Volkswagen : Volkwagen AG Annual Financial Statements of Volkswagen AG 2021 (2024)

Income Statement of Volkswagen AG for the

Period January 1 to December 31, 2021

Notes to the

Annual Financial Statements of

Volkswagen AG

for the Period ended December 31, 2021

Financial statements in accordance with the German Commercial Code

Volkswagen AG is domiciled in Wolfsburg, Germany, and entered in the commercial register at the Braunschweig Local Court under no. HRB 100484. The annual financial statements of Volkswagen AG have been prepared in accordance with the provisions of the Handelsgesetzbuch (HGB - German Commercial Code) and comply with the provisions of the Aktiengesetz (AktG - German Stock Corporation Act).

The fiscal year corresponds to the calendar year.

To enhance the clarity of presentation, individual items of the balance sheet and the income statement have been combined. These items are disclosed separately in the notes. The income statement uses the cost of sales (function of expense) format. Information that can be disclosed optionally in the balance sheet or income statement, in the notes to the annual financial statements, is disclosed in its entirety in the notes to the annual financial statements. All figures shown are rounded, so minor discrepancies may arise from addition of these amounts.

Volkswagen AG performs electricity generation and distribution/sales activities together with a subsidiary. As a result, Volkswagen AG and this subsidiary are classed as a vertically integrated energy company within the meaning of section 3 no. 38 of the Energiewirtschaftsgesetz (EnWG - German Energy Industry Act) and are therefore subject to the provisions of the EnWG. Separate accounts must normally be maintained for certain activities in the energy sector in accordance with section 6b(3) of the EnWG (unbundling requirement in accounting systems). Volkswagen AG itself only operates customer systems in accordance with section 3 no. 24 b. a) of the EnWG (medium-voltage and low-voltage grids). The subsidiary distributes the electricity via a general supply network (high-voltage grid in Wolfsburg, section 3 no. 17 of the EnWG).

The list of all shareholdings is a component of the notes and can also be downloaded from the electronic companies register at www.unternehmensregister.de and from www.volkswagenag.com/ir.

The Board of Management completed preparation of the annual financial statements on March 1, 2022. On March 1, 2022, the period ended in which adjusting events after the reporting period are recognized.

Declaration on the German Corporate Governance Code in accordance with section 161 of the AktG/section 285 no. 16 of the HGB

The Board of Management and Supervisory Board of Volkswagen AG issued the declaration of conformity in accordance with section 161 of the AktG December 9, 2021.

The declaration of conformity has been made permanently available at www.volkswagenag.com/ir.

Significant events in the fiscal year

DI E SE L IS SU E

On September 18, 2015, the US Environmental Protection Agency (EPA) publicly announced in a "Notice of Violation" that irregularities in relation to nitrogen oxide (NOX) emissions had been discovered in emissions tests on certain Volkswagen Group vehicles with 2.0 l diesel engines in the USA. In this context, Volkswagen AG announced that noticeable discrepancies between the figures recorded in testing and those measured in actual road use had been identified in type EA 189 diesel engines and that this engine type had been installed in roughly eleven million vehicles worldwide. On November 2, 2015, the EPA issued a "Notice of Violation" alleging that irregularities had also been discovered in the software installed in US vehicles with type V6 3.0 l diesel engines.

The so-called diesel issue is rooted in a modification of parts of the software of the relevant engine control units - which, according to Volkswagen AG's legal position, is only unlawful under US law - for the type EA 189 diesel engines that Volkswagen AG was developing at that time. This software function was developed and implemented from 2006 on without knowledge at the level of the Board of Management. Members of the Board of Management did not learn of the development and implementation of this software function until the summer of 2015.

There are furthermore no findings that, following the publication in May 2014 of the study by the International Council on Clean Transportation, an unlawful "defeat device" under US law was disclosed to the persons responsible for preparing the 2014 annual and consolidated financial statements as the cause of the high NOX emissions in certain US vehicles with 2.0 l type EA 189 diesel engines. Rather, at the time the 2014 annual and consolidated financial statements were being prepared, the persons responsible for preparing these financial statements remained under the impression that the issue could be resolved with comparatively little expense.

In the course of the summer of 2015, however, it became progressively apparent to individual members of Volkswagen AG's Board of Management that the cause of the discrepancies in the USA was a modification of parts of the software of the engine control unit that was later identified as an unlawful "defeat device" as defined by US law. This culminated in Volkswagen's disclosure of a "defeat device" to the EPA and the California Air Resources Board, a department of the Environmental Protection Agency of the State of California, on September 3, 2015. According to the assessment at the time by the responsible persons dealing with the matter, the magnitude of the costs expected to result for the Volkswagen Group (recall costs, retrofitting costs, and financial penalties) was not fundamentally dis-similar to that in previous cases involving other vehicle manufacturers. It therefore appeared to be manageable overall considering the business activities of the Volkswagen Group. This assessment by Volkswagen AG was based, among other things, on the advice of a law firm engaged in the USA for regulatory approval issues, according to which similar cases had in the past been amicably resolved with the US authorities. The EPA's publication of the "Notice of Violation" on September 18, 2015, which the Board of Management had not expected, especially at that time, then presented the situation in an entirely different light.

In fiscal year 2021, special items in connection with the diesel issue amounted to €0.7 billion; they were mainly recognized in the other operating result.

The contingent liabilities within the meaning of IAS 37 recognized in connection with the diesel issue totaled €4.2 billion (previous year: €4.2 billion), of which €3.6 billion (previous year: €3.5 billion) was attributable to investor lawsuits. Also included are certain elements of the class action lawsuits relating to the diesel issue as well as criminal proceedings/misdemeanor proceedings as far as these can be quantified.

Further information on the litigation in connection with the diesel issue can be found in the "Litigation" section of the management report.

IMPACT OF T H E COVI D - 19 PA N D E M IC/ SH O RTAG E OF S E MICON DU CTOR S

Many restrictive measures were eased in the course of 2021 for reasons that include the rising vaccination rate. In the annual financial statements as of December 31, 2021, no material impairment losses attributable to the Covid-19 pandemic had to be recognized.

The semiconductor shortage and the resulting supply bottlenecks had an increasingly negative impact across the entire industry. This also affected production in the Volkswagen AG. As a result, Volkswagen AG recorded a reduction in inventories of finished goods and a simultaneous increase in raw materials and work in progress in the fiscal year (see also the information provided in the notes on inventories).

Please also refer to our comments in the 2021 group management report, specifically in the chapters entitled Business Development, Results of Operations, Financial Position and Net Assets, Report on Expected Developments and Report on Risks and Opportunities.

M ATERIA L TRAN SACT IO N S

To finance its participation in a capital contribution and financing round by NorthVolt AB, Stockholm, Volkswagen AG injected further capital of €703.5 million into Volkswagen Finance Luxemburg.

Under a "pay-out-and-reinvest" transaction, Volkswagen Finance Luxemburg also distributed dividends of €3.2 billion to Volkswagen AG, which Volkswagen AG simultaneously reinvested in Volkswagen Finance Luxemburg in the form of capital increase.