5.12 Financial instruments

Recognition and classification

Financial assets and liabilities are recognized in the statement of the financial standing when a PZU Group entity becomes a party to a binding contract under which it incurs risk and receives benefits related to the financial instrument. For transactions concluded on an organized market, the purchase or sale of financial assets and liabilities is recognized as at the trade date.

Financial instruments are classified at the moment of acquisition according to one of four categories: held to maturity, available for sale, measured at fair value through financial result, or loans. At acquisition, financial instruments are recognized at fair value adjusted by transaction costs directly attributable to the purchase or sale of a given financial instrument. Instruments measured at fair value through profit or loss for which transaction costs reduce the item “Net investment income” as a one-off event are an exception. The fair value of a financial instrument upon initial recognition is usually its transaction price, unless the nature of the financial instrument provides otherwise.

Financial assets and liabilities are classified and measured according to the principles described in points 5.12.1 - 5.12.5.

In the case of financial instruments generating interest income, the interest is calculated starting from the first day after the date of transaction settlement.

Derecognition from the consolidated statement of financial standing

Financial assets are derecognized from the consolidated statement of financial position if they expire or if the contractual entitlement to cash flows from the given asset is transferred to another entity. The transfer takes place also when contractual entitlement to cash flows from an asset is blocked, but the contractual obligation to transfer these cash flows to a third party is accepted.

When financial assets are transferred, it is estimated to what extent the risk and benefits related to the ownership of an asset remain:

  • if the whole risk and benefits related to the ownership of a financial asset are transferred, the financial asset is derecognized from the consolidated statement of financial standing;
  • if practically the whole risk and benefits related to the ownership of a financial asset is kept, the financial asset continues to be recognized in the consolidated statement of financial standing;
  • if practically the whole risk and benefits related to the ownership of a financial asset are neither transferred nor kept, the financial asset continues to be recognized in the consolidated statement of financial standing.

If the control is kept, the financial asset is recognized in the consolidated statement of financial standing to the amount resulting from the continuous involvement, accordingly, if there is no control, the asset is derecognized from the consolidated statement of financial standing.

A financial liability (or its part) is derecognized from the consolidated statement of financial standing, if the obligation laid down in the contract was fulfilled, remitted or expired.

5.12.1. Financial assets held to maturity

5.12.2. Financial assets available for sale

5.12.3. Financial instruments measured at fair value through profit or loss

5.12.4. Loans, borrowings and other receivables

5.12.5. Financial liabilities other than ones measured at fair value

5.12.7. Impairment of financial assets

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