5. Key accounting policies, key estimates and judgments

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.