3.1 Introduction of new IFRS

3.1.1 Standards and interpretations as well as amended standards effective from 1 January 2013

The following new standards, interpretations and revised standards have been applied to these consolidated financial statements:

Standard/InterpretationDate of entry into force for periods beginning onRegulation endorsing a standard or interpretationDescription
Amendments to IAS 19 “Employee Benefits” – Improvements to the Accounting for Post-employment Benefits 1 January 2013 475/2012 The most important amendments are:
(1) eliminating an option to defer the recognition of gains and losses, known as the “corridor method”;
(2) streamlining the presentation of changes in assets and liabilities arising from defined benefit plans (including requiring remeasurements to be presented in other comprehensive income, thereby separating those changes from changes that many perceive to be the result of an entity’s day-to-day operations);
(3) enhancing the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans.  

As a result of implementation of the revised IAS 19, the PZU Group has presented a number of new disclosures concerning employee benefits. Actuarial gains and losses have been presented in other comprehensive income and not in the profit of loss, as before.
IFRS 13 - “Fair Value Measurement” 1 January 2013 1255/2012 IFRS 13 defines fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements.  

Application of the new IFRS has resulted in a significant extension of the scope of fair value disclosures.
Amendments to IAS 12 “Income Taxes” – Deferred Tax: Recovery of Underlying Assets 1 January 2012 1   1255/2012 IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 “Investment Property”. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally be, be through sale.  

The aforesaid change did not exert any effect on the consolidated financial statements of the PZU Group.
Amendments to IFRS 1 “First-time Adoption of IFRS” – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters 1 July 2011 1 1255/2012 Changes:
(1) replacement of references to a fixed date of “1 January 2004” with “the date of transition to IFRSs”;
(2) providing guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. The change does not affect the PZU Group.
IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine” 1 January 2013 1255/2012 The interpretation states that costs associated with a “stripping activity” should be accounted for as an addition to, or an enhancement of, an existing asset, and that this component should be amortised over the expected useful life of the of the identified component of the ore body that becomes more accessible as a result of the stripping activity (using the units of production method unless another method is more appropriate).  

The change does not affect the PZU Group.
Amendments to IFRS 7 “Financial Instruments: Disclosures” – Offsetting Financial Assets and Financial Liabilities 1 January 2013 1256/2012 The amendments require information about:
(1) all recognised financial instruments that are set off in accordance with paragraph 42 of IAS 32;
(2) disclosure of information about recognised financial instruments subject to enforceable master netting arrangements and similar agreements even if they are not set off under IAS 32.  

The aforesaid change does not exert any significant effect on the consolidated financial statements of the PZU Group.
Amendments to IFRS 1 “First-time Adoption of IFRS” – Government Loans 1 January 2013 183/2013 This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRSs. It also adds an exception to the retrospective e application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” in 2008.  

The change does not affect the PZU Group.
Amendments to 2009 -2011 1 January 2013 301/2013 Amendments to various standards and interpretations resulting from the annual improvement project of IFRS (IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34) primarily with a view to removing inconsistencies and clarifying wording. The revisions clarify the required accounting recognition in cases where free interpretation used to be permitted. The most important changes include new or revised requirements regarding: repeated application of IFRS 1, borrowing costs under IFRS 1, clarification of the requirements for comparative information, classification of servicing equipment, tax effect of distribution to holders of equity instruments, interim financial reporting and segment information for total assets and liabilities.  

The aforesaid change does not exert any significant effect on the consolidated financial statements of the PZU Group.

1) The EC voted in favor of the regulation to be applicable to annual periods beginning on or three days after publication, which took place on 29 December 2012, at the latest (periods beginning on or after 1 January 2013).

3.1.2 Standards, Interpretations and amended Standards issued but not effective as at the financial statements date

Standards, Interpretations and amended Standards issued but not effective as at the financial statements date:

  • Approved by European Commission:

Standard/InterpretationDate of entry into force for periods beginning onRegulation endorsing a standard or interpretationDescription
IFRS 10 “Consolidated Financial Statements”1 January1 2013 11254/2012 IFRS 10 replaces the consolidation guidance in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e., whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in special purpose entities). Under IFRS 10, control is based on whether an investor has power over the investee; exposure, or rights, to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the returns.  

Following the application of IFRS 10, effective from the beginning of 2014, PZU Energia Medycyna Ekologia sub-fund, PZU Akcji Rynków Wschodzących sub-fund, PZU Akcji Spółek Dywidendowych sub-fund and PZU FIZ Forte will be consolidated. In effect, assets and liabilities of the consolidated funds will be recognizedas on-balance sheet assets and liabilities instead of units. This will lead to an increase in the balance sheet total of ca. PLN 4,600 thousand. Due to retrospective application of the new standard, the 2013 figures will be restated.
IFRS 11 “Joint Arrangements”11 January1 20131 11254/2012 IFRS 11 introduces new accounting requirements for joint arrangements, replacing IAS 31 Interests in Joint Ventures. The option to apply the proportional consolidation method when accounting for jointly controlled entities is removed. Additionally, IFRS 11 eliminates jointly controlled assets to now only differentiate between joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and obligations for the liabilities. A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets.  

Application of IFRS 11 will not exert any significant effect on the consolidated financial statements of the PZU Group.
IFRS 12 “Disclosures of Interests in Other Entities”11 January1 20131 11254/2012 IFRS 12 will require enhanced disclosures about both consolidated entities and unconsolidated entities in which an entity has involvement. The objective of IFRS 12 is to require information so that financial statement users may evaluate the basis of control, any restrictions on consolidated assets and liabilities, risk exposures arising from involvements with unconsolidated structured entities and non-controlling interest holders' involvement in the activities of consolidated entities.  

Application of IFRS 12 will require additional disclosures in the consolidated financial statements (mainly as regards the associates held as well as entities with non-controlling interest).
Transition Guidance (Amendments do IFRS 10, IFRS 11 and IFRS 12)1 January 2013 1313/2013 The amendments are intended to provide additional transition relief in IFRS 10, IFRS 11 and IFRS 12, by “limiting the requirement to provide adjusted comparative information to only the preceding comparative period”.
Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment entities11 January1 20141174/2013 The amendments provide an exception to the consolidation requirements in IFRS 10 and require investment entities to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them. The amendments also set out disclosure requirements for investment entities.   The change does not affect the PZU Group.
Revised IAS 27 “Separate Financial Statements”11 January1 20131 11254/2012 The requirements relating to separate financial statements are unchanged and are included in the amended IAS 27. The other portions of IAS 27 are replaced by IFRS 10.   The change does not affect the PZU Group.
Revised IAS 28 “Investments in Associates and Joint Ventures”11 January1 20131 11254/2012 IAS 28 is amended for conforming changes based on the issuance of IFRS 10, IFRS 11 and IFRS 12.
Amendments to IAS 32 “Financial instruments: presentation” – Offsetting Financial Assets and Financial Liabilities11 January1 20141256/2012 Amendments provide clarifications on the application of the offsetting rules and focus on four main areas: the meaning of “currently has a legally enforceable right of set-off”; the application of simultaneous realisation and settlement; the offsetting of collateral amounts; the unit of account for applying the offsetting requirements.  

The aforesaid change does not exert any significant effect on the consolidated financial statements of the PZU Group.
Amendments to IAS 36 “Impairment of assets”11 January1 20141374/2013 Narrow-scope amendments to IAS 36 address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.  

The aforesaid change does not exert any significant effect on the consolidated financial statements of the PZU Group.
Amendments to IAS 39 – Novation of Derivatives and Continuation of Hedge Accounting11 January1 20141375/203 The narrow-scope amendments allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met  
The aforesaid change will not have any effect on the consolidated financial statements of the PZU Group (hedge accounting is not applied).

1) The EC voted in favor of the regulation to be applicable to annual periods beginning on 1 January 2014 at the latest (early application is allowed).

  • Not endorsed by European Commission:

Standard/InterpretationDate of issuance by IASBDate of entry into force for periods beginning on (by IASB)Description
IFRS 9 “Financial Instruments” 12 November 2009 -
16 December 2011
(update)
On 19 November 2013, the International Accounting Standards Board announced postponement of the obligatory effective date of the standard, as the impairment phase had not been completed. The new effective date will be agreed in the future, nearer the date of completion of the IFRS 9 project. On 19 November 2013 IASB issued another package of amendments to the accounting requirements for financial instruments. Standard uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the many different impairment methods in IAS 39. The new requirements on accounting for financial liabilities address the problem of volatility in profit or loss arising from an issuer choosing to measure its own debt at fair value. The IASB decided to maintain the existing amortised cost measurement for most liabilities, limiting change to that required to address the own credit problem. With the new requirements, an entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity’s own credit risk in the other comprehensive income section of the income statement, rather than within profit or loss. The amendments from November 2013 bring into effect a substantial overhaul of hedge accounting that will allow entities to better reflect their risk management activities in the financial statements.  

Considering the remote and not defined effective date and expected further changes in the accounting principles applicable to financial instruments, partly related to the current works on gradual replacement of IAS 39 effective at present with new regulations, the effect of application of IFRS 9 on the comprehensive income and equity of the PZU Group has not been assessed.
Amendments to IAS 19 “Employee Benefits” - Defined Benefit Plans: Employee Contributions 21 November 2013 1 July 2014 The narrow scope amendments in IAS 19 apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary.  

The aforesaid change does not exert any significant effect on the consolidated financial statements of the PZU Group.
IFRS 14 “Regulatory Deferral Accounts” 30 January 2014 1 January 2016 This Standard is intended to allow entities that are first-time adopters of IFRS, and that currently recognise regulatory deferral accounts in accordance with their previous GAAP, to continue to do so upon transition to IFRS.  

The change does not affect the PZU Group.
Amendments to IFRS 2010-2012 12 December 2013 1 July 2014 Amendments to various standards and interpretations resulting from the annual improvement project of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) primarily with a view to removing inconsistencies and clarifying wording. The revisions clarify the required accounting recognition in cases where free interpretation used to be permitted. The most important changes include new or revised requirements regarding: definition of 'vesting condition'; accounting for contingent consideration in a business combination; aggregation of operating segments and reconciliation of the total of the reportable segments' assets to the entity's assets; measuring short-term receivables and payables; proportionate restatement of accumulated depreciation application in revaluation method and clarification on key management personnel.  

The aforesaid change does not exert any significant effect on the consolidated financial statements of the PZU Group.
Amendments to IFRS 2011-2013 12 December 2013 1 July 2014 Amendments to various standards and interpretations resulting from the annual improvement project of IFRS (IFRS 1, IFRS 3, IFRS 13 and IAS 40) primarily with a view to removing inconsistencies and clarifying wording. The revisions clarify the required accounting recognition in cases where free interpretation used to be permitted. The most important changes include new or revised requirements regarding: meaning of effective IFRSs in IFRS 1; scope of exception for joint ventures; (iii) scope of of paragraph 52 if IFRS 13 (portfolio exception) and clarifying the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property.  

The aforesaid change does not exert any significant effect on the consolidated financial statements of the PZU Group.
IFRIC 21 “Levies” 20 May 2013 1 January 2014 IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.  

The aforesaid change does not exert any significant effect on the consolidated financial statements of the PZU Group.

Summing up – the aforesaid change does not exert any significant effect on the consolidated financial statements of the PZU Group, except IFRS 9 and IFRS 10.