R financial statement. Separate annual. Separate annual financial statement 1

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1 Separate annual financial statement R-2014 Separate annual financial statement 1 - Name of entity: Apator SA Page 1

2 Separate annual financial statement 2 Contents 1. General information Information on the entity Business activity of the entity The makeup of the Management Board and the Supervisory Board Information on the basis on preparation of separate financial statement, reporting currency and rounding applied The basis for preparation of separate financial statement Principles of International Financial Reporting Standards applied Reporting currency and the rounding applied Duration of the activity of the entity Approval of financial statement Separate financial statement of Apator S.A Separate financial statement of financial situation Separate financial statement of profit and loss account and other comprehensive income Separate financial statement of changes in equity Separate financial statement of cash flow Accounting principles applied Basis for preparation (general principles) Detail principles for measurement of assets and liabilities Intangibles Tangible fixed assets Investments in subsidiaries and jointly controlled entities Leasing Investment properties Inventories Cost of external financing Government subsidies Financial instruments Provisions Employee benefits Revenues Transactions in foreign currencies Taxes Tax relief resulting from activity in Pomeranian Special Economic Zone Equities Basic accounting judgements and the basis for estimation uncertainty Information on seasonal sales Explanatory notes to separate financial statement Operating segments Intangibles Tangible fixed assets Investment properties Other financial assets Inventories Trade and other receivables Borrowings granted Cash and cash equivalents Accruals and prepayments Name of entity: Apator SA Page 2

3 Separate annual financial statement Primary capital Other capitals Loans and borrowings Provisions for liabilities Liabilities Income tax Costs by nature Other revenues and operating costs Financial revenues and costs Explanations to cash flow statement Financial lease Future payments due to operating lease not included in the statement of financial position Financial instruments Derative financial instruments, hedging accounting Purposes and principles of financial risk management Information on related entities Contingent items and other ones not recognized in the statement of financial position Structure of employment Remuneration of the entity entitled to audit of financial statement Subsidies Amendments to accounting principles Events that occurred after the end of reporting period Signatures Name of entity: Apator SA Page 3

4 Separate annual financial statement 4 1. General information 1.1. Information on the entity APATOR Joint Stock Company with the headquarters in Toruń (ul.gdańska 4a lok C4) was established by the employees of former state owned company under the name of Zakłady Aparatury Elektrycznej Apator in Toruń. The entity was registered at District Court in Toruń at V Economic Division on 14 th January 1993 under registration number RHB On 24 th October 2001 the entity was entered into Register of Entrepreneurs at District Court in Toruń, VII Economic Division of National Register Court under number of The entity runs business in the territory of Poland based on regulations of the Polish Commercial Companies Code Business activity of the entity In accordance with the Statutes the main activity of the entity is manufacturing and service of electrical distribution and control equipment and sales of metering equipment and systems. Shares of APATOR S.A. are quoted on primary market electrical machines sector pursuant to classification of Warsaw Stock Exchange in Warsaw The makeup of the Management Board and the Supervisory Board The Management Board Andrzej Szostak President of Management Board Tomasz Habryka Member of Management Board Jerzy Kuś Member of Management Board Piotr Nowak Member of Management Board (since 1 st July 2014) After reporting period i.e. on 1 st February 2015 Tomasz Habryka took over the position of Chairman of Management Board of Apator Elkomtech S.A. Further to the above after the assignment of business obligations, he resigned from the Member of Management Board of Apator S.A. The Supervisory Board Janusz Niedźwiecki Chairman of Supervisory Board Mariusz Lewicki Deputy Chairman of Supervisory Board Janusz Marzygliński Member of Management Board Danuta Guzowska Member of Management Board Krzysztof Kwiatkowski Member of Management Board Marcin Murawski Member of Management Board Name of entity: Apator SA Page 4

5 Separate annual financial statement 5 2. Information on the basis on preparation of separate financial statement, reporting currency and rounding applied 2.1. The basis for preparation of separate financial statement The separate annual financial statement of Apator SA presented for the day and period ending on 31 st December 2014 has been prepared in accordance with International Accounting Standards, International Financial reporting Standards and related interpretations to them announced as the regulations of European Commission. The separate annual financial statement of of Apator SA covers the year 2014 and it contains comparative data for Principles of international Financial Reporting Standards applied FIRST TIME ADOPTED STANDARDS The following new standards, amendments to binding standards and their interpretations (accepted or being in the process of acceptance by European Union) are binding on 31 st December IFRS 10 Consolidated financial statement ; IFRS 11 Joint contractual arrangements ; IFRS 12 Disclosure of information on shares in other entities Amendments to IAS 27 Separate financial statement ; Amendments to IAS 28 Investments in associated entities and joint ventures ; Amendments to IAS 32 Financial instruments: presentation Compensation of financial assets and liabilities ; Amendments to IFRS 10, IFRS 11 and IFRS 12: Consolidated financial statements, Joint contractual arrangements, Disclosure of information on shares in other entities ; Amendments to IAS 36: Impairment of assets ; Amendments to IAS 39: Financial instruments: Recognition and measurement Acceptance of the above standards and interpretations did not cause any significant amendments to accounting policy of the Company and neither data presentation in financial statements. STANDARDS AND INTERPRETATIONS AWAITING THE APPROVAL BY EUROPEAN UNION On the day of acceptance of present financial statement the following standards and interpretations are awaiting the approval of European Union: IFRS 14 Regulatory Deferral Accounts has the application for annual periods commencing on 1 st January 2016 or later; Amendments to IFRS 11 Joint contractual arrangements have the application for annual periods commencing on 1 st January 2016 or later; Amendments to IAS 16 Property, plant and equipment and IAS 38 Intangibles have the application for annual periods commencing on 1 st January 2016 or later; Name of entity: Apator SA Page 5 Amendments to IAS 16 Property, plant and equipment and IAS 41 Agriculture have application for annual periods commencing on 1st January 2016 or later;

6 Separate annual financial statement 6 Amendments to IAS 27 Separate financial statements have application for annual periods commencing on 1 st January 2016 or later; Amendments to IFRS 10 Consolidated financial statements and IAS 28 Investments in Associates and joint ventures have application for annual periods commencing on 1 st January 2016 or later; Amendments to IFRS 10 Consolidated financial statements, MSSF 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures have application for annual periods commencing on 1 st January 2016 or later; Amendments to IAS 1 Presentation of financial statements Amendments to International Financial Reporting Standards have application for annual periods commencing on 1 st January 2016 or later; IFRS 15 Revenue from Contracts with Customers have application for annual periods commencing on 1 st January 2017 or later; IFRS 9 Financial instruments have application for annual periods commencing on 1 st January 2018 or later; Acceptance of the above standards and interpretations did not cause any significant amendments to accounting policy of the Company and neither data presentation in financial statements. STANDARDS AND INTERPRETATIONS DID NOT APPLY IN THIS FINANCIAL STATEMENT On the day of acceptance of this separate there are standards and interpretations that had been approved by European Union but they did not come into life: Amendments to International Financial Reporting Standards Amendments to International Financial Reporting Standards have application for annual periods commencing on 1 st January 2015 or later; IFRS 21 Levies have application for annual periods commencing on 17 th June 2014 or later; Amendments to IAS 19 Employee benefits have application for annual periods commencing on 1 st February 2015 or later; have application for annual periods commencing on 1 st February 2015 or later; Amendments to International Financial Reporting Standards have application for annual periods commencing on 1 st February 2015 or later; The above amendments will not have significant influence on financial statements of the Company 2.3. Reporting currency and the rounding applied Polish zloty is the reporting currency in hereby separate financial statement and all amounts are quoted in thousand Polish zloty (if not stated otherwise). Functional currency of this separate financial statement is also Polish zloty Duration of the activity of the entity Duration of the activity of Apator S.A. is indefinite. Separate financial statement has been prepared assuming that the economy activity will be continued in foreseeable future that is in 12 month period not shorter than since the end of reporting period. Name of entity: Apator SA Page 6

7 Separate annual financial statement Approval of financial statement This separate financial statement was approved and signed by the Management Board of the Company on 23 rd April Name of entity: Apator SA Page 7

8 Separate annual financial statement 8 3. Separate financial statement of Apator S.A Separate financial statement of financial situation NOTE Period Fixed assets Intangibles Property, plant and equipment Investment properties Other long-term financial assets in related entities in other entities Long-term receivables from other entities - 41 Deferred fixed assets Current assets Inventories Trade receivables from related entities from other entities Receivables due to corporate income tax Receivables due to other taxes (excluding income tax) and other similar charges Other short-term receivables from related entities from other entities Other short-term financial assets in other entities Short term borrowings granted to related entities Cash and cash equivalents Short term prepayments TOTAL ASSETS Name of entity: Apator SA Page 8

9 Separate annual financial statement 9 NOTE Day Equity Primary capital Other capitals Capital from revaluation of the plan for defined benefits (391) (170) Capital from evaluation of hedging transactions and exchange differences from (113) 349 consolidation Undistributed financial result undistributed result from previous years result of current period write off from the result of current year (9 932) (9 932) Liabilities Liabilities and long-term provisions Long-term loans and borrowings from other entities Long-term liabilities towards other entities Long-term liabilities due to employee benefits Short term liabilities and provisions Short-term loans and borrowings from other entities Trade liabilities towards related entities towards other entities Current tax liabilities Liabilities due to other taxes (excluding income tax) and other similar charges Other short-term liabilities towards related entities towards other entities Short-term liabilities due to employee benefits Other short-term provisions TOTAL LIABILITIES Name of entity: Apator SA Page 9

10 Separate annual financial statement Separate financial statement of profit and loss account and other comprehensive income. Period NOTE since since till till Revenues on sales Revenues on sales of products and services to related entities to other entities Revenues on sales of goods and materials to related entities to other entities Cost of goods sold ( ) ( ) Cost of products and services sold ( ) ( ) - to related entities (19 924) (19 780) - to other entities ( ) (88 669) Cost of goods and materials sold (9 758) (11 602) - to related entities (1 382) (1 997) - to other entities (8 376) (9 605) Gross profit on sales Selling costs (10 274) (9 524) Overheads (25 187) (24 302) Profit on sales Other operating revenues (costs), including: 7.18 (937) 785 Revenues Costs (1 371) (961) Profit on operating activity Net financial revenues, including: Revenues Costs (4 697) (1 729) Profit before tax Current income tax 7.16 (540) (604) Deferred income tax 7.16 (1 789) 665 Net profit Name of entity: Apator SA Page 10

11 Separate annual financial statement 11 Period NOTE since since till till Other comprehensive income Other net comprehensive income (683) (131) Items that can be reclassified to financial result in the future: Result on hedging account (462) (10) Items that will not be reclassified to financial result in the future: Actuarial profits and losses (221) (121) Total comprehensive income Period NOTE since since til till Profit on operating activity Amortization and depreciation EBITDA The above pieces of information are not required by IFRS (the measure does not exist in IFRS). Name of entity: Apator SA Page 11

12 Separate annual financial statement Separate financial statement of changes in equity Primary capital Other capitals Capital from revaluation of programme for defined benefits Capital from valuation of hedging transactions Undistributed financial result TOTAL EQUITY Balance as at (49) Changes in equity in the period since till Comprehensive income Net profit in the period since till Distribution of the result to supplementary capital (23 994) - Other comprehensive income Items that can be reclassified to financial result in the future Result on hedging accounting with tax effect (10) - (10) Items that will not be reclassified to financial result in the future Profits (losses) due to revaluation - - (121) - - (121) Comprehensive income recognized in the period since till (121) (10) Transactions with shareholders recognized directly in equity Dividends (46 350) (46 350) Settlement of interim dividend from previous year Interim dividend paid (9 932) (9 932) Total transactions with shareholders in the period since till (43 039) (43 039) Balance as at (170) Name of entity: Apator SA Page 12

13 Separate annual financial statement 13 Primary capital Other capitals Capital from revaluation of the plan for defined benefits Capital from evaluation of hedging transactions Undistributed financial result TOTAL EQUITY Balance as at (170) Changes in equity in the period since do Comprehensive income Net profit for the period since till Distribution of the result to supplementary capital Other comprehensive income Items that can be reclassified to financial result in the future (31 484) Result on hedging accounting with tax effect (462) - (462) Items that will not be reclassified to financial result in the future. - Profits (losses) due to revaluation - - (221) - - (221) Comprehensive income in the period since till (221) (462) Transactions with shareholders recognized directly in equity Dividends (19 865) (19 865) Settlement of interim dividend from previous year Interim dividend paid (9 932) (9 932) Total transactions with shareholders in the period since till (19 865) (19 865) Balance as at (391) (113) Name of entity: Apator SA Page 13

14 Separate annual financial statement Separate financial statement of cash flow Cash flow from operating activity NOTE Period since since till till Profit before tax Adjustments: (26 467) (27 520) Amortization of intangibles Depreciation of property, plant and equipment (Profit) loss on sales of property, plant and equipment and intangibles (53) (215) (profit) loss on sales of financial assets available for sale 7.19 (99) (255) (Profits) losses due to evaluation of investment property at fair value (160) (Profits) losses due to change in fair value of derivatives 367 (441) Cost of interest Revenues due to interest (20) (62) Revenues due to dividend 7.19 (39 951) (36 635) Other adjustments 265 (158) Cash from operating activity before changes in working capital Change in inventories (1 425) (560) Change in liabilities 7.20 (3 518) (1 323) Change in liabilities Change in provisions (174) Change in accruals and prepayments Cash generated by operating activity Income tax paid (5 754) Net cash from operating activity Cash flow from investing activity Outflows for acquisition of intangibles (3 072) (2 528) Outflows for acquisition of property, plant and equipment 7.20 (9 189) (9 944) Inflows from sales of property, plant and equipment Outflows for acquisition of financial assets available for sale - (1) Inflows from sales of financial assets available for sale Investments in subsidiaries 7.20 ( ) (3 247) Borrowings granted (2 000) (3 000) Repayments received of borrowings granted Interest received Dividends received Other inflows (outflows) (283) (5 009) Net cash used from investing activity (87 952) Name of entity: Apator SA Page 14

15 Separate annual financial statement 15 NOTE Period since since till till Cash flow from financing activity Inflows due to loans and borrowings taken Repayment of loans and borrowings (20 000) (4 638) Interest paid (3 383) (1 420) Dividend paid (19 849) (43 050) Repayment of liabilities due to financial lease (949) (782) Other inflows (outflows) (1 049) (60) Net cash from financing activity (44 950) Net increase (decrease) of cash and cash equivalents (3 212) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Name of entity: Apator SA Page 15

16 Separate annual financial statement Accounting principles applied 4.1. Basis for preparation (general principles) Separate financial statement has been prepared pursuant to the concept of historical cost, except for measurement of some fixed assets (investment properties) and financial instruments (derivatives) that are measured at fair value. The most significant accounting principles adopted by the entity have been presented in points from to Principles and policy of accounting presented below were adapted to all the periods presented in financial statement by the Company. There were also no presenting changes in Detail principles for measurement of assets and liabilities Intangibles Research and development Outflows incurred at the stage of research with the intention to obtain new knowledge in science or engineering are recognized as profit or loss of current period in the moment when they are incurred. Expenditure incurred for development that effects have been applied to prepare or make of new or improved in high degree product are subject to activation in case when making of a new product (or process) is possible from technical point of view and economically justified and the Group has technical, financial and other means necessary to complete the development. Costs that are subject to activation include: cost of materials, remuneration of employees being directly involved in development, recognized part of costs indirectly related to creation of the component of intangibles and activated costs of internal financing. Other costs of development are recognized as a profit or loss of current period at the moment when they are incurred. The cost of development is recognized as intangibles based on their price of acquisition reduced by cumulative write downs and write off due to value impairment. Other intangibles Other intangibles acquired by the Group of defined period of economic usefulness are indicated based on their purchase price reduced by amortization write off and value impairment write down. Expenditure incurred later Later outflows spent on elements of intangibles are subject to activation only when they increase the future economic benefits related to that element. Other expenditure including expenditure created on our own for; trademarks and brand are recognized as the profit or loss of current period at the moment they were incurred. Amortization Name of entity: Apator SA Page 16

17 Separate annual financial statement 17 Amortization write off is made in relation to purchase price of the element of assets or its equivalent value reduced by its residual value. The cost of amortization is recognized as the profit or cost of current period with application of line method in relation to estimate by the Group the period of usefulness of the element of intangibles other than goodwill of the company since the moment of its usability to use that possibly reflects the best the method of performance of the future economic benefits related to the usage of the element of assets. The Group assumes the periods of usage for particular categories of intangibles as below: Patents and licenses since 2 till 5 years Research and development since 3 till 5 years Tangible fixed assets Property, plant and equipment are tangible assets being in possession of the entity in order to make use them in manufacturing, provision of goods or rendering of services or to give them to the third persons for renting or for administration purposes which is expected to be used for more than 12 months. They are measured pursuant to the purchase price, or cost of manufacturing reduced by depreciation write offs or redemption write off or write offs due to permanent decrease of the value. According to the approach based on elements, the entity accepts different depreciation rates for significant elements of tangible fixed asset. Tangible fixed assets in the entity cover tangibles with predicted period of their economic usage longer than one year. The commencement of the depreciation is after a month of usage. During the establishment of annual depreciation rates the economic period of the usage of tangible fixed asset is taken into consideration. In case of establishment of annual depreciation rates, economical period of use of fixed asset is taken into account. The correctness of periods and depreciation rates used by the entity are periodically verified by managers of manufacturing departments. For depreciation purposes of tangible fixed assets, line method of depreciation has been adopted. The period of use for particular fixed assets is as follows: Buildings and constructions Machines and equipment Transport means Other tangible fixed assets from 10 to 70 years from 2 to 25 years from 4 to 10 years from 3 to 10 years If during preparation of financial statement some circumstances occurred indicating that reporting value of tangibles may not be recovered then the review of tangibles is carried out in respect of possible decrease of value. If there are some circumstances indicating that it could be the decrease of value and the reporting value exceeds estimated value to be recovered then the value of tangibles or the centres earning the cash the tangibles belong are reduced to the level of the value to be recovered. The value being recovered corresponds to the higher one from two values: fair value reduced by cost of sales or useful value costs. In order to establish useful value, estimated cash flow is discounted to current value using gross discount rate reflecting current market prices of the value of the money in the period and risks related to the element of assets. In case of element of assets that does not generate cash inflows significantly in independent manner the value recovered is established for the centre earning cash where this element belongs to. Name of entity: Apator SA Page 17

18 Separate annual financial statement 18. Profits or losses resulted from sales/liquidation or discontinuation of use of tangible fixed assets are defined as the difference between revenues from sales and net value of these tangible fixed assets and they are recognized in the result of the period when the sales occurred. Tangible fixed assets under construction regard assets as the construction or assembly in progress and they are indicated at the purchase price or the costs of manufacturing. Tangible fixed assets under construction are not subject to depreciation until the construction is completed and they are handed over for use. The Company has in its possession tangibles being used in social activity where it is their disposer. The tangibles together with the right to perpetual usufruct of the land on the day of transmission to IFRS were measured at fair value by the expert for property. Due to lack of property sales plans and the fact of reimbursement of the costs of keeping that property based on Company s Social Benefits Fund and pursuant to the agreement with the Trade Unions the Company presents these assets in financial statement. The Company controls these assets Investments in subsidiaries and jointly controlled entities The Company has the shares in domestic and foreign enterprises. The shares are treated as long-term investments. The shares in subsidiaries are measured at the purchase price reduced by write downs due to impairment. The joint controlled entity is the joint venture that is joint agreement where the parties have control over the venture (partners of joint venture) have the right to net assets resulting of the agreement. The agreement governs joint control over joint venture. The requirement makes a single partner unable to make control independently over venture. It is assumed that the partner makes joint control when strategic financial decisions and operations require unanimous consent of the parties making joint control. The Company settles the shares in joint venture by equity method under which investment is initially recognized pursuant to purchase price and then after the day of acquisition its value is adjusted suitably by the change of share of investor in net assets of the entity where the investment was performed. The profit or loss of investor covers its share in profit or loss of the entity where the investment was performed and other comprehensive income of investor includes its share in other comprehensive income of entity where the investment was performed Leasing Financial leasing agreements are ones where basically all the risk is transferred to the Company and potential benefits resulting of being the owner as the lessee. All other kinds of leasing are treated as operating leasing. The assets being in use based on financial leasing agreements are treated equally with the assets of the Company and they are measured when leasing agreement comes into life according to lower one from two presented values: fair value the element of property being the subject of leasing or the current value of minimum leasing fees. Leasing payments are divided into interest part and capital part in such a manner that interest rate from the outstanding liability was constant value. Leasing fees for operating leasing are recognized in the result of the period by line method for the duration of leasing agreement. Name of entity: Apator SA Page 18

19 Separate annual financial statement Investment properties Investment properties are considered the properties treated as the revenue from renting and/or they are kept due to expected increase of their values. Investment properties are measured on the fair value at balance day. Profits and losses resulting from the change in fair value of investment properties are recognized in the result in the period they occurred Inventories Materials and goods are valuated according to the price of acquisition (purchase price increased by transport costs, cross-border payments, customs duties, handling costs). Materials and goods are valuated according to weighted average. Products are measured on current basis of the cost of manufacturing but inventory of products and goods is valuated as manufacturing costs not higher than their net sale prices, possible to obtain if the sale takes place on reporting day. Manufacturing cost includes the summary of direct costs (materials, salaries) and justified part of indirect costs concerning manufacturing of the product covering indirect costs of manufacturing and part of fixed direct costs corresponding to the level of these costs when there is a normal use of manufacturing capacity. Inventories are verified at the end of each reporting period. Inventories unnecessary from economic point of view are 100% write down. Moreover, for realignment purpose of the value of inventories the analysis of the age structure is carried out where deciding factor is the date of income and outcome of the warehouse Cost of external financing The Company activates the costs of external financing (interest and other costs incurred by the Company due to activation of financing) that can be subject directly to the purchase or construction of tangible elements of property. The principles of activation are not adapted to investment properties and inventories manufactured in repeatable manner with short manufacturing cycle. The scope of granting of special means by the Company in order to finance the element of assets to be obtained, the amount of external financing in the period that is allowed to be activated is the difference between real costs of external financing in the period and the revenues of entities due to temporary investment of the means granted. If the company grants the financial means and then it uses them aimed at to get the element of assets therefore the expenditures born in the period, the capitalization rate is adopted (weighted average of external financing costs that includes all the loans and borrowings remaining to be settled in the period) Government subsidies Subsidies from the government and non-cash subsidies indicated in fair value are taken only when there is sufficient certainty that the Company will meet the conditions concerning the subsidy and the subsidy will be really granted. In case when subsidy regards the given cost item then it is recognized as the decrease of the costs that the subsidy has to offset it. But in case when subsidy regards the element of assets at that time its fair value decreases the value of the element. Name of entity: Apator SA Page 19

20 Separate annual financial statement Financial instruments As financial instrument the Company qualifies each contract that has the influence at the same time on the occurrence of the element of financial assets at one of the parties and financial liability or capital instrument at the other party provided that the contract concluded between two or more parties will bring clear business effects. The Company classifies financial instruments based on the following division: Elements of financial assets or financial liabilities are valuated according to fair value through the financial result assets and liabilities acquired or recognized mainly in order to sell or repurchase in the near future or they are the part of portfolio of definite financial instruments that are managed in total and for which current and actual pattern of generating of short-term profits is confirmed, the Company includes derivatives to them that provide hedging of exchange rate risk; Investments kept until the due date - financial assets not being the derivatives with agreed or possible to definite payments and fixed due date with respect to them the Company has firm intention and it is able to keep in possession until the due date; Loans and receivables financial assets not being the derivatives with agreed or possible to definite the payments which are not on active market; Financial assets available for sale financial assets not being the derivatives that have been indicated as available for sale or not being (a) loans and receivables, (b) investments kept up to the due date, neither (c) financial assets measured in fair value through financial result; Other financial liabilities. Inclusion and exclusion of the element of financial assets and financial liability The element of financial assets or financial liability is presented in the statement of financial position when the Company becomes the party of the contract of the instrument. The element of financial assets is excluded from the statement of financial position in case when the rights to economic benefits and risk resulting from the contract have been performed, expired or the Company waived the rights. The Company excludes financial liability from the statement of financial position when the liability expired that means the liability specified in the contract is fulfilled, redeemed or expired. Measurement of financial instruments at the date of their arise At the date of acquisition of asset and financial liabilities the Company are measured in fair value by the Company that is mostly in fair value of payment made in case of the element of assets or amount received in case of liability. The Company includes the transaction costs in the initial value of the measurement of all assets and financial liabilities except for the category of assets and liabilities valuated in fair value through financial result. Measurement of financial instruments at the reporting date The Company evaluates: Name of entity: Apator SA Page 20

21 Separate annual financial statement 21 according to amortized cost, with consideration of effective interest rate: investments kept till their due date, loans and receivables and other financial liabilities. The measurement can be in value requiring the payment if the effects of the discount are not significant, according to fair value: financial assets and financial liabilities of categories measured in fair value recognized in financial result and category of financial assets available for sale. If it is not possible to fix the fair value (such situation can occur in case of non-quoted capital instruments), such elements are measured according to the cost (price of acquisition). The effects of measurement of financial assets available for sale according to the fair value are recognized in equity. The effects of measurement of financial assets and liabilities qualified to other categories are recognized in the financial result. Trade liabilities Trade liabilities are measured in accounting books pursuant to amortized and depreciated costs taking into account proper doubtful receivable write downs. Value of liabilities is subject to updating, taking into account the probability of their payment by the write down to operating costs. The receivables and bad claims that is receivables proved by the decision of enforcement proceedings body are not treated as assets. The receivables write down is made when it there is the risk of irrevocability. There are overdue receivables over 180 days when new dates of payments have not been established. The receivables required over 180 days are adjusted by cumulative amount of difference discounted between initial value and its value on due date, calculated by interest effective rate. Bank loans Banks loans are initially recognized at fair value increased by costs of transactions that can be directly assigned. After initial recognition the liabilities are measured at amortized cost by use of interest effective rate method. Trade and other liabilities After initial recognition all the liabilities except liabilities measured at fair value are measured by adjusted purchase price using the interest effective rate. Hedge accounting Hedging of cash flows The Company uses the derivatives such as fx forward contracts in order to hedge the risk of the exchange rate difference. In order to hedge against the increase of interest rates (WIBOR 6M that is the base for interest payments relating to investment loan taken), the Company makes use of IRS type hedging transaction (Interest Rate Swap). IRS transaction enables to manage interest rate risk, allowing among other things to change interest rate of the loan from variable interest rate to fixed one, creating the possibility to hedge against the increase of the cost of the loan. The details concerning IRS transaction concluded have been presented in Note In the connection with the fact that the future expected payments due to sale are not recognized in the financial statement of the Company, whereas the hedging instruments fx forward without the hedge accounting are measured at fair value recognized in the result, the potential accounting mismatching occurred. In order to eliminate the possible accounting mismatching, the Company introduced the hedge accounting from 1 st July Name of entity: Apator SA Page 21

22 Separate annual financial statement 22 If the derivative is designated as the hedge for the variability of cash flows referred to the specified risk related to the recognized element of assets, the recognized liability or highly probable planned transaction which might affect the profit or loss of the current period, the part of profits or losses related to this hedge, which is an effective hedge, is recognized in other comprehensive income and it is presented as the separate item due to hedge in equity. Profits or losses previously recognized in equity are forwarded to the profit or loss of the current period in the same period and the same item, where the hedged cash flows are recognized in financial result.. The ineffective part of the fair value change of the derivative is recognized immediately as the profit or loss of the current period. If the hedging instrument discontinues meeting the hedge accounting criteria then it expires, is sold, released, executed or it will change its designation, the Company will discontinue applying the hedge accounting principles. The accumulated profits or losses previously recognized in other comprehensive income and presented in the equity are remained in the equity till the planned transaction is executed and recognized as the profit or loss of the current period. If the item is hedged by the non-financial asset, profits or losses previously recognized in other comprehensive income correct the carrying amount of these assets as at the recognition. If the planned transaction is not accepted to be executed, the profits or losses recognized in the statement of financial position are recognized promptly as the profit or loss of the current period. In other cases the amounts previously recognized in other comprehensive income are recognized as the profit or loss of the current period in the same period or periods, when the hedged planned transaction affects the profit or loss of the current period. When the hedging is established, the Company formally establishes documents the hedge relationship as well as the purpose of risk management and the strategy of establishing the hedge. The documentation contains identification of hedging instrument, hedged item or transaction, the nature of hedged risk as well as the manner how the entity will assess the effectiveness of hedging instrument in compensation of the threat of changes in the fair value of hedged item or cash flows related to the hedged risk. It is expected that the hedge will be highly effective in compensation of changes of the fair value or cash flows resulting from the hedged risk. The efficiency of the hedging is assessed on a current basis in order to check if it is highly effective in all reporting period, for which it was established Provisions The provisions are established when the Company bears the obligation (legal or custom) resulting from the past events and when it is likely that the fulfilment of this obligation will cause the necessity of outflow of assets when the reliable estimation of the liability's amount is possible to be made. The costs related to the relevant provisions are presented in the profit and loss account after all returns are reduced. In case when the proceed of the money in time is significant the amount of provision is established by discounting the anticipated further cash-flows to the current value using the gross discount rate reflecting the current market assessment of the money in time or the possible risk related to this liability. If the method basing on discounting is applied, the increase of the provision related to the lapse of time is recognized as the financial costs. The provisions are also established for the future liabilities caused by restructuring, if basing on the separate regulations the Company is obliged to carry out or to enter into the binding agreements and the restructuring plans allow estimating the value of future liabilities in a reliable manner. The Company establishes the provision for warranty repairs. For calculation of the provision, the cost of warranty repairs to the total sales ratio in this period is applied. The provision for warranty repairs is being established to other operating activity. Name of entity: Apator SA Page 22

23 Separate annual financial statement Employee benefits Pursuant to the pay-roll systems the employees are entitled to jubilee awards and retirement severance pays. The jubilee awards are paid to employees after working out the specified number of years. The retirement severance pays are paid once at the moment of going into retirement. The amount of the severance pays and jubilee awards depend on the time of employment and the fixed base specified in the corporate collective labour agreement of APATOR S.A. The Company establishes the provision for the future liabilities due to the retirement severance pays and jubilee awards in order to classify the costs to the periods to which they are related to. According to IAS 19 the jubilee awards are other long-term employee benefits and the retirement severance pays are the programs of post-employment employee benefits. The provisions established for jubilee awards and retirement severance pays are determined basing on the projected unit credit method and actuarial techniques. The base for reliable estimation of the provisions is as follows: Criteria for acquiring rights to defined benefits, Actuarial assumptions. Pursuant to IAS 19 the cost of the programme for defined benefits (provision for retirement services) covers the following elements: Cost of employee benefits recognized in the result (other operating costs) Net interest on liabilities due to defined benefits recognized in the result (other operating costs) Re-measurement of liabilities due to defined net employee benefits profit/ actuarial losses recognized in other comprehensive income (capital from re-measurement of the programme for defined benefits) The cost of other long-term employee benefits (jubilee awards) is recognized in other operating costs. The Company establishes the provision for the costs of compensated absences which will have to be incurred as a result unused benefit by the employees and which arisen at the reporting date. Provision for cost of accumulated compensated absences is recognized as the liability after amounts paid are deducted. Provision for costs of accumulated compensated absences is the short-term provision and is not subject of discount and is charged against the basic activity Revenues Revenues from sales The revenues from sale are recognized at fair value of received or payable payments and they represent the receivables for products, goods and services provided under the usual business activity less the rebates, tax on goods and services and other taxes related to the sale. The revenues are recognized in such amount which possibly will correspond to the Company s economic benefits related to the transaction to be achieved and when the amounts of revenues may be reliable measured. Sales of goods and products The sale of goods and products is recognized when the goods and products are delivered and the risk and benefits resulting from the ownership right are transferred and when the amount of revenues may be measured in a reliable manner. Rendering of services Name of entity: Apator SA Page 23

24 Separate annual financial statement 24 The revenues due to rendering of services are recognized under the progress of performance, if the result of related transaction may be measured in a reliable manner. The percentage progress of service performance is determined as the ratio of costs incurred as at the relevant date to the total estimated costs of transactions. If the result of the service related transaction cannot be estimated in a reliable manner then the revenues due to this agreement is recognized only to the amount of incurred costs which Company expects to recover. Other revenues Interest Revenues due to interest are recognized consecutively when they increase, with reference to the net reporting value of the relevant asset in compliance with the effective interest rate method. Dividends Dividends are recognized when the rights of shareholders to receive them are established. Revenues due to rent The revenues due to rent of investment real properties are recognized applying the straight line method for the period of renting to the concluded agreements Transactions in foreign currencies In the financial statement of APATOR S.A. the transactions in foreign currencies are translated pursuant to the exchange rate applicable as at the transaction date. As at the reporting day the monetary assets and liabilities are translated pursuant to the exchange rate of the leasing bank applicable at the end of the reporting period (assets acc. to buy rate, liabilities- sell rate). Profits and losses resulting from translation of the currencies that charges directly the profit or loss Taxes Income tax includes the current and deferred part. The current and deferred income tax is recognized as the profit or loss of the current period, except for the situation when it refers to merger of entities and the items recognized directly in the equity or as the other comprehensive income. The current tax is expected amount of liabilities or receivables due to the income tax to be taxable in the relevant year, established by the application of the income tax legally or actually applicable at the end of the period and the adjustments of the income tax from previous years. The deferred tax is recognized because of the temporary differences between the carrying amount of the assets and liabilities and their value established for the tax purposes. The deferred income tax is not recognized for the following temporary differences: initial recognition of assets or liabilities from the transaction, which is not a merger of entities and does not affect neither the profit and loss of the current period or the taxable income, the differences related to the investments in subsidiaries and under the joint control to the extent, to which it is not probable that they will be disposed in the foreseeable future. Moreover, the deferred tax from the temporary differences arisen as a result of the initial recognition of the goodwill is not recognized. The deferred tax is measured at the applicable tax rate, which will be applicable, when the differences will reverse as expected, whereas the legally or actually binding tax regulations to the end of the period are considered as the basis. The deferred tax assets and deferred tax provisions are offset if the Company has an enforceable legal title to offset the current tax assets and liabilities and provided that the deferred tax provisions refer to the income tax imposed by the same tax authority on the same taxpayer or on different taxpayers, who intend to offset the income tax liabilities and receivables at net amount or simultaneously to receive receivables and settle the liability. Name of entity: Apator SA Page 24