14.2. Intangible assets and goodwill

SELECTED ACCOUNTING PRINCIPLES

Intangible assets

An intangible asset shall be measured initially at acquisition or production cost and shall be presented in the statement of financial position in its net carrying amount.

Intangible assets with the finite useful life are amortised using straight-line method. Amortization shall begin when the asset is available for use i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

Standard useful lives of intangible assets are from 2 to 10 for software and from 2 to 15 years for licenses, patents and similar.

The amortization method and useful life of intangible asset item are verified at least at the end of each year.

Goodwill                     

Goodwill acquired in a business combination from the acquisition date, shall be allocated to each of the acquirer’s cash-generating units (CGU), that is expected to benefit from the synergies of the combination.

Each unit or group of units to which goodwill has been assigned:

a) corresponds to the lowest level within the acquire at which goodwill is monitored for internal management purposes; and

b) may not be greater than the operating segment before aggregation, as determined in accordance with paragraph 5 of IFRS 8 Operating Segments.

After combination the acquirer shall measure goodwill in the amount recognised at the acquisition date less any accumulated impairment allowances.

A cash-generating unit to which goodwill has been allocated shall be tested for impairment annually, and whenever there is an indication that the unit may be impaired.

Rights

The main item of property rights is CO₂ emission rights, not amortised, tested for impairment.

Received free of charge emission allowances are presented as intangible assets in correspondence with deferred income at fair value as at the date of registration. Purchased allowances are presented at purchase price. Grants are accounted systematically in individual reporting periods to ensure proportionality with the costs of the created provision. Purchased allowances are presented at purchase price.

For the estimated CO₂ emission during the reporting period, a provision is created and charged to the costs of basic activities (taxes and charges).

Property rights also include energy certificates.

Property rights, including CO₂ emission allowances and energy certificates are redeemed against the book value of the provision, as its settlement. Outgoing of CO₂ emission allowances and energy certificates are recognised using the weighted average method.

PROFESSIONAL JUDGEMENT

Allocation of goodwill to cash-generating units

Applying the Group’s accounting policy with regard to allocating goodwill to cash-generating units requires making a judgment as to which CGU will benefit from the synergy obtained as a result of combination of entities. Goodwill is allocated based on a number of subjective criteria, including:

• analysis of qualitative factors that led to the recognition of goodwill as part of the purchase price settlement, including expected operating and financial synergies as well as intangible assets that do not qualify for separate recognition;
• existence of an active market for the products generated or the services provided by the acquiree
• manner in which goodwill is monitored for the internal management needs of the Group
• existence of integration and reorganisation plans, which in the near future influenced changes within the CGU
• geographical location in which the acquired unit operates.

ESTIMATES

Useful lives of intangible assets

The Group verifies useful lives of intangible assets once at year end with effect from the beginning of next year. The impact of verification of useful lives in 2021 resulted in decrease of depreciation costs by PLN (1) million compared to depreciation costs that were recognised based on useful lives applied in 2020.

Change in internally generated intangible assets

As at 31 December 2021 and as at 31 December 2020 internally generated intangible assets amounted to PLN 5 million and PLN 4 million, respectively.

Change in other intangible assets

The gross carrying amount of all fully amortised intangible assets still in use as at 31 December 2021 and as at 31 December 2020 amounted to PLN 737 million and PLN 616 million, respectively.