GETBACK CAPITAL GROUP

Transcription

1 GETBACK CAPITAL GROUP CONSOLIDATED FINANCIAL STATEMENTS MADE IN COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR THE YEAR ENDED ON WITH AUDITOR S OPINION

2 TABLE OF CONTENTS CONSOLIDATED PROFIT AND LOSS ACCOUNT... 3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 3 CONSOLIDATED BALANCE SHEET... 4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY... 5 CONSOLIDATED CASH FLOW STATEMENT... 6 ADDITIONAL INFORMATION AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS General information Composition of the Capital Group Approval of the financial statements Material accounting principles Effect of changes to the accounting policies Financial risk management in the Capital Group Information on segments of operation Net revenues Other operating income Other operating expenses Salaries and employee benefits Third party-services Result on sale of financial instruments Financial income and expenses Share in profit (loss) of associates consolidated using the equity method Income tax Property, plant and equipment Intangible assets Investments in associated companies Investments Trade receivables and other receivables Cash and cash equivalents Share capital Other capital Earnings per share Dividend distributed and proposed Liabilities under issues of debt securities and liabilities under financial leasing Liabilities under loans, borrowings Trade liabilities and other liabilities Employee benefit obligations Contingent liabilities Operating lease Additional information to the cash flow statement Transactions with related entities Business Combinations Components of other comprehensive income Events after the balance sheet date /55

3 CONSOLIDATED PROFIT AND LOSS ACCOUNT Continuing operations Note (comparable data) Revenues Other operating income Salaries and employee benefits 11 (18 790) (7 315) Depreciation (1 384) (843) Third-party services 12 (10 187) (3 254) Other operating expenses 10 (12 913) (1 393) Operating profit Net gain/loss on disposal of financial assets Financial income Financial expense 14 (10 337) (4 650) Financial income and expense net (10 042) (4 305) Share in net profit (loss) of associates 15 (12) - Profit (loss) before income tax Corporate income tax 16 (9 952) (3 052) Net profit /(loss) for the period Attributable to equity holders of the parent Attributable to non-controlling interest Earnings per share: basic for the period (in PLN) 25 2,20 0,50 diluted for the period (in PLN) 25 2,20 0,50 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Note (comparable data) Profit / (Loss) for the period Exchange differences from evaluation of foreign subordinated entities 43 - Other comprehensive income Total of comprehensive income for the period Attributable to equity holders of the parent Attributable to non-controlling interest Components of other comprehensive income FX differences from translation of foreign companies may be transferred to the profit and loss account in the future. The additional information and notes to the consolidated financial statements provided on pages 7 to 55 constitute an integral part hereof 3/55

4 CONSOLIDATED BALANCE SHEET Note (at the date of transition to (comparable data) IFRSs) ASSETS Non-current assets Property, plant and equipment Intangible assets (excluding goodw ill) Investments in associates Investments Deferred tax assets Prepayments Current assets Investments Trade receivables Income tax receivable Other receivables Prepayments Cash and cash equivalents TOTAL ASSETS LIABILITIES AND EQUITY Capital and reserves attributable to the Company's equity holders Share capital Net profit (loss) Other capital and reserves Non-controlling interest Total equity Non-current liabilities and provosions for liabilities Deferred tax liabilities Financial liabilities from debt securities Financial lease liabilities Current liabilities Financial liabilities from debt securities Financial lease liabilities Liabilities due to loans, borrow ings Trade liabilities and other liabilities Corporate income tax payable Employee benefit obligations Total liabilities TOTAL LIABILITIES AND EQUITY The additional information and notes to the consolidated financial statements provided on pages 7 to 55 constitute an integral part hereof 4/55

5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for 12 months ended on Reserve capital and retained earnings Exchange differences Note As at Total comprehensive income for the period Transfer of profit for previous year to reserve capital (10 139) - - Transfer of profit for previous year to retained earnings (41) Dividends paid (151) (151) Transactions w ith shareholders (10 098) - (151) (151) As at for 12 months ended on Share capital Share capital Other capital Other capital Reserve capital and retained earnings Net (loss) profit Net (loss) profit Capital and reserves attributable to the Company's equity holders Capital and reserves attributable to the Company's equity holders Total equity Note As at Total comprehensive income for the period Transfer of profit for previous year to reserve capital (1 474) Transactions w ith shareholders (1 474) As at Non-controlling interest Total equity Dodatkowe informacje i objaśnienia do skonsolidowanego sprawozdania finansowego załączone na stronach od 7 do 55 stanowią jego integralną część 5/55

6 CONSOLIDATED CASH FLOW STATEMENT Cash flows from operating activities (comparable data) Net profit/loss for the period Adjustments: (84 237) Depreciation Share in net profits (losses) of associates Foreign exchange (profits)/losses (58) - Interest Change in deferred tax assets Change in debt portfolios purchased (94 231) Change in receivables 33 (11 515) 216 Change in liabilities, except credits and loans Change in employee benefit obligations Change in provisions and provisions for deferred income tax Change in prepayments 33 (305) (295) Income tax paid (132) (216) Current income tax Valuation of investment certificates (14) 5 Write dow n of goodw ill Other adjustments Net cash from operating activities (74 139) Cash flows from investing activities Purchase of intangible assets and property, plant and equipment (3 021) (406) Purchase of financial assets (600) (75) Purchase of subsidiary, net of cash acquired 33 ( ) - Purchase of shares in associates (35 340) - Net cash from investing activities ( ) (481) Cash flows from financing activities Payments under finance lease agreements (767) (557) Proceeds from loans, borrow ings Inflow s from due to issuance of debt securities Dividends paid 26 (151) - Interest paid 33 (7 764) (3 067) Net cash from financing activities Increase (decrease) in net cash and cash equivalents (1 244) Net foreign exchange differences 3 - Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period, including of w hich limited posibility of diposal Note The additional information and notes to the consolidated financial statements provided on pages 7 to 55 constitute an integral part hereof 6/55

7 ADDITIONAL INFORMATION AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 General information The ( Capital Group, Group ) is composed of the parent company getback S.A. ( getback", Company or parent company ) and its subsidiary companies. The consolidated financial statements of the Group covers the period of 12 months ended on and contains comparable data for the period of 12 months ended on for the profit and loss account, statement of changes in equity, statement of comprehensive income and cash flow statement as well as balance sheet data as at and The registered office of getback S.A. in located in Wrocław at ul. Powstańców Śląskich 2-4. On getback S.A. was entered in the National Court Register maintained by the District Court for Wrocław Fabryczna, 6 th Commercial Division of the National Court Register, under KRS number The Company was assigned the statistical number REGON The core business object of the Group is restructuring and recovery of acquired debt and debt commissioned by financial institutions and other entities. The duration of the Company and the other companies in the Capital Group is unlimited. The type of business objects of each company in the Capital Group is described in Note 2 of the additional information and notes. LC Corp B.V. owned by Dr. Leszek Czarnecki is the parent company for the entire getback Group. 2 Composition of the Capital Group As at the getback Group was composed of the following companies: Subsidiaries accounted using the full metod: Name and place Type of business Effective participation in the capital Kancelaria Praw na getback Mariusz Brysik sp.k. (Wroclaw ) legal services 90,91% 100,00% easydebt NSFIZ (Warsaw ) activity funds 100,00% 100,00% getback Recovery Srl (Bucharest, Romania) collection services 100,00% nd getback Investments Sp. z o.o. (Wroclaw ) other financial services 100,00% nd Open Finance FIZAN (Warsaw ) activity funds 100,00% nd Bakura Sp. z o.o. (Warsaw ) other financial services 100,00% nd Bakura Sp. z o.o. sp.k. (Warsaw ) other financial services 100,00% nd Bakura Sp. z o.o. S.K.A. (Warsaw ) other financial services 100,00% nd Associates accounted using the equity method: Name and place Type of business Effective participation in the capital OMEGA Wierzytelności NSFIZ (Warsaw ) activity funds 20,00% nd As at the proportion in the overall number of votes held by the Group in subsidiary and associated companies is equivalent to the direct interests held by the Group in the capital of those companies. 7/55

8 Graphical structure of the getback Group as at : getback S.A. 100% easydebt NSFIZ 90,91% Kancelaria Prawna getback Mariusz Brysik sp.k. 1) 100% getback Recovery Srl 2) 100% Open Finance FIZAN 100% getback Investments Sp. z o.o. 100% Bakura Sp. z o.o. S.K.A. 3) 99,91% Bakura Sp. z o.o. sp.k. 100% Bakura Sp. z o.o. 0,09% 20% Omega Wierzytelności NSFIZ 1) formerly Kancelaria Prawna getback Mariusz Brysik S.K.A. 2) formerly RIB Recovery Srl 3) formerly Abbey Asset Management Sp. z o.o. 6 S.K.A. In the period from to the following material capital transactions took place within the Capital Group: on getback entered into a sale agreement with Romanian International Bank S.A. (Romania) pursuant to which it acquired 100% shares in RIB Recovery Srl (now getback Recovery Srl) for EUR on getback S.A. acquired 100% shares in GetBack Investments Sp. z o.o. for PLN on the Company acquired 100% of series 1 investment certificates of Open Finance FIZAN at the nominal value in exchange of cash of PLN As at getback was the sole investor in the fund. The nominal value of the certificates was PLN as at on GetBack Investments Sp. z o.o. concluded an agreement with Raiffeisen Bank Polska S.A. to transfer the rights and obligations of the limited partner in Bakura Sp. z o.o. sp. k. with its registered office in Warsaw. Pursuant to the agreement, GetBack Investments Sp. z o.o. acquired all rights and obligations of the limited partner in Bakura Sp. z o.o. sp. k. for a price of PLN thousand, reduced with an annex of by PLN thousand. The final purchase prices was PLN thousand. As a result, the Company acquired rights to profit of Bakura Sp. z o.o. sp. k. of 99.99%. 8/55

9 on Open Finance FIZAN acquired from Raiffeisen Bank Polska S.A 100% shares in Bakura Sp. z o.o. which is the general partner of Bakura Sp. z o.o. sp.k. for the total amount of PLN on Open Finance FIZAN acquired from Abbey Art Fund FIZAN 100% of shares in Abbey Asset Management Sp. z o.o. 6 S.K.A. (now Bakura Sp. z o.o. S.K.A.) for the total amount of PLN On the same day Bakura Sp. z o.o. acquired the rights of the general partner of Abbey Asset Management Sp. z o.o. 6 S.K.A. (now Bakura Sp. z o.o. S.K.A.). on the partners of Bakura Sp. z o.o. sp. k. approved resolutions pursuant to which Bakura Sp. z o.o. sp. k. was obliged to refund contributions to the general partner - GetBack Investments Sp. z o.o. totalling PLN thousand. After the redemption, the amount of contributions to the general partner is PLN and the proportion of rights to profit 99.91%. on Bakura Sp. z o.o. S.K.A. acquired from GetBack Investments Sp. z o.o. rights of the general partner entitling to 99.91% in profit of Bakura Sp. z o.o. sp. k. for the total amount of PLN on getback S.A. filed a demand to redeem investment certificates easydebt NSFIZ for the total amount of PLN thousand. The nominal value of the certificates to be redeemed was PLN thousand. In connection with the above and the issues of certificates made in 2014 and acquired fully by getback S.A., the nominal value of investment certificates held by the Company was PLN thousand as at on getback S.A. acquired from Open Finance FIZAN 100% of shares in Bakura Sp. z o.o. S.K.A. for the total amount of PLN on getback S.A. acquired from Open Finance FIZAN 100% of shares in Bakura Sp. z o.o. for the total amount of PLN on the Company acquired series C investment certificates in Omega Wierzytelności NSFIZ for the total amount of PLN thousand. On the Company held one series A certificate with the nominal value of PLN 200 thousand. As at the share of the Company in the assets of the fund was 20% while the total nominal value of acquired certificates PLN thousand. In connection with the entry into force of IFRS 10 Consolidated Financial Statements on , the Group performed an analysis of the nature of its exposure to the investments in order to identify the companies controlled by it. As a result of the analysis, no need was identified to make any modifications to the existing structure of the Capital Group Employment in the Capital Group Number of employees (in FTEs) in the Group companies getback Change getback S.A Kancelaria Praw na getback Mariusz Brysik sp.k easydebt NSFIZ getback Recovery Srl getback Investments Sp. z o.o Open Finace FIZAN Bakura Sp.z o.o. sp.k Bakura Sp. z o.o Bakura Sp. z o.o. S.K.A Total including: Poland International activities /55

10 2.2. Composition of the Management Board of the parent company The Management of getback S.A. as at and as at the date of these consolidated financial statements was composed as follows: Konrad Kąkolewski President of the Management Board Paweł Trybuchowski Deputy President of the Management Board Piotr Kaliszuk Member of the Management Board On the Company s s Supervisory Board appointed Mr. Konrad Kąkolewski to the position of the President of Management Board of getback S.A. effective on Mr. Konrad Kąkolewski formerly had been a Member of the Management Board. 3 Approval of the financial statements These consolidated financial statements were approved for publication by the Management Board on /55

11 4 Material accounting principles 4.1 Basis for the preparation of the consolidated financial statements These consolidated financial statements have been made in accordance with the historical cost convention with the exception of derivative financial instruments, which are measured at fair value and at amortised cost. The consolidated financial statements are presented in PLN and unless specified otherwise, all values are presented in PLN thousand. The consolidated financial statements were made with a going concern assumption by companies in the Group in the foreseeable future minimum one year from the balance sheet date. As at the approval date of these consolidated financial statements there were no circumstances indicating any hazard to the continuation of business operations by Group companies within minimum one year from the balance sheet date. 4.2 Compliance statement These consolidated financial statements were prepared in compliance with International Financial Reporting Standards ( IFRS ) approved by EU, and to the extent not covered therewith, in compliance with the Accounting Act of ( Act ) as amended and the secondary regulations issued pursuant thereto ( Polish accounting standards ). IFRS include standards and interpretations approved by the International Accounting Standards Board and the International Financial Reporting Interpretations Committee. On the General Meeting approved a resolution pursuant to which consolidated financial statements of the would be prepared in compliance with IFRS. In this connection, these consolidated financial statements made as at are the first annual complete financial statements made in accordance with IFRS. For the purposes of these consolidated financial statements, was the date to transfer to the application of IAS standards. The previous consolidated financial statements for the year ended on were made in compliance with IFRS for management purposes the General Meeting did not approve a resolution to make financial statements in compliance with IFRS since in accordance with Art. 55 of the Accounting Act the Group could not do that in In 2013 the Group was subject to the exemption specified in Art. 56 of the Act and did not make its consolidated financial statements in compliance with the Act. 4.3 Major values based on professional judgment and estimates Professional judgment Classification of leasing contracts The Group classifies leasing contracts as operational or financial leasing on the basis of an assessment to what extent the risks and benefits resulting from holding the objects of leasing are held by the lessor and to what extent by the lessee. The assessment is based on the economic content of each transaction. Uncertainty of estimates The preparation of financial statements in compliance with IFRS-UE requires the Group to make certain estimates and assumptions that will affect the amounts disclosed in the financial statements. Estimates and assumptions are continuously reviewed by the Group s management, are based on historic experience and other factors, including expectations as to future events that are justified under given circumstances. Although the estimates are based on the best knowledge related to the prevailing conditions and actions taken by the Group, the actual results may differ from such estimates. Estimates made at the end of each reporting period reflect the conditions prevailing at those dates (e.g. FX rates, interest rates, market prices). Changes to accounting estimates are recognised prospectively starting from the period in which the estimates were changed. 11/55

12 The key areas for which the Group applied estimates are as follows: Fair value of financial instruments The fair value of financial assets not listed in active markets is measured using commonly recognised measurement techniques. All models are validated before application as well as calibrated in order to ensure that the results reflect actual data and comparable market prices. As far as possible, models rely solely on observable data from active markets; however, in certain circumstances the uncertainty is estimated by the Group (e.g. with respect to anticipated cash flows related to debt portfolios). A modification to the assumptions underlying those factors may affect the measurement of certain financial instruments. Deferred income tax asset The Group recognises a deferred income asset assuming that taxable profit will be generated in the future to offset the asset. Material deterioration of the generated taxable profit in the future could render this assumption unjustified. Deferred tax related to investment in subsidiary companies The Group establishes a deferred income tax provision for all temporary positive differences related to the investment in easydebt NSFIZ. The parent company controls the time and amounts of reversible temporary differences due to the fact of holding 100% of the investment certificates of the fund and thus 100% of votes at investor meetings. Considering that in the near future getback SA intends to have the certificates redeemed successfully (the first redemption took place in 2014), the Group is not exempt from establishing a deferred income tax provision available to entities that meet all of the following conditions pursuant to IAS 12: the parent company is able to control the time of reversing temporary differences; and it is likely that the temporary differences will not be reversed in the foreseeable future. 4.4 Functional currency and currency of financial statements PLN is the functional currency of the parent company, the reporting currency of these consolidated financial statements and the functional currency of Group companies with the exception of getback Recovery Srl where the Romanian leu (RON) is the functional currency. 4.5 Modifications to the applied accounting principles On the General Meeting approved a resolution pursuant to which consolidated financial statements of the would be prepared in compliance with IFRS. In this connection, these consolidated financial statements made as at are the first annual complete financial statements made in accordance with IFRS. IFRS 1 applies to entities that make their financial statements in compliance with IFRS for the first time and to entities that have applied IFRS but their financial statements contained a statement of incompliance with certain standards. IFRS 1 requires that the first financial statements in compliance with IFRS are the first annual financial statements in which the company will apply all IFRS standards and a statement is contained of compliance with all IFRS standards. These financial statements are the first full annual consolidated financial statements made in compliance with IFRS standards. For the purposes of these financial statements, was the date to transfer to the application of IFRS standards. The Group did not make its consolidated financial statements in accordance with the Accounting Act as at The reconciliation of equity for the year ended on and of equity as at made in accordance with the Act and with IFRS was presented in Note 5. The Group applied IFRS as at the status thereof on The Group applied identical accounting principles (policies) to its opening balance in compliance with IFRS as at and throughput all periods disclosed in these financial statements. All modifications to the accounting principles were implemented retrospectively. The standard and interpretations specified below, applicable to annual periods beginning on did not have material impact on the financial conditions, results of operations by the Group or on the scope of disclosures in the presented consolidated financial statements: 12/55

13 IFRS 10 Consolidated financial statements approved by EU on (applicable to annual periods beginning on or after that date), IFRS 11 Joint agreements approved by EU on (applicable to annual periods beginning on or after that date), IFRS 12 Disclosure of interests in other entities approved by EU on (applicable to annual periods beginning on or after that date), IAS 27 (amended in 2011) Separate financial statements approved by EU on (applicable to annual periods beginning on or after that date), IAS 28 (amended in 2011) Investments in associates and joint ventures - approved by EU on (applicable to annual periods beginning on or after that date), Amendments to IFRS 10 Consolidated financial statements, IFRS 11 Joint agreements and IFRS 12 Disclosure of interests in other entities clarifications to interim provisions approved by EU on (applicable to annual periods beginning on or after that date), Amendments to IFRS 10 Consolidated financial statements, IFRS 12 Disclosure of interests in other entities and IAS 27 Separate financial statements investment entities, approved by EU on (applicable to annual periods beginning on or after that date), Amendments to IAS 32 Financial instruments: presentation compensation of financial assets and financial liabilities approved by EU on (applicable to annual periods beginning on or after that date), Amendments to IAS 36 Impairment of assets disclosure of recoverable amount of financial assets, approved by EU on (applicable to annual periods beginning on or after that date). Amendments to IAS 39 Financial instruments: recognition and measurement novation of derivative instruments and continuation of hedge accounting, approved by EU on (applicable to annual periods beginning on or after that date). 4.6 New standards and interpretations that have been published but are not yet effective The following standards and interpretations have been issued by the International Accounting Standards Board and the International Financial Reporting Interpretations Committee but are not yet effective: Amendments to various standards Adjustments to IFRS ( cycle) modifications within the procedure of making annual adjustments to IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) addressing mainly irregularities and clarification of vocabulary approved by EU on (applicable to annual periods beginning on or after that date), Amendments to various standards Adjustments to IFRS ( cycle) modifications within the procedure of making annual adjustments to IFRS (IFRS 1, IFRS 3, IFRS 13 and IAS 40) addressing mainly irregularities and clarification of vocabulary approved by EU on (applicable to annual periods beginning on or after that date), Amendments to IAS 19 Employee benefits defined benefits schemes: employee contributions approved by EU on (applicable to annual periods beginning on or after that date), IFRIC 21 interpretation Fees approved by EU on (applicable to annual periods beginning on or after that date). Standards and interpretations approved by IASB but not yet approved for application in EU IFRS in the form approved by EU do not differ materially from the regulations approved by the International Accounting Standards Board (IASB) with the exception of the standards specified below amendments to standards and interpretations which as at were not approved for application in EU (the specified effective dates refer to the standards in their full version): IFRS 9 Financial instruments (applicable to annual periods beginning on or after that date), 13/55

14 IFRS 14 Regulatory deferral accounts (applicable to annual periods beginning on or after that date), IFRS 15 Revenues from contracts with customers (applicable to annual periods beginning on or after that date), Amendments to IFRS 10 Consolidated financial statements and IAS 28 Investments in associates and joint ventures sale or contribution of assets between the investor and its associate or joint venture (applicable to annual periods beginning on or after that date), Amendments to IFRS 10 Consolidated financial statements and IFRS 12 Disclosure of interests in other entities and IAS 28 Investments in associates and joint ventures investment units: application of consolidation exemption (applicable to annual periods beginning on or after that date), Amendments to IFRS 11 Joint agreements settlement of interests acquired in joint operations (applicable to annual periods beginning on or after that date), Amendments to IAS 1 Presentation of financial statements an initiative related to disclosures (applicable to annual periods beginning on or after that date), Amendments to IAS 16 Property, plant and equipment and IAS 38 Intangible assets clarifications to acceptable depreciation/amortisation methods (applicable to annual periods beginning on or after that date), Amendments to IAS 16 Property, plant and equipment and IAS 41 Agriculture agriculture: bearer plants (applicable to annual periods beginning on or after that date), Amendments to IAS 27 Separate financial statements equity method in separate financial statements (applicable to annual periods beginning on or after that date), Amendments to various standards Adjustments to IFRS ( cycle) modifications within the procedure of making annual adjustments to IFRS (IFRS 5 IFRS 7, IAS 19 and IAS 34 addressing mainly irregularities and clarification of vocabulary (applicable to annual periods beginning on or after that date), As the Group estimates, the above standards, interpretations and amendments to standards, with the exception of IFRS 9, would not have material impact on the Group s financial statements if applied by the company as at the balance sheet date. The Group is being estimating the impact of implementing IFRS 9 on its financial statements. 4.7 Consolidation principles Business combinations Business combinations, including closed-end investment funds, are accounted for with the acquisition method as at the acquisition date which is the day on which the Group assumes control over the acquired company. The Group measures all non-controlling interests in proportion to the share in net identifiable assets of the acquired company. Transactional costs incurred in connection with business combinations, such as legal fees, due diligence costs and for other professional services are recognised as costs of the period. Consolidation principles Consolidated financial information covers financial statements getback S.A. and financial statements of its subsidiary companies, made for the relevant reporting periods. Financial statements of subsidiary companies are made for the same reporting period as the statements of the parent company, with the application of cohesive and uniform accounting principles applied for transactions and economic events of a similar nature. In order to eliminate discrepancies in the accounting principles, adjustments are made. 14/55

15 All material balances and transactions between companies in the Group, including unrealised gains resulting from transactions within the Group, have been fully eliminated. Unrealised losses are eliminated unless they refer to impairment. Subsidiary companies The Company, irrespective of the nature of its interest in a company, identifies its status of a parent company assessing if it controls the company in which investment was made. The Company controls an company in which investment was made when as a result of its involvement in the company it is exposed to variable financial results or when it holds rights to variable financial results or when it may impact the amount of such financial results by exercising control over the company. The Company exercises control over the company in which investment was made only and only when at the same time: a) it controls the company in which investment was made, b) due to its involvement in the company in which investment was made it is exposed to variable financial results or when it holds rights to variable financial results, and c) it is able to exercise its control over the company in which investment was made to impact the amount of such financial results. Consolidation of the company in which investment was made begins on the date on which the Company acquires control over the company, and stops when control is lost. The Company attributes profit or loss and each element of other comprehensive income to owner of the parent company and to non-controlling interests. The Company discloses its non-controlling interests in its consolidated balance sheet, in equity separately from the equity of the owners of the parent company. Changes to equity interests in the parent company in a subsidiary company that do not result in loss of control by the parent company over the subsidiary company are treated as capital transactions. When there is a change to a part of equity held by non-controlling interests, getback makes an adjustment to the book value of the controlling and non-controlling interests in order to reflect the changes in relative interest in the subsidiary company. All differences between the adjustment amount of non-controlling interest and the fair value of the amount paid or received by the Company is recognised directly in equity and attributed to the owners of the parent company. If the Company loses control over the subsidiary company, then: a) it derecognises the assets (including goodwill) and liabilities of the former subsidiary company from the consolidated balance sheet, b) it recognises all investments held in the former subsidiary company at their fair value as the date control was lost and subsequently recognises them and all amounts of mutual obligations of the former subsidiary company and of the parent company in compliance with IFRS, c) it recognises gains and loss related to loss of control attributable to the former parent company. Associated companies Associated companies are such over which the investor has material impact. Material impact in control allowing to be involved in taking decisions on financial and operating policies of the company in which investment was made, which however is not equivalent to exercising control or co-control over the policies of the company. If the Group directly or indirectly (via its own subsidiary companies) holds 20% or more voting rights in the company in which investment was made, it is assumed that the Group exerts material influence on the company unless it can be explicitly demonstrated otherwise. However, if the Group directly or indirectly (e.g. via its subsidiary companies) holds less than 20% of voting rights in the company in which investment was made, an assumption may be made that it does not exert material influence on the company unless it can be explicitly demonstrated otherwise. 15/55

16 The Group loses material influence on the company in which investment was made when it loses the power allowing to be involved in taking decisions on financial and operating policies of the company in which investment was made. With reference to recognising investments in associated companies, the Group applies the equity method according to which the investment is originally recognised at cost and subsequently after the acquisition date, the value is adjusted by the change of the investor s share in the net assets of the company in which investment was made. Investor s profit or loss covers its share in profit or loss of the company in which investment was made and investor's comprehensive income covers its share in other comprehensive income of the company in which investment was made. If the share of the company in losses of the associated company is equal or lower than its shares in the associated company, the company discontinues recognition of its share in further losses unless it has assumed obligations or made payments on behalf of the company. If a company belonging to the Group concludes transactions with an associated company or a joint venture of the Group, profit and losses generated by such transactions are consolidated financial statements of the Group only to such extent to which its interests in the associated company or joint venture are not related to the Group. Each time at the end of the reporting period, the Group assesses the occurrence of premises underlying potential impairment charges to its net investment in its associated companies. Should such premises exist, the Group estimates the recoverable value value in use or fair value reduced by the costs of sale, whichever is higher. When the book value of an asset is in excess of its recoverable value, the Group recognises an impairment charge in its profit and loss account. 4.8 Translation of items in foreign currencies Transactions denominated in currencies other then PLN are translated into PLN at the exchange rates prevailing on the transaction date. As at the balance sheet date, cash assets and liabilities nominated in currencies other than PLN are translated into PLN at the mean exchange rates for each currency published for the date by the National bank of Poland. The FX differences from translation are recognised as financial income (costs) respectively or in instances specified in the accounting policies capitalised. Non-cash assets and liabilities recognised at historic cost in a foreign currency are disclosed at the historic exchange rate of the transaction date. Non-cash assets and liabilities recognised at fair value in a foreign currency are disclosed at the exchange rate of the date the fair value measurement was made. Goodwill generated from acquisition of a foreign company and all adjustments due to fair value measurement of assets and liabilities on such acquisition, are treated as assets and liabilities of such foreign company and translated at the mean exchange rate for the currency of the National Bank of Poland prevailing on the balance sheet date. The following exchange rates were applied for book measurement: Balance Sheet Profit and loss account RON 0,9510-0, Financial statements of foreign companies are translated into PLN as follows: appropriate balance sheet items at the mean exchange rate published by the National Bank of Poland as at the balance sheet date; appropriate profit and loss account items at the rate being the arithmetic mean of the mean rates published by the National Bank of Poland as at the day ending each financial month. FX differences resulting from such translation are recognised directly in equity as a separate item (as FX differences ). 16/55

17 4.9 Property, plant and equipment Property, plant and equipment include fixed assets and outlays on fixed assets under construction constituting resources controlled by the Company that are held and used in the provision of goods and services or possibly handed over for use to third persons pursuant to rental contracts or for administrative purposes and that are expected to be used for more than one year. Fixed assets are measured at cost or manufacturing cost, net of depreciation and impairment charges. The initial value of fixed assets covers the purchase price increased by all costs directly related to the purchase and adjustment of the asset for use. When a subsidiary company is subject to consolidation, the purchase price of fixed assets is equal to their fair value estimated as at the acquisition date. Fixed assets under construction are measured at cost and/or manufacturing cost, net of depreciation and impairment charges. Fixed assets under construction are not depreciated until the construction is completed and they are commissioned to use. Fixed assets are split at purchase into components that are items of material value to which separate periods of economic use may be assigned. Fixed assets with the exception of land are depreciated with the linear method at the following based rates resulting from estimates of economic use: Group of fixed assets: Depreciation rate Plant and machinery 20,0% - 30,0% Motor vehicles 20,0% Other 10%-20,0% If at the preparation of the financial statements circumstances occur indicating that the book value of tangible fixed assets may not be recoverable, such assets are reviewed for impairment. If premises exist that impairment may have taken place and the book value is in excess of the recoverable value, then the value of such assets or cash generating centres containing such assets is reduced to the recoverable value. The recoverable value is equal to the higher of: net realisable value or value in use. Value in use is determined, estimated future cash flows are discounted to the current value at a gross discount rate reflecting the prevailing market money value in time and the risks inherent in such assets. With respect to assets that do not generate cash inflows on its own, the recoverable value is determined for the cash generating centre containing such asset. Impairment charges are recognised in profit and loss account. A tangible fixed asset may be derecognised when it is disposed of or when no economic benefits from further use of such assets are expected. All profit or loss resulting from derecognition of an asset from the balance sheet (calculated as the difference between the potential net proceeds and the book value of the asset) are recognised in the profit and loss account n the period when the asset was derecognised. The final value, period of use and the depreciation method of assets are verified and adjusted if necessary at the end of each financial year. Costs of external funding are capitalised as a part of manufacturing costs of fixed assets. Costs of external funding include interest and FX profit or loss up to the amount equivalent to an adjustment of interest expense. Tangible fixed assets used pursuant to leasing contracts Leasing contracts under which the Group carries substantially the entire risk and derives substantially all benefits resulting from holding tangible fixed assets are classified as financial leasing contracts. Assets acquired under financial leasing contracts are initially disclosed at the lower of: the fair value or the amount of present value of minimum leasing fees, reduced by depreciation and impairment charges. 17/55

18 4.10 Intangible assets Components of intangible assets include identifiable non-cash assets (they can be identified or results from contractual or other arrangements), without physical form, controlled by the Company and from each economic benefits are anticipated. Intangible assets also include the acquired goodwill and costs of completed R&D works. Intangible assets acquired in a separate transaction are initially measured at the purchase price or manufacturing costs. The purchase price of intangible assets acquired in a business combination transaction is equal to their fair value as at the combination date. After such initial recognition, intangible assets are disclosed at the purchase price or manufacturing costs net of amortisation and impairment charges. Outlays incurred on internally manufactured intangible assets with the exception of capitalized R&D costs are not capitalised and are recognised in the costs of the period in which they were incurred. When a subsidiary company is subject to consolidation, the purchase price of intangible assets is equal to their fair value estimated as at the acquisition date. Subject to periods of economic useful life, the Group applies the following amortisation rates for intangible assets: software 20%-50% other intangible assets 20% The useful life of intangible assets depends on their type, has been assessed and found as limited or unlimited. Intangible assets with a limited useful life are amortised over their useful life and subject to impairment tests each time premises exist indicating potential impairment. The amortisation period and method of intangible assets with a limited useful time are verified as at the end of each financial year. Changes to the anticipated useful life or anticipated manner of consuming economic benefits from each asset are recognised by modifying the amortisation period or method respectively and are treated as changes to their estimated value. Amortisation charges to intangible assets with a limited useful life are recognised in the profit and loss account in the category that corresponds to the function of a specific intangible asset. Intangible assets with unspecified useful life and those that are not used are subject to an annual impairment test of each asset or cash generating centres. The other intangible assets are tested each year if premises exist to identify impairment. Periods of useful life are also subject to annual verification and if necessary adjusted with the effects of the beginning of a financial year Goodwill Goodwill resulting from acquisition of a company is initially recognised at purchase price being the surplus of: the sum of: payment made, amount of all non-controlling interests in the acquired company, and in a situation when the business combination is made in stages, the fair value as at the acquisition of interest in the capital of the acquired company held previously by the acquiring company over the net amount of identifiable acquired assets and liabilities, determined as at the acquisition date. After the initial recognition, goodwill is disclosed at the purchase price net of all cumulated impairment charges. Impairment tests are held once a year or more frequently should any premises so indicate. Goodwill is not amortised. As at the acquisition date, the acquired goodwill is allocated to cash generating centres that may benefits from the synergy of combination. Each centre or group of centres to which goodwill was allocated: corresponds to the lowest level in the Group at which goodwill is monitored for internal management purposes, and is not larger than one operating segment as specified in IFRS 8 Operating segments. 18/55

19 Impairment charges are recognised by estimating the recoverable value of the cash generating centre to which the goodwill was allocated. When the recoverable value of the cash generating centre is lower than its book value, an impairment charge is recognised. When goodwill constitutes a part of a cash generating centre and a part of business within the centre is disposed of, any profit or loss on such disposal is determined with the goodwill related to such disposed business is incorporated in its book value. In such circumstances, the sold goodwill is determined on the basis of the value of the sold business and the value of the retained part of the cash generating centre Financial assets Financial assets are classified into the following categories: Financial assets held until maturity, Financial assets measured at fair value through profit and loss, Loans and receivables, Financial assets available for sale. Financial assets held until maturity Financial assets held until maturity include investments with identified or identifiable payments and a specified maturity that the Group intends and is able to hold until such time. Financial assets kept until maturity are measured at the amortised cost with the effective interest rate method. Financial assets held until maturity are classified as long-term assets if their maturity exceed 12 months from the balance sheet date. Financial assets measured at fair value through profit and loss Financial assets are classified as investments measured at fair value through profit and loss if they are intended for trading or if they have been identified as measured at fair value through profit and loss after their initial recognition. Financial assets are designated as measured at fair value through profit and loss if the Company actively manages such investments and tales purchase and sale decisions on the basis of their fair value. At initial recognition, transactional costs related to the investment are recognised as profit or loss when incurred (exceptions applied to acquired portfolios of debt). All profit and loss relating to such investments are recognised as profit or loss of the current period. Acquired debt portfolios Acquired debt portfolios are mass portfolios of overdue consumer debt (e.g. under consumer loans, utility bills, etc.) acquired by the Company under debt assignment contracts for prices much below the nominal value of the debt. The Company classified acquired debt portfolios as financial assets measured at fair value through profit and loss. Portfolios acquired in packets are classified as financial assets measured at fair value through profit and loss and are originally stated at purchase cost covering the purchase prices of the portfolio increased by purchase transaction costs. The purchase price is additionally increased by direct expenses related to handling the debt incurred after conclusion of the transaction advances for bailiffs (bailiffs expenses related to enforced collection) and court fees. The portfolios are measured at fair value as at the end of each quarter; for the first time debt portfolios are measured after expiry of a full quarter from the purchase date. The fair value is determined as the sum of discounted anticipated cash flows as the difference between future cash flows for collected debt and the costs of pursuing such claims through negotiations, courts or by bailiffs. The measurement is made with the Anticipated cash flows approach (par. B23-B30 of Appendix B to IFRS 13) where the entire credit and liquidity risk is incorporated in cash flows and not in the discount rate. Fair value measurement is made collectively for each portfolio since the purchase price is determined for entire portfolios and not for each individual debt item. The interest rate used for discount purposes is based on a risk-free discount rate. 19/55