Accounting policy

Accrual accounting

Income and expenses are recorded according to the principle of accrual accounting, and so they are recorded as they are generated, regardless of the time when they are received or paid. The differences between the amounts received and paid and the corresponding income and expenses generated are recorded in the items “Other accounts receivable”, “Other accounts payable” and “Deferrals”.

Expenses and income whose real value is not known are estimated based on the best evaluation of the Boards of Directors of Nors and of its affiliates.

For the periods ended December 31, 2022 and 2021, operating expenses and losses are broken down as follows:

2.4. staff costs and other employee benefits

2.4.1. staff costs

In the periods ended December 31, 2022 and 2021, the personnel expenses were as follows

On December 31, 2022 the number of employees is 2,702 (122 more than the previous year).

Remuneration of the members of Nors ’ governing bodies in the years 2022 and 2021 were as follows:

2.4.2. defined benefits obligation

Accounting policies

Provisions for future employee benefit obligations

Pension obligations

In geographies where this is mandatory, employees have rights under the group's pension plans, which are either defined contribution or defined benefit plans.

The liability recognized in the consolidated statements of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is updated annually by the Board of Directors with key assumptions provided by independent actuaries using the projected unit credit method. Actuarial valuations of the defined benefit plans are performed at least every three years. The present value of the defined benefit obligation is determined by discounting estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension obligation.

Net interest is determined by multiplying the defined benefits obligation or net asset by the discount rated used to determine the defined benefits obligation (at the beginning of the year) and is included in the employee’s future benefits.

Changes to actuarial gains and losses that arise when calculating the present value of the defined benefits obligation and of the fair value of the plan’s assets are recognised in OCI in the period in which they arise and are debited or credited in retained earnings. On a provisional basis, management estimates the changes in actuarial gains and losses. These estimates are adjusted when the annual evaluation or estimate is concluded by the independent actuaries.

The cost of past services are immediately recognised in operating expenses in the consolidated income statements.

For defined contribution plans, the contributions are recognised as post-employment benefit expenses when they are due. Contributions paid in advance are recognised as an asset, in as far as a monetary reimbursement or a reduction in future payments is available.

Other future employee benefit obligations

The Group also has other future obligations to its employees, including a pension plan without an associated fund and a noncontributory dental and healthcare plan. The expected costs with these benefits are accrued throughout the employment period, using the same accounting method used for the defined benefit pension plans. These obligations are evaluated annually by independent, qualified actuaries.

Each provision typology takes into consideration: typology

Employee retirement benefits description post-employment benefits acquired by former Strongco employees and which have no underlying assets ("unfunded liabilities"). post-employment

Judgments and estimates

In determining the obligations with benefits for retired employees and with defined benefit pension funds, the Group uses actuarial assumptions, such as the discount rate and expectations of average life expectancy, being a matter that requires judgments and estimates to be made by the Board of Directors.In the actuarial assumptions, the group evaluated the discount rate applicable to the defined benefit plan for employees and other post-employment benefits. As a result of this evaluation, the Group updated the discount rate in accordance with the indicative market reference rates for calculating the liability with post-employment benefits and other long-term benefits.

For the periods ended December 31, 2022 and 2021, the breakdown is as follows :

The benefits to retired employees correspond to 3 retired beneficiaries and are associated with benefits with health and dental plans not covered by active employees. The employee pension fund has benefits attributable to current and former employees, of which only 29 employees are still accruing benefits. Prior to the acquisition by the Nors group, Strongco transferred the majority of employees participating in the defined benefit pension plan to a closed defined contribution plan effective January 1, 2019. The employees retained their rights to the pension benefits they had earned up to December 31, 2018. The executive pension fund currently has 6 beneficiaries already in the retirement period.

In the periods ended December 31, 2022 and 2021, the movements occurred as follows:

The current position of each defined benefit pension fund is as follows:

The risks associated with these plans are similar to those typical of benefit plans, including market risk, interest rate risk, liquidity risk, credit risk, longevity risk, etc. There are no significant risks associated with these plans that might be considered unusual or require special disclosure.

For the periods ended December 31, 2022 and 2021, the investment structure of plan assets is as follows:

The group measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as of December 31 of each year.

The main actuarial assumptions used were the following:

The sensitivity of the main assumption of the current value of future liabilities is the following:

2.5. remuneration of the statutory auditor

In the 2022 and 2021 financial years, the fees paid to the firms of statutory auditors in the various countries in which Nors is present is related to the companies included in the consolidation using the full method, and is as follows:

In 2022 and 2021, the statutory audit firms corresponded to firms in KPMG's international network (made up of independent member firms associated with KPMG International Limited).

3.1. goodwill Accounting policies

Following the transition to the IFRS and as permitted by IFRS 1 - “First time Adoption of IFRS”, Nors chose to maintain the Goodwill resulting from business combinations that took place prior to the transaction date, recorded according to the previous accounting rules used by Nors . Goodwill represents the difference between the fair value of the acquisition cost and the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiaries included in the consolidation at the date control is acquired and is allocated to each lowest cash-generating unit (CGU) or group of CGUs to which it is intended. Up to January 31, 2009, the contingent acquisition prices were determined based on the best estimate of probable payments, while subsequent changes were recorded in Goodwill. Since January 1, 2010, Goodwill is no longer corrected according to the final calculation of the value of the contingent price paid, that impact being recognised in profit or loss.

Impairment

The value of Goodwill is not amortised but is tested annually to check if there are any impairment losses. The recoverable amount is determined based on the highest out of the present value of estimated future cash flows expected to arise from continued use of the asset, and the value of the disposal less its sale costs. Goodwill impairment losses recorded in the financial year are recorded in the income statement for the year in the item “Impairment of non-depreciable assets” under "Other operating costs and losses". Impairment losses related to Goodwill cannot be reversed.

Judgments and estimates Recoverability of goodwill

The complexity and level of judgment inherent to the model adopted for the calculation of impairment and the identification and aggregation of cash-generating units (CGU's) imply considering this issue as a significant accounting estimate. For the purposes of the impairment analysis, the recoverable amount was determined based on the value in use, according to the discounted cash flow method, based on the "business plan" developed by the persons in charge of the companies and duly approved by the Board of Directors of Nors and using discount rates that reflect the inherent risks of the business, or in the case of the real estate companies the sale value less costs to sell, as provided for in the regulations.

Methods and assumptions used

In the periods ended December 31, 2022 and 2021, the method and assumptions used in assessing the existence, or not, of impairment occurred as follows:

Movements in goodwill

In the periods ended December 31, 2022 and 2021, the movements in goodwill occurred as follows:

During the year ended December 31, 2020 the acquisition of Strongco Corporation occurred, and during the year 2021, the Goodwill generated by this operation was reviewed, as provided in IFRS 3 - Business Combinations. For further information see note 10.2.

The Board of Directors, based on the value of the projected cash flows at 5 years, which are based on historical performance and expectations of efficiency and organic growth, discounted at the applicable rate, concluded that, at December 31, 2022, the book value of the cash generating units does not exceed their recoverable value. In companies with real estate activities, the recoverable amount was determined by the fair value of the properties minus disposal costs, which is higher than the book value of net assets, including goodwill, and for this reason it is not necessary to consider an impairment of assets.

Sensitivity Analysis

The cash flow projections were based on historical performance and expectations of efficiency and organic growth. The management believes that a possible change (within a normal scenario) in the main assumptions used in the calculation of the recoverable amount will not result in impairment losses, making the WACC and the business growth rate vary by 1 p.p., Goodwill remains unimpaired.

3.2. intangible assets Accounting policies

Recognition and initial measurement

Intangible assets are recorded at acquisition cost, less the accrued amortisations and accrued impairment losses. They are only recognised if it is probable that they will generate future economic benefits for Nors , if it is possible to reasonably measure their cost and if Nors has control over them.

Research expenses incurred with new technical knowledge are recognised as an expense in the income statement when incurred.

Development expenses, for which Nors demonstrates its ability to complete the development and begin marketing and/or using them, are capitalised if it is probable that the asset created will generate future economic benefits.

Development expenses that do not meet these criteria are recorded as an expense in the income statement for the year in which they are incurred. Internal costs linked to the maintenance and development of software are recorded as expenses in the income statement when incurred, except when such costs are directly linked to projects which will probably generate future economic benefits for Nors In such situations, these costs are capitalised as intangible assets.

Depreciations

Intangible assets are amortised using the straight-line method, for a period of three to six years, except those related to concession rights, which are considered to have an indefinite useful life, and as such, are not amortised, but subject to an annual impairment test. Amortisation of intangible assets in the year is recorded in the income statement under "Depreciation, amortization and impairment losses on non-financial assets".

Movements in intangible assets

In the periods ended December 31, 2022 and 2021, the movements in intangible assets, as well as in the respective accumulated amortization and impairment losses, occurred as follows: :

3.3. tangible fixed assets

Accounting policies

Recognition and initial measurement

Tangible fixed assets acquired up to January 1, 2009 (transition date to IFRS) are recorded at their deemed cost, which corresponds to their acquisition cost, or revalued acquisition cost in accordance with generally accepted accounting principles in Portugal (and the countries of the respective Nors subsidiaries) up to that date, less depreciation and accumulated impairment losses.

Tangible fixed assets acquired after that date are recorded at acquisition cost, less accumulated depreciation and accumulated impairment losses.