5.3 Explanation of differences between the 2017 annual consolidated financial statements and these consolidated financial statements

5.3.1. Settlement of the Pekao acquisition

In connection with the final settlement of the acquisition of the shares in Pekao, a retroactive restatement of data as at 31 December 2017 has been performed. More information on this matter is presented in section 2.4.1. 

5.3.2. Change in presentation of the consolidated statement of financial position and the consolidated profit and loss account

In order to propose a better presentation of the PZU Group’s financial standing and financial results, the following presentation changes have been made:

• in the consolidated statement of financial position:
• “loan receivables from clients” have been spun off to a different line item;
• financial derivatives have been spun off to a different line item and merged with derivatives for hedging purposes, presenting their breakdown in the pertinent note;
• in the consolidated profit and loss account, the line item “Net result on realization and impairment losses on investments” has been broken down into the following two separate line items: “Net result on realization of financial instruments and investments” and “Movement in allowances for expected credit losses and impairment losses on financial instruments”.

Comparative data have been restated accordingly.

5.3.3. Amendments to comparative data in Alior Bank

5.3.3.1. Correction of errors pertaining to Corporate Income Tax for 2012-2017 

Alior Bank made a correction to the income tax settlement for 2012-2017 due to eliminating from tax accounts for those years the accrued interest that was not received on the date of writing off the uncollectible receivables, thereby causing an understatement of taxable income. At the same time, some of the interest on the receivables written down in the off-balance sheet records was incorrectly recognized as a taxable temporary difference and included in the basis of the deferred tax liability.

This adjustment lowered equity as at 31 December 2017 by PLN 17 million (PLN 5 million on the PZU Group’s interest and PLN 12 million on non-controlling interests, respectively) and net profit for 2017 by PLN 3 million (PLN 1 million on the PZU Group’s interest and PLN 2 million on non-controlling interests, respectively).

5.3.3.2. Correction of the recognition of the result on structured products

Alior Bank altered the method of measuring the fair value of the option embedded in the structured products (certificates of deposit) issued by the bank. Previously, the embedded options were measured using parameters not coming from an active market. Presently, parameters from the interbank market are used where the bank enters into opposite transactions, hedging the options embedded in structured products. Alior Bank also altered its method of settling costs and income related to the issue of certificates of deposit. Under its previous methodology, marginal costs were approximately close to the amount of the distribution fee and therefore the costs and the fee were recognized all at once at the time of entering into the transaction. Alior Bank reviewed its marginal costs as a result of which their level was reduced. Accordingly, Alior Bank presently settles the income from the distribution fee and the marginal costs spread over time until the date of maturity of the certificates of deposit.

This adjustment lowered equity as at 31 December 2017 by PLN 35 million (PLN 11 million on the PZU Group’s interest and PLN 24 million on non-controlling interests, respectively) and lowered net profit for 2017 by PLN 22 million (PLN 7 million on the PZU Group’s interest and PLN 15 million on non-controlling interests, respectively).

5.3.3.3. Correction to the recognition of the cost for the Bank Guarantee Fund fee in respect to a portion of the contribution in the form of freezing securities in the last period

In conjunction with the amendment as of 2017 to the BFG Act and the regulation of 10 March 2017 issued by the Minister of Development and Finance on transferring in the form of payment obligations the contributions paid to BFG, availing itself of § 4 of this regulation Alior Bank makes the settlement (30% of the contribution due) with BFG in the form of a payment obligation in the form of a freeze on securities. After receipt on 2 March 2017 and 20 April 2017 of letters from BFG specifying the amounts of the contributions to the Deposit Guarantee Fund and the Forced Restructuring Fund, Alior Bank applied an incorrect method of keeping records by recognizing this portion of the contribution similarly as in the case of freezing securities for the Guaranteed Funds Protection Fund and accordingly it failed to recognize the cost of the payment obligation in its profit and loss account. According to IAS 37 and IFRIC 21 a payment obligation in the form of freezing securities, just as the remaining portion of the contribution to BFG should be recognized as a cost in the current period. Accordingly, Alior Bank made a retrospective adjustment by recognizing the payment obligation in the form of freezing securities for 2017 as a cost in 2017 and restating the comparative data.

This adjustment lowered equity as at 31 December 2017 and net profit for 2017 by PLN 19 million (PLN 6 million on the PZU Group’s interest and PLN 13 million on non-controlling interests, respectively).

5.3.4. Impact exerted by the differences on the consolidated financial statements

The following tables present the impact of the aforementioned changes on the individual items of the consolidated financial statements.