| Financial statement
97
Standalone nancial report of Echo Investment S.A. for 2020
the balance sheet date along with any tax adjust-
ments for previous years. Deferred tax is calculated
with the balance sheet method as tax to be paid or
reimbursed in the future on the dierences between
the carrying values of assets and liabilities and the
corresponding tax values used to calculate the tax
base, except for temporary dierences which arise at
the time of initial recognition of an asset or liability,
and do not aect the accounting or tax result. At
the commencement of the lease, the right-of-use
asset and the lease liability are equal, so there is no
temporary dierence and no deferred tax is created.
During the lease term, a dierence arises between
the value of the asset and the lease liability. The com-
pany charges deferred income tax on the dierence
between these values. This approach aims to reflect
the relationship between the right-of-use asset and
the lease liability, and account for deferred tax based
on cumulative temporary dierences. This method
provides an eective tax rate that better reflects the
economics of the entire lease transaction.
Deferred tax is not created for temporary dierenc-
es on investments in subsidiaries, jointly controlled
entities and associates, if the Company controls the
reversal of these dierences and they will not be
reversed in foreseeable future. Deferred income tax
assets due to tax loss are created, if the settlement
of the loss in the following years is probable. For the
calculation of deferred income tax, a tax rate is used
which will apply in the reporting periods in which
assets will be settled or liabilities will be released.
Deferred income tax is estimated on every balance
sheet date by recognising dierences in the profit
and loss account, other comprehensive income or
equity, depending where the temporary dierence
from which the deferred tax is subtracted was rec-
ognised. Assets and provisions on deferred income
tax are presented jointly.
EQUITY
Share capital is measured at the nominal value dis-
closed in the National Court Register. Dierences
between the fair value of a payment and the nominal
value of shares are recognised in the share premium.
The issue costs of shares decrease the Company’s
supplementary capital.
PROVISIONS
Provisions are established when the Company has
a present obligation as a result of past events and
when it is probable that the fulfilment of that obli-
gation will involve an outflow of assets representing
economic benefits and the amount of such obliga-
tion can be credibly estimated.
Provisions are measured at the current value of
costs estimated by the Company’s management
according to its best knowledge which must be in-
curred to settle a current liability as of the balance
sheet date.
In accordance with the adopted principle, no provi-
sions are made for retirement benefits. Due to the
age of employees and their rotation, potential re-
serves would not have a significant impact on the
presented financial statements. Upon their occur-
rence, the payment of retirement severance pays will
be booked on a cash basis.
FINANCIAL LIABILITIES
Financial liabilities include loans, borrowings, debt
securities, not payable interest on bank loans ac-
counted for according to the accrual principle as
well as the discount of debt securities to be settled
in subsequent accounting periods. Foreign currency
loans are measured at the selling rate of the bank
serving the Company.
Financial liabilities are initially recognized at fair val-
ue less transaction costs, and then measured using
the “amortized cost” method. The valuation of liabil-
ities includes all costs of obtaining financing, includ-
ing directly related to financing costs of bank fees,
costs of brokers and agents, legal costs, experts, a
bank monitor, and costs related to marketing at ob-
taining the capital, occurring in the issue of bonds.
Trade liabilities are initially measured at fair value,
and subsequently, long-term liabilities are measured
at amortized cost using the eective interest meth-
od. In cases where the dierence between the value
at amortized cost and the value in the amount of
the payment required does not have a significant
eect on the financial results of the Company, such
liabilities are recognized in the balance sheet in the
amount of the payment required.
Trade liabilities are initially measured at fair value,
and subsequently, long-term liabilities are measured
at amortized cost using the eective interest meth-
od. In cases where the dierence between the value
at amortized cost and the value in the amount of
the payment required does not have a significant
eect on the financial results of the Company, such
liabilities are recognized in the balance sheet in the
amount of the payment required.
CURRENCY TRANSACTIONS
The functional currency of the Company is the Pol-
ish Zloty (PLN, zł.). Foreign currencies as at the bal-
ance sheet day are valued at the NBP exchange rate
as at the balance sheet day. Exchange dierences
arising as at the date of their valuation and when
the payment of receivables and liabilities in foreign
currencies, are included respectively in financial
income or costs, and in justified cases, the cost of
manufacturing products or the purchase price of
goods, as well as the purchase price or production
cost of fixed assets, fixed assets under construction
or intangible assets.