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The accounting policies are changed only if the change:
- is required by the IFRS; or
- results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the Group's financial position, financial performance or cash flows – voluntary application.
Changes in accounting policies upon initial application of IFRS are applied in accordance with transitional provisions included in the IFRS. When changes in accounting policies are made upon initial application of IFRS that do not include specific transitional provisions applying to that change, or the changes are made voluntarily, the entity shall apply the change retrospectively. Retrospective application of a change in accounting policy requires to adjust the opening balance of each affected component of equity for the earliest prior period presented and the other comparative amounts disclosed for each prior period presented as if the new accounting policy had always been applied.
The items of financial statements determined based on accounting estimates shall be subject to verification if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience.
The results of a change in estimates shall be accounted for prospectively. This means that the amounts concerning transactions, other events and conditions are adjusted from the moment when the change occurred (the change impacts only the current statement of comprehensive income or the results in a given period and future periods).
It is assumed that errors are adjusted in the period when they were made (and not detected). Thus, essential errors from previous periods shall be adjusted retrospectively, and the differences are charged to equity.
5.1.1 Changes in the applied IFRS
5.1.1.1 Standards and interpretations as well as changes in standards effective from 1 January 2015
The following new standards, interpretations and changes in standards have been applied to these consolidated financial statements:
| Standard/Interpretation | Date of entry into force for periods beginning on | Resolution endorsing a standard or interpretation | Description |
| IFRIC 21 "Levies" | 17 June 2014 and later | 634/2014 |
IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the event resulting in the creation of an obligation to pay a public fee in a Business operations subject to a public fee, as specified in the relevant laws. In the case of the fees incurred by the companies of PZU Group, the obligation to pay a fee is recognized gradually, over time, as the revenue being the basis for the calculation is achieved. The exception to this are fees made by banks to the Bank Guarantee Fund. In accordance with the standpoint of the Polish Ministry of Finance, expressed in its letter dated 11 February 2015, a fee should not be recognized under costs as a one-off payment. Moreover, the Bank Guarantee Fund shares this standpoint. Therefore, the implementation of IFRIC 21 does not exert any effect on the consolidated financial statements of PZU Group. |
| Amendments to IFRS 2011-2013 | 1 July 2014 | 1361/2014 |
Amendments to various standards and interpretations resulting from the annual improvement project of IFRS (IFRS 1, IFRS 3, IFRS 13 and IAS 40) primarily with a view to removing inconsistencies and clarifying wording. The revisions clarify the required accounting treatment in situations in which the freedom of interpretation was previously acceptable. The most important changes include new or revised requirements regarding: meaning of effective IFRSs in IFRS 1; scope of exemption for joint ventures; scope of paragraph 52 if IFRS 13 (net exposure exception) and clarifying the interrelationship of IFRS 3 and IAS 40 (additional services). The aforesaid change did not exert any effect on the consolidated financial statements of PZU Group. |
| Amendments to IFRS 2010-2012 | 1 July 2014 | 28/2015 |
Amendments to various standards and interpretations resulting from the annual improvement project of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) primarily with a view to removing inconsistencies and clarifying wording. The revisions clarify the required accounting recognition in cases where free interpretation used to be permitted. The most important changes include new or revised requirements regarding: definition of "vesting condition"; accounting for contingent consideration in a business combination; aggregation of operating segments and reconciliation of the total of the reportable segments' assets to the entity's assets; measuring short-term receivables and liabilities; proportionate restatement of accumulated depreciation application in revaluation method and clarification on management personnel. The aforesaid change did not exert any effect on the consolidated financial statements of PZU Group. |
| Amendments to IAS 19 -Employee benefits - defined benefit programmes - employee contributions | 1 July 2014 | 29/2015 |
The narrow scope amendments in IAS 19 apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service (for example, employee contributions that are calculated according to a fixed percentage of salary). The aforesaid change did not exert any effect on the consolidated financial statements of PZU Group. |
5.1.1.2 Standards, Interpretations and changes in standards issued but not effective as at the balance sheet date
The following standards, Interpretations and changes in standards have been issued but are not effective as at the balance sheet date:
- Endorsed by European Commission ordinance:
| Standard/Interpretation | Date of entry into force for periods beginning on | Resolution endorsing a standard or interpretation | Description |
| Amendment to IAS 16 and IAS 41 – Bearer plants | 1 January 2016 | 2113/2015 |
The amendment introduces a definition of bearer assets and removes them from the scope of the application of IAS 41 by moving them to IAS 16, which will result in change in the method of valuation. The amendment will not affect the consolidated financial statement of PZU Group. |
| Amendments to IFRS 11 – settlement of acquisition of shares in a joint venture | 1 January 2016 | 2173/2015 |
The amendment clarifies that the purchaser of the shares in joint operations must comply with all the rules regarding acquisition accounting under IFRS 3 and other IFRSs that are not in conflict with IFRS 11 and disclose the information required by these standards. The aforesaid change does not exert any significant effect on the consolidated financial statements of PZU Group. |
| Amendments to IAS 16 and IAS 38 - an explanation acceptable methods of depreciation | 1 January 2016 | 2231/2015 |
The amendment clarifies that the adoption of depreciation methods based on revenues generated by the assets is not appropriate. The aforesaid change does not exert any significant effect on the consolidated financial statements of PZU Group. |
| Amendments to IFRS 2012-2014 | 1 January 2016 | 2343/2015 |
Amendments to IFRS 5 – adding guidance on how to reclassify assets held for sales to assets held for distribution to owners and conversely, and instances of discontinued classification of assets held for distribution to owners. Amendments to IFRS 7 – adding guidance on how to conduct disclosures of contracts on handling assets and explanations of amendments applied to IFRS 7 concerning offsetting in condensed interim financial statements. Amendment to IFRS 19 – explanation that high quality corporate bonds used for the estimation of the discount rate applied to calculate post-employment benefits shall be denominated in the same currency in which the benefits will be paid (hence, the market activity concerning the bonds should be evaluated at the currency level). Amendments to IAS 34 – clarification of terms. The aforesaid change does not exert any significant effect on the consolidated financial statements of PZU Group. |
| Amendments to IAS 1 – disclosure initiative | 1 January 2016 | 2406/2015 |
Adding requirements with respect to an orderly layout of financial statements, introduction of the requirement of reconciling indirect totals in the statement of profit or loss, comprehensive statement of profit or loss, statement of financial position, and in addition adding guidance on importance, level of detail of presentation and accounting principles. The amendment may result in minor modifications of the layout of basic tables in consolidated financial statements of PZU Group. |
| Amendment to IAS 27- Equity method in separate financial statements | 1 January 2016 | 2441/2015 |
The amendment allows entities to use the equity method in the valuation of investments in subsidiaries, associates and joint ventures in the separate financial statements. The amendment will not affect the consolidated financial statement of PZU Group. |
- Not endorsed by European Commission:
| Standard/Interpretation | Date of issuance by IASB | Date of entry into force for periods beginning on (by IASB) | Description |
| IFRS 9 - Financial Instruments | 24 July 2014 | 1 January 2018 |
The standard replaces IAS 39 and establishes the requirements regarding the recognition and measurement of impairment, derecognition of financial instruments and hedge accounting. The standard introduces a new approach to the classification of financial assets, which depends on the characteristics of cash flows and the business model associated with the given assets. The standard unifies the impairment model for all financial instruments. The new expected loss impairment requires faster recognition of expected credit losses. The standard introduces a reformed model of hedge accounting, with enhanced disclosure requirements for risk management activities. As IFRS 9 and IFRS 4 Phase II concerning insurance contracts entered into force on different dates (the latter standard will enter into force no sooner than in 2020), it is now under consideration whether different approaches may be adopted so as to eliminate from the statement of profit or loss significant volatilities related to applying the changes in financial asset valuation at an earlier point than the ones related to the valuation of insurance contracts. The Council considers the following transition approaches (in the period between 1 January 2018 and the date of entry into force of the new IFRS 4):
|
| IFRS 14 – Regulatory Deferral Accounts | 30 January 2014 | 1 January 2016 1) |
Allowing entities applying IFRS for the first time, and which now the regulatory deferral accounts in accordance with their previous generally accepted accounting principles, the continuation of the recognition of these balances in the transition to IFRS. The change does not affect PZU Group. |
| IFRS 15 – Revenue from Contracts with Customers | 28 May 2014 and changes of 11 September 2015 | 1 January 2018 2) | IFRS 15 defines how and when to recognize revenues and requires the provision of more detailed disclosures. The standard replaces IAS 18 "Revenue", IAS 11 "Construction Contracts" and many interpretations related to revenue recognition. The Standard applies to almost all contracts with customers (the main exceptions relate to lease agreements, financial instruments and insurance contracts). The fundamental principle of the new standard concerns the recognition of revenues in such a way as to reflect the transfer of goods or services to customers and in such amount that reflects the amount of remuneration (i.e. payments), to which the company expects to obtain the rights in exchange for goods or services. The standard replaces IAS 18 "Revenue", IAS 11 "Construction Contracts" and many interpretations related to revenue recognition. The Standard applies to almost all contracts with customers (the main exceptions relate to lease agreements, financial instruments and insurance contracts). Due to the long lead time of entry into force and the lack of application in relation to insurance companies of PZU Group, the potential impact of adopting the new standard on comprehensive revenues and equity has not been estimated. |
| IFRS 16 – Leasing | 13 January 2016 | 1 January 2019 |
IFRS 16 replaced IAS 17 Leasing and the related interpretations of the standard. With respect to lessees, the new standard eliminates the distinction between finance and operating leases. The recognition of operating leases in the statement of financial position leads to the recognition of a new asset – the right to use the object of lease – and a new liability – liabilities from lease payments. The rights to use the leased assets will be subject to accumulated depreciation and the liabilities will be charged with interest. As a result, higher costs in the initial stage of the lease will be generated, even if the parties agreed on fixed annual fees. The recognition of leases in most cases will remain unchanged, as the distinction between operating and finance leases did not change. Due to the long lead time of entry into force and the recent publication of the new standard, the potential impact of adopting the new standard on comprehensive revenues and equity has not been yet estimated. |
| Amendments to IAS 7 – Disclosure initiative | 29 January 2016 | 1 January 2017 |
The amendments include the presentation of disclosures enabling the assessment of changes in the value of liabilities arising from financial activities (resulting both from cash flows and non-cash changes). In order to apply the requirements, additional disclosures will need to be included in the consolidated financial statements of PZU Group. |
| Amendments to IAS 12 – Recognition of deferred tax assets for unrealized losses | 19 January 2016 | 1 January 2017 |
The amendments clarify, among other things, that unrealized loses related to debt instruments measured at fair value, with tax values equal to their initial cost, may lead to negative temporary differences. The amendment will not affect the consolidated financial statements of PZU Group. |
| Amendments to IFRS 10 and IAS 28 – Sales or transfer of assets between an investor and an associated entity or a joint venture | 11 September 2014 | Deferred for an indefinite time |
The major effect of the amendment is recognition of the full profit or loss whenever a transaction concerns organized business (irrespective of whether it is located within a subsidiary or not); partial profits or losses are recognized when a transaction concerns particular assets that do not form organized business, even when they are located in a subsidiary. The amendment will not affect the consolidated financial statement of PZU Group. |
| Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment entities: Exemptions from consolidation applied | 18 December 2014 | 1 January 2016 |
IFRS 10 – adding supplementary guidance instructing investment entities to perform obligatory consolidation of non-investment subsidiaries rendering services related to investment; adding guidance on the lack of duty to perform consolidated statements in the case of lower-level parent entities being subsidiaries of investment entities. IAS 28 – adding guidance on the application of measurement using the equity method by an investor not being an investment entity with respect to an associated investment entity or a joint-venture. The amendment will not affect the consolidated financial statement of PZU Group. |
1) European Commission put on hold the approval process by the time the final version of the standard has been published.
2) On 28 April 2015, IASB voted to postpone the date of entry into force by one year, i.e. until 1 January 2018.
Summing up, PZU Group is of the opinion that the introduction of the aforementioned standards and interpretation will not significantly impact the accounting policies applied by PZU Group, save for IFRS 9 and 15, impact of which on the accounting policies applied by PZU Group has not been assessed yet.
5.1.2 Explanation of differences between the statements published previously and the current consolidated financial statements
5.1.2.1 Change of presentation of cash flows from outstanding contributions of fund members of some investment programs
In order to faithfully reflect the economic content, cash flows in suspense accounts including outstanding contributions of fund members of PPE (employee pension plans), IKE (individual pension accounts) and PI (investment plans) are required to be offset in the consolidated financial statements. Instead of presenting them separately as "Other inflows from operating activities" and "Other operating outflows", the cash flows are recognized in these positions by compensation (per account balance).
5.1.2.2 Rearrangements of the consolidated statement of profit or loss and the consolidated statement of financial position
In order to recognize the financial data of Alior Bank Group, which has been subjected to consolidation since 18 December 2015, in the consolidated financial statements of PZU Group the layout of the consolidated statement of profit or loss and the consolidated statement of financial position has been rearranged.
In the consolidated statement of profit or loss:
- A new "Interest expense" line has been added, where interest expense from term deposits and current accounts, sell buy-back transactions or issued debt instruments are recognized, before in the line "Borrowing costs". This item includes also interest expense from investment contracts with guaranteed and fixed terms and conditions, recognized before in "Change in measurement of investment contracts" line.
- The line "Change in measurement of investment contracts" has been removed and the amounts recognized in it have been transferred, depending on the method of contract valuation as per effective interest rate or fair value, to "Interest expense" and "Net change in the fair value of assets and liabilities measured at fair value".
- The line "Borrowing costs" has been removed and the interest expense recognized in it have been transferred to "Interest expense", while exchange differences to "Net investment income".
In order to increase transparency of the consolidated statement of financial position:
- The breakdown of technical provisions has been removed.
- The items relating to investment contracts have been removed – the amounts associated with investment contracts are presented in an item "Financial liabilities".
- The items "Derivatives" and "Liabilities arising from the issue of own debt instruments" have been removed – the related amounts previously recognized in these lines are presented in a new item "Financial liabilities".
- A new item, "Financial liabilities", has been added – it includes, among other things, derivatives, investment contracts, liabilities to participants of consolidated investment funds, liabilities to banks and clients from deposits, liabilities arising from issue of debt instruments, presented in detail in Notes.
Moreover, the items of consolidated statement of financial position have been regrouped so as to better reflect the liquidity criterion.
5.1.2.3 Effect of the changes on the consolidated financial statements
| The effect of applying the aforementioned changed on the items of consolidated statement of financial position, the consolidated statement of profit or loss and the consolidated cash flow statement is presented in the tables below.Assets | 31 December 2014 (approved) | Adjustment | Note | 31 December 2014 (restated) | 1 January 2014 (approved) | Adjustment | Note | 1 January 2014 (restated) |
| Goodwill | 785,663 | (16,619) | 2.4.6.2 2.4.6.3 | 769,044 | 8,519 | - | 8,519 | |
| Receivables, including insurance receivables | 3,068,813 | 16,619 | 2.4.6.2 2.4.6.3 | 3,085,432 | 2,671,964 | - | 2,671,964 | |
| Total assets | 67,572,761 | - | 67,572,761 | 62,787,304 | - | 62,787,304 |
| Equity and liabilities | 31 December 2014 (approved) | Adjustment | Note | 31 December 2014 (restated) | 1 January 2014 (approved) | Adjustment | Note | 1 January 2014 (restated) |
| Total equity | 13,167,628 | - | 13,167,628 | 13,127,631 | - | 13 127 631 | ||
| Liabilities | ||||||||
| Investment contracts | 1,108,107 | (1,108,107) | 5.1.2.2 | item deleted | 2,121,037 | (2,121,037) | 5.1.2.2 | item deleted |
| - with guaranteed and fixed terms and conditions | 520,840 | (520,840) | 5.1.2.2 | item deleted | 1,250,492 | (1,250,492) | 5.1.2.2 | item deleted |
| - unit-linked | 587,267 | (587,267) | 5.1.2.2 | item deleted | 870,545 | (870,545) | 5.1.2.2 | item deleted |
| Financial liabilities | - | 9,403,244 | 5.1.2.2 | 9,403,244 | - | 8,398,582 | 5.1.2.2 | 8,398,582 |
| Derivative instruments | 625,844 | (625,844) | 5.1.2.2 | item deleted | 237,749 | (237,749) | 5.1.2.2 | item deleted |
| Liabilities arising from the issue of own debt instruments | 2,127,527 | (2,127,527) | 5.1.2.2 | item deleted | - | - | item deleted | |
| Other liabilities | 9,361,277 | (5,541,766) | 5.1.2.2 | 3,819,511 | 9,351,414 | (6,039,796) | 5.1.2.2 | 3,311,618 |
| Total liabilities | 54,405,133 | - | 54,405,133 | 49 659 673 | - | 49,659,673 | ||
| Total equity and liabilities | 67,572,761 | - | 67,572,761 | 62 787 304 | - | 62,787,304 |
| Selected items from consolidated statement of profit or loss | 1 January - 31 December 2014 (approved) | Adjustment | Note | 1 January - 31 December 2014 (restated) |
| Net investment income | 1,793,838 | (89,189) | 5.1.2.2 | 1,704,649 |
| Net change in the fair value of assets and liabilities measured at fair value | 512,533 | 2,578 | 5.1.2.2 | 515,111 |
| Interest expense | - | (147,285) | 5.1.2.2 | (147,285) |
| Change in measurement of investment contracts | (14,031) | 14,031 | 5.1.2.2 | - |
| Operating profit | 3,913,083 | (219,865) | 5.1.2.2 | 3,693,218 |
| Borrowing costs | (219,865) | (219,865) | 5.1.2.2 | item deleted |
| Gross profit | 3,691,693 | 5.1.2.2 | 3,691,693 |
| Selected items from consolidated cash flows statement | 1 January - 31 December 2014 (approved) | Adjustment | Note | 1 January - 31 December 2014 (restated) |
| Cash flows from operating activities | , | , | , | |
| Inflows | 20,817,079 | (1,046,982) | 5.1.2.2 | 19,770,097 |
| - other inflows from operating activities | 2,071,053 | (1,046,982) | 5.1.2.2 | 1,024,071 |
| Outflows | (19,041,866) | 1,046,982 | 5.1.2.2 | (17,994,884) |
| - other operating outflows | (2,932,743) | 1,046,982 | 5.1.2.2 | (1,885,761) |
| Net cash flows from operating activities | 1,775,213 | - | 1,775,213 | |
| Total net cash flows | (282,621) | - | (282,621) |
