1.1.2. Basis of preparation
These consolidated financial statements of the PGNiG Group have been prepared in accordance with the International Financial Reporting Standards (IFRS) as endorsed for application in the European Union (EU).
Basis of consolidation
These consolidated financial statements include data of the Parent, its subsidiaries and joint arrangements (joint ventures and joint operations). Financial statements of entities which are consolidated or accounted for with the equity method are prepared for the same reporting period as those of the Parent, based on consistent accounting policies. If necessary, adjustments are made to the financial statements of subsidiaries or joint ventures to ensure consistency between the accounting policies applied by a given entity and those applied by the Group.
Joint arrangements are accounted for in accordance with the policies presented in Notes 2.4 and 8.7.
Subsidiaries are consolidated with the full method from their acquisition date (the date of assuming control of the company) until the date the control is lost. Control is exercised when the Parent is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over that entity.
Acquisition of control of an entity representing a business is accounted for with the acquisition method. Identifiable acquired assets and assumed liabilities of an acquiree which is a business within the meaning of IFRS 3 are recognised as at the acquisition date and are measured at fair value. The excess of the acquisition cost (the consideration transferred (at fair value), any non-controlling interest in the acquiree measured in accordance with IFRS 3, and − in a business combination achieved in stages − the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree) over the net of the acquisition-date fair value of the identifiable assets acquired and the liabilities assumed, is recognised as goodwill. If the acquisition cost is lower than the net of the acquisition-date fair value of the identifiable assets acquired and the liabilities assumed, the difference is recognised as gain in profit or loss as at the acquisition date (gain on bargain purchase). The transaction costs are recognised in profit or loss when incurred. Non-controlling interests are initially measured at the non-controlling interest’s proportionate share of net assets of the acquiree or at fair value.
If the Parent loses control of a subsidiary in a reporting period, the consolidated financial statements account for the subsidiary’s results for such part of the reporting year in which control was held by the Parent.
These consolidated financial statements have been prepared based on the assumption that the Group will continue as a going concern in the foreseeable future. As at the date of authorisation of these financial statements for issue, no circumstances were identified which would indicate any threat to the Group’s continuing as a going concern.
These consolidated financial statements have been prepared in accordance with the historical cost convention, except with respect to financial derivatives measured at fair value and financial assets available for sale.
The reporting currency of these consolidated financial statements is the Polish złoty (PLN).
The functional currency of PGNiG S.A. and the presentation currency of these consolidated financial statements is the Polish złoty (PLN).
Items denominated in foreign currencies
Transactions denominated in foreign currencies are initially recognised at the exchange rate of the functional currency as at the transaction date. At the end of a reporting period:
- Monetary items denominated in foreign currencies are translated at the exchange rate of the functional currency quoted by the National Bank of Poland for the reporting date.
- Non-monetary items measured at historical cost in a foreign currency are translated at the exchange rate as at the date of the transaction.
Exchange differences arising on settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition, are taken to profit or loss. Exchange differences which are part of a gain/(loss) on measurement of a hedging instrument in hedge accounting are recognised in other comprehensive income.
The financial data of all foreign operations and branches which are accounted for in consolidated financial statements must be translated into the Group’s presentation currency, i.e. into PLN. For this purpose, their data from the statement of financial position is translated at the mid rate quoted for the given currency by the National Bank of Poland for the end of the reporting period, and data from the statement of profit or loss – at the rate equal to the arithmetic mean of mid rates quoted for the given currency by the National Bank of Poland for the last day of each month of the financial year.
Foreign currency differences arising on translation of assets and liabilities of foreign operations are recognised in other comprehensive income and accumulated as a separate item of equity. Upon disposal of a foreign operation, the foreign exchange differences accumulated in equity are transferred to the statement of profit or loss and disclosed as part of the overall net gain/(loss) on the disposal.
To hedge against foreign currency risk, the Group enters into currency derivative contracts (for description of the accounting policies applied by the Group to derivative financial instruments see Note 7.2).
These financial statements were signed and authorised for issue by the Parent’s Management Board on March 8th 2017.
