RAWLPLUG GROUP ADDITIONAL INFORMATION TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE PERIOD 1 JANUARY 31 DECEMBER 2013

Transcription

1 RAWLPLUG GROUP ADDITIONAL INFORMATION TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE PERIOD 1 JANUARY 31 DECEMBER 2013 Wrocław, 18 MARCH 2014

2 1. GENERAL INFORMATION The consolidated financial statements cover the 12 months ended 31 December The comparative period covers the 12 months ended 31 December The financial statements of the Parent and financial statements of subsidiaries constituting the basis for the consolidated financial statements were prepared on a going concern basis for a period of at least 12 months from 31 December 2013, and there are no indications of any doubt about the Parent's and its subsidiaries' ability to continue as a going concern INFORMATION ABOUT THE PARENT AND THE GROUP Parent RAWLPLUG S.A. (hereinafter also RAWLPLUG or the Company), based in Wrocław, the parent company of the RAWLPLUG S.A. Group (hereinafter RAWLPLUG Group or the Group), was registered on 20 December 1999 in division B of the trade register under number 9101 as KOELNER S.A. On 8 July 2013, the Company received a decision from the District Court for Wrocław-Fabryczna in Wrocław, 6th Commercial Division, regarding change of the Company's name from KOELNER S.A. to RAWLPLUG S.A., in accordance with a decision made by the Company's general meeting on 21 June The Parent is currently registered at the District Court for Wrocław- Fabryczna in Wrocław, 6th Commercial Division, under KRS number The Parent operates in Poland under the provisions of the Polish Commercial Companies Code. The Parent's shares are listed on the Warsaw Stock Exchange. The Parent was established for an unlimited period of time. Parent's main economic activities The main economic activities of RAWLPLUG S.A. are as follows: design, manufacture and sale, mostly through wholesale distribution channels, of the following assortment groups: construction fixings, hand tools and power tools, screws and related accessories. Group On 8 July 2013, the name KOELNER S.A. was officially replaced with RAWLPLUG S.A. as part of a global expansion that is based primarily on RAWLPLUG products and brand. The decision to change the Company's name was made in order to align the corporate identity with its products. Through a series of on-going organisational changes within the Group, RAWLPLUG S.A. is becoming a central distribution company, whose suppliers will include the Group's production entities and external suppliers of commercial products. At the same time, the management emphasises that the Group's development in Poland and Central and Eastern Europe will also be continued under the KOELNER brand, which is particularly strong in this part of the continent. 2/49

3 From 1 January 2013, RAWLPLUG S.A.'s sales structures for the Polish territory were transferred to Koelner Polska Sp. z o.o. The goal of this reorganisation is to streamline Group management. On 1 January 2013, a shared services centre was unbundled from RAWLPLUG S.A.'s organisational structure and transferred to Koelner Rawlplug IP Sp. z o.o. The newly-formed centre provides the following services: book-keeping, management accounting, owner's supervision, debt recovery, marketing, legal advice, IT support, HR, operations and logistics support and technical advisory for RAWLPLUG S.A. and selected related parties within RAWLPLUG Group. On 24 October 2013, RAWLPLUG S.A. paid PLN 2 thousand for shares in Koelner Ltd with a nominal value of RUB thousand, constituting 15.67% of the company's share capital. As a result of the purchase, RAWLPLUG S.A. held 100% of Koelner Ltd's share capital. Entities comprising RAWLPLUG Group as at 31 December 2013: RAWLPLUG S.A. -> Koelner Tworzywa Sztuczne Sp. z o.o % -> Koelner Polska Sp. z o. o.-100% -> FPiN Wapienica Sp. z o.o % > > -> Farmlord Trading Ltd - 100% -> Meadowfolk Holdings Ltd - 100% -> Koelner Łańcucka Fabryka Śrub -> -> Koelner Centrum Sp. z o.o. - 51% Sp. z o.o % -> Koelner Hungária Kft - 51% -> Koelner CZ s.r.o % -> Koelner Bulgaria EOOD - 100% -> Koelner Romania SRL - 100% -> Koelner Vilnius UAB - 100% -> Koelner Kiev Ltd- 99% -> Koelner Ltd - 100% -> Koelner Deutschland GmbH - 100% -> Stahl GmbH - 100% -> Rawl Scandinavia AB - 100% -> Koelner - Rawlplug Middle East FZE - 100% -> Koelner-Rawlplug Building and Construction Material Trading LLC* - 49% -> Rawlplug Ltd - 100% -> Koelner Finance Ltd* - 50% -> Rawl France SAS - 100% -> Rawlplug Ireland Ltd - 100% -> Herco Fixings Ltd* - 61% -> Koelner Inwestycje Budowlane Sp. z o.o.* - 98% -> Koelner Finance Ltd* - 50% -> Koelner Kazakhstan Ltd* - 70% > -> LeoTex Ltd * - 51% -> -> Koelner d.o.o.* - 100% -> Koelner Trading KLD LLC* - 100% -> Koelner Slovakia s.r.o.* - 100% PrJSC Koelner Ukraine* - 76% Koelner Rawlplug IP Sp. z o.o % * As at 31 December 2013, the companies were not subject to consolidation (in accordance with IAS 1 point 31). 3/49

4 RAWLPLUG GROUP SUBSIDIARIES, ASSOCIATES AND JOINTLY CONTROLLED ENTITIES (data in PLN 000s) 1 2 Name of entity Registered office Economic activities Koelner Tworzywa Sztuczne Sp. z o.o. Fabryka Pił i Narzędzi Wapienica Sp. z o.o. 3 Koelner Vilnius UAB 4 Koelner Bulgaria EOOD 5 Koelner CZ s.r.o. 6 Koelner Centrum Sp. z o.o. ul. Kwidzyńska 6 C, Wrocław, Poland ul. T. Regera 30, Bielsko-Biała, Poland Registration: Liudvinavos g. 123 B, LT-2028, Vilnius, Lithuania Boulevard Akademik Ivan Evstatiev Geshov No. 2E, Business Centre Serdika, building 3, floor 2, 206А, Sofia 1330, Bulgaria Komerční Park Tulipan ul. Palackého 1154/76a, Ostrava-Přívoz, Czech Republic ul. Piłsudskiego 34, Pabianice, Poland 7 Koelner Kiev Ltd Sofijewska 17/ Kiev, Ukraine 8 Koelner Romania SRL 9 Koelner Hungária Kft 10 Koelner Deutschland GmbH 11 Koelner Ltd 12 Rawlplug Ltd 13 Koelner Kazakhstan Ltd* Str. Drumul intre Tarlale nr , sector 3, Complex Logistic Apollo Center Bucharest, Romania Jedlik Anyos u.34, 2330 Dunaharaszti, Hungary Gmünder Str 65, Schorndorf, Germany Kaliningrad, 4-th Bolshaya Okruzhnaya 1A, Russia 21 Holborn Viaduct, London, United Kingdom m. Almaty al. Abaja 115, Kazakhstan Manufacture of fixings Manufacture of tools, Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Type of linkage (, jointly controlled entity, associate; showing direct and indirect links) 1st degree 1st degree 1st degree 1st degree 1st degree 1st degree 1st degree 1st degree 1st degree 1st degree 1st degree 1st degree 1st degree Type of consolidation, or indication of exclusion consolidation Data of control / joint control / significant influence % of share capital held Share of votes at general meeting Full % % Full % % Full % % Full % % Full % % Full % 51.00% Full % 99.00% Full % % Full % 51.00% Full % % Full % % Full % % not subject to consolidation, in accordance with IAS 1 point % 70.00% 4/49

5 14 Name of entity Registered office Economic activities Koelner-Rawlplug Middle East FZE 15 Rawl Scandinavia AB 16 PrJSC Koelner Ukraine* 17 Koelner Finance Ltd* 18 Farmlord Trading Ltd 19 Leotex Ltd* 20 Koelner d.o.o.* 21 Koelner Trading KLD LLC* 22 Rawlplug Ireland Ltd 23 Rawl France SAS P.O. BOX , Warehouse No. RA08BC01 Jebel Ali Dubai, UAE Baumansgatan 4 S Västervik, Sweden Łyczakowska 24/4a Lviv, Ukraine 34 Lavery Avenue, Park West, Dublin, Ireland 3 Thasos Street, 1087 Nicosia, Cyprus Łyczakowska 24/4a Lviv, Ukraine Ljudevita Gaja 48, Mala Gorica, Sveta Nedelja, Croatia Kaliningrad, 4-th Bolshaya Okruzhnaya 1A, Russia Unit 10, Donore Business Park, Donore Road Drogheda, Co Louth, Ireland 12/14 rue Marc Seguin, Mitry Mory, France Wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Services Holding company Wholesale of construction materials Wholesale of construction materials Manufacture and wholesale of construction materials Wholesale of construction materials Wholesale of construction materials Type of linkage (, jointly controlled entity, associate; showing direct and indirect links) 1st degree 1st degree 1st degree (51% of share capital); - 2nd degree (25% of share capital) Subsidiary: 1st degree (50% of share capital);- 2nd degree (50% of share capital) 1st degree 1st degree 1st degree 1st degree 1st degree 1st degree Type of consolidation, or indication of exclusion consolidation Data of control / joint control / significant influence % of share capital held Share of votes at general meeting full % % full % % not subject to consolidation, in accordance with IAS 1 point 31 not subject to consolidation, in accordance with IAS 1 point % 76.00% % % full % % not subject to consolidation, in accordance with IAS 1 point 31 not subject to consolidation, in accordance with IAS 1 point 31 not subject to consolidation, in accordance with IAS 1 point % 51.00% % % % % full % % full % % 5/49

6 24 25 Name of entity Registered office Economic activities Koelner Rawlplug IP Sp. z o.o. Koelner - Inwestycje Budowlane Sp. z o.o.* ul. Kwidzyńska 6 C, Wrocław, Poland ul. Kwidzyńska 6 C, Wrocław, Poland 26 Koelner Slovakia s.r.o.* ul. Dlhá 95, Žilina, Slovakia 27 Herco Fixings Ltd* 28 Koelner Łańcucka Fabryka Śrub sp. z o.o. 29 Stahl GmbH 30 Meadowfolk Holdings Ltd Koelner-Rawlplug Building & Construction Material Trading LLC* Koelner Polska Sp. z o.o. Unit 10, Donore Business Park, Donore Road Drogheda, Co Louth, Ireland ul. Podzwierzyniec 41, Łańcut, Poland Lutherstrasse 54, Schorndorf, Germany 3 Thasos Street, 1087 Nicosia, Cyprus P.O. BOX , Al. Qouz Industrial Area 3, 22nd Street, Compound 81, UAE ul. Kwidzyńska 6C, Wrocław, Poland IP management and shared services centre for Rawlplug Group companies Development of building projects Wholesale of construction materials Wholesale of construction materials Manufacture of fasteners Wholesale of construction materials Holding company Wholesale of construction materials Wholesale and retail of construction materials Type of linkage (, jointly controlled entity, associate; showing direct and indirect links) Subsidiary: 1st degree (71.62% of share capital); - 2nd degree (3.83% of share capital); - 4th degree (24.55% of share capital) 1st degree 1st degree 2nd degree 3rd degree 2nd degree 2nd degree 2nd degree 1st degree Type of consolidation, or indication of exclusion consolidation Data of control / joint control / significant influence % of share capital held Share of votes at general meeting full % % not subject to consolidation, in accordance with IAS 1 point 31 not subject to consolidation, in accordance with IAS 1 point 31 not subject to consolidation, in accordance with IAS 1 point % 98.00% % % % 61.00% full % % full % % full % % not subject to consolidation, in accordance with IAS 1 point % 49.00% full % % 6/49

7 FINANCIAL HIGHLIGHTS OF SUBSIDIARIES, ASSOCIATES AND JOINTLY CONTROLLED ENTITIES (data in PLN 000s) Name of entity Equity, including: other equity, including: share capital retained net profit earnings (loss) liabilities and liability provisions noncurrent assets current assets total assets revenue from sales finance income 1 Koelner Tworzywa Sztuczne Sp. z o.o (4 763) Fabryka Pił i Narzędzi Wapienica Sp. z o.o (5 417) Koelner Vilnius UAB Koelner Bulgaria EOOD (829) (680) Koelner CZ s.r.o (172) Koelner Centrum Sp. z o.o Koelner Kiev Ltd (122) 902 (1 024) (543) (68) Koelner Romania SRL (5 107) (7 666) (4 401) (3 113) Koelner Hungária Kft Koelner Deutschland GmbH (4 416) (421) Koelner Ltd (267) 990 (108) Rawlplug Ltd (24 855) (40 539) Koelner Kazakhstan Ltd* (233) 3 (236) (181) (40) Koelner-Rawlplug Middle East FZE Rawl Scandinavia AB (264) PrJSC Koelner Ukraine* (26) Koelner Finance Ltd* Farmlord Trading Ltd LeoTex Ltd* Koelner d.o.o.* (174) 201 (375) (321) (53) Koelner Trading KLD LLC* (2 278) 94 (2 372) (1 472) (1 128) Rawlplug Ireland Ltd (4 485) Rawl France SAS (181) Koelner Rawlplug IP Sp. z o.o (96) /49

8 Name of entity Equity, including: other equity, including: share capital retained net profit earnings (loss) liabilities and liability provisions noncurrent assets current assets total assets revenue from sales finance income 25 Koelner - Inwestycje Budowlane Sp. z o.o.* Koelner Slovakia s.r.o.* (101) (33) (34) Herco Fixings Ltd* (611) (194) Koelner Łańcucka Fabryka Śrub Sp. z o.o (2 534) Stahl GmbH Meadowfolk Holdings Ltd (6 207) Koelner-Rawlplug Building & Construction Material 31 Trading LLC* Koelner Polska Sp. z o.o. (1 916) (2 916) (12) (2 904) * As at 31 December 2013, the companies were not subject to consolidation (in accordance with IAS 1 point 31). The financial data of subsidiaries, associates and jointly controlled entities is presented after restatement to IAS/IFRS. The acquisition price of unconsolidated companies is presented in Table 6 - Non-current financial assets. According to the Parent's management, the financial data of unconsolidated subsidiaries is immaterial from the viewpoint of the consolidated financial statements. As at 31 December 2013, the total value of the assets of subsidiaries excluded from consolidation constitutes 3.6% of the Group's assets (31 December 2012: 4.1%), and the total net revenue of these companies in 2013 accounted for 6.9% of all Group revenue (31 December 2012: 7.8%). 8/49

9 Composition of the management board and supervisory board of the parent Composition of RAWLPLUG S.A.'s management board as at 31 December 2013: Radosław Koelner Piotr Kopydłowski - President - Member, responsible for finance Composition of RAWLPLUG S.A.'s supervisory board as at 31 December 2013: Krystyna Koelner Tomasz Mogilski Przemysław Koelner Zbigniew Szczypiński Zbigniew Pamuła Zbigniew Stabiszewski Wojciech Heydel Janusz Pajka* - Chairperson - Deputy Chairperson - Member - Member - Member - Member - Member - Member * On 21 June 2013, RAWLPLUG S.A.'s general meeting appointed Janusz Pajka as a member of the supervisory board. Value of remuneration, bonuses and other considerations paid or due to be paid to the Parent's management board and supervisory board members Remuneration paid or due to be paid to management board and supervisory board members (in PLN 000s): Management board Radosław Koelner - President 597 including roles at subsidiaries, associates and jointly controlled entities 237 Piotr Kopydłowski - Member, responsible for finance 396 including roles at subsidiaries, associates and jointly controlled entities 156 9/49

10 Remuneration paid or due to be paid to supervisory board members (in PLN 000s): Supervisory board Krystyna Koelner - Chairperson 204 Tomasz Mogilski - Deputy Chairperson 162 Przemysław Koelner - Member 9 Zbigniew Pamuła - Member 12 Zbigniew Szczypiński - Member 12 Zbigniew Stabiszewski - Member 12 Wojciech Heydel - Member 9 Janusz Pajka* - Member 6 * On 21 June 2013, RAWLPLUG S.A.'s general meeting appointed Janusz Pajka as a member of the supervisory board BASIS FOR PREPARING THE FINANCIAL STATEMENTS, PRESENTATION CURRENCY AND ROUNDING UP These consolidated annual financial statements of RAWLPLUG Group cover the 12 months ended 31 December 2013 and were prepared in order to present the financial situation, results and cash flows in accordance with International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and the associated interpretations published in the form of Commission Regulations. From 1 January 2005, RAWLPLUG Group, in accordance with the Act on Accounting of 29 September 1994 (Polish Journal of Laws of 2002 no. 76, item 694, as amended), prepares consolidated financial statements in accordance with International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and the associated interpretations published in the form of Commission Regulations. The presentation and functional currency for these consolidated financial statements is PLN, and all amounts are expressed in PLN 000s (unless stated otherwise). The financial statements of entities comprising the Group were translated into the presentation currency based on the principles specified in IAS IMPACT OF NEW STANDARDS AND INTERPRETATIONS ON THE GROUP'S FINANCIAL STATEMENTS In 2013, RAWLPLUG Group entities adopted all new EU-endorsed standards and interpretations issued by the IASB and IFRIC that were effective for annual periods beginning on or after 1 January The adoption of the new EUendorsed standards and interpretations did not result in changes to RAWLPLUG Group's accounting principles that would have an impact on the amounts presented in the 2013 and 2012 financial statements. RAWLPLUG Group decided against the early application of new EU-endorsed standards and interpretations that were issued, but will enter into force after the end of the reporting period. Standards and interpretations endorsed by the EU New or amended standards and interpretations effective from 1 January 2013: 10/49

11 IFRS 13 Fair Value Measurement - the new standard defines fair value for all IFRSs and IASs and introduces consistent guidance and principles, which were previously scattered among numerous standards. IFRS 13 does not specify which items are subject to measurement at fair value. IFRS 13 introduces a new definition of fair value, guidance on how to measure non-financial assets and a number of disclosures concerning fair value. The Group met the requirement to make these disclosures in notes pertaining to the specific assets and liabilities. IFRS applies retrospectively to annual periods beginning on or after 1 January Amendments to IAS 1 Presentation of Financial Statements - the IASB amended the presentation of items in other comprehensive income. The amended IAS 1 requires to present items in other comprehensive income under one of two groups: items that might be reclassified to profit or loss subsequently (e.g. measurement of hedging instruments) and those that will not be reclassified (e.g. fair value measurement of non-current assets, which is recorded in retained earnings outside of profit or loss). The amendments to IAS 1 apply to annual periods beginning on or after 1 July The Group amended presentation of its financial statements in accordance with the amendments to IAS 1. Amendments to IAS 19 Employee Benefits - the document introduces several changes, the most important of which are as follows: eliminating the 'corridor' approach, requiring the recognition of remeasurements in other comprehensive income. Given the fact that the Group does not have any defined-benefit plans, these changes did not affect its consolidated financial statements. Furthermore, the amended standard provided details on the accounting for termination benefits. This did not have an impact on the results or liabilities presented in the consolidated financial statements. The amended IAS 19 applies to annual periods beginning on or after 1 January IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine - the interpretation deals with the accounting for costs of stripping, which enables improved access to further quantities of material that will be mined in future periods. The costs of stripping activity should be capitalised as inventory (in the part attributable to the mined iron ore) and as non-current assets (in the part attributable to obtaining access to the iron ore). The interpretation applies to annual periods beginning on or after 1 January The entry into force of IFRIC 20 does not have an impact on the Group's financial statements. Amendments to IFRS 7 Financial Instruments: Disclosures - the changes provide for additional disclosures regarding financial assets and financial liabilities that are recognised in the statement of financial position in net amounts. Entities are required to disclose in additional information the net and gross amounts of assets and liabilities which are subject to offsetting, along with the terms of the framework arrangements regarding offsetting. The amendments apply to annual periods beginning on or after 1 January The above changes do not affect the Group's financial statements. Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - the amendments to IFRS 1 allow entities adopting IFRSs for the first time to measure government loans with a below-market rate of interest using one of the following approaches: at values resulting from the existing accounting principles, or at values resulting from the retrospective application of the relevant standards that require specific recognition of government assistance in financial statements (IAS 20 and IFRS 9 or IAS 39) - provided that the entity obtains the information necessary for appropriate measurement as at the recognition date. The amendment applies to annual periods beginning on or after 1 January The above change did not affect the Group's financial statements. 11/49

12 Amendments to IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34 resulting from Annual Improvements cycle , which apply to annual periods beginning on or after 1 January Amendments to standards include: IFRS 1 First-time Adoption of International Financial Reporting Standards - clarifies repeated application of IFRS. The repeated application of IFRSs may take place based on IFRS 1 or IAS 8. The amendment does not affect the Group's financial statements. IFRS 1 First-time Adoption of International Financial Reporting Standards - borrowing costs capitalised under the previous accounting policy before the date of the transition to IFRSs may be carried forward without adjustment to the amount previously capitalised at the transition date. After the transition date, IAS 23 should be applied. The amendment does not affect the Group's financial statements. IAS 1 Presentation of Financial Statements - the amendment specifies that it is no longer necessary to present notes to the third statement of financial position, which is included in the financial statements in the event of a change in accounting principles or presentation principles or a correction of error. In addition, only an entity that changes accounting policies retrospectively, or makes a retrospective restatement or reclassification that has a material effect on the information in the statement of financial position at the beginning of the preceding period, would present the statement of financial position at the end of the current period and the beginning and end of the preceding period. If the entity presents more than two reporting periods, it is not necessary to present a statement of financial position as at the beginning of the earliest comparative period. The amendment to IAS 1 had an impact on the Group's financial statements for the current period in that there was no need to present a third statement of financial position with notes despite having introduced certain amendments to the accounting policy, as described in these additional information to the consolidated financial statements. IAS 1 Presentation of Financial Statements - the entity may present additional periods or days in the financial statements (above those required by the standard), but does not have to present those for all components of the financial statements (e.g. it can present only an additional statement of financial position, without an additional statement of profit and loss), however additional information must include notes to this additional component of the financial statements. The amendment did not affect the Group's financial statements. IAS 16 Property, Plant and Equipment - due to an inconsistency, some users of IAS 16 thought that spare parts should be classified as inventory. This was clarified. In accordance with the amended standard, spare parts should be recognised as non-current assets or as inventory, in accordance with the general principles for assets specified in IAS 16. The amendment did not affect the Group's financial statements. IAS 32 Financial Instruments: Presentation - clarified that the tax effects of distribution to holders of equity instruments and costs of an equity transaction should be accounted for in accordance with IAS 12 Income Taxes. The amendment did not affect the Group's financial statements. IAS 34 Interim Financial Reporting - unified disclosure requirements regarding segment assets and liabilities as par IFRS 8. This change did not have an impact on the Group's annual financial statements, which were prepared in accordance with IAS 1. Presented below are the standards and interpretations in force as issued by the IASB, but not yet endorsed by the EU. Application of standards or interpretations before their entry into force The consolidated financial statements do not include any standards or interpretations that were adopted early. 12/49

13 Standards and interpretations issued but not yet effective for periods beginning on or after 1 January 2013, and their impact on the Group's financial statements The following new or amended standards and interpretations, effective for annual periods beginning after 2013, were issued prior to the publication of these consolidated financial statements: IFRS 9 Financial Instruments: Recognition and Measurement. The new standard will eventually supersede IAS 39. The part of IFRS 9 issued so far contains regulations regarding the recognition and measurement of financial assets, recognition and measurement of financial liabilities, derecognition of financial assets and financial liabilities and hedge accounting. The effective date has not yet been established, and the standard has not yet been endorsed by the EC. The Group is currently analysing the standard's impact on its consolidated financial statements. IFRS 10 Consolidated Financial Statements The new standard supersedes most of IAS 27 Consolidated and Separate Financial Statements. IFRS 10 introduces a new definition of control, but the rules and procedures of consolidation remain the same. According to the Group, the changes may have an impact on entities where the consolidation requirement was not clear up to now. The Group is evaluating the impact of the new regulations. The effective date provided by the IASB is 1 January 2013, however the EC introduced a requirement to apply the new standards for annual periods beginning on or after 1 January IFRS 11 Joint Arrangements IFRS 11 supersedes IAS 31 Interests in Joint Ventures. The new standard sets out that the accounting for a joint contractual arrangement results from its economic context, i.e. the parties' rights and obligations. Furthermore, IFRS 11 eliminates the possibility to account for an investment in a joint arrangement by proportionate consolidation. These investments are accounted for using the equity method, in accordance with the procedures currently applied to associates. The Group is evaluating the impact of the new regulations. The effective date provided by the IASB is 1 January 2013, however the EC introduced a requirement to apply the new standards for annual periods beginning on or after 1 January IFRS 12 Disclosure of Interests in Other Entities IFRS 12 specifies the disclosure requirements for consolidated and unconsolidated entities in which the entity preparing the financial statements holds interests. This will enable investors to evaluate the risks associated with an entity that establishes special purposes vehicles and similar structures. According to the Group, the standard will require that additional disclosures be made in the consolidated financial statements. The effective date provided by the IASB is 1 January 2013, however the EC introduced a requirement to apply the new standards for annual periods beginning on or after 1 January Amendments to IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures Amendments to IAS 27 and IAS 28 are a consequence of introducing IFRS 10, IFRS 11 and IFRS 12. IAS 27 concerned only separate financial statements, and IAS 28 will also cover investments in joint arrangements. The Group is evaluating the impact of the new regulations. The effective date provided by the IASB is 1 January 2013, however the EC introduced a requirement to apply the amendments for annual periods beginning on or after 1 January Amendments to IAS 32 Financial Instruments: Presentation The amendment introduces a detailed explanation of the conditions applied to the presentation of financial assets and liabilities in net amounts. According to the Group, the above change did not affect its consolidated financial statements. The amendment applies to annual periods beginning on or after 1 January IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. The amendments to the newly-issued standards concerning consolidation introduce clearer transition rules and certain exemptions as regards presentation of comparative data. The 13/49

14 Group is evaluating the impact of the new regulations. The amendments apply to annual periods beginning on or after 1 January Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements The amendment introduces an exemption from the consolidation requirement for investment entities. An investment entity is an entity fulfilling the following definition: obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services, commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both, and measures and evaluates the performance of substantially all of its investments on a fair value basis. The Group is evaluating the impact on the new regulations. The amendments apply to annual periods beginning on or after 1 January IFRIC 21 Levies The new interpretation provides guidance on when to recognise a liability for a levy imposed by a government, other than income tax regulated in IAS 12. The interpretation provides further details to IAS 37 Provisions, Contingent Liabilities and Contingent Assets. According to the Group, the interpretation will not have an impact on its consolidated financial statements. The interpretation applies to annual periods beginning on or after 1 January Amendment to IAS 36 Impairment of Assets Introducing the new IFRS 13 Fair Value Measurement, the IASB issued additional disclosures regarding impairment. The scope of the disclosures was too wide, however, which is why another amendment was introduced, narrowing recoverable amount disclosures for impaired assets. The Group is currently analysing the amendment's impact on its consolidated financial statements. The amendments apply to annual periods beginning on or after 1 January Amendments to IAS 39 Financial Instruments: Recognition and Measurement Under the previous IAS 39, if an entity designated a derivative instrument as a hedge, and as a result of changes in law the other party to the contract was replaced by a central counterparty (e.g. clearing agent), then the hedge must be released. Following the introduction of the amendment, the above situation will not result in having to close the hedge. The Group determined that the amendment will not have an impact on its consolidated financial statements. The amendments apply to annual periods beginning on or after 1 January Amendments to IAS 19 Employee Benefits The amendments provide specific procedures in the event that employees make contributions to cover the costs of a defined benefit plan. The Group determined that the amendment will not have an impact on its consolidated financial statements. The amendments apply to annual periods beginning on or after 1 July Amendments to IFRS 2, IFRS 3, IFRS 8, IAS 16, IAS 24 and IAS 38 resulting from Annual Improvements cycle , which apply to annual periods beginning on or after 1 July Amendments to standards include: IFRS 2: The IASB amended or issued new definitions for the following: 'market condition,' 'service condition,' 'vesting condition,' and 'performance condition.' According to the Group, the above change will not affect its financial statements. IFRS 3: The IASB clarified certain aspects of accounting for a contingent consideration in a business combination after the combination date, so as to align it with other standards (particularly IFRS 9 / IAS 39 and IAS 37). According to the Group, the above change will not affect its financial statements. 14/49

15 IFRS 8: The IASB required entities aggregating operating segments to make additional disclosures about the aggregated segments and their economic features due to which they were aggregated. The Group is currently analysing the amendment's impact on its consolidated financial statements. IFRS 8: The amended standard assumes that the requirement to disclose the matching of segment assets with the assets recorded in the balance sheet applies only if those are presented by segment. According to the Group, the above change will not affect its financial statements. IAS 16 and IAS 38: The IASB introduced a correction to the calculation approach for the gross amount and accumulated depreciation of a non-current asset (amortisation of an intangible asset), if the restated value model is applied. According to the Group, the above change will not affect its financial statements. IAS 24: The definition of a related party was expanded to include entities providing key management personnel services and the relevant disclosures. According to the Group, the above change will not affect its financial statements. Amendments to IFRS 3, IFRS 13 and IAS 40 resulting from Annual Improvements cycle , which apply to annual periods beginning on or after 1 July Amendments to standards include: IFRS 3: clarifies that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself. According to the Group, the above change will not affect its financial statements. IFRS 13: Clarifies that the scope of the portfolio exception concerning measurement of a portfolio of financial assets and liabilities in net amounts. According to the Group, the above change will not affect its financial statements. IAS 40: Clarifying that in a purchase of an investment property, examination is required as to whether this is a purchase of a group of assets or a business combination in accordance with IFRS 3. The Group is currently analysing the amendment's impact on its consolidated financial statements. IFRS 14 Regulatory Deferral Accounts The new standard applies only to entities that are first-time adopters of IFRSs and operate in industries where prices are subject to approval by a rate-regulator, such as gas, electricity and water providers. The standard permits to continue to account for revenue from such operations in accordance with the previous principles, both on initial adoption of IFRS and in subsequent financial statements. The new regulations will not have an impact on the Group's consolidated financial statements. The standard applies to annual periods beginning on or after 1 January The Group intends to implement the above regulations within the relevant deadlines specified for standards or interpretations. 15/49

16 2. ADOPTED ACCOUNTING PRINCIPLES 2.1. ACCOUNTING PRINCIPLES The consolidated financial statements are prepared using the historic cost concept, except for the measurement of certain non-current assets (investment properties) and certain financial assets, which - according to IFRS - are carried at fair value. Interests in subsidiaries are measured at purchase price, in accordance with IAS 27. The most important accounting principles adopted by RAWLPLUG Group are presented in points PRINCIPLES OF CONSOLIDATION The consolidated financial statements cover the separate financial statements of RAWLPLUG S.A. and the financial statements of subsidiaries over which RAWLPLUG has control, prepared as at 31 December Control is understood as the ability to influence the financial and operating policies of an entity in order to obtain economic benefits from its operations. The basis for exclusion of entities from consolidation is IAS 1 point 31 (the materiality concept). At RAWLPLUG Group, the materiality threshold is set as 5% of the balance sheet total or 5% of net revenue from sales before consolidation exclusions. As at the date of the acquisition of a (assumption of control), its assets and liabilities are measured at fair value. The excess of purchase price over the fair value of identifiable net assets of the acquired entity is recorded in assets as goodwill. In the event that the purchase price is lower than the fair value of identifiable net assets acquired, then the difference is recorded as profit in the statement of profit and loss in the period in which the acquisition took place. Non-controlling interests are presented in accordance with fair value of the net assets attributable to them. Subsidiaries sold during the financial year are subject to consolidation from the beginning of that year to the date on which they are sold. The financial results of entities acquired during the year are recorded in the financial statements from the acquisition date. Where necessary, adjustments are made in the financial statements of subsidiaries or associates in order to align the accounting principles applied by the entity with the principles applied by the Parent. All transactions, balances, revenues and costs between related parties covered by consolidation are subject to exclusion from the consolidated financial statements MANAGEMENT ESTIMATES AND ASSUMPTIONS The preparation of financial statements in accordance with IFRS requires the management to make professional judgements, estimates and assumptions that affect the adopted accounting principles and the presented values of assets, liabilities, revenues and costs. Estimates and associated assumptions are based on previous experience and other factors that are acknowledged as rational in given circumstances and whose results provide a basis for 16/49

17 professional judgment concerning the carrying amount of assets and liabilities that does not directly result from their sources. In certain significant issues, the management uses independent experts' opinions. The management's estimates that have an impact on financial statements concern the following: unpredictable periods of economic life of property, plant and equipment and intangible assets, impairment of assets, discount rates, expected growth in remuneration and actuarial assumptions used to calculate retirement pay provisions, future financial results used in testing for impairment of goodwill arising on consolidation, future tax results used in calculating deferred income tax assets. The adopted approach to establishing estimated amounts is based on the management's best knowledge and is in accordance with IFRS requirements. The approach to determine estimated amounts is used in a continuous manner in relation to the preceding reporting period. Changes in impairment and restatement are presented in further parts of the additional information and notes to the financial statements pertaining to specific assets INVESTMENTS IN ASSOCIATES Associates are entities which the Parent does not control but exerts significant influence over by participating in determining their financial and operating policies. Interests in associates are accounted for using the equity method, unless they are classified as held for sale. Investments in associates are carried at purchase price, with consideration given to changes in the Company's stake in net assets that occur after the end of the reporting period, less impairment of specific investments. Any unrealised profit and losses resulting from transactions between the Group and an associate are subject to exclusion from consolidation proportionately to the interest held. The excess of purchase price over the fair value of identifiable net assets of an associate on the acquisition date is recorded in the balance sheet as goodwill arising on investment in associates. If the purchase price is lower than the fair value of identifiable net assets of an associate on the acquisition date, then this difference is recorded as profit in the statement of profit and loss in the period in which the acquisition took place GOODWILL Goodwill arising on consolidation results from the occurrence as at the acquisition date of a surplus of the cost of acquiring the entity over the fair value of identifiable assets and liabilities of the, associate or joint venture as at the acquisition date. 17/49

18 Goodwill is recorded as an asset and is subject to impairment testing at least once a year. The effects of impairment are recorded in the statement of profit and loss and are not subject to reversal in subsequent reporting periods INTANGIBLE ASSETS AND OWN INTANGIBLE ASSETS - DEVELOPMENT COSTS Intangible assets are carried at purchase price or - in the case of development works - cost to manufacture, less accumulated amortisation and impairment. Intangible assets are amortised using the straight-line approach throughout the period of their economic life, as follows: acquired property rights, licences and concessions - no less than four years and no more than seven years, computer software - no less than four years and no more than seven years, other intangible assets - no less than four years and no more than seven years, Costs of development works are not capitalised and are presented in the statement of profit and loss as costs in the period in which they are incurred. Costs of development works are capitalised only in the event that: they concern a precisely defined project (e.g. software or new procedures), it is likely that the particular asset will bring future economic benefits, the project costs may be reliably estimated. Costs of development works are amortised using the straight-line method throughout the expected period of economic life. If it is not possible to separate an asset element produced internally, the development costs are recognised in the statement of profit and loss in the period in which they are incurred PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment items are presented in the balance sheet at historic cost, less accumulated depreciation and impairment. Depreciation is applied to all property, plant and equipment items, with the exception of land and production in progress, throughout their periods of economic life, on a straight-line basis and applying the following annual depreciation rates: buildings and facilities - no less than 10 years and no more than 40 years, technical equipment and machinery (excluding computer software) - no less than five years and no more than 20 years, computer software - no less than two years and no more than four years, means of transport - no less than seven years and no more than 10 years, 18/49

19 other property, plant and equipment - no less than two years and no more than 10 years. Property, plant and equipment under construction intended for manufacturing, leasing, administrative or undefined purposes is presented in the balance sheet at cost of manufacture, less impairment. The cost of manufacture is augmented by fees and - in some cases - by borrowing costs. Depreciation concerning this type of property, plant and equipment commences the moment it is commissioned, in accordance with the rules pertaining to internally-produced fixed assets. Profit or loss arising on disposal / liquidation or suspension of the use of property, plant and equipment is defined as the difference between proceeds from disposal and the net value of such assets and are recorded in the statement of profit and loss LEASING Finance lease agreements are agreements that transfer to the Group essentially all risk and all potential benefits incident to ownership of the subject of the lease. All other types of leases are treated as operating leases. Assets used pursuant to finance lease agreements are treated equally with other assets within the Group and are measured at the start of the lease at the lower of: the fair value of the asset being the subject of the lease or the minimum present value of lease payments. Lease payments are divided into interest and principal, so as to ensure that the interest rate on the outstanding liability remains at a constant level. Leasing payments under operating lease agreements are recognised in the profit and loss statement on a straight-line basis over the duration of the lease INVESTMENT PROPERTIES Investment properties are those properties which are treated as a source of lease income and/or are maintained for capital appreciation. Investment properties are measured at fair value at the end of the reporting period. Profit and losses from changes in the fair value of investment properties are recorded in the statement of profit and loss in the period in which they arise NON-CURRENT ASSETS AND GROUPS OF NET ASSETS HELD FOR SALE Non-current assets classified as held for sale and groups of net assets held for sale are measured at the lower of: carrying amount and fair value, less costs to sell. Non-current assets and groups of net assets are classified as held for sale if it is more likely that their carrying amount will be recovered through a sale rather than through further use. This condition is considered as having been met only when an asset (or a group of net assets held for sale) is available in its current condition for immediate sale, and the transaction may be expected within one year from the change in classification. 19/49

20 2.11.INVENTORIES Inventories are recorded at purchase price or cost of manufacture, provided that these are not higher than the net sales price. Cost of manufacture includes direct material costs and in certain cases direct remuneration costs, along with a justified portion of indirect costs. Product, material and goods inventories are measured using the FIFO method. The net sales price is equal to estimated sales price, less all costs connected with completing production or delivering the inventory to be sold or finding a buyer (i.e. selling costs, marketing, etc.). Inventories are carried at net value, less impairment. Impairment of inventories can be recognised in connection with the loss of their value, to bring the value of inventories to net recoverable amount BORROWING COSTS Borrowing costs are directly connected with the purchase or manufacture of assets, which are recorded as costs of manufacture of such fixed assets until they are commissioned. These costs are reduced by revenue generated from temporary investment of funds obtained to manufacture a given asset. All other borrowing costs are recorded directly in the statement of profit and loss in the period in which they are incurred FINANCIAL INSTRUMENTS Financial assets and liabilities are recognised in the balance sheet at the moment when the Group becomes a party to a binding agreement. At initial recognition, the Group values financial assets and liabilities at fair value, i.e. according to the fair value of the payment made in the case of assets, or the amount received in the case of liabilities. The Group includes transaction costs in the initial measurement of all financial assets and liabilities, with the exception of assets and liabilities carried at fair value through profit or loss TRADE RECEIVABLES Trade receivables are recognised in the accounts at nominal value, adjusted by impairment of receivables that are unlikely to be recovered. Impairment losses are recognised according to the following rules: receivables overdue by days - a 50% impairment, receivables overdue by over 360 days - a 100% impairment, court receivables - a 100% impairment. Recognition of impairment losses depends on the level of likelihood that the receivables will be paid, using the above criteria on a case by case basis. 20/49