in PLN millions, unless otherwise stated
Loans granted to Sierra Gorda S.C.M. were classified as credit-impaired financial assets due to the high credit risk at the moment of initial recognition (POCI). POCI loans are measured at amortised cost using the effective interest rate, adjusted by the credit risk using the scenario analysis and available free cash of Sierra Gorda S.C.M.
The terms of repayment of loans granted to finance operations abroad, including planned repayment dates, were set in individual agreements. Pursuant to the schedule, the principal amount and interest are paid on demand, but not later than 15 December 2024. Due to the implementation of IFRS 9 as at 1 January 2018, the expected, undiscounted credit loss at the moment of initial recognition was estimated to amount to PLN 6 105 million (USD 1 754 million per the 3.4813 USDPLN exchange rate of NBP dated 29 December 2017).
The start of repayment of loans by Sierra Gorda S.C.M. will depend on that company’s financial standing. It is assumed in the long-term plans of Sierra Gorda S.C.M. that the loans will be repaid with interest. The Group does not foresee a demand to repay the loan by the end of 2021, and therefore the loan is presented as a non-current receivable. Due to the fact that settling the loan is planned and probable in the foreseeable future, the loan is not a net investment under IAS 21.15.
Pursuant to the requirements of IFRS 9.5.5.17, the Group performed impairment testing of the loan. To estimate the expected credit losses, scenario analysis (IFRS 9.5.5.18) was used, comprising the Group’s assumptions on the repayment of the loan granted. Scenario analysis was based on cash flows adopted in December 2020 in Sierra Gorda S.C.M.’s budget, which were subsequently discounted using the effective interest rate method adjusted by the credit risk, determined at the initial recognition of the loan pursuant to IFRS 9.B5.5.45 at the level of 6.42%.
| 2020 | 2019 | |
|---|---|---|
| As at 1 January | 5 694 | 5 199 |
| Accrued interest | 377 | 341 |
| [Note 4.4] Gains due to the reversal of allowances for impairment | 74 | 106 |
| Exchange differences from the translation of foreign operation statements with a functional currency other than PLN | (76) | 48 |
| As at 31 December | 6 069 | 5 694 |
The loan granted to Sierra Gorda S.C.M. has a fixed interest rate.
As at 31 December 2020, the Group estimated cash flows on repayment of receivables due to loans granted to Sierra Gorda S.C.M. in the amount of PLN 6 069 million, which were higher than the carrying amount of loans (PLN 5 995 million) by the amount of PLN 74 million, as a result of which there was a reversal of an allowance for impairment recognised at the moment of initial recognition of an asset (in the comparable period there was a reversal of an allowance for impairment in the amount of PLN 106 million).
