Fabryka Farb i Lakierów “Śnieżka” S.A. FINANCIAL STATEMENTS
FOR YEAR ENDED 31 DECEMBER 2011 INCLUDING THE AUDITOR’S REPORT
Selected financial data ... 3
Statement of comprehensive income... 4
Statement of financial position... 5
Cash flow statement ... 6
Statement of changes in equity ... 7
Accounting principles (policies) and additional explanatory notes... 8
1. General information ... 8
2. Characteristics of consolidated financial statement... 8
3. Management Board of the Company... 8
4. Approval of the financial statement ... 8
5. Company investments ... 8
6. Significant items based on the professional judgement and estimates ... 10
6.1. Professional judgement ... 10
6.2. Estimation uncertainty ... 10
7. Basis for preparation of financial statements ... 10
7.1. Compliance statement ... 11
7.2. Functional currency and reporting currency ... 11
8. Changes in the accounting principles applied ... 11
9. New standards and interpretations published but not yet effective ... 11
10. Important accounting principles ... 12
10.1. Translation of items stated in foreign currencies ... 12
10.2. Tangible fixed assets ... 13
10.3. Investment property ... 14
10.4. Intangible assets ... 14
10.5. Leasing... 14
10.6. Impairment of non-financial fixed assets ... 15
10.7. Shares and stock in subsidiaries, affiliates and joint ventures... 15
10.8. Financial assets ... 15
10.9. Impairment of financial assets ... 16
10.10. Embedded derivatives ... 16
10.11. Financial derivatives and hedging... 17
10.12. Inventory ... 18
10.13. Trade and other receivables ... 19
10.14. Cash and cash equivalents... 19
10.15. Interest-bearing bank loans and borrowings ... 19
10.16. Trade and other liabilities... 19
10.17. Provisions... 19
10.18. Retirement benefits and similar ... 20
10.19. Revenue ... 20
10.20. Taxes ... 21
10.21. Net profit per share ... 21
11. Operating segments ... 22
12. Income and costs ... 24
12.1. Other operating revenue and costs ... 24
12.2. Financial revenue and costs ... 24
12.3. Costs by type... 25
12.5. Costs of employee benefits ... 25
13. Elements of other comprehensive income... 25
14. Income tax ... 26
14.1. Tax burden ... 26
14.2. Reconciliation of effective tax rate ... 26
14.3. Deferred income tax... 26
15. Non-current assets classified as held for sale ... 27
16. Assets and liabilities of the Company Social Benefit Fund (ZFŚS)... 27
17. Earnings per share ... 28
18. Dividend paid and to be paid... 28
19. Tangible fixed assets ... 29
20. Leasing ... 30
20.1. Liabilities from financial leasing and lease agreements with a purchase option... 30
20.2. Receivables from financial leasing and lease agreements with a purchase option... 30
21. Investment property... 31
22. Intangible assets ... 31
23. Financial assets... 32
24. Other non-financial assets ... 33
25. Employee benefits ... 33
26. Inventory ... 33
27. Trade and other receivables... 34
28. Cash and cash equivalents... 35
29. Initial and supplementary/reserve capital ... 35
29.1. Initial capital ... 35
29.2. Supplementary capital... 37
29.3. Undistributed financial result and limitations in dividend payout ... 37
30. Interest-bearing bank loans and borrowings... 38
31. Trade liabilities, other liabilities and accruals ... 39
31.1. Trade and other liabilities... 39
31.2. Accruals ... 39
32. Investment liabilities ... 40
33. Contingent liabilities ... 40
33.1. Court proceedings ... 40
33.2. Tax settlements ... 40
34. Information on related parties ... 41
34.1. Affiliate ... 41
34.2. Transactions with related parties... 41
34.3. Loan granted to member of the Management Board... 42
34.4. Other transactions with members of the Management Board ... 42
34.5. Remuneration paid to chief executives of the Company... 42
35. Information on remuneration of an auditor or an entity authorised to audit financial statements ... 42
36. Objectives and principles of financial risk management ... 43
36.1. Interest rate risk... 43
36.2. Foreign exchange risk ... 44
36.3. Risk of increase of raw material prices ... 44
36.4. Credit risk... 44
37. Financial instruments ... 45
37.1. Fair values of financial instruments by particular classes ... 45
37.2. Interest rate risk... 46
37.3. Hedging... 46
38. Additional information on cash flow statement ... 47
39. Capital management ... 47
40. Employment structure ... 47
SELECTED FINANCIAL DATA
for year ended 31 December 2011
in thousand PLN in thousand EUR
year ended 31 December 2011 year ended 31 December 2010 year ended 31 December 2011 year ended 31 December 2010
Selected financial data of FFiL Śnieżka S.A.
I. Revenue from the sale of products, goods and materials 417,728 414.182 100,898 103,458
II. Operating profit (loss) 8,127 43,856 1,963 10,955
III. Gross profit (loss) 2,027 41,735 490 10,425
IV. Net profit (loss) 1,812 35,963 438 8,983
V. Full income for the period 1,812 35,963 438 8,983
VI. Net cash flow from operating activities 28,339 29,218 6,845 7,298 VII. Net cash flow from investing activities (12,705) (15,458) (3,069) (3,861) VIII. Net cash flow from financial activities (25,594) (5,194) (6,182) (1,297)
IX. Total net cash flows (9,960) 8,566 (2,406) 2,140
X. Total assets 318,315 360,605 72,069 91,055
XI. Liabilities and provisions for liabilities 144,453 164,799 32,705 41,613
XII. Long-term liabilities 2,498 3,604 566 910
XIII. Short-term liabilities 141,955 161,195 32,140 40,703
XIV. Equity 173,862 195,806 39,364 49,442
XV. Share capital 13,551 13,551 3,068 3,422
XVI. Number of shares 13,550,676 13,550,676 13,550,676 13,550,676 XVII. Earnings (losses) per ordinary share (in PLN/EUR) 0.13 2.65 0.03 0.66 XVIII. Diluted earnings (losses) per ordinary share (in PLN/EUR) 0.13 2.65 0.03 0.66
XIX. Book value per share (in PLN/EUR) 12.83 14.45 2.91 3.65
XX. Diluted book value per share (in PLN/EUR) 12.83 14.45 2.91 3.65 XXI. Declared or paid dividend per share (in PLN/EUR) - 1.70 - 0.43
EUR exchange rates used for statement calculations:
Individual items of the condensed income statement have been calculated according to the average EUR exchange rate applicable in the period, which was:
during 12 months of 2011 – 4.1401 during 12 months of 2010 – 4.0034
Individual items of the statement of financial position have been calculated according to the EUR exchange rate at the end of the period:
as at 31 December 2011 – 4.4168 as at 31 December 2010 – 3.9603
STATEMENT OF COMPREHENSIVE INCOME
for year ended 31 December 2011
Note year ended 31 December 2011 Year ended 31 December 2010 (restated data) Continued activity Sales of products 331,704 332,938 Sales of goods 58,570 58,260 Sales of materials 27,454 22,984 Sales revenue 417,728 414,182
Cost of goods sold 12.3 299,052 280,208
Gross profit (loss) on sales 118,676 133,974
Other operating income 12.1 1,410 2,463
Selling expenses 65,413 52,300
General and administrative expenses 38,842 38,795
Other operating costs 12.1 7,704 1,486
Profit (loss) on operating activities 8,127 43,856
Financial income 12.2 5,097 5,748
Financial costs 12.2 11,197 7,869
Gross profit/(loss) 2,027 41,735
Income tax 14 215 5,772
Net profit (loss) on continued operations 1,812 35,963
Discontinued operations - -
Sales profit/loss relative to discontinued operations - -
Net profit (loss) for the period 1,812 35,963
Other net comprehensive income - -
COMPREHENSIVE INCOME FOR THE PERIOD
1,812 35,963
Profit (loss) per share:
- basic from profit for the reporting period 0.13 2.65
- basic from profit on continued operations for the reporting period
0.13 2.65
- diluted from profit for the reporting period 0.13 2.65
- diluted from profit on continued operations for the reporting period
STATEMENT OF FINANCIAL POSITION
as at 31 December 2011
Note 31 December 2011 31 December 2010 restated data
01 January 2010 restated data ASSETS
Fixed assets 159,618 161,226 148,650
Tangible fixed assets 19 116,507 108,736 96,184
Investment real property 21 13,287 16,460 16,990
Intangible assets 22 1,166 1,828 1,201
Financial assets available for sale 23 58 58 66
Shares, stock and other long-term assets 5.23 27,735 34,121 34,168
Long-term receivables 865 23 41
Deferred tax assets 14.3 - - -
Current assets 158,595 199,379 140,226
Inventory 26 67,992 52,413 48,334
Trade and other receivables 27 78,164 127,736 78,478
Income tax receivables 6,631 2,461 -
Derivatives - - -
Other financial assets 3,025 4,596 9,818
Other non-financial assets 24 618 - -
Cash and cash equivalents 28 2,165 12,173 3,596
Non-current assets classified as held for sale 15 102 - 73
TOTAL ASSETS 318,315 360,605 288,949
EQUITY AND LIABILITIES
Equity (attributable to shareholders of the parent company) 173,862 195,806 182,260
Share capital 29.1 13,551 13,551 13,554
Share premium - - -
Treasury shares - - (89)
Other reserve capitals - - -
Revaluation reserve - - -
Supplementary capital 29.2 158,499 146,282 131,998
Retained earnings/Uncovered losses 29.3 1,812 35,973 36,797
Long-term liabilities 2,498 3,604 3,826
Interest-bearing loans and borrowings - - -
Provisions 25 870 876 671
Other liabilities 31.1 163 - -
Provision for deferred tax 14.3 1,465 2,728 3,155
Accruals - - -
Short-term liabilities 141,955 161,195 102,863
Trade and other liabilities 31.1 46,535 75,609 35,888
Current portion of interest-bearing loans and borrowings 30 95,005 85,033 66,427
Derivatives - - -
Income tax liabilities - - -
Accruals 31.2 195 281 303
Provisions 25 220 272 245
Liabilities directly related to non-current assets classified as held for sale - - -
Total liabilities 144,453 164,799 106,689
The accounting principles (policies) and additional notes to the financial statements found on pages from 9 to 51 constitute an
CASH FLOW STATEMENT
for year ended 31 December 2011
A. Cash flows from operating activities Note year ended 31 December 2011
year ended 31 December 2010
Profit before tax 2,027 41,735
Adjustments: 24,605 6,206
Depreciation/amortisation of fixed and intangible assets 12,787 11,025
Impairment losses on property, plant and equipment 2,827 -
(Profit) loss on investing activities 2,520 (49)
(Profit) loss on sales of financial assets available for sale - -
(Profit) loss on changes in the fair value of financial assets disclosed at fair value 319 -
Foreign exchange differences 6,741 (2,623)
Net interest and dividends (589) (2,147)
Other adjustments - -
Cash from operating activities before changes in working capital 26,632 47,941
Change in inventories (15,578) (4,079)
Change in receivables 52,632 (45,980)
Change in liabilities (28,939) 41,065
Change in provisions (57) 231
Change in prepayments and accruals (704) (22)
Cash generated by operating activities 33,986 39,156
Interest costs -
Income tax paid (5,647) (9,938)
Net cash from operating activities 28,339 29,218
Cash flows from investment activities
Expenses related to acquisition of intangible assets (622) (1,501)
Inflows from sales of intangible assets - -
Expenses related to acquisition of property, plant and equipment and intangible assets (20,403) (22,429) Inflows from sales of property, plant and equipment 587 260
Inflows from leasing of fixed assets 181 -
Expenses on account of loans granted 38 (35,165) (185)
Inflows from repayment of loans 38 37,789 1,205
Expenses related to acquisition of subsidiaries (less the acquired cash) (5) (467)
Inflows from sales of related parties 747 2,084
Received repayments under loans granted 46 -
Interest received 913 855
Dividends received 3,227 4,720
Net cash used in investing activities (12,705) (15,458)
Cash flows from financing activities
Net inflows from issue of shares - -
Purchase of treasury shares. - (89)
Proceeds from loans and borrowings raised 9,019 20,326
Repayment of credits and loans (7,087) -
Repayment of liabilities under financial lease (64) (44)
Interest (3,707) (2,970)
Dividend and promoter certificates paid (23,755) (22,417)
Net cash from financing activities (25,594) (5,194)
Net increase (decrease) in cash and cash equivalents (9,960) 8,566 Cash and cash equivalents at the beginning of the period 12,173 3,596 Change in cash and cash equivalents relative to foreign exchange differences (48) 27
Change in cash relative to due interest - (16)
STATEMENT OF CHANGES IN EQUITY
for year ended 31 December 2011
Note Initial capital Share premium Treasury shares Other reserve capitals
Supplementary
capital Revaluation reserve
Retained earnings/Uncovered
losses
Total equity
As at 1 January 2010 29 13,554 - (89) - 131,998 - 36,797 182,260
Changes in the accounting policy (principles)
As at 1 January 2010 (restated data) 13,554 - (89) - 131,998 - 36,797 182,260
Net profit (loss) for the period - - - - 35,963 35,963
Reclassification for supplementary capital from distribution of profit
- - - 14,372 - (14,372) -
Comprehensive income for the period - - - - -
Redemption of treasury shares (3) - 89 - (88) - 7 5
Payment of founder certificates - - - - (736) (736)
Payment of dividend - - - - (21,686) (21,686)
As at 31 December 2010 29 13,551 - - - 146,282 - 35,973 195,806
As at 1 January 2011 13,551 - - - 146,282 - 35,973 195,806
Net profit (loss) for the period - - - 1,812 1,812
Reclassification for supplementary capital from distribution of profit
- - - - 12,217 - (12,217) -
Comprehensive income for the period - - - -
Payment of founder certificates - - - (720) (720)
Payment of dividend - - - (23,036) (23,036)
The accounting principles (policies) and additional notes to the financial statements found on pages from 9 to 51 constitute an
ACCOUNTING PRINCIPLES (POLICIES) AND ADDITIONAL
EXPLANATORY NOTES
1.
General information
The financial statements of Fabryka Farb i Lakierów “Śnieżka” S.A. covers the year ended 31 December 2011 and includes corresponding figures for the period of 12 months ended 31 December 2010.
Fabryka Farb i Lakierów “Śnieżka” S.A. (the "Company") was formed by a notarial deed of 16 January 1998. The Company is based in Lubzina 34a.
The Company was entered in the Register of Entrepreneurs of the National Court Register kept by the District Court in Rzeszów, 12th Economic Division of the National Court Register, under KRS no. 0000060537. The Company was granted statistical number REGON 690527477.
The Company has been established for an indefinite period of time.
The object of the Company is production of paints, varnishes, adhesives and solvents (PKD 2030Z). According to the Stock Exchange classification, the Company operates in the chemical sector.
2.
Characteristics of consolidated financial statement
The Company prepared consolidated financial statements for the year ended 31 December 2011, which was approved for publication on 23 April 2012.
3.
Management Board of the Company
As at 31 December 2011 the Management Board of Fabryka Farb i Lakierów “Śnieżka” S.A. was composed of: Piotr Mikrut – President of the Management Board since 31 March 2004 to present,
Witold Waśko – Vice-President of the Management Board since 1 April 2005 to present, Member of the Management Board from 16 February 1998 to 31 March 2005. Joanna Wróbel-Lipa – Vice-President of the Management Board since 6 May 2011 to present,
Member of the Management Board from 18 December 2007 to 5 May 2011.
In 2011, the composition of the Management Board was changed:
Mrs Walentyna Ochab resigned from being a Member of the Management Board on 5 May 2011. Mrs Joanna Wróbel-Lipa was appointed a Vice-President of the Management Board on 6 May 2011.
4.
Approval of the financial statement
These financial statements were approved for publication by the Management Board on 23 April 2012.
5.
Company investments
The Company has investments in the following subsidiaries, co-subsidiaries and affiliates:
Company name, legal form and city where the Management Board's office is placed
Balance sheet value of shares as at 31 December
2011
Balance sheet value of shares as at 31 December
2010
Balance sheet value of shares as at 01 January 2010
SUBSIDIARIES
Fabryka Farb i Lakierów Proszkowych Proximal Sp. z o. o. -
Śnieżka Group - Lubzina 3,458 3,458 4,958
Hadrokor Sp. z o. o. - Włocławek 715 715 715
Śnieżka Ukraina Sp. z o. o. - Yavoriv 16,022 16,022 15,640
SOOO Śnieżka BELPOL - Żhodino 696 696 701
Śnieżka Sp. z o. o. - Vistova - 1,224 4,724
Sniezka Romania S.R.L - Savinesti - 1,474 1,474
IP Solutions Sp. z o.o. - Brzeźnica 5 5 -
TM Investment Sp. z o.o. - Brzeźnica 5 - -
Total share in subsidiaries 20,901 27,099 31,717
AFFILIATES
Plastbud Sp. z o. o. Pustków 48 48 56
Total share in affiliates 48 48 56
Company name, legal form and city where the Management Board's office is placed
Percentage of shares held directly as at 31 December 2011
Indirect share as at 31 December 2011
SUBSIDIARIES
Fabryka Farb i Lakierów Proszkowych Proximal Sp. z o. o. - Śnieżka Group
- Lubzina 100.00% 100.00
Hadrokor Sp. z o. o. - Włocławek 51.09% 51.09
Śnieżka Ukraina Sp. z o. o. - Yavoriv 81.27% 81.27
SOOO Śnieżka BELPOL - Żhodino 88.00% 88.00
Sniezka Romania S.R.L - Savinesti 80.00% 80.00
IP Solutions Sp. z o.o. - Brzeźnica 100.00% 100.00
TM Investment Sp. z o.o. - Brzeźnica 0.003% 99.997%
Total share in subsidiaries AFFILIATES
Plastbud Sp. z o. o. Pustków 10.07% 10.07
Total share in affiliates
As at 31 December 2011 and 31 December 2010, the share in the total number of votes held by the Company in subsidiaries, co-subsidiaries and affiliates is equal to the Company's share in equity of these entities.
The parent company holds 10.07% share in Plastbud Sp z o.o. Due to the volume of transactions concluded between the investor and the above-mentioned company, this company is considered an affiliate.
The parent company also holds shares in Podkarpacki Bank Spółdzielczy. As at 31 December 2011 their balance sheet value is PLN 10 thousand.
As at 31 December the Company made a write-off to the whole number of shares held in Śnieżka Romania S.R.L., the value of which is PLN 1,474 thousand.
On 7 December 2011 the Company sold all the shares held in its subsidiary Farbud Sp. z o.o. Additional information on the sale of the above-mentioned shares is presented in note 23.
As a result of this transaction, as at 31 December 2011 Farbud Sp. z o.o is no longer in the Capital Group of the Issuer.
The accounting principles (policies) and additional notes to the financial statements found on pages from 9 to 51 constitute an
6.
Significant items based on the professional judgement and estimates
6.1.
Professional judgement
In the application of the accounting principles (policy) to the issues stated below, the most important aspect, apart from the accounting estimates, was the professional judgement of the management.
One of the areas requiring judgement of the management is verification of circumstances relating to the loss of investment values in related parties. As at each balance sheet date the Company makes an assessment whether objective evidence of impairment of a financial asset or a group of financial assets exists.
Another area where the Company bases its decisions on judgement of the management, apart from accounting estimates, is leasing. The Company classifies leasing as operating or financing based on the assessment on the extent to which risk and benefits from possessing the object of leasing are attributable to the lessor and the lessee. This assessment is based on economic aspects of each transaction.
Another area in which the Management Board of the Company based its decisions on professional judgement was the moment of loss of control in one of the subsidiaries, i.e. Farbud Sp. z o.o. The agreement on conditional sale of shares was concluded on 7 December 2011, while its conditions were satisfied in February 2012. The Management Board ascertained that upon conclusion of the agreement in 2011 the control over Farbud Sp. z o.o. was lost.
6.2.
Estimation uncertainty
The text below discusses the key assumptions concerning the future and other key sources of uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Impairment of assets
As at each balance sheet date, a business entity estimates whether there are any circumstances indicating the potential impairment of any asset. Details on impairment of assets are presented in note 21 and note 23.
Measurement of provisions for employee benefits
Provisions for employee benefits have been estimated using the actuarial method. Assumptions adopted for this purpose have been presented in note 25.
Deferred income tax asset
The Company recognises a deferred income tax assets based on the assumption that in the future there will be a tax profit allowing for its use. If tax results are worse in the future, this could make the above-mentioned assumption unjustified.
Depreciation rates
The value of depreciation rates is determined on the basis of the envisaged useful economic life of tangible fixed assets and intangible assets. Tangible fixed assets or their essential and separate parts are depreciated on the straight line basis throughout their useful economic life. Depreciation write-offs are made as long as the final value of an asset does not exceed its balance sheet value.
Every year the Company verifies its useful economic livers on the basis of current estimates.
Write-downs on receivables
As at the balance sheet date the Company estimates if there is any objective evidence for impairment of receivables. If the recoverable asset value is lower than its balance sheet value, the Company makes a write-down to the level of the current value of planned cash flows.
7.
Basis for preparation of financial statements
These financial statements have been prepared in line with the cost method.They are presented in Polish zloty ("PLN"), while all the values are provided in thousand PLN, unless specified otherwise.
The financial statements have been prepared on the assumption that the Company will continue as a going concern in the foreseeable future. As at the day of approval of these financial statements, there are no circumstances indicating the risk to the Company’s continuation as a going concern.
7.1.
Compliance statement
These financial statements have been prepared in compliance with the International Financial Reporting Standards ("IFRS") and IFRS adopted by the EU. As at the date of approving the statements for publication, taking into account the process of introducing the IFRS in the EU and the activity pursued by the Company, there are no differences between the IFRS that have become effective and the IFRS approved by the EU within the scope of the accounting principles applied by the Company. The IFRS include standards and interpretations accepted by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC).
7.2.
Functional currency and reporting currency
The functional currency of the Company and the reporting currency of these financial statements is the Polish zloty.
8.
Changes in the accounting principles applied
The new IAS and IFRS that became effective as of 1 January 2011 had no impact on the Company's accounting policy.
As from 1 January 2011 the Company has changed the way of presenting revenue on licences, sublicences and know-how. So far this revenue was presented as financial revenue; now it is disclosed in the statement on comprehensive income as revenue on sales of products.
Due to the application of the above-mentioned changes for 2010, the Company moved revenue on licences, sublicences and know-how in the amount of PLN 1,145 thousand from financial revenue to revenue on sales of products.
Some items in the statement on comprehensive income have been presented (aggregated) differently than in the statements prepared as at 31 December 2010, i.e.
trade receivables and other receivables were combined into one item, and trade liabilities and other liabilities were combined into one item, deferred tax assets and deferred tax provisions were compensated, financial assets held for sale are presented in a separate item of assets.
The Company has not decided to apply earlier any standard, interpretation or change which has been published, but has not become effective yet.
9.
New standards and interpretations published but not yet effective
The following standards and interpretations have been issued by the International Accounting Standards Committee or the International Financial Reporting Interpretations Committee, but have not yet come into effect: First phase of IRFS 9 Financial Instruments: Classification and Measurement – applicable to annual periods beginning on or after 1 January 2015 until the date of approving these financial statements, not approved by the EU. In the next phases the International Accounting Standards Board will deal with hedging accounting and impairment. Application of the first phase of IRFS 9 will affect the classification and measurement of Company's financial assets. The Company will assess this impact in connection with other phases, if they are published, to present a uniform picture.Changes to IFRS 7 Financial Instruments: Disclosures: transfer of financial assets – applicable to annual periods beginning on or after 1 July 2011,
The accounting principles (policies) and additional notes to the financial statements found on pages from 9 to 51 constitute an Changes to IAS 12 Income Taxes: Recognition of Deferred Tax Assets – applicable to annual periods beginning on or after 1 January 2012 until the date of approving these financial statements, not approved by the EU.
Changes to IFRS 1 First-time Adoption of International Financial Reporting Standards: Severe
Hyperinflation and Removal of Fixed Dates for First-time Adopters – applicable to annual periods beginning
on or after 1 July 2011 until the date of approving these financial statements, not approved by the EU. IFRS 10 Consolidated Financial Statements – applicable to annual periods beginning on or after 1 January
2013 until the date of approving these financial statements, not approved by the EU.
IFRS 11 Joint Arrangements – applicable to annual periods beginning on or after 1 January 2013 until the date of approving these financial statements, not approved by the EU.
IFRS 12 Disclosure of Interests in Other Entities – applicable to annual periods beginning on or after 1 January 2013 until the date of approving these financial statements, not approved by the EU.
IFRS 13 Fair Value Measurement – applicable to annual periods beginning on or after 1 January 2013 until the date of approving these financial statements, not approved by the EU.
IFRS 19 Employee Benefits – applicable to annual periods beginning on or after 1 January 2013 until the date of approving these financial statements, not approved by the EU.
Changes to IAS 1 Presentation of Financial Statements Presentation of Items of Other Comprehensive
Incomes – applicable to annual periods beginning on or after 1 July 2012 until the date of approving these
financial statements, not approved by the EU.
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine – applicable to annual periods beginning on or after 1 January 2013 until the date of approving these financial statements, not approved by the EU.
Changes to IFRS 7 Financial Instruments: Disclosures: Offsetting of financial assets and financial
liabilities – applicable to annual periods beginning on or after 1 January 2013 until the date of approving
these financial statements, not approved by the EU.
Changes to IAS 32 Financial instruments: presentation Offsetting of financial assets and financial liabilities – applicable to annual periods beginning on or after 01 January 2014 until the date of approving these financial statements, not approved by the EU.
Changes to IFRS 1 First-time Adoption of International Financial Reporting Standards: Government Loans
– applicable to annual periods beginning on or after 1 January 2013 until the date of approving these financial statements, not approved by the EU.
The Management Board does not envisage that the introduction of the above-mentioned standards and interpretations has a significant impact on the accounting principles (policy) applied by the Company.
10.
Important accounting principles
10.1. Translation of items stated in foreign currencies
Initially, the Company presents transaction in foreign currencies in the functional currency (PLN) applying the immediate exchange rate for converting the amount denominated in a foreign currency. This is an average exchange rate announced by the NBP for a particular currency as at the last business day preceding the transaction date.
As at the balance sheet date:
cash items denominated in foreign currencies are converted by applying the closing rate for a particular currency. The closing rate is the immediate exchange rate as at the balance sheet date. (The Company assumes this is an average exchange rate announced by the NBP from the last business day preceding the balance sheet date).
non-cash items, measured in line with the cost method, denominated in foreign currencies are converted by applying the immediate exchange rate from the transaction date.
Foreign exchange differences occur due to settlements of cash items or calculation of these items, as at the balance sheet date, as per exchange rates other than those i accordance with which they were calculated upon initial recognition. There are recognised in the result for the period they occurred, however, positive exchange
differences increase financial revenue for this period and negative exchange differences increase financial costs for this period.
Foreign exchange differences resulting from settlements of non-cash items are presented in the statement on comprehensive income in the period when the settlement was made.
The following exchange rates were adopted for measurement for balance sheet purposes:
31 December 2011 31 December 2010 USD 3.4174 2.9979 EUR 4.4168 3.9704 RON UAH BYR 1.0226 0.4255 0.000402 0.9249 0.3763 0.001014
10.2. Tangible fixed assets
Tangible fixed assets are fixed assets kept by the company to be used in the manufacturing process or for delivery of goods and provision of services for the purpose to hand them over to use by other entities under a lease agreement or for administration purpose.
The above-mentioned fixed assets are recognised as assets if it is expected that they will be used for more than one year and it is probable that the company will be provided with economic benefits in the future due to such assets.
Tangible fixed assets are disclosed at their purchase price or manufacturing cost, reduced by accumulated depreciation write-offs and impairment write-offs. If a particular tangible fixed asset consists of separate and essential components of different useful life, they are considered separate items of tangible fixed assets.
The registry of fixed assets is kept in respect of quantity and value, as divided into particular types.
Tangible fixed assets or their essential and separate parts are depreciated on the straight line basis throughout their useful economic life. Depreciation write-offs are made as long as the final value of an asset does not exceed its balance sheet value.Land is not depreciated.
Useful lives for fixed assets per particular types:
Group 0 Land Land indefinite
Group 1 Buildings Buildings 20-40 years
Group 2 Constructions Constructions 20-40 years
Group 3 Boilers and power tools Machines and equipment 5-10 years
Group 4 Machines and equipment Machines and equipment 3-15 years
Group 5 Special and professional machines, equipment and apparatus Machines and equipment 5-10 years
Group 6 Technical equipment Machines and equipment 4-30 years
Group 7 Transportation means Transportation means 3-8 years
Group 8 Tools, devices, movables and fittings Other fixed assets 5-15 years
As at a balance sheet date, the company estimates whether there are any circumstances indicating the potential impairment of any tangible fixed asset. If there are such circumstances, the company estimates the recoverable value of this asset. If the balance sheet value of a fixed asset is higher than its estimated recoverable value, then the balance sheet value of this fixed asset is subject to an impairment write-off to the amount of its recoverable value.
Every year the company verifies economic lifetime and residual values of tangible fixed assets.
An item of tangible fixed assets is removed from the company's statement on financial position after it is sold or if no economic benefits resulting from further use of such asset are expected. Any profit or loss resulting from removal of an asset from the company's statement on financial position is recognised in the statement on comprehensive income in the period it was derecognised.
Fixed assets under construction relate to fixed assets being constructed or assembled, which are recognised as
The accounting principles (policies) and additional notes to the financial statements found on pages from 9 to 51 constitute an probability that a fixed asset under construction will not bring any benefits in the future. Investments that have been started are not depreciated until the end of construction and commissioning of a fixed asset for use.
10.3. Investment property
The investment property is recognised in assets when it is probable that the company will receive future economic benefits relating to this property and its purchase price or manufacturing cost may be reasonably determined. The investment property is measured at its purchase price or manufacturing cost minus accumulated write-offs and impairment write-offs.
The investment property is removed from the balance sheet if it is sold or permanently withdrawn from use, and when no future benefits from its sale are expected. Any profit or loss resulting from removing the investment property from the balance sheet is disclosed as profit or loss in the period when the property was removed.
10.4. Intangible assets
An intangible asset is an identifiable non-cash asset not being tangible. This category includes e.g. computer software, patents, copyrights, formulas, licences.
Intangible assets are measured at their purchase price or manufacturing cost, taking into account accumulated write-offs and impairment write-offs. The latter ones are made using a straight line basis for an intangible asset of a defined economic lifetime. Intangible assets of a non-defined economic lifetime are not subject to a write-off.
Write-offs are calculated as of the first day of the month following the month when an intangible asset was accepted for use.
Every year economic lifetime and depreciation method of intangible assets are verified. In the Company economic lifetime of intangible assets is between 2 and 10 years.
Any profit or loss resulting from removal of intangible assets from the balance sheet are measured as per a difference between inflows from net sales and the balance sheet value of an asset and are recognised in profit or loss once they are removed from the balance sheet.
10.5. Leasing
Company as a lessee.
Leasing agreements under which the company practically bears all the risk and enjoys almost all the benefits from the title to tangible fixed assets are classified as financial leasing agreements. Tangible fixed assets purchased under financial leasing are recognised at the current value of minimum leasing fees minus accumulated write-offs and impairment write-offs.
Leasing fees are distributed among financial costs and decrease of the outstanding balance of liabilities to obtain a fixed periodic interest rate in relation to this outstanding balance. Financial costs are posted directly to costs unless capitalising criteria are met.
In the absence of sufficient certainty that the lessee is granted a title before the end of the leasing period, an asset is redeemed through shorter of these periods of time: the leasing term or the economic lifetime. The company analyses circumstances as to whether it is required to carry out a test for impairment of leased tangible fixed assets as well as verifies their economic lifetime.
Company as a lessor
Leasing agreements entered into by the company with the lessee are classified as financial leasing agreements and presented under receivables in the amount equal to the net leasing investment.
Leasing fees are recognised by the Company as repayment of the principal and financial revenue which are a return of invested funds and remuneration for services for the company.
The Company allocates financial revenue throughout the term of the leasing agreement in a reasonable and systematic way. Leasing fees relating to a particular fiscal period reduce the gross leasing investment, thus lowering both the principal and the amount of unrealised financial revenue.
10.6. Impairment of non-financial fixed assets
As at each balance sheet date, a business entity estimates whether there are any circumstances indicating the potential impairment of any asset. If there are such circumstances, the company estimates the recoverable value of this asset.
Notwithstanding the fact if there are circumstances indicating impairment, a company is obliged to carry out an annual test verifying if there was an impairment of an intangible asset of an undefined economic lifetime or an intangible asset which is not yet available for use by comparing its balance sheet value with its recoverable value.
The recoverable value is the higher of the following: a fair value minus sales costs of an asset and its economic lifetime. The fair value minus sales costs is an amount to be recovered from selling an asset under market conditions between the parties to the transaction, after deduction of sales costs. However, the fair value is the current estimated value of future cash flows which are expected from continued use of an asset or from a cash generating unit.
The balance sheet value of an asset is reduced to its recoverable level only when the recoverable value of this asset is lower than its balance sheet value. The amount of this reduction is a loss of value for impairment, which is disclosed as a cost in the statement on comprehensive income in other operating costs. If the recoverable value is higher than the balance sheet value of an asset, no write-off is made.
After an impairment write-off is made, it is required to adjust write-down of an asset so as to make write-offs on adjusted balance sheet value during the remaining economic lifetime.
As at each balance sheet date, the company assesses if there are circumstances indicating that a loss of value for impairment, which was disclosed in previous periods in relation to a particular asset, except for the goodwill, is irrelevant or should be reduced. If there are such circumstances, the company estimates again the recoverable value of this asset.
Reversal of a loss of value for impairment, except for the goodwill, is disclosed as revenue in the statement on comprehensive income. The balance sheet value of an asset, which was increase due to the reversal of a loss of value for impairment, should not exceed the balance sheet value which was determined (after deduction of redemption) if the loss of value for impairment was not recognised in relation to this assets in previous years.
10.7. Shares and stock in subsidiaries, affiliates and joint ventures
Shares and stock held in other entities are measured in the separate statements as per their purchase price reduced by any impairment write-offs. If shares are sold, their outflows are measured as per their weighted average price.
10.8. Financial assets
The following categories are distinguished among financial assets: Financial assets held until maturity date,
Financial assets measured at fair value through profit or loss, Loans and receivables,
Financial assets available for sale,
Financial assets held until maturity are financial assets quoted on an active market not being derivatives, with fixed or determinable payments and fixed maturity that the Company has the positive intention and ability to hold until maturity, other than:
initially determined as measured at fair value through financial performance, determined as available for sale,
those meeting the criteria to be classified as loans and receivables.
Financial assets held to maturity are measured at amortised cost using the effective interest rate method. Financial assets held until maturity are classified as long-term assets, if their maturities exceed 12 months from the balance sheet date.
Financial assets measured at fair value through profit or loss are measured at fair value, taking into account their market value as at the balance sheet date, excluding costs of sale transactions. Changes in values of these
The accounting principles (policies) and additional notes to the financial statements found on pages from 9 to 51 constitute an financial instruments are recognised in the statement on comprehensive income as financial revenue or costs.As at 31 December 2011 no financial assets were qualified to the category measured at fair value through financial result.
Borrowings and receivables are financial assets not included in derivatives, with determined or determinable payments, not traded on the active market. They are considered current assets if their maturity does not exceed 12 months from the balance sheet date. Loans granted and receivables maturing within over 12 months from the balance sheet date are considered fixed assets.
Financial assets held for sale are financial assets not being derivatives, which were qualified as available for sale or not belonging to any of the above-mentioned three categories of assets. Financial assets held for sale are disclosed at their fair value plus transaction costs which may be directly assigned to the acquisition or issue of a financial asset. If there are no published price quotations in an active market and the assets’ fair value cannot be reliably determined using the alternative methods, financial assets available for sale are measured at cost of acquisition adjusted for impairment loss. A positive and negative difference between the fair value of assets held for sale and their purchase price minus deferred tax is disclosed in other comprehensive income. A decrease in the value of assets available for sale resulting from impairment is recognised as a financial cost.
Acquisition and sales of financial assets are both recognised on the transaction day. Upon the initial recognition a financial asset is measured at fair value plus transaction costs which may be directly assigned to the acquisition in the case of an asset not considered as the one measured at fair value through financial result.
A financial asset is removed from the balance sheet when the Company loses control over contractual rights making up a given financial instrument; it is usually the case when the instrument is sold or when all cash flows assigned to a given instrument are transferred to an independent third party.
10.9. Impairment of financial assets
As at each balance sheet date the Company makes an assessment whether objective evidence of impairment of a financial asset or a group of financial assets exists. If there are circumstances indicating that a loss was incurred due to an impairment of loans granted and receivables measured at amortised cost, then the amount of an impairment write-off is a difference between the balance sheet value of a financial asset and the current value of estimated cash flows (excluding future losses on failure to recover debts which have not been incurred yet), discounted with the use of the initial (i.e. determined upon the initial recognition) interest rate. The balance sheet value of an asset is reduced by application of the statement of write-downs. The amount of loss is recognised in profit or loss. If the impairment write-off decreased during the next period and this decrease could be objectively related to an event following after recognition of the write-off, then the previous write-off should be reverted. Later reversal of the impairment write-off is recognised in profit or loss to the extent the balance sheet value of an asset does not exceed its amortised cost as at the reversal date.
If there is objective evidence of an impairment of the non-quoted capital instrument that is not presented at fair value, because its fair value cannot be reliably determined, or of a derivative instrument that is related and has to be settled by delivery of such non-quoted capital instrument, then the amount of the impairment write-off is defined as the difference between the balance sheet value of the component of the financial assets and the present value of estimated future cash flows discounted by the current market rate of return for similar financial assets.
If there are objective circumstances indicating impairment of a financial asset held for sale, then the amount being a difference between this asset's purchase price (minus any repayment of capital and depreciation) and its current fair value, minus any impairment write-offs of this asset previously recognised in profit or loss, is derecognised from equity and classified as profit or loss. It is impossible to recognise in profit or loss any reversal of an impairment write-off of capital instruments classified as held for sale. Should the fair value of a debt instrument available for sale increase in the subsequent period, and such an increase can be objectively related to an incident taking place after recognition of an impairment write-off in profit or loss, the amount of reversal is recognised in profit or loss.
10.10. Embedded derivatives
Embedded derivatives are separated from agreements and considered derivatives if all of the following conditions are met:
• the economic character and the risk of an embedded derivative are not closely related to the economic character and risk of the agreement in which the derivative is embedded;
• a separate instrument with identical conditions of its realisation as an embedded instrument would meet the criteria of a derivative;
• a hybrid (complex) instrument is not disclosed at its fair value and changes of its fair value are not recognised in profit or loss.
Embedded derivatives are recognised in a similar way as separate derivatives which are not considered hedging. The scope in which the economic characteristics and risk specific to the embedded derivative in a foreign currency are closely related to the economic character and risk specific to a framework (main) contract pursuant to IAS 39 also includes situations when the currency of the framework contract is a custom currency for contracts of purchase or sale of non-financial items in the market for a particular transaction.
The Company assesses whether a certain embedded derivative is to be separated upon its initial recognition.
10.11. Financial derivatives and hedging
Derivatives used by the Company as instruments hedging against the interest rate risk and FX risk are, in the first instance, FX forwards, such as forward transactions and currency options. This type of financial derivatives is measured up to their fair value. Derivatives are recognised as assets when their value is positive and as liabilities when their value is negative.
Profit and loss resulting from changes of fair values of derivatives which do not comply with the accounting principles for hedging are directly referred to the net financial result of a financial year.
The fair value of FX forwards is determined by reference to the current forward exchange rates applicable for contracts of a similar maturity. The fair value of currency options is determined by reference to the market value of similar instruments.
In hedging accounting, hedge is classified as:
• fair value hedge providing security against the risk of changes of fair value of an asset or a liability, or
• cash flow hedge providing security against changes of cash flows, which can be attributable to a certain type of risk relating to an asset, a liability or a future transaction, or
• hedge of shares in net assets held in a foreign entity.
Hedge of foreign exchange risk relating to a probable future liability is settled as cash flow hedge.
At the date of establishing the hedge, a hedging relationship is formally determined and documented by the Company, as well as purpose of risk management and the strategy for hedge establishment. Documentation contains identification of a hedging instrument, a hedged item or transaction, a character of hedged risk as well as the method for assessing effectiveness of the hedging instrument in compensating the risk of changes of fair value of a hedged item or cash flows relating to the hedged risk. It is expected that hedge will be highly effective in compensating changes of fair value or cash flows resulting from the hedged risk. Hedge effectiveness is assessed on a regular basis to verify if it is highly effective in all the reporting periods for which it was established.
10.11.1 Fair value hedge
Fair value hedge is a hedge established against the risk of changes in the fair value of a recognised asset or liability, or a non-recognised probable future liability, or a separated part of such an asset, liability or probable future liability attributable to a specific type of risk and which could affect profit or loss. In the case of fair value hedge, the balance sheet value of a hedged item is adjusted by profit or loss resulting from changes of fair value due to the hedged risk, while the hedging instrument is measured up to its fair value and profit and loss resulting from this hedging instrument and the hedged item are disclosed in profit or loss.
If the probable future liability which was not recognised is considered a hedged item, any future total changes of fair value of the probable future liability resulting from the hedged risk are recognised as an asset or a liability, while the resulting profit or loss are disclosed in profit or loss. Changes in the fair value of a hedging instrument are also recognised in profit or loss.
The Company ceases to apply the principles of hedging accounting if the hedging instrument expires, is sold, liquidated or performed, if the hedge no longer meets the criteria of hedging accounting or if the Company
The accounting principles (policies) and additional notes to the financial statements found on pages from 9 to 51 constitute an cancelled the hedging relationship. Any adjustment of the balance sheet value of the hedged financial instrument to which the method of effective interest rate is applied is subject to depreciation, while write-offs are recognised in profit or loss. Depreciation can start as from the moment of making the adjustment, however, not later than upon the completion of adjustment of the hedged item by changes of fair value resulting from the hedged risk.
10.11.2 Cash flow hedge
Cash flow hedge is hedging against the risk of cash flow volatility which can be attributable to a particular type of risk relating to an asset or a liability that was recognised or with a highly probable future transaction, and which could affect profit or loss. A part of profit or loss relating to the hedging instrument, which is considered effective hedging, is disclosed in other comprehensive income, while the ineffective part is disclosed in profit or loss.
If the hedged future transaction results in further recognition of a financial asset or a financial liability, any resulting profit or loss which were disclosed in other comprehensive income and accumulated in equity are moved to the profit and loss account in the same period or in the periods when the purchased asset or assumed liability affect profit or loss.
The Company ceases to apply the principles of hedging accounting if the hedging instrument expires or is sold, its economic lifetime has ended or it has been performed, or if the hedge no longer meets the conditions for application of special principles of hedging accounting. In such case, the total profit or loss on the hedging instrument, which were recognised in other comprehensive income and accumulated in equity are still disclosed in the equity until the future transaction. If the Company no longer expects the future transaction, then the total profit or net loss accumulated in the equity are referred to the net financial result for the current period.
10.11.3 Hedge of shares in net assets held in a foreign entity
Hedge of shares in net assets held in a foreign entity, including hedge of a cash item considered a part of shares in net assets, is disclosed in a way similar to the cash flow hedge. Any profit or loss resulting from the hedging instrument due to the effective part of hedge are recognised in other comprehensive income, while any profit or loss relating to the ineffective part of hedge are recognised in profit or loss. Upon sale of the foreign entity, the amount of profit or loss earlier recognised in other comprehensive income is reclassified from equity to profit or loss as an adjustment resulting from reclassification.
10.12. Inventory
Inventory includes assets (IAS 1 point 6):
held for sale under standard business activity,
The Company presents these assets as finished products and goods. Finished products are considered those manufactured by the Company. Goods are understood as commercial products bought by the Company for resale,
being manufactured, to be sold, presented as semi-finished goods in the Company's financial statements,
being materials to be used in the manufacturing process, when providing services and used for the sales and management processes. In the Company's financial statements they are presented as materials. Inventory is measured (pursuant to IAS 2 point 9.18) as per its purchase price or manufacturing costs not higher than their net sales price to be received as at the balance sheet date. The net value to be recovered is an estimated sales price applicable during the standard business activity minus estimated fitting costs and costs required to finalise the transaction.
The value of inventory is determined on the basis of:
Materials – purchase price while sale is measured at weighted average method, Goods – purchase price while sale is measured at weighted average method,
Finished goods – the book value determined at the level of planned manufacturing cost of a product, adjusted by deviation on a compound basis to reach the actual manufacturing cost not higher than the net sales price, while sale is measured at weighted average method,
Semi-finished goods – the book value determined at the level of planned manufacturing cost of a product, adjusted by deviation on a compound basis to reach the actual manufacturing cost, while sale is measured at weighted average method.
Manufacturing costs of finished and semi-finished goods contain a part of fixed indirect costs. The other unjustified part of indirect costs is charged to costs of the period in which they were incurred. The division into the above-mentioned parts is based on the level of use of standard production capability. Standard production capability is determined as an average production performance from three months. The ratio of unused production capability is a difference between standard production capability verified each month and the actual production volume in a particular reporting period.
Excess and inalienable inventory is subject to write-downs. Inventory is verified as to its moving and turnover regularly on a quarterly basis. Due to a write-down, book values of inventory reflect its net sale price to be received. Write-downs are made on the basis of separately defined criteria, taking into account the type of company's activities.
Provisions for supplies are recognised by the company under "Inventory" in the "Statement on financial situation of the company".
10.13. Trade and other receivables
Due to insignificant difference between measurement using a method of an adjusted cost of acquisition and the amount due, the company measures receivables in their amount due (i.e. a historic value) minus revaluation write-downs.
The company presents current income tax receivables under a separate item in the balance sheet.
10.14. Cash and cash equivalents
Domestic cash and cash equivalents comprise cash in hand and at bank, deposits and securities with a maturity date of up to three months. They are measured at their amortised cost.
10.15. Interest-bearing bank loans and borrowings
Bank loans and borrowings are disclosed in an adjusted acquisition price. When determining an amortised cost, costs relating to being granted a loan or a borrowing are taken into account as well as discounts and bonuses received due to the liability. However, if the difference between measurement using an adjusted acquisition price and measurement in the amount due is insignificant, bank loans and borrowings are measured in their amount due.
10.16. Trade and other liabilities
Due to insignificant difference between measurement using a method of an adjusted cost of acquisition and the amount due, the company measures liabilities in their amount due (i.e. a cost taking into account accrued interest).
Apart from trade liabilities, the company also recognises financial liabilities relating to loans and leasing. Other non-financial liabilities include in particular liabilities towards tax office from tax on goods and services and liabilities from prepayments received, which will be settled through supply of goods and services. Other non-financial liabilities are presented at the amount payable.
The company presents current corporate income tax liabilities under a separate item in the balance sheet.
10.17. Provisions
A provision is recognised when the company is under a legal or a customary obligation resulting from future events and it is probable that its performance will be connected with outflow of economic benefits from the company. Any significant provisions are determined by discounting expected future cash flows based on the interest rate before tax, which reflects the current market estimates of changes of the value of money over time and, if applicable, the risk relating to a certain liability.
The accounting principles (policies) and additional notes to the financial statements found on pages from 9 to 51 constitute an The provision for agreements involving any liabilities is recognised when the expected benefits to be achieved by the company due to the agreement are lower than the costs of fulfilling a contractual obligation, which cannot be avoided. The company divides provisions into long- and short-term.
10.18. Retirement benefits and similar
Pursuant to the company’s terms and conditions of remuneration, its employees are entitled to retirement, disability, death benefits and years of service awards and allowance for unused holiday leave. Service anniversary awards are paid to employees after having worked a certain number of years, while their amount depends on the number of years actually worked and the base remuneration of an employee. Retirement benefits are paid once upon retiring. A retirement benefit amounts to a one-month salary.
The Company creates provisions for future liabilities due to retirement benefits, service anniversary awards and unused holiday leaves to allocate costs to the periods they refer to. The current value of these liabilities is calculated by a licensed actuary. They are equal to discounted payments to be made in the future, including rotation of employment and relating to the period until the balance sheet date. Any profits and losses on actuarial calculations are recognised in profit or loss.
10.19. Revenue
Revenue is disclosed in the amount reflecting the probability that the Company will receive economic benefits relating to a particular transaction and when the amount of revenue may be measured in a reliable way.
In the statement on comprehensive income, the company presents the following separately:
revenue from sales of products – under this item revenue from sales of finished goods and services are disclosed,
revenue from sales of goods – under this item revenue from sales of commercial goods are disclosed in accordance with the definition of inventory,
revenue from sales of materials – under this item revenue from sales of materials is disclosed in accordance with the definition of inventory.
10.19.1 Sales of inventory and services
After deducting a tax on goods and services, discounts and rebates revenue from sales of inventory is recognised (pursuant to IAS 18 point 14) when:
the company provided the purchaser with significant risk and benefits resulting from titles to goods (IAS 18, kpt. 15,16,17),
the company is no longer actively engaged in management of goods sold and does not exercise any effective control over them,
the amount of revenue may be measured in a reliable way,
it is probable that the company will receive economic benefits from the transaction,
costs incurred and to be incurred by the company due to the transaction may be measured in a reliable way.
Revenue from sales of services is recognised when the result of the transaction relating to the provision of services may be estimated in a reliable way (pursuant to IAS 18 point 20). Revenue from such transaction is disclosed on the basis of the progress of transaction as at the balance sheet date.
Since 1 January 2011 revenue from licences, sublicences and know-how has been disclosed in the statement on comprehensive income as revenue from sales of products (until then this revenue was disclosed as financial revenue).
If it is impossible to estimate the result of the transaction relating to the provision of services in a reliable way, revenue from the transaction is disclosed only to the amount of cost incurred, which the company expects to recover.
10.19.2 Interest
Revenue from interest is disclosed successively as they are due (taking into account the effective interest rate method) in relation to the net balance sheet value of a financial asset.
10.19.3 Dividend
Dividend is disclosed upon determining rights of shareholders to receive it.
10.19.4 Revenue from lease (operating leasing)
Revenue from lease of investment properties is disclosed using a straight line basis throughout the term of lease in relation to open agreements.
10.19.5 Government subsidies
If there is a reasonable certainty that a subsidy will be granted and all the related conditions are met, then government subsidies are disclosed at their fair value.
If a subsidy relates to a particular expenditure item, then it is disclosed as revenue proportionally to expenditure it is to compensate. If a subsidy relates to an asset, then its fair value is disclosed as revenue from future periods and then, gradually, it is presented in profit or loss by means of equal annual write-offs throughout the estimated economic lifetime of this asset.
10.20. Taxes
10.20.1 Current tax
Current tax liabilities and receivables for the current and previous periods are measured in the amount of envisaged payment for tax authorities (to be refunded by tax authorities) with the application of tax rates and tax law which were in force legally and actually as at the balance sheet date.
10.20.2 Deferred tax
Deferred tax is calculated using a balance sheet method, taking into account temporary differences between the value of assets and liabilities determined for accounting purposes and the value determined for tax purposes. The amount of the deferred tax is based on the expected way of realisation of a balance sheet value of assets and liabilities, with the use of tax rates applicable or adopted as at the balance sheet date.
Deferred tax assets (pursuant to IAS 12) are recognised only when it is probable that there will be future tax income against which a particular asset could be realised. Such assets are subject to reduction if it can be ascertained that it is not probable that the economic benefit they represent will be realised.
The amount of deferred income tax assets is determined with the use of tax rates which, as per predictions, will apply in the period when an asset is realised or a provision released, based on tax rates applicable as at the balance sheet date or the ones which are certain to apply in the future as at the balance sheet date.
The company calculates and releases deferred income tax assets on a monthly basis.
A deferred income tax provision is created in the amount of a deferred tax to be paid in the future due to positive temporary differences, i.e. the ones which will increase the basis for calculation of the income tax in the future.
10.20.3 Tax on goods and services
Revenue, expenditure, assets and liabilities are disclosed after deduction of the tax on goods and services, except when:
the tax on goods and services paid when purchasing assets or services cannot be recovered from tax authorities; then, it is presented accordingly as a part of purchase price of an asset or a part of an expenditure item, and
receivables and liabilities are presented including the tax on goods and services.
The net amount of the tax on goods and services that can be recovered from or is due to tax authorities is presented in the statement on financial situation as a part of receivables or liabilities.
10.21. Net profit per share
Net profit per share for each period is calculated by dividing net profit for a particular period by the average weighted number of shares in a particular reporting period.
