28. Intangible assets
[Financial notes are presented in PLN thousand]
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 |
| 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.