6.1.3. IMPAIRMENT OF NON-FINANCIAL ASSETS
Material estimates
Impairment of non-financial assets Property, plant and equipment and intangible assets are tested for impairment when there are indications of impairment. Impairment tests are based on the comparison of the carrying amount of an asset (or cash-generating unit if the asset does not independently generate separate cash inflows) with its recoverable amount, equal to the higher of its fair value less cost to sell and value in use.
If the recoverable amount is lower than the carrying amount of an asset (or cash-generating unit), the carrying amount is decreased to the recoverable amount of the asset (or cash-generating unit). An impairment loss is recognised as cost of the period in which the impairment loss arose. |
Impairment losses recognised in 2019 in respect of property, plant and equipment are presented in the table below:
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2019
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2018
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Upstream operations
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Trade and storage
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Other
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Upstream operations
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Trade and storage
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Other
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Land
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(21)
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-
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(59)
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(3)
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-
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(8)
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Buildings and structures
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(1,822)
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(50)
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(171)
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(1,561)
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(47)
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(167)
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Plant and equipment
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(379)
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(318)
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(79)
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(360)
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(316)
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(71)
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Vehicles and other
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(35)
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(1)
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(4)
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(36)
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(1)
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(4)
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Tangible assets under construction:
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|
|
|
|
|
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tangible exploration and evaluation assets under construction
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(1,164)
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-
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-
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(1,177)
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-
|
-
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other
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-
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-
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(41)
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(1)
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-
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(46)
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Total
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(3,421)
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(369)
|
(354)
|
(3,138)
|
(364)
|
(296)
|
|
Total at end of the period
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(4,144)
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(3,798)
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In the reporting year, an impairment test was performed for the Group’s main operating assets: oil and gas production assets, gas fuel storage facilities, power generating unit, leased assets (including CNG stations, transmission assets, other property), LNG regasification stations, and tangible assets under construction (wells under construction). Below is presented basic information on the performed tests, relating to those areas where the largest amounts of impairment losses were recognised.
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2019
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2018
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impairment loss reversal
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impairment loss recognition
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impairment loss reversal
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impairment loss recognition
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Description of cash generating unit:
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CGU - 162 production units
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CGU - 159 production units
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Reasons for impairment / value increase
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* Decrease in the WACC discount rate in 2019. * Update of production forecast based on well tests and taking into account new wells brought on stream.
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* Change in price forecasts – decline in oil prices. * Update of production forecast to account for deterioration of reservoir conditions experienced by certain production units.
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* Change in price forecasts. * Update of production forecast based on well tests and taking into account new wells brought on stream. * Decrease in transmission fee costs.
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* Discount rate increase in 2018. * Update of production forecast to account for deterioration of reservoir conditions experienced by certain production units.
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Value in use
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21,476
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21,718
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Nominal pre-tax discount rate
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Poland 10.32% -12.08%
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Poland 10.70% - 12.81%
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Pakistan: 19.30% - 21.42%
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Pakistan: 19.52% - 25.35%
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Amount of recognised impairment loss
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185
|
576
|
137
|
298
|
|
Description of cash generating unit:
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Impairment tests were performed for individual CGUs, represented by specific wells in Poland
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2019
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2018
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impairment loss reversal
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impairment loss recognition
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impairment loss reversal
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impairment loss recognition
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|
Description of cash generating unit:
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CGU - 79 wells
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CGU - 76 wells
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Reasons for impairment / value increase
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* Decrease in the WACC discount rate in 2019. * Update of production forecast and reduction of planned expenditures. * Drilling of production wells
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* Decision not to proceed to wells drilling following unsatisfactory results of geological work. * Update of production forecast following well tests. * Change in price forecasts – decline in oil and gas prices during production periods.
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* Update of production forecast and reduction of planned expenditures. *Change in price forecasts - higher oil prices during production periods.
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* Decision not to proceed to wells drilling following unsatisfactory results of geological work. * Update of production forecast following well tests. *Increase in WACC in 2018. * Increase in royalty costs.
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Value in use
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2,741
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2,030
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Nominal pre-tax discount rate
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Poland 11.29% - 13.02%
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Poland 11.75%- 13.86%
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Amount of recognised impairment loss
|
152
|
281
|
51
|
226
|
|
Description of cash generating unit:
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LNG regasification stations in Ełk and Olecko – Head Office; impairment tests were performed for individual CGUs
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2019
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2018
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|
impairment loss reversal
|
impairment loss recognition
|
impairment loss reversal
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impairment loss recognition
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Description of cash generating unit
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CGU – two units
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Reasons for impairment / value increase
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* The sum of discounted cash and residual value exceeds the net value of tangible assets.
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* The sum of discounted cash and residual value exceeds the net value of tangible assets.
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Value in use [PLN]
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92
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20
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Nominal pre-tax discount rate
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3.97% - 4.73%
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5.48% - 5.60%
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Amount of recognised impairment loss (PLN)
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-
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-
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-
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-
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Description of cash generating unit:
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Leased assets (transmission assets, CNG stations, non-contributed assets) - Head Office
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2019
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2018
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impairment loss reversal
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impairment loss recognition
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impairment loss reversal
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impairment loss recognition
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|
Description of cash generating unit
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CGU – 167 units
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CGU – 173 units
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Reasons for impairment / value increase
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* Higher rental income from certain properties. * Lower cost of planned repairs and property maintenance costs.
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* Increase in the carrying amount of assets by the amount of items pertaining to the right of land usufruct (in accordance with IFRS 16) * Increase in the carrying amount of assets (completed investment) which do not generate additional income
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* Higher rental income from certain properties. * Lower cost of planned repairs and property maintenance costs.
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* Significant decline in revenue and increase in property maintenance costs.
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Value in use (PLN)
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52
|
67
|
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Nominal pre-tax discount rate
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7.56% - 8.52%
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8.03% - 9.31%
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Amount of recognised impairment loss (PLN)
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2
|
25
|
1
|
9
|
|
Description of cash generating unit:
|
Impairment tests were performed for individual CGU - the Wierzchowice unit
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2019
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2018
|
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impairment loss reversal
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impairment loss recognition
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impairment loss reversal
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impairment loss recognition
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Description of cash generating unit
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CGU - 1
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CGU - 1
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Reasons for impairment / value increase
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* Increase in the carrying amount of assets by the amount of items pertaining to the right of land usufruct (in accordance with IFRS 16)
|
-
|
-
|
|
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Value in use (PLN)
|
-
|
-
|
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Nominal pre-tax discount rate
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4.73 - 5.46%
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5.85 - 6.20%
|
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Amount of recognised impairment loss (PLN)
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0.2
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-
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-
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-
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Summary table (all cash-generating units in total) |
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2019
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2018
|
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impairment loss reversal
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impairment loss recognition
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impairment loss reversal
|
impairment loss recognition
|
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Value in use of assets tested for impairment
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24,362
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23,836
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Amount of recognised impairment loss (PLN)
|
338
|
882
|
189
|
532
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