10. New standards and interpretations and their amendments

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PKO Annual
Report Online
2020

Standards and interpretations and their amendments effective from 1 January 2020

Standards and interpretations*

Description of changes and impact
Amendments to References to the Conceptual Framework in IFRS
(1.01.2020/ 29.11.2019)
The purpose of the amendments is to replace references to the previous conceptual framework in a number of standards and interpretations with references to the amended Conceptual Framework.

Implementation of the Conceptual Framework had no effect on the consolidated financial statements.

Amendments to IAS 1 and IAS 8: Definition of the term ‘material’ (1.01.2020/ 29.11.2019) The amendments standardize and clarify the definition of ‘material’ and contain guidelines to increase the consistency of application of this concept in the IFRS.

The Group makes assessments of the materiality of disclosures in accordance with the requirements of IAS 1 on an ongoing basis, and based on these assessments, makes appropriate changes in the presentation of data in the consolidated financial statements.

Amendments to IFRS 9, IAS 39 and IFRS 7 – IBOR reform (1.01.2020/ 15.01.2020) The amendments introduce certain temporary, narrow departures from the requirements of prospective verification of the effectiveness of hedging relations set out in IAS 39 and IFRS 9. The amendments allow prospective testing of hedging relationships without taking into account the effects of the future implementation of the IBOR reform.

The Group took amendments into account in the prospective testing of hedging relationships.

As part of the established hedging relationships, the Capital Group identifies the following interest rate reference ratios: WIBOR, EURIBOR, LIBOR CHF, LIBOR USD. As at the reporting date, these benchmarks are quoted daily and are available for use and the resulting cash flows are normally exchanged with counterparties.

In the case of WIBOR and EURIBOR, the Group currently does not identify any uncertainty regarding the timing or amounts of cash flows resulting from the IBOR reform. For LIBOR CHF and LIBOR USD, the established hedging relationships exceed the announced discontinuation dates for both ratios, i.e. December 31, 2021 for CHF LIBOR and June 20, 2023 for USD LIBOR. The Capital Group expects that these ratios will be replaced by new benchmarks: LIBOR CHF by SARON and LIBOR USD by SOFR.

List of hedging relationships and the nominal amounts of their designated hedging instruments that may be affected by the IBOR reform:

  • Cash flow hedging:

CIRS CHF / PLN (CHF 25 million based on CHF LIBOR) – Hedging the volatility of cash flows of floating-rate loans in CHF, resulting from the risk of changes in interest rates and currency risk, and hedging of the volatility of cash flows of term deposits negotiated in PLN / bank products of regular PLN savings resulting from the risk of changes in interest rates, using CIRS transaction

  • Fair value hedge:

IRS USD (USD 81 million based on USD LIBOR) – Hedge of fair value volatility of a fixed-rate convertible currency, measured at fair value through other comprehensive income, resulting from the risk of changes in interest rates, using IRS transactions.

Amendments to IFRS 3 Business combinations
(1.01.2020/21.04.2020)
The amendments narrow down and clarify the definition of a venture. They also allow for a simplified assessment of whether a set of assets and activities is a group of assets and not a venture. A prospective approach will apply to these amendments.

The Group will apply these amendments, if relevant.

Amendments to IFRS 16 “Leases” (1.06.2020/9.10.2020) The amendments allow lessees not to account for rent concessions as lease modifications if they are a direct consequence of COVID-19 and meet certain conditions.

The Group does not expect these amendments to have a material effect on the consolidated financial statements.

* The expected effective date in EU / date of endorsement by EU is provided in parentheses.

NEW STANDARDS AND INTERPRETATIONS AND AMENDMENTS THERETO THAT HAVE BEEN PUBLISHED AND ENDORSED BY THE EUROPEAN UNION, BUT HAVE NOT COME INTO FORCE YET AND ARE NOT APPLIED BY THE BANK

Standards and interpretations* Description of changes and impact
Amendments to IFRS 9, IFRS 7, IAS 39 and IFRS 16, IFRS 4  – IBOR reform – Phase 2 (1.01.2021/14.01. 2021) Regulations issued under Phase 2 of the IBOR reform relate to the following:
  • changes to contractual cash flows – adding to IFRS 9 a practical expedient which will enable accounting for modifications of contractual cash flows arising from the IBOR reform by updating the effective interest rate of the contract to reflect the transition to an alternative benchmark rate (there will be no obligation to derecognize or adjust carrying amounts of financial instruments); practical expedient was introduced for lessee accounting applying IFRS 16;
  • hedge accounting: – there will be no need to discontinue applying hedge accounting solely due to the changes required by the reform, provided that the hedge meets other hedge accounting criteria, and
  • disclosures – companies will be obliged to disclose information on new risks arising from the reform and on it management of the transition to alternative benchmark rates.

The Group is in the process of assessing the impact of these amendments on the consolidated financial statements.

Amendments to IFRS 4 “Insurance Contracts”
(1.01.2021/16.12.2020)
The amendments move the date of termination of the temporary relief from the application of IFRS 9 from 1 January 2021 to 1 January 2023 in order to align it with the effective date of IFRS 17. The amendments provides for optional solutions in order to mitigate the impact of different effective dates of IFRS 9 and IFRS 17.

The amendments do not apply to the Group.

* The expected effective date in EU / date of endorsement by EU is provided in parentheses

NEW STANDARDS AND INTERPRETATIONS AND AMENDMENTS THERETO THAT HAVE BEEN PUBLISHED AND ENDORSED BY THE EUROPEAN UNION

Standards and interpretations* Description of changes and impact
MSSF 17 Insurance Contracts (1.01.2023/brak danych) and amendments to IFRS 17 (1.01.2023/ no data) IFRS 17 will replace IFRS 4 which enabled entities to recognize insurance contracts according to the accounting principles in force in the national standards, which, as a result, meant applying many different solutions. IFRS 17 introduces the requirements to recognize all insurance agreements in a consistent manner, including, among others, with regard to the measurement of insurance liabilities, recognition of the profit or loss over time, accounting for reinsurance, separation of an investment component. The application of the standard should follow the full retrospective approach with certain departures.

No material impact on the consolidated financial statements of the Group.

Amendments to IAS 1 – classification of liabilities (1.01.2023/1Q2021) The amendments relate to the presentation of liabilities in the statement of financial position. In particular, the amendment clarifies that classification of liabilities as current or non-current should be based on the contractual arrangements in place at the reporting date. A prospective approach will apply to these amendments.

The Group is in the process of estimating the impact on the consolidated financial statements.

Annual Improvements to IFRS 2018-2020 (1.01.2022/no data)
  • The amendment to IFRS 1 relates to situations when a subsidiary adopts IFRS for the first time at a later date than its parent; in such a case, the subsidiary may decide to measure cumulative translation differences for all foreign operations using the amounts reported by its parent in its consolidated financial statements, based on the parent’s date of transition to IFRS.
  • The amendment to IAS 41 aligns fair value measurement requirements set out in IAS 41 with the assumptions of IFRS 13.

Not applicable to the Group.

  • The amendment clarifies which fees should be included for purposes of the ‘10 per cent’ test in the case of derecognition of financial liabilities.
  • Amendments to illustrative examples in IFRS 16 relating to identification of lease incentives.

The Group does not expect these amendments to have a material effect on the consolidated financial statements.

Amendment to MSSF 3 “Business combinations” (1.01.2022/no data) Amendments to IFRS 3 have updated references to the Conceptual Framework issued in 2018. In order to ensure that this will not impact assets and liabilities which qualify for the recognition on a business combination, the amendment introduces new exceptions from the recognition and measurement principles of IFRS 3.

The Group does not expect these amendments to have a material effect on the consolidated financial statements.

Amendment to IAS 16 “Property, plant and equipment” (1.01.2022/no data) The amendment specifies that, among other things, proceeds from selling items produced while bringing an asset into the location and condition necessary for it to be capable of operating in the intended manner cannot be deducted from  the cost associated with that asset. Instead, such proceeds should be recognized as cost of producing those items, in profit or loss.

The Group does not expect these amendments to have a material effect on the consolidated financial statements.

Amendment to IAS 37 “Provisions, contingent liabilities and contingent assets” (1.01.2022/no data) The amendment clarifies that, when assessing whether or not a contract is onerous, the cost of fulfilling a contract comprises all costs that relate directly to the contract.

The Group does not expect these amendments to have a material effect on the consolidated financial statements.

Amendment to IAS 1 and IAS 8 (1.01.2023/no data) Amendments to IAS 1 contain guidelines on the application of the term “material” in disclosures of the accounting policies.

Amendments to IAS 8 explain how companies should distinguish changes in accounting policies from changes in accounting estimates.

The Group does not expect these amendments to have a material effect on the consolidated financial statements.

* The expected effective date in EU / date of endorsement by EU is provided in parentheses.

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