Instalaciones provisionales

The significant accounting policies applied in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

KPN applies International Financial Reporting Standards (‘IFRS’) as adopted by the European Union.

As the corporate financial information of KPN is included in the Consolidated Financial Statements, the Corporate Income Statement is presented in abbreviated format in accordance with Section 402, Book 2 of The Netherlands Civil Code. The Consolidated Financial Statements have been prepared under the historical cost convention, as modified for the revaluation of available-for-sale financial assets, and the accounting of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

Consolidated financial information, including subsidiaries, associates and joint ventures, has been prepared using uniform accounting policies for similar transactions and other events in similar circumstances.

Comparative figures 2008

The following changes were made to the 2008 comparative figures:

To improve insight in the balance sheet, the software under development has been reclassified from ‘other intangibles’

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to ‘software’, resulting in net increase of software of EUR 135 million as per December 31, 2008. The opening balance of software as per January 1, 2008, increased EUR 96 million. The other intangibles decreased with the same amounts. Refer to Note 10.

During 2009 inconsistencies were noticed in the determination of off balance sheet obligations. As a result the rental

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and operational lease contracts as per December 31, 2008, are EUR 1.1 billion lower. Refer to Note 31 for further details.

Following changes to KPN’s internal structure and reporting to the CEO, who is the chief operating decision maker,

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the segment reporting has changed, including the comparative figures as per December 31, 2008. Refer to Note 34 for further details.

To improve insight in the segment information, in 2009 goodwill and related deferred purchase price considerations

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originally recorded in the ‘Other activities’ segment, have been reclassified to segment to which they relate to within Mobile International – the comparative figures for 2008 have been adjusted. Furthermore the geographical information of 2008 has been adjusted to reflect the proper information.

KPNAnnual Report 2009 www.kpn.com 5

Changes in accounting policies and disclosures

KPN’s Annual Report 2008 mentioned the following standards, interpretations and amendments which had or could potentially have had an impact on KPN’s financial position and/or results in 2009 or disclosures:

As of January 1, 2009, IAS 1 (revised) ‘Presentation of Financial Statements’ became effective and has been applied

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by KPN. IAS 1 (revised) uses the terms ‘statement of income’ (previously ‘income statement’), ‘statement of financial position’ (previously ‘balance sheet’) and ‘statement of cash flows’ (previously ‘cash flow statement’) and introduces a ‘statement of comprehensive income.’ IAS 1 (revised) also requires the presentation of a statement of financial position at the beginning of the first comparative period presented if an entity has changed its accounting policies retrospectively or made retrospective restatements. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share, statement of income and statement of financial position.

As of January 1, 2009, IAS 23 (revised) ‘Borrowings Costs’ became effective and has been applied by KPN. In accordance with

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IAS 23 (revised), as of January 1, 2009, borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of that asset. In 2009, IAS 23 (revised) did not have a material impact. The IASB issued IFRIC 14 ‘The limit on a Defined Benefit Asset, Minimum funding Requirements and their Interaction’

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and has been applied by KPN which did not have an impact on KPN’s pension assets or costs in 2009.

During 2009 the following standards, interpretations and amendments became effective as from January 1, 2009, which had or could potentially have had an impact on KPN’s financial position and/or results in 2009 or disclosures: IFRS 7 (Amendments) ‘Improving Disclosures about Financial instruments’ the amendment requires enhanced

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disclosures about fair value measurement and liquidity risk and has been applied by KPN. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share, statement of income and statement of financial position;

IFRIC 18 ‘Transfer of Assets from Customers’ clarifies the requirements of IFRS for agreements in which a company

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receives an item of property, plant and equipment from a customer, that the company must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services. In 2009, this IFRIC did not have an impact on KPN.

Consolidation

Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which KPN has the power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether KPN controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to KPN and are deconsolidated from the date on which KPN’s control ceases.

KPN uses the purchase method of accounting to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets contributed, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. Intercompany transactions, balances and unrealized results on transactions with subsidiaries are eliminated.

Associates and joint ventures

Investments in entities in which KPN can exert significant influence but which KPN does not control (including joint ventures), generally accompanying a shareholding of between 20% and 50% of the voting rights, are accounted for by the equity method of accounting and are originally recognized at cost. The Group’s investments in associates and joint ventures include goodwill identified upon acquisition, net of any accumulated impairment.

The Group’s share of its associates’ post-acquisition profits or losses is recognized in the Consolidated Statement of Income, and its share of post-acquisition movements in reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealized results on transactions with associates are eliminated to the extent of KPN’s share in associates and joint ventures.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer (‘CEO’), which is the chief operating decision maker according to IFRS 8.

 KPNAnnual Report 2009

Consolidated Financial Statements

Consolidated Financial Statements Foreign currency translation

Functional and presentation currency

Items included in the financial information of each of KPN’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial information is presented in euro (EUR), which is the functional currency of the company and the group’s presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the Consolidated Statement of Income, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Exchange differences on non-monetary assets and liabilities are reported as part of the fair value gain or loss. Accordingly, exchange differences on non-monetary assets and liabilities such as financial assets recorded at fair value through profit or loss are recognized in the Consolidated Statement of Income as part of the fair value gain or loss. Exchange differences on non-monetary assets such as financial assets classified as available for sale are included in the available-for-sale assets reserve in Group Equity in the Consolidated Statement of Financial Position.

Exchange differences arising from the translation of the net investment in foreign entities and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Subsidiaries

In the Consolidated Financial Statements, the results and financial position of all the subsidiaries that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

1. Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

2. Income and expenses for each income statement are translated at average exchange rates; and

3. All resulting exchange differences are recognized as a separate component within equity (currency translation reserve).

Critical accounting estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the period as well as the information disclosed. For KPN’s critical accounting estimates and judgments, reference is made to the notes to these Consolidated Financial Statements, including the determination of deferred tax assets for loss carry forwards and the provision for tax contingencies (see Note 7), the determination of fair value and value in use of cash-generating units for goodwill impairment testing (see Note 10), the depreciation rates for the copper and fiber network (included within property, plant and equipment) (see Note 11), the assumptions used to determine the provision for retirement benefit obligations and periodic pension cost, such as expected salary increases, return on plan assets and benefit increases (see Note 22) and the more likely than not assessment required to determine whether or not to recognize a provision for idle cables, which are part of a public electronic communications network (Note 31). Also reference is made to Note 29 ‘Capital and Financial Risk Management’ which discusses KPN’s exposure to credit risk and financial market risks.

Actual results in the future may differ from those estimates. Estimates and judgments are being continually evaluated and based on historic experience and other factors, including expectations of future events believed to be reasonable under the circumstances.

Income Statement