14.10.2.1. Deferred income

SELECTED ACCOUNTING PRINCIPLES

Grants

Grants are recognized when there is reasonable assurance that the grant will be received and met all the conditions associated with it.

Grants related to property, plant and equipment are recognised as deferred income and is recognised in other operating income on a systematic basis over the useful life of the asset.

Grants related to costs are recognized as decrease of costs at the period they are incurred and the surplus amount of the received grant over the value of the given cost is recognised as other operating income.

PROFESSIONAL JUDGMENT

Investment tax reliefs

The companies of the Group use government assistance in the form of investment tax reliefs received directly in connection with the purchase or production of fixed assets. If the investment relief granted is not accompanied by a reduction in the tax value of the acquired or manufactured assets, and the amount of the relief is based on the value of eligible expenses that are part of the purchase price or the cost of manufacturing an asset and it may be used only in relation to the income generated by an acquired or manufactured asset, the Group applies accounting principles based on the guidelines contained in the National Accounting Standard No. 2 with regard to the recognition of investment bonuses. Thus, the Group recognizes the received tax relief as a subsidy and settles it systematically in other operating income over the weighted average useful life of the assets for which the relief was granted.

Deferred income as at 31 December 2021 and 31 December 2020 includes mainly the unsettled part of the grants for non-current assets received, mainly in previous years, in the amount of PLN 321 million and PLN 208 million, respectively.

In May 2019, ORLEN Południe S.A. obtained a decision on support from the Krakow Technology Park for the implementation of a new investment for the production of propylene glycol and glycerin.

Due to the completion of the investment and the fulfilment of the quantitative and qualitative criteria indicated in the decision, the company obtained the right to benefit from public aid in the form of income tax exemption (investment relief) in the amount of PLN 106 million, which will be settled according to the weighted average economic useful life of the fixed assets put into operation use, which has been estimated at 13 years. As at 31 December 2021, the remaining value of the investment relief granted amounted to PLN 105 million. The relief was presented under long-term and short-term donations in the amounts of PLN 98 million and PLN 7 million, respectively.