International Committee of the Red Cross, Geneva Report of the Statutory Auditor to the Assembly Meeting on the Consolidated Financial Statements 2023 KPMG SA Geneva, 25 April 2024 KPMG SA Esplanade de Pont-Rouge 6 PO Box 1571 CH-1211 Geneva +41 58 249 25 15 kpmg.ch Report of the Statutory Auditor to the Assembly Meeting of the International Committee of the Red Cross, Geneva Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of the International Committee of the Red Cross (the ICRC), which comprise the consolidated statement of financial position as at 31 December 2023, the consolidated statement of income, the consolidated statement of other comprehensive income, the consolidated statement of changes in reserves and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information. In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the ICRC as at 31 December 2023, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS Accounting Standards and comply with Swiss law. Basis for Opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISA) and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the “Auditor's Responsibilities for the Audit of the Consolidated Financial Statements” section of our report. We are independent of the ICRC in accordance with the provisions of Swiss law, together with the requirements of the Swiss audit profession, as well as those of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Information The Directorate is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements of the International Committee of the Red Cross and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. International Committee of the Red Cross, Geneva Report of the Statutory Auditor to the Assembly Meeting on the Consolidated Financial Statements Directorate’s Responsibilities for the Consolidated Financial Statements The Directorate is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS Accounting Standards and the provisions of Swiss law, and for such internal control as the Directorate determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Directorate is responsible for assessing the ICRC’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 Directorate either intends to liquidate the ICRC or to cease operations, or has no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 Swiss law, ISA and SA-CH 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 consolidated financial statements. As part of an audit in accordance with Swiss law, ISA and SA-CH, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the consolidated 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 ICRC’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made.  Conclude on the appropriateness of the Directorate’s 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 ICRC’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the ICRC to cease to continue as a going concern.  Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 2 International Committee ofthe Red Cross, Geneva Report of the Statutory Auditor to the Assembly Meeting on the Consolidated Financial Statements  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the ICRC to express an opinion on the consolidated financial statements. We are responsiblefor the direction, supervision and performance of the ICRC audit. We remain solely responsible for our audit opinion. We communicate with the Directorate regarding, among other matters, the planned scope and timing of the auditand significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on Other Legal and Regulatory Requirements In accordance with Art. 728a para. 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists,which has been designed for the preparation of the consolidated financial statements according to the instructionsof the Directorate. We recommend that the consolidated financial statements submitted to you be approved. KPMG SA Clémence Laemmel Elodie Elloy Licensed Audit Expert Licensed Audit Expert Auditor in Charge Geneva, 25 April 2024 Enclosure: - Consolidated statement of financial position, consolidated statement of income, consolidated statement of othercomprehensive income, consolidated statement of changes in reserves, consolidated statement of cash flows and notes to the consolidated financial statements 3 1 The International Committee of the Red Cross (ICRC) Consolidated financial statements for the year ended 31 December 2023 Consolidated statement of income .................................................................................... 2 Consolidated statement of other comprehensive income................................................... 2 Consolidated statement of financial position .................................................................... 3 Consolidated statement of changes in reserves ................................................................. 4 Consolidated statement of cash flows ............................................................................... 4 Explanatory notes to the consolidated financial statements .............................................. 5 1. Activities and basis for accounting ................................................................................ 5 1A. ACTIVITIES ............................................................................................................................................... 5 1B. ACCOUNTING INFORMATION, ACCOUNTING POLICIES AND BASIS OF PREPARATION ........................... 5 1C. ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS .............................................................. 6 1D. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES ....................................................................... 7 1E. STANDARDS ISSUED BUT NOT YET EFFECTIVE ......................................................................................... 7 2. Funding ........................................................................................................................ 7 2A. CONTRIBUTIONS ..................................................................................................................................... 7 2B. ACCOUNTS RECEIVABLE .......................................................................................................................... 8 2C. DEFERRED INCOME ................................................................................................................................. 9 2D. RESERVES ................................................................................................................................................ 9 3. Operations ................................................................................................................. 11 3A. OPERATING EXPENSES .......................................................................................................................... 11 3B. STAFF COSTS ......................................................................................................................................... 12 3C. RELATED PARTIES .................................................................................................................................. 13 3D. LEASES ................................................................................................................................................... 14 3E. DEPRECIATION AND AMORTIZATION .................................................................................................... 16 3F. NET OTHER INCOME AND EXPENSES..................................................................................................... 16 3G. INVENTORIES ........................................................................................................................................ 16 3H. TANGIBLE AND INTANGIBLE ASSETS ..................................................................................................... 16 3I. COMMITMENTS ..................................................................................................................................... 18 3J. CONTINGENT LIABILITIES ....................................................................................................................... 18 4. Management of funds ................................................................................................ 18 4A. CASH AND CASH EQUIVALENTS ............................................................................................................ 18 4B. LOANS AND BORROWINGS ................................................................................................................... 19 4C. NET FINANCIAL INCOME ....................................................................................................................... 20 4D. INVESTMENTS ....................................................................................................................................... 20 4E. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES ................................................................ 21 4F. MEASUREMENT CATEGORIES, INCLUDING FAIR VALUE ........................................................................ 24 4G. EMPLOYEE BENEFIT LIABILITIES ............................................................................................................ 26 4H. POST-EMPLOYMENT BENEFITS FOR HEADQUARTERS AND MOBILE STAFF MEMBERS ........................ 27 4I. POST-EMPLOYMENT BENEFITS FOR RESIDENT STAFF MEMBERS .......................................................... 32 5. Subsequent events ...................................................................................................... 37 Consolidated financial statements of the ICRC for the year ended 31 December 2023 1 Consolidated statement of income For the year ended 31 December Consolidated statement of other comprehensive income For the year ended 31 December Consolidated financial statements of the ICRC for the year ended 31 December 2023 2 Consolidated statement of financial position At 31 December Consolidated financial statements of the ICRC for the year ended 31 December 2023 3 Consolidated statement of changes in reserves For the year ended 31 December Consolidated statement of cash flows For the year ended 31 December Consolidated financial statements of the ICRC for the year ended 31 December 2023 4 At 31 December 2023 Explanatory notes to the consolidated financial statements The five sections of the notes present the financial information and material accounting information and policies that are relevant to understanding the activities of the ICRC: 1. Activities and basis of accounting 2. Funding 3. Operations 4. Management of funds 5. Subsequent events 1. Activities and basis for accounting 1A. ACTIVITIES The International Committee of the Red Cross (ICRC) is an impartial, neutral and independent organization whose exclusive humanitarian mission is to protect the lives and dignity of victims of armed conflict and other situations of violence and to provide them with assistance. It directs and coordinates the international relief activities conducted by the International Red Cross and Red Crescent Movement (hereafter “the Movement”) in situations of conflict. It also endeavours to prevent suffering by promoting and strengthening humanitarian law and universal humanitarian principles. Established in 1863, the ICRC is at the origin of the Movement. The Movement is made up of the following components: the International Committee of the Red Cross, the National Red Cross and Red Crescent Societies, and the International Federation of Red Cross and Red Crescent Societies (hereafter “International Federation”). The ICRC is formally recognized in the 1949 Geneva Conventions and by the International Conference of the Red Cross and Red Crescent. As a humanitarian non-profit organization domiciled in Switzerland, it was granted United Nations observer status in October 1990. Under Article 60 of the Swiss Civil Code, it has the legal form of an association. Its registered office is at 19, Avenue de la Paix, 1202 Geneva, Switzerland. The ICRC Assembly is the supreme governing body of the ICRC. The ICRC (but not its staff) is exempt from taxes in Switzerland and most countries in which its delegations are based. 1B. ACCOUNTING INFORMATION, ACCOUNTING POLICIES AND BASIS OF PREPARATION This note contains the ICRC’s material accounting policies that relate to the consolidated financial statements as a whole. Accounting policies specific to one note are described in that note. Statement of compliance The consolidated financial statements have been prepared in accordance with IFRS accounting standards issued by the International Accounting Standards Board (IASB). IFRSs do not contain specific guidelines for non-profit and non-governmental organizations concerning the accounting treatment and presentation of consolidated financial statements. As permitted by IAS 8, where IFRSs are silent or do not give guidance on how to treat transactions specific to the not-for-profit sector, accounting policies have been based on the general IFRS principles or other relevant accounting standards with similar conceptual frameworks, as detailed in the basis of measurement of the IASB Conceptual Framework for Financial Reporting. The consolidated financial statements have been prepared using the historical cost convention, except when otherwise indicated. The consolidated financial statements were authorized for issue by the Assembly on 25 April 2024. Functional and presentation currency The ICRC’s functional and presentation currency is the Swiss franc (CHF). All financial information presented has been rounded to the nearest CHF million, except when otherwise indicated. Transactions in foreign currencies are recorded at the exchange rates on the dates of the transactions. Subsequently, monetary assets and liabilities in foreign currency are translated at year-end rates. Any resulting exchange differences are taken to profit or loss. Consolidated financial statements of the ICRC for the year ended 31 December 2023 5 The principal rates of exchange are shown below: Basis of consolidation The consolidated financial statements of the ICRC cover the activities of the Geneva headquarters, all ICRC delegations, and the following funds and foundation. The general purpose of the funds and foundation is to help finance the ICRC’s humanitarian work. The Foundation for the ICRC is a separate legal entity, while the following funds are separate reporting entities: • Florence Nightingale Medal Fund • French Fund Maurice de Madre • Jean Pictet Fund • Omar El Mukhtar Fund The ICRC has evaluated its relationships with all funds and foundation by considering factors such as their activities, decision- making processes, benefits, and associated risks. Based on this assessment, it has determined that, in essence, the ICRC exercises control over the funds and foundation listed above. Accordingly, they are included in the ICRC's financial statements in accordance with IFRS 10. The ICRC conducts an annual review of its material judgements and assumptions related to its control over other entities. • National Society Investment Alliance (NSIA) The NSIA is a joint operation under IFRS 11 (see Note [3C]). The ICRC recognizes its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held assets, jointly incurred liabilities, and joint revenues and expenses. These have been incorporated in the financial statements under the appropriate headings. Intragroup balances, transactions, and the associated unrealized gains are eliminated in the consolidated financial statements. The financial statements of the funds and foundation use consistent accounting policies and report for the same period as the ICRC. At 1 January 2022, the Clare Benedict Fund and the Paul Reuter Fund were transferred to the Foundation for the ICRC. The foundation and its two funds are consolidated within the ICRC. 1C. ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS All key accounting judgements, estimates and assumptions specific to a given note are described in that note. In particular, the ICRC has used judgement in developing its accounting policies with respect to contributions (see Note [2A]) and deferred income (see Note [2C]). Estimates and assumptions are particularly relevant for determining non-current employee benefit liabilities (see Notes [4H] and [4I]). The ICRC is subject to risks and uncertainties which may lead to actual results differing from these estimates, both positively and negatively. Specific financial risks for the ICRC are discussed in Note [4E] on Financial risk management objectives and policies. Going concern assessment The widening gap between the funding needs of humanitarian organizations and the actual aid received poses a significant challenge to the humanitarian sector including the ICRC. As humanitarian needs continue to proliferate in both scale and complexity, humanitarian organizations are expected to provide essential assistance, yet funding shortfalls persist due to various factors, including competing global and donor priorities. In 2022, the ICRC faced a substantial deficit and liquidity issues. To address these challenges, a strategic steering committee chaired by the Director-General, comprising all Directors, was established in early 2023. After careful consideration, measures were approved by the ICRC Assembly on 30 March 2023. The two-year response plan includes cost reduction, fundraising efforts and enhanced financial oversight, aiming for a CHF 430 million reduction in expenditures by early 2024. These actions prompted the ICRC to recalibrate and streamline its operations, focusing on areas where it could maximize value to communities. Consolidated financial statements of the ICRC for the year ended 31 December 2023 6 Consequently, the ICRC adjusted its budget to CHF 2,461 million in 2023 and CHF 2,142 million in 2024. These measures resulted in a workforce restructuring affecting 3,974 employees in 2023 and led to a CHF 14 million provision at31 December 2023. Additionally, the ICRC implemented various liquidity measures, including extending the Swiss Confederation loan repayment period (see Note [4B1]) and expanding its short-term borrowing facilities to CHF 380 million (see Note [4B2]). Thanks to these actions, the ICRC reduced its expenditures in 2023, generated a CHF 311 million surplus and increased its discretionary unrestricted reserves to CHF 588 million at 31 December 2023. Management has determined, based on ongoing measures and activities, that there is no material uncertainty around the ICRC’s ability to continue operating, to remain liquid and to cover its debts. Consequently, these financial statements are prepared on the going concern basis. 1D. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES The ICRC has adopted all new or amended standards (IFRSs) and interpretations (by the Interpretations Committee, otherwise known as IFRS IC) that are effective for 2023. The implementation of the new or amended standards has not had any material impact on the ICRC’s consolidated financial statements. 1E. STANDARDS ISSUED BUT NOT YET EFFECTIVE The IASB has issued several new and amended IFRS standards and interpretations, which are not yet effective in the financial year ended 31 December 2023. The ICRC intends to adopt the new and amended standards and interpretations when they become effective. All standards and interpretations not yet effective are not expected to have any material impact on these consolidated financial statements. 2. Funding 2A. CONTRIBUTIONS • Contributions that are free of donor-imposed conditions are recognized as revenue when there is reasonable assurance that the contribution will be received, generally upon signature of the agreement with the donor or receipt of cash, whichever occurs first. • Where contribution agreements impose substantive performance conditions that must be met before the ICRC is entitled to the funding and it is probable that the conditions will be met, the corresponding conditional revenue is not accounted for and is disclosed as a contingent asset until the ICRC has reasonable assurance that it will comply with the conditions of the agreement and that the contribution will be received, at which point the revenue will be recorded in the statement of income. Substantive performance conditions generally relate to the completion of specified activities, or to the achievement of efficiency levels or performance indicators. • Contributions that will fall due after five years or are not regarded as probable to be received are not accounted for and are disclosed as contingent assets. In 2023, CHF 24 million of contributions (2022: CHF 56 million) were considered contingent assets. • Contributions designated for use after the reporting date are reported as deferred income in the consolidated statement of financial position and recognized as revenue in the year designated by the donor. • Contributions in cash directly funding the cost of purchasing or constructing specific fixed assets are fully recognized under operating income upon receipt of the cash. • Contributions of in-kind goods and services are recognized as revenue at their estimated fair value on the date the goods or services are received. However, for contributions of fixed assets or land surface rights, the ICRC has opted for a net presentation of these in-kind asset contributions, netting the value of assets received in kind against the related deferred income liabilities in the balance sheet at each reporting date. This accounting treatment applies to the four land surface rights in Switzerland, granted by the Swiss federal, cantonal and communal authorities giving the ICRC free use of the land for 30, 50 or 100 years. The value of these land surface rights at 31 December 2023, discounted using risk-free market rates at the date of the last contractual amendments, was CHF 105 million (2022: CHF 107 million). In 2023, CHF 3 million of in-kind contributions (2022: CHF 3 million) were related to these land surface rights. Consolidated financial statements of the ICRC for the year ended 31 December 2023 7 1. Donors Contributions are received from a wide range of donors: (1) Private sources are defined as individuals, foundations, legacies, private companies and associations. (2) Other public sources are defined as federal, cantonal and municipal government bodies. (3) Supranational organizations and international institutions include UN agencies, the World Bank and non-governmental organizations. 2. Earmarking Donors may set restrictions on the use of the contribution for a particular purpose or a specific programme or to be used in a specified geographical location. These restrictions do not create a performance condition and therefore do not affect the timing of revenue recognition. The ICRC has the following categories of earmarking: • Contributions restricted to general field or headquarters operations and no other purpose are considered unearmarked. • Contributions restricted to a given region and/or programme or target population (in the field or at headquarters) are considered loosely earmarked. • Contributions restricted to one of the ICRC’s contexts in the field are considered country-earmarked. • Contributions restricted to a (sub-)programme or (sub-)target population within a specific context in the field or a specific organizational unit at headquarters are considered tightly earmarked. The table below shows the various categories regarding the earmarking of contributions. 2B. ACCOUNTS RECEIVABLE • Accounts receivable with contractual cash flows for principal and interest are recognized at fair value and subsequently measured at amortized cost, less any allowance for expected credit loss. • Contributions receivable are amounts due from donors and recognized when there is reasonable assurance that the contributions will be received. There are no standard payment terms for contributions as the timing of payments is usually specified in each donor agreement. Contributions receivable that are due in more than 12 months and less than five years after the reporting date are recorded as long-term receivables and discounted to their present value based on the expected future cash flows, using discount rates on the dates the pledges were signed. • Contributions pledged or received after the reporting date but designated for use in the reporting period are recorded as accrued income in the reporting period. Accrued income of CHF 15 million was included within contributions receivable at 31 December 2023 (2022: CHF 9 million). • Contributions receivable are considered to be low-risk. Management specifically analyses historical trends and current economic trends when assessing the adequacy of the loss allowance. The loss allowance is based on specific credit Consolidated financial statements of the ICRC for the year ended 31 December 2023 8 qualities of individual positions. The loss allowance for contributions receivable at 31 December 2023 was CHF 4 million (2022: CHF 2 million). • Other receivables originate from the recharging of operating expenses or from non-core activities. A default is when the counterparty fails to make contractual payments within 60 days of when they fall due. Other receivables are written off when there is no reasonable expectation of recovery. Accounts receivable break down as follows: 2C. DEFERRED INCOME Revenue relating to future years is recorded as deferred income. Revenue deferred for more than 12 months after the reporting date is recorded as non-current and discounted to its present value at the reporting date. 2D. RESERVES Reserves consist of the results from operating and non-operating activities. Accumulated reserves are classified as either restricted (permanently or temporarily) or unrestricted reserves. 1. Unrestricted reserves Unrestricted reserves are divided into two main categories: Discretionary unrestricted reserves Discretionary unrestricted reserves are not subject to any legal or third-party restrictions and can be allocated as the ICRC Assembly sees fit. The amount is taken from the ICRC’s stand-alone financial statements, which are prepared in accordance with Swiss legislation regarding commercial accounting and financial reporting (Swiss Code of Obligations Art. 957 – 963). Discretionary unrestricted reserves are needed to meet current financing needs and to address future risks such as: • working capital requirements arising from seasonal variations in terms of receiving donor funds, as well as cash needed to invest upfront in tangible and intangible assets; • possible losses from foreign exchange exposures and other adverse financial market fluctuations, and operational losses that are not covered by third-party insurance; • continuity of operations during periods of insufficient operational funding. Consolidated financial statements of the ICRC for the year ended 31 December 2023 9 Non-discretionary unrestricted reserves • Temporarily unavailable unrestricted reserves: where the level of contributions is not sufficient to cover field funding deficits at the end of the reporting period (see Note [2D2]), the ICRC considers the corresponding portion of the unrestricted reserves to be temporarily unavailable for the Assembly. Should the ICRC close a field operation with a funding deficit, it would permanently use its unrestricted reserves to eliminate the deficit. • Reserve to cover losses due to fraud: this is used to replenish the reserves of delegations where agreed with the relevant donor(s). • IAS 19 impact on unrestricted reserves: the aim of this reserve is to isolate the impact of the IFRS accounting rules concerning the valuation of post-employment benefit liabilities. • Other non-discretionary reserves: these represent accumulated surpluses and deficits in excess of the discretionary unrestricted funds and the specific non-discretionary reserves described above. The changes in unrestricted reserves are summarized as follows: The amount of discretionary unrestricted reserves for 2022 shown above is consistent with the consolidated financial statements for the year ended 31 December 2022 approved for issue by the Assembly. Within the non-discretionary unrestrictedreserves, the reserve to cover losses due to fraud (CHF 1 million) was reported as part of other non-discretionary unrestrictedreserves in the consolidated financial statements for the year ended 31 December 2022. 2. Temporarily restricted reserves for the funding of operations Donors’ restricted contributions Donors’ restricted contributions may exceed specific expenses incurred in the field or at headquarters for the reporting period, resulting in a temporary surplus in funding. The cumulative excess is carried forward to the following year and recorded in reserves as Donors’ restricted contributions. Where the surplus funds cannot be used, the ICRC either obtains an agreement from the donors to reallocate the funds for a different use or reimburses the funds to the donors, in which case they are recognized as a liability. Field operations with a temporary funding deficit The ICRC incurs expenses for field operations which may not be fully funded by designated contributions, resulting in a temporary deficit for the reporting period. At year-end, management estimates the expected funding necessary to cover the expenses incurred and allocates available unearmarked and loosely earmarked contributions to field operations. The net position is reported in the reserves as Field operations with temporary funding deficit, for which funding will be sought in the following year. Changes in these estimates could result in the need to reassess temporarily restricted reserves for the funding of operations. Consolidated financial statements of the ICRC for the year ended 31 December 2023 10 The ICRC reports the same amount of unrestricted reserves as temporarily unavailable at the reporting date, to cover these funding deficits (see Note [2D1]). The changes in temporarily restricted reserves for the funding of operations are summarized as follows: Both Ukraine and Israel, along with the Occupied Territories, had temporary funding surpluses at the end of 2023: • Ukraine carried forward CHF 90 million to 2024 (2022: CHF 181 million surplus carried forward to 2023), • Israel and the Occupied Territories carried forward CHF 74 million (2022: CHF 10 million deficit carried forward to 2023). 3. Permanently restricted reserves for the funds and foundation Reserves corresponding to the following funds and foundation controlled by the ICRC are permanently restricted for the ICRC, as the use and allocation of these reserves are decided by the respective boards of the funds and foundation. Permanently restricted reserves are summarized as follows: 3. Operations 3A. OPERATING EXPENSES Operating expenses are defined as direct programme-oriented expenses incurred in order to fulfil the ICRC’s humanitarian mission. Non-operating expenses are defined as expenses not directly related to the ICRC’s mission and/or incurred in the management of cash and investments. For management reporting purposes, costs are analysed as relating to “field”, “headquarters” and “other operations”, while the effects of IAS 19 on staff costs and IFRS 16 on leases, depreciation, amortization and finance costs are shown separately. “Other operations” include the consolidated funds and foundation and the activities supervised by the Innovation Board, amongst others. Consolidated financial statements of the ICRC for the year ended 31 December 2023 11 The breakdown of operating expenses is as follows: Operating expenses are mostly in cash but can take the form of goods (in kind) or services. Operating expenses consisting of in-kind goods and services amounted to CHF 3 million and CHF 4 million respectively (2022: CHF 12 million and CHF 5 million respectively). 3B. STAFF COSTS 1. Monthly average headcount (full-time-equivalent) Year-end headcount fell from 22,488 in December 2022 to 19,369 in December 2023 (a decrease of 3,119 or 14%). This significant decline was mainly due to the workforce restructuring initiated in May 2023. Consolidated financial statements of the ICRC for the year ended 31 December 2023 12 2. Staff costs 3. Remeasurement gains/(losses) in other comprehensive income All remeasurement gains and losses on defined benefit plans are recognized in other comprehensive income in the period in which they occur. The breakdown of current and non-current employee benefit liabilities can be found in Notes [4G1] and [4G2] respectively. Additional disclosures relating to the ICRC’s post-employment benefits can also be found in Notes [4H] and [4I]. 3C. RELATED PARTIES 1. Identity of related parties The ICRC defines related parties as key management personnel or persons with authority and responsibility for planning, directing and controlling the ICRC’s activities. This includes the ICRC’s president, vice-president, director-general, deputy director-general, six directors, chief financial officer, two chief information officers and five regional directors. The members of the Assembly – the supreme governing body of the ICRC – are also identified as related parties. The close family and members of the same household of these identified related parties are also related parties of the ICRC. Other parties related to the ICRC include the NSIA, the ICRC Pension Fund, the International Retirement Savings Plan (IRSP) Foundation, and the Standing Commission. • The ICRC has a 50% interest in the NSIA. This joint operation was set up in Switzerland as a partnership with the International Federation to enhance the development of National Societies. • The ICRC Pension Fund and IRSP Foundation are independent funds that constitute separate legal entities from the ICRC. Each of these funds manages one post-employment defined benefit plan. These funds are presented in Notes [4H5] and [4I1] respectively. • The Standing Commission comprises representatives of the ICRC, the International Federation and National Societies. Its principal activity is to organize the next International Conference and the next Council of Delegates. The International Conference of the Red Cross and Red Crescent (the International Conference) is the supreme deliberative body of the International Red Cross and Red Crescent Movement. The Council of Delegates is the body where representatives of all components of the Movement meet to discuss matters that concern the Movement as a whole. Neither the International Conference nor the Council of Delegates are related parties of the ICRC. The International Federation and National Societies are not related parties of the ICRC. Consolidated financial statements of the ICRC for the year ended 31 December 2023 13 2. Key management personnel: compensation and transactions The salaries and benefits of the ICRC’s president, vice-president, directors and senior management are set by the Remuneration Commission. Their total remuneration below includes employer expenses for social insurance, health insurance and social benefits. • Key management personnel are members of the ICRC Pension Fund. • The president and the vice-president were entitled to meeting fees, representation allowances, mission allowances and reimbursement of travel costs incurred. • Certain key management personnel were entitled to representation allowances and reimbursement of travel costs incurred. In 2023 and 2022, five key management personnel received tuition benefits of less than CHF 40 thousand each. • Key management personnel received no other compensation or benefits (e.g. fringe benefits, loans, advances etc.). • Except for the president, the vice-president and key management personnel, no other related parties, including close family members, received any remuneration, loan or advance from the ICRC during the year. • Several key management personnel or their close family members hold positions in other companies and universities, with which the ICRC had transactions during the year. The amount of these transactions is not material (either individually or in aggregate). 3. Transactions with other related parties The NSIA incurred expenses of CHF 2 million in 2023 (2022: less than CHF 1 million). In 2022, the ICRC committed to contribute CHF 10 million to NSIA’s costs in 2023-2029. The ICRC’s total contributions to NSIA in 2023 amounted to CHF 2 million (2022: nil). The employer contributions paid to the ICRC Pension Fund and IRSP Foundation are reported in Notes [4H5] and [4I5] respectively. The outstanding receivables due from this fund and this foundation are mentioned as current employee benefit liabilities in Note [4G1]. 3D. LEASES The ICRC enters into leases in relation to the rental of offices, warehouses and residential properties. At 31 December 2023, the ICRC had entered into approximately 721 non-cancellable leases for premises in locations where the ICRC operates (2022: 750). The other leases entered into by the ICRC are cancellable, short-term or for low-value assets. The ICRC has elected to use the two recognition exemptions proposed by IFRS 16 relating to short-term leases (defined as leases with a lease term of 12 months or less) and on leases where the underlying asset is of low-value. The ICRC’s main accounting principles for leases are as follows: • The ICRC employs a single on-balance sheet lease accounting model for lessees, involving the recognition of a right- of-use asset that reduces over the lease term and a lease liability for payment obligations. Depreciation of right-of-use assets and interest on lease liabilities are recognized separately for these leases in the statement of income. • The lease term includes the non-cancellable period and reasonably certain renewal options, with the use of hindsight for contracts with extension or termination options. • The ICRC has applied a single discount rate to a portfolio of leases with reasonably similar characteristics. • IFRS 16 has no significant impact on leases in which the ICRC is a lessor. Leases in the statement of income • Rent payments relating to non-cancellable real-estate leases are recognized as interest and depreciation expenses. • For cancellable, short-term, and low-value leases, the ICRC recognizes lease expenses on a straight-line basis over the lease term. Consolidated financial statements of the ICRC for the year ended 31 December 2023 14 Leases in the statement of financial position Right-of-use assets At inception, right-of-use assets are measured as the initial lease liability, lease payments made and any initial direct costs, less any lease incentives received. They are subsequently depreciated over the shorter of the lease term or the useful life of the underlying asset, and any impairment losses are applied. Lease liabilities • The lease liability is initially measured as the present value of future lease payments. It is subsequently adjusted to reflect interest using the effective interest method and is reduced as lease payments are made. Adjustments are made whenever the lease term changes. • Future cash outflows that are not reflected in the measurement of lease liabilities (extension and termination options) are immaterial. • At 31 December 2023 there were no leases with residual value guarantees or leases not yet commenced to which the ICRC was committed. There were no material restrictions or covenants imposed by leases. The table below summarizes the maturity profile of the lease liabilities: Consolidated financial statements of the ICRC for the year ended 31 December 2023 15 Commitments relating to cancellable leases The ICRC has made commitments to make the following cancellable real-estate lease payments in future years. These commitment estimates are based on the lease terms and other provisions of the leases. 3E. DEPRECIATION AND AMORTIZATION 3F. NET OTHER INCOME AND EXPENSES 3G. INVENTORIES • Inventories primarily consist of medical, physical rehabilitation and relief supplies. • Inventories are strategically held at headquarters, at the principal regional distribution centres and in the main warehouses. There were 130 sites in total in 2023 (2022: 147 sites). • Inventories, net of allowances for obsolescence, were recognized in an amount of CHF 112 million (2022: CHF 168 million). Total allowances for obsolete inventories amounted to CHF 8 million in 2023 (2022: CHF 9 million). 3H. TANGIBLE AND INTANGIBLE ASSETS • Contributed assets are either assets funded by contributions in cash for assets, or assets donated in kind, and are recognized at their fair value. • The gross carrying amount of land, buildings and fixed installations below does not include the land surface rights that have been received by the ICRC as non-monetary in-kind donations from the Swiss federal, cantonal and communal authorities (see Note [2A]). Consolidated financial statements of the ICRC for the year ended 31 December 2023 16 • Subsequent expenses are capitalized only when they increase the future economic benefits embodied in the item of property and equipment and are otherwise recognized in the consolidated statement of income. • Intangible assets acquired separately are measured at cost at the time of initial recognition. • Internally generated intangible assets are capitalized if they constitute identifiable assets that will generate probable future economic benefits, as well as meeting the other IFRS conditions. • Other costs incurred for internally generated intangible assets, excluding capitalizable development costs, are not capitalized and the related expenditure is therefore reflected in the consolidated statement of income in the year in which the expenditure is incurred. Additionally, applications based on software as a service are not considered as intangible assets. • Depreciation and amortization of tangible and intangible assets with finite useful lives are calculated using the straight-line method to depreciate/amortize the acquisition cost over the asset’s estimated useful life, which is as follows: Tangible assets Useful life Buildings and land improvements – Switzerland 20 to 70 years Buildings – other countries 3 to 20 years Fixed installations 3 to 10 years Equipment and vehicles 3 to 10 years Hardware (IT equipment) 3 years Land Not depreciated Intangible assets Software 5 years • Tangible and intangible assets with finite useful lives are assessed for impairment whenever there is an indication that the asset may be impaired. The depreciation/amortization period and method are reviewed at least at each financial year-end. • The estimated useful lives and residual values of depreciable/amortizable assets are reviewed at least annually, based on the expected utility of the assets. • At 31 December 2023, a majority of the land, buildings and fixed installations were located in Switzerland, with a gross value of CHF 256 million (2022: CHF 258 million). • Most additions to tangible assets are related to external purchases, whilst a majority of additions to intangible assets are related to costs incurred for internally generated software. Consolidated financial statements of the ICRC for the year ended 31 December 2023 17 • At 31 December 2023, tangible assets included work in progress for the construction and renovation of buildings in an amount of CHF 2 million (2022: CHF 2 million). The ICRC still uses some fully depreciated tangible assets with a gross value of CHF 142 million at 31 December 2023 (2022: CHF 158 million). • At 31 December 2023, additions to internally developed software included capitalized staff costs of CHF 3 million (2022: CHF 4 million). In 2023, research and development costs of CHF 14 million (2022: CHF 12 million) were recognized as expenses. • Intangible assets included CHF 55 million for software in development at 31 December 2023 (2022: CHF 47 million). The ICRC still uses some fully amortized software with a gross value of CHF 78 million at 31 December 2023 (2022: CHF 72 million). 3I. COMMITMENTS 3J. CONTINGENT LIABILITIES Due to the nature of its operations, the ICRC is exposed to risks (for example, through local employment), of which the definite amount and exact timing cannot be reasonably established ahead of time. The risks that management considers likely to be settled through a payment and that can be measured reliably have been reported as provisions in the balance sheet. Other potential and improbable risks were estimated at CHF 37 million (2022: CHF 51 million) and reported as contingent liabilities. 4. Management of funds 4A. CASH AND CASH EQUIVALENTS • Term deposits with an original maturity of over three months are classified as current and/or non-current investments (see Note [4D]). They are valued at amortized cost. • Bank overdrafts that are repayable on demand and form an integral part of the ICRC’s cash management are included as a component of cash and cash equivalents in the consolidated statement of cash flows. Non-cash items of income and expense reported in the consolidated statement of cash flows are broken down as follows: Consolidated financial statements of the ICRC for the year ended 31 December 2023 18 4B. LOANS AND BORROWINGS 1. Loan from the Swiss confederation In 2020, the Swiss confederation granted a loan to the ICRC under the Federal Act on International Development Cooperation and Humanitarian Aid, in a nominal amount of CHF 200 million. The loan is unsecured and interest-free. On 21 December 2023, the Swiss confederation and the ICRC reached an agreement to revise the loan repayment terms from four instalments of CHF 50 million each to eight instalments of CHF 25 million each. The first instalment is due in 2024 and the final repayment is due in 2031. The loan remains interest-free, notwithstanding the extension of its repayment terms. Overall, the change did not result in a substantial modification of the loan. 2. Loans from the Foundation for Buildings for International Organizations (FIPOI) All FIPOI loans are initially recorded at fair value, which is the present value of expected future cash flows, discounted using a market interest rate. The difference between cost and fair value at initial recognition results from the below-market interest rates: the loan for the Carlton building bears interest of 0.5% per annum, while the other loans are interest-free. This difference is recognized as deferred income in Note [2C] that is subsequently recognized as revenue over the loan period. At 31 December 2023, there were three loans related to buildings located in the canton of Geneva in Switzerland. 3. Short-term uncommitted borrowing facilities The ICRC had the ability to draw CHF 380 million in 2023 (2022: CHF 95 million) on short-term uncommitted borrowing facilities. At 31 December 2023, CHF 380 million (2022: CHF 75 million) was available and undrawn under this facility. At 31 December 2023, the ICRC had pledged part of its financial assets (cash and investments) as security for a borrowing facility of CHF 180 million (2022: CHF 170 million). Additionally, the Foundation of the ICRC had pledged part of its cash deposits as security for a foreign exchange margin facility of CHF 3 million. Consolidated financial statements of the ICRC for the year ended 31 December 2023 19 4. Loan repayment terms The terms of all loan repayments are as follows: 4C. NET FINANCIAL INCOME 4D. INVESTMENTS In accordance with its documented investment management policy, the ICRC classifies its investments in two categories: Investments at fair value through profit or loss • Financial assets at fair value through profit or loss are held for trading and acquired for the purpose of selling in the short term. • These investments are recognized and derecognized on the trade date on which the ICRC, or the portfolio manager acting on behalf of the ICRC, commits to purchasing or selling them. Fair value gains or losses, dividend and interest income, as well as transaction costs, are recognized in the consolidated statement of income. • Money-market funds are investments with high liquidity and low-risk returns. The ICRC has determined that these funds do not meet the criteria for classification as cash equivalents due to their variable returns. Investments at amortized cost • Listed debt securities are held in order to receive contractual cash flows. Gains or losses on these investments are recognized when the investments are derecognized or impaired. Interest income is recorded using the effective interest rate method. • The “hold-to-collect” business model allows for the sale of investments at amortized cost, including infrequent sales as a result of unanticipated funding needs, near maturity, or in stress case scenarios, while still aiming to collect contractual cash flows. • The ICRC assesses on a forward-looking basis the expected credit loss associated with its debt securities carried at amortized cost. Bonds in this category are considered to be low-risk, and the loss allowance is determined as 12 months of expected credit losses. A default on a financial asset occurs when the counterparty fails to make contractual payments within 60 days of the time they fall due. Neither loss allowances for bonds at amortized cost at31 December 2023 nor expected credit losses for the year then ended are material. Consolidated financial statements of the ICRC for the year ended 31 December 2023 20 In 2023, the ICRC sold investments in an amount of CHF 185 million (2022: CHF 97 million) and purchased investments in an amount of CHF 412 million (2022: CHF 59 million). These higher amounts were due to the need for liquidity early in the year following funding shortages in 2022, followed by a return to more normal liquidity levels later in the year. Additionally, in 2023, the Foundation for the ICRC invested a CHF 100 million donation received in 2022. 4E. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The ICRC has various financial assets, such as cash and cash equivalents, investments, other financial assets, and accounts receivable. Its main financial liabilities comprise loans, accounts payable and accrued expenses. The main risks arising from these financial assets and liabilities are market risk and its components (foreign-currency and interest rate risks, as well as equity price risk), credit/counterparty risk and liquidity risk, which are summarized below. These risks are managed through several treasury policies. Compliance with these policies is monitored by the Treasury Committee, which is composed of the director of the Department of Support and Digital Transformation, the Chief Financial Officer, the head of Accounting and the Treasurer. The financial risk management policies in force have been approved by the Assembly Council, a subsidiary body of the ICRC’s Assembly. The various policies are submitted by the Treasury Committee to the Assembly Council for adoption. In 2023, the Treasury Committee was replaced by a broader body to address the ICRC's liquidity challenges. The Treasury Committee will be reconvened in 2024. 1. Foreign-currency exposure and risks Foreign-currency risk is the risk that the financial statements for a particular period or as at a certain date may be affected by changes in the value of transactions in foreign currencies owing to fluctuations in exchange rates. Exposure to fluctuations in foreign exchange (FX) rates arises from transactions denominated in currencies other than the Swiss franc. In addition, exchange rate fluctuations can have a significant impact on the consolidated statement of income. The currencies giving rise to this risk are primarily the euro, pound sterling and the US, Australian and Canadian dollars. Hyperinflationary currencies have the potential to create a higher FX risk than other field currencies, especially if these currencies are devalued. FX exposure on long-term receivables in foreign currencies is offset by the FX exposure on the related deferred income liability. No hedge accounting is applied. Forward foreign-currency contracts At year-end, open positions in relation to forward foreign-currency contracts were as follows: These contracts have a maturity of less than one year. Consolidated financial statements of the ICRC for the year ended 31 December 2023 21 Exposure management The ICRC uses derivative financial instruments – forward contracts and swaps – to hedge its exposure to foreign-currency risks. Forward foreign-currency contracts have maturities of less than 12 months after the reporting date. Where necessary, the contracts are swapped at maturity. In accordance with its treasury policies, the ICRC uses derivative instruments exclusively for hedging purposes. Such derivative financial instruments are initially recognized at fair value and subsequently at each reporting date. Any gains or losses arising from changes in fair value on derivatives during the year are recognized immediately. With respect to other monetary assets and liabilities held in foreign currencies, the ICRC ensures that its exposure is kept to an acceptable level. In addition, the ICRC buys and sells foreign currencies when necessary. To limit exposure from investments, the ICRC’s investment management policy defines which currencies may be used for investments. At 31 December 2023, all investments were denominated in Swiss francs, except for CHF 207 million (2022: CHF 101 million). Exposure measurement The ICRC uses a Value at Risk (VaR) calculation to estimate the potential annual loss in the fair value of its financial assets and liabilities denominated in foreign currencies. VaR estimates are made assuming normal market conditions, using a 95% confidence level. The ICRC cannot predict actual future movements in exchange rates. Therefore, the VaR numbers below do not represent actual losses or consider the effects of favourable movements in underlying variables. Accordingly, VaR figures are indicative of future movements over a one- year time horizon and are based on historical data to best estimate future movements. The estimated potential annual loss from the ICRC’s foreign-currency exposure is as follows: A reasonable possible strengthening (weakening) of the euro, the pound sterling and the US dollar against all other currencies at 31 December would have affected the measurement of foreign-currency financial instruments and affected profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact relating to forecast revenues and expenses. 2. Equity price and interest rate risks Investments in equity securities are exposed to equity price risk. The ICRC is exposed to interest rate risks through its investments in debt securities, term deposits and other funds. These financial assets, except for the portion of debt securities measured at amortized cost, are stated at fair value and are thus affected by interest rate changes. In addition, interest income recognized on floating-rate debt securities changes in response to movements in interest rates. Consolidated financial statements of the ICRC for the year ended 31 December 2023 22 Sensitivity analysis for listed equity securities at fair value through profit or loss The ICRC’s investments in the equity of other entities that are publicly traded are generally included in one of the following two equity indices: the Swiss Performance Index (SPI) for Swiss shares and MSCI World for non-Swiss shares. The table below summarizes the impact of increases/decreases in the two equity indices on the ICRC’s income for the year. The analysis is based on the assumption of a 5% increase/decrease in equity indices, with all other variables – particularly foreign-currency exchange rates – held remaining constant and with all equity instruments moving according to their historical correlation with the index. Sensitivity analysis for quoted debt securities at fair value through profit or loss A change of 100 basis points in interest rates at the end of the year – assuming that all other variables, particularly foreign- currency exchange rates, remain constant – would have the following impact on the ICRC’s income for the year. To limit this market exposure, the ICRC’s Investment and Treasury Committees have clarified the organization’s tolerance for risk and volatility in investment guidelines based on an investment management policy. Portfolio managers are required to trade all investments through stock exchanges that handle large volumes and with market makers. All selected financial assets must meet specific criteria defined in the policy, such as quality and tradability of securities, minimum counterparty ratings and maximum percentages of total invested funds. The Investment Committee – which consists of the director of the Department of Support and Digital Transformation, the Chief Financial Officer and two external members – manages the market and interest rate risks. The ICRC has also allowed portfolio managers to use futures contracts to hedge exposure to market risk. The futures contracts have maturities of less than 12 months after the reporting date. 3. Credit/counterparty risk The ICRC’s treasury policies focus on security of cash and cash equivalents. At headquarters in 2023, these positions were held in banks that were regulated by the Swiss National Bank (SNB) or by the central bank of any EU member state, and that had a long-term rating of at least A/A1 (Standard & Poor’s and Moody’s) (2022: A-/A3). The long-term ratings of bank counterparties stayed within that range in both 2023 and 2022. For field positions, there is no significant exposure to banks in risky countries. The ICRC’s receivables are mostly with governments and government agencies, where credit risk is considered to be low. In addition, the ICRC has a relatively broad government donor base. In 2023, the largest donor contributed 21% of overall income (2022: 25%) and the top five donors contributed 57% (2022: 52%). Investments are allowed only in liquid securities and only with counterparties that have a high credit rating. The ICRC’s investment policy defines the maximum exposure to a single counterparty in order to ensure diversification of investments. Accounts receivable are offset against accounts payable only if the offsetting criteria are met. At the reporting date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated statement of financial position. 4. Liquidity risk The ICRC monitors the level of working capital at all times. This is reassessed and quantified periodically, based on cash flow forecasts. The ICRC’s objective is to strike a balance between continuity of funding and flexibility by maintaining sufficient funds in the form of cash in hand, cash at bank and deposits with initial maturities of three months or less, in order to meet short-term liabilities. Cash flows can be difficult to project because the timing of fundraising can become less predictable, in particular during periods of economic uncertainty. In addition, cash flow forecasts are affected by emergency responses. Consolidated financial statements of the ICRC for the year ended 31 December 2023 23 Consequently, interest-bearing loans and borrowings – i.e. debts that involve servicing costs – are utilized where necessary to ensure that sufficient levels of liquidity are available to meet working capital needs and to provide a buffer for emergencies, while balancing the servicing costs. In addition, the ICRC is exposed to liquidity risk associated with forward foreign-currency hedging. Funds in the appropriate foreign currency are retained to settle forward contracts when they become due, or the contract is rolled forward until sufficient foreign currency is available. The table below summarizes the maturity profile of the ICRC’s financial liabilities based on contractual undiscounted payments. 5. Capital risk management By its nature, the ICRC does not have “capital” as defined by IFRSs. Unrestricted reserves may be considered to have characteristics similar to capital; the Assembly’s intention is to maintain a strong level of reserves so as to maintain stakeholder and donor confidence and to sustain the future development of operations. Unrestricted reserves are available to mitigate a broad range of operational and financial risks, including as regards working capital, non-current receivables and settlement of non-current liabilities. Unrestricted reserves are not subject to any external capital requirement. As further explained inNote [2D2], the ICRC holds restricted reserves that are subject to the earmarking requirements of donors. The description andposition of the various reserves are indicated in Note [2D]. There were no changes in the organization’s approach to reserves management during the year under review. 4F. MEASUREMENT CATEGORIES, INCLUDING FAIR VALUE 1. Measurement of financial assets and liabilities Financial instruments owned by the ICRC are classified under the appropriate IFRS 9 categories as follows: Measurement category Financial assets Cash and cash equivalents Amortized cost Short-term deposits Amortized cost Listed equity securities FVPL* Listed high yield debt funds FVPL* Listed money-market funds FVPL* Listed real-estate funds FVPL* Listed debt securities FVPL* Listed debt securities held to collect Amortized cost Accounts receivable (excluding derivatives) Amortized cost Derivatives FVPL* Financial liabilities Accounts payable and accrued expenses (excluding derivatives) Amortized cost Derivatives FVPL* Loans and borrowings (including bank overdrafts) Amortized cost Lease liabilities Amortized cost *FVPL - fair value through profit or loss Consolidated financial statements of the ICRC for the year ended 31 December 2023 24 A number of the ICRC’s accounting policies and disclosures require fair value to be determined, for both financial and non- financial assets and liabilities. Fair value figures are calculated for measurement and/or disclosure purposes based on the methods outlined below. 2. Fair value • The fair values of cash and cash equivalents, accounts receivable, bank overdrafts, accounts payable and accrued expenses are not materially different from the carrying amounts. • The fair value of equity, money-market funds, real estate funds and debt securities is determined by reference to their quoted closing price at the reporting date, or, if unquoted, by using a valuation technique. The valuation techniques employed include market multiples and discounted cash flow analysis using expected future cash flows and a market interest rate. • Held-for-trading investments are measured at fair value through profit or loss, because their performance is actively monitored, and they are managed on a fair value basis in accordance with the ICRC’s investment strategy. Fair value adjustments resulted in a net gain of CHF 7 million in 2023 (2022: net loss of CHF 42 million). • Debt securities held to collect contractual cash flows are measured at amortized cost. Their fair value is used for impairment testing. • All loans are initially recognized at fair value, which is the present value of the expected future cash flows, discounted using a market interest rate. • Derivative financial instruments are stated at fair value. Mark-to-market derivative financial instruments at the reporting date were not material in 2023 and 2022. The fair value of forward currency contracts is calculated with reference to current forward foreign-currency exchange rates for contracts with similar maturity profiles. The fair value of futures contracts is their market price at the reporting date. 3. Fair value hierarchy The tables below break down the carrying amounts and fair values of the ICRC’s financial assets and liabilities and their corresponding fair value measurement levels. The ICRC determines the fair value of financial instruments on the basis of the following hierarchy: • Level 1: the fair value of financial instruments quoted in an active market is based on their quoted closing price at the reporting date. • Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques based on observable market data. • Level 3: this level includes instruments where one or more of the significant inputs are not based on observable market data. There was no transfer between fair value measurement levels during the reporting periods ended 31 December 2023 or 31 December 2022. Consolidated financial statements of the ICRC for the year ended 31 December 2023 25 4G. EMPLOYEE BENEFIT LIABILITIES 1. Current employee benefit liabilities 2. Non-current employee benefit liabilities Benefits for headquarters and mobile staff members The post-employment benefits for headquarters and mobile staff members are detailed as follows and further disclosed in Note [4H]. Starting on 1 January 2022, the early retirement and supplementary plans were integrated into the pension plan. Their respective obligations were added to the defined benefit obligations of the pension plan at 31 December 2022. Benefits for resident staff members The post-employment benefits for resident staff members are detailed as follows and further disclosed in Note [4I]. Consolidated financial statements of the ICRC for the year ended 31 December 2023 26 4H. POST-EMPLOYMENT BENEFITS FOR HEADQUARTERS AND MOBILE STAFF MEMBERS 1. Description of the post-employment plan within the ICRC Pension Fund The pension plan is managed by an independent pension foundation called the ICRC Pension Fund, which is not controlled by the ICRC. The ICRC Pension Fund was established under article 80 et seq. of the Swiss Civil Code. This separate legal entity is registered with the Swiss supervisory authority in the canton of Geneva. The ICRC Pension Fund must comply with the compulsory insurance requirements set out in the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Funds (known under the acronym LPP in French / and BVG in German). The fund undertakes to meet at least the minimum requirements imposed by the LPP/BVG and its ordinances. The ICRC Pension Fund Board is responsible for the fund’s management. The board consists of six representatives appointed by the ICRC and six representatives elected by active pension plan members. The number of pension plan members is as follows: The pension plan has three components that operate as one post-employment plan, and it is treated as a defined benefit plan for IAS 19 purposes: • Main plan • Early retirement plan • Supplementary plan Under IFRSs, the pension plan assets are common to its three components. The components of the plan were administered separately before 1 January 2022. 2. Description of the main plan • The main plan is the ICRC’s most significant post-employment benefit plan. It covers all staff members working at headquarters and all mobile staff members working in the field. • The main plan is a plan that provides retirement benefits, as well as death and disability benefits. • In general, the ICRC must make contributions to the ICRC Pension Fund for each plan member covered and as defined in the fund’s regulations. Should the Pension Fund become underfunded (from a Swiss legal funding perspective), then the ICRC and its employees could be required to make additional contributions. • The main plan is a defined contribution scheme under Swiss law. However, under IFRSs, the plan is classified as a defined benefit plan. • The ICRC must contribute 17% of pensionable salaries following the member’s 17th birthday. • The accrued but not vested transitional measures at 31 December 2023 were estimated at CHF 41 million (2022: CHF 65 million) and will be paid by the ICRC to the Pension Fund between 2023 and 2026. One fifth of the transitional measures is vesting each year starting 1 January 2022. 3. Description of the early retirement plan • The ICRC Pension Fund regulations offer all staff members working at headquarters and mobile staff members the possibility of taking early retirement from the age of 58. • The plan provides retirement benefits that are generally based on a maximum annual social security pension for single members under certain conditions. The plan covers the period from the date of ICRC retirement up to the date of retirement under Swiss law. The amounts that the ICRC must contribute in any given year must be greater than the amounts of benefits that are due for that year. This plan is not subject to any minimum funding requirements. Consolidated financial statements of the ICRC for the year ended 31 December 2023 27 • The Collective Staff Agreement may change the benefits provided under the plan in the future. It was issued in 2018 and partially revised in 2020. • In 2022, the ICRC paid to the Pension Fund the remaining early retirement benefits of staff members who began their early retirement before 31 December 2022. The remaining balance will be paid to the Pension Fund progressively as staff members take early retirement and will be funded by the ICRC. 4. Description of the supplementary plan • The supplementary plan is for certain mobile staff members working in the field and at headquarters who are not covered by the Swiss social security system. • The Collective Staff Agreement may change the benefits provided under the plan in the future. It was issued in 2018 and partially revised in 2020. • Starting on 1 January 2022, the supplementary plan replaced and incorporated the benefits under the Contribution Suppletive Plan. The other major plan changes were a decrease in contribution rates and the crediting of interest. In total, future benefits paid each year are expected to be of the same order of magnitude as benefits paid in prior years. 5. Disclosures relating to the pension plan for headquarters and mobile staff members The total pension cost and the defined benefit liability are determined by applying the appropriate method under IAS 19 using actuarial assumptions. The net obligation in respect of defined benefit plans is calculated separately for each plan component by estimating the amount of future benefits that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. The fair value of the pension plan assets is deducted. Components of defined benefit expense Due to the ongoing restructuring of the workforce in 2023, which resulted in two waves of reductions on 31 May and 30 September, curtailment accounting was appropriately applied and the expense relating to the remainder of the year was remeasured from the two effective dates. Net gains from curtailment were recognized in past service cost in an amount of CHF 15 million in 2023 (2022: no curtailment event). Remeasurements of net defined benefit liability recognized in other comprehensive income In 2023, material actuarial losses caused by the decrease of the discount rate were partially offset by gains caused by the decrease of the interest crediting rate. In 2022, material actuarial gains were mainly caused by the increase in the discount rate to 2.15% at 31 December 2022. The shortfall in terms of the return on plan assets, excluding net interest amounts, was caused by the weak performance of plan assets in 2022. Consolidated financial statements of the ICRC for the year ended 31 December 2023 28 Changes in the present value of defined benefit obligation Changes in the fair value of pension plan assets In 2022, the “Employer extraordinary contributions” line item included transfers related to two other components integrated into the Pension Fund, as well as the transitional measures vested or paid in 2022. Consequently, due to the integration of the three components as one post-employment plan, the ICRC paid CHF 113 million to the ICRC Pension Fund in the first quarter of 2022. This total represents one fifth of the main plan transitional measures, the remaining early retirement benefits before 1 January 2022 for staff members who began early retirement before that date, and the full balance of supplementary plan benefits before 1 January 2022. In addition, the ICRC paid an extra CHF 13 million to the ICRC Pension Fund for the main plan transitional measures that vested upon retirement in 2022 and the early retirement benefits for staff members who beganearly retirement in 2022. Consolidated financial statements of the ICRC for the year ended 31 December 2023 29 Fair value of pension plan assets by asset category All plan assets, except direct investments in real estate, certain real-estate funds and cash and cash equivalents, are listed. The market values of direct real-estate investments are validated every three years by an independent real-estate appraiser. The last year of valuation was 2021. The next appraisal will be carried out in 2024. No pension plan assets are occupied or used by the ICRC. Principal actuarial risks The pension plan typically exposes the ICRC to actuarial risks such as liquidity/market (investment) risk, interest rate risk, longevity risk, and inflation/salary risk. • Liquidity/market (investment) risk: the present value of the defined benefit plan liability is calculated using a discount rate determined with reference to high quality corporate bond yields. If the return on plan assets is below this rate, it will create a deficit in the plan. Currently the plan has relatively balanced investments in equity securities, bonds and real estate. Due to the long-term nature of the plan`s liabilities, the ICRC Pension Fund Board considers it appropriate that a reasonable portion of the plan assets should be invested in equity securities and in real estate, with the aim of achieving higher overall returns than would be produced by bonds alone. • Interest rate risk: a decrease in bond yields will increase the plan`s liabilities but this will be partially offset by an increase in the return on the plan’s bond investments. • Longevity risk: the present value of the defined benefit plan liability is calculated with reference to the best estimate of plan members’ mortality both during and after their employment. An increase in the life expectancy of plan members will increase the plan’s liabilities. • Inflation/salary risk: the present value of the defined benefit plan liability is calculated with reference to the future salaries of plan members, driven by expected consumer price inflation. As such, an increase in plan member salaries will increase the plan’s liabilities. The ICRC Pension Fund performs periodic asset/liability studies, inter alia, to assess its risk capacity and help ensure that it has the right asset strategy to achieve the required rate of return. Consolidated financial statements of the ICRC for the year ended 31 December 2023 30 Principal actuarial assumptions used Actuarial valuations involve making assumptions about discount rates, interest crediting rates, future salary increases, mortality rates, staff turnover and future pension increases. Due to the complexity of the valuation and the determination of the assumptions to be used, and given the long-term nature of these plans, estimates are sensitive to changes in assumptions. All assumptions are reviewed at each reporting date. In determining the appropriate discount rate, management considers the yield curve at the reporting date on corporate bonds in Switzerland with at least an AA rating that have maturity dates approximating the terms of the ICRC’s obligations and that are denominated in the functional currency. Future salary increases are based on expected future inflation rates for Switzerland. Mortality rates are based on the publicly available LPP/BVG 2020 tables projected with CMI_2019 improvement factors. Sensitivity analysis Changes in relevant actuarial assumptions that were reasonably plausible at the reporting date, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below. Although the analysis does not take into account the full distribution of cash flows expected under the plan, it shows the approximate sensitivity to the assumptions. Expected contribution amounts Expected benefit payments Consolidated financial statements of the ICRC for the year ended 31 December 2023 31 4I. POST-EMPLOYMENT BENEFITS FOR RESIDENT STAFF MEMBERS Post-employment benefits for resident staff members consist of four post-employment benefit plans: 1. International Retirement Savings plan Description of the International Retirement Savings Plan • The IRSP Foundation, based in Geneva, is a pension fund controlled by the ICRC. It is governed by article 80 et seq. of the Swiss Civil Code, article 10 (1) of the Headquarters Agreement of 19 March 1993 and the Foundation’s statutes and regulations. This separate legal entity created in 2021 is registered with the Swiss supervisory authority in the canton of Geneva. • The IRSP Foundation Board is responsible for the fund’s management. The board consists only of representatives appointed by the ICRC. The ICRC pays all administration costs of the IRSP. • The IRSP, which came into effect on 1 January 2022, is intended for ICRC resident staff members working in certain countries. The number of active IRSP plan members at 31 December 2023 was 11,081 (2022: 13,372). • The IRSP is a funded plan providing post-employment and retirement benefits. It incorporates and replaces voluntary end-of-service benefits in the countries concerned. It does not replace national social security systems or the benefits they provide, or mandatory severance, retirement or termination payments under local labour law. • The major plan changes compared to voluntary end-of-service benefits were an increase in the employer’s contribution percentage; the denomination of liabilities in Swiss francs and the crediting of interest upon the decision of the IRSP Foundation Board. • As there is only a lump-sum benefit at the end of employment, there are no pensioners. • In general, the ICRC must make contributions to the IRSP for each plan member covered and as defined in the fund’s regulations, i.e. it must contribute 11.5% of pensionable salaries following the member’s 17th birthday. In article 13.1 of the fund’s regulations, the ICRC has undertaken to cover the IRSP benefits if, despite the restructuring measures implemented, the fund’s assets do not enable the IRSP to pay the benefits to its beneficiaries. In this case, the ICRC would pay the IRSP Foundation the amount required to cover the outstanding benefits. • The IRSP was designed with defined contribution characteristics. However, under IFRSs, the plan is classified as a defined benefit plan. • In 2020, the ICRC Assembly Council approved transitional measures for all resident staff members to compensate for years in which contributions were not made due to the 12-year cap on the former voluntary end-of-service benefits. Transitional measures were granted to members whose end-of-service benefits were stopped at 31 December 2023. These past service end-of-service benefits and associated transitional measures, where applicable, were transferred to the IRSP, a local plan or have been retained in the ICRC. • Transitional measures due to IRSP members will be paid to the IRSP Foundation annually between 2022 and 2026, with one fifth being credited to individual retirement savings each year. The not-yet-vested transitional measures allocated to the IRSP members were estimated at CHF 4 million at 31 December 2023 (2022: CHF 6 million) and were included in the IRSP defined benefit obligation. The total pension cost and the defined benefit liability are determined by applying the appropriate method under IAS 19 using actuarial assumptions. Components of defined benefit expense Consolidated financial statements of the ICRC for the year ended 31 December 2023 32 Remeasurements of net defined benefit liabilities recognized in other comprehensive income Changes in the present value of defined benefit obligation The integration of end-of-service benefits in an amount of CHF 71 million at 1 January 2022 resulted in a past service cost of CHF 4 million in 2022. Changes in the fair value of IRSP assets The ICRC transferred funds to the IRSP Foundation in 2022, so that the new plan was substantially funded at 31 March 2022. The ICRC paid CHF 70 million in March and July 2022 as the sum of the end-of-service benefits before 1 January 2022 and one fifth of the transitional measures due to the resident staff members working in the countries concerned. Consolidated financial statements of the ICRC for the year ended 31 December 2023 33 Fair value of IRSP assets by asset category Principal actuarial risks The IRSP typically exposes the ICRC to actuarial risks such as liquidity/market (investment) risk and interest rate risk. • Liquidity/market (investment) risk: the present value of the defined benefit plan liability is calculated using a discount rate determined with reference to high quality corporate bond yields; if the return on plan assets is below this rate, it will create a deficit in the plan. Currently the plan has relatively balanced investments in equity securities, bonds and real estate. Due to the long-term nature of the plan’s liabilities, the IRSP Foundation Board considers it appropriate that a reasonable portion of the plan assets should be invested in equity securities and in real-estate funds, with the aim of achieving higher overall returns than would be produced by bonds alone. • Interest rate risk: a decrease in bond yields will increase the plan’s liabilities but this will be partially offset by an increase in the return on the plan’s bond investments. In the case of this funded plan, the IRSP Foundation ensures that investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with pension plan obligations. The IRSP Foundation actively monitors how the duration and the expected yield of the investments match the expected cash outflows arising from the pension obligations. Principal actuarial assumptions used Actuarial valuations involve making assumptions about discount rates, interest crediting rates and employee turnover. Due to the complexity of the valuation and the determination of the assumptions to be used, and the long-term nature of the benefits, estimates are sensitive to changes in assumptions. All assumptions are reviewed at each reporting date. Sensitivity analysis Changes in relevant actuarial assumptions that were reasonably plausible at the reporting date, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below. Although the analysis does not take into account the full distribution of cash flows expected under the plan, it shows the approximate sensitivity to the assumptions. Consolidated financial statements of the ICRC for the year ended 31 December 2023 34 Expected contribution amounts Expected benefit payments 2. Mandatory gratuity plans Description of mandatory gratuity plans • In some countries that have joined the IRSP, local labour law mandates post-employment and/or post-retirement benefits to employees. The ICRC provides these benefits on top of the local voluntary retirement plan or the IRSP benefits as applicable for the relevant country. • As there is only a lump-sum benefit at the end of employment, there are no pensioners. • The ICRC’s Department of People and Culture is in charge of the plans’ governance. Potential risk exposure is derived from future changes to local regulations or to local collective staff agreements relating to mandatory gratuity benefits. • Among the countries concerned, the greatest mandatory gratuity benefits are in Iraq. Indeed, Iraqi resident staff members are entitled to a two-week gratuity benefits per year which is due at the end of the contract. For materiality reasons, these mandatory benefits are treated as a defined benefit plan for IAS 19 purposes. • For the other countries, a simplified defined benefit methodology is applied due to immateriality, and the ICRC performs the calculations. Expenses for these plans are recognized in the period in which the corresponding services are provided by the staff members. The expected contributions for these plans in 2024 are less than CHF 1 million. • At 31 December 2023, the ICRC recognized a non-current liability of CHF 6 million with respect to these benefits (2022: CHF 6 million, see Note [4G2]). The table below summarizes the breakdown of these non-current liabilities between defined benefit and defined contribution plans: As regards Iraq, for materiality reasons, these mandatory gratuity benefits are treated as a defined benefit plan for IAS 19 purposes. The total pension cost and the defined benefit liability are determined by applying the appropriate method under IAS 19 using actuarial assumptions. Consolidated financial statements of the ICRC for the year ended 31 December 2023 35 The following disclosures in this section are specific to the mandatory gratuity benefits in Iraq. Components of the defined benefit expense Change in the present value of the defined benefit obligation Principal actuarial risks The Iraqi mandatory gratuity benefits typically expose the ICRC to actuarial risks such as inflation/salary risk and currency risk. • Inflation/salary risk: the present value of the defined benefit plan liability is calculated with reference to the future salaries of plan members, driven by expected consumer price inflation. As such, an increase in the salary of the plan members will increase the plan liabilities. • Currency risk: benefits are generally provided in the currency of the country where the resident staff members work. As such, a strengthening of the local currency compared to the Swiss franc will increase the plan liabilities. Principal actuarial assumptions used Actuarial valuations involve making assumptions about discount rates, future salary increases and employee turnover. Due to the complexity of the valuation and the determination of the assumptions to be used, along with the long-term nature of the benefits, these estimates are sensitive to changes in assumptions. All assumptions are reviewed at each reporting date. Expected contribution amounts and benefit payments 3. End-of-service plans Description of the end-of-service plans • The ICRC also provides post-employment benefits to resident staff members in accordance with the legislation of the countries concerned, the local collective staff agreements and the ICRC retirement policy in some countries. The benefits are based on one month of compensation for every year of service, except in countries where local regulations have a materially different impact than if ICRC regulations were followed. • The end-of-service plan is an unfunded plan. • The present value of future financial obligations in respect of end-of-service benefits (e.g. end of employment, retirement, severance pay etc.) is borne by the ICRC. Consolidated financial statements of the ICRC for the year ended 31 December 2023 36 • As there is only a lump-sum benefit at the end of service, there are no pensioners. • The ICRC’s Department of People and Culture is in charge of the plan’s governance. Potential risk exposure is derived from future changes to local regulations or to local collective staff agreements relating to post-employment benefits. • A simplified defined benefit methodology was applied for the end-of-service plan due to immateriality, and the ICRC performed the calculations. • At 31 December 2023, the ICRC recognized a non-current liability of CHF 26 million with respect to these benefits (2022: CHF 33 million). Expenses for this plan are recognized in the period in which the corresponding services are provided by the staff members. Expected contributions for this plan in 2024 amount to CHF 7 million. • Following the launch of the IRSP, this end-of-service plan is continuing only in certain countries, with one major plan change effective at 1 January 2022. In 2020, the ICRC Assembly Council approved transitional measures to offset years in which contributions were not made due to the 12-year cap. • The transitional measures allocated to the countries continuing with the end-of-service plan will vest gradually between 2022 and 2026, with one-fifth being credited to individual retirement savings each year. The not-yet-vested transitional measures were estimated at CHF 1 million at 31 December 2023 (2022: CHF 1 million) and were presented under the “other post-employment benefits” line item within non-current liabilities (see Note [4G2]). A simplified defined benefit methodology (i.e. recognizing liabilities equal to the sum of accrued benefits) was applied for the end-of-service plan for immateriality reasons, and the ICRC performed the calculations. Principal actuarial risks The end-of-service plan typically exposes the ICRC to actuarial risks such as inflation/salary risk and currency risk. • Inflation/salary risk: the present value of the defined benefit plan liability is calculated with reference to the future salaries of plan members, driven by expected consumer price inflation. As such, an increase in the salary of the plan members will increase the plan liabilities. • Currency risk: benefits are generally provided in the currency of the country where the resident staff members work. As such, a strengthening of the local currency compared to the Swiss franc will increase the plan liabilities. 4. Local multi-employer plans • The ICRC has opted for outsourced multi-employer plans in certain countries. The decisions to choose these local plans, instead of the end-of-service plan, were taken based on the legislation of the countries concerned and common local market practices. • These plans are funded plans providing post-employment benefits, including retirement benefits. • Under IFRSs, they are considered as defined contribution plans. Expenses for these defined contribution plans are recognized in the period in which the corresponding services are provided by the staff members and based on employer contributions. Their classification as defined contribution plans is driven by the characteristics of the plans and the obligations of the employer. 5. Subsequent events At 25 April 2024, the date on which the consolidated financial statements were authorized for issue, there were no material events subsequent to 31 December 2023 that would require disclosure in this note. Consolidated financial statements of the ICRC for the year ended 31 December 2023 37