NS 2020 | Combined independent auditor’s report and assurance report

To: the shareholder and supervisory board of N.V. Nederlandse Spoorwegen

Please find below the conclusions and main features of our audit and review. For the full text of the auditor’s report, which includes the assurance report on non-financial information, please refer to the next pages.

Summary

Conclusions

Object of audit and review	Outcome of performed work	Level of assurance
Financial statements 2020 (consolidated and company)	True and fair view	Reasonable (audit)
Non-financial information 2020	Reliable and adequate view	Limited (review)
Other information, including the reports by the NS executive board and supervisory board	No material misstatements

Main features of out audit and review

What we have done	Scope of our procedures	Materiality		Key audit matters
Audit of the financial statements 2020 (consolidated and company)	The Netherlands, the United Kingdom and Germany	€50 million, based on 0,7% of total operating expenses (excluding impairment losses and the provision for termination fees related to the franchise contracts in the United Kingdom).	•	Valuation of the main rail network assets and future profitability due to the impact of COVID-19;
			•	Abellio United Kingdom: valuation of assets, accounting for termination fees, future profitability and financing due to the impact of COVID-19;
			•	Abellio Germany: valuation of assets, future profitability and financing
			•	NS liquidity forecast and going concern assumptions due to COVID-19;
			•	Revenue recognition and complexity and effectiveness of NS IT-environment in the Netherlands.
Review of non-financial information 2020	The Netherlands, the United Kingdom and Germany	Varies for each relevant part of the non-financial information		None
Procedures for other information	Complete annual report	Similar materiality levels as the audit and review scope		None

Combined independent auditor’s report and assurance report

To: the shareholder and supervisory board of N.V. Nederlandse Spoorwegen

Our conclusions

We have audited the financial statements 2020 of N.V. Nederlandse Spoorwegen (NS) based in Utrecht. The financial statements comprise the consolidated and company financial statements.

In our opinion:

The accompanying financial statements give a true and fair view of the financial position of N.V. Nederlandse Spoorwegen as at 31 December 2020 and of its result and its cash flows for 2020 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code
The accompanying company financial statements give a true and fair view of the financial position of N.V. Nederlandse Spoorwegen as at 31 December 2020 and of its result for 2020 in accordance with Part 9 of Book 2 of the Dutch Civil Code

We have reviewed the non-financial information in the annual report of N.V. Nederlandse Spoorwegen based in Utrecht over 2020. The scope of the review is described in the section The scope of our procedures. A review is aimed to obtain limited level of assurance.

Based on our review procedures performed, nothing has come to our attention that causes us to believe that the accompanying non-financial information does not present, in all material aspects, a reliable and adequate view of:

The policy and business operations with regard to Corporate Social Responsibility
The thereto related events and achievements for the year 2020

In accordance with the Sustainability Reporting Standards (option Core) of the Global Reporting Initiative (GRI) and the applied supplemental reporting criteria as disclosed in chapter Scope and reporting criteria of the annual report.

Based on the procedures performed in accordance with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720, we conclude that the other information, including the report by NS executive board and the report of the supervisory board:

Is consistent with the financial statements and does not contain material misstatements
Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code

Basis for our conclusions

We conducted our assurance procedures in accordance with Dutch law, including the Dutch Standards of Auditing and the Dutch Standard 3810N, “Assurance-opdrachten inzake maatschappelijke verslagen” (Assurance engagements relating to sustainability reports). Our responsibilities under those standards are further described in the Our responsibilities section of our report.

We believe the assurance evidence we have obtained is sufficient and appropriate to provide a basis for our conclusions.

Our independence

We are independent of N.V. Nederlandse Spoorwegen in accordance with the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands.
This includes that we do not perform any activities that could result in a conflict of interest with our independence assurance procedures. Furthermore we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).

Engagement

We were engaged by the supervisory board as auditor of N.V. Nederlandse Spoorwegen on 3 September 2013 as of the audit for the year 2014 and we have operated as statutory auditor ever since that date.

Reporting criteria

The information within the scope of the audit and review should be read and understood together with the reporting criteria. N.V. Nederlandse Spoorwegen is responsible for selecting and applying the reporting criteria, taking into account the applicable laws- and regulations in respect to reporting.

The absence of an established practice on which to draw, to evaluate and measure non-financial information allows for different, but acceptable, measurement techniques and can affect comparability between entities and over time.

The scope of our procedures

The consolidated financial statements comprise:

The consolidated statement of financial position as at 31 December 2020
The following statements for 2020:
- The consolidated income instatement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement
- The notes comprising a summary of the significant accounting policies and other explanatory information

The company financial statements comprise:

The company statement of financial position as at 31 December 2020
The company statement of income 2020
The notes comprising a summary of the significant accounting policies and other explanatory information

The non-financial information consists of the information included in the following chapters in the 2020 annual report of N.V. Nederlandse Spoorwegen: In Brief, Foreword by the CEO, 2020: A year dominated by COVID-19, Our Strategy, How NS adds value to the society, Our impact on the Netherlands, The profile of NS, Our activities and achievements in the Netherlands, Our activities and achievements abroad and sections Organisational improvements, Dialogue with our stakeholders in the Netherlands, Notes to the material themes, About the scope of this report and Scope and reporting criteria.

Next to the financial statements, the non-financial information and our combined independent auditor’s report and assurance report, the annual report includes other information, which comprises:

The report by the executive board, as identified in chapter About the scope of this report in the annual report
The report by the supervisory board
Other information

Limitations in the scope of our review of non-financial information

The non-financial information includes prospective information, such as ambitions, strategy, plans, expectations and estimates and risk assessments. Inherent to prospective information, the actual future results are uncertain. We do not provide any assurance on the assumptions and achievability of prospective information in the sustainability information.

In the chapter Our impact on the Netherlands the calculations were mostly made using sources from external parties. The sources used are explained in the Methodologie Impactanalyse jaarverslag 2020 section on www.ns.nl/mvoberekeningen. We have not performed any work with respect to the content of these external sources, other than assessing their suitability and plausibility.

The references to external sources or websites in the non-financial information, except for the 2020 Transport Franchise Definitions, are not part of the non-financial information reviewed by us. Therefore, we do not provide assurance on this information.

Our conclusion on the non-financial information has not been modified as a result of these matters.

Our approach of the audit of the financial statements and the review of the non-financial information

The activities of N.V. Nederlandse Spoorwegen mainly consist of passenger transport, the management and development of property and the operation of station locations in the Netherlands, Germany and the United Kingdom. The group structure consists of several group entities and we have designed our procedures accordingly. We have paid special attention in our procedures to a number of issues based on the Group’s activities and our risk analysis, which are explained in more detail in the section Key audit matters.

We begin by determining materiality and identifying and assessing the risks that the financial statements and non-financial information may contain material misstatements due to fraud, non-compliance with laws and regulations, or due to errors, in order to determine, in response to those risks, the audit and review procedures to obtain assurance information that is sufficient and appropriate to provide a basis for our conclusions. The scope of our assurance work is affected by the application of materiality.

The risk of not detecting a material misstatement resulting from fraud is higher than for errors.
Fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.

In 2020, due to COVID-19 measures, we were forced to perform more remote work. This limited observations and increased the likelihood of missing certain signals. To compensate for these limitations on physical contact and direct observation, we performed alternative work to obtain sufficient and appropriate audit evidence as a basis for our opinion.

Materiality for the audit of the financial statements

Based on our professional judgement we determined the materiality for the financial statements as follows:

Materiality	€50 million (2019: €50 million)
Applied benchmark	0.7% of total operating expenses (€9.1 billion) excluding the impairment losses and the movement of the provision for termination fees (of €2.3 billion)
Further explanation	Given the nature of the activities of NS, her goals, and the importance of her operating performance in the Netherlands and abroad, the operating expenses excluding the impairment losses and the movement of the provision for termination fees is activity based the most relevant basis for the materiality. The materiality of the audit of 2019 was based on the revenues as activity based, but as a result of the decrease in passenger revenues due to COVID-19 we do not consider the revenues as appropriate measure for the activities of NS in 2020.

We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

We agreed with the supervisory board that misstatements in excess of €2.5 million, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

Materiality of non-financial information

Based on our professional judgement we determined materiality levels for each relevant part of the
non-financial information and for the non-financial information as a whole. When evaluating our materiality levels, we have taken into account quantitative and qualitative considerations as well as the relevance of information for both stakeholders and the organization.

Further description of the audit approach relates to the audit of the financial statements. A summary of the review of non-financial information is included in the annex.

Scope of the group audit

N.V. Nederlandse Spoorwegen is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements of N.V. Nederlandse Spoorwegen.

Because we are ultimately responsible for the opinion, we are also responsible for managing, supervising and performing the group audit. In this respect, we have determined the nature and extent of the audit procedures to be carried out for group entities. The size and/or the risk profile of the group entities or operations were decisive in this regard. On this basis, we selected group entities for which an audit or review had to be carried out on either the complete set of financial information or specific items.

The group audit mainly focused on significant group entities, the main rail network operations and Abellio in the United Kingdom and Germany. For the Dutch group entities we have performed the audit procedures by ourselves. We used auditors from our international network during the audit of the foreign group entities. In total, the above-mentioned activities represent 90.4% of total assets and 91.1% of operating expenses excluding impairment losses and the movement in the group’s provision for termination fees.

Due to (international) travel restrictions as a result of the COVID-19 pandemic, we have not been able to visit Abellio’s management and auditors in the United Kingdom and Germany in order to, for example, discuss business activities and identified significant risks or to review relevant portions of the auditor’s audit documentation of these group entities and discuss significant matters raised in that review on-site. We performed alternative procedures in these extraordinary circumstances and primarily used communication technology, written information exchange, and remote file reviews to obtain sufficient and appropriate audit evidence.

By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the consolidated financial statements.

Engagement team and the use of the work of specialist

We have ensured that the engagement team has the appropriate knowledge and skills required for the audit of N.V. Nederlandse Spoorwegen, both at the group level and at the group entity level. We have included specialists in the engagement team or we have deployed internal experts in the fields of IT audit, forensic accountancy, taxation, valuations and in order to review the passenger revenue forecasts in the Netherlands.

Our focus on non-compliance with laws and regulations

Our responsibility

Although we are not responsible for the prevention of fraud or non-compliance with laws and regulations, and we cannot be expected to detect non-compliance with every law and regulation, our responsibility is to obtain reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether due to error or fraud. Non-compliance with laws and regulations may result in fines, litigation or other consequences for the company that may have a material effect on the financial statements.

Our audit related to fraud risks

In order to identify and assess the risks of material misstatements of the financial statements due to fraud, we obtained an understanding of the entity and its environment, including the entity’s internal control relevant to the audit and in order to design audit procedures that are appropriate in the circumstances. As in all of our audits, we addressed the risk of management override of internal control. We do not audit internal control per se for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

We considered available information and made enquiries of relevant executives, directors (including internal audit, legal, compliance, human resources) and the supervisory board. As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption in close co-operation with our forensic and legal specialists. In our risk assessment, we also we considered the potential impact of the risk of bribery and corruption.

In the process of identifying fraud risks, we considered whether the COVID-19 pandemic led to specific fraud risk factors because of possible pressure on the executive board to demonstrate that loss mitigation measures were successful or to meet certain performance indicators. We also examined whether the executive board might have formed excessive provisions in the perspective of releasing them in favour of the future profitability. We have reported on this in more detail in the Key audit matters section.

We evaluated the design and the implementation and, where considered appropriate, tested the operating effectiveness, of internal controls that mitigate fraud risks. In addition, we performed procedures to evaluate key accounting estimates for management bias in particular relating to important judgment areas and significant accounting estimates as disclosed in Section 1 of the financial statements.

We also used data analytics to identify and address high-risk journal entries. Our audit procedures to respond to the assessed fraud risks did not result in a specific key audit matter for our audit.

We incorporate elements of unpredictability in our audit. We considered the outcome of our other audit procedures and evaluated whether any findings were indicative of fraud or non-compliancewith laws and regulations. If so, we re-evaluate our assessment of fraud risk and its resulting impact on our audit procedures.

Our audit response related to risks of non-compliance with laws and regulations

We assessed factors related to the risks of non-compliance with laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general industry experience, through discussions with the executive board, reading minutes, inspection of internal audit and compliance reports and performing substantive tests of details of classes of transactions, account balances or disclosures.

We also inspected lawyers’ letters and correspondence with regulatory authorities and remained alert to any indication of (suspected) non-compliance throughout the audit. Finally we obtained written representations that all known instances of non-compliance with laws and regulations have been disclosed to us.

Going concern assumption

In the section Key audit matters we included the key audit matter NS liquidity forecast and going concern assumption as a result of COVID-19, in which the audit of the going concern assumption and our observations thereon are described.

We consider, based on the audit evidence obtained, whether there are events and circumstances that could cast reasonable doubt on the ability of the company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as a going concern.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the supervisory board.
The key audit matters are not a comprehensive reflection of all matters discussed.

These matters were addressed in the context of the audit of the financial statements as a whole and to conclude thereon, and we do not provide a separate conclusion on these matters.

In 2019, key audit matters included Accounting for settlement mechanisms included in franchise contracts and Progress and reliability performance indicators related to the main rail network. Because of COVID-19, adjustments have been made to the franchise contracts so that Accounting for settlement mechanisms included in franchise contracts is no longer a key audit matter. We did not identify any key audit matters in our review of the non-financial information. Progress and reliability performance indicators related to the main rail network’ is not a key audit matter of our review of the non-financial information in 2020, because passenger numbers have significantly decreased as a result of COVID-19 making the reporting of performance indicators such as seat availability and punctuality less important.

The developments concerning the COVID-19 pandemic have a major impact on the operational and financial performance of N.V. Nederlandse Spoorwegen. The situation can change constantly and inherently leads to uncertainty for the company. We have recognised, in part due to the impact of COVID-19, the following four key audit matters for our audit in 2020. These were not key audit matters for our 2019 audit.

Valuation of the main rail network assets and future profitability due to the impact of COVID-19
Abellio United Kingdom: valuation of assets, accounting for termination fees, future profitability and financing due to the impact of COVID-19
Abellio Germany: valuation of assets, future profitability and financing
NS liquidity forecast and going concern assumptions due to COVID-19

Valuation of the main rail network assets and future profitability due to the impact of COVID-19

In Note 14 of the financial statements NS included the results and bandwidth of the analysis of the impairment loss of the main rail network concession related assets.

Risk	Our audit approach	Key observations
NS has recorded an impairment loss in relation to the main rail network-concession related assets for €1.6 billion in the account depreciation, amortisation and impairments. COVID-19 and the associated measures have caused a sharp decrease in passenger revenue over 2020. As requested by the Ministry of Infrastructure and Water Management, NS largely continued its regular train services. Due to the impact of the COVID-19 crisis, there is an uncertainty about the passenger revenue and related cash flows for the coming years. NS is entitled to a Public Transport Availability Payment (Beschikbaarheidsvergoeding Openbaar Vervoersbedrijven) for the period from 15 March 2020 up to and including 30 September 2021. Under these measures, 93% of the qualifying costs less 100% of the generated revenue will be compensated. At the time of writing, there was no formalised support measures in place for the period following September 2021. NS has also set up and implemented cost-savings programs. All these developments have resulted in an indication of an impairment loss. As a consequence, NS calculated the recoverable amount of assets related to the main rail network franchise on the basis of multiple scenario analyses and compared the outcome with the carrying amount. The scenario analyses, cash flow forecasts and the implementation of the cost-savings programs all involve inherent and/or significant uncertainties, bandwidth which results in a significant bandwidth. In Note 14 to the financial statements, NS explained the results and bandwidth of the impairment analysis of the assets related to the main rail network franchise. The main assumptions, estimation uncertainties and analysis sensitivity data have also been included. Based on these figures, NS concluded that an impairment loss of €1.6 billion on main rail network related assets will have to be recognised.	We have discussed the scenario analyses, cash flow forecasts and cost-savings programs with NS and evaluated them with professional skepticism, devoting specific attention to the processes underlying the analyses and forecasts, trends that pose potential risks, the impact of current events and circumstances on the scenarios and the company's projected cash flows. We performed substantive tests of the scenario analyses, cash flow forecasts and cost-saving programs so as to evaluate the reasonableness of the underlying assumptions. We included specialists in our audit team specifically with a view to assessing the assumptions concerning projected passenger revenues. In addition, we included specialists in our team to test the calculation model used and the reasonableness of NS's cost of capital.	We concur with the determination and accounting treatment by NS of the impairment loss and the disclosures provided in Note 14 to the financial statements.

Abellio United Kingdom: valuation of assets, accounting for termination fees, future profitability and financing due to the impact of COVID-19

Disclosures regarding the impairment loss of assets of Abellio in the United Kingdom and the provision for the termination fees is included in the Notes 8, 14, 17 and 29 to the financial statements.

Risk	Our audit approach	Key observations
NS has recognised an impairment loss of €215 million in connection with the assets related to the UK franchises under Depreciation, amortisation and impairments. In addition, NS has recognised a provision for termination fees that she may have to pay, in the amount of €487 million relating to changes in the contractual terms. The associated costs have been recognised under Other operating expenses. COVID-19 has resulted in a significant decrease in passenger revenue in the United Kingdom. As a result, Abellio and the UK franchising authorities have agreed on amended franchise conditions, pursuant to which the franchising authorities have assumed the full passenger revenue related risks. Under the new contract terms, Abellio currently receives a management fee. One of the conditions agreed when the contract was amended is that the franchising authority, Department of Transport, will have the option of charging a termination fee for each franchise, depending partly on the pre-COVID-19 situation. NS has created a provision for this. The definitive amounts due are expected to be determined later in 2021. All these developments have likewise resulted in an indication of an impairment of assets. As a result, NS calculated the recoverable amount of these assets on the basis of multiple scenario analyses and compared the outcome with the carrying amount. In Note 14 to the financial statements, NS explained the results and bandwidth of the impairment analysis of these assets. The main assumptions, estimation uncertainties and analysis sensitivity data have also been included. Based on these figures, NS concluded that an impairment loss of €215 million will have to be recognised. The determination of the carrying amount and termination fees involves inherent and/or significant uncertainties, which results in a significant bandwidth. Disclosures regarding the impairment of assets of Abellio in the United Kingdom and the provision for termination fees are included in Notes 8, 14, 17 and 29 to the financial statements.	On the basis of the amended franchise conditions and other source documents, we have verified the agreements that exist between NS and the various franchising authorities. We have discussed the determination of the recoverable amount of assets with NS and evaluated the outcome with professional skepticism, devoting specific attention to the process underlying the determination of the recoverable amount, and performed substantive procedures to test the reasonableness of the underlying assumptions. NS has made a best estimate, as at the balance sheet date, of the provision for termination fees as per 31 December 2020. We have verified that the termination fees are based on the most recent communication with the franchising authority and constitute a best estimate by the company's management. We have also verified that no developments have taken place after the balance sheet date that have a significant impact on the estimate as at the balance sheet date.	We concur with the accounting treatment by NS and the disclosures in Notes 8, 14, 17 and 29 to the financial statements.

Abellio Germany: valuation of assets, future profitability and financing

In Note 14 in the financial statements NS explained the results and bandwidth of the impairment analysis of Abellio Germany’s assets.

Risk	Our audit approach	Key observations
NS has recognised an impairment loss of €68 million in connection with the franchises in Germany under Depreciation, amortisation and impairments. Given the nature of the German franchises, under which the franchising authority assumes the full passenger revenue related risk, the impact of COVID-19 on the results has been limited. Due in part however to the factors explained under Impact of COVID-19 in Section 1 of the financial statements, NS did incur a loss in 2020. NS engaged in discussions with several franchising authorities about additional compensation, and reached a provisional agreement on this matter with a number of franchising authorities in the course of 2020. This draft agreement has yet to be formalised in a written confirmation of the relevant arrangements. The developments mentioned above have resulted in an indication of an impairment of assets. In view of the factors mentioned above, this is a key audit matter of our audit. As a result, NS calculated the recoverable amount of these assets on the basis of multiple scenario analyses and compared the outcome with the carrying amount. The scenario analyses and cash flow forecasts (including the estimate of the supplementary compensation) all involve inherent and/or significant uncertainties, bandwidth which results in a significant bandwidth. Based on these figures, NS concluded that an impairment loss of €68 million will have to be recognised. In Note 14 to the financial statements, NS explained the results and bandwidth of the impairment analysis of Abellio Germany’s assets. The main assumptions, estimation uncertainties and the sensitivity of the analyses is also included.	Based on agreements with the franchising authorities and other source documents, we have verified the agreements that exist between NS and the various franchising authorities with respect to supplementary compensation. In addition, we have discussed the scenario analyses and cash flow forecasts with NS and evaluated them with professional skepticism, devoting specific attention to the process underlying the analyses and forecasts, trends that pose potential risks, the impact of current events and circumstances on the scenarios and the company's projected cash flows. We performed substantive tests of the scenario analyses and cash flow forecasts to evaluate the reasonableness of the underlying assumptions. In addition, we included specialists in our team to test the reasonableness of NS's cost of capital.	We concur with the accounting treatment by NS and the disclosures in Note 14 to the financial statements.

NS liquidity forecast and going concern assumptions due to COVID-19

In the paragraph Continuity assumption in Section 1 of the financial statements NS concluded that it is acceptable to apply the going concern principle in the financial statements.

Risk	Our audit approach	Key observations
COVID-19 has resulted in a significant decrease in passenger revenue, while NS largely continued its rail services at the request of the ministry of Infrastructure and Water Management. The impact of COVID-19 affects the company's liquidity position as at 31 December 2020 and its liquidity forecast for the year to come. In view of the importance of the going concern assumption for the financial statements, this is a key matter of our audit. NS is entitled to a Public Transport Availability Payment in the Netherlands for the period from 15 March 2020 to 30 September 2021. Under these measures, 93% of the qualifying costs less 100% of the generated turnover will be compensated. At the time of writing, no agreement had been reached regarding the possible extension of support measures for public transport companies beyond September 2021. Under Continuity assumption in Section 1 of the financial statements, NS concluded that it is acceptable to apply the going concern principle in the financial statements. NS came to this conclusion based on the scenario analyses and liquidity forecasts with taking into account the impact of COVID-19.	NS has specifically assessed the company's going concern assumption and its ability to continue its operations over at least the next twelve months. We have discussed this assessment with NS and evaluated it with professional skepticism, devoting specific attention to the process underlying the assessment, trends that pose potential risks, the impact of current events and circumstances on the company's operations and projected cash flows, and with a specific focus on the question of whether the company's cash position will be sufficient for it to continue meeting all of its obligations. We have spent specific attention to substantive procedures regarding amendments to the agreements between NS and the franchising authorities in 2020, projected cash flows from support measures and from guarantees granted by NS to Abellio and other parties. The procedures relate to the above-mentioned key matters of our audit.	NS's specific assessment of its going concern assumption and its ability to continue its operations for at least the next twelve months contains uncertainties for which NS has provided explanatory notes under Continuity assumption in Section 1 of the financial statements. We concur with these disclosures and with the use of the going concern assumption.

Revenue recognition and complexity and effectiveness of NS IT-environment in the Netherlands

The disclosure relating to the revenue recognition of passenger transport is included in 1 of the financial statements.

Risk	Our audit approach	Key observations
Dutch revenue of €1.5 billion from passenger services is included in the item Revenue in the financial statements. This amount consists of revenue from the sale of various types of tickets entitling passengers to transport services (passenger revenue), and of government contributions. The diversity in ticket types, combined with the high volume of transactions and cut-off aspects that apply to various ticket types, requires high standards of reliability and continuity of transaction processing systems in order to guarantee that individual transactions will result in correct and complete revenue recognition. For this reason, we consider the complexity and effectiveness of NS's IT environment a key matter of our audit, in conjunction with revenue recognition. In recent years, NS has invested in the simplification, standardisation and improvement of its IT infrastructure, systems and processes, focusing on increasing the effectiveness, reliability and continuity of automated data processing. We refer to the section on Organisation of risk management included in the NS annual report. The disclosure regarding revenue recognition for passenger transportation is included in Note 1 to the financial statements.	Our activities include testing of internal controls, performing data analysis procedures such as trend analyses and analysis of manual journal entries, performing sample testing of correct and complete transaction processing, audits on the basis of third-party confirmations and testing management’s estimates with regard to revenue allocation of the governmental contributions. We reviewed the reliability and continuity of the automated data processing - also focusing on information security risks - only insofar as necessary within the scope of the audit of the financial statements. For this purpose, we included specialised IT auditors in our audit team. Furthermore, our procedures consisted of an assessment of developments in the IT infrastructure, including an audit of the systems and applications modernised in 2020 and the associated conversions, as well as testing of the internal control procedures relating to IT systems and processes relevant to our audit.	In 2020, NS modernised a number of IT systems and further simplified the application landscape to improve the quality and effectiveness of IT controls. We reported our recommendations for further improvement in the management letter. The findings that still require attention and related recommendations have again been pointed out. Over the course of 2020, NS has followed up on a number our findings reported in previous years. As a result of our procedures, we note that NS has further increased the quality of IT management and information security during 2020. Our procedures have not revealed any significant shortcomings in the continuity and reliability of automated data processing. We concur with the accounting treatment by NS and the disclosures in Note 1 to the financial statements.

Responsibilities

Responsibilities of the executive board and supervisory board

The executive board is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Dutch Civil Code and for the preparation of the other information, including the executive board’s report, in accordance with Part 9 of Book 2 of the Dutch Civil Code and other information as required by Part 9 of Book 2 of the Dutch Civil Code.

The executive board is also responsible for preparation of reliable and adequate non-financial information in accordance with the Sustainability Reporting Standards (Core option) of the Global Reporting Initiative (GRI) and the additional reporting criteria used as disclosed in the Scope and reporting criteria chapter of the annual report, including the identification of stakeholders and determination of material issues. The choices made by the executive board regarding the scope of non-financial information and the reporting policy are set out in the Scope and reporting criteria chapter of the annual report.

Furthermore, the executive board is responsible for such internal control as the executive board determines is necessary to enable the preparation of the financial statements and non-financial information that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, the executive board is responsible for assessing the company's ability to continue as a going concern. Based on the financial reporting frameworks mentioned, executive board should prepare the financial statements using the going concern basis of accounting, unless executive board either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

The executive board should disclose events and circumstances that may cast significant doubt on the company's ability to continue as a going concern in the financial statements.
The supervisory board is responsible for overseeing the company's financial reporting process of N.V. Nederlandse Spoorwegen.

Our responsibilities

Our responsibility is to plan and perform the assurance engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our conclusions.

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.

Our review of the non-financial information is aimed to obtain a limited level of assurance.

The procedures performed to obtain a limited level of assurance are aimed to determine the plausibility of information and vary in nature and timing from, and are less in extent, than for a reasonable assurance engagement. The level of assurance obtained in a review is therefore substantially less than the assurance obtained in an audit.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

We have exercised professional judgement and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. The section entitled Our approach of the audit of the financial statements and the review of the non-financial information above and the annex contain an informative summary of our responsibilities and the work performed as a basis for our opinion.

We apply the Regulations for Quality Systems (Nadere Voorschriften Kwaliteitssystemen: NVKS).
This provides us with a coherent quality control system, including established guidelines and procedures regarding compliance with ethical requirements, professional standards and other relevant laws and regulations. A more detailed description of our responsibilities is included in the annex to this combined auditor’s report and assurance report. An informative summary of our work performed as a basis for our conclusion on the non-financial information is included in the annex.

Amsterdam, 24 February 2021

Ernst & Young Accountants LLP

Signed by J. Verhagen

Annex to the combined independent auditor’s report

	Work performed
	We have exercised professional judgment and have maintained professional skepticism throughout the assurance engagements performed by a multi-disciplinary team, in accordance with the Dutch Standards on Auditing and the Dutch assurance standards, ethical requirements and independence requirements.
	Our audit to obtain reasonable assurance about the financial statements (consolidated and corporate) included amongst others:		Our review to obtain limited assurance about the non-financial information included amongst others:
•	Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or errors, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control	•	Performing an analysis of the external environment and obtaining an understanding of relevant social themes and issues and the characteristics of the entity
•	Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control	•	Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the non-financial information. This includes the evaluation of the results of the stakeholders’ dialogue and the reasonableness of estimates by management
•	Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management	•	Obtaining an understanding of the reporting processes for the non-financial information, including obtaining a general understanding of internal control relevant to our review
•	Evaluating the overall presentation, structure and content of the financial statements, including the disclosures	•	Identifying areas of the non-financial information with a higher risk of misleading or unbalanced information or material misstatements, whether due to fraud or errors. Designing and performing further procedures aimed at determining the plausibility of the non-financial information responsive to this risk analysis
•	Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation		These further review procedures consisted amongst others of:
		•	Interviewing management and relevant staff at corporate and local level responsible for the sustainability strategy, policies and results
		•	Interviewing relevant staff responsible for providing the information for, carrying out internal control procedures on, and consolidating the data in the non-financial information
		•	Obtaining assurance information that the non-financial information reconciles with underlying records of the company
		•	Reviewing, on a limited test basis, relevant internal and external documentation
		•	Evaluating whether the estimates made in the impact analysis are reasonable, including the assumptions on which the estimates are based, which are included in the document Methodologie Impactanalyse jaarverslag 2020 on www.ns.nl/
		•	Evaluating the suitability and plausibility of the external sources used in the calculations on which the impact analysis is based, which are included in the document Methodologie Impactanalyse jaarverslag 2020 on www.ns.nl/mvoberekeningen
		•	Evaluating the definitions of the performance indicators related to the transport franchise in the Transport Plan 2020 as included in the Downloads on nsjaarverslag.nl/jaarverslag-2020
		•	Performing an analytical review of the data and trends in the information submitted for consolidation at corporate level
		•	Reconciling the relevant financial information with the financial statements
		•	Evaluating the consistency of the non-financial information with the information in the annual report which is not included in the scope of our review
		•	Evaluating the overall presentation, structure and content of the non-financial information
		•	Considering whether the non-financial information as a whole, including the disclosures, reflects the purpose of the reporting criteria used
	We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements or in our review of the non-financial information.
	Communication
	We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the assurance procedures and significant findings, including any significant findings in internal control that we identify during our assurance engagements. We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the supervisory board, we determine those matters that were of most significance in the audit of the financial statements and the review of the non-financial information of the current period and are therefore the key audit and review matters. We describe these matters in our combined independent auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.