14.5.2.1. Change in expected credit loss of trade receivables

14.5.2.2. Ageing analysis of trade receivables and expected credit loss as at 31 December 2021

SELECTED ACCOUNTING PRINCIPLES

Receivables
Receivables, excluding trade receivables, are recognised initially at a fair value and subsequently, at amortised cost using the effective interest rate including expected credit loss. On initial recognition, the Group measures trade receivables that do not have a significant financing component at their transaction price. After initial recognition, these receivables, apart from the portfolio of receivables transferred to non-recourse factoring within the limit granted to the Group, are measured at amortized cost, taking into account write-offs for expected credit losses. Receivables subject to full factoring are valued at fair value through the financial result.

The Group applies simplified methods of valuation of receivables measured at amortized cost if it does not distort information included in the statement of financial position, in particular when the period until the repayment date is not long.

Receivables accounted at amortised cost, where the Group applies simplifications, are accounted at the initial recognition in the amount due, and later, including at the end of the reporting period, in the amount of the payment due less impairment allowances.

ESTIMATES

Impairment of trade and other receivables
As an insolvency event (assumption that the contractor defaults), the Group recognises the failure to repay more than 90 days from the maturity of receivables, high probability of bankruptcy, pending bankruptcy/composition proceedings of the counterparty, legal dispute regarding the size or legitimacy of the claim being the basis for a given receivable and other qualitative information indicating the inability to fully satisfy all financial claims on the part of the counterparty.

For the purpose of estimating the expected credit loss, the Group applies a simplified model using a provision matrix which was estimated based on historical levels of repayment and recoveries from receivables from customers and a general model for selected trade receivables from counterparties (in the individual method) using CDS quotations.

The Group includes information on the future in parameters used in the expected loss estimation model, through the management adjustment of the basic default probability rates. In this respect, the Group takes into account changes in macroeconomic data such as, for example, the dynamics of the Gross Domestic Product, inflation rate, unemployment rate or WIG share price indices, and in the event of their significant deterioration compared to the previous period, the Group assesses whether it is necessary to take into account calculation of the expected credit loss of an additional risk element related to the economic situation and future forecasts. As at 31 December 2022, the Group has not identified premises to modify the assumptions used to assess the expected credit loss.

The expected credit loss is calculated when the receivables are recognised in the statement of financial position and is updated on each subsequent day ending the reporting period, depending on the number of days past due for a given receivable.

The calculated, as at the moment of initial recognition of the financial asset, the expected credit loss and each subsequent increase in the expected credit loss are recognised in the financial result.

The Group has active factoring agreements for selling trade receivables under full factoring (non-recourse). The position trade receivables subject to full factoring within the allocated limit is measured at fair value through profit or loss and represents the value of receivables unsold but only available for resale to the factor, within the limit provided for at the end of the reporting period.

Division of financial assets denominated in foreign currencies is presented in note 16.5.2. Division of receivables from related parties is presented in note 17.6.2.

The Group expects that the trade and other receivables by contractors will be realized no later than twelve months after the end of the reporting period.