project "Modernization of the Railway Line M202 Zagreb GK - Rijeka on the part of Oštarije-Škrljevo" - Received grants on 31 December 2022 amounted to HRK 16,949 thousand; - Grant Agreement for the Project "Development of the Railway Junction Development Study Zagreb" and the Project "Development of a Study on the Introduction of the European Rail Traffic Management System (ERTMS)" - Grants received on 31 December 2022 amounted to HRK 5,640 thousand; - Grant Agreement no. INEA / CEF / TRAN / M2019 / 1171547 for the Project "Application of telematics applications for European interoperability" - funded by the Connecting Europe Facility (CEF) 2014 - 2021 - funds received on 31 December 2022 amounted to HRK 469 thousand. - Grant Agreement no. INEA / CEF / TRAN / M2020 / 2097375 for the project "Establishment of a monitoring system for security, insurance and technical control" - received grants on 31 December 2022 amounted to HRK 16,227 thousand. - Grant Agreement no. INEA7CEF7TRAN7M202072440898 for the project "Study for the upgrade of the section of the railway Zagreb main station - Hrvatski Leskovac" - received grants on 31 December 2022 amount to HRK 10,531 thousand. 88 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 45. ACCRUED EXPENSES AND DEFERRED INCOME - continued /iii/ In the position deferred payment of expenses and income of the future period (short-term), the non-refundable funds received for OPKK projects were recorded in total amounted of HRK 230,964 thousand: - project Construction of a new railway for suburban traffic sections Gradec- Sveti Ivan Žabno in the amount of HRK 870 thousand - project Reconstruction of the existing and construction of the second track of the railway section Dugo Selo - Križevci in the amount of HRK 405 thousand - project of Modernization and electrification of the railway Zaprešić - Čakovec on the section Zaprešić (exclusively) - Zabok (inclusive) in the amount of HRK 7,945 thousand - project of reconstruction of the existing and construction of the second track on the section Hrvatski Leskovac-Karlovac in the amount of HRK 98,620 thousand - project Upgrading and electrification of the existing railway line of importance for international traffic M601 in the amount of HRK 24,684 thousand - project of railway connection within the functional region of central Croatia - Lepoglava junction in the amount of HRK 743 thousand - project of reconstruction of the freight part of the Rijeka station and construction of a terminal for railway intermodal transport at the container terminal Zagrebačka obala in the amount of HRK 96,767 thousand - the project of insurance and modernization of railway-road crossings in the amount of HRK 930 thousand When compiling the annual financial statements, a fee for unused vacation days was calculated at the expense of the results of the current accounting period. According to Article 82 of the Labor Act, in the case of termination of the employment contract, the employer is obliged to pay compensation to the employee who has not used the vacation in full instead of using the annual vacation. The benefit is determined in proportion to the number of days of unused vacation. The separate Profit and Loss Account and the Statement of Comprehensive Income in 2022 are charged to the calculated costs in the amount of HRK 32,749 thousand. Calculated costs of unused vacation that were recorded on 31 December 2021 in the amount of HRK 24,822 thousand were abolished by 30 June 2022 in favour of the separate Profit and Loss Account and the Statement of Comprehensive Income in order to realize these costs on the basis of the right to use the day of annual vacation for 2021. 89 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 45. ACCRUED EXPENSES AND DEFERRED INCOME - continued The calculation of new expenses for unused vacation days for 20221 and the elimination of these expenses from 2021 resulted in a positive net effect on the annual separate financial statements for 2022 in the amount of HRK 7,927 thousand. In the position of short-term deferred paid expenses and income for the future period, the employer's liability for unused annual vacation to the employee as at 31 December 2022 was recorded in the amount of HRK 32,749 thousand. 90 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 46. OFF BALANCE SHEET ITEMS Off-balance sheet items are stated at 31 December 2022 in the amount of HRK 18,049,516 thousand (31 December 2021 in the amount of HRK 16,055,618 thousand). 31 Dec 2022 31 Dec 2021 HRK'000 HRK'000 Received Guarantees 7,306,345 6,853,858 Guarantees given 14,500 27,000 Claims for funds destroyed in the war 269 269 Property in the unavailable area 369,836 369,836 EU – guarantee letters 355,036 355,036 EU agreements 9,990,264 8,672,613 EU – payment request to SAFU 13,266 (222,996) Total 18,049,516 16,055,616 Recording of unavailable, taken and completely destroyed property during the war was carried out in accordance with the Regulation of expression of assets, claims and obligations in war conditions (Official Gazette No. 2/92) and the Croatian Railways Act (Official Gazette No. 53/94). In the off-balance sheet item is stated asset at purchase value. Evidence of funds in an inaccessible area of the Republic of Croatia refers to the areas that have been mined and inaccessible to the census commission and which has not been listed yet: - railway lines and buildings on the section Sl. Brod – Bosanski Brod - railway lines and buildings, SIT and ETP devices on the sections: - Sisak-Caprag-Topusko and Sisak-Caprag-Sunja-Jasenovac - other assets in an inaccessible area 91 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 46. OFF BALANCE SHEET ITEMS - continued On 31 December 2022 the Company has registered EU contracts in the amount of HRK 9,990,264 thousand in its off balance sheet items: 31.12.2022. HRKˊ000 DB ENGINEERING 40,391 GERMANY THE RECONSTRUCTION OF THE RAILWAY LINE DUGO SELO-NOVSKA I. PHASE 1. THE PREPARATION OF DOCUMENTATION FOR RECONSTRUCTION OF THE 77,935 TYPSA SPAIN RAILWAY LINE DUGO SELO - NOVSKA, ZGB-SISAK-MOSLAVINA 1,517,122 MMPI - Grant RECONSTRUCTION OF THE EXISTING AND CONSTRUCTION II. RAILROAD TRACK AT Agreement ASSETS DUGO SELO - KRIŽEVCI 1,239,558 2. DIV-DALEKOVOD- RECONSTRUCTION OF THE EXISTING AND CONSTRUCTION II. RAILROAD TRACK AT ZAGREB-MONTAŽA DUGO SELO - KRIŽEVCI 14,425 SGS ADRIATICA - RECONSTRUCTION OF THE EXISTING AND CONSTRUCTION II. RAILROAD TRACK AT INVESTINŽENJERING DUGO SELO - KRIŽEVCI 3. 67,290 URS POLSKA ŽELJEZNIČKA LINIJA GOLJAK - SKRADNIK 4. 41,372 ITALFERR ITALY THE RECONSTRUCTION OF THE RAILWAY LINE HRVATSKI LESKOVAC - KARLOVAC 5. 39,937 URS POLSKA II. RAILROAD TRACK KRIŽEVCI - KOPRIVNICA 64,507 BOMBARDIER ITALY WORKS - SS DOUBLE TRACK OKUČANI - NOVSKA AND RAILWAY STATION RAJIĆ DB ENGINEERING 14,364 6. GERMANY WORKS - SS DOUBLE TRACK OKUČANI - NOVSKA AND RAILWAY STATION RAJIĆ SALCEF ITALY WORKS - SS DOUBLE TRACK OKUČANI - NOVSKA AND RAILWAY STATION RAJIĆ 193,936 18,830 7. THE PREPARATION OF DOCUMENTATION FOR THE RECONSTRUCTION AND ACCIONA ITALY ELECTRIFICATION OF THE RAILWAY LINE VINKOVCI - VUKOVAR 22,738 8. THE CONCEPTUAL SOLUTIONS AND STUDY DOCUMENTATION OF THE MMPI-SAFU-HŽI MODERNIZATION OF THE RAILWAY JUNCTION ZAGREB 2,720,993 RECONSTRUCTION PROJECT OF THE EXISTING AND CONSTRUCTION OF THE MMPI-SAFU-HŽI SECOND RAILWAY LINE HRVATSKI LESKOVAC-KARLOVAC MOBILITA EVOLVA, PPG, RECONSTRUCTION PROJECT OF THE EXISTING TRACK AND CONSTRUCTION OF 35,608 9. YUKSEL ANOTHER TRACK ON THE HRVATSKI LESKOVAC-KARLOVAC SECTION STRABAG, STRABAG AG, RECONSTRUCTION PROJECT OF THE EXISTING TRACK AND CONSTRUCTION OF 1,713,193 STRABAG RAIL ANOTHER TRACK ON THE HRVATSKI LESKOVAC-KARLOVAC SECTION 11,209 10. THE PROJECT OF CONNECTING WITH RAIL WITHIN THE FUNCTIONAL REGION OF MMPI-SAFU-HŽI THE CENTRAL CROATIA – LEPOGLAVA JUNCTION THE DEVELOPMENT OF PROJECT FOR MODERNIZATION OF RAILWAY SECTION 15,608 11. KNIN - SPLIT RAILWAY LINE M604 Oštarije – Knin - Split, M606 Knin - Zadar, M607 MMPI-SAFU-HŽI Perković - Šibenik 15,422 12. THE STUDY DOCUMENTATION OF THE MODERNIZATION OF TRACK OŠTARIJE-KNIN MMPI-SAFU-HŽI RAILWAY LINE M604 OŠTARIJE – KNIN - SPLIT DB ENGINEERING 13,476 GERMANY ZAPREŠIĆ-ZABOK DB 13. 530,655 SWIETELSKY ZAPREŠIĆ-ZABOK SWIET THE MODERNIZATION AND ELECTRIFICATION OF THE RAILWAY LINE ZAPREŠIĆ - 614,390 MMPI-SAFU-HŽI ZABOK 516,331 14. THE UPGRADING AND ELECTRIFICATION OF THE EXISTING RAILWAY LINE MMPI-SAFU-HŽI VINKOVCI - VUKOVAR THE DEVELOPMENT OF PROJECT AND OTHER DOCUMENTATION FOR 376,340 15. MODERNIZATION OF RAILWAY LINE M202 Zagreb GK - Rijeka SECTION KARLOVAC COMSA - OŠTARIJE 5,130 16. THE UPGRADING AND ELECTRIFICATION OF THE EXISTING RAILWAY LINE RUBICON VINKOVCI - VUKOVAR 69,504 17. THE UPGRADING AND ELECTRIFICATION OF THE EXISTING RAILWAY LINE MMPI-SAFU-HŽI VINKOVCI - VUKOVAR TOTAL 9,990,264 92 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 47. TRANSACTIONS WITH RELATED PARTIES Business activities Financial activities Related party Receivables Liabilities Income Expenses Receivables Liabilities Income Expenses HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 2022 year Pružne građevine 9,757 32,499 3,199 87,877 - - - 44 d.o.o., Zagreb Proizvodnja i - 2,699 - - - - - - regeneracija d.o.o., HŽ Zagreb Putnički 18,057 1,175 67,802 4,876 - - 666 205 prijevoz d.o.o., Zagreb HŽ Cargo d.o.o., 6,398 937 40,881 4,893 - - 90,564 584 Zagreb Tvornica 9 215 12 287 - - - - željezničkih vozila Gredelj d.o.o., Održavanje 2,892 1,526 950 1,591 - - - 71 Zagreb vagona d.o.o., Zagreb Tehnički servisi 293 1,523 295 2,952 - - - - željezničkih vozila d.o.o., Zagreb Odašiljači i veze 86 - 832 - - - - - d.o.o., Zagreb Hrvatske šume 7 - 99 - - - - - d.o.o., Zagreb Hrvatski operator - 1,097 - - - - - 1 prijenosnog sustava HEP d.o.o., Opskrba - 33,485 - 9,965 - - - 113 Zagreb d.o.o., Zagreb HEP ODS d.o.o., 5 992 78 7,857 - - - 8 Zagreb Hrvatske vode, - 211 - 4,631 - - - 1 Zagreb HEP Toplinarstvo - 511 - 2,743 - - - 2 d.o.o., Zagreb HP – Hrvatska - 77 - - - - - - pošta d.d., Zagreb Narodne Novine - 65 - 214 - - - - d.d., Zagreb Total 37,504 77,012 114,148 127,886 - - 91,230 1,029 93 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 47. TRANSACTIONS WITH RELATED PARTIES (continued) Business activities Financial activities Related party Receivables Liabilities Income Expenses Receivables Liabilities Income Expenses HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 2021 year Pružne građevine 5,789 54,520 2,371 122,030 - - - 193 d.o.o., Zagreb Proizvodnja i - 2,699 - - - - - - regeneracija d.o.o., HŽ Zagreb Putnički 24,263 986 70,466 222 - - 216 69 prijevoz d.o.o., Zagreb HŽ Cargo d.o.o., 178,313 776 41,583 2,988 - - 826 117 Zagreb Tvornica 6 1,751 26 1,563 - - - - željezničkih vozila Gredelj d.o.o., Održavanje 2,101 1,362 1,008 1,897 - - - - Zagreb vagona d.o.o., Zagreb Tehnički servisi 190 917 371 3,793 - - - - željezničkih vozila d.o.o., Zagreb Odašiljači i veze 369 - 944 - - - d.o.o., Zagreb - - Hrvatske šume 11 - 91 - - - - - d.o.o., Zagreb Hrvatski operator - 1,805 - - - - - - prijenosnog sustava HEP d.o.o., Opskrba - 26,349 - 13,021 - - - 109 Zagreb d.o.o., Zagreb HEP ODS d.o.o., - 933 30 7,923 - - - 6 Zagreb Hrvatske vode, - 28 - - - - - 2 Zagreb HEP Toplinarstvo - 409 - 2,356 - - - 6 d.o.o., Zagreb HP – Hrvatska - 149 - - - - - - pošta d.d., Zagreb Narodne Novine - 29 - - - - - - d.d., Zagreb Total 211,042 92,713 116,890 155,793 - - 1,042 502 94 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 48. NON – FINANCIAL STATEMENT AND CONSOLIDATED FINANCIAL STATEMENTS The preparation of a separate non-financial report on the Company's sustainability for 2022 is in progress. In accordance with the provisions of Article 21 a, paragraph 8b) of the Accounting Act, the non-financial report will be published on the Company's website within 6 months from the balance sheet date, i.e. by June 30, 2023. The report will be published at the following link; http://www.hzinfra.hr/. The annual consolidated financial statements of the Company will be published by September 30, 20232 in accordance with the directives of Article 30 a, paragraph 2 of the Accounting Act. 49. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 49.1. Financial risk management objectives The Company controls and manages financial risk that could affect the Company's operations through internal risk reports in which risk exposures are analysed based on the degree and significance of market risk, interest rate risk, credit risk, currency risk and liquidity risk. 49.2. Capital risk management The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of debt, which includes credits, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, legal and other reserves and retained earnings/transferred loss. 49.3. Gearing ratio The Management board reviews the capital structure on a semi-annual basis. As part of this review, Management considers the cost of capital and the risks associated with each class of sources of funding. The gearing ratio at the year’s end is presented as follows: 31 Dec 2022 31 Dec 2021 DESCRIPTION HRK '000 HRK '000 Debt 2,485,537 1,794,822 Cash and cash equivalents (399,674) (94,223) Net debt 2,085,863 1,700,599 Equity 8,002,578 7,363,830 Net debt to equity ratio 26,06% 23,09% 95 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 49. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT - continued Categories of financial instruments 31 Dec 2022 31 Dec 2021 DESCRIPTION HRK '000 HRK '000 Financial assets Loans and receivables (including cash and cash equivalents) 412,640 111,318 Financial liabilities Amortized cost 4,506,395 3,767,705 49.4. Market risk The Company operates on the Croatian and international markets. The Company’s management determines the prices of its products and services separately for domestic and foreign markets. There were no significant changes to the influence of market risks to the Company’s operations. 49.5. Interest rate risk The interest rate risk is a risk that the value of a financial instrument will fluctuate due to changes in market rates relative to the interest rate applicable to the financial instrument. Interest rate cash flow risk is the risk that the interest cost of an instrument will fluctuate over time. Due to the fact that The Company uses loans with changeable interest rates, it is exposed to the interest rate risk. Sensitivity analysis on interest rates Sensitivity analysis was performed only for the financial instruments with variable interest rates based on the exposure to interest rates at the end of the reporting period assuming that the outstanding amount at the end of the reporting period was unsettled during whole year. If interest rates were 50 basis points higher, the balance of loan indebtedness as at 31 December 2022 would be influenced by the increase of the interest rate expense in the amount of HRK 12,382 thousand (31 December 2021: HRK 8,923 thousand) based on exposure to the interest rate risk. This is mainly attributable to the Company's exposure to interest rates on loans with variable interest rates. 49.6. Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. Financial assets that potentially expose the Company to credit risk consist mainly of cash, money equivalents and trade receivables. Trade receivables have been adjusted to allow for bad and doubtful accounts. There were no significant changes to the influence of credit risks to the Company’s operations. 96 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 49. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT – continued 49.7. Currency risk The official currency of the Company is the Croatian kuna (‘’HRK’’) until 31 December, 2022. However, certain transactions denominated in foreign currencies are calculated in the Croatian kuna by applying the exchange rates in effect at the date of the Balance Sheet / Statement of Financial Position, and consequently, the Company is potentially exposed to risks of changes in currency rates. As the Company has a significant number of loans contracted with a currency clause (generally related to EUR), the Company is significantly exposed to this risk. Net carrying amount of cash and cash equivalents and liabilities of the Company denominated in foreign currencies on the Balance Sheet date is shown in the table below: Liabilities Assets Balance at 31 December 2022 2021 2022 2021 HRK 000 HRK 000 HRK '000 HRK '000 EUR 2,495,310 1,812,233 158,955 121,739 Analysis of sensitivity to foreign currency The Company is primarily exposed to the countries whose currency is EUR. The following table analyses the foreign currency risk of the Company in the event of a 1% increase in the value of Kuna against Euro. The 1% sensitivity rate is used in internal foreign currency risk reports to key managers and represents the Management's assessment of predictable changes in the exchange rates. The sensitivity analysis includes only open monetary items in foreign currency, and their translation at the end of the period is adjusted based on the 1-percent change in exchange rates. The influence of changes in the exchange rate is given in the following table: EUR influence Decrease by 1% Increase by 1% 2022 2021 2022 2021 DESCRIPTION HRK'000 HRK'000 HRK'000 HRK'000 Influence on the profit / loss for the period 2,451,661 1,766,725 2,501,190 1,802,417 97 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 49. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT – continued 49.8. Liquidity risk A solvency risk is a risk that the Company would not be able to fulfil its financial liabilities to the other contractual party. The Company manages solvency risk in a way that observes continuously and analyses expected and actual cash flow on the basis of maturity of financial assets and liabilities. Liquidity risk analysis The following table analyses the Company's liabilities based on the remaining period to contractual maturity. The table is prepared on the basis of undiscounted cash outflows by financial liabilities at the earliest date when payment can be requested from the Company. The remaining period up to the contractual maturity of the Company's financial liabilities is shown as follows: Up to 1 3 months – 1 LIABILITIES month 1-3 months year Over 1 year Total HRK '000 HRK '000 HRK '000 HRK '000 HRK '000 31 Dec 2022 Interest free - - - 195,881 195,881 Interest bearing - - 547,912 1,953,987 2,501,899 31 Dec 2021 Interest free - - - 194,218 194,218 Interest bearing - - 191,482 1,626,458 1,817,940 The following table analyses the remaining period until the contractual maturities of the Company's financial assets. The table is composed of undiscounted cash inflows on financial assets at the earliest date the Company may apply for payment. The remaining period up to the contractual maturity of the Company's financial assets is as follows: 3 months – 1 ASSETS Up to 1 month 1-3 months year Over 1 year Total HRK '000 HRK '000 HRK '000 HRK '000 HRK '000 31 Dec 2022 Interest free 140 - 140 Interest bearing 1,330 5,959 7,289 31 Dec 2021 Interest free - - 140 - 140 Interest bearing - - 1,450 9,632 11,082 98 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 50. POTENTIAL LIABILITIES Court disputes in which the Company is defendant on 31 December 2021 are as follows: /i/ The Company as a defendant, together with HŽ Cargo d.o.o., Zagreb and HŽ Putnički prijevoz d.o.o., participates in numerous court cases in the total amount of HRK 63,500 thousand with uncertain outcome. According to the plan of division of the company HŽ Hrvatske željeznice d.o.o., Zagreb, any new obligations arising from these disputes are borne by newly established companies based on their participation in the capital. The Company as a defendant participates in court proceedings initiated in 2007, 2008, 2012, 2013, 2014, 2015, 2016, 2018, 2019, 2020, 2021 and 2022 in the amount of HRK 130,337 thousand and EUR 44 thousand. On 31 December 2022 the Company determined provisions of costs for potential liabilities in litigation in the amount of HRK 131,394 (Reference to Note 35). /ii/ The Company is burdened with guarantees for certain subsidiaries in Croatia in the amount of HRK 14,500 thousand. /iii/ According to the adopted business plan of the Company for the period from 2023 to 2027, the costs of future severance payments amounts to HRK 55 million, per year as follows: • 2023 HRK 11,0 million • 2024 HRK 11,0 million • 2025 HRK 11,0 million • 2026 HRK 11,0 million • 2027 HRK 11,0 million 51. EVENTS AFTER THE BALANCE SHEET / STATEMENT OF FINANCIAL POSITION DATE After the date of the separate Statement of Financial Position / Balance Sheet, there were no events that would significantly affect the restated annual separate financial statements of the Company for the year 2022, which, consequently, should be published. 52. FINANCIAL STATEMENTS OF THE COMPANY AND THE PUBLIC GOOD As Railway Act implies existence of two parallel records of public goods and own income and expenses, as well as assets, liabilities and capital emerging from these changes, we present below restated financial statements of the Company and financial statements of public good. 99 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 BALANCE SHEET / STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 31 December 2022 Public Company Total good HRK '000 HRK '000 HRK '000 ASSETS Concessions, patents, licenses, trade and service brands, software and other rights 18,490 - 18,490 Intangible assets 18,490 - 18,490 Land 202,155 1,795,663 1,997,818 Buildings 126,504 6,978,954 7,105,458 Plant and equipment 13,063 86,351 99,414 Property with the right of use 15,690 - 15,690 Tools, plant inventory and transport vehicles 34,704 9 34,713 Prepayments for tangible assets 537,995 - 537,995 Tangible assets in preparation 4,526,717 - 4,526,717 Other tangible assets 47,444 22,058 69,502 Tangible assets 5,504,272 8,883,035 14,387,307 Investment in shares (stakes) in related parties 60,684 - 60,684 Investment in securities 402 - 402 Financial assets 61,086 - 61,086 - Other receivables 5,959 - 5,959 Receivables 5,959 - 5,959 LONG – TERM ASSETS 5,589,807 8,883,035 14,472,842 Inventories 146,808 - 146,808 - Receivables from related parties 37,504 - 37,504 Trade receivables 14,488 - 14,488 Receivables from employees 6,614 - 6,614 Receivables from State and other institutions 389,612 - 389,612 Other receivables 20,699 20,699 Receivables 468,917 - 468,917 - Given loans, deposits, etc, 7,007 - 7,007 Financial assets 7,007 - 7,007 100 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 31 December 2022 Public Company Total good HRK '000 HRK '000 HRK '000 Cash and cash equivalents 399,674 - 399,674 SHORT – TERM ASSETS 1,022,406 - 1,022,406 Prepaid expenses and accrued income 5,118,099 3,879,951 8,998,050 TOTAL ASSETS 11,730,312 12,762,986 24,493,298 OFF BALANCE SHEET ITEMS 17,753,479 296,037 18,049,516 101 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 31 December 2022 Public Company Total good HRK '000 HRK '000 HRK '000 CAPITAL AND LIABILITIES Subscribed capital 224,188 - 224,188 Capital reserves 3,074 7,466,321 7,469,395 Revaluation reserves 20,869 - 20,869 Retained earnings/transferred loss 166,993 - 166,993 Profit for the current year 121,133 - 121,133 TOTAL CAPITAL 536,257 7,466,321 8,002,578 PROVISIONS 165,086 - 165,086 Liabilities for loans, deposits etc. 16,363 - 16,363 Liabilities to banks and other financial institutions 1,937,624 - 1,937,624 Other long – term liabilities 9,363 - 9,363 Deffered atx liability 2,480 2,480 Long – term liabilities 1,965,830 - 1,965,830 Liabilities to related parties 77,012 - 77,012 Liabilities for loans, deposits, etc. – related parties 14 - 14 Liabilities for loans, deposits, etc. 5,813 190,054 195,867 Liabilities to banks and other financial institutions 547,912 - 547,912 Liabilities for prepayments 3,845 - 3,845 Trade payables 262,647 - 262,647 Liabilities to employees 47,019 - 47,019 Liabilities for taxes, contributions and similar fees 135,747 - 135,747 Other liabilities 14,381 - 14,381 Liabilities to the Ministry of Finance 1,332,446 - 1,332,446 Short – term liabilities 2,426,836 190,054 2,616,890 Accrued expenses and deferred income 6,636,303 5,106,611 11,742,914 TOTAL CAPITAL AND LIABILITIES 11,730,312 12,762,986 24,493,298 OFF BALANCE SHEET ITEMS 17,753,479 296,037 18,049,516 102 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 Pursuant to the Decisions of the Government of the Republic of Croatia from 2013 and 2014 on giving consent to take over the Company's debt, the Company posted long-term liabilities on loans and interest and exchange rate differences by increasing the capital of the Public Good. The total effect of all the aforementioned activities is changes in the capital of the Public Good (increase in capital by the amount of HRK 3,879,951 thousand and decrease in capital by the amount of HRK 3,439,631 thousand) which are shown in the individual balance sheets of the Company and the Public Good within positions '' Paid expenses of the future period'' and '' Deferred payment of costs and the future period income'' while in the total balance sheet of the Company these changes are consolidated in the amount of HRK 7,319,582 thousand. Within the positions "Paid expenses of the future period" and "Deferred payment of expenses and income of the future period", investments financed from loans for which the capital of the public good has been increased are stated, as at 31 December 2022 amount to HRK 1,666,981 thousand. In 2013 and 2014, the Government of the Republic of Croatia issued a Decision approving to take over the Company's debt on the basis of guarantees and unpaid mandatory payments to debtors by increasing the capital of public goods to reduce indebtedness and financial consolidation of railway infrastructure managers in the total amount of HRK 3,334,166 thousand. (2013 HRK 1,418,375 thousand and 2014 HRK 1,915,791 thousand). The given consent relates to the taking over of a long-term loan from Erste & Steiermaerkische Bank d.d., Erste & Steiermaerkische Bank d.d. and Sberbank d.d., Privredna banka Zagreb d.d., Zagrebačka banka d.d. and short-term indebtedness with OTP banka d.d. These loans financed public good investments. After taking over the loan, the Company increased the capital of the public good by the mentioned amount, and it was necessary to make a capital adjustment for the amount of activated investments. 103 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 BALANCE SHEET / STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 31 December 2021 Public Total - Company good - restated restated HRK '000 HRK '000 HRK '000 ASSETS Concessions, patents, licenses, trade and service brands, software and other rights 25,061 - 25,061 Intangible assets 25,061 - 25,061 Land 192,587 1,744,816 1,937,403 Buildings 115,014 6,736,034 6,851,048 Plant and equipment 1,239 100,169 101,408 Property with the right of use 22,508 - 22,508 Tools, plant inventory and transport vehicles 34,219 45 34,264 Prepayments for tangible assets 419,189 - 419,189 Tangible assets in preparation 4,005,231 - 4,005,231 Other tangible assets 48,444 19,013 67,457 Tangible assets 4,838,431 8,600,077 13,438,508 Investment in shares (stakes) in related parties 60,684 - 60,684 Investment in securities 611 - 611 Financial assets 61,295 - 61,295 Other receivables 9,632 - 9,632 Receivables 9,632 - 9,632 LONG – TERM ASSETS 4,934,419 8,600,077 13,534,496 Inventories 175,800 - 175,800 Receivables from related parties 211,042 - 211,042 Trade receivables 16,088 - 16,088 Receivables from employees 6,595 - 6,595 Receivables from State and other institutions 13,125 - 13,125 Other receivables 21,510 - 21,510 Receivables 268.360 - 268.360 Given loans, deposits, etc. 7,462 - 7,462 Financial assets 7,462 - 7,462 104 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 31 December 2021 Public Total - Company good - restated restated HRK '000 HRK '000 HRK '000 Cash and cash equivalents 94,223 - 94,223 SHORT – TERM ASSETS 545,845 - 545,845 Prepaid expenses and accrued income 5,330,685 3,879,951 9,210,636 TOTAL ASSETS 10,810,949 12,480,028 23,290,977 OFF BALANCE SHEET ITEMS 15,759,579 296,037 16,055,616 105 HŽ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS – continued for the year ended 31 December 2022 31 December 2021 Public Total - Company good - restated restated HRK '000 HRK '000 HRK '000 CAPITAL AND LIABILITIES Subscribed capital 224,188 - 224,188 Capital reserves 3,074 6,975,567 6,978,641 Revaluation reserves - - - Retained earnings/transferred loss 157,541 - 157,541 Profit for the current year 3,460 - 3,460 TOTAL CAPITAL 388,263 6,975,567 7,363,830 PROVISIONS 187,837 - 187,837 Liabilities for loans, deposits etc. 23,119 - 23,119 Liabilities to banks and other financial institutions 1,603,340 - 1,603,340 Other long – term liabilities 9,170 - 9,170 Long – term liabilities 1,635,629 - 1,635,629 Liabilities to related parties 92,713 - 92,713 Liabilities for loans, deposits, etc. – related parties - - - Liabilities for loans, deposits, etc. 4,164 190,054 194,218 Liabilities to banks and other financial institutions 191,482 - 191,482 Liabilities for prepayments 1,756 - 1,756 Trade payables 334,149 - 334,149 Liabilities to employees 38,213 - 38,213 Liabilities for taxes, contributions and similar fees 20,289 - 20,289 Other liabilities 2,869 - 2,869 Liabilities to the Ministry of Finance 1,256,386 - 1,256,386 Short – term liabilities 1,942,021 190,054 2,132,075 Accrued expenses and deferred income 6,657,199 5,314,407 11,971,606 TOTAL CAPITAL AND LIABILITIES 10,810,949 12,480,028 23,290,977 OFF BALANCE SHEET ITEMS 15,759,579 296,037 16,055,616 106