11. Intangible assets and goodwill

As intangible assets, the Group recognises identifiable non-cash assets without a physical form such as:

• non-current property rights acquired for commercial use, which have estimated useful lives of more than one year and are to be used for the Company’s captive use,
• costs of development work,
• goodwill excluding internally generated goodwill,
• easements acquired for power lines and received free of charge,
• intangible assets not yet available for use.

Intangible assets acquired in a separate transaction are initially recognised at acquisition or production cost (in the case of development work). After the initial recognition, intangible assets are stated at their purchase prices or manufacturing costs less amortisation and impairment write-downs. Expenditures incurred on intangible assets generated by the Company itself, with the exception of capitalised expenditures incurred on development work, are not capitalised and are included in the cost of the period in which they are incurred.

The Group estimates whether the economic useful life of an intangible asset is definite or indefinite and, if it is definite, it estimates its length on the basis of production volume or any other measure constituting a basis for determining the length of economic useful life. The economic useful life of an intangible asset is regarded as indefinite if, on the basis of an analysis of relevant factors, there exists no foreseeable length of time in which such an asset will generate cash flows for the Group.

The value subject to amortisation is amortised over a period corresponding to the estimated economic useful life of an intangible asset. Amortisation starts on the first day of the month following the month in which an asset is available for use.

Intangible assets with indefinite useful lives and intangible assets which have not been brought into use are tested for impairment on a cyclical (annual) basis.

Other intangible assets are tested for impairment only if there are indications of impairment. If there are indications of impairment and the carrying amount exceeds the estimated recoverable amount, then the carrying amount of such assets or the cash-generating units to which such assets belong is written down to the recoverable amount. The Group recognises impairment write-downs on intangible assets in the statement of profit and loss under costs by nature. This also applies to impairment write-downs on intangible assets not yet brought into use or those resulting from the impairment of an entire CGU.

The amortisation period and the amortisation method for an intangible asset are reviewed at the end of each financial year. Any changes resulting from the review are recognised as a change in estimates. The amortisation periods for intangible assets are as follows:

As at the reporting date of December 31, 2020, goodwill was allocated to the following segments:

• Heat Generation – PLN 192 million,
• Renewable Power Generation – PLN 4 million,
• Other Activities – PLN 8 million.