14.4.1. Discount rate

14.4.2. Key assumptions used in asset impairment tests as at 31 December 2022

14.4.3. Recognition and reversal of impairment losses on property, plant and equipment, intangible assets, goodwill and rights-of-use assets

Impairment of property, plant and equipment, intangible assets, goodwill and rights-of-use assets
As at the end of the reporting period, the Group assesses whether there is any indication of impairment or reversal of an impairment loss on any of the assets or cash-generating units (CGUs).

If there are indications that an impairment may have occurred, an impairment test is performed, whereby the Group estimates the recoverable amount of that asset or CGU by determining fair value less costs to sell or value in use using the appropriate discount rate, whichever is higher.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there are indications of its impairment.

The recoverable amount is determined at the level of the CGU to which the asset belongs. Assets that do not generate independent cash flows are grouped at the lowest level at which they generate cash flows that are independent from cash flows generated by other assets.

Recognition and reversal of impairment losses on property, plant and equipment, intangible assets and right-of-use assets are presented in other expenses and other operating income.

Impairment losses on goodwill are recognised as other expenses and are not reversed.

Impairment of property, plant and equipment, intangible assets, goodwill and rights-of-use assets
The Group tested assets for impairment using discounted cash flow models. The most important areas of estimation are the assumptions adopted in the models regarding the development of future expected cash flows, as well as the method used to calculate discount rates. The critical assumptions in the developed scenarios for future expected cash flows primarily relate to forecasts of key macroeconomic parameters including estimates of the probability of the impact of CO₂ emission allowance prices on revenue from sales of products.

A significant judgement made by the ORLEN Management Board was to allocate probability weights to individual macroeconomic scenarios. The scenario analysis was applied to measure the refining and petrochemical segments' assets at ORLEN, ORLEN Unipetrol and ORLEN Lietuva.

As at 31 December 2022, the ORLEN Group identified indications that necessitate impairment testing in accordance with IAS 36 Impairment of Assets in connection with:

• changes in the macroeconomic environment in 2022,
• higher discount rates due to an increase in interest rate benchmarks,
• adoption of the Financial Plan of ORLEN and ORLEN Group for 2023 on 27 January 2023,
• update on 27 February 2023 of the ORLEN Group's Strategy until 2030.