6.1.2. INTANGIBLE ASSETS

Intangible assets  

The Group identifies the following main categories of intangible assets:

• Software,
• CO₂ emission allowances,
• Licences obtained under the Polish Geological and Mining Law, mining rights and geological information (“Licences”).

CO₂ emission allowances

Pursuant to the Act on Trading in Greenhouse Gas Emission Allowances, the Group holds CO₂ emission allowances allocated for individual installations.

The Group classifies emission allowances as:

• Acquired for redemption – recognised as intangible assets and measured in accordance with the policies discussed below,
• Acquired for resale – recognised as inventory (Note 6.2.1) and measured initially at cost; at the end of each reporting period they are measured at the lower of cost or net realisable value,
• Received free of charge under the National Allocation Plan – recognised as off-balance-sheet items at nominal value (equal to zero).

Licences, mining rights and rights to geological information

In its exploration and production operations, the Group uses licences for exploration, appraisal and production of natural gas and/or crude oil granted under the Polish Geological and Mining Law. The Group also uses mining rights and rights to geological information.

Costs of licences for exploration for and production of natural gas and/or crude oil and charges for the grant of mining rights payable to the State Treasury are disclosed as capitalised expenditure.

Measurement

The Group initially recognises intangible assets at cost. In the case of granted mining rights, the initial value is equal to the charges paid to the State Treasury for the grant of the mining rights.

Subsequent to initial recognition, intangible assets are carried at cost less accumulated amortisation and impairment (for accounting policies relating to impairment, see Note 6.1.3.).

Intangible assets are amortised using the straight-line method based onamortisation rates that reflect the expected useful lives of the assets. Acquired CO₂ emission allowances are amortised depending on the actual emission volumes.

Useful lives of intangible assets

The useful lives of intangible assets were determined on the basis of assessments made by the engineering personnel responsible for their use. Any such assessment is connected with uncertainty as to the future business environment, technology changes and market competition, which could lead to a different assessment of the economic usefulness of the assets and their remaining useful lives, and ultimately have a material effect on the value of intangible assets and the future amortisation charges.

The estimated amortisation period and amortisation method are reviewed at the end of each financial year. If the forecast useful life of an asset is significantly different from previous estimates, the amortisation period is changed. Such transactions are recognised by the Group as revision of estimates and are recognised in profit or loss in the period in which such estimates are revised.

As a result of the review, annual amortisation expense was increased by about PLN 2,4m as at December 31st 2019.