6.2.2 Receivables
Accounting policies
Receivables include chiefly short-term trade receivables (mainly in connection with sale of gas fuel), taxes, customs duties and social security.
Short-term trade receivables are initially recognised at their transaction price if they do not contain a significant financing component.
Upon initial recognition, short-term trade receivables that meet the SPPI test and are held in a “hold to collect” business model are classified at amortised cost less impairment losses.
Taxes, customs duties and social security receivable are accounted for in accordance with the applicable laws and regulations.
Significant estimates
Impairment of financial assets
The amount of impairment loss on receivables equals the difference between the carrying amount of an asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.
The Group monitors changes in credit risk of a given financial asset and classifies financial assets to one of three classes for the purpose of determining lifetime impairment:
- Class 1 – Not impaired exposures and exposures without a significant increase in credit risk, where the risk of lifetime impairment is not significantly higher than the risk of the exposure as at the grant date. In this class, the expected credit loss is calculated for the next 12 months or for a shorter period, depending on the maturity of the exposure. Financial assets in this class have low credit risk or the increase in risk has not been significant, and have high credit ratings (determined on the basis of reliable financial data, including external ratings).
- Class 2 – Not impaired exposures and exposures with a significant increase in credit risk, where the risk of lifetime impairment is significantly higher than the risk of the exposure as at the date of grant, and not impaired. In this class, the probability of a default event is calculated for the lifetime of an asset.
- Class 3 – Impaired exposures, where the impairment occurred while the asset was held by the Group. For these exposures, impairment losses are calculated over the expected duration of the recovery period, with the expected recovery amount taken into account. Interest on impaired assets is calculated by applying the effective interest rate against the net asset value (net of impairment loss). Consequently, net interest (net of impairment loss) is recognised in the statement of profit or loss.
Depending on the type of financial asset, impairment loss is determined using either the statistical approach or the case-by-case approach.
In the statistical approach, impairment losses are recognised for a large number of current financial assets of relatively small values (the so-called homogeneous portfolio). Impairment losses are determined based on an analysis of historical payment data for past due receivables in particular ageing groups and the migration matrix method. Results of the analysis are then used to calculate recovery ratios on the basis of which the amounts of impairment losses in each ageing group are determined.
In the case-by-case approach, the Group estimates the expected credit losses for those exposures that could not be classified into the homogeneous portfolio, such as:
- lease receivables,
- acquired debt securities,
- material trade receivables,
- trade receivables maturing in more than one year,
- receivables from sale of shares,
- receivables under equity contributions.
The Group identifies an instrument as impaired if any of the following occurs:
- a payment is past due by more than 90 days,
- it is becoming probable that the counterparty will enter bankruptcy or other financial reorganisation;
- bankruptcy/arrangement proceedings are pending against the debtor,
- legal dispute with respect to the amount / legitimacy of a claim on which the receivable is based,
- other qualitative information indicating that the debtor is not able to fully satisfy all financial claims.
Expected impairment of such exposures is calculated over the period until the expected end of the recovery period.
Impairment losses are charged to other expenses or finance costs, as appropriate, depending on the type of the item for which an impairment loss is recognised.
| Receivables | 2021 | 2020 | ||||
| Gross carrying amount |
Impairment loss | Net carrying amount |
Gross carrying amount |
Impairment loss | Net carrying amount |
|
| Trade receivables (mainly in connection with sale of gas fuel) | 11,897 | (460) | 11,437 | 4,834 | (385) | 4,449 |
| Security deposits receivable | 3,250 | (1) | 3,249 | – | – | – |
| VAT receivable | 966 | – | 966 | 392 | – | 392 |
| Corporate income tax receivable | 265 | (6) | 259 | 107 | (6) | 101 |
| Other taxes, customs duties and social security receivable | 24 | (4) | 20 | 60 | (18) | 42 |
| Loans | 258 | (172) | 86 | 82 | (56) | 26 |
| Other receivables | 797 | (352) | 445 | 624 | (346) | 278 |
| Total | 17,457 | (995) | 16,462 | 6,099 | (811) | 5,288 |
Trade receivables are the source of the Group’s credit and currency risk exposure. For information on credit risk management
(including assessment of the credit quality of receivables and credit risk concentration), see Note 7.3.1. For information on currency
risk related to receivables, see Note 7.3.2.2.
Change in impairment losses on trade receivables in the period
| Trade receivables covered by statistical analysis | Trade receivables covered by case-by-case analysis | Measured at fair value through profit or loss |
||||
| lifetime expected loss |
impaired | 12-month expected loss |
lifetime expected loss |
impaired | ||
| As at Jan 1st 2020 | 7 | 201 | 10 | – | 157 | 1 |
| Increase taken to profit or loss | 91 | 17 | 4 | – | 34 | – |
| Decrease taken to profit or loss | (34) | (15) | (9) | – | (49) | – |
| Impairment losses used | – | (19) | – | – | (17) | – |
| Transfers | (16) | 16 | – | – | – | – |
| Effect of exchange rate movements and other | (2) | 9 | – | – | (1) | – |
| As at Dec 31st 2020 | 46 | 209 | 5 | – | 124 | 1 |
| Increase taken to profit or loss | 49 | 8 | 12 | 23 | 141 | – |
| Decrease taken to profit or loss | (33) | (8) | (9) | (8) | (100) | – |
| Impairment losses used | – | (19) | – | – | – | – |
| Transfers | (43) | 13 | – | – | 30 | – |
| Effect of exchange rate movements and other | 1 | 11 | – | – | 7 | – |
| As at Dec 31st 2021 | 20 | 214 | 8 | 15 | 202 | 1 |
Change of gross amount of trade receivables in the reporting period
| Trade receivables covered by statistical analysis | Trade receivables covered by case-by-case analysis | Measured at fair value through profit or loss | ||||
| lifetime expected loss |
impaired | 12-month expected loss |
lifetime expected loss |
impaired | ||
| Gross amount as at Jan 1st 2020 | 3,042 | 280 | 1,098 | 246 | 220 | 1 |
| Transfers between groups | (118) | 136 | (20) | – | 2 | – |
| Repaid financial assets | (20,076) | (122) | (19,832) | (680) | (224) | (20) |
| Newly recognised financial assets | 20,199 | 19 | 19,680 | 717 | 273 | 20 |
| Write-offs | (1) | (22) | – | – | (17) | – |
| Other effect | (16) | 35 | 18 | 1 | (5) | – |
| Gross amount as at Dec 31st 2020 | 3,030 | 326 | 944 | 284 | 249 | 1 |
| Transfers between groups | (169) | (58) | 25 | 117 | 85 | – |
| Repaid financial assets | (24,894) | (44) | (13,927) | (477) | (910) | (23) |
| Newly recognised financial assets | 26,834 | 21 | 17,010 | 652 | 830 | 23 |
| Write-offs | – | (24) | (1) | – | – | – |
| Changes due to modification of risk parameters | – | – | 1 | – | (1) | – |
| Changes in the Group | 463 | – | – | – | – | – |
| Other effect | 1,641 | – | (192) | 28 | 53 | – |
| Gross amount as at Dec 31st 2021 | 6,905 | 211 | 3,860 | 604 | 306 | 1 |
Impact of COVID-19 on expected credit losses on trade receivables
The economic effects of COVID-19 are expected to affect the quality of the Group’s portfolio of financial assets and collectability of trade receivables. The projected impact will vary depending on the sector of the economy in which the trading partners operate. The models adopted by the Group use adjusted probability of default by trading partners based on market expectations implied by prices of Credit Default Swaps (CDS).
In order to take into account the impact of future factors (including COVID-19) on the risk of the portfolio composed of individually assessed trading partners, the Group has adjusted the probability of default based on prices of CDS instruments as at the reporting date. The adjustment was differentiated according to the economic sectors and subsectors in which the trading partners operate and depended on the partners’ ratings (both internal and third-party ratings).
In order to take into account the impact of future factors (including COVID-19) on the risk of the portfolio assessed using the matrix method, the Group assumed an increase in the value of indicators reflecting the expected collectability of receivables in individual aging groups. The increase was proportional to the increase in the market-expected probability of default (reflected in prices of CDS contracts) for trading partners with a risk profile similar to the average risk of the portfolio, taking into account the economic sectors of the Group’s key trading partners.
Based on the analyses, as at December 31st 2021 the estimated effect of COVID-19 on impairment losses on the PGNiG Group’s trade receivables was their increase by about PLN 5m.
Change in impairment losses on other financial assets in the period
| Other financial assets covered by statistical analysis |
Other financial assets covered by case-by-case analysis | |||
| lifetime expected loss | Impaired | 12-month expected loss | Impaired | |
| As at Jan 1st 2020 | 16 | 295 | 1 | 83 |
| Increase taken to profit or loss | 20 | 19 | – | – |
| Decrease taken to profit or loss | (6) | (26) | – | (1) |
| Impairment losses used | – | (1) | – | (76) |
| Transfers | (14) | 14 | – | – |
| Effect of exchange rate movements and other | 12 | 64 | – | 1 |
| As at Dec 31st 2020 | 28 | 365 | 1 | 7 |
| Increase taken to profit or loss | 20 | 17 | 1 | 17 |
| Decrease taken to profit or loss | (13) | (23) | – | (3) |
| Impairment losses used | – | (11) | – | – |
| Transfers | (7) | (58) | – | 65 |
| Changes due to modification of risk parameters | (1) | – | – | – |
| Effect of exchange rate movements and other | 14 | (1) | – | (12) |
| As at Dec 31st 2021 | 41 | 289 | 2 | 74 |
Change in gross amount of other financial assets in the reporting period
| Other financial assets covered by statistical analysis |
Other financial assets covered by case-by-case analysis | Measured at fair value through profit or loss | Measured at fair value through other comprehensive income |
||||
| lifetime expected loss |
Impaired | 12-month expected loss | lifetime expected loss |
Impaired | |||
| Gross amount as at Jan 1st 2020 | 351 | 336 | 31 | – | 108 | 31 | 40 |
| Transfers between groups | (26) | 26 | – | – | – | – | – |
| Repaid financial assets | (472) | (38) | (32) | – | (5) | (126) | – |
| Newly recognised financial assets | 339 | 104 | 5 | – | 5 | 115 | – |
| Write-offs | – | (1) | – | – | (76) | – | – |
| Other effect | (49) | (10) | 36 | – | (16) | (21) | (40) |
| Gross amount as at Dec 31st 2020 | 143 | 417 | 40 | – | 16 | (1) | – |
| Transfers between groups | (11) | (54) | – | – | 65 | – | – |
| Repaid financial assets | (716) | (13) | (38) | – | (14) | – | – |
| Newly recognised financial assets | 822 | 9 | 3,278 | – | 18 | – | – |
| Write-offs | – | (11) | – | – | – | – | – |
| Changes in the Group | 35 | – | 24 | – | – | – | – |
| Other effect | 20 | 43 | 35 | 3 | 4 | – | – |
| Gross amount as at Dec 31st 2021 | 293 | 391 | 3,339 | 3 | 89 | (1) | – |