Accounting policies
Software – Acquired computer software licences are recognized in the amount of costs incurred on the purchase and preparation of the software for use, taking into consideration accumulated amortization and impairment losses.
Goodwill – Goodwill arising on acquisition of subsidiaries is recognized under “Intangible assets” and goodwill arising on acquisition of associates and joint ventures is recognized under “Investments in associates and joint ventures”. The test for goodwill impairment is carried out at least at the end of each year.
Customer relations and value in force – As a result of a settlement of the transaction, two components of intangible assets that are recognized separately from goodwill, i.e. customer relations and value in force, representing the present value of future profits from concluded insurance contracts, were identified. These components of intangible assets are amortized by declining balance method based on the rate of economic benefits consumption arising from their use.
Other intangible assets – Other intangible assets acquired by the Group are recognized at the cost of purchase or manufacture, less accumulated amortization and impairment losses.
Development costs – The costs of completed development projects are classified as intangible assets in connection with the expected economic benefits to be obtained and meeting specific terms and conditions, i.e. if there is a possibility and intention to complete and use the internally generated intangible asset, there are appropriate technical and financial resources to complete the development and to use the asset and it is possible to reliably measure the expenditure incurred during its development which can be directly attributed to generating the intangible asset.
The Group classifies the effects of in-house development work that can be used for the Group’s operations as intangible assets.
The Group uses cloud-based software. In each case, the Group assesses the possession of real control over this asset, including the fulfilment of the following conditions: having a contractual right to take ownership of the software during the period of use in the cloud without incurring significant penalties, i.e.:
- the possibility of purchasing from a software supplier without incurring significant costs, and
- the ability to use the software independently without significantly reducing the usefulness or value of the software,
- the possibility of running the software on own hardware or entering into an agreement with another party not related to the supplier to use the software.
Based on the above criteria, the Group classifies part of the software as an intangible asset and part as a service, with the costs recognised in operating expenses.
- Useful lives – note “Administrative expenses”;
- Impairment losses – note “Net impairment losses on non-financial assets”
Financial information
| INTANGIBLE ASSETS | Software | Goodwill | Future profit on concluded insurance contracts | Customer relations | Other, including capital expenditure | of which: software | Total |
|---|---|---|---|---|---|---|---|
| 2023 | |||||||
| Gross carrying amount at the beginning of the period | 6,439 | 1,407 | 45 | 94 | 802 | 671 | 8,787 |
| Purchase | 55 | – | – | – | 853 | 853 | 908 |
| Transfers from capital expenditure | 894 | – | – | – | (896) | (897) | (2) |
| Scrapping and sale | (32) | – | – | – | – | – | (32) |
| Other | 10 | – | – | – | 44 | 43 | 54 |
| Gross carrying amount at the end of the period | 7,366 | 1,407 | 45 | 94 | 803 | 670 | 9,715 |
| Accumulated amortization as at the beginning of the period | (4,663) | – | (44) | (90) | (96) | – | (4,893) |
| Amortization charge for the period | (547) | – | (3) | (2) | (3) | – | (555) |
| Scrapping and sale | 30 | – | 2 | – | – | – | 32 |
| Other | 1 | – | – | – | – | – | 1 |
| Accumulated amortization as at the end of the period | (5,179) | – | (45) | (92) | (99) | – | (5,415) |
| Impairment losses as at the beginning of the period | (18) | (354) | – | – | (10) | – | (382) |
| Recognized during the period | (1) | – | – | – | – | – | (1) |
| Other | 1 | – | – | – | – | – | 1 |
| Impairment losses as at the end of the period | (18) | (354) | – | – | (10) | – | (382) |
| Carrying amount as at the beginning of the period, net | 1,758 | 1,053 | 1 | 4 | 696 | 671 | 3,512 |
| Carrying amount as at the end of the period, net | 2,169 | 1,053 | – | 2 | 694 | 670 | 3,918 |
| INTANGIBLE ASSETS | Software | Goodwill | Future profit on concluded insurance contracts | Customer relations | Other, including capital expenditure | of which: software | Total |
|---|---|---|---|---|---|---|---|
| Gross carrying amount at the beginning of the period | 5,908 | 1,407 | 44 | 158 | 776 | 642 | 8,293 |
| Purchase | 45 | – | – | – | 492 | 492 | 537 |
| Transfers from capital expenditure | 504 | – | – | – | (504) | (504) | – |
| Scrapping and sale | (18) | – | – | (64) | – | – | (82) |
| Other | – | – | 1 | – | 38 | 41 | 39 |
| Gross carrying amount at the end of the period | 6,439 | 1,407 | 45 | 94 | 802 | 671 | 8,787 |
| Accumulated amortization as at the beginning of the period | (4,203) | – | (42) | (117) | (92) | – | (4,454) |
| Amortization charge for the period | (479) | – | (2) | (7) | (4) | – | (492) |
| Scrapping and sale | 19 | – | – | 34 | – | – | 53 |
| Accumulated amortization as at the end of the period | (4,663) | – | (44) | (90) | (96) | – | (4,893) |
| Impairment losses as at the beginning of the period | (18) | (354) | – | (9) | (15) | (2) | (396) |
| Recognized during the period | – | – | – | (21) | – | – | (21) |
| Other | – | – | – | 30 | 5 | 2 | 35 |
| Impairment losses as at the end of the period | (18) | (354) | – | – | (10) | – | (382) |
| Carrying amount as at the beginning of the period, net | 1,687 | 1,053 | 2 | 32 | 669 | 640 | 3,443 |
| Carrying amount as at the end of the period, net | 1,758 | 1,053 | 1 | 4 | 696 | 671 | 3,512 |
The comparative figures for 2022 and the opening balances for 2023 have been similarly adjusted by PLN 15 million and PLN 20 million due to the implementation of IFRS 17 „Insurance Contracts” (see note „IFRS 17 Insurance Contract”).
From the Bank’s perspective, expenditure incurred on the Integrated Information System (IIS) is a significant item of intangible assets. The total capital expenditure incurred on the IIS in 2007–2023 was PLN 1,272 million (PLN 1,392 million in 2006-2022).
The net carrying amount of the Integrated Information System (IIS) as at 31 December 2023 was PLN 624 million (PLN 651 million as at 31 December 2022). The expected useful life of the system is 24 years. As at 31 December 2023, its remaining useful life is 7 years.
Goodwill
| Net goodwill | 31.12.2023 | 31.12.2022 |
|---|---|---|
| Nordea Bank Polska SA | 747 | 747 |
| PKO Życie Towarzystwo Ubezpieczeń SA | 91 | 91 |
| Raiffeisen – Leasing Polska SA and its subsidiaries (PKO Leasing SA) | 57 | 57 |
| PKO Towarzystwo Funduszy Inwestycyjnych SA | 150 | 150 |
| Assets taken over from CFP sp. z o.o. | 8 | 8 |
| Total | 1,053 | 1,053 |
| Goodwill | Impairment test – method |
|---|---|
| Nordea Bank Polska SA | At the time of the acquisition, two cash-generating units („CGUs”) were distinguished to which the goodwill arising from the acquisition of Nordea Bank Polska SA was allocated – retail and corporate CGUs, corresponding to the operating segments. The Bank recognised an impairment loss on the goodwill attributable to the corporate CGU of PLN 117 million on 30 June 2020. Goodwill of Nordea Bank Polska S.A. of PLN 747 million belongs to the retail segment. The impairment test is performed by comparing the carrying amount of the CGUs with their recoverable amount. The residual value of a CGU has been calculated by extrapolating the cash flow projections beyond the projection period using the growth rate adopted at a level of 3.7%. Cash flow projections used in the impairment test covered a period of 10 years and are based on the assumptions included in the financial plan of the Bank for 2024. A discount rate of 12.48%, taking into account the risk-free rate and risk premium, was used for the discounting of the future cash flows. The impairment test of the goodwill arising from the acquisition of Nordea Bank Polska S.A. assigned to the retail CGU carried out as at 31 December 2023 did not indicate any impairment. |
| PKO Towarzystwo Funduszy Inwestycyjnych S.A. | The impairment test was carried out on the basis of the three-year financial forecast prepared by the Company based on the discounted dividend method, taking into account the residual value. No impairment of goodwill was identified. |
| PKO Życie Towarzystwo Ubezpieczeń S.A. | The impairment test carried out was developed on the basis of the present value of expected future cash flows for the Bank, taking into account the residual value. Future cash flows were estimated on the basis prepared by the Company’s 10 year financial forecast. No impairment of goodwill was identified. |
| PKO Leasing Pro S.A. | The goodwill arising on the acquisition of the Company was allocated to the whole of PKO Leasing S.A. as the immediate parent company, which acquired the assets of PKO Leasing Pro S.A. in the merger. The impairment test was prepared on the basis of the present value of the expected future cash flows generated by the Company, estimated on the basis of the financial forecast prepared by the Company for five years with the simultaneous fading out of activities thereafter. No further impairment was identified. |
| Raiffeisen – Leasing Polska S.A. and its subsidiaries (PKO Leasing S.A.) | The goodwill that arose on the acquisition of these companies was allocated to the portion of the assets of the PKO Leasing S.A. Group that was separately recorded in the accounts as assets of the Raiffeisen-Leasing Polska S.A. Group that was acquired. The impairment test was carried out on the basis of the five-year financial forecast prepared by the Company based on the discounted dividend method, taking into account the residual value. No impairment of goodwill was identified. |
In the impairment tests described above, a discount rate of 7.555% (except for Nordea Bank Polska S.A.) was used to discount future cash flows, taking into account the risk-free rate equal to the yield of 10-year treasury bonds as at the date of valuation and a premium for market risk and risk ratio determined for projects of PKO Bank Polski S.A.
The valuation methods and forecast periods were adapted to the specific features of activities related to the assets or companies being valued.