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The Group made the decision to implement this standard as of 1 January 2018 without restatement of comparative data, which means that the data for 2017 and 2018 are not comparable, since they were prepared using different accounting principles. The adjustments associated with the adaptation to IFRS 9 were introduced as of 1 January 2018 with regard to the impact on equity.
The Group published detailed information on the impact of the application of IFRS 9 for the first time in the consolidated financial statements for the financial year ended 31 December 2017. There are no material differences in the presented impact between the most recent annual consolidated financial statements and the statements for the current year, in which IFRS 9 was applied for the first time.
Pursuant to the provisions of IFRS 9, the Group made a decision constituting an element of the accounting policy on continuation of application of the hedge accounting requirements pursuant to IAS 39, thus not implementing the hedge accounting requirements following from IFRS 9, until IASB completes the work on the hedge project regarding macro hedging.
The table below presents the impact exerted by implementing IFRS 9 on the change to the classification and measurement of the Group’s financial assets as at 1 January 2018:
| Financial instrument classes | Classification according to IAS 39 | Classification according to IFRS 9 |
| Interests in other entities | Financial assets available for sale | Financial assets at fair value through profit or loss |
| Trade receivables | Loans and receivables | Financial assets measured at amortized cost |
| Receivables by virtue of the acquisition of investment certificates | Loans and receivables | Financial assets at fair value through profit or loss |
| Investment certificates | Financial assets at fair value through profit or loss | Financial assets at fair value through profit or loss |
| Derivatives | Financial assets at fair value through profit or loss | Financial assets at fair value through profit or loss |
| Derivatives | Hedging instruments | Hedging instruments |
| Bank term deposits | Loans and receivables | Financial assets measured at amortized cost. |
| Cash and cash equivalents | Loans and receivables | Financial assets measured at amortized cost. |
Further on, Note 2.6.2 presents a comparison of assets and liabilities according to IAS 39 and IFRS 9, summary of the impact of implementation of IFRS 9 on the Group’s equity, and presents explanations of individual adjustments and additional supplementary information.
| As at 1 January 2018 |
IAS 39 | IFRS 9 | Impact exerted by the change | |||||
| Amortized cost |
Financial assets at fair value through profit or loss | Financial assets available for sale | Hedging instruments | Amortized cost |
Fair value settled by: | Increase / (decrease) | ||
| profit or loss |
other comprehensive income | |||||||
| Interests in other entities | – | – | 0.1 | – | – | 0.1 | – | – |
| Trade receivables | 688.1 | – | – | – | 686.5 | – | – | (1.6) |
| gross value | 768.4 | – | – | – | 768.4 | – | – | – |
| impairment losses | (80.3) | – | – | – | (81.9) | – | – | (1.6) |
| Receivables by virtue of the acquisition of investment certificates | – | 1,450.0 | – | – | – | 1,450.0 | – | – |
| Bank term deposits | 10.4 | – | – | – | 10.4 | – | – | – |
| gross value | 10.4 | – | – | – | 10.4 | – | – | – |
| impairment losses | – | – | – | – | – | – | – | – |
| Cash and cash equivalents | 1,480.4 | – | – | – | 1,480.1 | – | – | (0.3) |
| gross value | 1,480.4 | – | – | – | 1,480.4 | – | – | – |
| impairment losses | – | – | – | – | (0.3) | – | – | (0.3) |
| Derivatives | – | 5.5 | – | 8.3 | – | 5.5 | 8.3 | – |
| FINANCIAL ASSETS | 2,178.9 | 1,455.5 | 0.1 | 8.3 | 2,177.0 | 1,455.6 | 8.3 | (1.9) |
| As at 1 January 2018 | IAS 39 | IFRS 9 | Impact exerted by the change | |
| Amortized cost | Financial assets excluded from IAS 39 |
Amortized cost | Increase / (decrease) | |
| Loans and borrowings | 122.2 | – | 122.2 | – |
| Liabilities under debt securities issued | 856.0 | – | 856.0 | – |
| Finance lease liabilities* | – | 66.8 | 66.8 | – |
| Trade liabilities and other financial liabilities | 1,409.6 | – | 1,409.6 | – |
| FINANCIAL LIABILITIES | 2,387.8 | 66.8 | 2,454.6 | – |
*Finance lease liabilities are excluded from the scope of IFRS 9. In the table above, they are presented solely for comparability.
| As at 1 January 2018 | Cumulative other comprehensive income | Retained earnings | Total equity |
| Reclassification of the item from measured at amortized cost or cost to be measured at fair value for: | – | ||
| – interests in other entities | – | – | |
| Adjustment of impairment losses for assets measured at amortized cost: | (1.9) | ||
| – trade receivables | – | (1.6) | |
| – bank term deposits | – | – | |
| – cash and cash equivalents | – | (0.3) | |
| Income tax adjustments | 0.4 | 0.4 | |
| TOTAL | – | (1.5) | (1.5) |
On 29 December 2017, JSW made a payment in the amount of PLN 1,450.0 million to subscribe for A series investment certificates of the JSW Stabilization Closed-End Investment Fund (“Fund”). As at 31 December 2017, the payment for the investment certificates was presented as other receivables in the consolidated statement of financial position. The rest of the payment was made in January of 2018. The Fund commenced investment activity on 6 February 2018. Receivables by virtue of the acquisition of investment certificates (just like the granted investment certificates in 2018) were included in assets carried at fair value through profit or loss, because they will be settled by the purchase of certificates.
The table below contains information on the items measured at fair value according to the hierarchy contemplated by IFRS:
|
|
Fair value measurement (hierarchy) |
||
| Level 2 | Level 3 | Total | |
| Interests in other entities | – | 0.1 | 0.1 |
| Receivables by virtue of the acquisition of investment certificates | 1,450.0 | – | 1,450.0 |
| Derivatives | 13.8 | – | 13.8 |
| 1,463.8 | 0.1 | 1,463.9 | |
The measurement of receivables by virtue of the acquisition of investment certificates has been determined at the level of the payment made by virtue of subscribing for investment certificates in the JSW Stabilization Closed-End Investment Fund.
The existing rules for recognizing impairment losses required that the entity assess whether there were objective grounds for impairment and (if they are identified) estimate the impairment loss on the basis of planned cash flows. IFRS 9 requires estimation of the expected loss, regardless of whether there were or there were not grounds to recognize such a loss. The standard provides for a 3-stage classification of financial assets from the standpoint of their impairment:
With regard to trade receivables which do not comprise any material financing element, the standard requires application of a simplified approach and valuation of the loss on the basis of expected credit losses for the entire life of the instrument. The Group has classified its trade receivables to Stage 2, except for receivables for which an impairment has been identified – these receivables have been classified to Stage 3. The Group classified cash and cash equivalents and bank term deposits as belonging to Stage 1.
Classification to individual Stages and calculation of the losses and their comparison to the losses consistent with IAS 39 is presented in the table below:
| As at 1 January 2018 | Measurement at amortized cost (classification in terms of impairment) |
|||
|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | |
| Gross value | 1,490.8 | 688.1 | 80.3 | 2,259.2 |
| Trade receivables | – | 688.1 | 80.3 | 768.4 |
| Bank term deposits | 10.4 | – | – | 10.4 |
| Cash and cash equivalents | 1,480.4 | – | – | 1,480.4 |
| Impairment losses (IFRS 9) | (0.3) | (1.6) | (80.3) | (82.2) |
| Trade receivables | – | (1.6) | (80.3) | (81.9) |
| Bank term deposits | – | – | – | – |
| Cash and cash equivalents | (0.3) | – | – | (0.3) |
| Carrying amount (IFRS 9) | 1,490,5 | 686.5 | – | 2,177.0 |
| Comparison of the sizes of impairment losses according to IFRS 9 and IAS 39 | ||||
| According to IAS 39 (only trade receivables) | – | – | 80.3 | 80.3 |
| Increase / (decrease) – for trade receivables | – | 1.6 | – | 1.6 |
| Increase / (decrease) – for bank term deposits | – | – | – | – |
| Increase/(decrease) – for cash and cash equivalents | 0.3 | – | – | 0.3 |
| TOTAL according to IFRS 9 | 0.3 | 1.6 | 80.3 | 82.2 |
The analysis of trade receivables was carried out for separate three groups of receivables i.e. coal and coke trade receivables from business partners who have a share in revenues for the reporting period above 2.5%, for coal and coke receivables from business partners with a share in revenues below 2.5%, and for other receivables.
For other receivables (except for those analyzed individually as not serviced), a portfolio analysis has been carried out and a simplified impairment loss matrix has been applied in individual age brackets on the basis of expected credit losses throughout the life of the receivable based on the default ratio determined on the basis of historical data for 2015-2016. The analysis of the coal and coke trade receivables from business partners with a share in revenues above 2.5%, has been carried out individually for each business partner on the basis of the probability of insolvency determined on the basis of external ratings and publically available rating agency information on the probability of default and the expected loss has been calculated on the basis of these probabilities, average maturity for the receivables portfolio and on the basis of the expected recovery rate. The analysis of coal and coke trade receivables from business partners with a share in revenues below 2.5%, in turn, has been carried out on the basis of the calculated weighted average of probability of insolvency for the portfolio and the expected loss has been calculated for this portfolio on the basis of these probabilities, average maturity and on the basis of the expected recovery rate.
Trade receivables are secured – as at 31 December 2017, 8.3% of the Group’s trade receivables was insured; additionally, 12.2% has been secured by a blank promissory note and 8.5% of the receivables in the form of a letter of credit.
The total impairment loss for trade receivables has been calculated at PLN 1.6 million. As regards non-serviced receivables analyzed individually, the impairment loss in the amount of 100% of the value was kept on the unchanged level of PLN 80.3 million.
The Group estimated the impairment losses for cash and cash equivalents and bank term deposits on the basis of the probability of insolvency calculated on the basis of external ratings of the banks in which the cash is kept and publically available rating agency information pertaining to probability of insolvency and the expected loss was calculated on the basis of these probabilities, the time horizon of the exposure to credit risk and on the basis of the expected recovery rate. The impairment loss has been determined individually for each balance pertaining to the given financial institution. The total impairment loss for cash and cash equivalents and bank deposits was PLN 0.3 million.
The deferred tax on the corrections described above will be recognized in retained earnings.