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5. Key accounting policies, key estimates and judgments

PZU AR 2021 > Results > Supplementary information and notes > 5. Key accounting policies, key estimates and judgments
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The consolidated financial statements have been prepared using the following measurement principles:

  • at fair value for derivatives, financial assets and liabilities held for trading, equity instruments, participation units and investment certificates of mutual funds, financial assets classified to a business model whose objective is achieved by obtaining contractual cash flows and from the sale of financial assets satisfying the SPPI test, other financial assets that do not satisfy the SPPI criterion;
  • at amortized cost for financial assets classified to a business model whose objective is achieved by obtaining contractual cash flows and satisfying the SPPI test as well as other financial liabilities;
  • at historical cost for non-financial assets and liabilities.

The preparation of consolidated financial statements in compliance with IFRS requires the PZU Management Board to make professional judgments, estimates and assumptions that affect the adopted accounting policies and the presented values of assets, liabilities, revenues and costs.

The estimates and the related assumptions are based on historical experience and other factors which are deemed reasonable in the given circumstances, and their results provide the basis for professional judgment regarding the carrying amount of the assets and liabilities which does not follow directly from other sources.

In making judgments, estimates or assumptions, the PZU Management Board may, in significant matters, rely on the opinions of independent experts.

The actual value may differ from the estimated one. All judgments, estimates and related assumptions are revised on an ongoing basis. Their changes are recognized as described in section 5.1.

The PZU Group assessed the adopted estimates and assumptions taking into account the impact of the COVID-19 pandemic on distinct assets and liabilities of the PZU Group. Given the uncertainty regarding the future economic situation, any estimates are subject to change. The uncertainty pertains predominantly to forecasts of macroeconomic assumptions, in particular those concerning key economic indicators (such as the degree of expected economic recovery, GDP, employment rate, housing prices, potential disruptions in capital markets), potential business disruptions caused by decisions made by state institutions, enterprises and consumers, the degree of effectiveness of aid programs designed to support businesses and consumers and the evolution of the mortality rate.

The key accounting policies, estimates and judgments used for the preparation of the consolidated financial statements are described below and in the individual notes as specified in the table below.

Item of the profit and loss account Note Item of the statement of financial position Note
Gross written premiums 10 Goodwill 27
Revenue from commissions and fees 11 Intangible assets 28
Interest income calculated using the effective interest rate 12 Deferred acquisition costs 30
Result on derecognition of financial instruments and investments 14 Property, plant and equipment 31
Movement in allowances for expected credit losses and impairment losses on financial instruments 38 Investment property 32
Claims, benefits and movement in technical provisions 18 Assets securing liabilities 36
Interest expenses 20 Entities measured by the equity method 33
Acquisition expenses 21 Loan receivables from clients 34
Administrative expenses 22 Financial derivatives 35
Income tax 25 Investment financial assets 36

Cash and cash equivalents 39

Assets and liabilities held for sale 49

Equity attributable to equity holders of the Parent 40

Non-controlling interest 2.4

Technical provisions 41

Subordinated liabilities 42

Liabilities on the issue of own debt securities 43

Liabilities to banks 44

Liabilities to clients under deposits 45

Other liabilities 46

Provisions 47

Deferred tax 48