7.3 Other financial instruments measured at fair value
in PLN millions, unless otherwise stated
The item “Other financial instruments measured at fair value” mainly includes: shares (listed and unquoted) which were not acquired for trading purposes, for which the option of measurement at fair value through other comprehensive income was selected in order to limit the volatility of the result, and loans granted measured at fair value through profit or loss, as they did not pass the contractual cash flow test (SPPI), because in the financing structure at the last stage of the target recipient of funds, debt is changed into a share, and that is why they were obligatorily classified to this measurement category.
Shares are initially recognised at fair value increased by transaction costs, and at the end of the reporting period they are measured at fair value with recognition of gains/losses from measurement in other comprehensive income. The amounts recognised in accumulated other comprehensive income are not transferred later to profit or loss, while accumulated gains/losses on a given equity instrument are transferred within equity to retained earnings at the moment an equity instrument ceases to be recognised.
Dividends from such investments are recognised in profit or loss.
The translation of items expressed in a foreign currency is performed according to the accounting policies described in Note 1.2.
The fair value of unquoted shares is calculated using the adjusted net assets method. The application of this method is due to the specific nature of the assets of companies whose shares are subject to measurement. Observable Input data other than the ones from the active market were used in the measurement (e.g. transaction prices of real estate similar to one subjected to measurement, market interest rates of State Treasury bonds and fixed-term deposits in financial institutions, and the risk-free discount rate published by the European Insurance and Occupational Pensions Authority).
The fair value of listed shares is calculated based on the closing price as at the end of the reporting period.
The loan’s fair value is set at the present value of future cash flows, including any change in market risk and credit risk factors during the loans’ life.
| As at 31 December 2022 |
As at 31 December 2021 |
|
| Shares of listed companies (Warsaw Stock Exchange and TSX Venture Exchange), of which: |
422 | 516 |
| TAURON POLSKA ENERGIA S.A. | 386 | 483 |
| GRUPA AZOTY S.A. | 32 | 27 |
| Other listed shares | 4 | 6 |
| Unquoted shares | 99 | 99 |
| Loans granted | 20 | 22 |
| Other receivables | 65 | – |
| Other financial instruments measured at fair value, of which: | 606 | 637 |
| recognised in assets held for sale (disposal group) | – | – |
| recognised as “other financial instruments measured at fair value” | 606 | 637 |
The measurement of listed shares is classified to level 1 of the fair value hierarchy (i.e. measurement is based on the prices of these shares listed on an active market at the measurement date), while the measurement of unquoted shares is classified to level 2 (i.e. measurement based on observable data, not deriving from an active market).
The measurement of loans granted is classified to level 2 of the fair value hierarchy.
In 2022 as well as in 2021, there were no dividends from companies in which the Group had shares classified as other financial instruments measured at fair value.
In 2022 there were no transfers of accumulated gain or loss within equity in respect of companies in which the Group holds shares classified as other financial instruments measured at fair value. In 2021, following the sale of shares of the company PGE EJ1 Sp. z o.o., the result on the sale of these shares was reclassified in the amount of PLN 18 million.
Due to investments in listed companies, the Group is exposed to price risk. Changes in the listed share prices of these companies resulting from the current macroeconomic situation may have a significant impact on the level of other comprehensive income and on the accrued amount recognised in equity.
The following table presents the sensitivity analysis of listed companies’ shares to price changes.
|
As at
31 December 2022 |
Percentage change of share price |
As at
31 December 2021 |
Percentage change of share price | |||
| 14% | -14% | 12% | -12% | |||
| Carrying amount | Other comprehensive income | Other comprehensive income | Carrying amount | Other comprehensive income | Other comprehensive income | |
| Listed shares | 422 | 60 | (60) | 516 | 63 | (63) |
Sensitivity analysis for significant types of market risk to which the Group is exposed presents the estimated impact of potential changes in individual risk factors (at the end of reporting period) on profit or loss and other comprehensive income.
Potential changes in share prices at the end of the reporting period were determined at the level of standard deviations from the WIG20 index for a period of 3 calendar years ended on the reporting date.