4. MSSF 9 Financial Instruments

IFRS 9 Financial Instruments was published in July 2014 and endorsed for application in the EU Member States on 22 November 2016 by the Commission Regulation (EU) 2016/2067. It is mandatory for financial statements prepared for annual periods commencing on or after 1 January 2018 (with the exception of insurance companies, which may apply the standard from 1 January 2021). For the purposes of these financial statements the data of the PKO Bank Polski SA insurance companies was prepared in accordance with IFRS 9. The standard replaces IAS 39 “Financial Instruments: Recognition and Measurement”. The amendments cover the classification and measurement of financial instruments, recognition and calculation of impairment and hedge accounting.

Annual report
2018

Financial Instruments

The total impact of the adjustments resulting from the implementation of IFRS 9 is presented in the table below:

31.12.2017 (classification under IAS 39 Classification and measurement: reclassification Classification and measurement: remeasurement Impairment allowance 01.01.2018 (classification under IFRS 9)
FINANCIAL ASSETS
Cash and balances with the Central Bank 17 810 17 810
Amounts due from banks 5 233 5 233
Hedging derivatives 887 887
Other derivative instruments 1 711 (12) 1 699
Securities 54 075 4 380 66 3 58 524
– held for trading 431 431
– financial instruments designated at fair value through profit or loss upon initial recognition 8 157 (8 157)
– available-for-sale investment securities 43 675 (43 675)
– investment securities held to maturity 1 812 (1 812)
– not held for trading, measured at fair value through profit or loss 4 578 66 46 4 690
– measured at fair value through OCI 47 266 (43) 47 223
– measured at amortized cost 6 180 6 180
Loans and advances to customers 205 628 (4 368) (797) 200 463
– not held for trading, measured at fair value through profit or loss 1 055 15 1 070
– measured at amortized cost 205 628 (5 423) (812) 199 393
Other financial assets 2 377 2 377
TOTAL financial assets 287 721 66 (794) 286 993
Deferred income tax assets 1 767 (12) 164 1 919

31.12.2017 (classification under IAS 39) Classification and measurement: reclassification Classification and measurement: remeasurement Impairment allowance 01.01.2018 (classification under IFRS 9)
Amounts due to the Central Bank 6 6
Amounts due to banks 4 558 4 558
Hedging derivatives 204 204
Other derivative instruments 2 536 2 536
Amounts due to customers 220 917 220 917
Debt securities in issue 23 932 23 932
Subordinated liabilities 1 720 1 720
Other financial liabilities 4 129 4 129
Deferred income tax provision 36 (3) 33
Provisions for financial liabilities and guarantees granted 86 71 157
TOTAL financial liabilities, provisions for liabilities and guarantees granted and deferred tax provision 258 124 68 258 192

IFRS 9 impact as at 1 January 2018: 31.12.2017
(classification under IAS 39)
Classification and measurement: reclassification Classification and measurement: remeasurement Impairment allowance 01.01.2018
(classification under IFRS 9)
Total change
Accumulated other comprehensive income (110) (78) (188) (78)
Retained earnings (66) 132 (699) (633) (567)
TOTAL impact on equity (176) 54 (699) (821) (645)

Compared to the disclosure of the impact of the implementation of IFRS 9 on the annual consolidated financial statements for 2017, the impairment losses in respect of loan receivables increased by PLN 33 million (PLN 23 million after accounting for tax) in effect of more accurate estimations of impairment. To better reflect the impact of the amendments to the Corporate Income Tax Act related to the implementation of IFRS 9, the effect of a tax liability arising as of 1 January 2018 resulting from the disclosure of the release of the IBNR allowance in the tax calculation and of accounting for the initial loss on the purchased or originated credit-impaired financial assets (POCI) and the respective changes in the deferred tax asset reflecting this liability, of PLN 52 million, was recognized in Note 20 as an impact on the profit/(loss) for the period.

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