When applying the accounting policy, professional judgement of the management, along with accounting estimates, have been of key importance; they have an impact on the figures disclosed in these consolidated financial statements. The assumptions underlying the estimates are based on the Management Board’s best knowledge and awareness of current and future actions and events in individual areas. In the period covered by these consolidated financial statements, no significant changes occurred in the estimates or estimation methods applied, which could affect the current or future periods, other than those presented and described hereinafter in these consolidated financial statements.
The items of the consolidated financial statements which are exposed to the risk of material adjustment of the carrying amounts of assets and liabilities have been presented in individual notes to these consolidated financial statements. Material estimates include allowances for non-financial assets, recognised as a result of impairment tests, as described in detail in Note 11 to these consolidated financial statements.
Besides the foregoing, the Group makes significant estimates as regards the contingent liabilities recognised, in particular as regards legal proceedings where the Group companies are parties. Contingent liabilities are presented in detail in Note 54 to these consolidated financial statements.
Impact of COVID-19 on the level of expected credit losses and fair value measurement of financial instruments
Export to Excel| Impact of COVID-19 on the level of expected credit losses of receivables from customers |
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| Estimates and assumptions |
With respect to receivables from customers, the Group estimates the amount of the allowance for expected credit losses based on the probability-weighted credit loss that will be incurred if any of the following events occur:
The Group has allocated a portfolio of strategic counterparties and a portfolio of other counterparties for receivables from customers. The default risk of strategic counterparties is assessed based on the ratings granted to counterparties using an internal scoring model, adequately converted to the probability of default, taking into account estimates of potential recoveries from the collaterals submitted. For receivables from other counterparties, it is expected that the adjusted historical repayment figures may reflect the credit risk that may be incurred in future periods. The expected credit losses for this group of counterparties were estimated using the receivables ageing matrix and the percentage ratios assigned to the various ranges and groups (including receivables claimed at court, receivables from counterparties in bankruptcy) allowing to estimate the value of receivables from customers expected to be outstanding. |
| Impact of COVID-19 on the methodology of estimates and assumptions
The economic impact of COVID-19 is expected to affect the quality of the Group’s financial asset portfolio and reduce the level of repayment of receivables from customers. The forecast impact varies depending on the economic sector in which a particular counterparty operates. Due to the uncertainty surrounding further development of the COVID-19 pandemic and the expected impact of aid programmes, the ability to accurately estimate the future repayment of receivables from customers is limited. In order to take into account the impact of future factors (including COVID-19) for the portfolio of strategic and other customers, the Group has applied the following measures:
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| Impact of COVID-19 on the level of estimates prepared
Estimates including uncertainties related to the effect of COVID-19 on expected credit losses in future periods on receivables from customers amounted to PLN 19,628 thousand, which had an impact on the operating profit of the Group for the year ended 31 December 2020. The total expected credit loss as at 31 December 2020 calculated for receivables from customers (excluding receivables claimed at court) was estimated at a level of PLN 60,522 thousand. The Group assumes that the volume of data available for analysis in future periods will grow and allow for extending the scope of analysis for expected credit losses for the needs of the next consolidated financial statements. |
Impact of COVID-19 on the level of expected credit losses and valuation of loans granted and guarantee issued at fair value
Export to Excel| Impact of COVID-19 on the level of expected credit losses and valuation of loans granted and guarantee issued at fair value |
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| Estimates and assumptions
For loans classified as assets measured at amortised cost, the Group estimates the amount of their impairment losses. The risk of insolvency of borrowers is estimated based on the ratings assigned to counterparties using an internal scoring model, adequately converted into a probability of default, taking into account the time value of money. The valuation of a loan classified as an asset measured at a fair value is estimated as the current value of future cash flows taking into account the credit risk of the borrower. The guarantees issued are estimated at the amount of expected credit losses. |
| Impact of COVID-19 on the methodology of estimates and assumptions
In order to take into account the impact of future factors (including COVID-19), the Group has adjusted the probability of expected credit losses based on quotations of Credit Default Swap instruments, diversified according to the internal rating of the counterparty. |
| Impact of COVID-19 on the level of estimates performed
The effect of considering the impact of COVID-19 on the estimation methodology resulted in the growth of expected credit losses on off-balance sheet liability under the guarantee issued by the Company affecting jointly the financial expenses charging the Group in the year ended 31 December 2020 in the amount of PLN 14,497 thousand which, in accordance with IFRS 9 Financial Instruments was recognised as an increase in financial liabilities. As at the balance sheet date, in the context of the analyses and the valuation of the loans granted, the Group assessed that it was unable to reliably determine the impact of COVID-19 on the reduction of the carrying amount of the loans granted. The Group assumes that the volume of data available for analysis in future periods will grow and allow for extending the scope of analysis for expected credit losses for the needs of the next consolidated financial statements. |