10. Intangible assets and goodwill
| SIGNIFICANT ACCOUNTING PRINCIPLES |
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Intangible assets As intangible assets, the Group recognises identifiable non-cash assets without a physical form such as:
Intangible assets acquired in a separate transaction are initially recognised at acquisition or production cost (in the case of development work). After the initial recognition, intangible assets are stated at their purchase prices or manufacturing costs less amortisation and impairment write-downs. The Group estimates whether the economic useful life of an intangible asset is definite or indefinite and, if it is definite, it estimates its length on the basis of production volume or any other measure constituting a basis for determining the length of economic useful life. The economic useful life of an intangible asset is regarded by the Group as indefinite if, on the basis of an analysis of relevant factors, there exists no foreseeable length of time in which such an asset will generate cash flows for the Group. Depreciation is applicable to the initial value of an intangible asset with a definite economic lifetime less its residual value. The residual value of an intangible asset is based on the recoverable amount from disposal determined using prices prevailing at the date of estimation for similar assets that have reached the end of their useful life and have operated under conditions similar to those in which the intangible asset has operated. The applicable period and depreciation method are reviewed annually. Any changes resulting from the review are recognised as a change in estimates. Intangible assets with indefinite useful lives and intangible assets which have not been brought into use are tested for impairment on a cyclical (annual) basis. Other intangible assets are tested for impairment only if there are indications of impairment. If there are indications of impairment and the book value exceeds the estimated recoverable amount, then the book value of such assets or the cash-generating units to which such assets belong is written down to the recoverable amount. The Group recognises impairment write-downs of intangible assets in the statement of profit and loss under costs by type, and in accordance with the depreciation reference under costs by function. This also applies to impairment write-downs on intangible assets not yet brought into use or those resulting from the impairment of an entire CGU. |
Economic lifetimes adopted for particular groups of intangible assets:
| Asset group | Average remaining period of amortisation in years | Applied total periods of amortisation in years |
| Patents and licences | 4 | 4 – 25 |
| Costs of completed development works | 2 | 3 – 15 |
| Other | 12 | 3 – 25 |
| As at 31 December 2023 | As at 31 December 2022 | |
| Costs of completed development work | 1 | 1 |
| Goodwill | 621 | 276 |
| Customer relations | 471 | – |
| Software | 414 | 179 |
| Other licences and patents | 10 | 5 |
| Other intangible assets | 191 | 151 |
| IA not brought into useia | 244 | 114 |
| NET VALUE OF INTANGIBLE ASSETS | 1,952 | 726 |
Changes in intangible assets by group
| Costs of completed development work | Goodwill | Customer relations | Software | Other licences and patents | Other intangible assets | IA not brought into use | Total | |
| GROSS BOOK VALUE | ||||||||
| AS AT 1 JANUARY 2023 | 16 | 276 | – | 866 | 115 | 274 | 149 | 1,696 |
| Capital expenditure | – | – | – | – | – | 1 | 137 | 138 |
| Settlement of intangible assets not brought into use | – | – | – | 63 | 10 | 13 | (86) | – |
| Liquidation, sale | – | – | – | (5) | (12) | – | – | (17) |
| Changes in composition of Capital Group | – | 345 | 471 | 267 | – | 40 | 82 | 1,205 |
| Other | – | – | – | – | (2) | 5 | – | 3 |
| AS AT 31 DECEMBER 2023 | 16 | 621 | 471 | 1,191 | 111 | 333 | 282 | 3,025 |
| AMORTISATION AND WRITE-DOWNS | ||||||||
| AS AT 1 JANUARY 2023 | 15 | – | – | 687 | 110 | 123 | 35 | 970 |
| Amortisation, liquidation | – | – | – | 94 | 4 | 17 | – | 115 |
| Write-downs | – | – | – | – | 1 | – | 6 | 7 |
| Liquidation, sale | – | – | – | (5) | (12) | – | – | (17) |
| Other | – | – | – | 1 | (2) | 2 | (3) | (2) |
| AS AT 31 DECEMBER 2023 | 15 | – | – | 777 | 101 | 142 | 38 | 1,073 |
| NET VALUE AS AT 31 DECEMBER 2023 | 1 | 621 | 471 | 414 | 10 | 191 | 244 | 1,952 |
| Costs of completed development work | Goodwill | Software | Other licences and patents | Other intangible assets | IA not brought into use | Total | |
| GROSS BOOK VALUE | |||||||
| AS AT 1 JANUARY 2022 | 18 | 285 | 842 | 107 | 260 | 106 | 1,618 |
| Capital expenditure | – | – | – | – | – | 123 | 123 |
| Settlement of intangible assets not brought into use | – | – | 64 | 3 | 11 | (78) | – |
| Transfers between groups | – | – | (5) | 5 | – | – | – |
| Liquidation, sale | – | – | (30) | (1) | – | – | (31) |
| Changes in composition of Capital Group | (3) | (9) | (2) | 1 | (1) | 1 | (13) |
| Other | 1 | – | (3) | – | 4 | (3) | (1) |
| AS AT 31 DECEMBER 2022 | 16 | 276 | 866 | 115 | 274 | 149 | 1,696 |
| AMORTISATION AND WRITE-DOWNS | |||||||
| AS AT 1 JANUARY 2022 | 16 | – | 677 | 104 | 105 | 34 | 936 |
| Amortisation, liquidation | 1 | – | 42 | 2 | 10 | – | 55 |
| Write-downs | – | – | – | 3 | 8 | – | 11 |
| Transfers between groups | – | – | (3) | 3 | – | – | – |
| Liquidation, sale | – | – | (29) | (1) | – | – | (30) |
| Changes in composition of Capital Group | (2) | – | (2) | – | (1) | 1 | (4) |
| Other | – | – | 2 | (1) | 1 | – | 2 |
| AS AT 31 DECEMBER 2022 | 15 | – | 687 | 110 | 123 | 35 | 970 |
| NET VALUE AS AT 31 DECEMBER 2022 | 1 | 276 | 179 | 5 | 151 | 114 | 726 |
Intangible assets not brought into use
The presented amount of intangible assets not brought into use as at 31 December 2023 mainly relates to IT system implementation projects within the Capital Group.
Goodwill
As at the reporting date of 31 December 2023, goodwill was allocated to the following segments:
- Railway Power Engineering – PLN 345 million,
- Heat Generation – PLN 192 million,
- Renewable Power Generation – PLN 84 million.
Customer relations
As a result of the final settlement of the acquisition of the PKP Energetyka Group, the “Customer relations” asset was recognised in intangible assets, reflecting the favourable impact of relationships and contracts with overhead contact line network customers on profitability and the achievement of higher margins than market averages. As at the reporting date, the value of customer relations amounted to PLN 471 million and was estimated using the Multi-period Excess Earnings Method as the discounted excess of trading results projected at the acquisition date over trading results forecast earlier by the PGE Capital Group. Customer relations are an asset with an indefinite useful life.
The amortisation periods for intangible assets
Carried out in 2023, the verification of economic useful life periods of intangible assets resulted in an increase in amortisation costs for 2023 by the combined amount of approximately PLN 1 million.