REPORT FOR THE FINANCIAL YEAR 2015/16. Warsaw/June 2016 ANNUAL FINANCIAL REPORT 2015/16

Transcription

1 REPORT FOR THE FINANCIAL YEAR 2015/16 1 Warsaw/June 2016

2 Kredyt Inkaso Spółka Akcyjna in Warsaw STAND ALONE FINANCIAL REPORT OF KREDYT INKASO S.A. FOR THE FINANCIAL YEAR 2015/16 (period from to ) drawn up according to the International Financial Accounting Standards approved by the European Union Warsaw, June

3 CONTENTS SELECTED STAND ALONE FINANCIAL DATA... 8 STAND ALONE BALANCE SHEET... 9 STAND ALONE TOTAL INCOME STATEMENT STAND ALONE CASH FLOW STATEMENT STAND ALONE CHANGES TO EQUITY GENERAL ECONOMIC AND FINANCIAL RATIOS ADDITIONAL INFORMATION TO THE STAND ALONE FINANCIAL STATEMENTS GENERAL INFORMATION Information on Kredyt Inkaso S.A Composition of the Management Board and the Supervisory Board BASIS OF DRAWING UP AND ACCOUNTING PRINCIPLES Basis of drawing up the Financial Statements Changes to standards and interpretations of the IFRS Statement of compliance Obligatory changes to standards or interpretations observed and applied by Kredyt Inkaso since Application of standards and interpretations prior to their coming into effect Published standards and interpretations which did not come to effect for periods commencing on 1 January 2015 and their effect on the stand alone financial statements of Kredyt Inkaso Significant elements of accounting policy Transactions in foreign currencies Intangible assets Tangible fixed assets Deferred income tax assets Financial assets Short-term receivables Cash and cash equivalents Short-term prepayments and accruals Share capital Cost of bonds issue and own shares Supplementary reserve (agio) Capital from revaluation, capital from revaluation of financial assets available for sale

4 Reserve for deferred income tax Reserve for employee benefits Other reserves Financial liabilities Other accruals Revenues Overheads Other costs of the core business Income tax Cash flow statement Adjustments of errors and changes to accounting principles UTILISING INFLOWS FROM ISSUE OF SECURITIES STATEMENT OF KREDYT INKASO S.A. MANAGEMENT BOARD ON COMPLIANCE OF THE FINANCIAL STATEMENTS WITH THE APPLICABLE ACCOUNTING PRINCIPLES STATEMENT OF KREDYT INKASO S.A. MANAGEMENT BOARD ON APPOINTMENT OF THE ENTITY AUTHORIZED TO AUDIT FINANCIAL STATEMENTS INFORMATION ON THE SEGMENT NOTES TO THE BALANCE SHEET INTANGIBLE FIXED ASSETS AND GOODWILL Goodwill Intangible assets TANGIBLE FIXED ASSETS INVESTMENT REAL ESTATE LONG-TERM CAPITAL INVESTMENTS RECEIVABLES AND LOANS OTHER FINANCIAL ASSETS Financial assets valued according to depreciated cost PREPAYMENTS AND ACCRUALS DEFERRED INCOME TAX ASSETS RECEIVABLES DUE TO INCOME TAX CASH AND CASH EQUIVALENTS EQUITY Share capital Own Shares Distribution of profit of the Dominant Company for the year 2014/

5 17.4. Number of shares and earnings per share (EPS) PAID DIVIDENDS AND DIVIDEND POLICY CREDITS, LOANS, OTHER DEBT INSTRUMENTS Credits and loans Issued Bonds LIABILITIES DUE TO LEASE RESERVE DUE TO DEFERRED INCOME TAX RESERVES TRADE LIABILITIES AND OTHER LIABILITIES LIABILITIES DUE TO INCOME TAX NOTES TO THE TOTAL INCOME STATEMENTS NET REVENUES COSTS OF BUSINESS ACTIVITIES OTHER REVENUES AND OPERATING COSTS REVENUES AND FINANCIAL COSTS INCOME TAX NOTES TO THE CASH FLOW STATEMENTS ADDITIONAL INFORMATION TO THE CASH FLOW STATEMENT FINANCIAL INSTRUMENTS FINANCIAL INSTRUMENTS Additional information on methods of valuation of financial instruments recognized in the consolidated financial statements in the fair value Reclassification Exclusion from the balance sheet Method of valuation of financial instruments FINANCIAL RISK MANAGEMENT Credit risk Liquidity risk Market risk: interest rate risk Market risk: risk of change of statutory interest rates and the National Bank of Poland interest rates Market risk: foreign currency risk Market risk: price fluctuation risk COST OF CAPITAL OTHER DISCLOSURES

6 34. NUMBER OF SHARES AND EARNINGS PER ONE SHARE (EPS) ENTERPRISE VALUE COMPANY S GOVERNING BODIES, KEY PERSONNEL Changes to the governing bodies of the Company Remuneration Remuneration of the Supervisory Board Value of remunerations, awards and benefits paid out, due or potentially due to the managing and supervising persons Information on benefits for key management personel Contracts concluded between the Company and managing persons providing for compensation in case of their resignation or dismissal Share in shareholding and in the number of votes at the General Assembly (GA) Shareholding structure of Kredyt Inkaso S.A. as at 31 March Shareholding structure of Kredyt Inkaso S.A. as at Approval Date Loans for the key personnel and the persons related to them Transactions with the key personnel OPTIONS, EMPLOYEE SHARES PROGRAM TRANSACTIONS WITH RELATED ENTITIES Kancelaria Prawnicza FORUM Radca Prawny Krzysztof Piluś i S-ka spółka komandytowa Kredyt Inkaso Portfolio Investments (Luxembourg) Société Anonyme Kredyt Inkaso I Niestandaryzowany Sekurytyzacyjny Fundusz Inwestycyjny Zamknięty Kredyt Inkaso II Niestandaryzowany Sekurytyzacyjny Fundusz Inwestycyjny Zamknięty KI Nieruchomości Sp. z o.o Kancelaria Forum S.A Legal Process Administration Sp. z o.o Finsano Consumer Finance S.A Finsano Consumer Finance S.A. Spółka komandytowa Information on significant transactions made by the Company with related entities on terms other than arm s length REMUNERATION OF AUDITORS ISSUES, REDEMPTION AND REPAYMENT OF DEBT AND CAPITAL SECURITIES SIGNIFICANT EVENTS WHICH OCCURRED AFTER THE BALANCE SHEET DATE AND WERE NOT DISCLOSED IN THE FINANCIAL STATEMENTS FOR A GIVEN REPORTING PERIOD INFORMATION ON SIGNIFICANT EVENTS RELATED TO PREVIOUS YEARS DISCLOSED IN THE FINANCIAL STATEMENTS FOR THE CURRENT PERIOD CONTINGENT ASSETS AND LIABILITIES

7 44. INFORMATION ON INCOME, COSTS AND RESULTS ON DISCONTINUED BUSINESS ACTIVITY INFORMATION ON GRANTED GUARANTEES AS WELL AS SECURITY INTERESTS ON THE COMPANY S ASSETS OTHER INFORMATION WHICH, ACCORDING TO THE COMPANY IS SUBSTANCIAL FOR ASSESSING ITS EMPLOYMENT, PROPERTY AND FINANCIAL SITUATION AS WELL AS FINANCIAL RESULT AND THEIR CHANGES AND THE INFORMATION SIGNIFICANT FOR ASSESSING THE ABILITY TO MEET OBLIGATIONS BY THE COMPANY COMMENTARY EXPLAINING THE SEASONAL OR CYCLICAL CHARACTER OF BUSINESS ACTIVITY IN THE REPORTING PERIOD FINANCIAL STATEMENTS DRAWN UP IN CONDITIONS OF HIGH INFLATION EMPLOYMENT IN THE COMPANY APPROVAL FOR PUBLICATION

8 SELECTED STAND ALONE FINANCIAL DATA SELECTED FINANCIAL DATA WITH CONVERSION INTO EURO Profit and loss account PLN thousand EUR thousand Sales revenues Operating profit (loss) (3 494) 423 (836) Profit (loss) before tax Net profit (loss) Net profit (loss) falling to the shareholders of the dominant entity Earnings per share (in PLN) 0,30 0,61 0,07 0,15 Diluted earnings per share (in PLN) 0,30 0,62 0,07 0,15 Average exchange rate PLN/EUR in the period X X 4,2365 4, Cash flow statement Net operating cash flows (6 651) (1 570) Net investment cash flows (251) (56 583) (59) (13 540) Net financial cash flows (19 439) (4 652) Net change in cash and cash equivalents (3 411) (816) Average exchange rate PLN/EUR in the period X X 4,2365 4,1791 Balance sheet Assets Long-term liabilities Short-term liabilities Equity Equity falling to the shareholders of the dominant company Exchange rate PLN/EUR as at the end of the period X X 4,2684 4,0890 Conversion into EURO was calculated in the following way: 1. For items from the Profit and Loss Account and the Cash Flow Account the average rate of exchange for a given period was applied, calculated as the arithmetic average of the National Bank of Poland rates of exchange (table A) binding as of the last day of each month in a given period. In the period from 1 April 2015 to 31 March 2016 the average amounts to PLN/EUR4,2365 and in the period from 1 April 2014 to 31 March 2015 equals to PLN/EUR 4, For items from the Balance Sheet the average rate of exchange of NBP (table A) as at the last day of the period, i.e. as at 31 March 2016 was applied, which was equal to PLN/EUR 4,2684 and as at 31 March 2015 the rate of exchange equal to PLN/EUR 4,0890 was applied. 8

9 STAND ALONE BALANCE SHEET Assets Note Fixed assets Goodwill 7 - Intangible assets Tangible fixed assets Investments real estate Investment in subsidiaries Investments in affiliates Receivables and loans Derivatives - - Other long term financial assets Long term prepayments and accruals Assets due to deferred income tax Fixed assets Current assets Stock Receivables due to construction service agreements - - Trade receivables and other receivables Receivables due to current income tax Receivables due to awarded costs of legal proceedings Purchased receivables Loans Other short-term financial assets Short-term prepayments and accruals Cash and cash equivalents Assets classified as designated for sale - - Current assets Total assets

10 Liabilities Note Equity 20 Share capital Own shares (-) 17 (500) (500) Capital from the sale of shares above their nominal value Capital from revaluation of financial assets available for sale - - Other capital - - Retained profit: net profit (loss) profits (loss) brought forward 17 - (4 418) - Supplementary reserve established out of profit Capital reserve established out of profit Equity Liabilities Long-term liabilities Loans, credits and other debt instruments Financial leasing Derivatives - - Other liabilities - - Reserves due to deferred income tax Liabilities and reserves for employee benefits - - Other long term reserves Long term prepayments and accruals Long term liabilities Short-term liabilities Trade liabilities and other liabilities Liabilities due to the current income tax Credits, loans and other debt instruments Financial leasing Derivatives - - Liabilities and reserves for employee benefits - - Other short term reserves Short term prepayments and accruals Liabilities related to assets designated for sale - - Short term liabilities Liabilities Total liabilities

11 STAND ALONE TOTAL INCOME STATEMENT Continued activity Note 4 quarters accumulatively quarters accumulatively (comparative) Net revenues Gross sales profit (loss) Cost of sales - - Overheads Other costs of core activity Other operating revenues Other operating costs Profit (loss) from sales of subsidiaries (+/-) - - Profit (loss) from operating activity (3 494) Financial revenues Financial costs Share in profit (loss) of entities valuated by the property rights method(+/-) - - Profit (loss) before tax Income tax (223) Net profit (loss) from continued activity Discontinued activity Net profit (loss) from discontinued activity - - Net profit (loss) Other total income Revaluation of assets Financial assets available for sale: revenues (losses) included in the period in other total income amounts transferred to the financial result - - Cash flow hedges: revenues (losses) included in the period in other total income amounts transferred to the financial result amounts included in the initial value of secured items - - Currency exchange differences from valuation of entities operating abroad - - Currency exchange differences transferred to the financial result sale of foreign entities - - Share in other total income of entities valuated by the property rights method - - Income tax related to components of other total income - - Other total revenues after tax - Total income Total income falling to: - shareholders of the dominant company non-controlling interest 11

12 STAND ALONE CASH FLOW STATEMENT 4 quarters accumulatively 4 quarters accumulatively (comparative) Cash flows from operating activity Note Profit (loss) before tax Adjustments: Depreciation and revaluation write-offs of tangible fixed assets Depreciation write-offs of intangible assets Change in the fair value of investment real estate - - Profit (loss) from financial assets (liabilities) valued in the fair value through the profit and loss account - - Purchased receivables depreciation from the results account - - Purchased receivables purchases and outlays for portfolios - - Profit (loss) from sale of non-financial fixed assets - 5 Profit (loss) from sale of financial assets (other than derivatives) - - Profit (loss) due to exchange rate differences - - Cost of interest Income from interest and dividends (26 497) (32 113) Cost of payments in the form of shares (incentive programs) - - Share in profit (loss) of associated entities - - Other adjustments (25) - Total adjustments (6 595) (9 615) Change to inventory - - Change to the state of receivables (7 120) Change to the state of liabilities (2 572) Change to the state of reserves and accruals Change to the state due to construction agreements - - Change to current capital (9 623) Inflows (expenditures) from settlement of derivatives - - Paid interest on operating activity - - Paid income tax - - Net cash flows from operating activity (6 651) Cash flows from investment activity Expenditures for purchase of intangible assets (15) (9) Inflows from sale of intangible assets Expenditures for purchase of fixed tangible assets (491) (214) Inflows from sale of tangible fixed assets - - Expenditures for purchase of investment property - - Inflows from sale of investment property - - Net expenditures for purchase of subsidiaries (937) (4 793) Net inflows from sale of subsidiaries Received repayment of granted loans - - Granted loans - - Expenditures for purchase of remaining financial assets (22 430) ( ) Inflows from sale of remaining financial assets Inflows from received government grants - - Received interest Received dividends Net cash from investment activity (251) (56 583) 12

13 Cash flows from financial activity Net inflows due to issue of shares - - Purchase of own shares - - Transactions with non-controlling interests without losing control - - Inflows due to issue of debt securities Buyout of debt securities ( ) - Inflows due to incurred loans and credits - - Repayment of credits and loans - - Repayment of liabilities related to financial leasing (160) (554) Paid interest (16 986) (18 886) Paid dividends - - Net cash flows from financial activity (19 439) Change to net cash flows and their equivalents (3 411) Cash flows and their equivalents as of the beginning of the period Change due to the exchange rate differences - - Cash flows and their equivalents as of the end of the period

14 STAND ALONE CHANGES TO EQUITY STAND ALONE CHANGE TO EQUITY FOR THE PERIOD FROM 1 APRIL 2015 TO 31 MARCH 2016 Note Share capital Own shares (-) Capital from sale of shares above their nominal value Equity Capital from revaluation of financial assets available for sale Other capital Retained profit Balance as at (500) Changes to accounting principles (policy) and adjustment of the basic error Balance after adjustments (500) Changes to equity in the period from to Issue of shares Issue of shares due to realization of options (program of payment with shares) Valuation of options (program of payment with shares) Change to the structure of capital group (transactions with non-controlling interests) Dividends - Transfer of financial result to capital - Total transactions with owners Net profit for the period from to Other total income after tax for the period from to Total income Transfer to retained profit (sale of revaluated fixed assets) - Balance as at (500) Total

15 STAND ALONE CHANGE TO EQUITY FOR THE PERIOD FROM 1 APRIL 2014 TO 31 MARCH 2015 Note Share capital Own shares (-) Capital from sale of shares above their nominal value Equity Capital from revaluation of financial assets available for sale Other capital Retained profit Balance as at (500) Changes to accounting principles (policy) and adjustment of the basic error Balance after adjustments (500) Changes to equity in the period from to Issue of shares Issue of shares due to realization of options (program of payment with shares) Valuation of options (program of payment with shares) Change to the structure of capital group (transactions with non-controlling interests) Dividends Transfer of financial result to capital Total transactions with owners Net profit for the period from to Other total income after tax for the period from to Total income Transfer to retained profit (sale of revaluated fixed assets) Balance as at (500) Total 15

16 GENERAL ECONOMIC AND FINANCIAL RATIOS RATIO ANALYSIS ratio numerator denominator Profitability and efficiency ratios ratio value ROA (ROAMA) net profit average assets 0,9% 2,1% ROE net profit average equity 2,9% 6,3% efficiency ratios operating cost net income 94,6% 117,8% efficiency ratios operating cost EBIT 1602,1% -678,4% net profitability net profit net income 12,7% 39,5% EBIT profitability EBIT net income 5,9% -17,4% EBITDA profitability EBITDA net income 9,9% -9,4% Structure of capital balance sheet structure ratios Debt and liquidity ratios equity balance sheet total 30,6% 33,4% debt/assets debt balance sheet total 69,4% 66,6% debt/equity debt equity 226,5% 199,0% share of interest bearing debt share of interest bearing debt interest bearing debt balance sheet total 64,5% 62,8% interest bearing debt equity 210,6% 187,6% share of short-term debt interest bearing STD interest bearing debt 27,0% 49,2% share of long-term debt interest bearing LTD interest bearing debt 73,0% 50,8% short-term debt/equity STD equity 68,1% 102,3% long-term debt/equity LTD equity 158,4% 96,6% EBITDA/debt EBITDA STD 3,3% -1,4% EBITDA/debt EBITDA debt 1,0% -0,7% EBITDA/debt EBITDA interest bearing debt 1,1% -0,8% coverage of interest gross profit + financial costs financial costs 151,1% 137,0% Economic and financial ratios were calculated as the quotient of the quantity described in the column numerator by the quantity described in the column denominator. Apart from items presented in the consolidated balance sheet, consolidated total income statement and consolidated cash flow statement, the following financial quantities (based on the mentioned ones) were applied to calculations. Term average assets means the average of the total asset value as of the date of ratio calculation and 12 months earlier. We did not own off-balance sheet items in the presented periods, so the assets are at the same time the assets adjusted for off-balance sheet items (managed assets). Balance sheet total means the total of all assets equal to the total of all liabilities presented in the consolidated balance sheet. Average equity means the average of the equity as at the date of the ratio calculation and 12 months earlier. Debt means the value of all liabilities (short-term and long-term ones). 16

17 Abbreviation LTD means long-term liabilities. Interest bearing LTD means long-term liabilities that cause the necessity to pay interest (total of long-term liabilities relative to bonds issued and long-term liabilities relative to leasing). Abbreviation STD means short-term liabilities. Interest bearing STD means short-term liabilities, which cause the necessity to pay interest (total of short-term liabilities relative to bonds issued and short-term liabilities relative to leasing). Interest bearing debt means the total of interest bearing STD and interest bearing LTD. EBIT profit means operating profit. EBITDA profit means EBIT profit plus amortization. Operating costs were calculated as the total of selling costs, overheads, other costs of the core business and other operating costs. 17

18 ADDITIONAL INFORMATION TO THE STAND ALONE FINANCIAL STATEMENTS 1. General information 1.1. Information on Kredyt Inkaso S.A. Company name: Kredyt Inkaso Spółka Akcyjna ( Company, Issuer ) Company s registered office: Warszawa, ul. Domaniewska 39 Registration Court: Date of registration: District Court for the Capital City of Warsaw, XIII Commercial Division of the National Court Register (KRS) 28 December in the present legal form (joint stock company) 19 April in the previous legal form (limited partnership) KRS Entry No.: Regon (statistical number): NIP (tax identification number): PKD: Z - other financial service activity, not classified elsewhere, except insurance and pension funds Objects of activity according to the National Court Register(KRS): a) other financial service activity, not classified elsewhere, except insurance and pension funds in PKD Z b) other activity supporting finance services, except insurance and pension funds in PKD Z c) operating call centres in PKD Z d) activity connected with funds management - in PKD Z.; e) accounting and bookkeeping activities; tax consulting in PKD Z. f) activities of financial holding companies in PKD Z. g) activities of head offices and holdings excluding financial holdings - in PKD Z. h) other consultancy services in the fields of business activity and management - in PKD Z Term of the Company is indefinite Composition of the Management Board and the Supervisory Board In the period from 1 April 2015 until the balance sheet date the composition of the Management Board of the Company was not subject to change. As at the Date of the Consolidated Financial Statements Approval for Publication the Management Board was composed of: 1) President of the Management Board Mr Paweł Robert Szewczyk 2) Vice-President of the Management Board Mr Jan Paweł Lisicki 18

19 As at the Approval Date, the composition of the Supervisory Board of the Dominant Company was as follows: 1) Chairman of the Supervisory Board Mr Ireneusz Andrzej Chadaj 2) Vice-Chairman of the Supervisory Board Mr Andrzej Soczek 3) Secretary of the Supervisory Board Mr Marek Gabryjelski 4) Member of the Supervisory Board Mr Tomasz Mazurczak 5) Member of the Supervisory Board Mr Karol Szymański 6) Member of the Supervisory Board Mr Piotr Urbańczyk 7) Member of the Supervisory Board Mr Piotr Woźniak 2. Basis of drawing up and accounting principles 2.1 Basis of drawing up the Financial Statements The Stand-Alone Financial Statements of Kredyt Inkaso S.A. ( financial statements ) were drawn up in accordance with the International Financial Reporting Standards (hereinafter referred to as IFRS ), approved by the European Union, binding as of 31 March 2016 and into the extent required by the Ordinance of the Minister of Finance dated 19 February 2009 on current and periodic information published by issuers of securities and the conditions for recognition as equivalent the information required by the laws of a nonmember state (Journal of Laws No. 33, item 259 as amended), and comprise the period from 1 April 2015 to 31 March 2016 and a comparable period from 1 April 2014 to 31 March The functional currency of Kredyt Inkaso S.A. in which this financial statements were presented is Polish zloty (PLN), and all amounts are expressed in PLN thousand (unless it was indicated otherwise). The present Financial Statements were drawn up assuming the going concern of the Company in the foreseeable future. As at the Date of Approval there are no circumstances posing a threat to the going concern of the Company. The Company named the statements on financial standing as the balance sheet. 2.2 Changes to standards and interpretations of the IFRS Statement of compliance The present Financial Statements were drawn up in accordance with the IFRS as well as in accordance with interpretations announced in the form of ordinances of the European Commission, published and binding during drawing up of the present financial statements Obligatory changes to standards or interpretations observed and applied by Kredyt Inkaso since 2015 New or amended standards and interpretations, which have been in effect since 1 January 2015 and their impact on the financial statements of Kredyt Inkaso: New KIMSF 21 Public fees The new interpretation introduces principles defining the moment of recognizing liabilities due from fees and taxes imposed by the government bodies other than the income tax regulated in the IAS 12. The interpretation is a specification of the principles defined by the IAS 37 Reserves, contingent liabilities and contingent assets. Pursuant to the decision of the IAS Board, the interpretation is in effect for annual periods commencing on 1 January 2014 or later, however its coming into effect in the European Union is obligatory for annual periods commencing on 17 June 2014 or later, therefore the Company started to apply it since The Company has applied the interpretation, however its effect on the financial statements has been insignificant. 19

20 Amendments to the IFRS 3, IFRS 13 and IAS 40 resulting from the Annual adjustments project: cycle which become effective for annual periods commencing on 1 July 2014 or later. Adjustments to standards include: o o o IFRS 3: it has been specified that excluded from the standard are the transactions of creating common conventional agreements (joint arrangements) in reports on these common conventional agreements The amendment had no effect on the financial statements of the Company. IFRS 13: The Board has specified the scope of application of release related to valuation of a portfolio of assets and financial liabilities in the net amount. The amendment has not influenced the financial statements of the Company. IAS 40: The Board has specified that in the case of the purchase of an investment property, one should also consider,whether it is a purchase of the group of assets or joining ventures according to the principles defined in the IFRS 3. The amendment has not influenced the financial statements of the Company. Standards and interpretations obligatory in the version published by the IAS Board but not approved by the European Union, are shown below in the section related to standards and interpretations that did not come to effect Application of standards and interpretations prior to their coming into effect In the present stand-alone financial statements the early voluntary application of standards or interpretations was not used Published standards and interpretations which did not come to effect for periods commencing on 1 January 2015 and their effect on the stand alone financial statements of Kredyt Inkaso Up to the day of drawing up the present stand-alone financial statements, the new or updated standards and interpretations effective for annual periods following the year 2015, were published: New IFRS 9 Financial Instruments: classification and valuation The new standard is to replace the present IAS 39. Changes introduced by the standard in accounting of financial instruments include, first of all: o o o other categories of financial assets, the method of assets valuation depends on; allocation of assets to a category is performed depending on the business model relating to a given asset component, new principles of collaterals accounting reflecting to the higher degree the risk management, the new model of the loss of value of financial assets based on the anticipated losses and creating the necessity of the faster recognition of costs in the financial result. The standard is in effect for annual periods commencing on 1 January 2018 or later. The Company is in the process of evaluation of the effect of the standard on the consolidated financial statements. Amendment to the IAS 19 Employee benefits The amendments consist in specifying the principles of the course of actions in the case when the employees make payments to cover the cost of certain benefits program. The Company has recognized that the amendment will not affect its consolidated financial statements. The amendments are in effect for annual periods commencing on 1 February 2015 or later. Amendments to IFRS 2, IFRS 3, IFRS 8, IAS 16, IAS 24, IAS 38 resulting from the Annual adjustments project: cycle which become effective for annual periods commencing on 1 February 2015 or later. Adjustments to standards include: 20

21 o o o o o IFRS 2: The Board has specified the standard by changing or introducing new definitions of the following terms: market condition, condition of rendering services, condition to acquire rights, condition related to performance. The Group has decided that the amendment will not affect its financial statements. IFRS 3: The Board specified the principles of valuation of conditional payment following the day of take-over so that they are in compliance with other standards (mainly with the IFRS 9 /IAS 39 and IAS 37). The Group has assessed that the amendment will not affect its financial statements. IFRS 8: the Board imposed on the entities performing mergers of operating segments the requirement of additional disclosures related to these joined segments and economic features due to which the merger was performed. The Company is in the process of evaluation of the effect of the standard on the consolidated financial statements. IFRS 8: the standard after the amendment stipulates that the disclosure obligation of agreeing the sum of the assets of the segments with the assets indicated in the balance sheet is obligatory only when the asset values are disclosed divided into segments. The Company has assessed that the amendment will not affect its financial statements. IAS 16 and IAS 38: The Board introduced an adjustment to the principle of calculating the gross amount and the cumulated write-off of an asset (intangible asset) in the case of applying the revaluated value model. The Company has assessed that the amendment will not affect its financial statements. o IAS 24: Definition of the related entity was extended by the entities providing services of the key management personnel and relevant disclosures. The Company has assessed that the amendment will not affect its financial statements. New IFRS 14 Regulatory Deferral Accounts The new standard relates exclusively to entities which are switching to the IFRS and pursue activities in industries, where the government regulates the applied prices such as supply of natural gas, electricity or water. The standard allows to continue the accounting policy related to recognizing revenues from such activity applied prior to switching to the IFRS both in the first statements drawn up according to the IFRS and later. The new regulations will not affect the consolidated financial statements of the Company. The standard is in effect for annual periods commencing on 1 January 2016 or later, however it will not be approved for application in the European Union. New IFRS 15 Revenue from Contracts with Customers The new standard shall replace the current IAS 11 and IAS 18 ensuring one consistent model of recognizing revenues. The new 5-step model shall make the recognition dependent on gaining the client s control over a good or a service. Additionally, the standard introduces additional requirements of disclosing information on a few detailed issues. The new standard may change the time and the amount of the revenues recognized by the Company, however the Company has not finalized the process of analysis of its influence on the financial statements. The standard becomes effective for annual periods commencing on 1 January 2018 or later. Amendment to IFRS 11 Common conventional agreements Pursuant to the amendment the entity purchasing shares in the common activity constituting business (undertaking) will have to apply principles defined in the IFRS 3 for including assets and liabilities of the common activity, meaning, among other things, to evaluate assets and liabilities in the fair value and establish the company value. The Company anticipates that the amendment will not affect its financial statements. The amendment is effective for annual periods commencing on 1 January 2016 or later. 21

22 Amendment to IAS 16 Tangible fixed assets and IAS 38 Intangible Assets According to the amendment, the method of amortization of tangible assets based on the achieved revenues from utilizing the asset component is inadmissible. In case of intangible assets applying this method has been limited. The Company anticipates that the amendment will not affect its financial statements. The amendment is effective for annual periods commencing on 1 January 2016 or later. Amendment to IAS 16 Tangible fixed assets and IAS 41 Agriculture The amendment stipulates that production plants (e.g. vines, fruit trees) shall be excluded from the IAS 41 range and included in the IAS 16 range as tangible assets created on one s own. Due to this amendment performing valuation of these plants in the fair value as of each balance day, which was required by IAS 41 up till now, shall not be necessary. The amendment does not concern the business activity of the Company. The amendment is effective for annual periods commencing on 1 January 2016 or later. Amendment to IAS 27 Stand alone financial statements Pursuant to the introduced adjustment to the stand alone statements, shares in the subsidiary, common undertaking or in the associated entity will be possible to be valuated also by means of the property rights method. Up till now the IAS 27 stipulated exclusively valuation in the purchase price or according to ISFR 9/ IAS 39. The Company has not decided yet whether to apply the permitted option of valuation by means of the property rights method. The amendments are effective for annual periods commencing on 1 January 2016 or later. Amendment to IFRS 10 "Consolidated Financial Statements" and IAS 28 "Investments in Associates and Joint Ventures" The so far principles regulating the settlement of a loss of control over a subsidiary stipulated that a profit or a loss should be recognized as at the moment of the loss of control. Whereas, the principles of equity method stipulated that the result on transactions with entities valuated by means of the equity method should be recognized only up to the extent of the interest attributable to the other equity holders in these entities. In the event a dominant company sold or made a contribution in-kind consisting of shares to the entity valuated with the use of equity method in such a way as to lose control over the entity, the above mentioned regulations would be contradictory. The amendment to IFRS 10 and IAS 28 mitigates the contradiction as follows: o o if the entity control over which was lost is a company (a business) the result of the transaction should be recognized in full, if the entity control over which was lost is not a company, the result shall be recognized only to the extent of interest attributable to other investors. The effective date of this amendment has been postponed. Amendment to IFRS 5, IFRS 7, IAS 19 and IAS 34 resulting from the Annual Improvements Cycle: , which are effective for annual periods commencing on 1 January 2016 or later. The amendments to the standards include: o o IFRS 5: the amendment to the standard stipulates that if the company changes the classification of assets for sale to those for distribution to owners, or from those for distribution to owners to those allocated for sale, it means that the initial plan was continued and the introduced corrections shall not be reverted. The Company anticipates that the amendment will not affect its financial statements. IFRS 7: due to the change to the standard it was specified that the requirements related to disclosure of information on items presented in net amounts in force since 2013 do not apply to the abbreviated interim statements unless they are the information that require disclosure on the basis of the general IAS 34 principles. The change shall not influence the annual financial statements. The Company anticipates that the amendment will not significantly affect its interim financial statements. 22

23 o o o IFRS 7: the amendment introduces a new guideline allowing to assess whether an engagement in transferred assets was maintained. If the entity transferred the assets however it concluded a service agreement in which remuneration depends on the amounts and dates of payments of the transferred asset component, it means that the entity maintaines its engagement in this asset component. The Company anticipates that the change shall not influence its financial statements. IAS 19: the standard allows applying for discounting the cash flows the interest rates relevant to treasury securities in case where the securities market for commercial entities is shallow. The change to the defines that the depth of the market should be evaluated from the perspective of the currency of these securities and not the coutry. The Company anticipates that the change shall not influence its financial statements. IAS 34: the standard allows that some information required by IAS 34 for the abbreviated interim financial statements is presented in other documents which accompany such interim statements, e.g. in the activity report. If information is included in accompanying documents than a clear reference to the items where they were disclosed should be made in the interim financial statements. Supplementary documents should be available to users on the same terms and at the same time as the interim financial statements otherwise the interim financial statements shall be deemed incomplete. The change shall not influence the Company s annual financial statements. The Company anticipates that the change shall not influence its financial statements. Changes to IFRS 10 Consolidated financial statements, IFRS 12 Disclosure of information on shares in other entities and IAS 28 Investments is affiliated entities and common undertakings. The IAS Board added further exclusions from the requrment of consolidation or applying the property rights method in case of investment entities: o o o if the mid-level dominant company is dependant on the investment entity which presents its investments in the fair value pursuant to IAS 39/IFRS 9 then such mid-level dominant company may not draw up consolidated financial statements, if the investor is dependant on the investment entity which presents its investments in the fair value pursuant to IAS 39 /IFRS 9 then such inwestor is allowed not to apply the property rights method for recognizing his investments in the co-controlled or affiliated entities, the investment entity is obliged to consolidate subsidiaries which provide auxiliary services, if however such subsidiary is the investment entity itself then it is not subject to consolidation. The amendments apply to annual periods commencing on 1 January 2016 or later. Changes to IAS 1 Presentation of financial statements The IAS Board, within the largest project which is to icrease the clarity and to avoid the excessive disclosures in the financial statements, published several changes to the IAS 1. The changes include the following aspects: o o o o The Board points out that including in the financial statements too much insignificant information results in the financial statements becoming illegible and contradictory to the principle of significance, the required by the standard items of the results and other total income statements as well as the financial standing statements may be disaggregated, requirements related to partial amounts included in the results and other total income statements as well as in the financial standing statements were added, the sequence of notes to the financial statements is up to the company s decision, however within this range clearity and comparability should be assured. 23

24 The Company is in the proces of evaluating the influence of the changes on the consolidated financial statements. The amendmenta apply annual periods commencing on 1 January 2016 or later. The new IFSR 16 Leasing The new standard regulating lease agreements(including rental agreement and contract of tenancy) includes the new definition of leasing. Significant changes apply to lessors: the standard requires including in the balance sheet for each lease agreement the value of the right to use the asset component and the analogical financial liability. The right to use assets is then amortized however the liability is valued in the amortized cost. Simplifications have been stipulated for short-term agreemens (up to 12 months) and the assets with the low value. The accounting apporach to leasing from the point of view of the lessor is close to the principles defined in the current IAS 17. The Company anticipates that the new standard shall have a significant influence on its financial statemets however it has not completed the value defining proces. The amendments apply to annual periods commencing on 1 January 2019 or later. The Company intends to implement the aforementioned regulations within timelines forseen to be applied by standards or interpretations. 2.3 Significant elements of accounting policy The financial year comprises the period from 1 April to 31 March of the following year Transactions in foreign currencies Transactions denominated in currencies other than Polish zloty are converted into PLN at the exchange rate binding on the date of transaction (spot exchange rate). Cash items denominated in foreign currencies are valuated according to the closing exchange rate (spot exchange rate) i.e. at the exchange rate of the leading bank ING Bank Śląski S.A. from the first quotation at the balance sheet date. Non-cash balance sheet items recorded according to the historical cost, denominated in foreign currency, are valuated at the exchange rate of the transaction date. Non-cash balance sheet items recorded according to the fair value, denominated in foreign currency, are valuated at the exchange rate of the date of the fair value estimation Intangible assets Intangible assets are considered these components of assets which result from agreements or other legal titles regardless of the fact whether they are marketable or not. Initial valuation of intangible assets was calculated at the acquisition price resulting from a separate transaction. After the initial recognition, intangible assets valuation was calculated at the acquisition price after deduction of amortization; moreover the factor which as a rule decreases the valuation is the total amount of impairment write offs. The mentioned factor did not occur in the reporting period. The period and the method of amortization of the intangible assets with the defined period of usage were verified at the end of the reporting period. Verified period of intangible assets usage did not differ from the previous estimations. Amortization write offs for intangible assets are calculated according to a straight-line method during the period of anticipated period of usage, which is following for individual categories of intangible assets used in the presented periods: - for system software - 30%, 33% or 50% - for production software - 30% lub 50% 24

25 Depreciation rates applied for intangible assets in previous periods do not differ from those, which were verified and applied in the reporting period. Due to this fact, net values of intangible assets estimated according to the previous rules and those, which are valid at present, are the same. In the presented reporting periods no prerequisites for impairment of other components of intangible assets occurred. The component of intangible assets is removed from a balance sheet register when it is sold or if further benefits resulting from its usage or sale are not anticipated Tangible fixed assets The following fixed assets are classified as tangible fixed assets: those maintained by the Company in order to be used in business activities, those to be used for the time longer than one period those in relation to which there is the probability that they will generate economic benefits, those the value of which can be estimated in a reliable manner. The following assets were classified as tangible fixed assets: improvements in third party fixed assets (buildings), machinery, technical equipment, other fixed assets, fixed assets under construction. As at the date of initial recognition, fixed assets were valuated at the purchase price. In the tangible fixed assets used by the Company, no significant parts of fixed assets (components) of which period of usage would differ from the period of usage of the whole tangible fixed asset were identified. In the presented periods straight-line method of tangible fixed assets depreciation was applied, resulting from the anticipated useful life of a tangible fixed asset, with the exception of notebooks depreciated according to a degressive method at the ratio equal 2. The basis of tangible fixed assets depreciation in the period of applying IFRS is the initial value decreased by residual value. Depreciation rates applied for tangible fixed assets in previous periods do not differ from those that were verified and applied in the reporting period. Depreciation was calculated applying rates resulting from anticipated periods of usage, which are following for already owned tangible fixed assets: Investments in third party fixed assets (buildings) - 10% Computers (work stations) - 30% Notebooks - 30% Servers - 30% Computer specialist equipment - 30% Photocopiers and high-output printers - 28% Telecommunications systems - 20% Furniture - 20% Means of transport - 20% Specialized office equipment (e.g. mailing equipment, high-output shredders) - 14% Depreciation begins when a tangible fixed asset is available for usage and it ends for tangible fixed assets removed from the balance sheet register. 25

26 Deferred income tax assets Deferred income tax assets were estimated at the amount that is meant to be deducted from income tax in the future, in relation to negative temporary timing differences that will result in decrease of taxable base in the future, calculated in a conservative manner. When valuating deferred income tax assets, the tax rate equal to 19% was taken into consideration, which to the best of our knowledge will be valid in the year in which the mentioned item of assets will be effectuated Financial assets The component of financial assets is disclosed in the financial standing report if the Company becomes the party to the agreement of this instrument. The standardized transactions of purchase and sale of financial assets and liabilities are recognized as of the day of transaction conclusion. The component of financial assets is excluded from the financial standing report in the event when the resulting from the concluded agreement rights to economic benefits and the risks resulting from it have been completed, have expired or the Company has waived them them. As at the purchase day, the Company values the financial assets and liabilities in the fair value, i.e. most often according to the fair value of the realized payment in case of the asset component or according to the received amount in case of the liability. The Group includes transaction cost in the initial value of the valuations of all financial assets and liabilities, except for the assets and liabilities category valued in the fair value through the result. As at the balance sheet day the financial assets are valued according to the below principles. For the purposes of valuaton after the intial recognition the financial assets other than the collateral derivative financial instruments are classified as: loans and liabilities financial assets valued according to the fair value through the financial result, investments retained until the maturity date, as well as financial assets available for sale. These categories define valuation principles as of the balance sheet day as well as recognizing profits or losses from valuation in the financial result or in other total income. Profits or losses recogized in the financial result are presented as revenues or financials cost, exccept for revaluation write-offs due to trade receivables, which are presented as other operating cost. All financial assets, except for those valued in the fair value through the financial result, are subject to evaluation as of each balance sheet day due to occurance of the loss of their value prerequisites. The component of financial assets is subject to revaluation write-offs provided there is objective evidence proving the loss of its value. The loss of value prerequisites are analyzed separately for each category of financial assets, which can be seen below. Loans and receivables are the financial assets which are non-derivative instruments, the payment of which is established or is possible to be determined, and which are not quoted on the active market. Loans and receivables are valued according to the depreciated cost using the efective interest rate method. Valuation of short term receivables is performed in the due payment value due to the insignificant discout effect. Financial assets qualified for the loans and receivables category are disclosed in the financial standing statemens as: long-term assets in the item Receivables and loans, and and short-term assets in the items: Loans, Trade receivables and other receivables as well as Cash and cash equivalents. 26