Asseco Poland S.A. Annual Report
Annual Report
for the year ended 31 December 2017
Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
FINANCIAL STATEMENTS OF ASSECO POLAND S.A. for the year ended 31 December 2017 FINANCIAL HIGHLIGHTS OF ASSECO POLAND S.A...... 5 INCOME STATEMENT OF ASSECO POLAND S.A...... 8 STATEMENT OF COMPREHENSIVE INCOME OF ASSECO POLAND S.A...... 9 STATEMENT OF FINANCIAL POSITION OF ASSECO POLAND S.A...... 10 STATEMENT OF CHANGES IN EQUITY OF ASSECO POLAND S.A...... 12 STATEMENT OF CASH FLOWS OF ASSECO POLAND S.A...... 13 SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS ...... 14 I. GENERAL INFORMATION...... 14 II. BASIS FOR THE PREPARATION OF FINANCIAL STATEMENTS ...... 15 1. Basis for preparation ...... 15 2. Compliance statement ...... 15 3. Estimates ...... 15 4. Professional judgement ...... 15 5. Changes in the accounting policies applied ...... 16 6. New standards and interpretations published but not in force yet ...... 17 7. Corrections of material errors ...... 22 III. SIGNIFICANT ACCOUNTING POLICIES ...... 23 1. Property, plant and equipment ...... 23 2. Intangible assets ...... 23 3. Government grants ...... 25 4. Borrowing costs ...... 25 5. Impairment of non-financial assets ...... 25 6. Investments in subsidiaries and associates ...... 26 7. Combinations of businesses under common control ...... 26 8. Financial assets ...... 26 9. Financial guarantee contracts ...... 28 10. Inventories ...... 28 11. Prepayments and accrued income ...... 28 12. Trade receivables ...... 28 13. Interest-bearing bank loans and borrowings ...... 29 14. Leases (Company as a lessee) ...... 30 15. Trade payables ...... 30 16. Transactions and items in foreign currencies ...... 30 17. Provisions ...... 30 18. Provision for warranty repairs ...... 31 19. Revenues ...... 31 20. Revenues and costs related to the execution of implementation contracts ...... 32 21. Operating costs ...... 34 22. Income tax and value added tax ...... 34 23. Earnings per share (basic and diluted) ...... 35 IV. INFORMATION ON OPERATING SEGMENTS ...... 36 V. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS ...... 38 1. Sales revenues and operating costs ...... 38 2. Other operating income and expenses ...... 39 3. Financial income and expenses ...... 40 4. Corporate income tax...... 42
All figures in millions of PLN, unless stated otherwise 2 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
5. Discontinued operations ...... 45 6. Earnings per share ...... 45 7. Information on dividends paid out ...... 45 8. Property, plant and equipment ...... 46 9. Intangible assets ...... 48 10. Investments in subsidiaries and associates ...... 53 11. Impairment testing of non-financial assets ...... 56 12. Other financial assets ...... 61 13. Prepayments and accrued income ...... 63 14. Long-term and short-term receivables ...... 63 15. Implementation contracts ...... 65 16. Inventories ...... 66 17. Cash and cash equivalents ...... 66 18. Non-current assets held for sale ...... 66 19. Assets and liabilities of the Company Social Benefits Fund ...... 66 20. Share capital and other components of equity ...... 67 21. Interest-bearing bank loans and debt securities issued ...... 68 22. Finance lease liabilities and other financial liabilities ...... 69 23. Provisions ...... 71 24. Long-term and short-term trade payables and other liabilities ...... 72 25. Accruals and deferred income ...... 73 26. Related party transactions ...... 74 27. Notes to the Statement of Cash Flows ...... 77 28. Off-balance-sheet liabilities towards related parties ...... 79 29. Off-balance-sheet liabilities towards other entities ...... 79 30. Employment ...... 79 31. Objectives and principles of financial risk management ...... 80 32. Remuneration of the entity authorized to audit financial statements ...... 86 33. Remuneration of the Management Board and Supervisory Board of Asseco Poland S.A...... 86 34. Capital management ...... 87 35. Significant events after the reporting period ...... 87
All figures in millions of PLN, unless stated otherwise 3 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Financial Highlights of Asseco Poland S.A.
Selected financial data for the year ended 31 December 2017
All figures in millions of PLN, unless stated otherwise 4 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
FINANCIAL HIGHLIGHTS OF ASSECO POLAND S.A. The following table presents selected financial data of Asseco Poland S.A.
12 months ended 12 months ended 12 months ended 12 months ended
31 Dec. 2017 31 Dec. 2016 31 Dec. 2017 31 Dec. 2016 mPLN mPLN mEUR mEUR
Sales revenues 861.2 936.8 202.9 214.1 Operating profit 120.6 191.0 28.4 43.7 Pre-tax profit 204.8 389.7 48.2 89.1 Net profit from continuing operations 175.6 353.4 41.4 80.8 for the reporting period Net profit for the reporting period 175.6 352.1 41.4 80.5 Net cash provided by (used in) operating activities 67.1 149.2 15.8 34.1 Net cash provided by (used in) investing activities 484.9 113.6 114.2 26.0 Net cash provided by (used in) financing activities (263.6) (286.2) (62.1) (65.4) Cash and cash equivalents at the end of period 308.0 21.7 73.8 4.9 Earnings per ordinary share from continuing 2.12 4.26 0.50 0.97 operations (in PLN/EUR)
The financial highlights disclosed in these financial statements have been translated into EUR in the following way: ▪ items of the income statement and statement of cash flows have been translated into EUR at the arithmetic average of mid exchange rates as published by the National Bank of Poland and in effect on the last day of each month. These exchange rates were respectively: o in the period from 1 January 2017 to 31 December 2017: EUR 1 = PLN 4.2447 o in the period from 1 January 2016 to 31 December 2016: EUR 1 = PLN 4.3757 ▪ The Company’s cash and cash equivalents as at the end of the reporting period and the comparable period of the previous year have been translated into EUR at daily mid exchange rates as published by the National Bank of Poland. These exchange rates were respectively: o exchange rate effective on 31 December 2017: EUR 1 = PLN 4.1709 o exchange rate effective on 31 December 2016: EUR 1 = PLN 4.4240
All figures in millions of PLN, unless stated otherwise 5 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Financial Statements of Asseco Poland S.A.
Financial Statements for the year ended 31 December 2017 prepared in accordance with the International Financial Reporting Standards as endorsed by the EU
All figures in millions of PLN, unless stated otherwise 6 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
FINANCIAL STATEMENTS of Asseco Poland S.A. for the year ended 31 December 2017 These financial statements have been approved for publication by the Management Board of Asseco Poland S.A. on 19 March 2018.
Management Board:
President of the Management Adam Góral Board
Vice President of Andrzej Dopierała the Management Board
Vice President of Tadeusz Dyrga the Management Board
Vice President of Krzysztof Groyecki the Management Board
Vice President of Rafał Kozłowski the Management Board
Vice President of Marek Panek the Management Board
Vice President of Paweł Piwowar the Management Board
Vice President of Zbigniew Pomianek the Management Board
Vice President of Artur Wiza the Management Board
Vice President of Gabriela Żukowicz the Management Board
Person responsible for maintaining the accounting books:
Renata Bojdo Chief Accountant
All figures in millions of PLN, unless stated otherwise 7 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
INCOME STATEMENT OF ASSECO POLAND S.A.
12 months 12 months
ended 31 Dec. 2017 ended 31 Dec. 2016 Note mPLN mPLN
Continuing operations Sales revenues 1 861.2 936.8
Cost of sales 1 (603.6) (622.2)
Gross profit on sales 257.6 314.6
Selling costs 1 (50.8) (44.2) General and administrative expenses 1 (87.2) (81.0)
Net profit on sales 119.6 189.4
Other operating income 2 5.5 3.2 Other operating expenses 2 (4.5) (1.6)
Operating profit 120.6 191.0
Financial income 3 370.9 217.0 Financial expenses 3 (286.7) (18.3)
Pre-tax profit 204.8 389.7
Corporate income tax 4 (29.2) (36.3) (current and deferred tax expense)
Net profit from continuing operations for the reporting period 175.6 353.4
Discontinued operations Net profit from discontinued operations for the reporting period 5 - (1.3)
Net profit for the reporting period 175.6 352.1
Earnings per share (in PLN): Basic earnings per share from continuing operations 6 2.12 4.26 for the reporting period Diluted earnings per share from continuing operations 6 2.12 4.26 for the reporting period
All figures in millions of PLN, unless stated otherwise 8 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
STATEMENT OF COMPREHENSIVE INCOME OF ASSECO POLAND S.A.
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016 mPLN mPLN
Net profit for the reporting period 175.6 352.1
Other comprehensive income:
Components that may be reclassified to profit or loss Net profit/loss on valuation of financial assets available for sale, 0.6 - net of deferred income tax
Components that will not be reclassified to profit or loss Amortization of intangible assets recognized directly in equity, (0.8) (0.8) net of deferred income tax
Total other comprehensive income (0.2) (0.8)
TOTAL COMPREHENSIVE INCOME FOR THE REPORTING PERIOD 175.4 351.3
All figures in millions of PLN, unless stated otherwise 9 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
STATEMENT OF FINANCIAL POSITION OF ASSECO POLAND S.A.
31 Dec. 2017 31 Dec. 2016 ASSETS Note mPLN mPLN
Non-current assets Property, plant and equipment 8 322.1 335.4 Intangible assets 9 2,217.1 2,311.7 of which goodwill from business combinations 9,11 1,932.5 2,012.6 Investment property 0.4 0.4 Investments in subsidiaries and associates 10 2,046.2 2,404.8 Long-term receivables 14 87.9 15.5 Other long-term financial assets 12 37.2 63.9 Long-term prepayments and accrued income 13 1.8 1.9 4,712.7 5,133.6
Current assets Inventories 16 2.7 6.5 Trade receivables 14 393.8 366.0 Corporate income tax receivable 29.1 7.4 Other receivables 14 27.1 44.2 Other non-financial assets 0.9 1.3 Other financial assets 12 11.7 3.7 Prepayments and accrued income 13 8.1 8.8 Cash and short-term deposits 17 308.0 21.7 Non-current assets held for sale 18 3.9 6.7 785.3 466.3
TOTAL ASSETS 5,498.0 5,599.9
All figures in millions of PLN, unless stated otherwise 10 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
STATEMENT OF FINANCIAL POSITION OF ASSECO POLAND S.A.
31 Dec. 2017 31 Dec. 2016 EQUITY AND LIABILITIES Note mPLN mPLN
TOTAL EQUITY Share capital 20 83.0 83.0 Share premium 20 4,180.1 4,180.1 Retained earnings and current net profit 772.6 847.0 5,035.7 5,110.1
Non-current liabilities Long-term interest-bearing bank loans, borrowings and debt securities 21 63.6 68.7 Long-term finance lease liabilities 22 44.0 66.5 Other long-term financial liabilities 22 - 9.5 Deferred tax liabilities 4 18.7 15.3 Other long-term liabilities 24 0.3 3.6 Long-term provisions 23 22.3 37.8 Long-term deferred income 25 34.9 38.3 183.8 239.7
Current liabilities Interest-bearing bank loans, borrowings and debt securities 21 25.3 17.1 Finance lease liabilities 22 21.5 22.4 Other financial liabilities 22 16.8 14.9 Trade payables 24 122.4 94.6 Liabilities to the state and local budgets 24 11.3 15.0 Other liabilities 24 18.3 5.8 Provisions 23 16.2 30.5 Accruals 25 31.0 37.4 Deferred income 25 15.7 12.4 278.5 250.1
TOTAL LIABILITIES 462.3 489.8
TOTAL EQUITY AND LIABILITIES 5,498.0 5,599.9
All figures in millions of PLN, unless stated otherwise 11 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
STATEMENT OF CHANGES IN EQUITY OF ASSECO POLAND S.A.
Retained earnings Note Share capital Share premium and current net Total equity profit mPLN mPLN mPLN mPLN
As at 1 January 2017 83.0 4,180.1 847.0 5,110.1
Net profit for the reporting period - - 175.6 175.6 Total other comprehensive income for the reporting period - - (0.2) (0.2) Dividend for the year 2016 7 - - (249.8) (249.8)
As at 31 December 2017 83.0 4,180.1 772.6 5,035.7
As at 1 January 2016 83.0 4,180.1 726.5 4,989.6
Net profit for the reporting period - - 352.1 352.1 Total other comprehensive income for the reporting period - - (0.8) (0.8) Dividend for the year 2015 7 - - (249.8) (249.8) Merger with Infovide-Matrix S.A. - - 19.0 19.0
As at 31 December 2016 83.0 4,180.1 847.0 5,110.1
All figures in millions of PLN, unless stated otherwise 12 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
STATEMENT OF CASH FLOWS OF ASSECO POLAND S.A.
12 months ended 12 months ended 31 Dec. 2017 31 Dec. 2016 Note mPLN mPLN
Cash flows – operating activities Pre-tax profit from continuing and discontinued operations 204.8 388.1 Total adjustments: (93.4) (212.0) Depreciation and amortization 1 54.1 53.2 Changes in working capital 27 (29.0) (64.8) Interest income/expenses 2.6 3.9 (Gain)/loss on foreign exchange differences 0.7 (0.5) Sale of shares (145.3) - Dividend income (127.4) (209.3) Other financial (income)/expenses 72.5 6.8 Impairment write-downs on intangible assets 81.2 0.6 (Gain)/loss on investing activities (2.8) (1.9) Cash generated from operating activities 111.4 176.1 Corporate income tax paid (44.3) (26.9) Net cash provided by (used in) operating activities 67.1 149.2
Cash flows – investing activities Disposal of property, plant and equipment and intangible assets 10.9 1.3 Acquisition of property, plant and equipment and intangible 27 (15.2) (12.4) assets Expenditures for development projects in progress 27 (10.0) (11.9) Disposal of investments in related companies 27 340.3 61.8 Acquisition of shares in related companies 27 (10.4) (124.0) Cash and cash equivalents in subsidiaries acquired - (1.6) Disposal of financial assets carried at fair value through profit or 3.0 2.7 loss Loans collected 27 9.3 43.6 Loans granted 27 (3.8) (42.7) Interest received 4.6 3.5 Dividends received 27 156.2 193.3 Net cash provided by (used in) investing activities 484.9 113.6
Cash flows – financing activities Dividends paid out 27 (249.8) (249.8) Proceeds from bank loans and borrowings 19.5 6.4 Repayments of bank loans 27 (15.0) (12.9) Grants received 9.9 - Finance lease liabilities paid (21.6) (21.6) Interest paid (6.6) (8.3) Net cash provided by (used in) financing activities (263.6) (286.2) Net change in cash and cash equivalents 288.4 (23.4) Net foreign exchange differences (0.3) - Cash and cash equivalents as at 1 January 19.9 43.3 Cash and cash equivalents as at 31 December 17 308.0 19.9
All figures in millions of PLN, unless stated otherwise 13 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS I. GENERAL INFORMATION Asseco Poland S.A. (the “Company”, “Issuer”, Asseco Poland S.A. focuses on the production and “Asseco”) with registered office at 14 Olchowa development of proprietary software, dedicated St., Rzeszów, Poland, was established on 18 for each sector of the economy. It is one of January 1989 as a limited liability company, and the very few companies in Poland to develop and subsequently under notary deed of 31 August implement centralized, comprehensive IT systems 1993 it was transformed into and since then has for the banking sector that are utilized by over operated as a joint-stock company with registered half of domestic banks. Furthermore, Asseco office at 72a, 17 Stycznia St., Warsaw, Poland. offers software solutions for the insurance The Company is entered in the Register of industry and implements dedicated systems for Entrepreneurs of the National Court Register the public administration, among others for under the number KRS 0000033391 (previously it the Polish Social Insurance Institution (ZUS) or was entered in the Commercial Register the Ministry of Finance. Asseco implements maintained by the District Court of the Capital numerous IT projects for the energy industry, City of Warsaw, Commercial Court, XVI telecommunications, healthcare, local Commercial and Registration Department, under governments, agriculture, uniformed services, as the number RHB 17220). well as for international organizations and institutions such as NATO or FRONTEX. Asseco’s On 4 January 2007, the Issuer changed its product portfolio also includes sector- corporate name from Softbank S.A. to Asseco independent ERP and Business Intelligence Poland S.A., and moved its registered office from solutions. 72a, 17 Stycznia St., Warsaw to 80 Armii Krajowej Av., Rzeszów. As a leader of the Group, Asseco Poland S.A. intends to be actively engaged in mergers and On 8 March 2010, the Issuer moved its registered acquisitions both in the domestic and foreign office from 80 Armii Krajowej Av., Rzeszów to markets, seeking to strengthen its position across 14 Olchowa St., Rzeszów. Europe and worldwide. Now the Company is Since 1998, the Company’s shares have been expanding its investment spectrum for software listed on the main market of the Warsaw Stock houses, with an eye to gain insight into their local Exchange S.A. The Company has been assigned markets and customers, as well as access to the statistical ID number REGON 010334578. innovative and unique IT solutions. The period of the Company’s operations is indefinite.
Asseco Poland S.A. is the largest IT company listed
on the Warsaw Stock Exchange. Asseco also ranked in the top ten of the largest producers of software in Europe (Top 100 European Software
Vendors, Truffle Capital 2015).
All figures in millions of PLN, unless stated otherwise 14 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
II. BASIS FOR THE PREPARATION OF FINANCIAL STATEMENTS
1. Basis for preparation 4. Professional judgement These financial statements have been prepared Preparation of financial statements in in accordance with the historical cost accordance with IFRS requires making estimates convention, except for financial assets carried at and assumptions which have an impact on fair value through profit or loss, financial assets the data disclosed in such financial statements. available for sale which are carried at fair value, Although the adopted assumptions and investment property, as well as financial estimates have been based on the Company liabilities carried at fair value through profit or management’s best knowledge on the current loss. activities and occurrences, the actual results may differ from those anticipated. The presentation currency of these financial statements is the Polish zloty (PLN), and all Presented below are the main areas which, in figures are presented in millions of PLN (mPLN), the process of applying our accounting policies, unless stated otherwise. were subject not only to accounting estimates but also to the management’s professional These financial statements have been prepared judgement, and whose estimates, if changed, on a going-concern basis, assuming the Company could significantly affect the Company’s future will continue its business operations over a results. period not shorter than 12 months from 31 December 2017. Till the date of approving i. Valuation of IT contracts and measurement of these financial statements, we have not their completion observed any circumstances that would threaten The Company executes a number of contracts for the Company’s ability to continue as a going construction and implementation of information concern. technology systems. Additionally, some of those 2. Compliance statement contracts are denominated in foreign currencies. Valuation of IT contracts requires that future These financial statements have been prepared operating cash flows are determined in order to in compliance with the International Financial arrive at the fair value of income and expenses Reporting Standards (“IFRS”) as endorsed by the and to provide the fair value of the embedded European Union (“EU IFRS”). currency derivatives, as well as it requires IFRS include standards and interpretations measurement of the progress of contract accepted by the International Accounting execution. The percentage of contract Standards Board (“IASB”) and the International completion shall be measured as the relation of Financial Reporting Interpretations Committee costs already incurred (provided such costs (“IFRIC”). contribute to the progress of work) to the total costs planned, or as a portion of man-days As at the date of approving publication of these worked out of the total work effort required. financial statements, given the ongoing process of implementing IFRS in the EU as well as Budgeted future operating cash flows are not the nature of the Company’s operations, within always consistent with agreements concluded the scope of accounting policies applied by originally with our customers or suppliers due to the Company there is no difference between modifications of IT projects implementation IFRS that came into force and IFRS endorsed by schedules. As at 31 December 2017, receivables the European Union. arising from valuation of IT contracts amounted to PLN 127.5 million, while liabilities arising from 3. Estimates such valuation equalled PLN 5.3 million. In the period of 12 months ended 31 December
2017, our approach to making estimates was not subject to any substantial change.
All figures in millions of PLN, unless stated otherwise 15 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
In case of contracts denominated in foreign iv. Impairment of non-financial assets currencies or contracts denominated in EUR or Goodwill is tested for impairment on an annual USD (even if these currencies are not a basis, whereas in the case of other assets, the functional currency), embedded financial Company determines whether there are any derivatives are not disclosed separately. In the indications of possible impairment of non- Management’s opinion, EUR and USD should be financial fixed assets (including intangible assets, regarded as currencies commonly used in tangible fixed assets, and investments in contracts for the sale or purchase of IT systems subsidiaries). If such indications are identified or and services. Revenues and expenses relating to if it is necessary to perform an annual such contracts are determined on the basis of impairment test on non-financial assets, the spot exchange rates. In all the other cases Company shall compare the carrying value of an embedded derivatives are separated from their asset with the higher of the following two host contracts. When an embedded instrument amounts: the market value or value in use of is separated, revenues resulting from the host such an asset or of the cash-generating unit, to contract are recognized at the embedded which such an asset has been allocated. exchange rate; whereas, any foreign exchange Determination of the value in use of an asset or differences between the exchange rate applied cash-generating unit requires estimating the in the issued invoice and the embedded future cash flows expected to be achieved from exchange rate are recognized as financial income such an asset or cash-generating unit, as well as or expense. As at 31 December 2017, determining a discount rate to be subsequently no embedded instruments were separated from used in order to calculate the present value of any effective agreements. those cash flows. Disclosures concerning ii. Rates of depreciation and amortization the annual impairment test, which was performed as at 31 December 2017, have been The level of depreciation and amortization rates presented in explanatory note 11 to these is determined on the basis of anticipated period financial statements. of useful economic life of the components of tangible and intangible assets. The Company v. Classification of lease contracts verifies the adopted periods of useful life on an The Company classifies its lease contracts as annual basis, taking into account the current operating or financial depending on whether estimates. In 2017, the rates of depreciation and substantially all the risks and rewards incidental amortization applied by the Company were not to ownership of leased assets are retained by subject to any significant modifications. the lessor or transferred to the lessee. Such iii. Internally generated intangible assets assessment is based on the economic substance of each leasing transaction. The costs of internally generated intangible assets are measured and capitalized in line 5. Changes in the accounting policies applied with the Company’s accounting policy. The accounting policies adopted in the The determination of when to begin preparation of these financial statements are the capitalization of such costs is subject to consistent with those followed when preparing the management’s professional judgement as to the Company’s annual financial statements for the technological and economic feasibility of the year ended 31 December 2016, which were completing the development project. This published on 16 March 2017. moment is determined by reaching a stage (milestone) of the project, at which the Company The Company did not decide on early adoption is reasonably certain of being able to complete of any standard, interpretation or amendment the intangible asset so that it will be available for which has been published but has not yet use or sale, and that future economic benefits to become effective. be obtained from use or sale of such intangible asset will exceed its production cost. Thus, when determining the amount of capitalizable expenditures, the Management Board needs to estimate the present value of future cash flows to be generated by the intangible asset.
All figures in millions of PLN, unless stated otherwise 16 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
6. New standards and interpretations published ▪ Amendments to IAS 28 Investments in but not in force yet Associates and Joint Ventures, provided as The following standards and interpretations part of the Annual Improvements to IFRSs: were issued by the International Accounting 2014-2016 Cycle (issued on 8 December Standards Board (IASB) and International 2016) – effective for annual periods Financial Reporting Interpretations Committee beginning on or after 1 January 2018; (IFRIC), but have not yet come into force: ▪ Amendments to IFRS 1 First-time Adoption ▪ IFRS 9 Financial Instruments (issued on 24 of International Financial Reporting July 2014) – effective for annual periods Standards, provided as part of the Annual beginning on or after 1 January 2018; Improvements to IFRSs: 2014-2016 Cycle (issued on 8 December 2016) – effective ▪ IFRS 14 Regulatory Deferral Accounts for annual periods beginning on or after 1 (issued on 30 January 2014) – the January 2018; European Commission has decided not to initiate the process of endorsement of this ▪ Interpretation IFRIC 22 Foreign Currency standard until the release of its final Transactions and Advance Consideration version – not yet endorsed by the EU till (issued on 8 December 2016) – not yet the date of approval of these financial endorsed by the EU till the date of statements – effective for annual periods approval of these financial statements – beginning on or after 1 January 2016; effective for annual periods beginning on or after 1 January 2018; ▪ IFRS 15 Revenue from Contracts with Customers (issued on 28 May 2014), ▪ Amendments to IAS 40 Transfers of including the amendment to IFRS 15 Investment Property (issued on 8 Effective Date of IFRS 15 (issued on 11 December 2016) – not yet endorsed by September 2015) – effective for annual the EU till the date of approval of these periods beginning on or after 1 January financial statements – effective for annual 2018; periods beginning on or after 1 January 2018; ▪ Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets Between an ▪ IFRS 17 Insurance Contracts (issued on 18 Investor and its Associate or Joint Venture May 2017) – not yet endorsed by the EU (issued on 11 September 2014) – work for till the date of approval of these financial the endorsement of these amendments statements – effective for annual periods has been postponed by the EU – the beginning on or after 1 January 2021; effective date of these amendments has ▪ Interpretation IFRIC 23 Uncertainty over been deferred indefinitely by the IASB; Income Tax Treatments (issued on 7 June 2017) – not yet endorsed by the EU till the ▪ IFRS 16 Leases (issued on 13 January date of approval of these financial 2016) – effective for annual periods statements – effective for annual periods beginning on or after 1 January 2019; beginning on or after 1 January 2019; ▪ Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 ▪ Amendments to IFRS 9 Prepayment Insurance Contracts (issued on 12 Features with Negative Compensation September 2016) – effective for annual (issued on 12 October 2017) – not yet periods beginning on or after 1 January endorsed by the EU till the date of 2018; approval of these financial statements – ▪ Clarifications to IFRS 15 Revenue from effective for annual periods beginning on Contracts with Customers (issued on 12 or after 1 January 2019; April 2016) – effective for annual periods ▪ Amendments to IAS 28 Long-term beginning on or after 1 January 2018; Interests in Associates and Joint Ventures ▪ Amendments to IFRS 2 Classification and (issued on 12 October 2017) – not yet Measurement of Share-based Payment endorsed by the EU till the date of Transactions (issued on 20 June 2016) – approval of these financial statements – effective for annual periods beginning on effective for annual periods beginning on or after 1 January 2018; or after 1 January 2019;
All figures in millions of PLN, unless stated otherwise 17 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
▪ Annual Improvements to IFRSs: 2015- a) Warranties 2017 Cycle (issued on 12 December 2017) In many cases, the Company provides a warranty – not yet endorsed by the EU till the date for goods and services sold. Based on the of approval of these financial statements conducted analysis, the Company determined – effective for annual periods beginning that in principle the scope of warranties it grants on or after 1 January 2019; is broader than just an assurance to the customer ▪ Amendments to IAS 19 Plan Amendment, that the product/service complies with agreed- Curtailment or Settlement (issued on 7 upon specifications. This has been concluded from February 2018) – not yet endorsed by the the fact that the Company contractually EU till the date of approval of these undertakes to repair any errors in the delivered financial statements – effective for annual software during a strictly specified time limit and periods beginning on or after 1 January in principle such warranties are more extensive 2019. than the minimum required by the Polish law. Hence, in the Management’s opinion, the IFRS 15 Revenue from Contracts with Customers Company actually provides an additional service. In accordance with IFRS 15, this means the The International Financial Reporting Standard 15 Company needs to recognize an extended Revenue from Contracts with Customers (“IFRS warranty as a separate performance obligation 15”), which was issued in May 2014 and and allocate a portion of the transaction price to subsequently amended in April 2016, provides the such service. so-called Five-Step Model for revenue recognition In all cases where an extended warranty is in contracts with customers. According to IFRS 15, accompanied by maintenance services, which are revenue shall be recognized in an amount that even a broader category than an extended reflects the consideration to which the entity warranty itself, our accounting approach will expects to be entitled in exchange for transferring remain unchanged. This is because in such cases promised goods or services to customers. the Company has already allocated a portion of The new standard will replace all existing the transaction price to such maintenance service requirements for revenue recognition in pursuant to the previously applicable regulations. compliance with IFRS. This standard applies to However, in cases where a warranty service is annual reporting periods beginning on or after 1 provided after the project completion and is not January 2018. Earlier application is permitted. accompanied by any maintenance service, then a Asseco Poland will adopt this new standard as of portion of the transaction price and analogically the required effective date, i.e. from 1 January recognition of a portion of contract revenue will 2018. have to be deferred until the warranty service is The Company may choose to apply the full or actually fulfilled. In the case of contracts that, as modified retrospective approach, as the transition understood by IFRS 15, have not yet been provisions provide for some practical expedients. completed as at the reporting date, due to the The Company will implement IFRS 15 using the above described reasons the Company’s modified retrospective approach, which involves statement of financial position will be adjusted by recognition of the cumulative effect of applying reducing the amount of retained earnings by PLN this standard as at the date of its initial 2.0 million, increasing the amount of deferred application. income by PLN 6.5 million, and reducing the
amounts of short-term provisions and receivables The Company has analyzed the impact of the from valuation of contracts accordingly. In the new standard on its financial statements and has case of contracts where the provided warranty is come to the below-described conclusions. These limited to the statutory minimum, our accounting conclusions have been quantified and attributed approach will remain unchanged, meaning the to relevant items in the statement of financial Company will create provisions for warranty position, as presented in the table at the end of repairs that will be reflected in operating costs. this section.
All figures in millions of PLN, unless stated otherwise 18 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017 b) Variable consideration comprehensive goods or services, including the supply of own licenses and/or own modification In accordance with IFRS 15, if a contract services and/or own implementation services. consideration encompasses any amount that is This means that the so-called comprehensive IT variable, the entity shall estimate the amount of contracts most often result in a separate consideration to which it will be entitled in performance obligation that consists in providing exchange for transferring promised goods or the customer with a functional IT system. In services to the customer, and the entity shall accordance with IFRS 15, revenue from such include a portion or the whole amount of performance obligation may be recognized over variable consideration in the transaction price time of transferring control of the supplied but only to the extent that it is highly probable a goods/services, as long as the entity’s significant reversal in the amount of cumulative performance does not create an asset with an revenue recognized will not occur when the alternative use to the entity, and the entity has uncertainty associated with the variable an enforceable right to payment for performance consideration is subsequently resolved. completed throughout the duration of the The Company is party to a number of contracts contract. In the Management’s opinion, in the which provide for penalties for non-performance case of execution of comprehensive IT projects or improper performance of contractual the provider cannot generate an asset with an obligations. Any contractual penalties may alternative use because such systems together therefore affect the consideration, which has with the accompanying implementation services been stated as a fixed amount in the contract, are “tailor-made”. Concurrently, the analysis and make it subject change due to such expected carried out so far showed that virtually all penalties. Therefore, beginning from 1 January contracts concluded by Asseco meet the 2018, as part of estimating the amount of criterion of ensuring an enforceable right to consideration receivable under a contract, the payment for performance completed throughout Company will estimate the expected value of the duration of the contract. The latter criterion payment while taking into account the has been also verified on the basis of general probability of paying such contractual penalties. legal regulations and judicature in Poland. The This may potentially cause a reduction in Company came to the conclusion that the revenues, and not an increase in the amount of enforceability of a right to payment exists as a provisions and relevant costs as it was until now. rule because it can be derived from the general The scale of this phenomenon in the Company is principles applicable to assignment and similar insignificant, but it has been identified as a arrangements to which the Company is party. change from the current accounting approach. In We have assessed that as at the reporting date the scope of contracts that are not yet the Company was not party to any contract that completed as at the reporting date, the would not meet the condition of the existence of described change will result in an increase of the a right to payment. Company’s retained earnings by PLN 0.1 million. Due to the above-described arguments, the The conducted analysis did not reveal the implementation of IFRS 15 in the aspect of existence any other elements within the revenue recognition from contracts for the Company that would cause variability of provision of comprehensive IT projects will not consideration from contracts with customers. result in changes applicable to solutions provided under such comprehensive projects, except for c) Valuation of IT contracts – supply of goods extended warranties described in item (a) above. and services in a bundle
As part of the process of implementing IFRS 15, the Company analyzed its performance obligations under contracts which, on the basis of previously applicable regulations, were accounted for in accordance with IAS 11 Construction Contracts, this is using the percentage of completion method. The analysis carried out especially with regard to the distinct nature of our performance obligations indicated that in such contracts the Company is virtually always required to provide the customer with
All figures in millions of PLN, unless stated otherwise 19 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017 d) Licenses the Company’s own software licenses that are sold in conjunction with significant modification IFRS 15 has introduced detailed guidance on the or implementation services, the analysis carried recognition of revenues from licenses sold. If a out by the Company showed that the criteria for license to be granted is distinct from other goods being distinct are not met. This is because, under or services promised in a contract, then such such contracts the customer can only benefit license constitutes a separate performance from the system or final product which is obligation, and the entity needs to determine comprised of our own licenses and related whether the licence is transferred to the significant services. customer at a specific point in time or over the passage of time. When determining this e) Presentation and disclosure requirements circumstance, the entity should consider whether the purpose of granting a license to the customer IFRS 15 introduces new requirements for is to provide the customer with: presentation and disclosure. In the Company’s - the right to access the entity’s opinion, some of the required disclosures will intellectual property in the form in which have significant effects. In particular, the it exists throughout the licensing period; Company expects additional disclosures regarding or significant judgments and changes in such - the right to use the entity’s intellectual judgments, use of practical expedients, and what property in the form in which it exists at the Company identifies as the biggest change in the time of granting the license. this area, in the scope of disclosures regarding revenue remaining to be recognized from The Company has analyzed the nature of licenses performance obligations that are not satisfied or it sells and found out that the vast majority of only partially satisfied as at the reporting date. licenses sold separately by Asseco Poland provide IFRS 15 requires disclosure of the cumulative the right to use intellectual property, which amount of transaction price allocated to means that if a given license also meets the performance obligations that remain to be criteria for being distinct (i.e. constitutes a satisfied as at the reporting date, including an separate performance obligation), then, in explanation of when the entity expects to accordance with IFRS 15, revenue from the sale recognize revenue from such yet unsatisfied of such license will be recognized at the point in performance obligations. time at which control of the licence is transferred to the customer. Hence, the method of revenue The table below presents the expected impact on recognition in this area will not change, i.e. in the equity which is caused by the implementation of case of licenses sold without significant related IFRS 15 as at 31 December 2017: services for an indefinite period, revenue will still be recognized at the point in time at which control of the licence is transferred, being 31 Dec. 2017 Adjustments equivalent to the transfer of risks and rewards in millions of PLN incidental to ownership of the license. Assets In the course of the conducted analysis we have Trade receivables and other receivables (0.8) also identified licenses that provide the right to Contract assets - access our intellectual property. As a rule, such licenses are sold by the Company for a definite Liabilities period and the resulting revenue has so far been Deferred tax liabilities (0.5) recognized over time for which a license was Trade payables and other financial liabilities - granted. This means that despite changing the Contract liabilities - indications for revenue recognition in accounting Provisions (5.0) for licenses (including the fact that under IFRS 15 Deferred income 6.5 the period for which a license is granted is not relevant for the method of revenue recognition), Net impact on equity, of which: the method of revenue recognition itself will Retained earnings (1.9) remain unchanged. Other components of equity The above analysis applies to licenses that are - sold separately, and therefore have been deemed by the Company to constitute a separate performance obligation. Whereas, in the case of
All figures in millions of PLN, unless stated otherwise 20 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
IFRS 9 Financial Instruments Receivables included in other receivables resulting from the sale of investments in subsidiaries are In July 2014, the International Accounting held until contractual cash flows are collected, Standards Board issued the International and they shall be disclosed as instruments Financial Reporting Standard 9 Financial measured at amortized cost. Instruments (“IFRS 9”). IFRS 9 specifies three Trade receivables and other receivables resulting aspects involved in accounting for financial from the sale of investments in subsidiaries are instruments: classification and measurement, held until contractual cash flows are collected, impairment, and hedge accounting. IFRS 9 is and as the Company does not sell its trade effective for annual periods beginning on or after receivables in factoring schemes, they will 1 January 2018, with early adoption permitted. continue to be measured at amortized cost The Company intends to adopt IFRS 9 as of its through profit or loss. The Company uses a effective date, without restatement of the practical expedient not to identify significant comparable data. financing components for trade receivables that In 2017, the Company carried out a detailed are due in 12 months or less. assessment of the impact of adopting IFRS 9 on the accounting policies applied by the Company b) Impairment with regard to its business operations or financial results. This assessment is based on currently In accordance with IFRS 9, the entity measures an available information and may be subject to allowance for expected credit losses at an amount changes if additional reasonable and supportable equal to the 12-month expected credit losses or information is obtained during the period when expected credit losses over the life of the financial IFRS 9 is applied by the Company for the first instrument. In the case of trade receivables, the time. Company will apply the simplified approach and The Company does not expect a significant impact measure an allowance for expected credit losses of the introduction of IFRS 9 on the statement of at an amount equal to expected credit losses over financial position or on its equity. the full lifetime of receivables. The Company has analyzed its trade receivables a) Classification and measurement by dividing its customers into homogeneous groups. This analysis showed that due to the The Company does not anticipate that application nature of our trade receivables, the loss allowance of IFRS 9 in the scope of classification and for receivables will remain at a similar level as measurement will have any significant impact on recognized as at the reporting date, despite its statement of financial position or on its equity. introducing the changes required by the said It is expected that all of our financial assets, which standard. have so far been measured at fair value, will continue to be carried at fair value. 31 Dec. 2017 Adjustments Shares in companies quoted on stock exchanges, in millions of which are currently held as financial assets PLN Assets available for sale (AFS), will be classified as Trade receivables and other receivables financial assets carried at fair value through profit - or loss. As a consequence, capital from revaluation of such shares amounting to PLN 0.6 Liabilities
million will be reclassified to retained earnings. Deferred tax liabilities - In the case of shares in companies not quoted on stock exchanges, the Company is going to choose the possibility of recognizing subsequent changes Net impact on equity, of which: in their fair value through other comprehensive Retained earnings 0.6 income, and therefore the application of IFRS 9 Other components of equity - will have no significant impact on the Company’s
financial results.
All figures in millions of PLN, unless stated otherwise 21 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
IFRS 16 Leases
As part of its operations, the Company has signed a number of rental, hire, use and lease contracts that are currently classified as operating leases. The adoption of IFRS 16 will result in the recognition of a right-of-use asset and a lease liability in the statement of financial position. As at the date of approving these financial statements for publication, the Management has not yet fully assessed the effects of the introduction of IFRS 16 Leases on the accounting policies adopted by the Company with regard to its business operations or financial results. A detailed analysis will be carried out during the year 2018.
7. Corrections of material errors In the reporting period, no events occurred that would require making corrections of any misstatements.
All figures in millions of PLN, unless stated otherwise 22 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
III. SIGNIFICANT ACCOUNTING POLICIES
1. Property, plant and equipment Investments in progress relate to tangible assets under construction or during assembly and are Property, plant and equipment are disclosed at recognized at purchase cost or production cost, purchase cost or production cost decreased by decreased by any potential impairment accumulated depreciation and any impairment write-downs. Tangible assets under construction write-downs. The initial value of a tangible asset are not depreciated until their construction is corresponds to its purchase cost increased by completed and they are made available for use. expenditures related directly to the purchase and adaptation of such asset to its intended use. Non-current assets or groups of assets are Such expenditures also include the cost of classified as held for sale when their carrying replacing parts of machinery or equipment at the value will be recovered principally through a sale time when incurred if the asset recognition transaction rather than through continuing use. criteria are met. Any costs incurred after a For this to be the case, the asset must be available tangible asset is made available for use, such as for immediate sale in its present condition and its maintenance or repair fees, are expensed in the sale must be highly probable. The fact of income statement at the time when incurred. classifying an asset as held for sale means that the Company’s management intends to complete At the time of purchase tangible assets are the sale transaction within one year from the date divided into components of significant value for of such classification. Fixed assets that have been which separate periods of useful life may be classified as held for sale are measured at adopted. General overhaul expenses constitute a the lower of their carrying value and fair value less component of assets as well. costs to sell. Such assets are depreciated using the straight- 2. Intangible assets line method over their expected useful lives. The periods of useful life are presented in the table Intangible assets purchased in a separate below: transaction shall be capitalized at purchase cost.
Period Goodwill is disclosed at purchase cost less any Type (in years) accumulated impairment charges. The principles Land and buildings 0 – 50 for recognition of goodwill are described in item 7, whereas the principles for carrying out an Computers and other office equipment 3-7 annual impairment test are described in item 5 Transportation vehicles 5 of this accounting policy. Other tangible assets 3-40 Leasehold improvements 10 The period of useful life of an intangible asset shall be assessed and classified as definite or indefinite. Intangible assets with a definite period of useful life are amortized using The Company verifies the adopted periods of the straight-line method over their expected useful life on an annual basis, taking into account useful life, and amortization charges are the current estimates. In 2017, the rates of expensed adequately in the income statement. depreciation and amortization applied by the Company were not subject to any significant The periods of useful life are presented in the modifications. table below: A tangible asset may be derecognized from the balance sheet after it is disposed of or when Period no economic benefits are expected from its Type further use. Any gains or losses resulting from (in years) derecognition of an asset from the balance sheet Purchased licenses and software 2-5 (measured as the difference between net Costs of research and development work 2-5 proceeds from disposal of such asset and its Customer relations 18 carrying value) are recognized in the income Other 3-10 statement for the period when such derecognition is made.
All figures in millions of PLN, unless stated otherwise 23 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
The Company verifies the adopted periods of The cost of an internally generated intangible useful life on an annual basis, taking into account asset is the sum of expenditures incurred from the current estimates. In 2017, the rates of the date when the intangible asset first meets depreciation and amortization applied by the the above-mentioned recognition criteria. Company were not subject to any significant Expenditures previously recognized as expenses modifications. may not be capitalized. The cost of an internally generated intangible asset comprises directly Impairment tests shall be performed every year attributable costs necessary to create, produce, for intangible assets with an indefinite period of and prepare that asset to be capable of useful life and those which are no longer used. operating in the manner intended by The remaining intangible assets shall be tested management. Such costs shall include: for impairment if there are indications of a possible impairment. Should the carrying value ▪ costs of benefits for employees who are exceed the estimated recoverable amount directly involved in the generation of an (the higher of the following two amounts: net intangible asset; sales price or value in use), the value of these ▪ all directly attributable costs necessary to assets shall be reduced to the recoverable create, produce, and adjust an intangible amount. asset, including any legal title registration Any gains or losses resulting from derecognition fees and amortization of patents and of an intangible asset from the statement of licenses that are used to generate such financial position (measured as the difference intangible asset; between net proceeds from disposal of such ▪ costs of materials and services that are used asset and its carrying value) are recognized as or consumed directly in generating an other operating income or expenses in the intangible asset; income statement at the time when such ▪ indirect costs that are directly attributable to derecognition is made. the generation of an intangible asset, Internally generated intangible assets including depreciation of equipment used in the generation process as well as rental The Company presents in separate categories costs of any office space utilized by the work the final products of development projects team. (“internally generated software”) and the products which have not been finished yet The cost of an internally generated intangible (“costs of development projects in progress”). asset shall not include: An intangible asset generated internally as a ▪ selling, administrative and other general result of development work (or completion of overhead expenditures; the development phase of an internal project) ▪ clearly identified work inefficiencies and may be recognized if, and only if, the Company is initial operating losses incurred before an able to demonstrate: intangible asset achieves planned ▪ the technical feasibility of completing such performance; and intangible asset so that it would be available ▪ expenditures on training staff to operate for use or sale; such intangible asset. ▪ the intention to complete the construction Until completion of the development work, of such intangible asset; accumulated costs directly attributable to such ▪ the ability to use or sell such intangible development work are disclosed as “costs of asset; development projects in progress”. Upon ▪ how such intangible asset is going to completion of the development work, the ready- generate probable future economic benefits; made product of the development work is ▪ the availability of adequate technical, reclassified to the category of “Internally financial and other resources to complete generated software” and from that time the the development work and to make Company begins to amortize such internally the intangible asset ready for use or sale; generated software. Costs of development work which satisfy the above-mentioned criteria are ▪ its ability to reliably measure the recognized at purchase cost less accumulated expenditure for the development work amortization and accumulated impairment attributable to such intangible asset. write-downs. All the expenditures carried
All figures in millions of PLN, unless stated otherwise 24 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
forward to future periods are subject to higher. This recoverable amount is measured for amortization over the estimated period in which individual assets unless a given asset does not the related undertaking generates sales generate cash flows significantly independent revenues. from cash flows generated by other assets or groups of assets. Impairment takes place when 3. Government grants the carrying value of an asset is higher than its Government grants are recognized if, and only if, recoverable amount, in which case such asset there is reasonable assurance that a beneficiary shall be written-down to the determined company will comply with the conditions recoverable amount. In order to determine the attached to such grants and that such grants will value in use, estimated future cash flows shall be be received. A grant shall be accounted for using discounted to their present value by applying a the same approach irrespective of whether it is pre-tax discount rate that reflects the current received in cash or as a reduction of liabilities market assessments of the time value of money towards the government. and the risks related to the given asset. Impairment write-downs on assets used in If a grant is related to a specific cost item, then it continuing operations are recognized as shall be recognized as income (or as a reduction operating expenses. of expense) proportionally to the costs that the grant is intended to compensate. At the end of each reporting period, the Company determines whether there are any Whereas, if a grant is related to a specific asset, indications for reversal or reduction of an then its fair value is accounted for as deferred impairment charge that was recognized on a income which is afterwards systematically, given asset in the prior periods. If such by way of equal annual write-offs, recognized in indications exist, the Company needs to estimate the income statement over the estimated useful the recoverable amount of the relevant asset. A life of the related asset as a reduced formerly recognized impairment charge may be depreciation expense. reversed only when estimates applied for 4. Borrowing costs determination of the recoverable amount of the relevant asset have changed since the time of Borrowing costs that are directly attributable to the last recognition of impairment. If this is the the acquisition, construction or production of an case, the carrying value of such asset shall be asset, that requires substantial time to be increased to its recoverable amount. The prepared to its intended use or sale, shall be increased amount cannot exceed the given capitalized as part of such asset’s purchase cost asset’s book value (net of depreciation) that or production cost. Other borrowing costs shall would be carried in case no impairment charge be recognized as an expense in the period in was recognized on such asset in the prior years. which they are incurred. Borrowing costs include A reversal of an impairment charge shall be interest expense as well as foreign exchange immediately recognized as a reduction of gains or losses to the extent achievable by an operating expenses. Following a reversal of an adjustment of interest expense. impairment write-down, the depreciation 5. Impairment of non-financial assets charges made on the relevant asset during subsequent financial periods shall be adjusted in At the end of each reporting period, the such a way as to enable systematic depreciation Company determines whether there are any of the asset’s verified book value (net of residual indications of impairment of non-financial fixed value) over the remaining period of its useful life. assets. In the event such indications occur, or when it is necessary to carry out an annual impairment test, the Company estimates the recoverable amount of a given asset or cash- generating unit to which such asset has been allocated. The recoverable amount of an asset or cash- generating unit corresponds to the fair value of such asset or cash-generating unit less the costs necessary to make the sale of such asset or cash- generating unit, or to the value in use of such asset or cash-generating unit, whichever is
All figures in millions of PLN, unless stated otherwise 25 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
6. Investments in subsidiaries and associates ▪ any difference between the purchase price paid/transferred and the value of net assets Subsidiaries are entities in which the Company acquired (at their carrying values disclosed in possess all the following three elements of the consolidated financial statements) control: shall be recognized in equity of the acquirer ▪ power over the investee; (such amounts recognized in equity are not included in reserve capital, and therefore ▪ rights to variable returns from involvement they are not distributable); with the investee; and ▪ the income statement presents the financial ▪ the ability to use power over the investee to results of both combined entities from affect the amount of the investor’s returns. the date when their merger was effected; Associates are entities in which the Company whereas, the results for earlier reporting holds more than 20% and not more than 50% of periods are not restated. voting rights at the general meeting of In the event of a business combination in which shareholders and on which the Company exerts an investment in one subsidiary is contributed to a significant influence, however, without another subsidiary or in which two subsidiaries the ability to control them jointly. This means of Asseco Poland are combined, the carrying they are neither subsidiaries nor joint ventures. value of investment in the acquiree subsidiary is Investments in subsidiaries and associates are only transferred to the value of investment in recognized by the Company at historical cost less the acquirer subsidiary. Hence, a takeover of one any impairment charges. subsidiary by another subsidiary has no impact on the Company’s financial results whatsoever. 7. Combinations of businesses under common control 8. Financial assets A business combination involving business Financial assets are divided into the following entities under common control is a business categories: combination whereby all of the combining ▪ financial assets held to maturity, business entities are ultimately controlled by ▪ financial instruments carried at fair value the same party or parties, both before and after through profit or loss, the business combination, and that control is not transitory. This refers in particular to ▪ loans and receivables, transactions such as a transfer of companies or ▪ financial assets available for sale. ventures between individual companies within a Financial assets held to maturity are non- capital group, or a merger of a parent company derivative financial assets quoted on an active with its subsidiary. market, with fixed or determinable payments The effects of combinations of businesses under and with fixed maturity that the Company common control are accounted for by the intends and is able to hold until maturity, which Company by the pooling of interests method, are different from: assuming that: ▪ financial assets designated at the initial ▪ assets and liabilities of the combining recognition as carried at fair value through business entities are measured at profit or loss, their carrying values as disclosed in ▪ financial assets designated as available for the Company’s consolidated financial sale, statements. This means that goodwill ▪ assets qualifying as loans and receivables. previously recognized in the consolidated financial statements as well as any other Financial assets held to maturity are carried at intangible assets recognized in the merger amortized cost using the effective interest rate. accounting process are transferred to Financial assets held to maturity shall be the standalone financial statements; classified as fixed assets if their maturity exceeds ▪ merger-related transaction costs are 12 months from the end of a reporting period. expensed in the income statement (financial expenses); ▪ mutual balances of accounts receivable/ payable are eliminated;
All figures in millions of PLN, unless stated otherwise 26 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Financial assets carried at fair value through Loans and receivables are non-derivative profit or loss include assets that satisfy one of financial assets with fixed or determinable the following conditions: payments, which are not quoted on an active market. They are recognized as current assets ▪ have been classified as assets held for unless their maturity periods are longer than trading. Financial assets are classified as held 12 months from the end of a reporting period. for trading if they are: Loans granted and receivables with maturity purchased for resale in short term periods longer than 12 months from the end of (up to 3 months), a reporting period are recognized as fixed assets. a part of the portfolio of specific financial Financial assets available for sale comprise instruments which are managed financial assets which are not derivative together, and which are likely to instruments, and which have been designated as generate short-term gains, available for sale, or do not belong to any of derivative instruments, except for the above three categories of financial assets. derivatives which are used as the Financial assets available for sale are carried at elements of hedge accounting or fair value, increased by the transaction-related financial guarantee contracts; costs that are directly attributable to ▪ have been classified in this category, in the acquisition or issuance of a financial asset. accordance with IAS 39, at the time of initial If financial instruments are not quoted on an recognition. active market and it is impossible to determine their fair value reliably with alternative methods, Financial assets carried at fair value through such financial assets available for sale shall profit or loss are measured at the market value be measured at purchase cost adjusted by of financial instruments as at the end of impairment charges. Any positive or negative the reporting period with no regard to any costs differences between the fair value of financial of their disposal transaction. Changes in the assets available for sale and their purchase cost value of such financial instruments are (on condition the price of such assets is recognized as financial income or expenses in determined in a regulated active market or their the income statement. In the event a contract fair value can be measured in another reliable includes one or more embedded financial way), shall be recognized net of deferred tax in derivatives, the whole contract may be classified other comprehensive income. A decrease in the as a financial asset carried at fair value through value of assets available for sale, resulting from profit or loss. This is not applicable where their impairment, shall be recognized as a the embedded derivative instrument does not financial expense. significantly modify the cash flows that otherwise would be required by the contract, or Purchases or disposals of financial assets are it is clear with little or no analysis when a similar recognized in the accounting books at the hybrid instrument is first considered that transaction date. At the initial recognition, separation of the embedded derivative is financial assets are measured at fair value which, prohibited. Financial assets may be initially in case of assets not classified as carried at fair recognized as assets carried at fair value through value through profit or loss, shall be increased by profit or loss provided the following criteria are directly attributable transaction-related met: (i) such qualification eliminates or expenses. substantially decreases any inconsistency in A financial asset shall be derecognized from recognition or measurement (accounting the balance sheet if the Company no longer mismatch); or (ii) such assets belong to the group controls the contractual rights arising from such of financial assets which are managed and financial instrument; this usually takes place evaluated on a fair value basis, according to when the instrument is sold or when all cash a documented risk management strategy. flows generated by that instrument are transferred to an independent third party.
All figures in millions of PLN, unless stated otherwise 27 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
9. Financial guarantee contracts 11. Prepayments and accrued income Financial guarantee contracts are contracts that Prepayments comprise expenses incurred before require the issuer to make specified payments to the end of the reporting period that relate to reimburse the holder for a loss it incurs because future periods or to future revenues. a specified debtor fails to make payment when Prepayments may in particular include due in accordance with the original or modified the following items: terms of a debt instrument. Financial liabilities under any guarantees issued are initially ▪ prepaid third-party services (inclusive of recognized and measured at fair value. maintenance services) which shall be Subsequently to initial recognition, all financial provided in future periods, liabilities are measured at the higher of ▪ rents paid in advance, the following two amounts: amortized cost ▪ advance payments of insurance and calculated using the effective interest rate subscription fees, method, or expected actual settlement of a liability resulting from a financial guarantee. ▪ any other expenses incurred in the current period, but related to future periods. 10. Inventories 12. Trade receivables The Company distinguishes two categories of inventories: goods for resale, and service parts Trade receivables, usually with payment terms (spare parts and computer hardware that have ranging from 14 and 30 days, are recognized and been purchased for the purposes of disclosed at the amounts initially invoiced, less maintenance service contracts). any allowances for doubtful receivables. Receivables with remote payment terms are At the end of each reporting period, an ageing recognized at the present value of expected analysis of goods for resale is performed, payments. providing rationale for making any write-downs subject to the following rules: Allowances for doubtful receivables are estimated when it is no longer probable that ▪ 100% write-down on goods stored for the entire amount of original receivables will be 24 months or longer, collected. The amount of allowances represents ▪ 75% write-down on goods stored between the difference between the nominal amount of 18 and 24 months, receivables and their recoverable amount, ▪ 50% write-down on goods stored between which corresponds to the net present value of 12 and 18 months, expected cash flows discounted using the interest rate applicable to similar debtors. ▪ 25% write-down on goods stored between 6 and 12 months. Receivables are revalued taking into account the probability of their collection, by making The initial value of service parts is expensed on allowances for: a straight-line basis over the duration of the maintenance service contract, for which such ▪ receivables from debtors who went into parts have been purchased. liquidation or bankruptcy – up to the amount receivable not covered by any Every year the Company verifies whether guarantee or other collateral, reported to the adopted principles for recognition of write- the liquidator or magistrate in bankruptcy downs correspond to the actual impairment of proceedings; its inventories. ▪ receivables from debtors in case Write-downs on inventories shall be recognized the declaration of bankruptcy is dismissed as operating expenses. and the debtor’s assets are insufficient to satisfy the costs of bankruptcy proceedings – in full amount receivable;
All figures in millions of PLN, unless stated otherwise 28 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
▪ receivables disputed by debtors and past- Allowances for trade receivables are recognized due where, following an assessment of as operating expenses. Allowances for other the debtor’s property and financial receivables are recognized as other operating condition, collection of full contractual expenses, or as financial expenses if such amounts is unlikely – up to the amount receivables resulted from the sale of investments receivable not covered by any guarantee or other activities whose costs and revenues are or other collateral; by principle disclosed in financial activities. ▪ receivables that constitute an increase of Allowances for accrued interest receivable are other receivables subject to prior allowances recognized as financial expenses. – in full amount receivable until they are If the cause for recognition of an allowance is received or written-off as uncollectible; no longer valid, such allowance shall be reversed, ▪ past-due (or not yet due) receivables, where in the whole amount or in the appropriate it is highly probable they will become portion, being recognized as an increase in the uncollectible because of the type of business value of a relevant asset or as an adjustment to or structure of customers – in the amount of respective cost items. reliably measured or full allowance for Receivables in litigation represent all receivables doubtful receivables. that have been brought into court, both Moreover, the Company analyzes the amounts domestically and abroad, including because they of allowances at least at the end of each are disputed by debtors, or in order to interrupt quarter. An allowance for receivables is created the limitations period or obtain a debt based on individual analysis taking into account the probability of obtaining payment, the value enforcement title. An allowance for receivables is of collateral held, as well as the amount of created based on individual analysis taking into realizable compensation of mutual debts. account the legal assessment of a dispute’s If making an allowance is justified, it shall outcome, and in particular the probability of be recognized following the general rules in obtaining payment, the value of collateral held, as the amount not lower than: well as the amount of realizable compensation of ▪ 100% in relation to receivables in litigation, mutual debts. If making an allowance is justified, unless the Management Board believes that it shall be recognized in the amount of up to 100% obtaining a favourable judgment by of relevant receivables. the Company is almost certain; 13. Interest-bearing bank loans and borrowings ▪ 100% in relation to receivables past-due over 12 months (from the payment All bank loans, borrowings and debt securities deadline), taking into account any partial are initially recognized at their purchase cost, payments or arrangements made after being the fair value of cash received net of any the end of the reporting period; costs associated with obtaining a bank loan or borrowing, or with issuing debt securities. ▪ 50% in relation to receivables past-due between 6 and 12 months (from Subsequently to initial recognition, bank loans, the payment deadline), taking into account borrowings as well as debt securities are any partial payments or arrangements made measured at amortized cost using the effective after the end of the reporting period. interest rate. Determination of the amortized cost shall take into account the costs related to When deciding on revaluation of receivables, the obtaining a bank loan or borrowing, or issuing Group takes into consideration not only events debt securities, as well as any discounts or that took place before the end of the reporting bonuses obtained on repayment of the liability. period, but also later events that took place prior to the preparation of financial statements if such The difference between the amount of cash events are related to receivables carried in received (net of any costs related to obtaining the books as at the end of the reporting period. a bank loan or borrowing, or issuing debt Every year the Company verifies whether the securities) and the amount to be repaid shall be adopted principles for recognition of allowances disclosed in the income statement over the term correspond to the actual impairment of its of such financing. receivables.
All figures in millions of PLN, unless stated otherwise 29 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
14. Leases (Company as a lessee) As at the end of the reporting period, assets and liabilities denominated in currencies other than Lease contracts, under which substantially all the Polish zloty are translated to Polish zlotys at risks and rewards incidental to ownership of the the mid exchange rates of such currencies as leased asset are transferred to the Company, are published by the National Bank of Poland and in classified as finance lease contracts effect on the last day of the reporting period. and recognized in the balance sheet at the Foreign exchange differences resulting from such commencement of the lease term, at the fair translation are accounted for respectively as value of a leased tangible asset or at the present financial income or financial expenses. value of minimum lease payments, whichever is lower. Lease payments are allocated between Non-cash assets and liabilities carried at the finance charge and the reduction of historical cost expressed in a foreign currency the outstanding lease liability so as to obtain are disclosed the historical exchange rate of a constant periodic rate of interest on the transaction date. Non-cash assets and the outstanding amount of the liability. liabilities carried at fair value expressed in a foreign currency are reported at the exchange Financial expenses are recognized in the income rate from the date when fair value measurement statement unless they are eligible for was carried out. capitalization (both in 2017 and the comparable period, the Company did not capitalize any 17. Provisions interest expenses incurred under finance lease A provision should be recognized when contracts). the Company has a present obligation (legal or Property, plant and equipment used under constructive) as a result of a past event, and finance lease contracts are subject to when it is probable that an outflow of resources depreciation over their estimated useful life or embodying economic benefits will be required to the lease term, whichever is shorter. However, settle the obligation, and a reliable estimate can if the lease contract provides that after its be made of the amount of the obligation. termination the lessee shall obtain ownership of Where the Company expects that the the leased asset, then such an asset shall be expenditure required to settle a provision is to depreciated over its estimated useful life, be reimbursed, e.g. under an insurance contract, i.e. following the depreciation rules applicable to this reimbursement should be recognized similar owned assets. as a separate asset. When, and only when, Lease contracts, whereby the lessor retains it is virtually certain that such reimbursement substantially all the risks and rewards incidental will be received, expenses relating to such to ownership of the leased asset, are considered provision shall be disclosed in the income as operating lease. Leasing fees and instalments statement, net of the amount of any under operating lease are recognized as reimbursements. operating expenses in profit or loss on a straight- The Company recognizes provisions for onerous line basis over the lease term. The conditional contracts in which the unavoidable costs of leasing fees are recognized as expense in meeting the obligations under the contract the period when they become due. exceed the economic benefits expected to be 15. Trade payables received therefrom. Trade payables relating to operating activities Where the effect of the time value of money is are recognized and disclosed at the amounts due material, the amount of a provision shall be for payment, and are recognized in the reporting determined by discounting the expected future periods which they relate to. cash flows to their present value, using a pre-tax discount rate that reflects current market 16. Transactions and items in foreign currencies assessments of the time value of money and the Transactions denominated in currencies other risks related to the liability. Where discounting than Polish zloty are translated to Polish zlotys method is used, the increase in a provision due at the mid exchange rate applicable for to the passage of time is recognized as a financial the transaction date as published by the National expense. Bank of Poland.
All figures in millions of PLN, unless stated otherwise 30 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
18. Provision for warranty repairs The Company identifies the following types of revenues: The provision for warranty repairs is created to cover anticipated future costs of warranty or revenues from the sale of proprietary service obligations resulting from the executed IT licenses and services, contracts. The costs of fulfilment of our warranty revenues from the sale of third-party obligations comprise mainly labour costs licenses and services, and (number of man-days multiplied by the standard rate) as well as the cost of goods, materials and revenues from the sale of hardware. third-party services used in performing such The category of “Proprietary licenses and warranty obligations. services” includes revenues from contracts with This provision is set aside in the cases where: customers under which we supply our own software and provide related services. ▪ the client has not signed any contract for Such services may be performed by the maintenance services; Company’s employees (internal resources) as ▪ the scope of the maintenance services well as by subcontractors (external resources). contract does not fully cover all anticipated The engagement of subcontractors in this costs of the fulfilment of warranty category of revenues has no impact on the scope obligations; of responsibility or relationship between ▪ the scope of the manufacturer’s warranty the Company and the customer to whom a for any equipment resold is narrower than service is provided. It is entirely up to the scope of warranty the Company is the Company to decide whether services contractually committed to provide to its required for this type of projects should be client. performed by subcontractors or by own employees. In addition, this category includes The provision amount recognized at the end of revenues from the provision of own services for the reporting period shall be proportional to third-party software and infrastructure. the progress of the IT contract execution. The category of “Third-party licenses and Any costs associated with the provision of our services” includes revenues from the sale of warranty services shall be, when incurred, third-party licenses as well as from the provision deducted from the previously created provision. of services which, due to technological or legal At the end of each reporting period, reasons, mast be carried out by subcontractors the Company verifies the amount of carried (this applies to hardware and software provision for warranty repairs. If the actual costs maintenance and outsourcing services provided of warranty services or anticipated future costs by their manufacturers). are lower/higher than assumed at the time of initial recognition of a provision, such provision Revenues from the sale of own software licenses shall be decreased/increased accordingly to and/or services, which are supplied/rendered reflect the Company’s current expectations in under an implementation contract, shall be respect of fulfilment of its warranty obligations recognized proportionally to the completion of in future periods. the entire contract. The rules for recognition of sales revenues from implementation contracts 19. Revenues are described in explanatory note 20 to these ▪ Sales revenues financial statements. Sales revenues are recognized if the amount of In the case of own software licenses and/or revenue can be reliably measured and if it is services, revenues are recognized in the period highly probable that economic benefits in which the Company expects to be required to associated with the transaction will flow to provide such services to the client. the Company. Revenues from the sale of third-party software Should it be impossible to reliably estimate licenses and/or services may be recognized as the amount of revenue from a service sales of goods or as sales of services, depending transaction, such revenue shall only be on the nature of the contract with the client. recognized in the amount of costs incurred which the Company expects to recover.
All figures in millions of PLN, unless stated otherwise 31 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
In the case of third-party software licenses 20. Revenues and costs related to the execution and/or services for which the significant risks and of implementation contracts rewards of ownership are transferred to Revenues from implementation contracts shall the buyer at the time of the sale, revenues are include highly probable revenues resulting from recognized as sales of goods, this is in a lump the concluded contracts and/or orders, which sum at the time of the sale, regardless of can be measured reliably. Therefore, the pool of whether a third-party license and/or service is such revenues does not include any proceeds provided for a specified or unspecified period of that are considered as doubtful despite being time. The Company considers that significant determined in a signed contract (e.g. risks are transferred to the buyer when, after the Company anticipates that a client may decide the delivery of a license/service, the Company is to resign from a portion of contracted work). not obligated to provide any additional and potentially costly benefits to the client. Contract revenues include the following: In other cases, i.e. when the significant risks and ▪ revenues resulting from issued invoices, rewards incidental to the ownership of a third- ▪ future revenues resulting from signed party license and/or service are not transferred agreements and/or orders placed on to the buyer at the time of the sale, revenues are the basis of framework agreements. recognized as sales of services, this is over a period in which such services are performed and proportionally to the completion of the entire Contract costs include the following: transaction. ▪ costs of goods, materials and third-party services sold (COGS), and Revenues from the sale of hardware are recognized as sales of goods, provided that ▪ costs of internal resources being involved the significant risks and rewards resulting from a in the contract execution. contract have been transferred to the buyer and The costs of internal resources employed in the the amount of revenue can be measured contract execution are calculated on the basis of reliably. actual workload (for ended periods) or estimated ▪ Interest workload (for forecast periods), and appropriate standard (cost) rate covering the production Interest income shall be recognized on a time costs. proportion basis (taking into account the effective yield, this is the interest rate which The standard rate corresponds to the cost of accurately discounts future cash flows during man-hour (or man-day) of our own production the estimated useful life of a financial resources calculated on the basis of production instrument) on the net book value of a financial costs budgeted for a given year. asset. Valuation of implementation contracts Interest income comprises interest on loans The purpose for valuation of an IT granted, investments in securities held to implementation contract is to determine the maturity, bank deposits and other items, as well amount of revenues to be recognized in a given as the discounts on costs (liabilities) according to period. The Company performs such valuation the method of the effective interest rate. using the percentage of completion method. ▪ Dividends Should the percentage progress of incurred Dividends shall be recognized when the costs, decreased by expected losses and shareholders’ right to receive payment is vested. increased by profits included in the income statement, exceed the percentage progress of invoiced sales, the amount of uninvoiced sales resulting from such difference shall be disclosed as trade receivables in the balance sheet, under “Receivables arising from valuation of IT contracts”.
All figures in millions of PLN, unless stated otherwise 32 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Conversely, if the percentage progress of ▪ measurement of work performed; or invoiced sales exceeds the percentage progress ▪ comparison of work performed as a physical of costs incurred, decreased by expected losses proportion of total work under the contract. and increased by profits included in the income statement, then future-related (unearned) The percentage of completion method is applied revenues resulting from such difference shall be on a cumulative basis in each accounting period disclosed as trade payables, under “Liabilities to the current estimates of contract revenues arising from valuation of IT contracts”. and contract costs. The effects of changes in estimates of contract revenues or contract costs In case of contracts denominated in foreign are recognized in the period in which such currencies deemed to be functional currencies or changes occur. in case of contracts denominated in EUR (even if EUR is not a functional currency), embedded Combining and segmenting of implementation financial derivatives are not disclosed separately. contracts In the Management’s opinion, EUR should be Valuation is usually performed on single regarded as a currency commonly used in Poland contracts or contracts with annexes thereto, in contracts for the sale or purchase of IT if such annexes modify the main contract by systems and services. Revenues and expenses extending or limiting the subject thereof. relating to such contracts are determined on the In the event an annex represents an additional basis of spot exchange rates. In all the other order, going beyond the subject of the main cases embedded derivatives are separated from contract, and the price of such order is their host contracts. determined without reference to the main Loss generating contracts contract price, such annex shall be valued separately. Loss generating contract is a contract, under which total revenues are lower than total costs. When a contract covers a number of elements, the implementation of each element should In the event it is highly probable that the total be treated as a separate contract, only if contract execution costs exceed the total the following conditions are jointly met: contract revenues, the anticipated loss shall be recognized as cost in the reporting period in ▪ separate offers have been submitted for which it has been detected, by creating a each of the identified elements; provision for contractual losses. ▪ each element has been subject to separate negotiations; and The amount of such provision and/or its legitimacy are subject to verification at each ▪ the costs and revenues of each element can subsequent reporting date, until the completion be identified – revenues must be specified of the contract. in the contract and/or order. The amount of created provisions for losses shall Whereas, a group of contracts may be treated be disclosed under “Provisions for losses arising as a single contract, if the following conditions from valuation of IT contracts”. are jointly met: Methods for measuring the percentage of ▪ the group of contracts is negotiated as contract completion a single package; ▪ the contracts are so closely interrelated that In order to measure the progress of contract they are, in effect, part of a single project completion, the Company applies a variety of with an overall profit margin; and methods allowing to reliably determine the percentage of work that has already been ▪ the contracts are performed concurrently or executed under the contract. Depending on in a continuous sequence. the contract nature, these methods may include: ▪ determination of the proportion of costs incurred for work performed up to the end of the reporting period to the estimated total contract costs;
All figures in millions of PLN, unless stated otherwise 33 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
21. Operating costs has no influence on pre-tax profit, taxable income or tax loss. In relation to negative The Company maintains cost accounting both by temporary differences arising from investments cost nature and by cost function. Cost of sales in subsidiaries or associates or from interests in comprises the costs resulted directly from joint ventures, deferred tax assets are purchases of goods sold and generation of recognized in the balance sheet in such amount services sold. Selling costs include the costs of only that it is probable that the above- distribution and marketing activities (including mentioned temporary differences will be sponsorship). General and administrative reversed in the foreseeable future and that expenses include the costs of the Company’s sufficient taxable income will be available to management and administration activities. offset such negative temporary differences. 22. Income tax and value added tax The carrying value of an individual deferred tax Liabilities and receivables resulting from current asset shall be verified at the end of each income tax, for the current and prior periods, are reporting period and shall be adequately measured at the amounts of expected payments decreased or increased in order to reflect any to the taxation authorities (or repayments from changes in the estimates of achieving taxable the taxation authorities), applying the tax rates profit sufficient to utilize such deferred tax asset and tax regulations legally or factually in force at partially or entirely. the end of the reporting period. Deferred tax assets and deferred tax liabilities For the purpose of financial reporting, deferred shall be valued using the future tax rates income tax is calculated applying the balance anticipated to be applicable at the time when a sheet liability method to all temporary deferred tax asset is realized or a deferred tax differences that exist, at the end of the reporting liability is reversed, based on the tax rates period, between the tax base of an asset or (and tax regulations) legally or factually in force liability and its carrying value disclosed in at the end of the reporting period. the financial statements. Deferred tax liabilities Deferred tax assets are compensated against are recognized in relation to all positive deferred tax liabilities if and only if the Company temporary differences – except for situations holds an enforceable legal title for compensation when a deferred tax liability arises from initial of current income tax receivables and liabilities, recognition of goodwill or initial recognition of and the deferred income tax is related to the an asset or liability on a transaction other than same taxpayer and the same taxation authority. combination of businesses, which at the time of its conclusion has no influence on pre-tax profit, Income tax relating to items that are directly taxable income or tax loss, as well as in relation recognized in equity shall be disclosed under to positive temporary differences arising from equity and not in the income statement. investments in subsidiaries or associates or from Revenues, expenses and assets shall be disclosed interests in joint ventures – except for situations in the amounts excluding value added tax unless: when the investor is able to control the timing of reversal of such temporary differences and when ▪ value added tax paid at the purchase of it is probable that such temporary differences goods or services is not recoverable; in such will not be reversed in the foreseeable future. event the value added tax paid shall be recognized as a part of the purchase cost of Deferred tax assets are recognized in relation to an asset or as an expense, and all negative temporary differences, as well as ▪ receivables and liabilities are presented unutilized deferred tax assets or unutilized tax including value added tax. losses carried forward to subsequent years, in such amount that it is probable that future Any excess of the value added tax paid over the taxable income will be sufficient to allow amount collected, or an excess of the value added the above-mentioned temporary differences, tax collected over the amount paid, shall be assets or losses to be utilized. This does not disclosed in the statement of financial position, apply to situations when deferred tax assets respectively under receivables or liabilities. related to negative temporary differences arise from initial recognition of an asset or liability on a transaction other than combination of businesses, which at the time of its conclusion
All figures in millions of PLN, unless stated otherwise 34 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Regulations applicable to the value added tax, 23. Earnings per share (basic and diluted) corporate income tax or social security Basic earnings per share for each reporting period contributions are frequently amended. Such shall be computed by dividing the net profit from frequent amendments result in the lack of continuing operations for the reporting period by relevant reference points, inconsistent the weighted average number of shares interpretations, and a low number of established outstanding in the given reporting period. legal precedents that could be followed. The current regulations also include ambiguities Diluted earnings per share for each reporting giving rise to differences in opinions and legal period shall be calculated by dividing the net profit interpretations on the tax regulations, either from continuing operations for the reporting between various bodies of public administration, period by the total of weighted average number of or between taxation authorities and companies. shares outstanding in the given reporting period and all shares of potential new issues. Tax treatments as well as other settlements
(for instance customs duties or foreign currency transactions) may be controlled by competent administration bodies that are entitled to impose high penalties and fines, and any additional tax liabilities resulting from such inspections must be paid along with high interest. Due to such circumstances, tax-related risks existing in Poland are higher than in countries with more mature taxation systems. As a consequence, the amounts presented and disclosed in our financial statements may be subject to future changes following any final decision that can be issued by the tax control authorities. The Company recognizes and measures its current and deferred income tax assets and liabilities in accordance with the requirements of IAS 12 Income Taxes on the basis of taxable profit (tax loss), tax base, unused tax losses, unused tax credits and tax rates, taking into account the assessment of uncertainty over tax treatments.
All figures in millions of PLN, unless stated otherwise 35 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
IV. INFORMATION ON OPERATING SEGMENTS
According to IFRS 8, an operating segment is a General Business – this segment is engaged in separable component of the Company’s business the provision of dedicated IT solutions for large for which separate financial information is and medium-sized industrial enterprises. This available and regularly reviewed by the chief segment is primarily a provider of information operating decision maker in order to allocate technology services such as IT consulting, resources to the segment and to assess its systems integration and implementation as well performance. The Company has identified as provision of the related support services. the following reportable segments: During the year ended 31 December 2017, the segment’s major clients included: Orange Polska Banking and Finance – this segment offers S.A. (telecom and media), Cyfrowy Polsat S.A. comprehensive baking systems, capital market (telecom and media), Tauron Group (power systems (for brokerage houses, banks, firms and industry), Enea Group (power industry), as well institutions engaged in investing activities) as as a group of energy industry clients in Ethiopia. well as highly specialized solutions and IT Revenues from none of the above-mentioned services for the commercial insurance sector. clients exceeded 10% of the Company’s total During the period of 12 months ended 31 sales in the year ended 31 December 2017. December 2017, the segment’s major clients included: Bank PKO BP S.A., Insurance Group PZU None of the Company’s operating segments S.A., Deutsche Bank PBC S.A., mBank S.A., and needed to be combined with another segment in Getin Noble Bank S.A. Only revenues obtained order to be identified as a reportable segment. from Bank PKO BP S.A. exceeded the threshold The results achieved by individual segments are of 10% of the Company’s total sales in the period regularly monitored by the management in order of 12 months ended 31 December 2017. to decide on allocation of resources among operating segments as well as to assess their Public Administration – within this segment performance and effects of such allocation. Asseco Poland S.A. executes projects including Operating profit (loss) is the main measure in design, development, implementation and evaluation of the segment’s performance. exploitation of dedicated IT systems. During the period of 12 months ended 31 December 2017, Financing activities (including financial expenses the segment’s major clients included: Social and income) as well as income taxes are Insurance Institution (ZUS), National Healthcare monitored on the company level; therefore, Fund (NFZ), Agricultural Social Insurance Fund these items are not taken into consideration (KRUS), Ministry of Finance, and Frontex – when allocating resources to individual European Agency for the Management of segments. Operational Cooperation at the External Borders The transfer prices applied in transactions of the Member States of the European Union. conducted between our operating segments are Only revenues obtained from the Social determined on an arm’s length basis just as in Insurance Institution exceeded 10% of case of transactions with unrelated parties. the Company’s total sales in the year ended 31 December 2017.
All figures in millions of PLN, unless stated otherwise 36 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Discontinued Continuing operations Eliminations Total operations For the period of 12 months ended Banking and Public 31 December 2017 General Business Other Total Infrastructure Finance Administration mPLN mPLN mPLN mPLN mPLN mPLN mPLN mPLN
Sales to external customers 310.2 386.6 159.5 4.9 861.2 - - 861.2 Inter-segment settlements 23.1 2.5 3.6 0.4 29.6 - (29.6) -
Net profit on sales of reportable segment 73.8 63.0 20.2 (37.4) 119.6 - - 119.6
Depreciation and amortization (17.5) (22.6) (7.9) (1.4) (49.4) - - (49.4)
Average number of employees, recalculated into 933 943 541 39 2,456 - - 2,456 full-time salaried jobs
Goodwill from business combinations allocated to 896.8 854.7 181.0 n/a 1,932.5 n/a n/a 1,932.5 the segment
For the period of 12 months ended
31 December 2016 Sales to external customers 316.7 426.1 184.0 10.0 936.8 64.1 - 1,000.9 Inter-segment settlements 21.3 13.2 5.8 3.6 43.9 1.9 (45.8) -
Net profit on sales of reportable segment 70.8 92.5 26.4 (0.3) 189.4 (1.7) - 187.7
Depreciation and amortization (15.5) (22.0) (10.1) (0.9) (48.5) (0.8) - (49.3)
Average number of employees, recalculated into 880 1,056 550 45 2,531 45 - 2,576 full-time salaried jobs
Goodwill from business combinations allocated to 896.8 934.8 181.0 n/a 2,012.6 n/a n/a 2,012.6 the segment
All figures in millions of PLN, unless stated otherwise 37 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
V. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS
1. Sales revenues and operating costs Operating revenues generated and operating costs incurred during the year ended 31 December 2017 and in the comparable period were as follows:
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016 mPLN mPLN
Sales revenues Proprietary licenses/software and services 773.8 872.5 Third-party licenses/software and services 48.5 44.7 Hardware and infrastructure 36.7 15.2 Other sales 2.2 4.4 Total 861.2 936.8
Operating costs Cost of goods and third-party services sold (80.4) (53.3) Employee benefits (362.0) (360.7) Depreciation and amortization (49.4) (48.5) Services for internal purposes (171.1) (207.6) Other (78.7) (77.3) Total (741.6) (747.4)
Cost of sales (603.6) (622.2) Selling costs (50.8) (44.2) General and administrative expenses (87.2) (81.0) Total (741.6) (747.4)
Total sales revenues generated in 2017 were lower than those reported for the year 2016 because of a high base effect. It resulted, among others from changing the Company’s structure in 2016 when we decided contribute our organized business unit called the Enterprises Division to another company of Asseco Group, as a consequence of which the Division’s revenues have been presented in the financial statements of another company of Asseco Group since the middle of 2016. The transaction of contributing the Enterprises Division has been described in our financial statements for the period of 12 months ended 31 December 2016. Our sales revenues dropped also due to the stagnation in awarding new contracts in the public administration sector. In 2017, other operating costs included primarily maintenance of property and business cars in the amount of PLN 50.8 million, as well as advertising expenses in the amount of PLN 26.5 million. Whereas, in the comparable period other operating costs included primarily maintenance of property and business cars in the amount of PLN 51.9 million, as well as advertising expenses in the amount of PLN 22.4 million.
All figures in millions of PLN, unless stated otherwise 38 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
i. Costs of employee benefits
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016 mPLN mPLN
Remuneration (301.3) (305.1) Social insurance contributions (24.2) (24.6) Retirement benefit expenses (23.6) (23.0) Other post-employment benefits (6.0) (1.5) Other costs of employee benefits (6.9) (6.5) Total employee benefit expenses (362.0) (360.7)
The line ‘Other post-employment benefits’ disclosed for 2017 includes provisions for severance payments to our key management personnel, whose employment in the Company expired during 2017. Reconciliation of depreciation and amortization charges The table below presents the reconciliation of depreciation and amortization charges reported in the income statement with those disclosed in the tables of changes in property, plant and equipment (note 8) and in intangible assets (note 9): 12 months ended 12 months ended
31 Dec. 2017 31 Dec. 2016 Note mPLN mPLN
Depreciation charges for the year as disclosed in the table of changes in 8 (28.7) (29.9) property, plant and equipment Amortization charges for the year as disclosed in the table of changes in 9 (27.7) (25.4) intangible assets Amortization charges recognized directly in other comprehensive income 0.8 0.8 Reduction of amortization charges due to recognition of grants 1.4 1.2 to internally generated licenses Amortization charges capitalized for development projects in progress 0.1 0.1 Total depreciation and amortization charges disclosed in the statement (54.1) (53.2) of cash flows Depreciation of rental property recognized in other operating expenses 4.7 3.9 Depreciation and amortization charges on discontinued operations - 0.8 Total depreciation and amortization charges recognized in operating (49.4) (48.5) costs
2. Other operating income and expenses Other operating income in the period of 12 months ended 31 December 2017 and in the comparable period was as follows:
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016 Other operating income mPLN mPLN
Gain on disposal of property, plant and equipment 3.5 1.9 Gain on disposal of intangible assets - 0.1 Income from rental of office space 0.8 - Reversal of provisions 0.5 0.3 Compensations received 0.7 0.8 Other - 0.1 Total 5.5 3.2
All figures in millions of PLN, unless stated otherwise 39 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Other operating expenses in the period of 12 months ended 31 December 2017 and in the comparable period were as follows:
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016 Other operating expenses mPLN mPLN
Costs related to income from rental of office space - (0.3) Grants made (0.3) (0.4) Penalties and compensations (1.3) - Costs of post-accident repairs (0.6) (0.7) Creation of provisions (0.4) (0.1) Liquidation of property, plant and equipment, and intangible (0.8) (0.1) assets Impairment write-downs on non-current assets held for sale (1.1) - Total (4.5) (1.6)
3. Financial income and expenses Financial income earned during the period of 12 months ended 31 December 2017 and in the comparable period was as follows:
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016 Financial income mPLN mPLN
Interest income on bank deposits, loans granted, and 9.9 4.5 own receivables Other interest income 0.1 0.4 Positive foreign exchange differences - 2.3 Dividends received and receivable 145.3 209.3 Reversal of impairment write-downs on financial assets 19.9 0.3 Gain on sale of shares in subsidiaries, jointly controlled entities 184.1 0.2 and associates Gain on exercise and/or valuation of derivative instruments 11.6 - Total 370.9 217.0
The line ‘Reversal of impairment write-downs on financial assets and investments in subsidiaries’ presents the reversal of an impairment write-down on Asseco Western Europe S.A., which has been described in detail in explanatory note 11. The ‘Gain on sale of shares in subsidiaries’ is comprised of gross income earned on the sale of a 20% stake in Formula Systems, Ltd amounting to PLN 182.5 million, as well as gross income from the sale of shares in Asseco South Eastern Europe S.A. amounting to PLN 1.6 million. The ‘Gain on exercise and/or valuation of derivative instruments’ represents profits from the valuation of currency forward contracts in the amount of PLN 3.0 million, as well as profits from the settlement of such contracts in the amount of PLN 8.6 million.
All figures in millions of PLN, unless stated otherwise 40 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Financial expenses incurred during the period of 12 months ended 31 December 2017 and in the comparable period were as follows:
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016 Financial expenses mPLN mPLN
Interest expenses on bank loans and liabilities (3.7) (3.6) Interest expenses under finance leases (4.3) (5.6) Other interest expenses (3.3) (3.3) Negative foreign exchange differences (14.7) - Impairment of investments in subsidiaries, jointly controlled (80.2) - entities and associates Loss on sale of shares in subsidiaries, jointly controlled entities (17.4) - and associates Loss on impairment of financial assets (23.9) (0.2) Allowances for receivables (54.9) (1.2) Impairment write-down on goodwill (80.1) - Loss on exercise and/or valuation of derivative instruments - (4.3) Expenses related to company disposals (4.2) - Other financial expenses - (0.1) Total (286.7) (18.3)
Positive and negative foreign exchange differences are presented in net amounts (reflecting the excess of positive differences over negative differences or otherwise). The line ‘Impairment of investments in subsidiaries, jointly controlled entities and associates’ includes an impairment write-down recognized on our investment in associated company R-Style Softlab in the amount of PLN (52.5) million. This line also includes impairment write-downs on our investments in the following companies: Asseco Nigeria (PLN 2.9 million), Sintagma (PLN 17.3 million), Asseco Georgia (PLN 4.6 million), and Asseco Kazakhstan (PLN 2.9 million). Such impairment write-downs have been recognized following a review of Asseco Group’s plans regarding its business in eastern markets, which was performed by the Company in connection with the establishment of a new entity responsible for the consolidation of Asseco Group’s foreign operations, namely Asseco International, a.s. As part of this revision and due to the deteriorating financial results of the above-mentioned companies, Asseco Poland’s Management carried out an impairment test and concluded that the Company’s investments in these companies have been permanently impaired. The ‘Loss on sale of shares in subsidiaries, jointly controlled entities and associates’ is comprised of a gross loss incurred on the sale of R-Style Softlab (PLN (15.4) million resulting from the sale of shares alone, without allowances for receivables recognized after this transaction), as well as a gross loss on the sale of shares in Asseco Central Europe (PLN 0.7 million). Expenses related to losing receivables from subsidiaries include an allowance for a deferred payment resulting from the sale of a 51% stake in the company R-Style Softlab. Such allowance amounting to PLN (43.6) million was recognized because this deferred payment depended upon the future financial position of R-Style Softlab. However, due to the deteriorating financial results and forecasts of that company, the Management decided to write-down our investment in R-Style Softlab and subsequently to recognize an allowance for receivables arising from the deferred payment for shares in that company. In addition, this line includes an allowance for dividends receivable from R-Style Softlab in the amount of PLN (11.3) million. The line ‘Impairment write-down on goodwill’ includes a write-down that resulted from carrying out an impairment test on the Company’s assets. The disclosed amount represents a write-down on goodwill allocated to our Public Administration segment that has been recognized on the basis of an impairment test carried out by the Company’s Management. The assumptions and outcome of this impairment test are presented in explanatory note 11 to these standalone financial statements for the year ended 31 December 2017.
All figures in millions of PLN, unless stated otherwise 41 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
The ‘Loss on impairment of financial assets’ includes impairment write-downs on loans granted to the following companies: Gdyński Klub Koszykówki Arka S.A. in the amount of PLN (10.5) million, and Asseco Resovia S.A. in the amount of PLN (13.4) million. 4. Corporate income tax The main charges on pre-tax profit resulting from corporate income tax (current and deferred portions):
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016 mPLN mPLN
Current portion of income tax and prior years’ adjustments (25.7) (24.9) Deferred portion of income tax (3.5) (11.1)
Income tax expense related to discontinued operations - (0.3)
Income tax expense as disclosed in the income statement (29.2) (36.3)
During the period of 12 months ended 31 December 2017, our effective tax rate equalled 14.2 % as compared with 9.31 % in the comparable period last year. The effective tax rate increased primarily due to the recognition in 2017 of an impairment write-down on goodwill in the amount of PLN (80.1) million which constitutes a permanent difference in the calculation of corporate income tax. On 15 July 2016, Poland’s Tax Code was amended to include the provisions of General Anti-Abuse Rule (GAAR). GAAR is intended to prevent the creation and use of artificial legal arrangements aiming to avoid payment of taxes in Poland. GAAR defines tax avoidance as an action carried out for the essential purpose of obtaining a tax benefit that under the circumstances is inconsistent with the object and purpose of relevant tax provisions. According to GAAR, an action shall not result in achieving a tax advantage if it is conducted on a non-genuine basis. The occurrence of (i) an unjustified division of operations, (ii) involvement of intermediaries without an economic or commercial reason, (iii) mutually cancelling or offsetting elements, as well as (iv) any other actions of similar nature may be considered to indicate the undertaking of artificial actions that are subject to GAAR provisions. The new regulations will require much greater judgment when assessing the tax effects of each transaction. The general anti-abuse rule shall apply to transactions conducted after its entry into force as well as to transactions that were carried out prior to its entry into force but brought tax benefits after that time or still continue to bring such benefits. The implementation of the above-mentioned regulations shall enable the Polish tax control authorities to put into question the legal arrangements and agreements undertaken by taxpayers, including the restructuring or reorganization of a group of companies. Regulations applicable to the value added tax, corporate income tax, personal income tax or social security contributions are frequently amended, thereby depriving taxpayers of a possibility to refer to well established legal decisions and precedents. The current regulations in force are not always unambiguous, which may cause additional discrepancies in their interpretation. Tax treatments are subject to control by the taxation authorities. Should any irregularities in tax settlements be detected, a taxpayer is obliged to pay the outstanding amounts along with the statutory interest thereon. Payment of tax arrears does not always release a taxpayer from penal and fiscal liability. Such circumstances lift the tax-related risks in Poland above the level characteristic to countries with better developed taxation systems. Settlement of tax liabilities may come under control in a period of five years, counting from the end of the year in which relevant tax returns were filed. In effect, the amounts of taxes payable disclosed in the financial statements may be later changed, after they are finally determined by the taxation authorities. Presented below is the reconciliation of corporate income tax payable on pre-tax profit at the statutory tax rate, with corporate income tax computed at the effective tax rate.
All figures in millions of PLN, unless stated otherwise 42 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016 mPLN mPLN
Pre-tax profit from continuing operations 204.8 389.7 Statutory corporate income tax rate 19% 19% Corporate income tax computed at the statutory tax rate 38.9 74.0 Dividends received from subsidiaries and associates (26.7) (30.7) Impairment write-down on goodwill 15.2 - Transaction of selling shares in R-Style Softlab (4.7) - Transactions of selling shares 0.9 - Reversal of impairment write-downs on investments (3.8) - Impairment write-downs on investments in subsidiaries 3.3 - Impairment write-downs on loans granted 4.5 - Taxes on income earned by the Company’s foreign subsidiaries 1.6 2.3 Acquisition of shares in Asseco International in exchange (0.4) - for non-cash contribution of companies Other permanent differences 0.4 (9.3) Corporate income tax computed at the effective tax rate 29.2 36.3
The line ‘Transaction of selling shares in R-Style Softlab’ includes the cumulative tax effects arising from the sale of shares and recognition of allowances for receivables, resulting in the origination of permanent differences, including: ▪ Sale of shares – PLN (15.2) million ▪ Allowances for receivables – PLN 8.3 million ▪ Impairment write-down on investments – asset – PLN (2.3) million ▪ Impairment write-down on deferred tax assets – PLN 4.5 million.
All figures in millions of PLN, unless stated otherwise 43 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Comprehensive income Deferred tax liabilities Deferred tax assets for the period 12 months ended 31 Dec. 2017 31 Dec. 2016 31 Dec. 2017 31 Dec. 2016 31 Dec. 2017 mPLN mPLN mPLN mPLN mPLN Property, plant and equipment 12.3 12.1 8.9 9.3 (0.6) Intangible assets 27.2 29.8 - - 2.6 Shares in subsidiaries - - 0.7 0.7 - Financial assets available for sale - - 0.1 0.2 (0.1) Financial assets carried at fair value through profit or loss 0.8 - - 0.8 (1.6) Borrowings 0.1 0.3 0.1 - 0.3 Inventories - - - 0.1 (0.1) Prepayments and accrued income 0.2 0.1 4.7 4.3 0.3 Trade receivables 25.4 19.4 6.2 2.9 (2.7) Other receivables 7.7 10.3 3.4 0.7 5.3 Non-current assets classified as held for sale 0.3 0.3 0.1 - 0.1 Interest-bearing bank loans and borrowings - - 0.1 0.1 - Provisions - - 8.0 14.0 (6.0) Trade payables - - 5.6 4.6 1.0 Financial liabilities - - 6.0 9.1 (3.1) Other liabilities 0.2 0.3 3.6 0.6 3.1 Accruals - - 5.7 7.0 (1.3) Deferred income - - 2.3 2.9 (0.6)
Deferred tax liabilities, gross 74.2 72.6 (1.6) Deferred tax assets, gross 55.5 57.3 (1.8)
Deferred tax assets (+)/liabilities (-), net (18.7) (15.3) - - Change in deferred income tax in the reporting period, of which: (3.4) change in deferred income tax recognized directly in other comprehensive income 0.1 deferred income tax change recognized in the income statement (3.5)
All figures in millions of PLN, unless stated otherwise 44 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
5. Discontinued operations In 2016, the Company disposed of its organized business unit referred to as the “Infrastructure Division” that constituted a separate operating segment of the Company. Detailed information on discontinued operations have been provided in our financial statements for the year 2016. 6. Earnings per share Basic earnings per share are computed by dividing net profit for the reporting period by the weighted average number of ordinary shares outstanding during that financial year. Diluted earnings per share are computed by dividing the net profit for the reporting period by the adjusted (for the diluting impact of potential shares) weighted average number of ordinary shares outstanding during the reporting period, adjusted by the impact of diluting instruments. Both during the period of 12 months ended 31 December 2017 and the comparable period, there were no instruments that could potentially dilute basic earnings per share. The table below presents net profits and numbers of shares used for the calculation of earnings per share:
12 months 12 months ended 31 Dec. 2017 ended 31 Dec. 2016
Weighted average number of ordinary shares outstanding, 83,000,303 83,000,303 used for calculation of basic earnings per share Net profit from continuing operations for the reporting period (in millions 175.6 353.4 of PLN) Net earnings per share (in PLN) 2.12 4.26
7. Information on dividends paid out In 2017 the Company paid out to its shareholders a dividend for the year 2016. On 25 April 2017, the Annual General Meeting of Shareholders of Asseco Poland S.A. passed a resolution to allocate PLN 249.8 million out of the Company’s net profit for the financial year 2016 to the payment of a dividend amounting to PLN 3.01 per share. The remaining portion of net profit in the amount of PLN 102.3 million was disclosed in retained earnings. The dividend record date was set for 16 May 2017; whereas, the dividend payment was scheduled for 1 June 2017. In 2016 the Company paid out to its shareholders a dividend for the year 2015. On 29 April 2016, the Annual General Meeting of Shareholders of Asseco Poland S.A. passed a resolution to allocate PLN 249.8 million out of the Company’s net profit for the financial year 2015 to the payment of a dividend amounting to PLN 3.01 per share. The remaining portion of net profit in the amount of PLN 7.3 million was disclosed in retained earnings. The dividend record date was set for 16 May 2016; whereas, the dividend payment was scheduled for 2 June 2016.
All figures in millions of PLN, unless stated otherwise 45 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
8. Property, plant and equipment The net book value of property, plant and equipment, during the period of 12 months ended 31 December 2017 and in the comparable period, changed as a result of the following transactions:
Computers and Tangible assets Land and Transportation Other tangible other office under Total buildings vehicles assets equipment construction As at 1 January 2017, less accumulated depreciation 254.5 57.4 13.3 9.8 0.4 335.4 and impairment write-downs
Additions, of which: 0.6 8.6 6.4 0.5 2.0 18.1 Purchases and modernization 0.3 8.2 5.4 0.4 2.0 16.3 Transfers from tangible assets under construction - 0.4 1.0 0.1 - 1.5 Transfers from non-current assets held for sale 0.3 - - - - 0.3
Reductions, of which: (11.7) (10.4) (5.2) (2.6) (1.5) (31.4) Depreciation charges for the reporting period (11.7) (10.0) (4.5) (2.5) - (28.7) Disposal and liquidation - (0.4) (0.7) (0.1) - (1.2) Transfers from tangible assets under construction - - - - (1.5) (1.5)
As at 31 December 2017, less accumulated depreciation 243.4 55.6 14.5 7.7 0.9 322.1 and impairment write-downs
As at 1 January 2017 Gross value 343.2 126.3 26.2 31.0 0.4 527.1 Accumulated depreciation and impairment write-downs (88.7) (68.9) (12.9) (21.2) - (191.7) Net book value as at 1 January 2017 254.5 57.4 13.3 9.8 0.4 335.4
As at 31 December 2017 Gross value 343.8 126.8 25.9 31.4 0.9 528.8 Accumulated depreciation and impairment write-downs (100.4) (71.2) (11.4) (23.7) - (206.7) Net book value as at 31 December 2017 243.4 55.6 14.5 7.7 0.9 322.1
All figures in millions of PLN, unless stated otherwise 46 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Computers and Tangible assets Land and Transportation Other tangible other office under Total buildings vehicles assets equipment construction As at 1 January 2016, less accumulated depreciation 266.1 67.0 15.0 11.7 0.5 360.3 and impairment write-downs
Additions, of which: - 6.0 6.0 0.8 1.3 14.1 Purchases and modernization - 4.5 4.4 0.5 1.3 10.7 Transfers from tangible assets under construction - 0.3 1.0 - - 1.3 Merger with Infovide-Matrix S.A. - 1.2 0.6 0.3 - 2.1
Reductions, of which: (11.6) (15.6) (7.7) (2.7) (1.4) (39.0) Depreciation charges for the reporting period (11.6) (11.3) (4.3) (2.6) (0.1) (29.9) Disposal and liquidation - (3.9) (0.7) - - (4.6) Contribution of an organized business unit - (0.4) (2.7) (0.1) - (3.2) Transfers from tangible assets under construction - - - - (1.3) (1.3)
As at 31 December 2016, less accumulated depreciation 254.5 57.4 13.3 9.8 0.4 335.4 and impairment write-downs
As at 1 January 2016 Gross value 343.2 139.0 31.2 30.6 0.5 544.5 Accumulated depreciation and impairment write-downs (77.1) (72.0) (16.2) (18.9) - (184.2) Net book value as at 1 January 2016 266.1 67.0 15.0 11.7 0.5 360.3
As at 31 December 2016 Gross value 343.2 126.3 26.2 31.0 0.4 527.1 Accumulated depreciation and impairment write-downs (88.7) (68.9) (12.9) (21.2) - (191.7) Net book value as at 31 December 2016 254.5 57.4 13.3 9.8 0.4 335.4
All figures in millions of PLN, unless stated otherwise 47 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
9. Intangible assets The net book value of intangible assets, during the period of 12 months ended 31 December 2017, changed as a result of the following transactions: Costs of Purchased Intangible assets Internally development software, patents, recognized in “ASSECO” Goodwill generated Total projects in licenses and other business trademark software progress intangibles combinations As at 1 January 2017, less accumulated amortization 2,012.6 22.7 24.8 25.4 88.6 137.6 2,311.7 and impairment write-downs
Additions, of which: - 11.5 10.2 3.2 - - 24.9 Purchases and modernization - - - 3.2 - - 3.2 Capitalization of the costs of research and development - - 10.2 - - - 10.2 projects Transfers from the costs of development projects - 11.5 - - - - 11.5 in progress
Reductions, of which: (80.1) (7.8) (11.5) (9.3) (10.8) - (119.5) Amortization charges for the reporting period n/a (7.8) n/a (9.1) (10.8) n/a (27.7) Impairment write-downs and liquidation (80.1) - - (0.2) - - (80.3) Transfers to internally generated software - - (11.5) - - - (11.5)
Net book value as at 31 December 2017 1,932.5 26.4 23.5 19.3 77.8 137.6 2,217.1
As at 1 January 2017 Gross value 2,012.7 78.6 33.4 117.3 193.1 137.6 2,572.7 Accumulated amortization and impairment write-downs (0.1) (55.9) (8.6) (91.9) (104.5) - (261.0) Net book value as at 1 January 2017 2,012.6 22.7 24.8 25.4 88.6 137.6 2,311.7
As at 31 December 2017 Gross value 2,012.7 90.1 32.1 120.5 193.1 137.6 2,586.1 Accumulated amortization and impairment write-downs (80.2) (63.7) (8.6) (101.2) (115.3) - (369.0) Net book value as at 31 December 2017 1,932.5 26.4 23.5 19.3 77.8 137.6 2,217.1
All figures in millions of PLN, unless stated otherwise 48 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Goodwill The largest portion of intangible assets is constituted by goodwill recognized from business combinations carried out in the years 2007-2017. As at 31 December 2017, goodwill arising from business combinations amounted to PLN 1,932.5 million as compared with PLN 2,012.6 million in the comparable period, and it was allocated to the beneath mentioned operating segments which are treated as cash-generating units:
31 Dec. 2017 31 Dec. 2016
mPLN mPLN
Goodwill allocated to the segment of “Banking and Finance” 896.8 896.8 Goodwill allocated to the segment of “Public Administration” 854.7 934.8 Goodwill allocated to the segment of “General Business” 181.0 181.0 1,932.5 2,012.6
Costs of development projects in progress The Company carries out a number of development projects, including those co-financed from EU funds. The Company shall begin to capitalize the costs of such projects which qualify under the requirements of IAS 38, i.e. only the development phase expenditures that can be directly attributed to a performed project are capitalized. Such costs shall include basically employee benefits, expenditures for materials and services that are used or consumed directly in the project implementation, depreciation charges on equipment used in the generation process, as well as costs of any office space utilized by the development team. In the year ended 31 December 2017, capitalized expenditures for development projects totalled PLN 10.2 million, of which PLN 1.8 million were spent in the Banking and Finance segment, PLN 3.8 million in the Public Administration segment, and PLN 4.6 million in the General Business segment. Whereas, in the year ended 31 December 2016, capitalized expenditures for development projects totalled PLN 12.0 million, of which PLN 3.9 million were spent in the Banking and Finance segment, PLN 1.3 million in the Public Administration segment, and PLN 6.8 million in the General Business segment. The largest development projects conducted during the year ended 31 December 2017 included the following: ▪ AUMS This project aims to develop a version of AUMS (Asseco Utility Management Solutions) ready to be sold and implemented as a Billing & CIS class solution in the power utility sector. It will in particular involve the translation of the UMTS system into English, its preparation for translation into other languages, as well as expansion of its functionality in order to meet the requirements in foreign markets. The research phase of this project was initiated in the second quarter of 2014, whereas its development phase in the first quarter of 2015. Until 31 December 2017, total expenditures that have been capitalized as intangible assets amounted to PLN 11.5 million, of which PLN 2.2 million in 2017. The project is scheduled to be completed till 30 November 2018. ▪ Smart This project is aimed at developing a converged system to support telecom operators in their sales processes and customer service involved in the provision of VOICE, SMS and DATA services. The development phase of this project was initiated in October 2015. Until 31 December 2017, total expenditures that have been capitalized as intangible assets amounted to PLN 2.7 million, of which PLN 0.5 million in 2017. The project is scheduled to be completed till 31 December 2018. ▪ BSS Cloud The aim of this project is to create a product dedicated to comprehensive handling of processes performed by Business Support Systems of small and medium-sized retail and wholesale telecommunications and television operators. As a result, Asseco Poland will be able to offer comprehensive BSS and Network Inventory for the above-mentioned service providers.
All figures in millions of PLN, unless stated otherwise 49 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
The research phase of this project was initiated in April 2014, whereas its development phase in May 2014. Until 31 December 2017, total expenditures that have been capitalized as intangible assets amounted to PLN 4.1 million, of which PLN 1.9 million in 2017. The project is scheduled to be completed till 31 December 2018. ▪ def3000/CBP for Internet Services Center This project is aimed at the adaptation of def3000/CBP software to provide cloud computing services in the SaaS model. In addition, the software will provide the following functionality: innovative concept of enabling the bank’s customers to access various functionalities of the system by means of mini-applications that are available from the apps boutique; ability to use the system on any device (desktop, tablet, smartphone) with a web browser; flexible arrangement of functionalities offered to customers; possibility of managing the set of mini-applications by customers themselves; customer satisfaction guaranteed with the availability of services tailored to their specific needs. The development phase of this project was initiated in October 2015. Until 31 December 2017, total expenditures that have been capitalized as intangible assets amounted to PLN 2.0 million, of which PLN 0.5 million in 2017. The project is scheduled to be completed till 28 February 2018. Purchased software, patents, licenses and other intangibles During the year ended 31 December 2017, the Company did not make any significant purchases of third- party software, patents or other licenses. “ASSECO” trademark The ASSECO trademark is the only intangible asset considered by the Management Board to have an indefinite useful life. Therefore, this asset is not amortized and only tested for impairment on an annual basis. The Management Board has decided that the useful life of this trademark is indefinite, because it is expected to contribute to the generation of net cash flows by the Company in the future for an indefinite period of time. For impairment testing purposes, this trademark is considered to be a common asset and its value is allocated on a consistent basis to individual operating segments that are treated as cash-generating units. Intangible assets recognized in business combinations Intangible assets recognized in the purchase price allocation process include the following:
Internally generated Customer relations Total software As at 1 January 2017: Gross value 130.0 63.1 193.1 Accumulated depreciation (60.9) (43.6) (104.5) Net book value as at 1 January 2017 69.1 19.5 88.6
As at 31 December 2017: Gross value 130.0 63.1 193.1 Accumulated depreciation (67.8) (47.5) (115.3) Net book value as at 31 December 2017 62.2 15.6 77.8
Depreciation charges for the reporting period (6.9) (3.9) (10.8)
The average amortization period for the Company’s customer relations is 18 years.
All figures in millions of PLN, unless stated otherwise 50 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
The net book value of intangible assets, during the period of 12 months ended 31 December 2016, changed as a result of the following transactions:
Costs of Purchased Intangible assets Internally development software, patents, recognized in “ASSECO” Goodwill generated Total projects in licenses and other business trademark software progress intangibles combinations As at 1 January 2016, less accumulated depreciation 2,040.1 13.2 28.2 29.8 99.4 137.6 2,348.3 and impairment write-downs
Additions, of which: 123.8 14.8 12.0 5.1 - - 155.7 Purchases and modernization - - - 5.0 - - 5.0 Capitalization of the costs of research and development - - 12.0 - - - 12.0 projects Transfers from the costs of development projects - 14.8 - - - - 14.8 in progress Merger with Infovide-Matrix S.A. 123.8 - - 0.1 - - 123.9
Reductions, of which: (151.3) (5.3) (15.4) (9.5) (10.8) - (192.3) Depreciation charges for the reporting period - (5.3) - (9.3) (10.8) - (25.4) Impairment write-downs - - (0.6) - - - (0.6) Transfers to internally generated software - - (14.8) - - - (14.8) Contribution of an organized business unit (151.3) - - (0.2) - - (151.5)
Net book value as at 31 December 2016 2,012.6 22.7 24.8 25.4 88.6 137.6 2,311.7
As at 1 January 2016 Gross value 2,040.2 63.8 36.2 112.4 193.1 137.6 2,583.3 Accumulated depreciation and impairment write-downs (0.1) (50.6) (8.0) (82.6) (93.7) - (235.0) Net book value as at 1 January 2016 2,040.1 13.2 28.2 29.8 99.4 137.6 2,348.3
As at 31 December 2016 Gross value 2,012.7 78.6 33.4 117.3 193.1 137.6 2,572.7 Accumulated depreciation and impairment write-downs (0.1) (55.9) (8.6) (91.9) (104.5) - (261.0) Net book value as at 31 December 2016 2,012.6 22.7 24.8 25.4 88.6 137.6 2,311.7
All figures in millions of PLN, unless stated otherwise 51 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Intangible assets recognized in business combinations Intangible assets recognized in the purchase price allocation process include the following:
Internally generated Customer relations Total software As at 1 January 2016: Gross value 130.0 63.1 193.1 Accumulated depreciation (53.9) (39.8) (93.7) Net book value as at 1 January 2016 76.1 23.3 99.4
As at 31 December 2016: Gross value 130.0 63.1 193.1 Accumulated depreciation (60.9) (43.6) (104.5) Net book value as at 31 December 2016 69.1 19.5 88.6
Depreciation charges for the reporting period (7.0) (3.8) (10.8)
All figures in millions of PLN, unless stated otherwise 52 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
10. Investments in subsidiaries and associates The structure of Asseco Poland’s investments in subsidiaries and associates is presented in the chart below:
Asseco Poland S.A.
Asseco International, a.s. Asseco Data Systems S.A. KKI-BCI Sp. z o.o. * Slovakia Poland Poland 100/100 (0/0) 100/100 (100/100) 100/100 (100/100)
Asseco Enterprise Solutions, a.s. 1) ZUI Novum Sp. z o.o. IMX tow Slovakia Poland Ukraine 49.9/49.9 (100/100) 51/51 (51/51) 100/100 (100/100)
Asseco Western Europe S.A. SKG S.A. CodeConnexion Ltd * Poland Poland Sri Lanka 100/100 (100/100) 60/60 (60/60) 45/45 (45/45)
Formula Systems (1985) Ltd DahliaMatic Sp. z o.o. Postdata S.A. Israel Poland Poland 26.31/26.31 (46.33/46.33) 100/100 (100/100) 49/49 (49/49)
Podkarp. Fund. Nieruchomości Sp. z o.o. Modulus Sp. z o.o. Poland Poland 100/100 (100/100) 50/50 (50/50)
Gladstone Consulting Ltd Cyprus 1) Asseco Poland S.A. holds shares, however control over 100/100 (100/100) this company is maintained by Asseco Central Europe, a.s. Slovakia
GSTN Consulting Sp. z o.o. * company in liquidation Poland subsidiary company 100/100 (0/0) associated company
100/100 voting rights / equity interest as at 31 December 2017 (in %) (100/100) voting rights / equity interest as at 31 December 2016 (in %)
All figures in millions of PLN, unless stated otherwise 53 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
The Company’s capital investments held as at 31 December 2017 and in the comparable period are disclosed in the table below:
31 Dec. 2017 31 Dec. 2016
mPLN mPLN
Investments in companies quoted on active markets Formula Systems (1985), Ltd 242.6 427.0 Asseco South Eastern Europe S.A. - 291.5
Investments in non-listed companies Asseco International, a.s. 894.6 - Asseco Data Systems S.A. 414.6 414.6 Asseco Western Europe S.A. 212.8 193.0 Podkarpacki Fundusz Nieruchomości Sp. z o.o. 89.2 89.2 DahliaMatic Sp. z o.o. 73.6 73.6 Asseco Enterprise Solutions, a.s. 69.0 69.0 Gladstone Consulting Ltd and GSTN Consulting Sp. z o.o. 33.8 33.8 SKG S.A. 8.7 8.7 ZUI Novum Sp. z o.o. 3.9 3.9 Modulus Sp. z o.o. 2.0 2.0 Postdata S.A. 1.0 1.0 Asseco Central Europe a.s. 0.4 507.3 R-Style Softlab - 114.2 Exictos SGPS S.A. - 103.4 Asseco Danmark A/S - 29.2 Sintagma UAB and Asseco Lietuva UAB - 24.0 Peak Consulting Group ApS - 8.4 Asseco Georgia LLP - 4.9 Asseco Software Nigeria Ltd - 3.1 Asseco Kazakhstan LLP - 3.0
2,046.2 2,404.8
During the period of 12 months ended 31 December 2017, Asseco Poland’s investments in subsidiaries and associates changed as follows: ▪ Sale of shares in R-Style Softlab Joint Stock Company by Asseco Poland S.A. On 10 March 2017, Asseco Poland S.A. signed an agreement to sell 51 shares in R-Style Softlab Joint Stock Company, representing 51% of the share capital and voting rights at the General Meeting of R- Style. The agreed price amounted to PLN 71.0 million which should be paid within 60 months from the date of concluding the transaction. Currently, following the recognized allowances, the net present value of such receivables equals PLN 2.2 million. The sale agreement also contains put and call options, and the selling price has been secured by establishing a pledge on shares purchased by each buyer. The result achieved on this transaction and the resulting allowances for receivables have been described in explanatory note 3. ▪ Sale of shares in Asseco Central Europe a.s. by Asseco Poland S.A. On 20 March 2017, Asseco Poland S.A. signed an agreement to sell 1,390,535 shares in Asseco Central Europe a.s., representing 6.51% of the share capital and voting rights at the General Meeting of Asseco Central Europe a.s. The transaction value amounted to PLN 32.8 million, which shall be paid
All figures in millions of PLN, unless stated otherwise 54 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
in 8 annual instalments, the first two of which have been already paid till the date of publication of this report. The ownership of shares was transferred on 29 March 2017.
The said agreement was concluded, directly or indirectly, with five managers of Asseco Central Europe Group, of which one agreement was concluded directly with a natural person, and four agreements were concluded with entities being directly controlled by those managers or by their related persons. The result recognized on this sale transaction has been described in explanatory note 3.
▪ Sale of shares in Asseco South Eastern Europe S.A. by Asseco Poland S.A. On 23 June 2017, Asseco Poland S.A. signed an agreement to sell 2,221,356 shares in Asseco South Eastern Europe S.A., representing 4.28% of the share capital and voting rights at the General Meeting of that company. The transaction value amounted to PLN 24.2 million, which shall be paid in 8 annual instalments. The sale agreement also contains put and call options, and the selling price has been secured by establishing a pledge on shares purchased by each buyer. Such agreements were concluded, directly or indirectly, with twenty-two managers of Asseco South Eastern Europe Group, of which eighteen agreements were concluded directly with natural persons, and four agreements were concluded with entities being directly controlled by those managers or by their related persons. The result recognized on this sale transaction has been described in explanatory note 3. ▪ Increasing the share capital of Asseco Enterprise Solutions a.s. On 1 July 2017, the share capital of Asseco Enterprise Solutions a.s. was increased through the contribution of shares in Asseco Solutions a.s. seated in Slovakia as well as shares in Asseco Solutions AG seated in Germany, which was made by Asseco Central Europe, a.s. seated in Slovakia. Following that transaction, the direct shareholding of Asseco Poland S.A. in Asseco Enterprise Solutions a.s. dropped to 60.3%; whereas, the direct shareholding of Asseco Central Europe, a.s. in Asseco Enterprise Solutions a.s. reached the level of 39.7%. Pursuant to the provisions of the articles of association of Asseco Enterprise Solutions a.s., since 1 July 2017 this company has been directly controlled by Asseco Central Europe a.s., while Asseco Poland has maintained indirect control over Asseco Enterprise Solutions a.s. through ACE Group. On 8 December 2017, the share capital of Asseco Enterprise Solutions a.s. was increased once again through the contribution of shares in Asseco Solutions, a.s. seated in the Czech Republic, which was made by Asseco Central Europe, a.s. seated in Slovakia. Following that transaction, the direct shareholding of Asseco Poland S.A. in Asseco Enterprise Solutions a.s. dropped to 49.9%; whereas, the direct shareholding of Asseco Central Europe, a.s. in Asseco Enterprise Solutions a.s. reached the level of 50.1%. The conclusion about the existence of control remained unchanged. The described transaction had no impact on the standalone financial results of Asseco Poland S.A. ▪ Sale of shares in Formula Systems by Asseco Poland S.A. In August 2017, Asseco Poland S.A. concluded a transaction to sell 2,945,756 shares in its subsidiary Formula Systems (1985) Ltd seated in Tel Aviv, representing 20% of the share capital and total voting rights at the General Meeting of Shareholders of Formula Systems. Following this transaction, the Company’s shareholding in Formula Systems dropped to 26.33%. The sale transaction was conducted in Israel, out of the regulated market, with eleven Israeli financial institutions and an entity controlled by the CEO of Formula Systems. The selling price was set at NIS (New Israeli Shekel) 124.14 per share. The transaction’s total value reached NIS 365.7 million. The result recognized on this sale transaction has been described in explanatory note 3. In connection with concluding the transaction to sell this 20% stake in Formula Systems, as a consequence of which the Parent Company has lost control over the Israeli company, the CEO of Formula Systems notified the Management Board of Asseco Poland S.A. about his will to terminate the authorization for the exercise of voting rights by Asseco Poland with respect to all of his shares held in Formula Systems, which was granted to the Company on 3 November 2016. The Management Board accepted this termination notice, as a result of which the said authorization expired as of 3 August 2017.
All figures in millions of PLN, unless stated otherwise 55 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
On 11 October 2017, the Company concluded an agreement with the Chief Executive Officer of Formula Systems (1985) Ltd and the entity controlled by that CEO which granted an authorization to Asseco Poland S.A. for the exercise of voting rights attached to 1,971,973 shares held by these shareholders, representing 13.39% of the share capital and total voting rights at the General Meeting of Formula. As a result of this agreement, the Company will regain control over Formula Systems. The detailed information on the agreement, along with the financial effects of regaining control over Formula Group, have been presented in the consolidated financial statements of Asseco Group for the year ended 31 December 2017. ▪ Establishing of Asseco International, a.s. by Asseco Poland S.A. On 11 October 2017, Asseco Poland S.A. established Asseco International, a.s., a company operating under the Slovak laws and based in Slovakia, with the share capital of EUR 25,000 divided into 2,500 shares with a par value of EUR 10 per share, and acquired 100% of shares issued by Asseco International. This company was registered on 1 November 2017. On 5 December 2017, the share capital of Asseco International was increased through Asseco Poland’s contribution of all the shares it held in Asseco Central Europe. The merger was registered on 19 December 2017. On 14 December 2017, the share capital of Asseco International was increased once again through Asseco Poland’s contribution of all the shares it held in the following companies: Asseco South Eastern Europe, Exictos, R-Style Softlab, Asseco Denmark, Peak Consulting, Asseco Lietuva, Sintagma, Asseco Georgia, Asseco Kazakhstan, Asseco Software Nigeria, which was made in exchange for the acquisition of newly issued shares. The merger was registered on 19 December 2017. The described transaction had no impact on the standalone financial results of Asseco Poland S.A. As a result of these transactions, Asseco Poland holds 100% of shares in the share capital of Asseco International, a.s. In accordance with item 7 of our Significant Accounting Policies, as a consequence of the above described non-cash contribution, the total value of our investments in individual companies subject to such contribution was transferred to the value of our investment in Asseco International, a.s. ▪ Establishing of GSTN Consulting Sp. z o.o. by Asseco Poland S.A. On 20 November 2017, Asseco Poland S.A. established a new company called GSTN Consulting Sp. z o.o., with the share capital of PLN 5,000 divided into 100 shares with a par value of PLN 50 per share. This company was registered on 28 November 2017. This company will ultimately take over all the business activities that have so far been performed by Gladstone Consulting Ltd. based in Cyprus.
11. Impairment testing of non-financial assets Both as at 31 December 2017 and during the period of 12 months ended 31 December 2017, the stock market capitalization of Asseco Poland remained under the Company’s book value (the so called “low capitalization”). The Management Board of Asseco considered such situation as an indication of possible impairment of the Company’s assets. In order to analyze the indications of possible impairment, the Company’s assets were divided into two groups: 1. assets employed in operating activities. These assets include among others goodwill, intangible assets as well as working capital of the Company; 2. assets related to investing activities, representing mainly financial assets and capital investments in subsidiaries and associates.
All figures in millions of PLN, unless stated otherwise 56 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Ref. 1 Assets employed in operating activities As described in explanatory note 9, goodwill arising from business combinations has been allocated to the Company’s operating segments. The value of individual cash-generating units has been subsequently increased by net operating assets, which are used by such units to generate cash flows. Each of the identified cash-generating units was tested for impairment by estimating the value in use of a given unit/segment. The value in use of a cash-generating unit/segment is estimated by applying the model of discounted free cash flow to firm (FCFF). Individual segment cash flows applied in the value-in-use model were based on the 2018 budget approved by the Management as well as on the forecasts of growth for the Polish IT market in the years 2019 - 2022. The residual value was determined assuming no growth of the achieved margins after the forecast period. Whereas, the margins assumed for the forecast period are not substantially different from their levels realized in previous years. The average rates of growth in free cash flows are presented for each individual segment in the table below. The discount rate applied to determine the present value of expected future cash flows was equivalent to the Company’s estimated weighted average cost of capital that equalled 8.3% (in nominal terms) as at 31 December 2017. Particular components of the discount rate were determined taking into account the market values of risk-free interest rates, the beta coefficient (deleveraged β of 0.92 was adopted that was subsequently leveraged to reflect the average market debt/equity ratio) as well as the expected market yield. The conducted impairment tests, which involved the estimation of the value in use by applying the model of discounted free cash flow to firm (FCFF), indicated that the carrying value of our cash-generating unit represented by the Public Administration segment is higher than its value in use. Hence, the test result indicated that goodwill allocated to this segment has been permanently impaired. Therefore, in the financial results for 2017 we recognized an impairment write-down on goodwill in the amount of PLN 80.1 million, which corresponds to the difference between the value in use and the carrying value of this segment. The conducted tests have shown that for our remaining segments, i.e. the Banking and Finance segment and the General Business segment, the value in use exceeded the carrying value. Analysis of sensitivity Additionally, the Company carried out a sensitivity analysis in relation to the conducted impairment test. Such sensitivity analysis examined the impact of changes in: ▪ discount rate applied for the residual period, i.e. for cash flows generated after 2021; ▪ average annual effective rate of change in free cash flows over the period of forecast, i.e. in the years 2018-2022; as factors with influence on the recoverable amount of a cash-generating unit, assuming other factors remain unchanged. The objective of such sensitivity analysis was to find out the terminal values showing how much the selected parameters applied in the model could be changed so that the estimated value in use of each cash-generating unit equalled its carrying value. The results of the conducted analysis are presented in the table below:
Average rate of change in Discount rate margin IV
applied in applied in terminal terminal the model the model
Goodwill allocated to the segment of “Banking and Finance” 8.3% 9.8% 13.0% 10.9% Goodwill allocated to the segment of “Public Administration” 8.3% 8.3% 10.5% 10.5% Goodwill allocated to the segment of “General Business” 8.3% 13.5% 11.6% 6.0%
In addition, the table below presents an analysis of sensitivity of our models applied to calculate the recoverable amounts of cash-generating units, to changes in discount rates as well as to a percentage change in the projected margin at level IV.
All figures in millions of PLN, unless stated otherwise 57 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
change in discount rate (in percentage points) Public Administration segment -1.50 pp -1.00 pp -0.50 pp 0.00 pp +0.50 pp +1.00 pp +1.50 pp Present value of FCFF 1,281.19 1,216.27 1,159.66 1,109.87 1,065.72 1,026.32 990.93 Excess / Deficit against the unit’s book value 251.43 106.40 49.80 0.00 -44.14 -83.55 -118.93
change in CAGR (in percentage points) Public Administration segment -5.00 pp -3.00 pp -1.00 pp 0.00 pp +1.00 pp +3.00 pp +5.00 pp Present value of FCFF 966.58 1,052.62 1,144.93 1,189.97 1,243.87 1,349.77 1,463.02 Excess / Deficit against the unit’s book value -223.39 -137.35 -45.03 0.00 53.90 159.80 273.05
change in discount rate (in percentage points) General Business segment -1.50 pp -1.00 pp -0.50 pp 0.00 pp +0.50 pp +1.00 pp +1.50 pp Present value of FCFF 392.61 372.23 354.46 338.82 324.97 312.60 301.49 Excess / Deficit against the unit’s book value 147.50 127.12 109.35 93.71 79.86 67.49 56.38
change in CAGR (in percentage points) General Business segment -5.00 pp -3.00 pp -1.00 pp 0.00 pp +1.00 pp +3.00 pp +5.00 pp Present value of FCFF 253.06 281.83 312.68 388.78 345.73 381.08 418.86 Excess / Deficit against the unit’s book value 7.95 36.72 67.57 143.67 100.62 135.97 173.75
change in discount rate (in percentage points) Banking and Finance segment -1.50 pp -1.00 pp -0.50 pp 0.00 pp +0.50 pp +1.00 pp +1.50 pp Present value of FCFF 1,503.05 1,424.11 1,355.29 1,294.74 1,241.06 1,193.15 1,150.13 Excess / Deficit against the unit’s book value 351.98 273.05 204.22 143.67 89.99 42.09 -0.94
change in CAGR (in percentage points) Banking and Finance segment -5.00 pp -3.00 pp -1.00 pp 0.00 pp +1.00 pp +3.00 pp +5.00 pp Present value of FCFF 993.18 1,103.12 1,220.89 1,294.74 1,346.94 1,481.70 1,625.60 Excess / Deficit against the unit’s book value -157.89 -47.95 69.83 143.67 195.87 330.63 474.54
All figures in millions of PLN, unless stated otherwise 58 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Ref. 2 Assets related to investing activities Each impairment test on investments in subsidiaries requires making estimates of the recoverable amount of a cash-generating unit or a group of cash-generating units constituted by individual subsidiaries. In the case of cash-generating units constituted by companies quoted on an active market, the recoverable amount may equal the market value (i.e. stock market capitalization) of a company or its value in use, whichever is higher. Therefore, for cash-generating units constituted by companies quoted on an active market, impairment testing was performed in two stages. First of all, the book value of an investment in a company was compared to its market value (stock market capitalization). If the market value exceeded the book value, the investment was deemed not to have been impaired. Otherwise, the value in use of such investment in a company was estimated by applying the model of discounted free cash flow to firm (FCFF). In the case of investments in companies not quoted on an active market, the recoverable amount was determined as their value in use by applying the model of discounted free cash flow to firm (FCFF). Our companies quoted on active markets include: Asseco Business Solutions S.A., Formula Systems (1985), Ltd, and Asseco South Eastern Europe S.A. The table below compares the market values of our investments against their book values:
Formula Systems Asseco South Eastern Asseco Business (1985), Ltd Europe S.A. Solutions S.A. mPLN mPLN mPLN
31 Dec. 2017 book value 242.6 268.8* 69.0* market value 557.5 312.2 419.3 excess (+) / deficit (-) of fair value over book value 314.9 43.4 350.3
31 Dec. 2016 book value 427.0 291.5 69.0 market value 1,129.7 265.7 358.8 excess (+) / deficit (-) of fair value over book value 702.7 (25.8) 289.8
* As at 31 December 2017, the investments in Asseco South Eastern Europe and in Asseco Business Solutions both constituted investments in indirect subsidiaries of Asseco Poland S.A. This means that the values of investments in these companies are presented within the values of investments in direct subsidiaries of Asseco Poland that maintain control over Asseco Business Solutions and Asseco South Eastern Europe. Hence, the value of investment in Asseco Business Solutions has been presented as part of our investment in Asseco Enterprise Solutions, a.s., whereas, the value of investment in Asseco South Eastern Europe has been presented as part of our investment in Asseco International, a.s. as at 31 December 2017. As shown in the table above, the market values of our investments in Formula Systems (1985) Ltd, Asseco Business Solutions S.A. and Asseco South Eastern Europe S.A., exceed their book values. As at 31 December 2017, we estimated the value in use of investments in companies not quoted on an active market. In the calculation of the value in use of cash-generating units, which are constituted by individual subsidiaries, the following assumptions have been adopted: ▪ for each subsidiary, the so-called business units were analyzed which, when put together, comprise the budget and forecasts of the whole subsidiary company; ▪ detailed forecasts covered the period of 5 years with an assumed increase in cash flows, while the residual value for later operations of each subsidiary was computed assuming no growth in cash flows;
All figures in millions of PLN, unless stated otherwise 59 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
▪ the assumed increases in cash flows depend upon the strategy of the entire Group and tactical plans of individual companies, taking due account of conditions prevailing in particular geographical markets and sectors, and at the same time reflecting the present and potential order backlog. The potential order backlog presumes gaining new clients whilst keeping the present ones; ▪ the forecasts for foreign subsidiaries assumed growth of sales in their functional currencies; ▪ the discount rates applied were equivalent to the weighted average cost of capital for particular companies. Particular components of the discount rate were determined taking into account the market values of risk-free interest rates, the beta coefficient leveraged to reflect the average market debt/equity ratio, as well as the expected market yield. The conducted impairment tests, which involved the estimation of the value in use by applying the model of discounted free cash flow to firm (FCFF), indicated that the value in use of our investments is higher than their carrying value. Analysis of sensitivity Additionally, the Company carried out a sensitivity analysis in relation to the conducted impairment test. Such sensitivity analysis examined the impact of changes in: ▪ real discount rate applied for the residual period, i.e. for cash flows generated after 2021; ▪ average annual effective rate of change in free cash flows over the period of forecast, i.e. in the years 2018-2022; as factors with influence on the recoverable amount of a cash-generating unit, assuming other factors remain unchanged. The objective of such sensitivity analysis was to find out how much the selected parameters applied in the model could be changed so that the estimated value in use of each cash-generating unit equalled its carrying value. The results of the conducted analysis are presented in the table below:
Book value of Discount rate Average rate of change in margin IV investment applied for applied for the residual terminal the forecast terminal mPLN period period Investments in non-listed companies Asseco Western Europe S.A. 212.8 10.1% ∞ 27.7% 3.8% Exictos SGPS S.A.* 103.4 10.5% 66.3% 4.3% (8.9%) Asseco Data Systems S.A. 414.6 9.4% 13.8% 41.4% 35.5% DahliaMatic Sp. z o.o. 73.6 11.9% 15.3% 16.6% 14.0% Asseco Danmark & Peak Consulting* 37.7 7.2% 31.2% 19.1% 5.2% Gladstone Consulting Ltd 33.8 11.9% 13.8% 1.4% (2.3%) Sintagma UAB and Asseco Lietuva UAB* 6.6 11.9% ∞ 41.7% (24.4%) ZUI Novum Sp. z o.o. 3.9 11.9% ∞ (3.5%) (43.8%) SKG S.A. 8.7 11.9% 72.5% 0.1% (12.5%) Asseco Central Europe a.s.* 474.2 6.8% ∞ 10.8% (14.4%)
∞ - means that the terminal discount rate for the residual period is greater than 100%; hence, no reasonable modification of the discount rate for the residual period would indicate impairment. * As at 31 December 2017, the investments in Exictos, Asseco Danmark, Peak Consulting, Sintagma UAB, Asseco Lietuva UAB and in Asseco Central Europe constituted investments in indirect subsidiaries of Asseco Poland S.A. This means that the values of investments in these companies are presented as part of Asseco Poland’s investment in Asseco International that maintains direct control over the above-mentioned companies.
All figures in millions of PLN, unless stated otherwise 60 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Reversal of an impairment write-down on our investment in Asseco Western Europe S.A. In the first half of 2017, the Company analyzed the validity of indications for recognition of an impairment charge on our investment in Asseco Western Europe S.A. (hereinafter “AWE”) that was created in previous years. The assets and thereby the value of Asseco Western Europe are constituted by investments in two subsidiaries, namely Asseco Spain and Necomplus. The said write-down was recognized in 2010 due to macroeconomic problems suffered by the Spanish economy as well as Asseco Spain’s failure to achieve the budgeted targets. Our recent analysis of the indications of impairment showed that it is no longer justified to carry such a write-down on our subsidiary AWE. Since the time of recognizing the impairment charge on our investment in AWE, estimates applied for determination of the recoverable amount of relevant assets have changed. We also observed both a reduction in market interest rates and a substantial and continued improvement in economic results. As a result, the carrying value of our investment in AWE has been increased to match its carrying value from before making the write-down, this is by PLN 19.8 mln. In order to estimate free cash flow to firm (FCFF), we assumed that the average revenue growth rate over the period of forecast (i.e. in the years 2017-2021) shall equal 7.3% per annum. The residual value was determined assuming no growth of the achieved margins after the forecast period. The discount rate applied to estimate the present value of expected future cash flows was equivalent to the company’s estimated weighted average cost of capital that equalled 9.2% as at the date of write-down reversal. Particular components of the discount rate were determined taking into account the market values of risk-free interest rates, expected market yield, as well as the beta coefficient (deleveraged β of 0.78 was adopted that was subsequently leveraged to reflect the market debt/equity ratio).
12. Other financial assets As at 31 December 2017 and in the comparable period, the Company held the following categories and classes of financial assets:
31 Dec. 2017 31 Dec. 2016
Long-term Short-term Long-term Short-term mPLN mPLN mPLN mPLN
Loans, of which: granted to related parties 24.9 0.3 54.2 1.4 granted to employees 0.4 1.3 0.2 1.3 25.3 1.6 54.4 2.7 Financial assets carried at fair value through profit
or loss, of which: currency forward contracts – EUR 2.0 10.1 - 1.0 2.0 10.1 - 1.0
Financial assets available for sale, of which: shares in companies quoted on active markets 1.1 - 0.7 - shares in companies not listed on stock markets 8.8 - 8.8 - 9.9 - 9.5 -
Total 37.2 11.7 63.9 3.7
Loans granted are measured at amortized cost at the end of the reporting period. Loans to related parties were granted on an arm’s length basis.
All figures in millions of PLN, unless stated otherwise 61 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Loans granted to related parties Loans granted to related parties include the following:
31 Dec. 2017 31 Dec. 2016 Loans granted to related parties mPLN mPLN
Podkarpacki Fundusz Nieruchomości Sp. z o.o. 23.2 26.2 Asseco Resovia S.A. 1) - 16.9 Gdyński Klub Koszykówki Arka S.A.2) - 11.7 Asseco Data Systems S.A. - 0.7 Asseco Enterprise Solutions, a.s. - 0.1 Modulus Sp. z o.o. 2.0 Total 25.2 55.6
1) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Adam Góral, President of the Company’s Management Board, served as Member of the Supervisory Board of Asseco Resovia S.A., whereas Mr. Marek Panek, Vice President of the Company’s Management Board, served as Chairman of the Supervisory Board of Asseco Resovia S.A. Mr. Andrzej Gerlach, the Company’s Commercial Proxy, served as Vice President of the Management Board of Asseco Resovia S.A., whereas Mrs. Renata Bojdo, the Company’s Commercial Proxy, served as Member of the Supervisory Board of Asseco Resovia S.A. 2) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Przemysław Sęczkowski, Vice President of the Company’s Management Board, served as President of Gdyński Klub Koszykówki Arka S.A. Furthermore, Mr. Adam Góral, President of the Company’s Management Board, served as Chairman of the Supervisory Board of Gdyński Klub Koszykówki Arka S.A., while Mrs. Renata Bojdo and Mr. Andrzej Gerlach, the Company’s Commercial Proxies, served as Members of the Supervisory Board of Gdyński Klub Koszykówki Arka S.A.
During the period of 12 months ended 31 December 2017, the largest changes in the amounts of loans granted to related parties resulted from the recognition of allowances for loans granted to the companies of Gdyński Klub Koszykówki Arka S.A. and Asseco Resovia S.A. Financial assets carried at fair value through profit or loss include forward transactions for the purchase or sale of foreign currencies. Such forward transactions have been concluded in order to hedge against our foreign currency risk resulting from finance leases of real estate as well as from other contracts. The fair values of currency forward contracts and embedded derivatives are determined at the end of each reporting period using calculation models based on inputs that are directly observable in active markets. Financial assets available for sale include primarily equity investments not exceeding 20% of the target company’s outstanding stock. Investments in companies quoted on active markets are measured at fair value at the end of each reporting period, on the basis of their closing prices at the end of the reporting period. Investments in companies not quoted on active markets are measured at their purchase cost adjusted by any impairment charges. As at 31 December 2017, these assets comprised mainly shares held in Bank Polskiej Spółdzielczości S.A.
All figures in millions of PLN, unless stated otherwise 62 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
13. Prepayments and accrued income As at 31 December 2017 and in the comparable period, prepayments and accrued income included the following items:
31 Dec. 2017 31 Dec. 2016
Long-term Short-term Long-term Short-term mPLN mPLN mPLN mPLN
Prepaid services, of which: 1.7 7.2 1.9 7.8 Prepaid maintenance services and license fees 0.9 3.5 1.0 3.4 Prepaid rents and averaging of instalments under operating - 0.7 - 0.4 leases Prepaid insurance - 0.5 - 0.6 Other prepaid services 0.8 2.5 0.9 3.4 Expenses related to services performed for which 0.1 0.6 - 0.5 revenues have not been recognized yet Other prepayments and accrued income - 0.3 - 0.5
Total 1.8 8.1 1.9 8.8
Both as at 31 December 2017 and at the end of the comparable period, prepayments included primarily the costs of maintenance services and license fees that will be successively expensed in future periods. 14. Long-term and short-term receivables
31 Dec. 2017 31 Dec. 2016
Long-term Short-term Long-term Short-term mPLN mPLN mPLN mPLN
Trade receivables 1.7 414.7 - 382.2 From related parties, of which: - 12.0 - 12.1 Invoiced receivables - 2.4 - 2.8 from subsidiaries - 2.2 - 1.9 from associates - 0.2 - 0.9 from other related parties - - - - Uninvoiced receivables - 7.8 - 9.3 from subsidiaries - 7.4 - 9.2 from associates - 0.3 - 0.1 from other related parties - 0.1 - - Receivables from valuation of IT contracts - 1.8 - - from subsidiaries - 1.8 - - from associates - - - - from other related parties - - - -
From other entities, of which: 1.7 402.7 - 370.1 Invoiced receivables 0.6 187.2 - 190.8 Uninvoiced receivables 1.1 89.8 - 84.3 Receivables from valuation of IT contracts - 125.7 - 95.0
Allowance for doubtful receivables - (20.9) - (16.2)
Total trade receivables 1.7 393.8 - 366.0
All figures in millions of PLN, unless stated otherwise 63 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Related party transactions have been presented in explanatory note 26 to these financial statements. Receivables from valuation of IT (implementation) contracts result from the excess of the percentage of completion of implementation contracts over invoices issued. Receivables relating to uninvoiced deliveries result from sales of services which were performed during the reporting period, but have not been invoiced until the end of the reporting period.
31 Dec. 2017 31 Dec. 2016
Other receivables Long-term Short-term Long-term Short-term mPLN mPLN mPLN mPLN
Receivables from guarantees of due performance of - - 1.0 3.1 contracts Receivables from dividends - 12.4 - 26.7 Receivables from disposal of property, plant and 1.1 0.2 1.1 5.4 equipment Receivables from disposal of financial instruments or 79.3 9.9 3.3 1.9 capital investments Receivables from security deposits paid-in 5.8 15.4 10.0 2.0 Receivables in court litigation - 0.2 - 0.2 Other receivables - 1.3 0.1 7.2
Allowance for other doubtful receivables - (12.3) - (2.3)
Total other receivables 86.2 27.1 15.5 44.2
‘Receivables from disposal of financial instruments or capital investments’ include primarily receivables from the sale of shares in the companies: Formula Systems (1985) Ltd. in the amount of PLN 35.7 million, Asseco Central Europe – PLN 24.1 million, and Asseco South Eastern Europe – PLN 22.8 million. The payment for Asseco Central Europe shares sold was divided into eight equal instalments, the first two of which were already paid before 31 December 2017. The remaining instalments are payable annually till 31 May of a given year. The last instalment shall be paid till 31 May 2023. The selling price of shares has been secured by establishing a pledge on shares purchased by each buyer. The transaction parties and Asseco Central Europe also agreed on put and call options for these shares. The payment for Asseco South Eastern Europe shares sold was divided into eight equal instalments which are payable annually till 31 July of a given year. The last instalment shall be paid till 31 July 2024. The first instalment was already paid before 31 December 2017. The selling price of shares has been secured by establishing a pledge on shares purchased by each buyer. The transaction parties also agreed on put and call options for these shares. The payment for 2% of shares in Formula sold to the CEO of Formula Group has been deferred for a maximum period of 5 years. The consideration was divided into two portions – one payable in US dollars (USD) and the other payable in Israeli shekels (NIS). Our receivables both in NIS and USD bear a fixed interest that was calculated on the basis of market interest rates, LIBOR USD and TELBOR respectively, plus a margin. Earlier repayment of these receivables is permitted. Payment of the consideration has been secured by depositing all unpaid shares with the trustee. As long as the shares remain deposited with the trustee, dividends attributable to these shares will, as per the agreed mechanism, be transferred by the trustee to Asseco on account of repayment of its receivables. Receivables relating to guarantees of due performance of contracts constitute a security in cash extended in favour of customers in order to compensate for their potential losses should the company fail to fulfil its contractual obligations. The Company’s policy is to sell its products and services to reliable clients. Owing to that, in the Management’s opinion the credited sales risk would not exceed the level covered with allowances for doubtful trade receivables. The Company’s policy for establishing allowances for doubtful receivables is described in item 12 of the “Significant accounting policies”.
All figures in millions of PLN, unless stated otherwise 64 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
The following table presents the ageing structure of gross receivables (i.e. before allowances and discounts) as at 31 December 2017 and 31 December 2016, which provides the basis for recognition of allowances following the general rules:
31 Dec. 2017 31 Dec. 2016
Ageing of trade receivables mPLN % mPLN %
Receivables not yet due 309.8 74.4% 271.9 71.1% Past-due receivables 19.8 4.8% 102.8 26.9% Receivables past-due up to 3 months 7.8 1.9% 7.4 1.9% Receivables past-due from 3 to 6 months 1.7 0.4% 1.1 0.3% Receivables past-due from 6 to 12 months 3.5 0.9% 89.6 23.5% Receivables past-due over 12 months 6.8 1.6% 4.7 1.2% 329.6 79.2% 374.7 98.0%
Trade receivables in court litigation 86.8 20.8% 7.5 2.0%
Total 416.4 100.0% 382.2 100.0%
‘Trade receivables in court litigation’ include basically receivables from the company KT Corporation that resulted from the execution of “Internet for Mazovia” project under a consortium agreement. The payment deadline passed more than 12 months ago; however, the Management assessed that the collection of these receivables is highly probable, and thus the Company recognized an allowance only for a portion of these receivables amounting to PLN 6.5 million. As at the date of publication of these financial statements, i.e. on 19 March 2018, the Company remains in dispute with KT Corporation which is being resolved in the arbitration court, where the Company pursues its claims by arguing that the counterparty’s refusal to make the payment is absolutely groundless. 15. Implementation contracts In the years 2017 and 2016, the Company executed a number of the so-called IT implementation contracts. In line with IAS 11, sales generated from such contracts are recognized according to the percentage of completion of relevant contracts. The Company measures the percentage of completion of IT implementation contracts using the “cost-to-cost” method (this is by determining the relation of costs incurred to the overall project costs) or by the “effort-expended” method (by determining the portion of work completed out of the total work effort required in a project). The following table includes basic data about the ongoing IT implementation contracts:
12 months ended 12 months ended 31 Dec. 2017 31 Dec. 2016 mPLN mPLN
Revenues from execution of IT contracts recognized in the reporting 227.1 280.2 period from continuing and discontinued operations
For all projects being in progress at the end of the reporting period: Revenues recognized from execution of IT contracts (cumulative) (-) 746.2 677.1 Costs incurred due to execution of IT contracts (cumulative) (-) (632.4) (568.3)
Net provisions for losses on IT contracts (3.8) (16.4)
Profit (loss) on execution of IT contracts 110.0 92.4
Invoiced revenues from execution of IT contracts (cumulative) 624.0 588.9 Receivables arising from valuation of IT contracts 127.5 95.0 Liabilities arising from valuation of IT contracts (5.3) (6.9)
All figures in millions of PLN, unless stated otherwise 65 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
16. Inventories
The category of goods for resale includes mainly computer hardware and third-party software licenses intended for resale under the implementation or supply contracts. Hence, majority of goods for resale are purchased for the purpose of execution of already signed or highly probable contracts.
31 Dec. 2017 31 Dec. 2016
mPLN mPLN
Computer hardware, third-party software licenses and other goods for resale 2.3 7.4 Computer hardware, spare parts and other materials intended for the 1.1 - performance of repair/maintenance services Impairment write-down (-) (0.7) (0.9) Total 2.7 6.5
17. Cash and cash equivalents
31 Dec. 2017 31 Dec. 2016
mPLN mPLN
Cash at bank 21.7 11.8 Short-term (overnight) bank deposits 286.3 9.9
Total cash and cash equivalents as disclosed in the balance sheet 308.0 21.7
Bank overdraft facilities utilized for current liquidity management - (1.8)
Total cash and cash equivalents as disclosed in the cash flow 308.0 19.9 statement
Interest earned on cash at bank is variable and depends on interest rates offered on bank deposits. Short- term deposits are made for varying periods of between one day and three months and earn interest at their respective fixed interest rates. The increase in cash and cash equivalents as at 31 December 2017 in comparison to those reported as at 31 December 2016 is attributable primarily to proceeds from the sale of shares in Formula System (1985) Ltd. 18. Non-current assets held for sale As at 31 December 2017, the value of non-current assets held for sale equalled PLN 3.9 million, as compared with PLN 6.7 million in the comparable period. In 2017, the Company sold real estates classified as held for sale with the carrying value of PLN 1.5 million. The transaction gross value amounted to PLN 3.0 million. Furthermore, in the third quarter of 2017, we recognized an impairment write-down in the amount of PLN 1.1 million. 19. Assets and liabilities of the Company Social Benefits Fund The Social Benefits Fund Act dated 4 March 1994 (with subsequent amendments) requires enterprises that have at least 20 full-time employees to establish and run a social benefits fund. The purpose of our Social Benefits Fund is to finance the Company’s social activities, loans to employees, and other social expenditures. The Company has offset the Fund’s assets against its liabilities towards the Fund, because such assets do not qualify as the Company’s assets. The structure of assets, liabilities and costs of the Social Benefits Fund is presented in the table below.
All figures in millions of PLN, unless stated otherwise 66 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
31 Dec. 2017 31 Dec. 2016
mPLN mPLN
Loans granted to employees - - Cash and cash equivalents 0.8 0.7 Liabilities of the Fund (0.8) (0.7) Balance after netting off - -
Amounts contributed to the Fund in the reporting period (0.8) (0.8)
20. Share capital and other components of equity Share capital The Company’s share capital as at 31 December 2017 and in the comparable period amounted to PLN 83,000,303.00 and has been fully paid up. The share capital is divided into 83,000,303 ordinary shares with a par value of PLN 1 each. The Company has not issued any preference shares. During the year ended 31 December 2017, our share capital remained unchanged in relation to its amount of 31 December 2016. The Company’s authorized capital is equal to its share capital. Reserve capital The Company’s reserve capital was established in accordance with the Commercial Companies Code (CCC), from the premium of issuance price over the par value on shares (less the share issuance-related expenses) as well as from prior years’ profits that have been appropriated to reserve capital by the Company’s General Meeting of Shareholders. The remaining portion of reserve capital is presented as retained earnings and is related to the accounting for prior years’ profits in compliance with the CCC. In order to demonstrate the Company’s ability to pay out dividends, the table below presents the components and amount of the Company’s reserve capital as at 31 December 2017 and 31 December 2016.
31 Dec. 2017 31 Dec. 2016
mPLN mPLN
Share premium 4,180.1 4,180.1 Retained earnings appropriated to reserve capital by the General Meeting 1,291.6 1,189.3 of Shareholders Result on settlement of transactions in treasury shares (734.0) (734.0) 4,737.7 4,635.4
In accordance with the Commercial Companies Code, the Company is required to create a reserve capital in order to be able to cover its losses. At least 8% of the net profit reported for each financial year must be appropriated to such reserve capital until the amount thereof reaches at least one-third of the Company’s share capital. Because the value of reserve capital exceeded one-third of the Company’s share capital, our statutory obligation to pay in additional amounts from net profits to the reserve capital has expired. The General Meeting of Shareholders may decide on how the Company’s reserve capital, including capital reserves, shall be used. Furthermore, as described in the accounting policy above, capitals arising from business combinations do not increase the amount of reserve capital and therefore cannot be distributed in the future. In conclusion, it should be noted that the dividend payment capacity of Asseco Poland as at 31 December 2017 is equal to the amount of prior years’ profits that have been appropriated to the reserve capital pursuant to resolutions of the General Meeting of Shareholders, but assuming that any negative results from the settlement of treasury shares transactions will be covered from the share premium. The share premium (excess of the issuance price over the par value on shares) can only be used to cover potential losses disclosed in the financial statements and therefore it does not increase the Company’s capacity to pay out dividends. Moreover, the amount of reserve capital that equals one-third of the share capital cannot be distributed to shareholders. As at 31 December 2017, there were no other restrictions as regards the payment of dividends.
All figures in millions of PLN, unless stated otherwise 67 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
21. Interest-bearing bank loans and debt securities issued
Maximum debt limit 31 Dec. 2017 31 Dec. 2016 Effective interest rate % Repayment date available LT ST LT ST Bank overdraft facilities Bank overdraft facility 150.0 1M WIBOR + margin 2018-12-31 - - - - Bank overdraft facility 200.0 1M WIBOR + margin 2018-07-31 - - - - Bank overdraft facility - 3M WIBOR + margin 2017-04-30 - - - 1.8 Bank overdraft facility 150.0 1M WIBOR + margin 2018-08-31 - - - - Bank overdraft facility 70.0 1M WIBOR + margin 2019-04-02 - - - - 570.0 - - - 1.8
Investment loans Investment loan n/a 3M WIBOR + margin 2022-11-18 25.8 6.6 32.2 6.6 Investment loan n/a 3M WIBOR + margin 2022-11-18 25.8 6.6 32.2 6.6 TOTAL 51.6 13.2 64.4 13.2
Borrowings
Loan n/a fixed interest rate 2019-12-25 2.1 2.1 4.3 2.1 Loan n/a 3M WIBOR + margin 2019-06-30 9.9 10.0 - - TOTAL 12.0 12.1 4.3 2.1
TOTAL 63.6 25.3 68.7 17.1
As at 31 December 2017, total funds available to the Company under bank account overdraft facilities amounted to PLN 570.0 million, as compared with PLN 585.0 million available in the comparable period. As at 31 December 2017, the Company had no liabilities under bank overdraft facilities, as compared with PLN 1.8 million outstanding under bank overdrafts as at 31 December 2016. The investment loan represents a bank loan obtained by the Company to finance the construction of Asseco Poland’s office building situated in Wilanów, Warsaw. The loan shall be ultimately repaid till 18 November 2022; whereas, its interest shall be based on WIBOR variable interest rate plus the creditor margin. The repayment of this loan is secured with a contractual joint mortgage amounting up to PLN 218.6 million. As at 31 December 2017, the Company used a loan in the amount of PLN 4.2 million. This loan shall be ultimately repaid till 25 December 2019 and it bears a fixed interest rate. The loan was obtained to finance the purchase of products and services needed for one of the projects implemented by the Company. As at 31 December 2017, the Company used a loan in the amount of PLN 19.9 million. This loan shall be ultimately repaid till 30 June 2019 and it bears a variable interest rate based on WIBOR plus the creditor margin. As at 31 December 2017, the Company’s total debt amounted to PLN 88.9 million.
All figures in millions of PLN, unless stated otherwise 68 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
The table below presents the ageing structure of liabilities under the investment loan, including interest payable, as at 31 December 2017 and 31 December 2016.
31 Dec. 2017 31 Dec. 2016
mPLN mPLN
Investment loan falling due within 3 months 3.7 3.8 falling due within 3 to 12 months 11.0 11.3 falling due within 1 to 5 years 55.1 56.7 falling due after 5 years - 13.2 Total 69.8 85.0
The table below presents the ageing structure of borrowings, including interest payable, as at 31 December 2017 and 31 December 2016.
31 Dec. 2017 31 Dec. 2016
mPLN mPLN
Loan falling due within 3 months 0.7 0.5 falling due within 3 to 12 months 11.7 1.6 falling due within 1 to 5 years 12.1 4.3 falling due after 5 years - - Total 24.5 6.4
Both as at 31 December 2017 and in the comparable period, no other assets served as security for any bank loans and borrowings. Whereas, bank overdraft facilities have been secured by issuing the declaration of submission to enforcement, as well as the bank account authorization.
22. Finance lease liabilities and other financial liabilities As at 31 December 2017, the subjects of finance lease contracts, where the Company is a lessee, included: ▪ office building located at 21 Podolska St. in Gdynia; ▪ IT hardware and business cars. The table below presents the amounts of finance lease liabilities as at 31 December 2017 and in the comparable period:
31 Dec. 2017 31 Dec. 2016
Long-term Short-term Long-term Short-term mPLN mPLN mPLN mPLN
Leasing of real estate 41.9 20.6 66.3 20.3 Leasing of IT hardware and business cars 2.1 0.9 0.2 2.1 Total 44.0 21.5 66.5 22.4
All figures in millions of PLN, unless stated otherwise 69 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Leasing of real estate The net value of the office building in Gdynia, which is held under a finance lease contract, amounted to PLN 20.8 million as at 31 December 2017, as compared with PLN 28.2 million as at 31 December 2016. Future minimum cash flows and liabilities under the real estate finance lease contract are as follows:
31 Dec. 2017 31 Dec. 2016 mPLN mPLN Minimum lease payments in the period shorter than 1 year 23.6 24.7 in the period from 1 to 5 years 44.2 71.9 in the period longer than 5 years - - Future minimum lease payments 67.8 96.6
Future interest expense 5.3 10.0
Present value of finance lease commitments in the period shorter than 1 year 20.6 20.3 in the period from 1 to 5 years 41.9 66.3 in the period longer than 5 years - - Finance lease commitments 62.5 86.6
As at 31 December 2017, the effective interest rate on the above finance leases equalled 5.83% and it remained unchanged from the level observed as at 31 December 2016.
Leasing of IT hardware and business cars The net value of IT hardware and business cars held under finance lease contracts amounted to PLN 3.4 million as at 31 December 2017. Whereas, as at 31 December 2016, the net value of IT hardware held under finance lease contracts amounted to PLN 2.4 million. The aggregate future cash flows and liabilities under such finance leases of equipment are as follows:
31 Dec. 2017 31 Dec. 2016
mPLN mPLN Minimum lease payments in the period shorter than 1 year 0.9 2.2 in the period from 1 to 5 years 2.3 0.2 in the period longer than 5 years - - Future minimum lease payments 3.2 2.4
Future interest expense 0.1 0.1
Present value of finance lease commitments in the period shorter than 1 year 1.0 2.1 in the period from 1 to 5 years 2.1 0.2 in the period longer than 5 years - - Finance lease commitments 3.1 2.3
As at 31 December 2017, the effective interest rate on the above finance leases equalled 3.3% as compared with 5.8% as at 31 December 2016.
All figures in millions of PLN, unless stated otherwise 70 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Other financial liabilities
31 Dec. 2017 31 Dec. 2016
Other financial liabilities Long-term Short-term Long-term Short-term mPLN mPLN mPLN mPLN
Liabilities from the acquisition of shares - 9.0 9.5 9.5 Liabilities from forward contracts - 7.8 - 5.4 Total - 16.8 9.5 14.9
Other financial liabilities include primarily our liability resulting from deferred payments to non-controlling shareholders of Exictos SGPS S.A. based in Portugal that was acquired on 3 September 2015. This liability shall be finally settled till 30 June 2018. Liabilities from currency forward contracts correspond to forward transactions in foreign currencies that have been concluded in order to hedge against our foreign currency risk. The fair values of currency forward contracts and embedded derivatives are determined at the end of each reporting period using calculation models based on inputs that are directly observable in active markets. 23. Provisions During the period of 12 months ended 31 December 2017, the amount of provisions changed as follows:
Provision for losses Post- arising from Provision for employment valuation of Other provisions Total warranty repairs benefits long-term IT contracts mPLN mPLN mPLN mPLN mPLN As at 1 January 2017 2.0 49.8 16.4 0.1 68.3
Provisions created (+) 0.1 1.8 0.3 1.3 3.5 Unwinding of discount (+) - 2.0 - - 2.0 Provisions utilized (-) / reversed (-) - (22.4) (12.9) - (35.3) As at 31 December 2017, of which 2.1 31.2 3.8 1.4 38.5 Short-term 0.3 10.7 3.8 1.4 16.2 Long-term 1.8 20.5 - - 22.3
As at 1 January 2016 1.4 67.7 0.4 - 69.5
Merger with Infovide-Matrix S.A. 0.2 19.7 17.5 0.1 37.5 Provisions created (+) 0.6 15.5 1.8 - 17.9 Unwinding of discount (+) - 1.8 - - 1.8 Contribution of an organized business (0.2) (0.7) (0.6) - (1.5) unit Provisions utilized (-) / reversed (-) - (54.2) (2.7) - (56.9) As at 31 December 2016, of which 2.0 49.8 16.4 0.1 68.3 Short-term 0.3 19.2 10.9 0.1 30.5 Long-term 1.7 30.6 5.5 - 37.8
The provision for warranty repairs is held against future unidentified losses which may be incurred in the post-implementation phase of executed projects (or parts thereof) as a result of performing our contractual obligations to provide services (e.g. warranty repairs), for which the Company will not be paid or the received consideration will cover the total cost of performing such services. The provision for post-employment benefits relates entirely to retirement benefits which are to be potentially paid to the Company’s employees when they go into retirement. In compliance with the Labour Code provisions, Asseco Poland S.A. pays out a one-month average salary to each retiring employee. The amount of this post-employment benefits provision was based on the calculations prepared by an actuary.
All figures in millions of PLN, unless stated otherwise 71 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
In order to measure the value of such liabilities as at the end of the reporting period, the actuary made the following main assumptions:
31 Dec. 2017 31 Dec. 2016
Discount rate (%) 3.25% 3.55% Forecast inflation rate (%) 2.50% 2.50% Probability of leaving the job prior to becoming eligible for 12.20% 10.6% benefits (%) Projected rate of salaries increase (%) 5.00% 5.00%
24. Long-term and short-term trade payables and other liabilities As at 31 December 2017 and in the comparable period, the Company had the following liabilities:
31 Dec. 2017 31 Dec. 2016
Long-term Short-term Long-term Short-term mPLN mPLN mPLN mPLN
Trade payables To related parties, of which: - 50.3 - 26.4 Invoiced payables - 44.5 - 22.4 to subsidiaries - 42.7 - 22.1 to other related parties - 1.8 - 0.3 Uninvoiced payables - 5.6 - 4.0 to subsidiaries - 5.5 - 3.9 to other related parties - 0.1 - 0.1 Liabilities arising from valuation of IT contracts - 0.2 - - to subsidiaries - 0.2 - - To other entities, of which: - 72.1 - 68.2 Invoiced payables - 33.8 - 35.0 Uninvoiced payables - 33.2 - 26.3 Liabilities arising from valuation of IT contracts - 5.1 - 6.9 - 122.4 - 94.6 Liabilities to the state and local budgets Value added tax (VAT) - - - 2.9 Personal income tax (PIT) - 3.7 - 4.6 Social insurance - 7.3 - 7.2 Other - 0.3 - 0.3 - 11.3 - 15.0 Other liabilities Prepayments received - 10.4 - 0.6 Liabilities from purchases of tangible assets and - 3.8 - 2.4 intangible assets Other liabilities 0.3 4.1 3.6 2.8 0.3 18.3 3.6 5.8
Trade payables are non-interest bearing. Related party transactions have been presented in explanatory note 26 to these financial statements.
All figures in millions of PLN, unless stated otherwise 72 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
The table below discloses the Company’s gross trade payables as at 31 December 2017 and 31 December 2016, by maturity based on contractual undiscounted payments.
31 Dec. 2017 31 Dec. 2016
mPLN % mPLN %
Trade payables Liabilities due already 10.2 8.3% 8.2 8.7% Liabilities falling due within 3 months 111.9 91.4% 85.9 90.8% Liabilities falling due within 3 to 6 months 0.1 0.1% 0.2 0.2% Liabilities falling due after more than 6 months 0.2 0.2% 0.3 0.3% 122.4 100.0% 94.6 100.0%
25. Accruals and deferred income
31 Dec. 2017 31 Dec. 2016
Long-term Short-term Long-term Short-term mPLN mPLN mPLN mPLN
Accruals, of which: Accrual for unused holiday leaves - 11.4 - 11.4 Accrual for employee and management bonuses - 19.6 - 26.0 - 31.0 - 37.4 Deferred income, of which: Prepaid maintenance services and licenses 3.2 14.3 6.8 10.4 Grants for the development of assets 31.7 1.4 31.5 2.0 34.9 15.7 38.3 12.4
The total amount of accruals comprises: accruals for unused holiday leaves, accruals for remunerations of the current period to be paid out in future periods which resulted from the bonus incentive schemes applied by the Company. The total amount of deferred income comprises mainly future revenues recognized over time for the provision of services, such as IT support services, as well as grants for the development of assets. Grants for the development of assets represent subsidies received by the Company in connection with its development projects or projects related to the creation of IT competence centers.
All figures in millions of PLN, unless stated otherwise 73 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
26. Related party transactions
12 months 12 months Asseco Poland sales to related parties: ended ended 31 Dec. 2017 31 Dec. 2016 Name of entity Transaction type mPLN mPLN Transactions with entities controlled by the Company sale of goods and services related to implemented IT Asseco Central Europe a.s. 2.0 0.1 projects sale of goods and services related to implemented IT DanubePay, a.s. 0.4 0.4 projects sale of goods and services related to implemented IT Asseco Business Solutions S.A. 1.9 1.7 projects; rental of office space Asseco Georgia Sale of services related to implemented IT projects 0.6 - Asseco South Eastern Europe S.A. sale of advisory services; rental of office space 0.2 0.3 sale of goods and services related to implemented IT Asseco Software Nigeria Ltd 0.2 0.1 projects Asseco Western Europe S.A. sale of advisory services; rental of office space 0.1 0.1 sale of goods and services related to implemented IT Asseco Data Systems S.A. 20.9 9.7 projects; rental of office space sale of goods and services related to implemented IT Sapiens International Corp. Group 4.2 6.4 projects; sale of tangible and intangible assets sale of goods and services related to implemented Sigilogic Sp. z o.o. - 0.2 IT projects and other activities; rental of office space Gdyński Klub Koszykówki Arka S.A.1) rental of office space 0.1 0.1 sale of goods and services related to implemented CTPartners S.A. - 0.3 IT projects and other activities; rental of office space sale of goods and services related to implemented DahliaMatic Sp. z o.o. 21.4 4.8 IT projects and other activities; rental of office space sale of goods and services related to implemented IT Infovide-Matrix S.A. - 1.8 projects 52.0 27.7
Transactions with associates sale of goods and services related to implemented IT Postdata S.A. 4.3 7.5 projects sale of goods and services related to implemented IT R-Style Softlab JSC 0.9 1.7 projects 5.2 9.2
Transactions with Members of the Management Board and Commercial Proxies Renata Bojdo sale of goods and services related to other activities - 0.03 - 0.03 Transactions with Members of the Supervisory Board Dariusz Brzeski sale of goods and services related to other activities 0.02 0.02 0.02 0.02 Transactions with the Group’s key management personnel
Mr. Yury Vasilievich Ostrashevsky 2) sale of shares 2.2 - 3) Managers of ASEE Group sale of shares 21.8 - 4) Managers of ACE Group sale of shares 32.8 - Manager of Formula Systems 5) sale of shares 73.5 - 130.3 -
TOTAL TRANSACTIONS 187.5 35.3
1) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Przemysław Sęczkowski, Vice President of the Company’s Management Board, served as President of Gdyński Klub Koszykówki Arka S.A. Furthermore, Mr. Adam Góral, President of the Company’s Management Board, served as Chairman of the Supervisory Board of Gdyński Klub Koszykówki Arka S.A., while Mrs. Renata Bojdo and Mr. Andrzej Gerlach, the Company’s Commercial Proxies, served as Members of the Supervisory Board of Gdyński Klub Koszykówki Arka S.A. 2) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Yury Vasilievich Ostrashevsky served as Member of the Supervisory Board of R-Style Softlab JSC.
All figures in millions of PLN, unless stated otherwise 74 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
3) Shares in Asseco South Eastern Europe S.A. were sold to the following managers of ASEE Group companies or to their related entities: Mr. Piotr Jeleński, Mr. Miljan Mališ, Mr. Miodrag Mirčetić, Mr. Marcin Rulnicki, as well as to other managers. 4) Shares in Asseco Central Europe, a.s. were sold to the following managers of ACE Group companies or to their related entities: Mr. Jozef Klein, Mr. Branislav Tkáčik, Mr. Marek Grác, Mr. David Stoppani, and Mr. Markus Haller. 5) Shares in Formula Systems (1985) Ltd were sold to Mr. Guy Bernstein, CEO of Formula Systems as well as to his related entity.
12 months 12 months Asseco Poland purchases from related parties: ended ended 31 Dec. 2017 31 Dec. 2016 Name of entity Transaction type mPLN mPLN Transactions with entities controlled by the Company purchase of goods and services related to implemented Asseco Business Solutions S.A. 1.7 2.1 IT projects; rental of office space purchase of goods and services related to implemented IT Asseco Central Europe a.s. 0.7 2.5 projects purchase of goods and services related to implemented IT Asseco South Eastern Europe S.A. - 0.1 projects purchase of goods and services related to implemented IT Asseco Software Nigeria Ltd - 0.4 projects purchase of goods and services related to implemented IT Asseco Data Systems S.A. 57.3 24.6 projects purchase of goods and services related to implemented IT Sapiens International Corp. Group 30.9 45.4 projects purchase of goods and services related to implemented IT Asseco SEE d.o.o. (CROATIA) 0.1 - projects DahliaMatic Sp. z o.o. purchase of services related to implemented IT projects 41.1 20.8 purchase of goods and services related to implemented IT Sigilogic Sp. z o.o. - 5.2 projects SKG S.A. purchase of services related to implemented IT projects 2.0 2.3
purchase of goods and services related to implemented IT Sintagma UAB Sp. z o.o. 2.6 - projects Infovide - Matrix S.A. purchase of services related to implemented IT projects - 5.2 Gdyński Klub Koszykówki Arka S.A.1) sponsorship 4.7 4.4 Asseco Resovia S.A.2) sponsorship 15.3 10.5 156.4 123.5
Transactions with associates purchase of goods and services related to implemented IT Postdata S.A. 0.4 0.5 projects R-Style Softlab JSC 3) 0.5 - 0.9 0.5
Transactions with entities related through the Key Management Personnel rental of apartments (including reception, cleaning and Top Fin Sp. z o.o.4) security services, etc.) with parking lot spaces for 2.7 2.7 the accommodation of employees on business trips Kościuszko Institute for European Integration 5) sponsorship, workshops 0.1 -
2.8 2.7
Transactions with Members of the Management Board and Commercial Proxies Andrzej Gerlach purchase of advisory services 0.7 0.7 0.7 0.7
Transactions with Members of the Supervisory Board Dariusz Brzeski purchase of advisory services 1.7 2.1 Jacek Duch purchase of advisory services 1.3 - 3.0 2.1
TOTAL TRANSACTIONS 163.8 129.5
All figures in millions of PLN, unless stated otherwise 75 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
1) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Przemysław Sęczkowski, Vice President of the Company’s Management Board, served as President of Gdyński Klub Koszykówki Arka S.A. Furthermore, Mr. Adam Góral, President of the Company’s Management Board, served as Chairman of the Supervisory Board of Gdyński Klub Koszykówki Arka S.A., while Mrs. Renata Bojdo and Mr. Andrzej Gerlach, the Company’s Commercial Proxies, served as Members of the Supervisory Board of Gdyński Klub Koszykówki Arka S.A. 2) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Adam Góral, President of the Company’s Management Board, served as Member of the Supervisory Board of Asseco Resovia S.A., whereas Mr. Marek Panek, Vice President of the Company’s Management Board, served as Chairman of the Supervisory Board of Asseco Resovia S.A. Mr. Andrzej Gerlach, the Company’s Commercial Proxy, served as Vice President of the Management Board of Asseco Resovia S.A., whereas Mrs. Renata Bojdo, the Company’s Commercial Proxy, served as Member of the Supervisory Board of Asseco Resovia S.A. 3) R-Style JSC was controlled by the Company till 10 March 2017. 4) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Andrzej Gerlach, the Company’s Commercial Proxy, was a partner in the company Top Fin Sp. z o.o. Moreover, during the analyzed period, Mrs. Ewa Góral, the wife of Mr. Adam Góral, President of the Company’s Management Board, was a partner in the company Top Fin Sp. z o.o.; whereas, Mrs. Jolanta Wiza, the wife of Mr. Artur Wiza, Vice President of the Company’s Management Board, was the President and a partner in the company Top Fin Sp. z o.o. In addition, since July 2013, Mr. Adam Góral, President of the Company’s Management Board, has been the owner of business premises rented out to Top Fin Sp. z o.o. 5) In the period of 12 months ended 31 December 2017, Mrs. Izabela Albrycht, Member of the Company’s Supervisory Board, served as President of the Management Board at the Kościuszko Institute for European Integration.
Trade and other receivables Trade payables and other liabilities from related parties to related parties Name of entity 31 Dec. 2017 31 Dec. 2016 31 Dec. 2017 31 Dec. 2016 mPLN mPLN mPLN mPLN
Transactions with entities controlled by the Company Asseco Business Solutions S.A. 0.4 0.1 0.2 0.4 Asseco Central Europe A.S. 1.6 - 0.7 1.5 Asseco Data Systems S.A. 7.2 11.9 28.8 12.6 Asseco South Eastern Europe S.A. - 0.1 - 0.1 Asseco Software Nigeria Ltd 0.1 0.1 - -
Asseco Georgia 0.5 - - - Sapiens International Corp. Group 0.6 1.0 5.4 9.1 Sigilogic Sp. z o.o. - 0.8 - - SKG S.A. - - 0.9 0.5 Gdyński Klub Koszykówki Arka S.A. 1) - - 2.9 0.2 Asseco Resovia S.A. - - 1.1 - DahliaMatic Sp. z o.o. 2.1 4.1 8.5 6.9 CTPartners S.A. - 0.2 - 0.2 Solver Sp. z o.o. - - - 0.1 12.5 18.3 48.5 31.6
Transactions with associates Postdata S.A. 0.5 1.1 0.1 - 0.5 1.1 0.1 -
Transactions with entities related through managers Mr. Yury Vasilievich Ostrashevsky 2) 2.2 - - - Managers of ASEE Group 3) 20.5 - - - Managers of ACE Group 4) 24.1 - - - Managers of FORMULA 5) 35.7 - - - 82.5 - - -
All figures in millions of PLN, unless stated otherwise 76 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Transactions with entities related through the Key Management Personnel Top Fin Sp. z o.o. 6) 0.4 0.3 0.5 0.2 0.4 0.3 0.5 0.2
Transactions with Members of the Management Board and Supervisory Board Andrzej Gerlach - - 0.1 0.1 Dariusz Brzeski - - 0.1 0.1 Jacek Duch - - 1.3 - - - 1.5 0.2
TOTAL TRANSACTIONS 95.9 19.7 50.6 32.0 1) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Przemysław Sęczkowski, Vice President of the Company’s Management Board, served as President of Gdyński Klub Koszykówki Arka S.A. Furthermore, Mr. Adam Góral, President of the Company’s Management Board, served as Chairman of the Supervisory Board of Gdyński Klub Koszykówki Arka S.A., while Mrs. Renata Bojdo and Mr. Andrzej Gerlach, the Company’s Commercial Proxies, served as Members of the Supervisory Board of Gdyński Klub Koszykówki Arka S.A. 2) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Yury Vasilievich Ostrashevsky served as Member of the Supervisory Board of R-Style Softlab JSC. 3) Shares in Asseco South Eastern Europe S.A. were sold to the following managers of ASEE Group companies or to their related entities: Mr. Piotr Jeleński, Mr. Miljan Mališ, Mr. Miodrag Mirčetić, Mr. Marcin Rulnicki, as well as to other managers. 4) Shares in Asseco Central Europe, a.s. were sold to the following managers of ACE Group companies or to their related entities: Mr. Jozef Klein, Mr. Branislav Tkáčik, Mr. Marek Grác, Mr. David Stoppani, and Mr. Markus Haller. 5) Shares in Formula Systems (1985) Ltd were sold to Mr. Guy Bernstein, CEO of Formula Systems as well as to his related entity. 6) In the period of 12 months ended 31 December 2017 as well as in the comparable period, Mr. Andrzej Gerlach, the Company’s Commercial Proxy, was a partner in the company Top Fin Sp. z o.o. Moreover, during the analyzed period, Mrs. Ewa Góral, the wife of Mr. Adam Góral, President of the Company’s Management Board, was a partner in the company Top Fin Sp. z o.o.; whereas, Mrs. Jolanta Wiza, the wife of Mr. Artur Wiza, Vice President of the Company’s Management Board, was the President and a partner in the company Top Fin Sp. z o.o. In addition, since July 2013, Mr. Adam Góral, President of the Company’s Management Board, has been the owner of business premises rented out to Top Fin Sp. z o.o.
Transactions with related parties are carried out on an arm’s length basis. As at 31 December 2016, receivables from related parties comprised trade receivables amounting to PLN 12.0 million, as well as other receivables amounting to PLN 83.9 million. As at 31 December 2016, receivables from related parties comprised trade receivables amounting to PLN 12.1 million, as well as other receivables amounting to PLN 7.6 million. As at 31 December 2017, liabilities to related parties comprised trade payables amounting to PLN 50.3 million, as well as other liabilities amounting to PLN 0.3 million. As at 31 December 2016, liabilities to related parties comprised trade payables amounting to PLN 26.4 million, as well as other liabilities amounting to PLN 5.6 million.
27. Notes to the Statement of Cash Flows Cash flows – operating activities The table below presents items included in the line “Changes in working capital”:
12 months ended 12 months ended 31 Dec. 2017 31 Dec. 2016 mPLN mPLN
Change in inventories 3.8 (2.0) Change in receivables (21.0) 73.5 Change in non-financial assets 0.3 1.3 Change in liabilities excluding bank loans and borrowings 21.9 (96.4) Change in prepayments and accruals (4.2) (3.5) Change in provisions (29.8) (37.7) Total (29.0) (64.8)
All figures in millions of PLN, unless stated otherwise 77 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Cash flows – investing activities In the period of 12 months ended 31 December 2017, the amount of cash flows from investing activities was affected primarily by the following proceeds and expenditures: ▪ Acquisition of property, plant and equipment for the amount of PLN 11.9 million, including purchases of transportation vehicles and computer hardware; ▪ Acquisition of intangible assets for PLN 3.3 million, including purchases of third-party software and licenses to be used by the Company’s employees; ▪ Expenditures for development projects amounting to PLN 10.0 million; ▪ Sale of shares in related companies for the amount of PLN 340.3 million. This total comprises mainly proceeds from the sale of shares in the following companies: Formula Systems Ltd. in the amount of PLN 330.2 million, Asseco Central Europe, a.s. in the amount of PLN 8.0 million, and Asseco South Eastern Europe in the amount of PLN 1.2 million; ▪ Acquisition of shares in related companies for PLN 10.4 million; ▪ Dividends received from subsidiaries and associates amounting to PLN 156.2 million.
The following table presents detailed cash flows relating to loans during the period of 12 months ended 31 December 2017:
Loans collected Loans granted Name of entity mPLN mPLN
Podkarpacki Fundusz Nieruchomości Sp. z o.o. 3.0 -
Asseco Resovia S.A. 3.5 -
Gdyński Klub Koszykówki Arka S.A. 1.0 -
Modulus Sp. z o.o. - (2.0) Other entities 1.8 (1.8) Total 9.3 (3.8)
Cash flows – financing activities ▪ Dividends paid out represent the divided of PLN 249.8 million that was distributed by the Company (the divided for the year 2017 has been described in detail in explanatory note 6); ▪ Repayments of bank loans represent mainly instalments repaid under the investment loan that was obtained by the Company to finance the construction of its office building in Wilanów, Warsaw.
Interest-bearing bank Finance lease Dividend payment loans and borrowings liabilities liabilities mPLN mPLN mPLN As at 1 January 2017 84.0 88.9 -
Proceeds (+) 19.5 2.8 -
Repayment of principal amount – Cash flows (15.0) (21.5) (249.8) expenditures Payment of interest – expenditures (2.3) (4.3) -
Accrued interest 2.5 4.3 - Non-cash Non-cash increase in liabilities 0.2 - 249.8 changes Foreign exchange differences recognized - (4.5) - in financial income/expenses Decrease in liabilities - (0.2) -
As at 31 December 2017 88.9 65.5 -
All figures in millions of PLN, unless stated otherwise 78 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
28. Off-balance-sheet liabilities towards related parties As at 31 December 2017, guarantees and sureties granted by Asseco Poland S.A. for its subsidiary Asseco Lietuva UAB were as follows: ▪ On 13 November 2017, Asseco Poland made a commitment to grant a surety up to the amount of PLN 6.2 million in favour of SG Equipment Leasing Polska Sp. z o.o. in order to secure a loan agreement. Asseco Poland’s obligations resulting from this surety shall expire upon the repayment of all liabilities under the loan agreement by Asseco Lietuva; however, not later than till 31 December 2020. 29. Off-balance-sheet liabilities towards other entities The Company is party to a number of rental, leasing and other contracts of similar nature, resulting in the following off-balance-sheet liabilities for future payments:
31 Dec. 2017 31 Dec. 2016 Liabilities under leases of space mPLN mPLN In the period up to 1 year 9.5 17.0 In the period from 1 to 5 years 9.4 20.1 Over 5 years - - 18.9 37.1
During the presented reporting period ended 31 December 2017, the Company was not engaged in any legal proceedings pending before any court, competent arbitration body or public administration authority, concerning its liabilities or receivables, whose aggregate value would equal or exceed 10% of the Company’s equity.
The total value of claims under legal proceedings in which the Company is involved did not exceed 10% of the Company’s equity, neither in the group of liabilities nor in the group of receivables. With regard to liabilities in litigation, the Company raises arguments that claims made by other parties are groundless.
The aggregate amount of guarantees of due performance of contracts as well as tender guarantees issued by various banks in favour of Asseco Poland S.A. reached PLN 155.2 million as at 31 December 2017. In the Management’s opinion, the likelihood of having to fulfil the obligations resulting from such guarantees is very low.
30. Employment
12 months ended 12 months ended Average number of employees during the reporting period* 31 Dec. 2017 31 Dec. 2016 Management Board 9 10 Production departments 2,032 2,148 Sales departments 80 84 Administration departments 335 334 Total 2,456 2,576 *Average employment during the reporting period in full-time salaried jobs, i.e. employment in full-time jobs adjusted for (reduced by) positions which are not salaried by the Company (such as an unpaid leave, maternity leave, etc.)
Number of employees as at: 31 Dec. 2017 31 Dec. 2016
Management Board 10 10 Production departments 2,104 2,346 Sales departments 87 80 Administration departments 370 376 Total 2,571 2,812
All figures in millions of PLN, unless stated otherwise 79 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
31. Objectives and principles of financial risk management Asseco Poland S.A. is exposed to various types of risks arising either from the macroeconomic situation in Poland as well as from microeconomic situation within its own organization. The main market factors that may have an adverse impact on the Company’s financial performance are: (i) fluctuations in foreign currency exchange rates versus the Polish zloty, and (ii) changes in official interest rates. ▪ Foreign currency risk The Company’s main functional currency is the Polish zloty, however, certain IT contracts or property lease contracts are denominated in foreign currencies (EUR and USD). With regard to the above, the Company is exposed to fluctuations in its financial performance resulting from differences in foreign currency exchange rates versus the Polish zloty in the period from concluding a contract until it is invoiced or paid for. Identification: According to the Company’s procedures pertaining to entering into commercial contracts, each agreement that is concluded or denominated in a foreign currency shall be subject to special registration. Measurement: The exposure to foreign currency risk is measured by the value of a contract concluded in a foreign currency on one hand, and on the other by the nominal amount of currency derivative instruments concluded in the financial market. The procedures applicable to the execution of IT projects require making systematic updates of the project implementation schedules as well as of cash flows generated under individual projects. Objective: The purpose of counteracting the risk of fluctuations in foreign currency exchange rates is to reduce their negative impact on the financial results of our contracts. Contracts settled in foreign currencies are hedged with simple derivatives such as currency forward contracts (deliverable or non-deliverable, depending on a type of the hedged contract). Foreign currency risk hedges are matched by selecting suitable financial instruments to offset the impact of changes in the risk-causing factor on the Company’s financial performance (the changes in embedded instruments and concluded instruments are balanced out). However, due to a considerable variability in project implementation schedules and the resulting variability in cash flows, the Company is prone to changes in its exposure to foreign exchange risk. Therefore, the Company dynamically transfers its existing hedging instruments or concludes new ones with the objective to ensure the most effective matching. It has to be taken into account that the valuation of embedded instruments changes with the reference to the parameters as at the contract signing date (spot rate and swap points), while transferring or conclusion of new instruments in the financial market may only be effected on the basis of current rates available. Hence, it is possible that the value of financial instruments will not be matched and the Company’s financial result will be potentially exposed to the foreign currency risk. As at 31 December 2017, the Company holds open forward contracts to purchase EUR for the total nominal amount of PLN 1.03 million which shall be finally settled on 30 April 2018. Moreover, the Company holds forward contracts to sell EUR for the total amount of PLN 90.9 million which shall be finally settled on 14 December 2022. The Company also holds open forward contracts to sell USD for the total nominal amount of PLN 120.3 million which shall be finally settled on 24 August 2022, as well as forward contracts to purchase USD for the total nominal amount of PLN 44.1 million which shall be finally settled on 9 January 2018. Furthermore, the Company holds open forward contracts to sell RUB for the total nominal amount of PLN 7.9 million which shall be finally settled on 31 December 2018, as well as open forward contracts to sell ILS for the total nominal amount of PLN 18.1 million which shall be finally settled on 2 April 2019.
All figures in millions of PLN, unless stated otherwise 80 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
▪ Interest rate risk The Company is exposed to the risk of interest rate changes primarily in two areas of its business activities: (i) change in the value of interest charged on loans granted to the Company, which are based on variable interest rates, and (ii) change in the valuation of concluded derivative instruments, which are based on the forward interest rate curve. Identification: The interest rate risk arises and is recognized by the Company at the time of concluding a transaction or a financial instrument based on a variable interest rate. Measurement: The Company measures its exposure to the interest rate risk by preparing the statements of total amounts of all of its financial instruments based on a variable interest rate. Additionally, the Company maintains records of debt planned to be incurred during the next 12 months, and in the case of long-term instruments – for their effective period. Objective: The purpose of reducing such risk is to minimize expenses arising from the concluded financial instruments based on a variable interest rate. Actions: In order to reduce its interest rate risk, the Company may: (i) try to avoid incurring liabilities based on a variable interest rate or, if not possible, (ii) conclude forward rate agreements. Matching: The Company gathers and analyzes the current market information concerning its present exposure to the interest rate risk. For the time being, the Company does not hedge against changes of interest rates due to a high degree of unpredictability of the repayment schedules of its liabilities based on a variable interest rate. ▪ Counterparty credit risk The Company is exposed to the risk of defaulting contractors. This risk is connected firstly with the financial credibility and good will of customers to whom the Company provides IT solutions, and secondly with the financial credibility of contractors with whom supply transactions are concluded. The maximum exposure to credit risk is limited to the book value of financial assets. Identification: The risk is identified each time when concluding contracts with clients, and afterwards during the settlement of payments. Measurement: Determination of this type of risk requires the knowledge of complaints or pending judicial proceedings against a client already at the time of signing an agreement. Every two weeks the Company is obliged to control the settlement of payments under the concluded contracts, inclusive of the profit and loss analysis for individual projects. Objective: Minimizing the amount of uncollectible receivables. The risk control involves monitoring of the timely execution of bank transfers and, if needed, sending a reminder of outstanding payment, or turning receivables over to debt collection agencies. ▪ Financial liquidity risk The Company monitors its risk to a shortage of funds using a recurring liquidity planning tool, which considers the maturity of its assets and liabilities as well as projected cash flows from its operations. The Company’s objective is to maintain a balance between continuity and flexibility of financing by using various sources of funds. Quantitative analyses of the Company’s liquidity broken down by categories of liabilities and assets are presented: for receivables in explanatory note 14, for liabilities in explanatory note 24, and for loans in explanatory note 21 to these financial statements. ▪ Analysis of sensitivity – foreign currency risk The Company tries to conclude contracts with its clients in the Polish currency in order to avoid exposure to the risk arising from fluctuations in foreign currency exchange rates versus the Polish zloty. The Company has analyzed the impact of changes in the exchange rate of PLN vs. EUR on its pre-tax financial results both as at 31 December 2017 and 31 December 2016. Assuming PLN appreciated 10% versus EUR, the Company would recognize a financial gain of PLN 15.3 million. Analogically, if PLN depreciated 10% versus EUR, the Company’s financial results would deteriorate by PLN 15.3 million.
All figures in millions of PLN, unless stated otherwise 81 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Amount exposed As at 31 December 2017 Impact on financial results of the Company to risk EUR mPLN (10%) 10% Financial assets Forward contracts 1.9 8.1 (8.1) Trade receivables 5.3 (0.5) 0.5
Liabilities Trade payables 4.6 0.5 (0.5) Finance lease liabilities 62.5 6.3 (6.3) Liabilities for unpaid shares 9.0 0.9 (0.9)
Balance 15.3 (15.3)
Amount exposed As at 31 December 2016 Impact on financial results of the Company to risk EUR mPLN (10%) 10% Financial assets Forward contracts 1.0 (1.1) 1.1 Trade receivables 0.7 (0.1) 0.1
Liabilities Trade payables 2.6 0.3 (0.3) Finance lease liabilities 86.6 8.7 (8.7) Liabilities for unpaid shares 19.1 1.9 (1.9)
Balance 9.7 (9.7)
The Company has analyzed the impact of changes in the exchange rate of PLN vs. USD on its pre-tax financial results as at 31 December 2017. Assuming PLN appreciated 10% versus USD, the Company would recognize a financial gain of PLN 22.2 million. Analogically, if PLN depreciated 10% versus USD, the Company’s financial results would deteriorate by PLN 22.2 million.
Amount exposed As at 31 December 2017 Impact on financial results of the Company to risk USD mPLN (10%) 10% Financial assets
Forward contracts 10.1 (11.0) 11.0 Trade receivables 74.6 (7.5) 7.5
Liabilities Trade payables 0.1 - - Forward contracts 7.2 (3.7) 3.7
Balance (22.2) 22.2
All figures in millions of PLN, unless stated otherwise 82 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
Amount exposed As at 31 December 2016 Impact on financial results of the Company to risk USD mPLN (10%) 10% Financial assets
Trade receivables 89.1 (8.9) 8.9
Liabilities Trade payables 2.7 0.3 (0.3) Forward contracts 3.4 7.1 (7.1)
Balance (1.5) 1.5
▪ Analysis of sensitivity – interest rate risk The Company tries to avoid obtaining loan facilities that are based on a variable interest rate. In case it is necessary to conclude a loan agreement based on a variable interest rate, the Company does not really have a strategy for hedging against the rate risk involved. As at 31 December 2017, the Company’s total liabilities under variable interest rate loans aggregated at PLN 64.8 million, as compared with PLN 77.6 million as at the end of 2016. Such liabilities resulted mainly from a specific purpose loan, which was obtained in order to finance the construction of the Company’s office building in Warsaw. The following table presents the impact of the loan’s base interest rate (3M WIBOR) on the interest expense incurred in 2017:
Amount exposed As at 31 December 2017 Impact on financial results of the Company to risk Bank loans based on the WIBOR variable interest rate mPLN -1.0 pp 1.0 pp
Interest-bearing bank loans 64.8 (0.6) 0.6
The following table presents the impact of the loan’s base interest rate (3M WIBOR) on the interest expense incurred in 2016:
Amount exposed As at 31 December 2016 Impact on financial results of the Company to risk Bank loans based on the WIBOR variable interest rate mPLN -1.0 pp 1.0 pp
Interest-bearing bank loans and debt securities issued 77.6 (0.8) 0.8
The interest rate risk involved in the Company’s assets and other liabilities, which are based on variable interest rates, is insignificant and therefore has not been analyzed. ▪ Methods adopted for conducting the sensitivity analysis The analysis of sensitivity to fluctuations in foreign exchange rates with potential impact on our financial results was conducted using the percentage deviations of +/-10%, by which the reference exchange rates, effective as at the end of the reporting period, were increased or decreased. The sensitivity of interest rate exposure was analyzed using the percentage deviations of +/- 1 pp. ▪ Other types of risk Other types of risk are not analyzed for sensitivity due to their nature and impossibility of absolute classification.
All figures in millions of PLN, unless stated otherwise 83 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
▪ Fair value As at 31 December 2017, the Company held the following financial assets measured at fair value:
As at 31 December 2017 Carrying value Level 1i) Level 2 ii) Level 3iii) Financial assets carried at fair value through profit or loss Currency forward contracts 12.1 - 12.1 - Total 12.1 - 12.1 -
Financial assets available for sale Shares in companies listed on regulated markets 1.1 1.1 - - Shares in companies not listed on regulated markets 8.8 - - 8.8 Total 9.9 1.1 - 8.8
As at 31 December 2017 Carrying value Level 1i) Level 2 ii) Level 3iii) Financial liabilities carried at fair value through profit or loss Currency forward contracts 7.8 - 7.8 - Liabilities carried at amortized cost 9.0 - - 9.0 Total 16.8 - 7.8 9.0
i.fair value determined on the basis of quoted prices offered in active markets for identical assets; ii.fair value determined using calculation models based on inputs that are observable, either directly or indirectly, in active markets; iii.fair value determined using calculation models based on inputs that are not observable, neither directly nor indirectly, in active markets. As at 31 December 2016, the Company held the following financial assets measured at fair value:
As at 31 December 2016 Carrying value Level 1 Level 2 Level 3 Financial assets carried at fair value through profit or loss Currency forward contracts 1.0 - 1.0 - Total 1.0 - 1.0 -
Financial assets available for sale Shares in companies listed on regulated markets 0.7 0.7 - - Shares in companies not listed on regulated markets 8.8 - - 8.8 Total 9.5 0.7 - 8.8
Both as at 31 December 2017 and 31 December 2016, the fair values of financial assets and financial liabilities held by the Company did not significantly differ from their carrying values, except for our investment in Asseco South Eastern Europe which, as at 31 December 2017, has been already disclosed as part of our investment in Asseco International. The difference between the carrying value and the fair value of Asseco South Eastern Europe has been described in explanatory note 11 to these financial statements.
As at 31 December 2016 Carrying value Level 1i) Level 2 ii) Level 3iii) Financial liabilities carried at fair value through profit or loss Currency forward contracts 5.4 - 5.4 - Liabilities carried at amortized cost 19.0 - - 19.0 Total 24.4 - 5.4 19.0
All figures in millions of PLN, unless stated otherwise 84 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
▪ Items of income, expenses, gains and losses recognized in the income statement As at 31 December 2017, the following items of income, expenses, gains and losses were recognized in the Company’s income statement:
Interest Gain/(loss) Reversal/ Gain/(loss) on Items of income, expenses, gains and losses recognized income/ on foreign (recognition) valuation and Total in the income statement as at 31 December 2017: (expenses): exchange of impairment exercise differences write-downs Financial assets: 9.6 (20.7) (37.9) 19.6 (29.4) Financial assets carried at fair value through - - - 19.6 19.6 profit or loss Currency forward contracts - - 19.6 19.6 Cash and cash equivalents 1.7 0.8 - - 2.5 Loans and receivables: 7.9 (21.5) (37.9) - (51.5) Loans granted to related parties 1.8 - (23.9) - (22.1) Loans granted to other entities - - - - - Trade receivables and other receivables 6.1 (21.5) (14.0) - (29.4)
Financial liabilities: (7.6) 6.0 - (8.0) (9.6) Financial liabilities carried at fair value through (4.3) 5.3 - (8.0) (7.0) profit or loss: Derivative instruments and financial liabilities (4.3) 5.3 - (8.0) (7.0) Interest-bearing bank loans, borrowings and debt (2.8) - (2.8) securities issued: Bank loans (2.8) - (2.8) Trade payables (0.5) 0.7 - 0.2
As at 31 December 2016, the following items of income, expenses, gains and losses were recognized in the Company’s income statement:
Interest Gain/(loss) Reversal/ Gain/(loss) on Items of income, expenses, gains and losses recognized income/ on foreign (recognition) valuation and Total in the income statement as at 31 December 2016: (expenses): exchange of impairment exercise differences write-downs Financial assets: 4.5 9.4 (0.5) 0.3 13.7 Financial assets carried at fair value through - - - 0.3 0.3 profit or loss Currency forward contracts - - - 0.3 0.3 Cash and cash equivalents 0.4 0.3 - - 0.7 Loans and receivables: 4.1 9.1 (0.5) - 12.7 Loans granted to related parties 3.9 - (0.2) - 3.7 Loans granted to other entities 0.2 - - - 0.2 Trade receivables - 9.1 (0.3) - 8.8 Financial liabilities: (9.2) (7.0) - (4.6) (20.8) Financial liabilities carried at fair value through (5.6) (4.2) - (4.6) (14.4) profit or loss: Derivative instruments and financial liabilities (5.6) (4.2) - (4.6) (14.4) Interest-bearing bank loans, borrowings and debt (3.5) - - - (3.5) securities issued: Bank loans (3.5) - - - (3.5) Trade payables (0.1) (2.8) - - (2.9)
All figures in millions of PLN, unless stated otherwise 85 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
32. Remuneration of the entity authorized to audit financial statements The table below discloses the amounts of remuneration paid or payable to the entity authorized to audit financial statements of the Company, namely Ernst & Young Audyt Polska Sp. z o.o. sp.k., for the years ended 31 December 2017 and 31 December 2016, in a breakdown by type of service:
12 months 12 months
ended 31 Dec. 2017 ended 31 Dec. 2016 mPLN mPLN
Obligatory audit of the annual financial statements 1.3 1.1 Total 1.3 1.1
33. Remuneration of the Management Board and Supervisory Board of Asseco Poland S.A. The table below presents the amounts of remuneration paid to individual Members of the Company’s Management Board and Supervisory Board for performing their duties during the years 2017 and 2016.
12 months ended 12 months ended
31 Dec. 2017 31 Dec. 2016 mPLN mPLN
Management Board Adam Góral 1.5 1.9 Przemysław Borzestowski 1) 1.1 1.1 Andrzej Dopierała 2) - 0.2 Tadeusz Dyrga 1.5 1.8 Krzysztof Groyecki 3) 0.8 0.6 Rafał Kozłowski 1.0 1.0 Marek Panek 1.0 1.2 Paweł Piwowar 1.2 1.7 Zbigniew Pomianek 2.8 2.1 Włodzimierz Serwiński 4) - 0.2 Przemysław Sęczkowski 1.0 1.1 Robert Smułkowski 5) 0.8 1.1 Gabriela Żukowicz 6) 0.2 - Total 12.9 14.0
Supervisory Board Jacek Duch 0.22 0.21 Piotr Augustyniak 0.14 0.12 Dariusz Brzeski 0.11 0.10 Artur Kucharski 0.14 0.12 Adam Noga 0.16 0.16 Dariusz Stolarczyk 7) - 0.03 Izabela Albrycht 8) 0.11 - Total 0.88 0.74 1) Mr. Przemysław Borzestowski resigned from the position of Vice President of the Company’s Management Board with effect from 18 September 2017. 2) Mr. Andrzej Dopierała was appointed as Vice President of the Company’s Management Board with effect from 1 October 2017, and in the comparable period he served at this position from 1 January till 30 June 2016. 3) In the comparable period, Mr. Krzysztof Groyecki served as Member of the Company’s Management Board from 1 June till 31 December 2016. 4) In the comparable period, Mr. Włodzimierz Serwiński served as Member of the Company’s Management Board from 1 January till 31 March 2016. 5) Mr. Robert Smułkowski resigned from the position of Vice President of the Company’s Management Board with effect from 28 March 2017.
All figures in millions of PLN, unless stated otherwise 86 Financial Statements of Asseco Poland S.A. for the year ended 31 December 2017
6) Mrs. Gabriela Żukowicz was appointed as Vice President of the Company’s Management Board with effect from 1 October 2017. 7) Mr. Dariusz Stolarczyk served as Member of the Company’s Supervisory Board in the period from 1 January till 28 April 2016. 8) Mrs. Izabela Albrycht has served as Member of the Company’s Supervisory Board since 1 January 2017. 34. Capital management The primary objective of the Company’s capital management is to maintain a favourable credit rating and a safe level of capital ratios in order to support the Company’s business operations and maximize shareholder value. The Company manages its capital structure and makes necessary adjustments in response to the changing economic conditions. In order to maintain or adjust its capital structure, the Company may decide to pay out a dividend, return some capital to shareholders, or issue new shares. The Company consistently monitors the level of its capital using the leverage ratio, which is calculated as a relation of net liabilities to total equity increased by net liabilities. Net liabilities include interest-bearing loans and borrowings, finance lease liabilities, trade payables and other liabilities, decreased by cash and cash equivalents.
31 Dec. 2017 31 Dec. 2016
mPLN mPLN
Interest-bearing bank loans and borrowings 88.9 85.8 Finance lease liabilities 65.5 88.9 Trade payables and other liabilities 141.0 104.0 Minus cash and cash equivalents (-) (308.0) (21.7) Net debt (12.6) 257.0
Equity 5,035.7 5,110.1 Equity and net debt 5,023.1 5,367.1
Leverage ratio (0.3%) 4.8%
35. Significant events after the reporting period ▪ Recommendation of the Management Board of Asseco Poland S.A. regarding the amount of dividend payment for 2017 On 9 March 2018, the Management Board of Asseco Poland S.A. informed about its recommendation regarding the amount of dividend to be paid out for the year 2017. The Management Board made a decision to initially declare payment of a dividend from the net profit for 2017 and retained earnings, and recommended to pay out a dividend in the amount of PLN 3.01 per share, translating into the total amount of dividend payment of PLN 249.8 million, this is at the same level as in the previous two years. This recommendation will be assessed by the Company’s Supervisory Board. The final decision on distribution of the net profit for 2017 will be made by the Company’s Annual General Meeting of Shareholders. Except for the above described event, till the date of publication of these standalone financial statements of Asseco Poland S.A. for the year ended 31 December 2017, this is until 19 March 2018, we have not observed any significant events that should be disclosed in this report. ▪ Exercise of put options by minority shareholders of SKG S.A. On 15 March 2018, we signed an agreement under which the minority shareholders of the company SKG S.A., by exercising their put options, sold their 40% equity interest in SKG S.A. to Asseco Poland S.A. The purchase price of this stake has been agreed at PLN 5.4 mln. Upon completion of this transaction, Asseco Poland will hold 100% of shares in SKG S.A.
All figures in millions of PLN, unless stated otherwise 87
Asseco Poland S.A. 14 Olchowa St. 35-322 Rzeszów, Poland phone: +48 17 888 55 55 fax: +48 17 888 55 50 e-mail: [email protected] inwestor.asseco.pl