GETBACK CAPITAL GROUP

Transcription

1 GETBACK CAPITAL GROUP CONSOLIDATED FINANCIAL STATEMENTS COMPILED IN COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR THE YEAR ENDED ON TOGETHER WITH INDEPENDENT STATUTORY AUDITOR'S OPINION

2 TABLE OF CONTENTS SELECTED FINANCIAL DATA... 3 CONSOLIDATED INCOME STATEMENT... 4 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 4 CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 5 CONSOLIDATED STATEMENT ON CHANGES IN EQUITY... 6 CONSOLIDATED CASH FLOW STATEMENT... 7 ADDITIONAL INFORMATION AND EXPLANATIONS TO THE CONSOLIDATED FINANCIAL STATEMENTS General information Composition of the Capital Group Approval of the financial statements Important accounting principles Effect of changes to the accounting policies Financial risk management at the Capital Group Information on operational segments Net revenues Other operating revenues Other operating expenses Remuneration costs and employee benefits External services Result on sales of financial assets Financial revenues and costs Income tax Tangible assets Intangible assets Investments Prepayments Debt portfolios Trade and other receivables Cash and cash equivalents Share capital Other equity Profit per share Dividends paid and proposed for payment Liabilities from issue of debt securities, liabilities arising from financial lease and liabilities arising from loans and credits53 28 Trade liabilities and other liabilities Liabilities relative to employee benefits Contingent liabilities and provisions for liabilities Operating lease Additional information to cash flow statement Related party transactions Business combinations Components of other comprehensive income Events after the balance sheet date /67

3 SELECTED FINANCIAL DATA in PLN thousand in EUR thousand Net revenues Result on operations Gross profit Net profit Net profit per shareholders of the parent company Profit (earning) per share attributable to equity holders of the parent company (in PLN/EURO per one share) Profit (earning) per share attributable to equity holders of the parent company - diluted (in PLN/EURO per one share) Acquisition of portfolios set forth in the agreement ( ) ( ) ( ) (26 569) Payments from debtors Net cash from operating activities ( ) (41 761) (63 102) (9 979) Net cash from investing activities ( ) (35 982) (64 085) (8 598) Net cash from financing activities Net increase / (decrease) in cash and cash equivalents Total assets Long-term liabilities Short-term liabilities Total equity Equity attributable to equity holders of the parent company Non-controlling interests Share capital Number of shares Book value per ordinary share (in PLN/EUR) , The selected financial data presented above are supplementary to the financial statements and have been converted into EUR according to the following principles: relevant items of assets and liabilities as at balance sheet day according to average exchange rate applicable at the last balance sheet day, announced by the National Bank of Poland; as of 31 December , as of 31 December respectively; particular items of assets and liabilities statement, as well a cash flow statement for the period between 1 January and 31 December of given year - based on average rate calculated as an arithmetic rate average quoted by the National Bank of Poland on the last day of the month in given period; for the period between 1 January and 31 December , between 1 January and 31 December respectively. Additional information and explanations to consolidated financial statements attached on pages 7 through 67 are an integral part of consolidated financial statements 3/67

4 CONSOLIDATED INCOME STATEMENT Continuing operations Note Net revenues Share in profits (losses) of affiliates measured according to the equity method 18 (10 662) Other operating revenue Remuneration costs and employee benefits 11 (78 101) (49 034) Depreciation / amortisation (6 108) (2 983) External services 12 (71 788) (27 013) Other operating expenses 10 (25 692) (18 104) Operating profit Result on sales of financial assets 13 (32) 6 Financial revenues Financial expenses 14 (44 619) (12 717) Net financial revenues (costs) (43 564) (12 609) Gross profit (loss) Income tax Other charges on the financial result - - Net profit (loss) shareholders of parent company Equity attributable to non-controlling interest Earnings per one share: - basic earnings for the financial year (in PLN) diluted earnings for the financial year (in PLN) Earnings per share Net profit for the period attributable to non-preference shareholders of the parent company (in PLN thousand) Weighted average number of ordinary shares issued, applied to calculate the basic profit per share Basic earnings per share (in PLN) Weighted average number of ordinary shares issued, applied to calculate the diluted profit per share Diluted earnings per share (in PLN) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Components of other comprehensive income, i.e. exchange rate differences on translating foreign entities may be transferred in the future to the income statement. Note Profit (loss) for the period Exchange differences on translating foreign entities 23 (87) Other net comprehensive income (87) Comprehensive income for the period Attributable to shareholders of parent company Attributable to non-controlling interest Additional information and explanations to consolidated financial statements attached on pages 7 through 67 are an integral part of consolidated financial statements 4/67

5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS Note Non-current assets Tangible fixed assets Intangible assets Goodwill Investment property Investments Investments in affiliates Investments in securitisation funds Other long term receivables Deferred income tax assets Prepayments Current assets Debt portfolios Trade receivables Income tax receivables Other debtors Prepayments Cash and cash equivalents TOTAL ASSETS LIABILITIES AND EQUITY Equity (attributable to shareholders of the parent company) Share capital Net profit (loss) Other equity Non-controlling interests Total equity Long-term liabilities and provisions for liabilities Liabilities arising from issuance of debt securities Financial leasing liabilities Long-term liabilities relative to loans and borrowings Other Liabilities Short-term liabilities Liabilities arising from issuance of debt securities Trade and other liabilities Financial leasing liabilities Short-term liabilities relative to loans and borrowings Corporate income tax liabilities Liabilities relative to employee benefits Short-term provisions TOTAL LIABILITIES TOTAL OF LIABILITIES AND EQUITY Additional information and explanations to consolidated financial statements attached on pages 7 through 67 are an integral part of consolidated financial statements 5/67

6 CONSOLIDATED STATEMENT ON CHANGES IN EQUITY for the period of 12 months ended on 31 December 2016 Other equity Equity Supplementary attributable to Noncontrolling Total equity Share capital Undistributed capital and Exchange rate Net profit shareholders retained retained differences of the parent interests earnings earnings company Note As at (44) Comprehensive net income for the period Reclassification of previous year s profit to undistributed financial results ( ) Dividends payable to non-controlling shareholders (196) (196) Transactions with shareholders ( ) - (196) (196) As at (21) for the period of 12 months ended on 31 December 2015 Other equity Equity Supplementary attributable to Noncontrolling Total equity Share capital Undistributed capital and Exchange rate Net profit shareholders retained retained differences of the parent interests earnings earnings company Note As at (41) Comprehensive net income for the period (87) Reclassification of previous year s profit to undistributed financial results Transfer of undistributed financial result to reserve capital (44 097) (21 074) Dividends payable to non-controlling shareholders (175) (175) Non-controlling interest in Lawyer Consulting Associate Srl Transactions with shareholders (44 097) - (174) (174) As at (44) Additional information and explanations to consolidated financial statements attached on pages 7 through 67 are an integral part of consolidated financial statements 6/67

7 CONSOLIDATED CASH FLOW STATEMENT Cash flows from operating activities Note Net profit (loss) Total adjustments: ( ) ( ) Depreciation / amortisation Share in (profit) loss of associates (11 711) Foreign exchange (gain)/loss (814) 105 (Profit) loss on investing activities (2 628) (220) Interest Movements in deferred income income tax assets 32 (9 313) (673) Movement of investments in debt portfolios 32 ( ) (29 366) Change in receivables 32 ( ) (62 962) Changes in liabilities except for loans and borrowings (55 309) Movement of liabilities relative to employee benefits Movements in provisions as well as deferred income tax provision 32 - (12 594) Changes in prepayments and accruals 32 (15 321) (2 320) Income tax (paid) / refunded (1 181) (2 270) Current income tax Valuation of fund s investment certificates (653) (20) Other adjustments (7) (1 317) Net cash from operating activities ( ) (41 761) Cash flows from investment activities Disposal of property, plant and equipment and intangible assets Acquisition of property, plant and equipment and intangible assets (34 314) (15 209) Disposal of financial assets Purchase of financial assets (33 294) - Acquisition of a subsidiary, net of cash acquired 32 ( ) Acquisition of shares or stock in other entities 32 (39 272) (30 300) Disposal of a subsidiary, net of cash spent on acquisition - (54) Other capital expenditure (22 921) - Net cash used in investing activities ( ) (35 982) Cash flows from financial activities Payment of liabilities under finance lease agreements (1 014) (834) Cash inflows from loans and borrowings taken out Inflows from issue of debt securities Dividends paid 26 (196) (175) Repayment of loans and borrowings (4 100) (5 133) Redemption of debt securities 32 ( ) (45 000) Interest paid 32 (33 949) (10 073) Net cash from financing activities Net increase / (decrease) in cash and cash equivalents Net foreign exchange gains/losses 3 (6) Opening balance of cash and cash equivalents Closing balance of cash and cash equivalents, including of limited disposability Additional information and explanations to consolidated financial statements attached on pages 7 through 67 are an integral part of consolidated financial statements 7/67

8 ADDITIONAL INFORMATION AND EXPLANATIONS TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 General information GetBack Capital Group ( Capital Group, Group ) consists of a parent company GetBack S.A. ( GetBack, Company or parent entity ) and its subsidiaries. Consolidated financial statement of the Group cover 12 month long period until 31 December 2016, and includes comparative data for the period of 12 months until 31 December 2015 for the consolidated profit and loss statement, statement of changes in consolidated equity, consolidated statement of total income as well as cash flow, and consolidated statement of financial position as of 31 December 2016 and 31 December GetBack S.A. is based in Wrocław at Powstańców Śląskich street No On GetBack S.A. was entered to the National Court Register by the District Court for Wrocław Fabryczna, 6th Commercial Division of the National Court Register under KRS no The Company s REGON (Business ID) is The predominant business of the Group is recovery of acquired debt and management of debt portfolios in securitisation funds, including: restructuring and recovery of acquired debt. The duration of the Company and member companies of the Capital Group is unlimited. Business activity type of each company included in the Group of Companies was described in note no.2 - additional information and explanationa. Starting from the direct parent company for GetBack Group and the owner of 100% of company s shares is DNLD sp. z o.o. (former: Emest Investments sp. z o.o.). Prior to that day, the direct parent company for GetBack Group and the owner of all Company s shares was a subsidiary called Getin International S.a r.l. located in Luxemburg, which received 100% of GetBack S.A. shares in kind from its subsidiary Idea Expert S. A. on 14 March The company LC Corp B.V., owned by PhD Leszek Czarnecki, is the parent company of the whole Group. 2 Composition of the Capital Group As of, GetBack Capital Group included the following companies: 8/67

9 Subsidiaries fully consolidated: Name and registered office Kancelaria Prawna GetBack Mariusz Brysik sp.k. with its registered office in Wrocław Activity type Effective share in capital legal services 90.91% 90.91% easydebt NSFIZ with its registered office in Warsaw statutory activity of funds % % GetBack Recovery Srl with its registered office in Bucharest (Romania) debt collection services % % Lawyer Consulting Associate Srl with its registered office in Bucharest (Romania) legal services 98.00% 98.00% Neum Pretium Sp. z o.o. (former Bakura IT Sp. z o.o.) with its registered office in Wrocław other financial services % % Open Finance FIZAN with its registered office in Warsaw statutory activity of funds % % Bakura sp. z o.o. with its registered office in Warsaw other financial services % % Bakura sp. z o.o. S.K.A. with its registered office in Warsaw other financial services % % Universe 3 NSFIZ with its registered office in Warsaw statutory activity of funds % % Bakura Sp. z o.o. Kolima Sp. k. with its registered office in Wrocław other financial services % not appl. GetPro NSFIZ (former EGB Wierzytelności 1 NSFIZ) with its registered office in Warsaw statutory activity of funds % not appl. Debito NSFIZ with its registered office in Warsaw statutory activity of funds % not appl. Open Finance Wierzytelności NSFIZ with its registered office in Warsaw statutory activity of funds % not appl. Neum Pretium S.A. with its registered office in Warsaw other financial services % not appl. The subsidiaries cover the entities controlled by GetBack, including investment funds, where GetBack Group has its investment certificates and exercises active control. Detailed consolidation principles were enclosed in the note 4.8. Affiliated entities disclosed using the equity method Name and registered office Activity type Effective share in capital OMEGA Wierzytelności NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% 20.00% Trigon Profit XIV NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% not appl. Trigon Profit XV NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% not appl. Trigon Profit XVI NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% not appl. Trigon Profit XVIII NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% not appl. Trigon Profit XXI NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% not appl. CENTAURIS Windykacji NSFIZ with its registered office in Warsaw statutory activity of funds 26.66% not appl. Affiliated entities are all entities where the Group has significant influence. Detailed consolidation principles were enclosed in the note 4.8. As at Group s share in the total number of votes in respect of its subsidiaries and affiliated entities is equal to its share in share capital of those entities. 9/67

10 Graphic presentation of GetBack Capital Group structure as at : GetBack S.A. Subsidiaries - Companies Subsidiaries - Funds Affiliated entities GetBack Recovery Srl easydebt NSFIZ Omega Wierzytelności NSFIZ Lawyer Consulting Associate Srl 1 GetPro NSFIZ (former EGB Wierzytelności 1 NSFIZ) Trigon Profit XIV NSFIZ Kancelaria Prawna GetBack Mariusz Brysik sp.k. 2 Universe 3 NSFIZ Trigon Profit XV NSFIZ Baktura sp. z o.o. S.K.A. Debito NSFIZ Trigon Profit XVI NSFIZ Bakura sp. z o.o. Open Finance Wierzytelności NSFIZ Trigon Profit XVIII NSFIZ Bakura sp. z o.o. Kolima sp. k. Open Finance FIZAN 3 Trigon Profit XXI NSFIZ Neum Pretium SA Centarius Windykacji NSFIZ 4 Neum Pretium sp. z o.o. (former Bakura IT sp. z o.o.) 1 Lawyer Consulting Associate Srl GetBack SA oraz GetBack Recovery Srl hold 49% share in profit each 2 Kancelaria Prawna GetBack Mariusz Brysik sp.k. the limited partner with 90.91% stake is GetBack SA, whereas Bakura sp. z o.o. S.K.A is a limited partner 3 Open Finance FIZAN GetBack holds 19% investment certificates and Bakura sp. z o.o. S.K.A holds 81% investment certificates of this Fund 4 Centauris Windykacji NSFIZ GetBack SA and Open Finance hold 13.33% investment certificates of this Fund 10/67

11 In the period between and the following significant transactions took place within the Capital Group: On 18 February 2016 Bakura sp. z o.o. SKA, a subsidiary of GetBack S.A. acquired series 3 investment certificates of Open Finance FIZAN fund. The same year, on , GetBack S.A. acquired series 4 investment certificates and on series 5 investment certificates of Open Finance FIZAN fund. As at 31 December 2016 Bakura sp. z o.o. S.K.A. held 81% of the fund s investment certificate, while the direct share of GetBack S.A. in the fund was 19%. GetBack Capital Group now holds in total 100% of investment certificates of Open Finance FIZAN fund. The final valuation of all transactions amounted to PLN thousand. On GetBack S.A. submitted a subscription for series B investment certificates and series C investment certificates of NSFIZ (former EGB Wierzytelności 1 NSFIZ). The acquisition was completed on The transaction resulted in GetBack S.A. holding 100% stake in the fund. The final valuation of all transactions amounted to PLN 19 million. On Bakura sp. z o.o. SKA, a subsidiary of GetBack S.A., joined a partnership with Prawna GetBack Mariusz Brysik sp. k. as limited partner. On r. Neum Pretium sp. z o.o. sp.k., a subsidiary of GetBack S.A., acquired the rights and obligations of a limited partner to Kolima sp. z o.o. sp. k. The final valuation of the transaction amounted to PLN thousand. On GetBack S.A. acquired: o o o 42 series B investment certificates of Trigon Profit XV NSFIZ fund, thus acquiring 20% of investment certificates issued by this fund 37 series B investment certificates of Trigon Profit XV NSFIZ fund, thus acquiring 20% of investment certificates issued by this fund, 34 series B investment certificates of Trigon Profit XVI NSFIZ fund, thus acquiring 20% of investment certificates issued by this fund The final valuation of the transaction amounted to PLN thousand. On GetBack S.A. submitted a subscription for 160 series 22 investment certificate of easydebt NSFIZ fund. The final valuation of the transaction amounted to PLN thousand. On GetBack S.A. submitted a subscription for 73 series 23 investment certificate of easydebt NSFIZ fund. The final valuation of the transaction amounted to PLN thousand. As at r. GetBack S.A. held 100% investment certificates of easydebt NSFIZ fund. In the second half of 2016 Capital Group GetBack S.A. acquired investment certificates of Centauris Windykacji NSFIZ fund; the acquisition was conducted in the following tranches: o o o on GetBack S.A. submitted a subscription for one series B0 investment certificate, on GetBack S.A. GetBack S.A. submitted a subscription for one series B2 investment certificate, on r. Open Finance FIZAN fund acquired 2 series B investment certificates, thus acquiring 26,6% of investment certificates issued by this fund. The final valuation of the transaction amounted to PLN 800 thousand. In quarter 3 of 2016 GetBack S.A. acquired investment certificates of Trigon Profit XVIII NSFIZ fund; the acquisition was conducted in the following tranches: o 20 series B investment certificates on , o 44 series B investment certificates on , thus acquiring 20% of investment certificates issued by this fund The final valuation of the transaction amounted to PLN thousand. 11/67

12 GetBack Capital Group On GetBack S.A. acquired series E, G, J, K investment certificates of Debito NSFIZ fund thus becoming a 100% owner of the fund. The final valuation of the transaction amounted to PLN thousand. On r. GetBack S.A. acquired 31 series B investment certificates of Trigon Profit XXI NSFIZ fund, thus acquiring 20% of investment certificates issued by this fund The final valuation of the transaction amounted to PLN thousand. In quarter 4 of 2016 GetBack S.A. acquired 100% investment certificates of Open Finance Wierzytelności NSFIZ fund; the acquisition was conducted in the following tranches: o series 11 investment certificates on , o series 11 investment certificates as well as series 10 investment certificates on , o series 11 investment certificates as well as 500 series 1 investment certificates on , o series 11 investment certificates on , The final valuation of the transaction amounted to PLN thousand. On Neum Pretium S.A. with share capital of PLN 200 thousand, founded by GetBack S.A, was entered in the National Court Register Employment at the Capital Group Number of persons employed (in FTE s) with entities of GetBack Capital Group Change GetBack S.A Kancelaria Prawna GetBack Mariusz Brysik sp.k (8) easydebt NSFIZ GetBack Recovery Srl Neum Pretium Sp. z o.o. (former Bakura IT Sp. z o.o.) 6-6 Open Finace FIZAN Bakura sp. z o.o Bakura sp. z o.o. SKA 1-1 Kolima sp. z o.o. sp. k. - not appl. - GetPro NSFIZ (former EGB Wierzytelności 1 NSFIZ) - not appl. - Universe 3 NSFIZ Lawyer Consulting Associate Srl Debito NSFIZ - not appl. - Open Finance Wierzytelności NSFIZ - not appl. - Neum Pretium S.A. - not appl. - Total including: Poland Overseas activity Management Board of Parent Company Composition of the Management Board of GetBack S.A. as at as well as at the date of approva of the consolidated financial statements was as follows: Konrad Kąkolewski President of the Management Board, Paweł Trybuchowski Vice-President of the Management Board, Anna Paczuska Vice President of the Management Board, Mariusz Brysik Member of the Management Board, Marek Patuła Member of the Management Board, 12/67

13 Bożena Solska Member of the Management Board. On June 01st, 2016, the Supervisory Board of Cersanit S.A. appointed Mr Paweł Oskard, the former Financial Director, to the Management Board of the Company. On 1 August 2016 Ms Anna Paczuska was appointed to the Company s Management Board and assumed the function of Vice-President of the Management Board. On 15 September 2016 Mr Michał Synoś was dismissed from his function of the Member of the Management Board and replaced by Mr Wojciech Małek, who remained Member of the Management Board until 7 November On 14 November 2016 Mr Marek Patuła was appointed to the Management Board as Member of the Management Board. On 30 December 2016 Ms Bożena Solska was appointed to the Management Board as Member of the Management Board. 3 Approval of the financial statements These consolidated financial statements were approved for publication by the Company s Management Board on Important accounting principles 4.1 Basis for preparation of the consolidated financial statements The consolidated financial statements have been prepared in line with the historical cost method, except for financial instruments, measured at fair value (i.e. investments in acquired debt portfolios and investment certificates). The consolidated financial statements are presented in PLN and all values in PLN 000, unless specified otherwise. The consolidated financial statements were prepared with assumption of continuation of business activity by the companies of the Group in possible to predict future covering a period of at least 12 months from the balance sheet date. As of the date of approving these consolidated financial statements there are no circumstances which would indicate any threat to the going concern of the Group companies within a period of at least one year from the balance sheet date. For a period from 1 January 2016 to 31 December 2016 as well as in comparable period no discontinued operations occurred at the Group. The consolidated financial statements contain data for the period from 1 January 2016 to 31 December 2016 as well as in comparable data: for items of consolidated statement of financial position as at 31 December 2015, for items of consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated cash flow statement for the period between 1 January 2015 to 31 December Statement of compliance This consolidated financial statement was prepared in compliance with International Financial Reporting Standards (IFRS) approved by the EU, and to all matters not settled therein, in compliance with the Accounting Act ( Act, AA ) of 29 September 1994 as amended, and with the secondary legislation thereto ( Polish accounting standards ). Consolidated financial statement considers the requirements of all standards approved by the EU, and related interpretations, excluding the standards and interpretations listed below, which are to be approved by the EU, or have been approved by the EU, but entered or will enter into force after the balance sheet date. 13/67

14 Within the period covered by the consolidated financial statement the Group failed to earlier application of the standards and interpretations, which have been approved by the EU, but entered or will enter into force after the balance sheet date. IFRS cover the standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC"). 4.3 Changes in the accounting principles applied The below standards and interpretations, valid for annual periods commencing on 1 January 2016, have no significant effect on financial position, results of Group s operation, or the scope of information presented in the consolidated financial statement: Amendments to IFRS 11 Joint Arrangements - reconciliation of acquisition of interest in joint operations - approved in the EU on 24 November (effective for annual periods beginning on or after 1 January 2016), Amendments to IAS 1 Presentation of Financial Statements - Initiative regarding disclosures - approved in the EU on 18 December 2015 (effective for annual periods beginning on or after 1 January 2016), Amendments to IAS 16 "Property, Plant and Equipment" and IAS 38 "Intangible Assets" - Explanations on acceptable methods of depreciation - approved in the EU on 2 December 2015 (effective for annual periods beginning on or after 1 January 2016), Amendments to IAS 16 "Property, Plant and Equipment" and IAS 41 "Agriculture" - Agriculture: crops - approved in the EU on 23 November 2015 (effective for annual periods beginning on or after 1 January 2016), Amendments to IAS 27 "Separate financial statements - Equity method in separate financial statements - approved in the EU on 18 December 2015 (applicable to annual periods beginning on or after 1 January 2016); Amendments to various standards Improvements to IFRS ( cycle) - resulting from the annual improvement procedure of IFRS (IFRS 5, IFRS 7, IAS 19 and IAS 34) primarily with a view to removing inconsistencies and clarifying wording - approved in the EU on 15 December 2015 (effective for annual periods beginning on or after 1 January 2016) 4.4 New standards and interpretations which have been published but have not entered into force yet The following standards and interpretations have been issued by the International Accounting Standards Committee or the International Financial Reporting Interpretations Committee, approved by the EU, but have not yet come into effect: IFRS 15 "Revenue from contracts with customers" (effective for annual periods as of 1 January 2017 and thereafter) - This new standard clarifies the principles that will replace most of the detailed guidelines on disclosing revenues, that currently exist in IFRS. In particular, the standard, when approved, will invalidate IAS 18 Revenues, IAS 11 Construction contracts and associated interpretations. IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018) - This new standard replaces the disclosure and valuation guidelines on classification and valuation of financial assets, including guidelines on impairment of financial assets, outlined in IAS 39 Financial Instruments. IFRS 9 eliminates the categories of financial assets, existing in IAS 39: held to maturity, available for sale, as well as loans and receivables. Corresponding to the requirements of the new standard, financial assets should be classified as one of the three categories upon the initial recognition, if they meet the conditions of two criteria - business model and cash flow characteristics test: financial assets measured at amortised cost; 14/67

15 financial assets measured at fair value through profit or loss; or financial assets measured at fair value through other comprehensive income. Profits and losses of financial assets pricing at fair value measurement are presented in the current period result, except for assets in the business model, which intends to hold the assets both in order to obtain contractual cash flow along with their sale and meeting the cash flow characteristics test - for these assets, pricing profits and losses are presented in other total incomes. As regards the estimation of value loss of the financial assets, IFRS 9 substitutes the incurred loss model, contained in IAS 39, with the expected loss model, which means that the event causing the loss does not have to be prior to its recognition and making allowance. New principles aim to avoid situations, when the allowances for credit losses are created too late and are not sufficient. Expected loss model uses two approaches to loss valuation, which are based on: credit loss expected within the period of 12 months, or credit loss expected until maturity (life-time expected loss). New Standards and Interpretations adopted by IASB but not yet approved by the EU: IFRS 14 Deferred balances on regulated activity (applicable to annual period beginning on or after 1 January 2016, to be applied only by entities using IFRS for the first time) - the European Commission chose not to initiate the process of approval of this interim standard for use in the EU until the final version of IFRS 14 is published, IFRS 16 Leasing (effective for annual periods beginning on or after 1 January 2019), IFRS 16 Leasing supersedes IAS 17 Leasing as well as interpretations associated with this standard. As regards the lessee, a new Standard eliminates the existing distinction between financial and operational leasing. Presenting the operational leasing in the statement of financial position will result in recognising a new item of assets - a right to use the leased asset, and a new liability - liability to make the leasing payment. Rights of using the leased assets are subject to remission, whereas liability is subject to charging interests. This will result in the increased costs in the initial leasing phase, even if, the parties agreed the fixed annual fees. Amendments to IFRS 15 "Revenue from contracts with customers" (effective for annual periods as of 1 January 2017 and thereafter), The changes include two additional simplifications aimed at facilitating transition to the Standard and reduce the associated cost, Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures - sale or in-kind contribution of assets between an investor and its associated entity or joint venture (effective for annual periods as of 1 January 2016 and thereafter), Amendments to IFRS 10 Consolidated financial statements, IFRS 12 Disclosure of interests in other entities and IAS 28 Investments in affiliates and joint ventures - Investment units: exemption from consolidation (effective for annual periods as of 1 January 2016 and thereafter; The European Commission chose to postpone approval of these changes for undefined period of time). The changes eliminate the existing incoherence between the requirements of IFRS 10 and IAS 28 as regards presenting the loss of control over the subsidiary, being an in-kind contribution to the associated company or a joint venture, Amendments to IAS 7 Statement of cash flows - Initiative regarding disclosures (effective for annual periods beginning on or after 1 January 2017), The changes provide for presentations by the entities, which enable the users of financial statements to asses the value changes of liabilities within financial operation, including both changes resulting from cash flows, as well as non-cash changes. One of the method to meet the above requirements is to present the opening and closing balances reconciliation of liabilities due to financial operation, Amendments to IAS 12 Income Taxes Recognition of deferred tax assets for unrealised losses (effective for annual periods beginning on or after 1 January 2017). The changes clarify, among other things, that unrealised losses related to debt instruments valuated at fair 15/67

16 value in the financial statements, in which their initial cost is the fiscal value, may contribute to negative temporary differences, Changes in different standards Amendments to IFRS (cycle ) - (valid for annual periods commencing on 1 January 2018 or after this date - except for changes to IFRS 12, which are valid for annual periods commencing on 1 January 2017, or after this date). Amendments contain 3 modifications of the standards, mainly: amendments eliminate short term exemptions for entities using the IFRS for the first time (IFRS 1 First-time Adoption of International Financial Reporting Standards); the exemptions regarded mainly the transitional provisions of IFRS 7 Financial Instruments: Disclosures in terms of comparative data disclosures and financial assets transfer, as well as IAS 19 Employee benefits; clarify that requirements of IFRS 12 Disclosure of information about shares in other entities (except for disclosures of shortened financial information in accordance with paragraphs B10-B16 of the standard) apply also to the shares in a subsidiary, associated company, joint venture, non-consolidated subordinate organization that is affiliated with another organization, which are classified as intended for for selling according to IFRS 5 Fixed assets intended for selling and discontinued operations; and clarify that the selection as regards waiver for equity method according to IAS 28 Investments in affiliates and joint ventures should be made separately for each affiliate or joint venture, as well as clarify when the selection should be made, IFRIC 22 Foreign currency transactions and Advances (valid for annual periods commencing on 1 January 2018, or after this date), contains guidelines as regards exchange rate to be used for presenting a foreign currency transaction (such as income transaction), if the payment is made or received as advance payment, and clarifies the date of these transactions is the initial day of presenting the prepayments, or deferred income related to the advance. As regards serial payments transactions, executed or received, a separate date is settled for each transaction, Changes to MSR 40 Investment Estates (applicable in relation to annual periods starting on or after this date). Changes contain clarifications as regards transfers to or from the investment properties: transfer to or from investment properties should take place only if the manner of property usage is changed; and the change of property usage manner should be followed by the assessment, if the property can be qualified as investment property. According to Group s estimates, the above-mentioned standards, interpretations and amendments would have had no material effect on the financial statements, had they been applied as at the balance sheet date, except for IFRS 16. According to the preliminary analysis carried out by the Group, IFRS 16 can significantly affect the financial statement of the Group. GetBack Capital Group carried out the preliminary impact analysis of implementing a new IFRS 9 standard as regards classification and valuation of financial instruments and impairment of financial instruments and trade receivables. The Group does not apply the hedge accounting, so the impact of the standard in this regard has not been valuated. Classification of purchased portfolio of debts, valuated previously at fair value, will depend on the business model according to the requirements of a new standard. If the business model test is positive, these assets will be classified as estimated in amortized cost. The Group does not expect that the implementation of a new standard will significantly affect the classification and the estimation of other assets and financial liabilities. Taking into account that the Group purchases the portfolios of debts with significant value loss, the impact of this impairment is already included in the purchase price. Portfolios of debts, currently estimated according to the fair value model, contain the correction due to expected future credit losses. Similarly, for the portfolios of debts to be estimated in amortized cost according to a new standard, the impact of assets impairment should already be included in the purchase price of this portfolio. 16/67

17 Therefore, the Group does not expect a significant impact of a new standard, as regards presenting the expected credit losses, on the estimation of financial assets. As a result of further analysis and obtaining new information by the Group, the estimated impact can differ. 4.5 Significant items based on the professional judgement and estimates Professional judgement Leasing contracts classification The Group classifies the leasing as operational or financial by assessing the scope of the risk and the gain, resulted from the leased asset, for the lessee and the lessor. The assessment is based on the economic content of each transaction. Financial asset impairment loss The Group assesses whether there is reasonable evidence indicating the loss of value of the component/group of financial assets. Evidences of impairments are understood as events or group of events, which occurred after the date of initial presentation of the item/group of assets, indicating the decreased expected future cash flows from assets item or group of assets. Upon recognition of evidence of loss of value, the estimation of impairment losses is carried out. Impairment of other fixed assets As at every balance sheer date, the Group assesses whether there is reasonable evidence of the impairment of a component of other fixed assets. If the Group recognises the evidences indicating the impairment, it is settled, if the current book value of particular asset is higher than the value which can be achieved by further using or selling of this asset, so the recovery value of this item is estimated. If the recovery value is lower than the current balance value of given asset, the impairment is recognised and the write-off is charged in the financial statement. Loss of goodwill Following the initial recognition, goodwill is disclosed at cost of acquisition less all accumulated impairment losses. Each statement date is assessed in terms of preconditions for company s impairment loss. Impairment loss test is carried out once a year by comparing the balance value of cash generating units, along with company s value and their recoverable amount. Recoverable amount is estimated based on value in use of cash generating units which is an estimated value of future cash flows including residual value of cash generating units. Identified impairment loss is charged in the financial result. Assets component due to deferred tax The Group recognises a component of assets due to deferred tax basing on an assumption that in the future a tax profit will be achieved that will allow for its use. Deterioration of achieved tax results in the future could make this assumption unjustified. 17/67

18 Uncertainty of estimates Preparation of a financial statement according to the IFRS-UE requires that the Group executes some estimates and makes assumptions which affect the amounts presented in the financial statement. Estimates and assumptions which are subject to permanent assessment by the Group s management are based on the past experience and other factors, including the expectations for future events, which seem justified in given situation. Although these estimates are based on the best knowledge of current conditions and actions taken by the Group, the actual results may differ from these estimations. Estimates carried out at the end of each reporting period reflect the conditions existing at these dates (foe example, exchange rate, rate of interest, market prices). Changes of accounting estimates are presented in prospective beginning from the period, in which the estimate was made. Main fields, in which the Group carried out the estimates include: Fair value of financial instruments Fair value of financial assets, not quoted on active markets, which include purchased portfolios of debts, are estimated at reliably justified value calculated with the estimating model based on estimates within the discounted expected cash flows. Fair value is settled as the sum of discounted expected cash flows, equal to the difference between future incomes from debt recovery and costs of asserting claims out of court, before the court and by means of enforcement. The most significant estimates carried out by the Management Board include: Assumed amount of a discounted rate, Amount of recovery and a period of estimated expected cash flows, Value of the Company s securities and assumption for the period of their implementation. Assumption about similar characteristics of debts included in particular Portfolios. All models used for valuating the purchased portfolios of debts are approved before being applied, and calibrated in order to ensure that the received results reflect the actual data and comparative market prices. As far as possible, models use solely data which can be observed, stemming from the active market, however, in some cases, they are based on professional judgement. Future real flows from the purchased portfolios may differ from the estimates and assumptions, which may result in balance value corrections of these assets. Additional information about the adopted valuation methods, executed estimates and assumptions, as well as balance value of the purchased portfolios of debts as of balance sheet date are presented in Note 4.13 and 20. Deferred tax relating to investments in subsidiaries and associates In 2016,the GetBack Group did not create the reserve for deferred tax related to investment certificates of funds, which are subsidiaries; the reserve created in the previous years was also released. In the Group created the reserve for deferred income tax on all positive temporary differences related to potential redemption of easydebt investment certificates, and currently concentrates on reinvesting the recovered cash without intending to generate profits from the purchase of investment certificates in the near future. Parent company controls dates and amounts of reversed temporary differences in connection with the fact that it possesses 100% of investment certificates, including 100% of votes on the meeting of investors. The Group is not required to create reserve for deferred tax, which refers to entities meeting the below conditions under IAS 40 jointly: parent company is capable of controlling the dates of temporary differences reversal; and: it is likely that temporary differences will not reverse in the foreseeable future. Recognition of revenue Incomes of the Company stem partly from the valuation of the financial assets. When assessing the estimates related to the valuation, the management, at the same time, verifies the estimate of recognised incomes The periods of use of tangible fixed assets and intangible assets. Every year, the Group verifies adopted periods of usability of fixed assets and intangible assets on the basis of current estimations. Detailed information related to the usability periods of fixed assets and intangible assets are contained in Note 4.9 and The estimation of the duration of expected period of economic usability of particular types of tangible fixed assets and intangible assets takes into account e.g.: previous average expected periods of economical usability, which reflect the time of wear and tear, intensity of use, etc., 18/67

19 GetBack Capital Group loss in the economic value due to technological grounds, period of executing control over the asset, as well as legal and other limits of usability period, relation of usability period of asset items to the usability period of other assets, other circumstances affecting the expected average economical usability period of this asset type. If the usability period of the asset item arising from contractual rights, the expected average economical usability period translates to the period related to the contractual rights, or in the situation, when the estimated period is shorter, the estimated economical usability period is assumed. 4.6 Functional currency and financial statements currency Polish zloty is the functional currency of the parent company, the presentation currency of this consolidated financial statement and the functional currency of the Group s companies, except for GetBack Recovery Srl and Lawyer Consulting Associate Srl, where the functional currency is Romanian lej (RON). 4.7 Measurement of items expressed in foreign currencies Transactions denominated in currencies other than the Polish zloty are translated into the Polish zloty at the exchange rate applicable as at the transaction date. As at the balance sheet day cash assets and liabilities expressed in currencies other than PLN are translated into PLN using the average exchange rates for respective currencies as determined by the National Bank of Poland and applicable at the end of the reporting period. Exchange rate differences caused due to conversion are recognised in the financial income (costs) item or, in cases specified by the accounting policy, are capitalised in the value of assets respectively. Non-monetary assets and liabilities recognised at cost denominated in a foreign currency are disclosed at the historical exchange rate applicable on the transaction day. Non-monetary assets and liabilities recognised at fair value denominated in a foreign currency are translated according to the foreign exchange rate applicable on the date of fair value measurement. The Company s value due to the purchase of foreign entity and all corrections due to fair value valuation of the assets and liabilities at such purchase are treated as assets or liabilities of such foreign entity, and translated using the average exchange rate for respective currency as determined by the National Bank of Poland valid on the balance sheet day. For the purpose of balance sheet valuation the following exchange rates were adopted: Statement of financial position Income statement RON Financial statements of foreign units are converted to Polish currency in the following manner: appropriate balance sheet items using average exchange rate, established by the Polish National Bank at the end of the reporting period; appropriate items of the income statement using exchange rate that constitute arithmetic average of average exchange rates established by the Polish National Bank for each day ending a financial months. Exchange rate differences arising due to such conversion are recognised in directly in equity as a separate item (line Exchange rate differences ). 4.8 Consolidation principles Business combinations Business combinations, including closed-end investment funds, are calculated by purchasing on purchase day method, which is the day, when the Group takes control over the purchased entity. 19/67