Basis of preparation
Uisce Éireann (‘the Company’) is a designated activity company, limited by shares, and incorporated in Ireland on 17 July 2013. The Company registration number is 530363. Uisce Éireann’s shares are solely held by both the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation (99 shares) and the Minister for Housing, Local Government and Heritage (one share).
The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) agenda decisions, as endorsed by the EU, and effective for accounting periods beginning on or after 1 January 2024, and the Companies Acts 2014. The financial statements are presented in Euro, rounded to the nearest thousand and are prepared on a historical cost basis.
These policies have been consistently applied to all years presented in these financial statements with the exception of adoption of new standards (as set out below). In the process of applying these accounting policies, judgements and estimates are necessarily used which affect the amounts recognised in the financial statements. Details of the most significant accounting judgements and estimates applied are set out in the final section of this note under “Critical Accounting Judgements and Estimates”.
Going concern
The Directors believe that the Company is well placed to manage its risks successfully. The Company’s objectives, policies and process for managing its capital, its financial risk management objectives and its exposures to credit risk and liquidity risk are set out in note 22 to the financial statements.
The Company’s forecasts and projections show that Uisce Éireann is expected to meet its liabilities as they fall due through a combination of State funding and tariffs charged by Uisce Éireann. The revised framework for the Company’s long-term funding model is outlined in the Water Services Act 2017. Uisce Éireann’s state funding for 2025 was agreed and approved in Q4 2024 as part of the Government budgetary process. The Directors believe that the Government has demonstrated its commitment to the continued funding of Uisce Éireann, including beyond 2025, through the enactment of the Water Services (Amendment) Act 2022 in December 2022 which reflects Government’s commitment to retain Uisce Éireann in public ownership as a national, standalone and regulated utility. In addition, the Framework for the Future Delivery of Water Services, published by the Department of Housing, Local Government & Heritage in June 2022, further signified the Government’s long term strategy for the Company whereby in 2023 Uisce Éireann assumed full responsibility for the delivery of all public water services. The Government’s commitment to ongoing funding for capital investment is evidenced by inclusion of Uisce Éireann’s capital investment programme in Project Ireland 2040, in the National Development Plan 2021-2030, and approval in 2024 of the Uisce Éireann Strategic Funding Plan (2025-2029).
In June 2020 the Company entered into new State loan facilities, provided by the Minister for Finance for capital expenditure attributed to the non-domestic sector. These facilities are now fully drawn. In the Government’s 2025 Budget, it was announced that €1 billion of funding would be provided by the Minister of Finance to support the capital investment included in the approved Strategic Funding Plan 2025-2029, €300 million would be provided in 2025 to fund domestic capital investment, with €700 million provided to fund non-domestic capital investment over the period 2025-2027, €214 million of which will be provided in 2025. In 2021, the Company entered into a €350 million working capital facility with the NTMA. Uisce Éireann has committed to ensuring that the NTMA working capital facility remains undrawn on 31 December each calendar year, unless Uisce Éireann has obtained prior Ministerial agreement to utilise the facility. The Company also has a €10 million overdraft facility to help manage its daily banking requirements.
Following consideration of the facts set out above, and while noting the Company’s net current liability position which is €97 million at 31 December 2024 (2023: €100 million), the Directors have concluded that they have a reasonable expectation that the Company will continue to meet its liabilities as they fall due for the foreseeable future and consequently the financial statements are prepared on a going concern basis. The Directors have concluded that there are no material uncertainties related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern over the period of assessment. The period of assessment used by the Directors is twelve months from the date of approval of these annual financial statements.
New IFRS accounting standards effective for the year ended 31 December 2024
The Company has adopted the following amendments to standards, which have had no material impact on the Company’s results or financial statement disclosures:
- Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements
- Amendments to IAS 1 Classification of Liabilities as Current or Non-current
- Amendments to IAS 1 Classification of Liabilities as Current or Non-current — Deferral of Effective Date
- Amendments to IAS 1 Non-current Liabilities with Covenants
- Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback
New IFRS accounting standards and interpretations not yet adopted
The following new accounting standards and amendments to existing standards have been issued but are not yet effective for this accounting period or have not yet been endorsed by the EU:
- IFRS 19 Subsidiaries without Public Accountability: Disclosures
- IFRS 18 Presentation and Disclosure in Financial Statements
- Amendments to IFRS 9 and IFRS 7: Contracts Referencing Nature-dependent Electricity
- Annual Improvements Volume 11
- Amendments to IFRS 9 and IFRS 7: Classification and Measurement of Financial Instruments
- Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability
It is anticipated that application of the remaining IFRS amendments and annual improvements, in issue at 31 December 2024, but not yet effective, will not have a significant impact on the Company’s financial statements.
Material Accounting Policy Information
a) Property, plant and equipment
Recognition
Property, plant and equipment is measured at cost less accumulated depreciation and accumulated impairment losses thereon. Cost includes direct costs (including directly attributable labour and overhead costs), and interest incurred in financing the construction of the asset when construction takes a substantial period of time to complete. Assets under construction represent the cost of purchasing, constructing and installing property, plant and equipment ahead of their productive use. Items such as spare parts, stand-by equipment and servicing equipment are recognised as property, plant and equipment when they meet the definition under IAS 16, otherwise such items are classified as inventory.
Subsequent expenditure
Subsequent expenditure, for example, the cost of replacing a component of an item of property, plant and equipment, is recognised in the carrying amount of the item if it is probable that the future economic benefits associated with the item will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.
Depreciation
Items of property, plant and equipment are depreciated from the date they are available for use.
The charge for depreciation is primarily calculated to write down the cost of property, plant and equipment, less estimated residual value, on a straight-line basis over their expected useful lives. Leased assets are depreciated over the shorter of the lease term and their useful lives.
Major asset classifications and their estimated useful lives are:
Infrastructure assets (including boundary boxes, reservoirs, water & waste pipelines and service connections) |
40-100 years |
Operational assets (including meters, pumps, and electrical & mechanical systems) |
12-70 years |
Non-network assets (including fixtures & fittings, vehicles and computer equipment) |
3-15 years |
Depreciation is not charged on land or assets under construction. Depreciation method, useful lives (including production hours) and residual values are reviewed at each reporting date (including consideration of any potential impacts due to climate change and sustainability) and adjusted if appropriate.
b) Intangible assets
Software and software under development
Software costs include both internally developed and externally purchased assets.
Internally developed software refers to costs directly associated with the production of identifiable and unique software products which are controlled by the Company. These costs are recognised as intangible assets as it is considered probable that these products will generate economic benefits exceeding the recognised costs. These costs are capitalised only if the criteria set out in IAS 38 are met. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets.
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring into use the specific assets, provided the costs meet the criteria in IAS 38 for capitalising. Software-as-a-Service (SaaS) arrangements are expensed as operating costs unless the arrangement meets the capitalisation criteria under IAS 38.
Amortisation of intangible assets
Intangible assets are amortised on a straight-line basis in the income statement over their estimated useful lives, from the date that they are available for use. Amortisation is not charged on development assets that are not yet available for use. Software is amortised, on a straight-line basis, over their estimated useful lives of up to seven years. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
c) Impairment and derecognition of assets
Property, plant and equipment and intangible assets which are not yet ready for use are tested annually for impairment. Assets in use are assessed at the reporting date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is then assessed.
If an indication of impairment exists, impairment is assessed. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or CGUs) - refer to judgements and estimates section for further detail. An impairment loss is recognised for the amount by which an asset’s carrying amount exceeds its recoverable amount or if it is determined no longer probable that an asset will be delivered by the project. Impairment losses are recognised in the income statement.
Where it is subsequently determined that assets no longer meet the criteria for recognition, these are derecognised and presented as operating costs.
d) Revenue
Revenue is measured based on the consideration which the Company expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The Company recognises revenue when or as the performance obligations, as set out in the contract, are satisfied. If it is considered that the criteria for revenue recognition are not met for a transaction, revenue recognition would be delayed until such time as collectability is considered probable.
A number of the Company’s sources of revenue are dependent on being approved by the industry regulator, the Commission for Regulation of Utilities (CRU). Certain circumstances may result in the regulatory “allowed” revenue being over or under recovered in the year. Any over or under recovery may be included, within certain parameters, in the calculation of the following years’ regulatory revenue. No adjustment is made for over or under recoveries in the year that they arise.
Revenue principally comprises the sales values derived from the following:
Supply of water and wastewater services to domestic customers - Government subvention revenue
The Government, acting in its capacity as Government, purchases from the Company a certain volume of water and wastewater and related services on behalf of domestic customers and at a transaction price determined in line with the allowed revenue set by the CRU. This revenue is recognised by the Company on a systematic basis to reflect the timing of the sale of goods to the Government. All subvention revenue is billed and collected within the reporting period.
Supply of water and wastewater services to non-domestic customers
Revenue billed is dependent on the volume supplied. Where services have been provided, but for which no invoice has been raised at the reporting date, an estimate of value of water and wastewater services supplied to customers between the date of the last meter reading and the reporting date is recognised in revenue.
New connections revenue
The Company receives contributions from customers in respect of the cost of connecting them to the network. Where such contributions are billed in advance, they are recognised in deferred revenue and are released to revenue as the performance obligation is satisfied (i.e. confirmation that connection to water and wastewater services is available for use).
e) Leases
At the inception of a lease contract the Company assesses whether a contract is, or contains, a lease. If the contract conveys the right to control the use of an asset for a period of time in exchange for consideration, it is recognised as a lease.
Where the Company is a lessee, a right-of-use asset (presented within ‘Property, plant and equipment’) and a corresponding liability (presented within ‘Borrowings and other debt’) are recognised at the date at which the leased asset is available for use by the Company.
For short-term (lease term less than 12 months) and low value leases (value of the asset when new is less than $5,000), the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefit from the leased assets are consumed.
The lease term is assessed as the non-cancellable period of a lease, together with any periods covered by extension / termination options that are reasonably certain to exercise. The lease term is reassessed when there is a significant event or a significant change in circumstances and revised where appropriate.
f) Retirement benefit obligations
Defined benefit pension scheme
A defined benefit scheme is a post-employment benefit scheme other than a defined contribution scheme, which is detailed below.
Post-employment benefit plans include not only formal arrangements but also informal practices that give rise to constructive obligations and therefore the accounting treatment is the same regardless of whether an obligation is legal or constructive.
For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial reviews being carried out at each reporting date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the income statement and presented in other comprehensive income.
Past service cost is recognised immediately. The current service cost and gains and losses on settlements and curtailments are charged to operating costs, or to provisions in the instances where the associated costs were provided for initially as part of the recognition of a restructuring provision. The pension net interest cost is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation of the schemes net of the fair value of the schemes’ assets.
Defined contribution pension schemes
A defined contribution scheme is a post-employment scheme under which an entity pays fixed contributions into a separate entity from which no legal or constructive obligation to pay further amounts arises. The contributions payable under the defined contribution schemes are charged to the income statement in the periods during which services are rendered by employees.
g) Grants
A grant is recognised as a liability initially on the balance sheet when there is reasonable assurance that it will be received and that the Company will comply with the conditions attaching to it. Grants that compensate the Company for the cost of an asset are amortised to the income statement on a systematic basis over the useful life of the asset to match the depreciation charge. Grants that compensate the Company for expenses incurred are recognised in the income statement on a systematic basis in the same years in which the expenses are incurred.
Grant accounting is applied to refund programmes (such as the refund of domestic charges and the Temporary Time-Limited Waiver in respect of Development Contributions) which are funded by Government acting in their capacity as government and presented as exceptional items (see “presentation of exceptional items” below). Following validation of the connections refund claim, the grant income and the related grant expense is recognised separately in the income statement. The relevant contribution is then refunded and the government funding is provided thereafter.
h) Provisions and contingent liabilities
The Company evaluates its exposures to contingent liabilities relating to pending litigation or other outstanding claims subject to negotiated settlement, mediation, arbitration or Government regulation. A provision is recognised when it is probable that an obligation exists for which a reliable estimate can be made after careful analysis of the individual matter. Analysis includes assessing the likelihood that a pending claim will succeed or a liability will arise, the point of recognition for the associated liability and the potential timing of settlement.
Matters that either are possible obligations or do not meet the recognition criteria for a provision are recognised as contingent liabilities, unless the possibility of transferring economic benefits is remote.
Provisions determined may change in the future due to new developments and as additional information becomes available. Reflecting the inherent uncertainty in this evaluation process actual costs may be different from the estimated provision. Details of provisions and contingent liabilities are disclosed in note 20.
i) Financial assets and liabilities
Borrowings
Borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, borrowings are stated at amortised cost using the effective interest rate method.
Trade and other receivables
Trade and other receivables are initially recognised at the transaction price receivable and are subsequently carried at this value, as there is no significant financing component, less an appropriate allowance for expected credit losses. Impairment losses are provided for using a lifetime expected credit loss model, with the expected impairment being recognised as an expense in operating costs and presented as ‘Impairment of trade receivables’. The expected credit loss amount is calculated by applying expected loss rates, based on actual historical cash collection performance, to the aged debt profile with future macro-economic factors and factors specific to the debtors taken into consideration.
Cash and cash equivalents
Cash includes cash on hand and demand deposits which are accessible by the Company within 3 months. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.
Where the conditions and intention for offset exists, cash balances are combined with overdraft balances and this combined balance is presented on the balance sheet.
Where there are contractual restrictions on the Company’s ability to use the cash (e.g. third party monies received as financial security and held in accounts accessible within 3 months), these funds are presented as “Cash and cash equivalents - third party balances”. Cash held, where there is no restriction on use, is presented as “Cash and cash equivalents - available for company use”.
Financial assets - financial security held on term deposit
Financial securities held on deposit terms greater than 3 months at the date of acquisition are presented as “Financial assets - financial security held on term deposit” as they do not meet the definition of cash and cash equivalents, as the deposits are not accessible by the Company within 3 months. These are third party monies, held under financial security arrangements which place contractual restrictions on the Company’s ability to uses these monies.
Trade and other payables
Trade and other payables are initially recorded at fair value, which is usually the original invoiced amount plus any directly attributable transaction costs, and subsequently carried at amortised cost using the effective interest rate method.
j) Inventory
Inventories comprise mainly of consumable items. These are measured at the lower of cost and net realisable value. Cost is determined using the first in, first out (FIFO) method. Cost is comprised of all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less any estimated selling costs. A provision is made for obsolete, slow moving or defective items where appropriate.
Where the Company takes operational control of an inventory store and the related inventory in the store, the initial recognition of inventory held at that facility at the date of transfer is recognised at €nil value. Subsequent inventory purchases are recognised in accordance with the Company’s inventory policy above.
k) Finance income
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in the income statement, using the effective interest rate method.
l) Finance costs
Finance costs comprise interest payable on borrowings, financing charge on provisions (recognised following assessment if material), impairment losses recognised on financial assets (other than trade receivables) and net pension interest costs. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in the income statement using the effective interest rate method. The pension net interest cost is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
m) Income tax
Income tax expense comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous periods. Current tax assets and liabilities are offset where there is a legally enforceable right of offset within the same tax authority and where the intention is to settle on a net basis or to realise the asset and settle the liability simultaneously.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to apply in the periods in which the temporary differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it is probable that there will be suitable taxable profits in the foreseeable future from which the reversal of the underlying temporary differences can be deducted.
Deferred tax assets and liabilities are offset where there is a legally enforceable right of offset within the same tax authority and where the intention is to settle on a net basis or to realise the asset and settle the liability simultaneously.
A provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable. The assessment is based on the judgement of tax professionals within the Company supported by previous experience in respect of such activities and in certain cases based on specialist independent tax advice.
n) Non-GAAP measures
Operating profit is stated before net finance costs and taxation.
EBITDA is defined as earnings before interest, tax, depreciation and amortisation. Net debt is defined as total borrowings and other debt less cash and cash equivalents. The Company uses these non-GAAP measures and presentation to provide useful performance and financing information to management, stockholders and external stakeholders.
o) Presentation of exceptional items
As permitted by IAS 1 Presentation of Financial Statements, the Company has disclosed additional information in respect of exceptional items on the face of the income statement, to aid understanding of the Company’s financial performance. An item is treated as exceptional if it is considered unusual by nature and scale and of such significance that separate disclosure is required for the financial statements to be properly understood.
Critical Accounting Judgements and Estimates
In the process of applying these accounting policies, the Company is required to make certain estimates, assumptions and judgements that it believes are reasonable based on the information available. These estimates, assumptions and judgements affect the amounts of assets and liabilities at the date of the financial statements and the amounts of revenues and expenses recognised during the reporting periods presented. Changes to these estimates could have a material effect on the financial statements.
These estimates, assumptions and judgements are assessed in the preparation of these financial statements. The environment in which the Company operates will be subject to climate change impacts, and this will influence how water and wastewater services will be delivered in the future. The Company will continue to develop its assessment of climate change impacts on its assets and liabilities and the potential implications of climate change on its infrastructure and operations. The impact of climate change has been considered in the preparation of these financial statements and no changes in judgement or estimate have been identified in this process (see below for further disclosure where relevant). Due consideration has also been given to relevant macro-economic factors, including inflation. The Company has provided additional information in respect of each of the impacted judgements and estimates as set out below. On an ongoing basis, the Company evaluates its estimates using historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Actual results may differ from these estimates, the effect of which, is recognised in the period in which the facts that give rise to the revision become known.
(i) Significant judgements in applying the Company’s accounting policies
The following are the significant judgements apart from those involving estimates (which are dealt with separately below) that the Company has made in the process of applying these accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
(a) Classification of costs between operating expenditure and capital expenditure
The classification of expenditure as capital or operating expenditure can require significant judgements, particularly in instances where projects include elements of both enhancement (capital) and maintenance (operating) activities. The Company has appropriate policies, controls and procedures in place to mitigate against the risks of ineligible expenditure being capitalised.
Costs associated with projects that are in the early stages of planning are capitalised where the Company is satisfied that it is probable that the necessary consents will be received and the projects will be developed to achieve the successful delivery of an asset such that future returns will flow to the Company.
The duration of the planning phase of certain strategic projects is particularly long due to the various legislative and judicial challenges these projects have encountered. The scale of these projects are so significant that the construction phase will also be of significant duration, and thereby these assets are expected to remain in ‘assets under construction’ for a significant period of time. At 31 December 2024, €127.6 million is recognised in assets under construction in respect of such projects, namely the Water Supply Project Eastern and Midlands Region and the Greater Dublin Drainage Project (2023: €115.7 million).
The Company reviews these projects on a regular basis to determine whether events or circumstances have arisen that may indicate that the carrying amount of the asset may not be recoverable, at which point the asset would be assessed for derecognition. These reviews, during 2024 and post year end, have concluded it is appropriate to continue to recognise these costs in ‘assets under construction’ on the balance sheet.
(ii) Estimation uncertainty
The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next year.
(a) Infrastructure assets and the assets we use in our business
As of 31 December 2024, the aggregate of the Company’s property, plant and equipment and intangible assets was €8,126.5 million (2023: €6,969.1 million), which accounted for the majority of the Company’s assets. Therefore the estimates and assumptions made in determining the carrying value are critical to the financial statements because the recoverability of the amounts, or lack thereof, could significantly affect the Company’s future financial results and position.
Impairment
The Company operates under a regulated framework, administered by the Commission for Regulation of Utilities (CRU). The Company therefore recovers the costs of efficient capital spend on PP&E and intangible assets through regulated revenues based on its approved Regulatory Asset Base (RAB). In compliance with, and supplemental to, the requirements of IAS 36 Impairment of Assets, the Company carried out the following reviews during the year:
1) PP&E and intangible assets are assessed at the reporting date to determine whether there is any indication of impairment;
2) Tested for impairment of intangible assets under development of €17.1 million as at 31 December 2024 (2023: €32.3 million); and
3) Compared the RAB value with the aggregate of the carrying amounts of PP&E and intangible assets.
The Company has concluded that an impairment charge is not required at a CGU level, though note that some impairments have been recognised at an individual project level. The key assumption concerning the future used by the Company in reaching this conclusion is that the Company will continue to generate regulated revenues based on its existing RAB.
The Company, having considered the relevant requirements of IAS 1 Presentation of Financial Statements, has concluded that it is impractical to disclose the impact of variation in this assumption as it is not possible to evaluate the impact of unknown potential revenue generation restrictions that could arise in the future relating to its existing RAB.
Depreciation and useful lives
The Company recognises depreciation and amortisation charges annually (2024: €210 million and 2023: €176.0 million) which are primarily calculated to write down the cost of PP&E and intangible assets over their expected useful economic lives (UELs).
In the case of property, plant and equipment in particular, the determination of estimated UELs of assets requires significant judgements, that are based on experience, expectations about the future and other factors. The estimated UELs for major asset classifications are set out in these accounting policies. The Company reviews assets’ UELs annually and any required changes are adjusted prospectively. This review includes consideration of Government policies and plans in the area of climate action and greenhouse gas emissions targets. The Company has concluded that the existing asset lives continue to be the best estimate of the assets’ UELs.
Due to the significance of asset investment by the Company, variations between actual and estimated UELs could have a material impact on future results, either positively or negatively. Historically, no changes in UELs have been identified by the Company that have had a material impact on operating results.
(b) Unbilled revenue (non-domestic)
The Company raises bills and recognises revenue in accordance with its right to receive revenue in line with the Company’s accounting policy. For water and wastewater customers, the revenue recognised depends on the amount due for the services provided between the date of the last meter read and year end. Meters are read on a cyclical basis and the Company recognises revenue for unbilled values based on estimated amounts from the last billing date to the end of the year. The estimated value since the last bill, takes into account the average daily rate or similar information for comparable customers by the number of days between last billing date and the reporting period end.
(c) Impairment of trade receivables and allowance for expected credit losses
An allowance for expected credit losses in respect of trade and other receivables is recognised in accordance with the Company’s accounting policy i.e. estimated using an aged debt matrix based on the number of days the debt is past due and applying the Company’s historical credit loss experience, adjusted for forward looking economic conditions at the balance sheet date.
The full extent of the financial impact on trade and other receivables as a result of the challenging macro-economic environment remains unknown. This necessarily increases the level of estimation uncertainty on the measurement of expected credit losses at the balance sheet date, particularly with regard to estimating the impacts of the forward looking economic outlook on the collection of the Company’s trade and other receivables at the balance sheet date.
The Company has considered a broad range of factors in assessing the requirement to increase historic credit loss rates to incorporate the impact of the forward looking economic outlook. The factors considered included macro-economic forecasts and scenario analysis, and impact assessments on customers through historic and forward looking customer cash collection analysis.
Based on a review of the above factors, the Company has assessed that a reasonable range for additional expected credit losses due to the future economic outlook would be in the range of between €5.3 million and €19.6 million. Following due consideration, the Company has concluded that €12.5 million represents the best estimate based on the information available. Nonetheless, procedures and controls in respect of debt collection remain focused on full recovery of amount invoiced.
(d) Retirement benefit obligations
The Company’s projected pension benefit cash outflows underpinning its defined benefit obligation are discounted at a rate set by reference to market yields at the end of the reporting period, on high quality corporate bonds. Significant judgement is required when setting the criteria for bonds to be included in the population from which the yield curve is derived. The most significant criteria considered for the selection of bonds include the issue size of the corporate bonds, quality of the bonds and the identification of outliers which are excluded. Significant judgement is also required when deriving the yield curve at longer terms as the number of long dated high quality corporate bonds is sparse for longer durations. Sensitivities regarding the principal assumptions used to measure the schemes’ liabilities are detailed in note 17.
(e) Provisions and other liabilities
The assessments of the financial outcome of uncertain commercial and legal positions involves estimation uncertainty and requires the use of judgement, estimation and assumptions. The amounts recognised as a provision are the Company’s best estimate of the expenditure required to settle present obligations at the reporting date. In assessing the likely outcome, the Company bases its assessment on available facts, historical experience, advice from legal advisors and other experts and additional relevant factors that are believed to be reasonable in the circumstances. A revised estimate is established at each reporting date to ensure that the amounts provided/accrued correspond to the best estimate of the costs eventually to be borne by the Company and the timing of settlement. See note 20 for the categories of provision held and further details on each category.
Given the nature of these provisions and liabilities, and the estimation uncertainty involved, further sensitivity analysis on these amounts is not deemed practicable.