6.2.2. RECEIVABLES

Receivables include chiefly short-term trade receivables (mainly in connection with sale of gas fuel), taxes, customs duties and social security. 
 

Short-term trade receivables are initially recognised at their transaction price if they do not contain a significant financing component. 

Upon initial recognition, short-term trade receivables that meet the SPPI test and are held in a “hold to collect” business model are classified at amortised cost less impairment losses.
 

Taxes, customs duties and social security receivable by the Group are determined in accordance with applicable laws and regulations. 

Impairment of financial assets

The amount of impairment loss on receivables equals the difference between the carrying amount of an asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.

The Group monitors changes in credit risk relating to a given financial asset and classifies financial assets to one of three buckets for determining impairment related to future expected loss:

• Bucket 1 - Not impaired exposures, where the risk of lifetime impairment is not significantly higher than the risk of a given exposure as at the grant date. The expected credit loss for exposures in this bucket is calculated for a term of the next 12 months or shorter, depending on the maturity date of the exposure.
  Financial assets in this bucket are characterised by low risk and high level of creditworthiness confirmed by an external rating institution.
• Bucket 2 - Not impaired exposures, where the risk of lifetime impairment is significantly higher than the risk related to a given exposure as at the date of grant. For this bucket, the probability of an insolvency event is calculated for the lifetime of the asset.

• Bucket 3 - Impaired exposures, recognised when the asset was held by the Group. For this bucket, the probability of an insolvency event is calculated for the lifetime of the asset. Interest on impaired assets is calculated by applying the effective interest rate against the net asset value (net of impairment loss). Consequently, net interest (net of impairment loss) is recognised in the statement of profit or loss.

Depending on the type of financial asset, impairment loss is determined using either the statistical or case-by-case approach.

According to the statistical approach (matrix, cluster), impairment losses on financial assets are recognised for a large number of current financial assets of relatively small values (homogeneous portfolio). Impairment losses are determined based on an analysis of historical data on payment of past due receivables in particular ageing groups and the migration matrix method. The results of the analysis are then used to calculate recovery ratios on the basis of which the amounts of impairment losses on receivables in each ageing group are determined.

In accordance with the case-by-case approach, the Group estimates the expected credit losses for those items that could not be classified into a homogeneous portfolio, such as:

• lease receivables,
• acquired debt issues,
• material trade receivables (all trade receivables with a total value exceeding the minimum amount defined by the Company based on historical data as at the reporting date of the financial statements),
• trade receivables with initial maturity of more than one year,
• receivables from sale of shares,
• receivables under equity contributions.

The Group also identifies impaired instruments:

• with a default on payment exceeding 90 days,
• against which bankruptcy/arrangement proceedings are pending,
• with respect to which a legal dispute is pending as to the size/legitimacy of the claim concerning the receivable.

Expected impairment of such exposures is calculated over the period until the expected end of the collection period.

Impairment losses are charged to other expenses or finance costs, as appropriate, depending on the type of the item for which an impairment loss is recognised.