Vestas Wind Systems (VWS) Investor presentation summary

POC accounting principles

• Revenue is recognized based on the percentage of cost incurred versus planned cost to complete, following the cost-to-cost method under IFRS 15.

• Higher incurred costs than planned, even if temporary, result in increased revenue recognition.

• Increasing planned cost to complete leads to an immediate negative revenue adjustment, reflecting lower expected contract margin.

• When actual costs outpace planned costs, revenue is recognized faster than billing, accumulating as contract assets (unbilled revenues).

• Contract assets represent amounts owed by customers, with revenue booked ahead of billing but total contract revenue unchanged over its life.

Illustrative contract example

• Over a 15-year contract, revenue and cost are recognized proportionally to the percentage of completion.

• A planned cost adjustment in year 4 increases total planned cost to complete from 77 to 78, impacting profit margin.

• Revenue and cost are recognized annually based on updated POC percentages, with numbers rounded for illustration.

• The example demonstrates how changes in planned costs affect revenue and profit margin over the contract's duration.