19. Financial revenues and costs
SELECTED ACCOUNTING PRINCIPLES
Financial revenues and costs comprise, in particular, revenues and costs related to:
- interest and unwinding of discounts and revenues due to participating in the profits of other entities,
- revaluation of financial instruments, except financial assets measured at a fair value where the effects are recognized in other comprehensive income and charged to revaluation reserve and derivative commodity instruments falling within the scope of IFRS 9 Financial Instruments in the case of which gains/losses on change in measurement and on exercising are presented within operating activities where gains/losses on the related trading in goods are also recognized;
- foreign exchange differences, except for differences recognized in the initial value of a fixed asset, to the extent they are classified as adjustment to interest expenses;
- other items related to financing activities.
Transactions expressed in a foreign currency are converted to functional currency at initial recognition according to the average exchange rate determined for a given currency by the National Bank of Poland as at the day preceding such a day. As at the balance sheet date, monetary items expressed in foreign currency are converted applying the closing exchange rate (the average exchange rate determined for a given currency by the National Bank of Poland on that day is deemed the closing exchange rate),
For the purpose of balance sheet valuation, the following exchange rates were applied:
| Currency | 31 December 2022 | 31 December 2021 |
|---|---|---|
| EUR | 4,6899 | 4,5994 |
| USD | 4,4018 | 4,06 |
| CZK | 0,1942 | 0,185 |
Exchange differences arising on settlement and translation as at the balance sheet date are recognized, respectively, in the income statement under financial revenues (costs), except when capitalized in the value of assets.
| Year ended 31 December 2022 | Year ended 31 December 2021 (restated figures) | |
|---|---|---|
| Income and costs from financial instruments | (931) | (221) |
| Interest costs | (591) | (365) |
| Gain/loss on derivative instruments | (219) | 116 |
| Exchange differences | (124) | 15 |
| Commission relating to borrowings and debt securities | (24) | (25) |
| Remeasurement of loans granted | (14) | 1 |
| Interest income | 75 | 25 |
| Dividend income | 14 | 10 |
| Other | (48) | 2 |
| Other finance income and costs | (28) | (14) |
| Interest on employee benefits | (31) | (9) |
| Interest on discount of other provisions | (8) | (2) |
| Other finance income | 22 | 6 |
| Other finance costs | (11) | (9) |
| Total, including recognized in the statement of comprehensive income: | (959) | (235) |
| Interest expense on debt | (591) | (365) |
| Finance income and other finance costs | (368) | 130 |
The increase in interest expenses in the year ended 31 December 2022 in relation to the comparable period results from the level of external borrowing and the increase in base rates. The change of the base rates is partially offset by the concluded IRS hedging instruments. The amount of interest expense shown in the table takes into account the above hedging effect.
The loss on derivatives is mainly related to the decline in the measurement of FX derivatives at the end of 2022.