The preparation of these consolidated financial statements in accordance with IFRS-EU requires that the Management Board makes certain estimates and assumptions that affect the adopted accounting policies and the amounts disclosed in the consolidated financial statements and notes thereto. The adopted assumptions and estimates are based on the Management Board’s best knowledge of the current and future activities and events. The actual figures, however, can be different from those assumed. The key areas in which the estimates made by the Management Board have a material impact on the consolidated financial statements include:
- employment and post-employment benefits – the provisions for employee benefits are measured using a method which involves determination of the opening balance of liabilities due to expected future benefit payments as at the end of the reporting period, calculated in line with actuarial methods; a change in the discount rate and a long-term salaries and wages increase rate impact the accuracy of the estimate made (Note 33),
- periods of depreciation of tangible and intangible fixed assets– the amount of depreciation is determined on basis of the estimated economic useful life of property, plant and equipment or intangible assets. Economic periods are reviewed at least once during the year. Depreciation periods are presented in Notes 53.5, 53.6, 53.7 and 53.12 of these consolidated financial statements,
- fair value of acquired assets, liabilities and goodwill – the Group identifies and measures acquired assets, liabilities and goodwill. Valuation relates to the acquisition of LWB entity. Valuation includes significant assumptions, such as: selection of the appropriate method of valuation, plans for use of the acquired assets, financial forecasts (including price trends specifying the key items of income and expenses), changes in legislation. Applied assumptions may have a significant impact on determination of fair value of acquired assets and liabilities and calculation of goodwill. Purchase price allocation of acquired assets, liabilities and goodwill is presented in Note 14 to these consolidated financial statements,
- trade and other receivables allowance – allowance is determined as the difference between the carrying amount and the present value of estimated future cash flows, discounted using the original interest rate; a change in estimated future cash flows shall cause a change in estimated allowance on receivables (Note 18),
- uninvoiced sales revenue at the end of a financial year – the amount of uninvoiced energy sales is estimated based on the estimated consumption of electricity in the period from the last meter reading date until the end of the financial period (Note 18),
- compensation for non-contractual use of land – the potential payment of compensation for the so called non-contractual use of land and rental fee is estimated by the technical staff of the Group based on analyses of claims filed on a case-by-case basis (Note 34, 50.5),
- provision for land reclamation – the Group, having filled or closed a slag and ash dump, is obliged to reclaim the land. As the company has large unfilled dumps, land reclamation is planned for 2060. Future estimated costs of land reclamation were discounted to their current value as at 31 December 2015 , using a discount rate of 2.80 % (Note 34),
- recoverable amount of tangible and intangible fixed assets – impairment tests of cash generating units are based on a number of significant assumptions, some of which are outside the control of the Group. Significant changes to the assumptions impact the results of impairment test and consequently the financial position and performance of the Group (Note 7),
- provision for purchasing CO2 emissions rights – the assumptions concern the allocation of free of charge CO2 emission rights for 2015 (Note 34),
- estimating the useful life of mines and coal resources – the useful life of a mine (LWB) is estimated based on operating resources of coal covered by the concession rights and estimated production capacity for the year 2034. The actual date of mine liquidation may differ from estimated by the Group. This results from taking into account in the calculation of the estimated useful life of mines, only recoverable reserves of coal. In 2014 ENEA Group received a mining license for K-3 area. The Group also tries to obtain further mining, which may result in a substantial extension of useful life of mines,
- estimating the provision for mine liquidation – ENEA Group creates a provision for liquidation costs of mines, which is imposed by existing law. Key assumptions used in determining the cost of the liquidation of mines include assumptions regarding the useful life of mines, the expected inflation and long-term discount rates. Any change in these assumptions affect the carrying value of provisions (Note 34).