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Annual
Report 2022

28. Intangible assets

Significant accounting policies

Goodwill

Goodwill is defined as a surplus of the purchasing price over the fair value of acquired assets, assumed liabilities and contingent liabilities of the acquired subsidiary, associate or a unit under joint control. Goodwill at initial recognition is carried at purchase price reduced by any accumulated impairment losses. Impairment is determined by estimating the recoverable value of the cash generating unit, to which given goodwill pertains.

If the recoverable value of the cash generating unit is lower than the carrying amount an impairment charge is made. Impairment identified in the course of such tests is not reversed.

Goodwill on acquisition of subsidiaries is presented in intangible assets and goodwill on acquisition of associates is presented under the caption ‘Investments in associates’.

Other intangible assets

Intangible assets are assets controlled by the Group which do not have a physical form which are identifiable and represent future economic benefits for the Group directly attributable to such assets.

These assets include:

  • computer software licenses,
  • copyrights,
  • costs of completed development works.

Intangible assets are initially carried at purchase price. Subsequently intangible assets are stated at cost less accumulated amortization and accumulated impairment losses.

Intangible assets with a definite useful life are amortized over their estimated useful life. Intangible assets with indefinite useful life are not amortized. All intangible assets are reviewed on a periodical basis to verify if any significant impairment triggers occurred, which would require performing a test for impairment and a potential impairment charge.

As far as intangible assets with indefinite useful life and those still not put into service are concerned, impairment test is performed on a yearly basis and additionally when impairment triggers are identified.

Financial data

31.12.2022 31.12.2021
Intangible assets, including: 1 504 735 1 551 830
research and development expenditures 13 269 10 624
licenses and patents 814 596 913 080
other 119 974 130 842
assets under construction 556 896 497 284
Goodwill (*) 748 552 748 552
Total 2 253 287 2 300 382

The item ‘Goodwill’ contains:

  • goodwill recognized upon acquisition of Pekao Investment Management S.A. and indirectly Pekao TFI S.A. by Bank Pekao S.A. It is determined the smallest identifiable cash-generating units (‘CGU’) relating mainly to the Bank’s assets management , to which the goodwill has been allocated in the amount of PLN 692 128 thousand,
  • goodwill that was transferred to Bank Pekao S.A. on integration with Bank BPH S.A. It represents the goodwill recognized upon acquisition of Pierwszy Komercyjny Bank S.A. in Lublin (‘PKBL’) by Bank BPH S.A. and relates to those branches of the PKBL which were transferred to Bank Pekao S.A. as a result of integration with Bank BPH S.A. It is determined the smallest identifiable cash-generating units (‘CGU’) relating to the Bank’s retail segment, to which the goodwill has been allocated in the amount of PLN 51 675 thousand,
  • gooodwill recognized upon acquisition of Pekao Leasing i Finanse S.A. (formerly BPH Leasing S.A.) by Pekao Leasing Holding S.A. (formerly BPH PBK Leasing S.A.). It is determined the smallest identifiable cash-generating units (‘CGU’) relating to the Bank’s leasing business segment, to which the goodwill has been allocated in the amount of PLN 2 885 thousand,
  • goodwill recognized upon acquisition of Spółdzielcza Kasa Oszczędnościowo – Kredytowa im. Mikołaja Kopernika by Bank Pekao S.A. It is determined the smallest identifiable cash-generating units (‘CGU’) relating to the Bank’s retail segment, to which the goodwill has been allocated in the amount of PLN 960 thousand,
  • goodwill resulting from the acquisition of Idea Bank S.A. by Bank Pekao S.A. The smallest identifiable cash-generating units relating to the Bank’s retail segment were determined, to which goodwill was assigned in the amount of PLN 904 thousand.

In respect to the goodwill, the impairment tests are performed annually, irrespective of whether there is any indication that it may be impaired.

The impairment tests are performed by comparing the carrying amount of the CGU, including the goodwill, with the recoverable amount of the CGU. The recoverable amount is estimated on the basis of value in use of the CGU. The value in use is the present, estimated value of the future cash flows for the period of 5 years, taking into account the residual value of the CGU. The residual value of the CGU is calculated based on an extrapolation of cash flows projections beyond the forecast period using the growth rate presented in the table below. The forecasts of the future cash flows are based on the assumptions included the budget for 2023 and financial plan for 2024-2027. To discount the future cash flows, it is applied the discount rates, which includes the risk-free rate and the risk premium.

The growth rates and discount rates used in the impairment tests for goodwill are as follows.

31.12.2022 31.12.2021
GROWTH RATE DISCOUNT RATE GROWTH RATE DISCOUNT RATE
Pekao Investment Management S.A. (including Pekao TFI S.A.) 3.50% 12.62% 2.50% 9.20%
PKBL 3.50% 12.88% 2.50% 9.16%

The impairment tests performed as at 31 December 2022 and as at 31 December 2021 showed the surplus of the recoverable amount over the carrying amount of the CGU, and therefore no CGU impairments were recognized.

Sensitivity analysis

Estimating the recoverable amount is a complex process and requires the use of subjective assumptions. Relatively small changes in key assumptions may have a significant effect on the measurement of the recoverable amount.

The table below presents the surplus of recoverable amounts over the carrying amounts under the current assumptions and the maximum discount rates at which the carrying amounts and recoverable amounts of each CGU are equalized.

31.12.2022 31.12.2021
SURPLUS MARGINAL VALUE OF DISCOUNT RATE SURPLUS MARGINAL VALUE OF DISCOUNT RATE
Pekao Investment Management S.A. (w tym Pekao TFI S.A.) 179 622 14.63% 650 020 14.67%
PKBL 11 144 13.46% 6 545 9.39%
2022 RESEARCH AND DEVELOPMENT COSTS LICENSES AND PATENTS OTHER ASSETS UNDER CONSTRUCTION GOODWILL TOTAL
GROSS VALUE
Opening balance 86 205 3 806 600 212 207 497 284 748 552 5 350 848
Increases including: 5 335 370 244 2 555 426 577 804 711
acquisitions 9 561 335 852 345 413
transfer from investments outlays 5 335 352 825 1 678 359 838
the work carried out on their own 90 725 90 725
other 7 858 877 8 735
Decreases, including: (955) (384 192) (1 128) (366 965) (753 240)
liquidation and sale (64 880) (64 880)
transfer to non-current assets held for sale
transfer from investments outlays (359 838) (359 838)
other (*) (955) (319 312) (1 128) (7 127) (328 522)
Closing balance 90 585 3 792 652 213 634 556 896 748 552 5 402 319
ACCUMULATED AMORTIZATION
Opening balance 75 581 2 893 520 81 365 3 050 466
Amortization 1 993 282 619 12 924 297 536
Liquidation and sale (64 765) (64 765)
Transfer to non-current assets held for sale
Other (*) (258) (133 318) (629) (134 205)
Closing balance 77 316 2 978 056 93 660 3 149 032
IMPAIRMENT
Opening balance
Increases
Decreases
Closing balance
NET VALUE
Opening balance 10 624 913 080 130 842 497 284 748 552 2 300 382
Closing balance 13 269 814 596 119 974 556 896 748 552 2 253 287
(*) including: changes related to the reclassification of part of IT expenses from intangible assets to costs settled over time.
2021 RESEARCH AND DEVELOPMENT COSTS LICENSES AND PATENTS OTHER ASSETS UNDER CONSTRUCTION GOODWILL TOTAL
GROSS VALUE
Opening balance 83 825 3 342 381 211 947 345 761 747 648 4 731 562
Increases including: 3 137 468 680 267 566 323 904 1 039 311
acquisitions 8 639 505 811 514 450
transfer from investments outlays 3 137 405 702 184 409 023
increases due to the acquisition of Idea Bank S.A 40 435 904 41 339
the work carried out on their own 56 262 56 262
other 13 904 83 4 250 18 237
Decreases, including: (757) (4 461) -7 (414 800) (420 025)
liquidation and sale (354) -7 (361)
transfer to non-current assets held for sale (4 107) (198) (4 305)
transfer from investments outlays (409 023) (409 023)
other (757) (5 579) (6 336)
Closing balance 86 205 3 806 600 212 207 497 284 748 552 5 350 848
ACCUMULATED AMORTIZATION
Opening balance 73 754 2 581 919 67 792 2 723 465
Amortization 1 879 311 861 13 598 327 338
Liquidation and sale (354) -7 (361)
Transfer to non-current assets held for sale (3 020) (3 020)
Other (52) 3 114 (18) 3 044
Closing balance 75 581 2 893 520 81 365 3 050 466
IMPAIRMENT
Opening balance
Increases
Decreases
Closing balance
NET VALUE
Opening balance 10 071 760 462 144 155 345 761 747 648 2 008 097
Closing balance 10 624 913 080 130 842 497 284 748 552 2 300 382

 

In the period from 1 January to 31 December 2022 the Group acquired intangible assets in the amount of PLN 345 413 thousand (in 2021 – PLN 514 450 thousand).

In the period from 1 January to 31 December 2022 and in 2021 there have been no intangible assets whose title is restricted and pledged as security for liabilities.

Contractual commitments

As at 31 December 2022 the contractual commitments for the acquisition of intangible assets amounted to PLN 82 157 thousand, whereas as at 31 December 2021 – PLN 229 513 thousand.

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