5. Changes in accounting principles and data presentation

The accounting principles (policy) applied in preparing these financial statements are consistent with those applied in preparing the financial statements for 2021, except for the amendment to IAS 16, as described below. The following amendments to IFRSs are applied in these financial statements in line with their effective dates. With the exception of the amendment to IAS 16, the following amendments did not have a material impact on the presented and disclosed financial information or were not applicable to the Group’s transactions:

• Amendments resulting from IFRS annual improvement cycle 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41, mainly concerning clarifications and wording;
• Amendments to IFRS 3 – amendments concerning references to conceptual assumptions;
• Amendments to IAS 16 – amendments concerning proceeds from property, plant and equipment before intended use;
• Amendments to IAS 37 – Onerous Contracts — Cost of Fulfilling a Contract;
• Amendments to IFRS 16 – amendments concerning rent concessions in connection with COVID-19.

The Group decided not to apply early any standard, interpretation or amendment that was published but is not yet effective in the light of EU regulations.

In accordance with the requirements of IAS 16 effective from January 1, 2022, revenue from the sale of items generated in the course of bringing an item of property, plant and equipment to the location and condition necessary to enable it to operate properly and the costs of such items are recognised in the statement of profit and loss. IAS 16 requires retrospective application of the regulation described above, but only in respect of property, plant and equipment that was placed in service in the earliest period presented in the financial statements.

This regulation applies to revenue from the trial start-up of the power unit, which was generated in the first quarter of 2021 by PGE GiEK S.A., Elektrownia Turów Branch. According to the accounting policy in place in 2021, revenue from the so-called trial start-up reduced the cost of production of the power unit, but the amount of revenue that reduces the cost of production of the asset could not exceed the amount of the cost of verification (testing). In accordance with the accounting policy in place in 2021, in the first quarter of 2021 expenses related to the construction of the power unit were recognised as costs related to the trial start-up as well as revenue from the sale of electricity from the trial start-up in the amount of PLN 42 million. The surplus of revenue from the sale of electricity from trial start-up over the costs incurred amounted to PLN 9 million and was recognised in the statement of profit and loss.

In order to make the data for 2021 comparable, revenue from electricity sales and own costs of sales were increased by PLN 42 million. The change had no impact on the financial result.

In the current reporting period, PGE Group made changes to the accounting policies applied regarding the presentation and accounting for energy collisions.

The principle of accounting for energy collision removal operations has been changed. Up to now, the removal of collisions was treated as the replacement of assets without economic effect, and the outstanding value of collisions in the statement of financial position reduced the value of fixed assets.

After the rule change, collision removal operations are accounted for as liquidation of existing assets and acceptance of new assets. The value of assets received free of charge as a result of collision removal is presented in deferred income.

The impact of the change on the presentation of balance sheet items has only been recognised in the statement of financial position without a full value adjustment to the comparative figures. This event increased total assets and equity and liabilities by PLN 308 million as at December 31, 2021 and by PLN 245 million as at January 1, 2021 and had no impact on equity.

The change in the rules for recording de-collision operations also affected the measurement of the value of de-collision accruals, but the Group did not retrospectively value-adjust the data, despite having made reasonable efforts and actions to do so, due to the impossibility of doing so in practice. This results in the impossibility of reliably estimating the impact of a change in accounting policy on the comparative information in the financial statements.

To ensure greater consistency in the financial data presented, PGE Group decided to change the presentation of accrued exchange differences on cash. The accrued exchange differences are now presented in operating activities and, due to the change applied, the cash balance in the statement of cash flows is consistent with the cash balance in the statement of financial position. The data for the comparative period was appropriately restated.