33. Loans and advances to customers

Loans and advances to customers include amounts due from loans and advances granted and finance lease receivables.

Loans and advances to customers are classified in the individual measurement categories in accordance with the principles for selecting the business model and evaluating the characteristics of contractual cash flows referred to in the Note „Description of significant accounting policies”.

Finance lease agreements are recognized as receivables in the amount equal to the current contractual value of the lease payments plus the potential not guaranteed residual value attributed to the lessor, determined as at the date of inception of the lease. Lease payments on finance leases are divided between interest income and a reduction in the balance of receivables in a manner enabling the achievement of a fixed interest rate on the remaining receivables.

The item “Loans and advances to customers” also includes an adjustment relating to fair value hedge accounting for loans and advances to customers which represent hedged items (note “Hedge accounting”).

Additionally, the Group recognizes the impact of:

• the legal risk related to potential litigation for the portfolio of mortgage loans in convertible currencies and existing legal claims related to loan exposures recognized as at the balance sheet date in the statement of financial position;
• potential reimbursements of costs to customers in connection with expected early repayment of active consumer and mortgage loans;

when adjusting the gross carrying amount of housing and consumer loans measured at amortized cost.