Tauron – 37. Equity

SELECTED ACCOUNTING PRINCIPLES Issued capital Equity is recognised at a level specified in the articles of association of the parent entity and entered in the Court Register. Reserve capital Reserve capital is created, to which at least 8% of profit for each financial year is appropriated in order to offset the loss of the joint stock company, until its amount equals at least one-third of the issued capital. Revaluation reserve from valuation of hedging instruments Revaluation reserve arising from hedging instruments is related to the measurement of Interest Rate Swaps hedging interest rate risk of issued bonds. Its amount is determined as the fair value of the effective portion of cash flow hedging instruments, including deferred tax. Foreign Exchange differences due to translation of foreign entities Items in the financial statements of foreign entities (TAURON Czech Energy s.r.o.) are translated into the presentation currency as follows: assets and liabilities have been translated to the presentation currency at the average exchange rate published by the National Bank of Poland as at the end of the balance sheet date; revenue and expenses have been translated at the average exchange rate of the National Bank of Poland published at the transaction date or the average exchange rate for a given period, if no significant exchange rate fluctuations occurred in the period. The resulting translation differences were recognised in other comprehensive income. Retained profits / (accumulated losses) Retained profits/ (accumulated losses) comprise: previous years’ retained earnings/uncovered losses, reserve and supplementary capital of subsidiaries that occurred after the control acquisition date, settlement of acquisition/business combination of entities under common control, using the pooling of interests method, actuarial gains and losses regarding provisions for post-employment benefits recognised through other comprehensive income, impact of adjustments related to the application of IFRS, such as, among others, differences from revaluation of fixed assets to fair value as the assumed cost as at the date of adoption of IFRS or application of exemptions from IFRS 1 First-time Adoption of International Reporting Standards. Non-controlling shares Non-controlling interests represent a separate equity item. Its initial value is determined as the corresponding fair value of net assets or as fair value of non-controlling interests as at the control commencement date and increased/decreased by respective changes in net assets of the subsidiaries. Decisions regarding initial measurement of non-controlling interests are made on a case-by-case basis.

SELECTED ACCOUNTING PRINCIPLES

Issued capital
Equity is recognised at a level specified in the articles of association of the parent entity and entered in the Court Register.

Reserve capital

Reserve capital is created, to which at least 8% of profit for each financial year is appropriated in order to offset the loss of the joint stock company, until its amount equals at least one-third of the issued capital.

Revaluation reserve from valuation of hedging instruments

Revaluation reserve arising from hedging instruments is related to the measurement of Interest Rate Swaps hedging interest rate risk of issued bonds. Its amount is determined as the fair value of the effective portion of cash flow hedging instruments, including deferred tax.

Foreign Exchange differences due to translation of foreign entities

Items in the financial statements of foreign entities (TAURON Czech Energy s.r.o.) are translated into the presentation currency as follows:

assets and liabilities have been translated to the presentation currency at the average exchange rate published by the National Bank of Poland as at the end of the balance sheet date;
revenue and expenses have been translated at the average exchange rate of the National Bank of Poland published at the transaction date or the average exchange rate for a given period, if no significant exchange rate fluctuations occurred in the period.

The resulting translation differences were recognised in other comprehensive income.

Retained profits / (accumulated losses)

Retained profits/ (accumulated losses) comprise:

previous years’ retained earnings/uncovered losses,
reserve and supplementary capital of subsidiaries that occurred after the control acquisition date,
settlement of acquisition/business combination of entities under common control, using the pooling of interests method,
actuarial gains and losses regarding provisions for post-employment benefits recognised through other comprehensive income,
impact of adjustments related to the application of IFRS, such as, among others, differences from revaluation of fixed assets to fair value as the assumed cost as at the date of adoption of IFRS or application of exemptions from IFRS 1 First-time Adoption of International Reporting Standards.

Non-controlling shares

Non-controlling interests represent a separate equity item. Its initial value is determined as the corresponding fair value of net assets or as fair value of non-controlling interests as at the control commencement date and increased/decreased by respective changes in net assets of the subsidiaries. Decisions regarding initial measurement of non-controlling interests are made on a case-by-case basis.