6.1.2. Intangible assets
Accounting policies
Intangible assets
The Group identifies the following main categories of intangible assets:
- Perpetual usufruct rights to land,
- Software,
- CO2 emission allowances,
- Licences obtained under the Polish Geological and Mining Law, mining rights and geological information (“Licences”).
Perpetual usufruct rights to land
The Group uses perpetual usufruct rights to land which it has acquired in the market against consideration or obtained from the State Treasury or a local government unit.
Perpetual usufruct rights to land acquired for consideration (from other entities) are presented as intangible assets and amortised over their useful lives. The useful life of a perpetual usufruct right to land acquired for consideration from an entity other than the State Treasury or local government unit is equal to the period from the acquisition date of the perpetual usufruct right to the last day of the perpetual usufruct period set out in the perpetual usufruct agreement. Useful lives of perpetual usufruct rights acquired against consideration range from 40 to 99 years. As at December 31st 2016, the average remaining useful life of perpetual usufruct rights held by the Group was 55 years.
In the case of perpetual usufruct rights obtained under perpetual usufruct agreements made with the State Treasury or a local government unit, the Group discloses in intangible assets the excess of the first payment over the annual perpetual usufruct charge. The useful life of the excess of the first payment over the annual perpetual usufruct charge is equal to the perpetual usufruct period specified in the perpetual usufruct agreement.
Perpetual usufruct rights to land acquired free of charge pursuant to an administrative decision issued under the Amendment to the Act on Land Management and Expropriation of Real Estate of September 20th 1990 are presented only in off-balance-sheet records.
CO2 emission allowances
Pursuant to the Act on Trading in Greenhouse Gas Emission Allowances, the Group holds CO2 emission allowances allocated for individual installations.
The Group classifies emission allowances as:
- Acquired for redemption – recognised as intangible assets and measured in accordance with the policies discussed below,
- Acquired for resale – recognised as inventory (Note 6.2.1) and measured initially at cost; at the end of each reporting period they are measured at the lower of cost or net realisable value,
- Received free of charge under the National Allocation Plan – recognised as off-balance-sheet items at nominal value (equal to zero).
Licences, mining rights and rights to geological information
In its exploration and production operations, the Group uses licences obtained under the Polish Geological and Mining Law, rights to geological information, and mining rights.
Costs of licences for exploration for and production of natural gas and/or crude oil and charges for the grant of mining rights payable to the State Treasury are disclosed as capitalised expenditure.
Measurement
The Group initially recognises intangible assets at cost. In the case of granted mining rights, the initial value is equal to the charges paid to the State Treasury for the grant of the mining rights.
Subsequent to initial recognition, intangible assets are carried at cost less accumulated amortisation and impairment (for accounting policies relating to impairment, see Note 6.1.3.).
Intangible assets are amortised using the straight-line method based on amortisation rates that reflect the expected useful lives of the assets. Acquired CO2 emission allowances are amortised depending on the actual emission volumes.
Material estimates
Useful lives of intangible assets
The useful lives of intangible assets were determined on the basis of assessments made by the engineering personnel responsible for their use. Any such assessment is connected with uncertainty as to the future business environment, technology changes and market competition, which could lead to a different assessment of the economic usefulness of the assets and their remaining useful lives, and ultimately have a material effect on the value of intangible assets and the future amortisation charges.
The estimated amortisation period and amortisation method are reviewed at the end of each financial year. If the forecast useful life of an asset is significantly different from previous estimates, the amortisation period is changed. Such transactions are recognised by the Group as revision of estimates and are recognised in profit or loss in the period in which such estimates are revised.
The most recent review was carried out as at December 31st 2016. As a result of the review, annual amortisation charges were reduced by about PLN 5m.
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| Perpetual usufruct rights to land | CO2 emission allowances | Software | Licences | Other intangible assets | Total | |
|---|---|---|---|---|---|---|
| Gross carrying amount as at Jan 1 2015 |
682 | 338 | 387 | 279 | 399 | 2,085 |
| Accumulated amortisation | (15) | (291) | (271) | (104) | (234) | (915) |
| Impairment losses | (4) | – | (2) | (50) | (1) | (57) |
| Net carrying amount as at Jan 1 2015 |
663 | 47 | 114 | 125 | 164 | 1,113 |
| Exchange differences on translating foreign operations | – | – | 1 | 4 | – | 5 |
| Transfer from tangible assets under construction | – | 3 | 122 | 20 | 19 | 164 |
| Transfers between asset groups and between items of the statement of financial position | (5) | – | (4) | – | 4 | (5) |
| Acquisition | – | 90 | – | – | – | 90 |
| Disposal | (3) | – | – | – | – | (3) |
| Amortisation | (2) | (59) | (60) | (15) | (61) | (197) |
| Impairment losses | (18) | – | (1) | 2 | – | (17) |
| Retirement | (1) | – | – | – | (14) | (15) |
| Other changes | 5 | – | – | (35) | 33 | 3 |
| Gross carrying amount as at Dec 31 2015 |
677 | 430 | 499 | 243 | 423 | 2,272 |
| Accumulated amortisation | (16) | (349) | (324) | (94) | (277) | (1,060) |
| Impairment losses | (22) | – | (3) | (48) | (1) | (74) |
| Net carrying amount as at Dec 31 2015 |
639 | 81 | 172 | 101 | 145 | 1,138 |
| Exchange differences on translating foreign operations | – | – | – | 2 | – | 2 |
| Transfer from tangible assets under construction | 1 | 2 | 28 | 5 | 19 | 55 |
| Transfers between asset groups and between items of the statement of financial position | (3) | – | – | – | – | (3) |
| Acquisition | – | 94 | – | – | – | 94 |
| Disposal | (2) | – | – | – | – | (2) |
| Amortisation | (2) | (89) | (59) | (20) | (35) | (205) |
| Impairment losses | (7) | – | (1) | (5) | (1) | (14) |
| Changes in the Group | 8 | 11 | 2 | – | 20 | 41 |
| Retirement | – | – | (1) | (2) | – | (3) |
| Other changes | 3 | – | – | (27) | – | (24) |
| Gross carrying amount as at Dec 31 2016 |
676 | 538 | 529 | 203 | 460 | 2,406 |
| Accumulated amortisation | (10) | (439) | (384) | (96) | (310) | (1,239) |
| Impairment losses | (29) | – | (4) | (53) | (2) | (88) |
| Net carrying amount as at Dec 31 2016 |
637 | 99 | 141 | 54 | 148 | 1,079 |
