6.1.2 Intangible assets

The Group’s key items of intangible assets are:

• software,
• CO₂ emission allowances (purchased for redemption and received free of charge),
• licences obtained under the Polish Geological and Mining Law, mining rights and geological information (“Licences”),
• goodwill.

Pursuant to the Act on Trading in Greenhouse Gas Emission Allowances, the Group holds CO₂ emission allowances allocated for individual installations. 

The Group classifies emission allowances as: 

• acquired for redemption – recognised as intangible assets and measured in accordance with the policies discussed below, 
• acquired for resale – are recognised as inventories (Note 6.2.1.), 
• rights obtained free of charge under the National Allocation Plan (2008-2012) – the originally granted rights, allocated free of charge, are recognised in the statement of financial position at their purchase price (i.e. zero) and recorded off-balance sheet. 

In its exploration and production operations, the Group uses licences for exploration, appraisal and production of natural gas and/or crude oil granted under the Polish Geological and Mining Law. The Group also uses mining rights and rights to geological information. 

Costs of licences for exploration for and production of natural gas and/or crude oil and charges for the grant of mining rights payable to the State Treasury are disclosed as capitalised expenditure. 

Goodwill is the excess of the acquisition cost over the net amount determined at the acquisition date of the identifiable assets acquired and liabilities assumed measured in accordance with IFRS 3. Acquisition-related costs are accounted for as an expense in the period in which the costs are incurred in exchange for services received, except for costs of issuing debt and equity securities.

The Group initially recognises intangible assets at cost. In the case of granted mining rights, the initial value is equal to the charges paid to the State Treasury for the grant of the mining rights. 

Subsequent to initial recognition, intangible assets are carried at cost less accumulated amortisation and impairment (for accounting policies relating to impairment, see Note 6.1.3.).  

Intangible assets are amortised using the straight-line method based on amortisation rates that reflect the expected useful lives of the assets. Purchased CO₂ emission allowances are amortised by redeeming the allowances based on the volume of emissions. 

Goodwill is tested annually for impairment and is disclosed in the statement of financial position at initial value less accumulated impairment losses. Goodwill is not amortised.

The useful lives of intangible assets were determined on the basis of assessments made by the engineering personnel responsible for their use. Any such assessment is connected with uncertainty as to the future business environment, technology changes and market competition, which could lead to a different assessment of the economic usefulness of the assets and their remaining useful lives, and ultimately have a material effect on the value of intangible assets and the future amortisation charges. 

The estimated amortisation period and amortisation method are reviewed at the end of each financial year. If the forecast useful life of an asset is significantly different from previous estimates, the amortisation period is changed. The effects of changes in estimate are recognised in the statement of profit or loss in the period in the same line item in which the estimate was previously classified. 

As a result of the review as at December 31st 2021, annual amortisation expense increased by about PLN 1m.