Tauron – 32. Receivables from customers

SELECTED ACCOUNTING PRINCIPLES Receivables from customers include amounts invoiced and receivables accrued to revenue which have not been measured and invoiced due to the customer settlement system used. The accounting policy in the scope of accrued revenue is described in Note 12. Receivables from customers are measured at the amounts originally invoiced (taking into account the effect of discounting, if material), less allowances / write-downs. Impairment allowances are recognised for both overdue and current receivables based on probability-weighted credit loss to be incurred should any of the following events occur: a material delay in payment, a debtor is put in liquidation, declared bankrupt or undergoes restructuring procedures, the receivables are claimed at administrative or common court, or undergo enforcement. If a given counterparty’s receivables are overdue by more than 90 days, they are classified as bad debt, i.e. the 100% probability of insolvency is assigned to that counterparty. For receivables from customers, the Group has separated a portfolio of strategic counterparties (counterparty with credit exposure exceeding PLN 1 000 thousand) and a portfolio of the remaining counterparties. For the portfolio of strategic counterparties, the risk of insolvency of strategic counterparties is assessed based on ratings assigned to the counterparties using an internal scoring model and appropriately restated to account for the probability of default. The expected credit loss, in line with IFRS 9 Financial Instruments, is calculated based on the estimated potential recoveries from security interests. It is expected that the historical performance information concerning receivables from other counterparties may reflect the credit risk that will be faced 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. In order to take into account the impact of future factors (in relation to strategic and other counterparties), the Group adjusts the parameters related to the probability of default using the quotations of Credit Default Swap instruments for individual ratings. Revaluation allowances of receivables are recognised in such cost categories which correspond to the function of the assets component, i.e. in costs of operating activity or financial costs – depending on the type of receivables the allowance refers to. PROFESSIONAL JUDGEMENT AND ESTIMATES In accordance with the requirements of IFRS 9 Financial Instruments, the Group estimates impairment losses on receivables from customers attributable to expected credit losses. The allowance calculation methodology is described above.

SELECTED ACCOUNTING PRINCIPLES

Receivables from customers include amounts invoiced and receivables accrued to revenue which have not been measured and invoiced due to the customer settlement system used. The accounting policy in the scope of accrued revenue is described in Note 12.

Receivables from customers are measured at the amounts originally invoiced (taking into account the effect of discounting, if material), less allowances / write-downs.

Impairment allowances are recognised for both overdue and current receivables based on probability-weighted credit loss to be incurred should any of the following events occur:

a material delay in payment,
a debtor is put in liquidation, declared bankrupt or undergoes restructuring procedures,
the receivables are claimed at administrative or common court, or undergo enforcement.

If a given counterparty’s receivables are overdue by more than 90 days, they are classified as bad debt, i.e. the 100% probability of insolvency is assigned to that counterparty.

For receivables from customers, the Group has separated a portfolio of strategic counterparties (counterparty with credit exposure exceeding PLN 1 000 thousand) and a portfolio of the remaining counterparties.

For the portfolio of strategic counterparties, the risk of insolvency of strategic counterparties is assessed based on ratings assigned to the counterparties using an internal scoring model and appropriately restated to account for the probability of default. The expected credit loss, in line with IFRS 9 Financial Instruments, is calculated based on the estimated potential recoveries from security interests.

It is expected that the historical performance information concerning receivables from other counterparties may reflect the credit risk that will be faced 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.

In order to take into account the impact of future factors (in relation to strategic and other counterparties), the Group adjusts the parameters related to the probability of default using the quotations of Credit Default Swap instruments for individual ratings.

Revaluation allowances of receivables are recognised in such cost categories which correspond to the function of the assets component, i.e. in costs of operating activity or financial costs – depending on the type of receivables the allowance refers to.

PROFESSIONAL JUDGEMENT AND ESTIMATES

In accordance with the requirements of IFRS 9 Financial Instruments, the Group estimates impairment losses on receivables from customers attributable to expected credit losses. The allowance calculation methodology is described above.

Table 1

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	As at 31 December 2020	As at 31 December 2019
Value of items before allowance/write-down:
Receivables from buyers, of which:	2,423,607	2,306,208
Additional assessment of revenue from sales of electricity and distribution services	814,235	689,395
Receivables claimed at court	184,664	213,900
Total	2,608,271	2,520,108
Allowance/write-down
Receivables from buyers	(60,522)	(39,655)
Receivables claimed at court	(184,664)	(189,707)
Total	(245,186)	(229,362)
Value of item net of allowance (carrying amount)
Receivables from buyers	2,363,085	2,266,553
Receivables claimed at court	–	24,193
Total, of which:	2,363,085	2,290,746
Current	2,363,085	2,290,746

In accordance with the model described above, the Group estimates the impairment loss.

Ageing of receivables from customers as at 31 December 2020

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	Not past due	Past due					Total
	Not past due	<30 days	30-90 days	90-180 days	180-360 days	>360 days	Total
Value of item before allowance/write-down	2,133 713	217,763	51,711	32,521	34,199	138,364	2,608,271
Allowance/write-down	(11,586)	(9,250)	(19,347)	(32,489)	(34,178)	(138,336)	(245,186)
Net Value	2,122,127	208,513	32,364	32	21	28	2,363,085

Ageing of receivables from customers as at 31 December 2019

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	Not past due	Past due					Total
	Not past due	<30 days	30-90 days	90-180 days	180-360 days	>360 days	Total
Value of item before allowance/write-down	2,039,689	216,273	33,588	18,031	31,981	180,546	2,520,108
Allowance/write-down	(9,541)	(6,252)	(10,534)	(15,329)	(31,356)	(156,350)	(229,362)
Net Value	2,030,148	210,021	23,054	2,702	625	24,196	2,290,746

As at the balance sheet date, the Group did not have any material non-collectible items not covered with an allowance.

Change in allowances on receivables from customers

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	Year ended 31 December 2020	Year ended 31 December 2019
Opening balance	(229,362)	(221,759)
Recognised	(37,665)	(13,931)
Utilized	6,240	5,101
Reversed	580	1,221
Other movements	15,030	6
Foreign exchange differences from translation of foreign entity	(9)	–
Closing balance	(245,186)	(229,362)