6. Equity Accounting for Associates
6.1. Condensed financial information on equity-accounted associates
in PLN m
| Dec 31 2013 | Dec 31 2012 | |
|---|---|---|
| EUROPOL GAZ S.A. | ||
| PGNiG Group’s ownership interest* | 49.74% | 49.74% |
| Core business | Transmission of natural gas | Transmission of natural gas |
| Key financial data** | ||
| Total assets | 4,527 | 4,852 |
| Total liabilities | 918 | 1,192 |
| Revenue | 1,120 | 1,244 |
| Net profit/(loss) | (12) | 103 |
| Gas-Trading S.A. | ||
| PGNiG Group’s ownership interest | 43.41% | 43.41% |
| Core business | Trade | Trade |
| Key financial data** | ||
| Total assets | 41 | 42 |
| Total liabilities | 2 | 2 |
| Revenue | 46 | 42 |
| Net profit/(loss) | (0.9) | (0.6) |
* Including a 48% direct interest and 1.74% held indirectly through Gas-Trading S.A.
** Data from financial statements prepared in accordance with the Polish Accounting Standards.
6.2. Net carrying amount of interests in equity-accounted associates
in PLN m
| Dec 31 2013 | Dec 31 2012 | |
|---|---|---|
| SGT EUROPOL GAZ S.A. | ||
| Equity accounting for the investment* | 1,507 | 1,528 |
| Cost | 38 | 38 |
| Share in changes in equity | 1,545 | 1,566 |
| Impairment losses | (834) | (811) |
| Net carrying amount of the investment | 711 | 755 |
| Gas-Trading S.A. | ||
| Equity accounting for the investment | 15 | 15 |
| Cost | 1 | 1 |
| Share in changes in equity | 16 | 16 |
| Impairment losses | - | - |
| Net carrying amount of the investment | 16 | 16 |
| Total net carrying amount of the investment | 727 | 771 |
*After adjustment to equity to ensure compliance with the Group's accounting policies. See Note 6.3.
6.3. Reconciliation of the value of interests in equity-accounted associates
in PLN m
| Period from Jan 1 – Dec 31 2013 | Period from Jan 1– Dec 31 2012 | |
|---|---|---|
| Net carrying amount of the investments at beginning of the period | 771 | 598 |
| Dividend paid by GAS-TRADING S.A. | 0 | 0 |
| Valuation recognised in profit or loss, including: | (44) | 173 |
| Valuation of SGT EUROPOL GAZ S.A. | (44) | 173 |
| Valuation of Gas-Trading S.A. | - | - |
| Net carrying amount of the investments at end of the period | 727 | 771 |
The Parent estimated the amount of its equity interest in SGT EUROPOL GAZ S.A. on the basis of the company’s equity as shown in its financial statements at December 31st 2013 prepared in accordance with the Polish Accountancy Act, adjusted for differences in the accounting policies applied within the Group and results on intercompany transactions. The differences in the accounting policies concerned recognition of interest expenses in the net value of property, plant and equipment (until the end of 2008). Until the end of 2008, the Group applied the standard approach (in accordance with IAS 23) and did not recognise borrowing costs in the initial value of property, plant and equipment. As of the beginning of 2009, the Group capitalises borrowing costs in the value of property, plant and equipment, therefore the adjustment consists in continued elimination of these costs with respect to the previous years.
Subsequently, the Parent tested its interest in SGT EUROPOL GAZ S.A. for impairment using the discounted cash flow method, on the basis of information on the company's target net profit as indicated in the Inter-Governmental Protocol dated October 29th 2010. The calculations were based on the assumption that in each year in 2011-2021 SGT EUROPOL GAZ S.A.'s net profit will be PLN 21m. The discounted cash flows include all cash flows generated by SGT EUROPOL GAZ S.A., including cash flows related to the servicing of interest-bearing borrowings (interest expenses and repayment of principal amounts).
As at December 31st 2013, the Parent measured the value of its equity interest in jointly-controlled entity SGT EUROPOL GAZ S.A. using the equity method at PLN 1,545m. The company's value estimated as at the same date using the discounted cash flow method was PLN 711m.
Therefore, the Parent made a revaluation adjustment to the company's net carrying amount to reflect the company’s current valuation of PLN 711m. As at the end of 2013, the difference in valuation relative to December 31st 2012 was PLN 44m and was recognised in the income statement for the current period in “Share in net profit/loss of equity-accounted entities”.
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