41. Provisions for dismantling fixed assets, restoration of land and other provisions

SELECTED ACCOUNTING PRINCIPLES

Provision for mine decommissioning costs

The provision for costs of dismantling fixed assets and restoration of land includes mainly the provision for costs of decommissioning of mines for which it is required that the assets be liquidated and the land restored to its original condition after the exploitation.

The provision is determined based on future decommissioning costs and costs of land restoration estimated by independent experts taking into account the discounting effect and the amount determined in line with separate regulations of the Mine Decommissioning Fund. The provision is estimated based on an analysis prepared using deposit exploitation projections (for mines) and a technical and business analysis.

For coal mines a corresponding entry is made in line with IAS 16 Property, Plant and Equipment as a fixed asset of a mine and changes in estimates are disclosed in line with IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities, i.e. as adjustments to the provision and capitalised future mine decommissioning costs. The unwinding of discount is recognised in the profit or loss.

Provision for restoration of land and dismantling and removal of fixed assets

Based on estimates of future costs of dismantling prepared by independent experts, taking into account the discounting effect, the Group establishes a provision for estimated costs of dismantling, to include those related to wind farms, but also for removing fixed assets and restoring the land where the fixed assets were located if it has an obligation arising from the acquisition or use of property, plant and equipment items.

PROFESSIONAL JUDGEMENT AND ESTIMATES

The Group estimates the amount of provisions created based on the assumptions, methodology and calculations appropriate for a given type of provisions, evaluating the probability of spending funds that incorporate economic benefits and determining the reliable level of funds necessary to perform the obligation. Provisions are created by the Group if the probability of spending funds that incorporate economic benefits is higher than 50%.

Table 1

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Year ended 31 December 2020 Year ended 31 December 2019
Provision for mine
decommissioning
costs
Provision for land
restoration and
dismantling and
removal of fixed
assets
Provisions
total
Provision for mine
decommissioning
costs
Provision for land
restoration and
dismantling and
removal of fixed
assets
Provisions
total
Opening balance 305,885 194,082 499,967 202,599 135,878 338,477
Unwinding of the discount 6,125 3,561 9,686 6,078 3,651 9,729
Discount rate adjustment 62,873 24,488 87,361 97,042 11,303 108,345
Business acquisition 60,817 60,817
Recognition/(reversal), net 254 (11,740) (11,486) 166 (25,522) (25,356)
Utilisation (323) (2,147) (2,470) (5,367) (5,367)
Other changes 13,322 13,322
Closing balance 374,814 208,244 583,058 305,885 194,082 499,967
Non-current 374,732 195,823 570,555 305,493 164,142 469,635
Current 82 12,421 12,503 392 29,940 30,332
Other provisions, long-term portion 98,651 193,495
Total 669,206 663,130