Main page > Financial statements > Consolidated annual report > Consolidated financial statement of JSW S.A. Capital Group for 2012

Consolidated financial statement of JSW S.A. Capital Group for 2012

Consolidated statement of financial position

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated Cash Flow Statement

1.1. Name, registered office and line of business

1.2. Approval of the financial statements

1.3. Going concern assumption

2. Description of significant accounting policies applied

2.1. Basis for drawing up the financial statements

2.2. Consolidation

2.3. Segment reporting

2.4. Measurement of items in foreign currencies

2.5. Property, plant and equipment

2.6. Investment property

2.7. Intangible assets

2.8. Impairment of non-financial assets

2.9. Financial assets

2.10. Derivatives

2.11. Inventories

2.12. Cash and cash equivalents

2.13. Share capital

2.14. Trade liabilities and other liabilities

2.15. Loans and borrowings

2.16. Current and deferred income tax

2.17. Employee benefits

2.18. Provisions

2.19. Subsidies

2.20. Contingent items

2.21. Revenues

2.22. Costs

2.23. Cost of external funding

2.24. Lease

2.25. Dividend payment

3.1. Financial risk factors

3.2. Capital risk management

3.3. Estimation of fair value

4. Significant accounting estimations and judgments

5.1. Employee package for eligible employees

5.2. Employee package for ineligible employees

6. Property, plant and equipment

7. Intangible assets

8. Investment property

9. Financial instruments by type

10. Other long-term assets

11. Financial derivatives

12. Inventories

13. Trade receivables and other receivables

14. Other short-term financial assets

15. Cash and cash equivalents

16. Share capital

17. Loans and borrowings

18. Deferred income tax

19. Employee benefit liabilities

20. Provisions

21. Trade liabilities and other liabilities

22. Liabilities under financial lease agreements

23. Future contractual liabilities and operating lease liabilities

24. Sales revenues

25. Costs by type

26. Other income

27. Disputed property tax on underground mine workings

28. Other costs

29. Other net profits

30. Financial income and costs

31. Operating segments

32. Income tax

33. Earnings per share

34. Dividends paid and proposed

35. Net cash inflows on operating activity

36. Contingent items

37. Transactions with related entities

38. Business combinations

39. Events taking place after the final day of the reporting period

Consolidated statement of financial position

	31 Dec 2012	31 Dec 2011
Assets
Non-current assets
Property, plant and equipment	9,230.9	8,458.8
Intangible assets	77.3	64.9
Investment property	23.1	-
Investments in associates	10.8	9.1
Deferred income tax assets	184.2	101.6
Other long-term assets	265.7	239.2
	9,792.0	8,873.6
Current assets
Inventories	806.1	739.7
Trade receivables and other receivables	1,020.4	1,363.2
Income tax overpaid	4.2	22
Financial derivatives	3.9	4
Other short-term financial assets	948.9	24.6
Cash and cash equivalents	1,490.7	2,589.0
	4,274.2	4,742.5
Non-current assets available for sale	0.9	0.9
	4,275.1	4,743.4
TOTAL ASSETS	14,067.1	13,617.0

Equity
Equity attributable to shareholders of the Parent Company
Share capital	1,251.9	1,260.9
Share premium account	905	905
Retained earnings	6,245.6	6,070.4
	8,402.5	8,236.3
Non-controlling interest	171.4	207.1
Total equity	8,573.9	8,443.4

Liabilities
Long-term liabilities
Loans and borrowings	189.9	241.2
Deferred income tax liabilities	47.4	-
Employee benefit liabilities	2,084.7	1,774.3
Provisions	502.9	436.6
Trade liabilities and other liabilities	211.2	208
	3,036.1	2,660.1
Short-term liabilities
Loans and borrowings	75.7	187.6
Financial derivatives	0.3	0.1
Current income tax liabilities	40.4	3.6
Employee benefit liabilities	269.7	239.7
Provisions	286.7	246.4
Trade liabilities and other liabilities	1,784.3	1,836.1
	2,457.1	2,513.5
Total liabilities	5,493.2	5,173.6
TOTAL EQUITY AND LIABILITIES	14,067.1	13,617.0

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Consolidated statement of comprehensive income

	For the financial year ended 31 Dec
	2012	2011 restated *
Sales revenues	8,821.0	9,376.8
Cost of products, materials and merchandise sold	(6,385.8)	(5,967.1)
Gross sales profit	2,435.2	3,409.7

Cost of sales	(361.9)	(272.2)
Administrative costs	(662.5)	(508.9)
Employee share ownership plan	-	(293.0)
Other income	53.5	49.4
Disputed property tax on underground mine workings	(48.5)	359.7
Other costs	(111.5)	(48.8)
Other net profits	3.9	12.6
Operating profit	1,308.2	2,708.5

Financial income	119.8	118.1
Financial costs	(153.1)	(152.7)
Share in profits of associates	2	1.1
Pre-tax profit	1,276.9	2,675.0

Income tax	(288.8)	(589.0)
Net profit	988.1	2,086.0

Other comprehensive income:
Actuarial profit/loss	(234.0)	24.1
Income tax	44.4	(4.6)
Total other comprehensive income	(189.6)	19.5

Total comprehensive income	798.5	2,105.5

Net profit attributable to:
- shareholders of the Parent Company	985.1	2,067.1
- non-controlling interest	3	18.9

Total comprehensive income attributable to:
- shareholders of the Parent Company	795.7	2,086.6
- non-controlling interest	2.8	18.9

Earnings per share attributable to shareholders of the Parent Company (in PLN per share)	8.35	18.25

* Explanation given in Note 2.1.1 of the Consolidated financial statement of JSW S.A. Capital Group for 2012

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Consolidated statement of changes in equity

	Attributable to shareholders of the Parent Company
	Share capital	Share premium account	Retained earnings	Total	Non-controlling interest	Total equity
As at 1 January 2011	1,209.1	387.4	4,252.9	5,849.4	253.1	6,102.5
Total comprehensive income: restated	-	-	2,086.6	2,086.6	18.9	2,105.5
- net profit	-	-	2,067.1	2,067.1	18.9	2,086.0
- other comprehensive income	-	-	19.5	19.5	-	19.5
Dividends	-	-	(257.0)	(257.0)	(0.4)	(257.4)
Acquisition transactions under common control	32	235.4	(23.0)	244.4	141.7	386.1
Transactions with non-controlling shareholders	-	-	21.5	21.5	(208.4)	(186.9)
Employee share ownership plan – issue of series C shares	19.8	282.2	(9.0)	293	-	293
Others	-	-	(1.6)	(1.6)	2.2	0.6
As at 31 Dec 2011	1,260.9	905	6,070.4	8,236.3	207.1	8,443.4

As at 1 January 2012	1,260.9	905	6,070.4	8,236.3	207.1	8,443.4
Total comprehensive income:	-	-	795.7	795.7	2.8	798.5
- net profit	-	-	985.1	985.1	3	988.1
- other comprehensive income	-	-	(189.4)	(189.4)	(0.2)	(189.6)
Dividends	-	-	(631.7)	(631.7)	(6.0)	(637.7)
Transactions with non-controlling shareholders	-	-	2.2	2.2	(32.5)	(30.3)
Retirement of series C shares	(9.0)	-	9	-	-	-
As at 31 Dec 2012	1,251.9	905	6,245.6	8,402.5	171.4	8,573.9

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Consolidated Cash Flow Statement

	For the financial year ended 31 Dec
	2012	2011
Cash flow on operating activity
Cash inflows on operating activity	2,608.1	3,334.2
Interest paid	(24.0)	(8.9)
Movement in financial derivatives	0.3	(2.6)
Income tax paid	(225.0)	(487.4)
Net cash flow on operating activity	2,359.4	2,835.3

Cash flow on investing activity
Acquisition of property, plant and equipment	(1,804.8)	(1,272.0)
Acquisition of intangible assets	(24.7)	(19.0)
Acquisition of financial assets	(926.9)	(25.6)
Mergers of business entities under common control	-	(470.1)
Proceeds on the sale of property, plant and equipment	6.5	8
Dividends received	0.5	0.5
Interest received	115.1	111
Net cash flow on investing activity	(2,634.3)	(1,667.2)

Cash flow on financing activity
Loans and credits received	91.6	125.7
Loans and borrowings repaid	(256.7)	(61.7)
Dividends paid to shareholders of the Parent Company	(631.7)	(298.0)
Dividends paid to non-controlling shareholders	(6.0)	(2.4)
Transactions with non-controlling shareholders	(0.2)	(185.4)
Payments related to financial lease	(7.4)	(1.4)
Other cash flows	(11.1)	(13.7)
Net cash flow on financing activity	(821.5)	(436.9)

Change in the net balance of cash and cash equivalents	(1,096.4)	731.2

Cash and cash equivalents at the beginning of the period	2,589.0	1,855.8
Foreign exchange differences from the conversion of cash and cash equivalents	(1.9)	2
Cash and cash equivalents at the end of the period	1,490.7	2,589.0

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1.1. Name, registered office and line of business

Jastrzębska Spółka Węglowa S.A. (“Parent Company”; “JSW S.A.”) was established on 1 April 1993. On 17 December 2001, JSW S.A. was entered in the National Court Register kept by the District Court in Gliwice, 10th Commercial Division of the National Court Register, under file number KRS 0000072093. The Parent Company has been given the following statistical number: REGON 271747631. The Parent Company’s registered office is located in Jastrzębie-Zdrój at Al. Jana Pawła II no. 4. The JSW S.A. Capital Group (“Group”, “Capital Group”) consists of JSW S.A. and its subsidiaries. Parent Company's shares are free float shares.

The Group’s core business is:

black coal mining,
coke production and processing,
generation, transmission and distribution of electricity.

1.2. Approval of the financial statements

These consolidated financial statements for the financial year ended 31 December 2012 were approved for publication and signed by the Management Board of the Parent Company on 12 March 2013.

1.3. Going concern assumption

The consolidated financial statements have been prepared with the assumptions that the company will continue its business activity as a going concern in the foreseeable future. As at the date of approval of these consolidated financial statements, there are no circumstances indicating a threat to the Group’s continued operations.

2. Description of significant accounting policies applied

The fundamental accounting principles used in the preparation of these consolidated financial statements are presented below.

The subsidiaries apply the same methods for measuring assets and liabilities and the same principles for the preparation of the financial statements as the Parent Company.

2.1. Basis for drawing up the financial statements

These consolidated financial statements of the Jastrzębska Spółka Węglowa S.A. Capital Group were prepared in accordance with the IFRS approved by the European Union.

These consolidated financial statements have been drawn up in accordance with the historical cost principle, except for financial derivatives measured at fair value.

Preparation of the consolidated financial statements in accordance with IFRS requires that certain significant accounting estimations are used. It also requires the Management Board to exercise its judgment when applying the accounting principles adopted by the Group. The matters that require more judgment, that are more complex or that assumptions and estimations regarding them are more significant from the standpoint of the consolidated financial statements are disclosed in Note 4.

These financial statements have been prepared using the same accounting principles for the current period and for the comparative period, while the comparative period has been adjusted to the comparative conditions to reflect the change to the accounting and presentation principles adopted in the statements in the current period in connection with the early application of changes to IAS 19 “Employee Benefits”. Detailed information about the effect of applying changes to IAS 19 on the consolidated financial statements is presented in Note 2.1.1.

New standards, interpretations and their changes

a. New and amended standards and interpretations used

In these consolidated financial statements, the following new and amended standards and interpretations have been applied for the first time:

Changes to IAS 19 “Employee benefits”

The changes to IAS 19 “Employee benefits” were published by the International Accounting Standards Board in June 2011 and are applicable to annual periods commencing 1 January 2013 or after that date, with an early application option. These changes implement new requirements on capturing and measuring the costs of defined benefit plans related to employee benefits after the employment period and additional guidelines for job severance benefits; they also change the required disclosures concerning all employee benefits. The changes to IAS 19 were approved by the European Union on 5 June 2012.

The Group decided to apply the changes to IAS 19 starting on 1 January 2012 and to capture actuarial profits/losses arising from the measurement of defined benefit plans after the employment period in other comprehensive income. Since the changes were applied retrospectively, the consolidated statement of comprehensive income contains restated data for the financial year ended 31 December 2011. The consolidated statement of changes in equity as at 31 December 2011 was changed accordingly. These changes have not affected the consolidated statement of financial position as at 1 January 2011.

The impact of the early application of the changes to IAS 19 on the consolidated statement of comprehensive income for the financial year ended 31 December 2011 is presented in the table below:

	31 Dec 2011 approved data	Adjustment due to early application of changes to IAS 19	31 Dec 2011 restated data
Cost of products, materials and merchandise sold	(5,961.6)	(5.5)	(5,967.1)
Gross sales profit	3,415.2	(5.5)	3,409.7
Administrative costs	(490.3)	(18.6)	(508.9)
Operating profit	2,732.6	(24.1)	2,708.5
Pre-tax profit	2,699.1	(24.1)	2,675.0
Income tax	(593.6)	4.6	(589.0)
Net profit	2,105.5	(19.5)	2,086.0

Actuarial profit/(loss)	-	24.1	24.1
Income tax	-	(4.6)	(4.6)
Total other comprehensive income	-	19.5	19.5

Total comprehensive income	2,105.5	-	2,105.5

Net profit attributable to:
- shareholders of the Parent Company	2,086.6	(19.5)	2,067.1
- non-controlling interest	18.9	-	18.9

Total comprehensive income attributable to:
- shareholders of the Parent Company	2,086.6	-	2,086.6
- non-controlling interest	18.9	-	18.9

Earnings per share attributable to shareholders of the Parent Company (in PLN per share)	18.43	(0.18)	18.25

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Changes to IFRS 7 – Transfers of financial assets

The changes to IFRS 7 “Financial Instruments: Disclosures” about the transfer of financial assets were published by the International Accounting Standards Board in October 2010 and are applicable to annual periods commencing 1 July 2011 or after that date. These changes require the disclosure of information relating to the risk stemming from the transfer of financial assets. They include the requirement of disclosure, by asset class, nature, book value and description of the risk and benefits concerning the financial assets transferred to some other entity, but which continue to remain in the entity’s statement of financial standing. If the financial assets are removed from the accounts, but the entity is exposed to some risk and may obtain some benefits associated with the transferred asset component, it is additionally necessary to make a disclosure of information making it possible to understand the effects of that risk.

The Group has applied the changes to IFRS 7 as of 1 January 2012.

The amendments have no effect on the Group’s consolidated financial statements.

Other changes of standards applicable from 1 January 2012 do not apply to these consolidated financial statements.

b. The published standards and interpretations which are not yet effective and which have not been applied by the Group before:

With respect to these consolidated financial statements, the Group has not chosen early application of the following published standards, interpretations or amendments to the existing standards before their effective date.

IFRS 9 “Financial Instruments Phase 1: Classification and Measurement”

IFRS 9 published by the International Accounting Standards Board on 12 November 2009 supersedes those parts of IAS 39 that refer to the classification and measurement of financial assets. In October 2010 IFRS 9 was modified to include the problem of classifying and measuring financial liabilities. In accordance with the changes introduced in December 2011, the new standard applies to annual periods beginning on or after 1 January 2015. This standard implements a single model contemplating only two categories for the classification of financial assets: fair value measurement and amortized cost measurement. The assets are classified upon the initial recognition and depend on the financial instruments management model adopted by the entity and the characteristics of contractual cash flows from these instruments. Most of the IAS 39 requirements relating to classification and measurement of financial liabilities were transferred to IFRS 9 without any modification. The crucial change is the requirement imposed on entities of presenting the effects of changes in their own credit risk in other comprehensive income on account of financial liabilities subject to fair value measurement through the financial result.

The Group plans to apply IFRS 9 as of 1 January 2015.

The Group is in the course of analyzing the impact this new standard will exert on the consolidated financial statements.

At the time of preparing these consolidated financial statements IFRS 9 has not yet been approved by the European Union.

IFRS 10 “Consolidated financial statements”

IFRS 10 was published by the International Accounting Standards Board in May 2011 and is applicable to annual periods commencing 1 January 2013 or after that date (mandatory application in the European Union from 1 January 2014). The new standard supersedes the guidelines on control and consolidation in IAS 27 “Consolidated and Separate Financial Statements” and SIC-12 interpretation “Consolidation– Special-Purpose Entities”. IFRS 10 alters the definition of control in such a manner that the same criteria for determining control will apply to all entities. The adjusted definition is accompanied by extensive guidelines concerning application.

The Group will apply IFRS 10 as of 1 January 2014.

It is expected that the application of this new standard will have no effect on the future consolidated financial statements, since the evaluation of the holding control, performed in accordance with the new standard, will not change any conclusions regarding control over entities comprising the Capital Group.

IFRS 11 “Joint ventures”

IFRS 11 was published by the International Accounting Standards Board in May 2011 and is applicable to annual periods commencing 1 January 2013 or after that date (mandatory application in the European Union from 1 January 2014). The new standard supersedes IAS 31 “Interests in Joint Ventures” and SIC-13 interpretation “Jointly Controlled Entities - Non-Monetary Contributions by Venturers”. The changes in the definitions curtailed the number of types of joint ventures to two: joint operations and joint ventures. At the same time, the current possibility of selecting pro rata consolidation in reference to entities under joint control was eliminated. All participants in joint ventures currently have the duty of consolidating them by the equity method.

The Group will apply IFRS 11 as of 1 January 2014.

Application of the new standard will have no material effect on the future consolidated financial statements of the Group.

IFRS 12 “Disclosure of Interests in Other Entities”

IFRS 12 was published by the International Accounting Standards Board in May 2011 and is applicable to annual periods commencing 1 January 2013 or after that date (mandatory application in the European Union from 1 January 2014). This new standard applies to entities holding interests in a subsidiary, joint venture, associated entity or in an unconsolidated entity managed under a management contract. The standard replaces the disclosure requirements that were previously included in IAS 27 “Consolidated and Separate Financial Statements”, IAS 28 “Investment in Associates” and IAS “Interest in Joint Ventures”. IFRS 12 requires entities to disclose information to assist the users of financial statements in assessing the nature, risk and financial effects of the entity’s investments in subsidiaries, associates, joint ventures and entities managed under a management contract. To this end the new standard imposes the requirement of information disclosure regarding many areas, including significant judgments and assumptions made when determining whether the entity controls, co-controls or exercises significant influence over other entities, extensive information on the importance of non-controlling interests in a group’s operations and cash flows; summary financial information on subsidiaries with substantial non-controlling interests as well as specific information on stakes in unconsolidated entities managed under a management contract.

The Group will apply IFRS 12 as of 1 January 2014.

The application of the new standard will increase the number of required disclosures about investments in other entities.

IFRS 13 “Fair Value Measurement”

IFRS 13 was published by the International Accounting Standards Board in May 2011 and is applicable to annual periods commencing 1 January 2013 or after that date. The new standard aims to enhance consistency and attenuate complexity by articulating a precise definition of fair value and concentrating in a single standard the requirements concerning fair value measurement and the disclosure of relevant information.

The Group will apply IFRS 13 as of 1 January 2013.

It is expected that the application of this new standard will have no effect on the Group's future consolidated financial statements, as the methods and assumptions used for measuring asset components at fair value are consistent with IFRS 13

Amended IAS 28 “Investments in Associates and Joint Ventures"

The amended IAS 28 “Investments in Associates and Joint Ventures" was published by the International Accounting Standards Board in May 2011 and is applicable to annual periods beginning on or after 1 January 2013 (mandatory application in the European Union from 1 January 2014). The amendments to IAS 28 resulted from the project carried out by the International Accounting Standards Board regarding joint ventures. The Board decided to include the principles for recording joint ventures using the equity method of accounting in IAS 28, since the method is applicable to both joint ventures and associates. Other than this exception, no other guidelines were changed.

The Group will apply the amended IAS 28 starting from 1 January 2014.

The foregoing changes will not exert an influence on the Group’s consolidated financial statements.

Changes to IAS 12 – Asset value realization

The changes to IAS 12 “Income Tax” concerning the recovery of underlying assets were published by the International Accounting Standards Board in December 2010 and are applicable to annual periods beginning on or after 1 January 2012 (mandatory application in the European Union from 1 January 2013). These changes concern the measurement of deferred tax assets and liabilities on investment properties measured at fair value in accordance with z IAS 40 “Investment Property” and implement the supposition, that may be refuted, that the value of an investment property may be totally recovered by sale. This supposition may be refuted if the investment property is maintained in a business model whose objective is basically to use all the economic benefits represented by an investment property over time, and not at the time of sale. The SIC-21 interpretation “Income Taxes – Recovery of Revalued Non-Depreciable Assets” referring to similar questions pertaining to non-depreciable assets, which are measured according to the revaluation model presented in IAS 16 “Property Plant and Equipment” was included in IAS 12 after removal of the guidelines pertaining to investment properties carried at fair value.

The Group will apply the changes to IAS 12 as of 1 January 2013.

The foregoing changes will not exert an influence on the Group’s consolidated financial statements.

Changes to IFRS 1 – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters of IFRS

The changes to IFRS 1 “First-time Adoption of International Financial Reporting Standards” were published by the International Accounting Standards Board in December 2010 and are applicable to annual periods commencing 1 July 2011 or after that date (mandatory application in the European Union from 1 January 2013). The change concerning severe hyperinflation creates an additional exclusion in the event that an entity which underwent severe hyperinflation, re-commences or intends for the first time to prepare its financial statements in compliance with IFRS. This exclusion enables the entity to choose asset and liability measurement using fair value and to use this fair value as the assumed cost of these assets and liabilities in the opening balance in the first statement of financial standing according to IFRS. IASB also changed IFRS 1 to exclude any references to fixed dates for one exception and one exclusion for financial assets and liabilities. The first change requires first-time adopters of IFRS to prospectively apply the requirements pertaining to the derecognition according to IFRS from the IFRS adoption date instead of 1 January 2004. The other change pertains to financial assets or liabilities carried at fair value upon first recognition, where the fair value is determined using valuation techniques since there is no active market and permits for the application of the guidelines prospectively from the IFRS adoption date instead of 25 October 2002 or 1 January 2004. This means that the first-time adopters of IFRS do not have to determine the fair value of financial assets and liabilities before the IFRS adoption date. IFRS 9 has also been adapted to these changes.

The amendments have no effect on the Group’s consolidated financial statements.

Amendments to IAS 1 – Presentation of items of Other Comprehensive Income

The changes to IAS 1 “Presentation of Financial Statements” pertaining to the presentation of items of other comprehensive income were published by the International Accounting Standards Board in June 2011 and are applicable to annual periods commencing 1 July 2012 or after that date. These changes require that entities split the line items presented in other comprehensive income into two groups on the basis of whether they may be captured in the financial result in the future. In addition, the title of the statement was changed from statement of comprehensive income to “statement of financial result and other comprehensive income”.

The Group will apply the changes to IAS 1 as of 1 January 2013.

The Group has only one item of other comprehensive income – actuarial profit/loss on the valuation of defined benefit plans after the employment period. This item is not revalued through profit or loss.

Amendments to IAS 32 – Offsetting Financial Assets and Financial Liabilities,

The amendments to IAS 32 “Financial Instruments: Presentation” pertaining to the offsetting of financial assets and financial liabilities were published by the International Accounting Standards Board in December 2011 and are applicable to annual periods beginning on or after 1 January 2014. The amendments introduce additional explanations pertaining to IAS 32 in order to clarify certain inconsistencies found in the application of certain offsetting criteria. They include, among others, an explanation what the phrase “has a legally enforceable right to set off the amounts” means and that some mechanisms for settlement on a gross basis may be treated as settlement on a net basis when certain conditions are met.

The Group will apply the amendments to IAS 32 as of 1 January 2014.

Application of the aforementioned amendments will have no material effect on the future consolidated financial statements of the Group.

Amendments to IFRS 7 – Disclosures – Offsetting Financial Assets and Financial Liabilities,

The amendments to IFRS 7 relating to disclosures – offsetting financial assets and financial liabilities, were published by the International Accounting Standards Board in December 2011 and are applicable to annual periods beginning on or after 1 January 2013. The amendments introduce an obligation to make new disclosures, which will allow users of financial statements to evaluate effects or potential effects of arrangements that allow for settlements on a net basis, including the rights to perform offsetting.

The Group will apply the amendments to IFRS 7 as of 1 January 2013.

Application of the aforementioned amendments will have no material effect on the future consolidated financial statements of the Group.

Amendment to IFRS 1 – Government Loans

The amendments to IFRS 1 “First adoption of International Financial Reporting Standards” pertaining to government loans were published by the International Accounting Standards Board in March 2012 and are applicable to annual periods beginning on or after 1 January 2013. The changes pertaining to government loans and borrowings received by the entity on preferential terms (below-market rate of interest) allow the first-time adopters of IFRS drawing up financial statements to be exempt from the requirement of full retrospective recognition of those transactions in accounting records. Therefore, these changes introduce the same exemption for first-time adopters of IFRS as the one that exists for all other entities.

The Group plans to apply the amendments to IFRS 1 as of 1 January 2013.

The foregoing changes will not exert an influence on the Group’s consolidated financial statements.

At the time of preparing these interim condensed consolidated financial statements the changes to IFRS 1 have not yet been approved by the European Union.

IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine

IFRIC Interpretation 20 was published by the International Accounting Standards Board in October 2011 and is applicable to annual periods beginning on or after 1 January 2013. The interpretation pertains to the settlement of the stripping costs in the production phase of a surface mine. The interpretation that the stripping process costs are recorded as costs of ongoing production activity in accordance with the principles of IAS 2 “Inventories” if benefits from stripping take the form of producing inventories. On the other hand, if stripping leads to benefits in the form of a better access to ore, the entity should recognize those costs as “stripping assets” in non-current assets, provided that the conditions specified in the interpretation are met.

Since the Group owns underground mines only, this interpretation will not affect the consolidated financial statements.

Amendments to IFRS 2009-2011

In May 2012, the International Accounting Standards Board published the “Improvements to IFRSs 2009-2001” amending 5 standards. The improvements include changes to presentation, recognition, measurement and contain changes in terms and editorial changes. The changes will apply for the annual periods starting on 1 January 2013.

The Group plans to apply the improvements to IFRSs 2009-2011 as of 1 January 2013.

The changes will have no material effect on the consolidated financial statements, as the improvements are mainly explanations or elimination of accidental inconsistencies between the published standards.

At the time of preparing these consolidated financial statements, the Improvements to IFRSs 2009-2011 have not yet been approved by the European Union.

Changes to transition guidance for IFRS 10, IFRS 11 and IFRS 12

In June 2012, the International Accounting Standards Board published changes to transition guidance for IFRS 10, IFRS 11 and IFRS 12. The changes will apply to the annual periods starting on 1 January 2013 or earlier, if the underlying standards (IFRS 10, 11 or 12) are applied from an earlier date. The changes define in detail the transition guidance for IFRS 10 “Consolidated financial statements”. The entities adopting IFRS 10 should assess whether or not they have control on the first day of the annual period, for which IFRS 10 was applied for the first time and if conclusions from that assessment are different from the conclusions in IAS 27 and SIC 12 then comparative data should be restated, unless impracticable. The changes also introduce additional transition guidance providing relief from the full application of IFRS 10, IFRS 11 and IFRS 12 by limiting the obligation to present adjusted comparative information to a single reporting period directly preceding the current one. Moreover, the changes abolish the requirement to present comparatives for disclosures relating to unconsolidated entities managed under a management contract for periods preceding the first time adoption of IFRS 12

The Group plans to apply these changes as of 1 January 2014.

The Group is in the course of analyzing the impact these changes will have on the consolidated financial statements.

At the time of preparing these consolidated financial statements, the amendments to transition guidance for IFRS 10, IFRS 11 and IFRS 12 have not yet been approved by the European Union.

Changes to IFRS 10, IFRS 12, IAS 27 – Investment Entities

The changes to IFRS 10, IFRS 12, IAS 27 “Investment Entities” were published by the International Accounting Standards Board in October 2012 and are applicable to annual periods beginning on or after 1 January 2014.

The changes introduce a definition of an investment entity into IFRS 10. Such entities will be required to measure investments in subsidiaries at fair value through profit or loss and consolidate only those of the subsidiaries that provide services that are related to the entity's investment activity. Also, IFRS 12 was changed by introducing new disclosures about investment entities.

The Group plans to apply these changes as of 1 January 2014.

These changes will have no effect on the consolidated financial statements, as the Group currently does not conduct any such operations.

At the time of preparing these consolidated financial statements, the amendments to IFRS 10, IFRS 11 and IFRS 12 have not yet been approved by the European Union.

2.2. Consolidation

Subsidiaries
Subsidiaries are all the companies (including special-purpose vehicles) for which the Group may govern their financial and operational policies; this usually coincides with the Group holding the majority of votes in their decision-making bodies. When assessing whether or not the Group controls an entity, the existence and impact of the potential voting rights, which can be exercised or replaced in the given moment, are taken into consideration. Subsidiaries are subject to full consolidation as of the date on which the Group assumes control over them. Subsidiaries cease to be consolidated on the date on which such control is discontinued.
The Group’s acquisition of subsidiary entities is settled by the purchase method. Remuneration paid for the acquisition of a subsidiary is set as the fair value of assets delivered and liabilities incurred or equity instruments issued by the Group. A remuneration payment covers the fair value of assets or liabilities resulting from agreeing upon a conditional element of remuneration under the agreement. The costs associated with the acquisition are captured in the financial result when they are incurred. The identifiable acquired assets and liabilities and contingent liabilities acquired during a business combination are initially recognized at their fair value as at the acquisition date. For each acquisition, the Group captures non-controlling interest in the acquired entity at their fair value or at the proportional part of net assets of the acquired entity attributable to the non-controlling interest.
The surplus of the price paid and the fair value of any prior shares in acquired company's equity as at the acquisition date over the fair value of the Group's share in the identifiable net assets acquired is recognized as goodwill. If that amount is lower than the fair value of net assets of the subsidiary acquired at a bargain price then the difference is recognized directly in the financial result.
Intragroup transactions, settlements, revenues, costs and unrealized profits from transactions between Group companies are eliminated. Unrealized losses are also eliminated, but only after a review of the assets to which they are related for impairment. The subsidiaries apply the same accounting principles as the Group does.
Non-controlling interest and transactions with non-controlling shareholders
The Group treats transactions with non-controlling shareholders as transactions with holders of the Group's equity. In the event of an acquisition from non-controlling shareholders, the difference between the price paid and the acquired share in the subsidiary's net assets at their book value is captured in equity. Profits or losses on disposals to non-controlling shareholders are also posted in equity.
Associates
Associated companies are all the entities on which the Group exerts significant influence but does not control them; this usually coincides with the Group holding from 20 to 50% of all the votes in their decision-making bodies. Investments in associates are settled using the equity method and initially recognized at cost.
The Group's share in the financial result of the associated companies is captured in the financial result right from the acquisition date, its share in other comprehensive income of associated companies is captured in other comprehensive income, while its share in movements in other capital from the acquisition date – in other capital. The book value of the investment is adjusted by the aggregated changes of the balance from the acquisition date. Where the Group's share in the value of losses of an associated company becomes equal to or greater than the Group's stake in that entity including other possible unsecured receivables, the Group no longer recognizes further losses, unless it accepted any obligations or undertook to make payments on behalf of that associated company.
Unrealized profits resulting from transactions between the Group and associated companies are eliminated pro rata to the Group's interest in the associated entity. Unrealized losses are also eliminated, unless the transaction provides evidence for impairment of the transferred asset component. Where necessary, the accounting principles used by the associated companies were changed to ensure compliance with the accounting principles applied by the Group. Profits and losses in associated companies on account of dilution are captured in the consolidated financial result.
Combination of businesses remaining under common control
In order settle a combination of businesses remaining under common control, the Group applies the pooling of interest method. The method is based on the assumption that both before and after the transaction, the combining entities were controlled by the same shareholder. Accordingly, the consolidated financial statements reflect the continuity of common control and do not reflect any changes in the value of net assets to fair value (or recognition of new assets) or valuation of goodwill, since none of the combining entities is actually being acquired. The pooling of interest method used by the Group involves an aggregation of amounts recorded in the individual items of the statement of financial position of the acquired entities, as well as revenues and costs and profits and losses of the merging entities, starting from the merger date. The difference between the acquisition price and the acquired net assets is settled through equity.

2.3. Segment reporting

The Group presents information on operating segments in accordance with IFRS 8 “Operating Segments”. The Group is organized and managed in segments by type of products offered and type of production activity. An operating segment is a component of the Group:

that engages in business activities from which it may earn revenues and incur expenses,
for which separate financial information is available,
whose operating results are reviewed regularly by the body responsible for operational decisions (Management Board of the Parent Company) about resources to be allocated and assessment of performance in the segment.

The Management Board has identified operating segments based on the financial reporting of the companies comprising the Group. Information originating from the reports are used for strategic decision-making in the Group.

After analyses of the aggregation criteria and quantitative thresholds, the following operating segments were established in the Group's consolidated financial statements:

Segment 1 – Coal – includes extraction and sales of black coal;
Segment 2 – Coke – includes production and sales of coke and coal derivatives;
Other segments – include activities performed by the Group’s entities other than those covered by Segments 1 or 2, such as, without limitation, production and sales of electricity and heat, repair services, etc.

2.4. Measurement of items in foreign currencies

Functional currency and presentation currency
The items included in the financial statements of individual Group companies are measured in the currency of the main economic environment in which the company conducts its operations (“functional currency”). The functional currency of the companies comprising the Group is the Polish zloty. The consolidated financial statements are presented in Polish zloty (“PLN”) which is the Group's presentation currency.
Transactions and balances
Transactions in foreign currencies are converted at their initial capture to the functional currency at the exchange rate from the day preceding the transaction date, the weighted average exchange rate or the exchange rate actually used by the bank, depending on the nature of the transaction.
At the end of each reporting period:
- cash items denominated in a foreign currency are converted using the closing rate effective on that date, i.e. the average NBP exchange rate set for the currency,
- non-cash items carried at historical cost in a foreign currency are converted using the exchange rate in effect on the transaction date,
- non-cash items at fair value in a foreign currency are converted using the exchange rate from the date the fair value is determined.
Foreign exchange gains and losses obtained as a result of settlements of those transactions and book value measurement of the assets and liabilities denominated in foreign currencies are recorded in the financial result, provided they are not deferred in other comprehensive income, when they are eligible for recognition as security of cash flows.

2.5. Property, plant and equipment

Property, plant and equipment are the assets:

which are held by the Group in order to be used in the production process, in deliveries of goods and provision of services for administrative purposes,
which are expected to be used for a period longer than one year,
for which it is probable that the entity will obtain economic benefits in the future associated with the asset component, and
the value of which may be reliably determined.

As at the initial recording date, property, plant and equipment is measured at the purchase price or manufacturing cost.

Upon initial recording, the purchase price (production cost) of property, plant and equipment includes the expected cost of dismantling and removing them and restoring the place where the asset component is located to its initial state; the obligation to perform those actions arises upon installation or use of the asset component. In particular, the initial value of property, plant and equipment includes the discounted liquidation cost of property, plant and equipment used in underground mining activity which, according to the applicable Geological and Mining Law Act, must be liquidated after the operations are discontinued.

The mine liquidation costs included in the initial value of property, plant and equipment are depreciated with the depreciation method used for depreciation of the property, plant and equipment to which they are related, starting from the moment the given property, plant and equipment item is commissioned for use, throughout the period set in the liquidation plan of facility groups being part of the anticipated mine liquidation schedule.

Specialized spare parts with significant initial value, the use of which is expected after a period longer than one year, are classified as property, plant and equipment. The same approach is adopted for those maintenance-related spare parts and equipment which may only be used for specific items of property, plant and equipment. Other maintenance-related spare parts of insignificant value are classified as inventories and recognized in the financial result upon their utilization.

The value of property, plant and equipment includes costs of regular and material inspections (including certification inspections) which are mandatory.

On the date ending the financial period, property, plant and equipment items are measured at purchase price or manufacturing cost plus the expected cost of dismantling and removing the property, plant and equipment item and minus the accumulated depreciation charges and impairment charges.

The subsequent expenditures are recognized in the book value of the property, plant and equipment item or captured as a separate property, plant and equipment item (where applicable) only when it is probable that the Group will obtain economic benefits from this item and the cost of this item may be measured reliably. All other expenditures towards repairs and maintenance are posted in the financial result of the financial period in which they are incurred.

Depreciation of property, plant and equipment, with the exception of operational headings, is calculated using the linear method to distribute their initial values or restated values, minus their final values, over their useful life periods, which are as follows for respective groups of property, plant and equipment:

Buildings and structures (including capital pits) 10-65 years;
Technical equipment and machinery 2-40 years;
Means of transportation 5-27 years;
Other property, plant and equipment 3-20 years.

In the case of the Parent Company, these periods may not be longer than the useful life of the mine.

Land is not depreciated.

Depreciation begins when a property, plant and equipment item is available for use. Depreciation is discontinued on the earlier of the following dates: when the property, plant and equipment item is classified as held for sale (or included in the group classified as held for sale) in accordance with IFRS 5 “Non-Current Assets Held For Sale And Discontinued Operations” or removed from the accounting records as a result of its liquidation, sale or retirement.

Depreciation charges are calculated based on the initial value of property, plant and equipment minus their estimated final value.

Certain significant component parts of property, plant and equipment (components) the useful life of which differs from the useful life of the whole property, plant and equipment item and the purchase price (manufacturing cost) of which is significant as compared to the purchase price (manufacturing cost) of the whole property, plant and equipment item are depreciated separately, using the depreciation rates reflecting the expected period of their use.

The correct application of depreciation periods and rates and the final value are subject to verification annually (in the fourth quarter) in order to make appropriate adjustments to depreciation rates in the subsequent financial years.

If the book value of a given property, plant and equipment item exceeds its estimated recoverable value then its book value is subject to an impairment charge down to the amount of its recoverable value. The principles for making impairment charges are described in Note 2.8.

Profits and losses on the sale of property, plant and equipment are determined by comparing proceeds on the sale with their book value and recognized in the financial result as other net profits/losses item.

The property, plant and equipment that is being built or installed is measured at purchase price or manufacturing cost minus any impairment charges and are not depreciated until the building process is completed.

Expensable mining pits

Upon initial recognition, mine workings that are used to access operational mining pits, i.e. expensable mining pits, are measured at the accumulated cost incurred to build them, minus the value of coal mined during their construction measured at the normative production cost of the mined coal. Capitalized cost of expensable mining pits (which are classified as prepayments and accruals) are presented in the consolidated financial statements as a separate item of property, plant and equipment. The expenditures for expensable mining pits are settled pro rata to the production of coal in respective wall areas. This is presented as depreciation in the financial result.

2.6. Investment property

Investment property includes property that is held to earn rentals or for value appreciation or both and property that is being constructed or developed for future use as investment property.

Investment property does not include any facilities that are used in the production or supply of goods or services or for administrative purposes and property held for sale in the ordinary course of business.

Investment property is initially measured at purchase cost or manufacturing cost, including the costs of transaction and external financing. External financing costs incurred for the construction or production of investment property are capitalized as part of the manufacturing cost. External financing costs are capitalized in the period when the purchase transaction was completed or in the property construction period until the construction is completed and adapted for use.

After initial recognition, the Group measures all investment property according to the purchase price or manufacturing cost model.

Investment properties are depreciated using the straight-line method over their useful life, taking their residual value into account. The estimated useful life of investment property is the same as for property, plant and equipment.

In a situation where the use of any property changes, as evidenced by the property being adapted for sale, the investment property is transferred to the inventories item. If the Group decides to sell the property before it is adapted then it will treat the property as investment property until it is removed from the accounting ledgers. Therefore, it is never classified in inventories.

Investment properties are removed from the ledgers when sold or withdrawn from use permanently, provided that no benefits from its disposal are expected in the future.

2.7. Intangible assets

Geological information
The right to use geological information is capitalized at the amount of expenses incurred to purchase it. The capitalized expenses are written off throughout the estimated useful life of information. The estimated useful life of geological information is from 11 to 65 years.
Perpetual usufruct right
The Group recognizes the perpetual usufruct rights acquired against payment as intangible assets and amortizes them throughout the period for which such right had been granted. Perpetual usufruct rights acquired gratuitously are recorded in off-balance sheet records, at the value specified in the administrative decision about the perpetual usufruct fee.
Software
Purchased software licenses are capitalized at the amount of expenses incurred for the purchase and preparation for use of specific computer software. The capitalized costs are written off throughout the estimated useful life of the software, which is 3 to 8 years.

2.8. Impairment of non-financial assets

Assets with unspecified useful lives, such as goodwill, are not depreciated but tested for impairment on an annual basis. The assets that are subject to depreciation and amortization are analyzed for impairment any time any events or changes in circumstances indicate that their book value may not be realized.

Impairment loss is recognized at the surplus of the asset's book value over its recoverable value. Recoverable value is the higher of: fair value of the assets minus the cost of sale, or usable value.

For the purpose of the impairment analysis, assets are grouped at the lowest level where there are identifiable separate cash flows (cash flow centers). Impairment tests of property, plant and equipment components are conducted based on the principle that a mine or another subsidiary company constitutes the smallest group of assets.

If an impairment test shows that the recoverable value of an asset component is lower than its book value then a revaluation charge is made at the amount of the difference between the recoverable value and the book value of the asset component.

The revaluation charge associated with impairment of the cash flow center to which goodwill had been allocated is allocated first of all to goodwill and then to other assets in the cash flow center, pro rata to the percentage of the asset's book value in the value of the entire cash flow center.

The impairment charge is recognized instantly in the financial result.

After the revaluation charge associated with impairment is recognized the depreciation charge for the asset is adjusted.

Non-financial assets other than goodwill, impairment of which had been found earlier, are evaluated as at every end date of the financial period for the occurrence of premises indicating that the impairment charge may be reversed.

A reversal of an asset impairment charge is recognized instantly as other income in the financial result.

2.9. Financial assets

Classification – financial instruments

The Group determines the classification of its financial assets upon their initial capture. The classification is based on the purpose of acquiring the financial assets. The classification of derivatives depends on their purpose and whether the requirements for the use of hedge accounting as specified in IAS 39 have been met. Derivatives are divided into hedging derivatives and derivatives at fair value through profit or loss.

The following rules for classification of financial instruments into respective categories have been adopted:

Financial assets carried at fair value through profit or loss
This category includes financial assets held for trading. An asset is classified in this category if it was purchased with the main purpose of being sold in a short period. This category also includes derivatives, provided that they are not subject to hedge accounting. Assets in this category are classified in current assets according to the specific derivatives presentation principles described in Note 11.
Loans and receivables
Loans and receivables include financial assets with determined or determinable payments, not listed on an active market, which are not classified as derivative instruments. They are classified as current assets unless their maturity exceeds 12 months from the end-date of the financial year (otherwise they are classified as non-current assets). The “Loans and receivables” category includes trade receivables and other receivables and cash and cash equivalents.
Financial assets held to maturity
Investments held to maturity include financial assets except for derivatives, with determined or determinable payments and with a specified maturity, for which the Group has a positive intention and ability to hold to maturity, except for assets classified by the Group as assets at fair value through profit or loss or designated by the Group as available for sale or those that satisfy the definition of loans and receivables.
Financial assets available for sale
Financial assets available for sale are non-financial derivatives designated for this category or those that are not classified in any of the other categories. They are classified as non-current assets, provided that the Management Board has no intention of selling them within 12 months of the final day of the reporting period.

Recognition and measurement

Regular financial asset purchase and sale transactions are recognized as at the date of the transaction, i.e. the date on which the Group undertakes to purchase or sell the respective asset. As at the day of concluding the transaction, financial instruments are carried at fair value, increased by transaction costs which are directly ascribed to purchase or issue of the financial asset or financial liability, excluding financial assets and liabilities carried at fair value through profit or loss, which are initially carried at fair value.

After initial recognition, financial assets shown at fair value through profit or loss and financial assets available for sale are carried at fair value. Loans and receivables and financial assets held to maturity are measured at amortized cost using the effective interest rate method. Unlisted financial instruments included in the available for sale category, for which it is not possible to reliably determine the fair value, are carried at cost, i.e. the purchase price.

Financial assets are excluded from the accounting ledgers when the rights to obtain cash flows from them have expired or have been transferred and the Group transferred principally all risk and all benefits following from their ownership. If there is no transfer of principally all risk and all benefits following from the ownership of an asset, the asset is excluded from the accounting ledgers when the Group loses control over it.

Impairment

On every final day of a reporting period, the Group evaluates whether there are objective proofs that the financial asset or group of financial assets has been impaired. A financial asset or a group of financial assets is considered to have been impaired and loss on the impairment is considered to have been incurred only if there exist objective proofs indicating impairment resulting from one or more events that have taken place after the initial capture of the asset (the ‘loss-causing event’) and the loss-causing event(s) has influenced the expected future cash flows resulting from the financial asset or the group of financial assets whose reliable estimation is possible.

Assets measured at amortized cost, including trade receivables and other receivables of financial nature
The amount of loss is defined as the difference between the carrying value of an asset and the current value of estimate future cash flows (excluding future credit losses that have not been incurred so far) discounted according to the original effective interest rate for the respective financial asset. The carrying value of the asset is reduced and the amount of the impairment charge is recognized in the financial result. If a loan or investment is held to maturity, it bears interest at the variable interest rate; the discount rate for the purpose of determining the amount of the impairment loss is the current effective interest rate envisaged in the agreement. As a practical solution, the Group may verify impairment on the basis of the fair value of the instrument determined using the observable market price.
If, at a later date, the amount of the impairment loss decreases, and such decrease can be objectively tied to an event that took place after showing the impairment, the previously recognized impairment loss is reversed in the financial result.
Assets measured at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment charges are not reversed.
Assets classified as available for sale
If there are premises for impairment of financial assets available for sale in the case of which the decrease of the fair value was recognized in other comprehensive income, then the cumulative losses – defined as the difference between the purchase price and the current fair value minus all impairment losses of such assets, previously recognized in the financial result – are subject to reclassification from equity to profit or loss, as an adjustment resulting from reclassification.
Equity instrument impairment losses are not reversed in the financial result. If at a later date the fair value of a debt instrument classified as available for sale increases and the increase can be objectively attributed to an event that took place after showing the impairment loss in the financial result, the impairment charge is reversed also in the financial result.

2.10. Derivatives

Derivatives are carried at fair value as at the date of concluding the contract and then revalued to fair value as at each final day of the reporting period. Derivatives are shown as assets when their value is positive and as liabilities when their value is negative, and the profit or loss from their valuation is shown immediately in the financial result. The instruments are presented as fixed assets or long-term liabilities if the period remaining to maturity of the instrument exceeds 12 months and it is not expected that it will be realized or settled within the next 12 months. Other derivatives are shown as current assets or short-term liabilities.

2.11. Inventories

Inventories are shown at purchase price or production cost which, however, is not higher than net sales prices. The value of material and merchandise consumption is determined using the “first in first out” (FIFO) method. The consumption of finished goods, semi-finished products and production in progress is determined using the weighted average method. The cost of finished goods and production in progress comprises direct labor, auxiliary materials, other direct costs and pertinent general production costs (based on normal production capacity). The net sales price is the estimate sales price in normal course of business, minus pertinent variable costs of sales.

2.12. Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, call deposits in banks, other short-term investments with high liquidity and original maturity up to 3 months. Current account overdraft is presented in the consolidated cash flow statement as a component of the financial cash flows.

According to the provisions of the Geological and Mining Law Act and the Minister of Economy's Regulation on the principles of establishing and managing a mining plant decomissioning fund, the Group is obligated to accumulate funds on a separate bank account of the Mining Plant Decomissioning Fund (Fundusz Likwidacji Zakładów Górniczych – FLZG), which may be expended solely and exclusively to finance a total or partial decomissioning of a mining plant Cash and cash equivalents of the Mining Plant Decomissioning Fund, due to restrictions on their disposal, are presented in the consolidated statement of financial position as long-term financial assets, regardless of their maturity.

2.13. Share capital

Ordinary shares of the Parent Company are classified as share capital. The share capital is recognized in the amount specified in the articles of association and registered in the court register of the parent company, taking into account an adjustment for hyperinflation of the part of the share capital which comes from before 31 December 1996.

The costs incurred directly in connection with the issue of new shares and options are presented in the equity as decrease, after tax, of proceeds from the issue.

2.14. Trade liabilities and other liabilities

Liabilities are the current obligation resulting from past events, whose fulfillment, according to expectations, will cause outflow from the Group of resources comprising future economic benefits.

Short-term liabilities comprise trade liabilities and other liabilities maturing within 12 months of the final day of the reporting period. Initially liabilities are recognized at fair value, but this measurement corresponds to the required payment amount or the amount of the liability and, in later periods, financial liabilities are shown at amortized cost, using the effective interest rate method (for trade liabilities this corresponds to the required payment amount), while other non-financial liabilities at the required payment amount.

Long-term liabilities are initially recognized at fair value minus the transaction costs incurred, and in the next periods are shown at amortized cost, using the effective interest rate method.

Increase (decrease) of a liability in connection with elapse of time, is recognized as financial expense (income).

2.15. Loans and borrowings

Loans and borrowings are recognized initially at fair value minus the transaction costs incurred. Loans and borrowings are then presented at adjusted purchase price (amortized cost). Any and all differences between the received amount (minus transaction costs) and the redemption amount are recognized using the effective interest rate method in the financial result throughout the term of pertinent agreements.

2.16. Current and deferred income tax

Income tax for the reporting period comprises current tax and deferred tax. The tax is recognized in the financial result, excluding the extent to which it applies directly to items recognized in other comprehensive income or equity. In this case the tax is also recognized respectively in other comprehensive income or equity. The current income tax liability is calculated on the basis of the applicable tax regulations. The Management Board periodically reviews the calculation of tax liabilities with reference to situations in which pertinent tax regulations are subject to interpretation, creating provisions, if any, for the amounts due to tax authorities.

The deferred income tax liability resulting from temporary differences between the tax value of assets and liabilities and their carrying value in the consolidated financial statements – is recognized in the full amount, using the balance sheet method. However, if the deferred income tax results from original recognition of an asset or liability in a transaction other than combination of business entities, which does not influence the financial result or the income tax (tax loss) it is not presented. Deferred income tax is determined using tax rates (and regulations) actually or legally applicable as at the final day of the reporting period which, pursuant to expectations, will prevail at the time of realization of pertinent deferred income tax assets or settlement of the deferred tax liability.

Deferred income tax assets are recognized if it is probable that in the future taxable income will be generated which will make it possible to use the temporary differences.

A deferred income tax liability resulting from temporary differences resulting from investments in subsidiaries and associates is recognized unless the timing of the reversal of temporary differences is controlled by the Group and it is probable that in the foreseeable future these differences will not be reversed.

Deferred income tax assets and liabilities are subject to compensation if there is an enforceable legal title for the compensation of current income tax assets with the current income tax liabilities and if the deferred income tax assets and liabilities pertain to income taxes accrued by the same tax authorities from the entity subject to taxation or other entities subject to taxation if there is an intention and possibility to settle the accounts in net amounts.

2.17. Employee benefits

Pursuant to Company Collective Bargaining Agreements (ZUZP) and pertinent provisions of law, the Group companies pay benefits from the following main titles:

retirement and disability severance pays,
jubilee awards
adjustment disability benefits,
write-offs for the Company Social Benefit Fund for pensioners and recipients of disability benefits
in-kind allowance of coal for pensioners and recipients of disability benefits,
death benefits.

In the consolidated statement of financial position, the Group recognizes disbursements of the above benefits at the present value of the liability as at the final day of the reporting period.

The amount of the post-employment benefit liability in the form of defined benefit plans (retirement and disability severance pays, adjustment disability benefits, write-offs for the Company Social Benefit Fund for pensioners and recipients of disability benefits, in-kind allowance of coal for pensioners and recipients of disability benefits) and other long-term employee benefits (jubilee awards) is calculated by an independent actuarial advisory company using the projected unit benefit method.

Liabilities on account of employee benefits are calculated using an individual method, for each employee separately. The liability for an employee is calculated based on the anticipated amount of the respective benefit that the Group undertakes to pay out on the basis of internal regulations and pertinent provisions of law. The amount calculated is subject to actuarial discounting as at the final day of the reporting period and then decreased by actuarially discounted amounts of annual provision charges, as at the same day, which the Group makes to increase the provision of the respective employee. The actuarial discount means the product of the financial discount and probability of survival of the respective employee as a Group employee until the time of receipt of the benefit.

The cost components of the post-employment defined benefits are classified as follows:

costs of current employment – as operating expenses,
net interest on the net liability derived from a changing value of provisions due to the passage of time – as financial costs,
actuarial profit/loss resulting from changes in actuarial assumptions – as other comprehensive income.

On the other hand, with respect to other long-term employee benefits, current employment costs and actuarial profits/losses are recognized as operating expenses, while net interest as financial costs.

The provision for death benefits is calculated on the basis of historical data, using the discount rate recommended by the actuary and the expected inflation rate and statistical number of years remaining to be worked by Group employees, constituting the difference between the average retirement age of the Group’s employees and the average age of the employees as at the final day of the reporting period.

2.18. Provisions

Provisions are recognized if the Group has a legal or customary obligation following from past events and is probable that fulfillment of the obligation will cause the necessity to pay out funds comprising economic benefits and payment amount has been reliably estimated.

The Group establishes provisions, in particular for:

a. Decommissioning of a mining plant

The provision for future costs associated with decommissioning of a mining plant is established on the basis of the obligations following from the Geological and Mining Law Act imposing on mining enterprises an obligation to decommission mining plants upon completion of operation, in the amount of anticipated costs associated with:

securing or decommissioning of mining workings and facilities and mining plant equipment;
securing the unused part of the mineral deposit;
securing the neighboring mineral deposits;
securing the workings of neighboring mining plants;
undertaking necessary measures to protect the environment and reclaim the land and develop the sites left after mining operations.

The provision amounts are presented in the present value of the expenditures which are expected to be required to fulfill the obligation. The interest rate before tax is then used, which reflects the current assessment of the market regarding the value of money over time and the risk associated specifically with the given liability. The initial estimation of the provision for decommissioning of mining plants increases the value of property, plant and equipment (Note 2.5). Increase of the provisions associated with elapse of time is recognized as interest expenses. Changes in the amount of the provisions associated with updating the estimates pertaining to them (discount rate, inflation rate, expected nominal value of liquidation expenditures) are recognized as an adjustment correction of the value of fixed assets subject to the liquidation obligation.

b. mining damages

The provision for removing mining damages is calculated on the basis of a reliable estimation of cost of repairing the facilities, structures and compensation being the effect of the mining operations. The starting point for recognition of the provision are the impacts of mining operations, resulting from execution of mine operation plans, identified on the surface. The provision is presented as the present value of expenditures required to fulfill this obligation.

c. other reserves

The provision for environment reclamation, property tax, legal claims, warranty repairs et al. is recognized when the Group has the legal or customary obligation resulting from past events and it is probable that fulfillment of the obligation will cause the necessity to pay out funds, and its size has been reliably estimated. Provisions are not created for future operating losses.

The balance of provisions is verified as at each final day of the reporting period and is adjusted to reflect the current, most appropriate estimate.

2.19. Subsidies

Subsidies are not recognized until obtaining reasonable certainty that the Group will satisfy the required conditions and receives such subsidies.

Subsidies which involve a principal condition that the Group acquires or develops fixed assets, are recognized in the consolidated statement of financial position in the deferred income line item and charged to the financial result systematically throughout the anticipate economic life of such assets.

Other subsidies are systematically recognized in revenues, over a period required to compensate the costs which such subsidies were intended to compensate. Subsidies due as compensation of costs or losses already incurred or as a form of direct financial support for the Group without incurring future costs, are recognized in the financial result over the period in which they are due.

2.20. Contingent items

Contingent assets are formed as a result of past events or events whose existence will be confirmed only at the time of occurrence or non-occurrence of one or more uncertain future events which are not fully in the company’s control, or They are assessed on an ongoing basis to make sure that they are properly reflected in the financial statements. If the impact of economic benefits becomes certain then this asset component is carried through revenues and recognized in the financial statements for the period in which the change occurred. Contingent assets are not recognized in the consolidated statement of financial position but disclosed in notes.

A contingent liability is:

a possible obligation that results from past events, whose existence will be confirmed only at the time of occurrence or non-occurrence of one or more uncertain future events which are not fully in the Group’s control, or
a current obligation which results from past events but is not recognized in the report because it is not probable that it will be necessary to spend funds comprising economic benefits to satisfy the obligation or the amount of the obligation (liability) cannot be sufficiently reliably valuated.

Contingent liabilities are not recognized in the consolidated statement of financial position but are disclosed in the notes, unless the probability of disbursement of funds embodying economic benefits is low.

2.21. Revenues

Revenues on sales are shown at fair value of the received or due payment on account of sale of products, merchandise, materials or services in the ordinary course of the Group’s operations, taking into account the rebates granted and other sales price reductions, after elimination of intra-Group sales.

The Group recognizes revenues when the amount of the revenues can be reliably determined, the costs incurred to obtain the revenues can be reliably measured when the Group transferred to the buyer significant risk and benefits resulting from the ownership rights and when it is probable that the Group will obtain economic benefits in the future. It is recognized that the value of revenues cannot be reliably measured until all contingent events associated with the sale are clarified. The Group bases its estimates on historical results, taking into account the customer type, transaction type and details of specific agreements.

a. Revenues on the sales of products, merchandise and materials

Revenues on the sales of products, merchandise and materials, in particular coal and coke, are recognized upon delivery of the products by the Group to the recipient. Delivery takes place at the time of transferring significant risk and benefits resulting from the ownership rights to the products, merchandise and materials to the buyer, pursuant to the terms and conditions of the deliveries set forth in the sales agreements. Revenues on sales are presented on the basis of the prices specified in sales agreements, after reduction by estimate rebates and other sales decreases.

b. Revenues on the sale of services

Revenues on the sale of services are recognized if a service has been provided as at the date ending the reporting period.

c. Interest income

Interest income is recognized pro rata to the elapse of time, using the effective interest rate method. Interest income on granted loans which have been impaired are recognized according to the original effective interest rate in the remaining income.

d. Dividend income

Dividend income is recognized at the time of determining the shareholders’ rights to receive the dividends and is presented in other income.

2.22. Costs

Costs are construed as probable decreases, in the reporting period, in economic benefits with a reliably determined value in the form of a decrease in the value of assets or an increase in the value of liabilities and reserves which will lead to a decrease in equity or an increase in a shortage of equity in a manner different than a withdrawal of funds made by the shareholders or owners.

Costs are recognized in the consolidated statement of comprehensive income on the basis of the direct relation between the costs incurred and the specific income earned, i.e. using the commensurability principle, through the prepayments and accruals and deferred income account.

The Group keeps full records of costs, i.e. the costs are captured by type and by business segments. The Group presents a division of costs captured in the financial result by function of expenditure.

2.23. Cost of external funding

The cost of external funding, which includes interest on incurred liabilities and FX differences resulting from loans and borrowings in foreign currencies to the extent to which they are recognized as adjustment of the interest expense which can be directly ascribed to acquisition, construction or production of an adjusted asset, are capitalized as part of the purchase price or production cost of such asset. The amount of costs of external funding subject to capitalization is determined pursuant to IAS 23.

2.24. Lease

A lease in which a significant portion of risk and benefits derived from the ownership title remain with the lessor (financing party) constitutes an operating lease. Leasing fees paid under operating lease, after reduction by special promotional offers, if any, obtained from the lessor (financing party) are charged to costs using the straight-line method throughout the term of the lease.

Operating lease comprises also the right of perpetual usufruct of land. The purchase price paid for the possibility using this right is amortized over the term of the lease in line with the timing of drawing benefits from such right. The right of perpetual usufruct of land is recognized in the intangible assets line item.

A lease in which all the risks and benefits derived from the possession of a leased item (asset) are transferred, even though the legal title to the asset may but does not have to be ultimately transferred – is classified as a financial lease.

The subject matter of a financial lease is recognized in assets on the lease commencement date, at the lower of the two amounts: the fair value of the leased item or the present value of the minimum leasing fees. The present value of the minimum leasing fees is recorded as liabilities on account of financial lease, divided into a short-term part (payable within 1 year) and a long-term part (payable in over 1 year). When calculating the present value of the minimum leasing fees, the discount rate used is the lease interest rate, provided it can be determined. Otherwise, the lessee's marginal interest rate is used. All of the lessee's initial direct costs are added to the amount recognized as an asset component.

The minimum leasing fees are divided between financial costs and reduction of the liability on account of leases. Financial costs are settled over the individual periods covered by the term of the lease, to obtain a fixed interest rate for the outstanding balance of liabilities. Conditional leasing fees are recognized as costs in the period in which they are incurred.

Depreciable assets acquired under financial leases are depreciated over the useful lives of the assets if the agreement envisages transfer of the ownership title to the leased item to the lessee. If the agreement does not envisage ultimate transfer of the leased item to the lessee the asset is amortized over the term of the lease.

2.25. Dividend payment

Dividend payments to shareholders of the Parent Company are recognized as liability in the Group's consolidated financial statements in the period when they are approved by the shareholders of the Parent Company.

3.1. Financial risk factors

The business conducted by the Group exposes it to the following financial risks: market risk (including: price risk, foreign exchange risk and cash flow risk related to changes in interest rates), credit risk and liquidity risk.

a. Price risk

The Group has no material investments in capital securities classified in the consolidated statement of financial position as available for sale or carried at fair value through profit or loss and therefore is not exposed to price risk related to changes in the prices of such investments.

b. Foreign exchange risk

The overriding objective of the Group's policy is to mitigate as much as possible the Group's FX risk arising from its foreign currency exposure and which results from the uncertainty as to the level of future cash flows and financial result due to changes of the exchange rate. The Group is exposed to a significant foreign exchange risk associated with the sales of products on international markets. Moreover, in order to mitigate the foreign exchange risk, the Group concluded FX forward transactions in 2012. The Group also makes small purchases of materials, services or investment assets in foreign currencies and incurs foreign currency loans. This curtails the FX volatility risk resulting from selling products in a natural way.

The Group does not apply hedge accounting.

Potential impact of an increase in the EUR/PLN exchange rate on net profit:

	31 Dec 2012	31 Dec 2011
% change	5.00%	5.00%

Change in the value of financial assets:	15.1	14.6
Change in the value of financial liabilities	(8.0)	(19.0)
Impact on pre-tax profit	7.1	(4.4)
Tax effect	(1.4)	0.8
Impact on net profit	5.7	(3.6)

Potential impact of a decrease in the EUR/PLN exchange rate on net profit:

	31 Dec 2012	31 Dec 2011
% change	-5.00%	-5.00%

Revaluation of financial assets	(15.1)	(14.6)
Revaluation of financial liabilities	1.8	19
Impact on pre-tax profit	(7.1)	4.4
Tax effect	1.4	(0.8)
Impact on net profit	(5.7)	3.6

Changes in exchange rates of currencies other than EUR do not have a material impact on the Group’s net profit.

c. Cash flow volatility risk caused by changes in interest rates

The Group’s exposure to interest rate risk concerns primarily potential changes in cash flows caused by shifts in market interest rates. The Group companies finance their operating and investing activities partly with external funds bearing variable interest rates and invest surplus cash in the financial assets bearing also floating interest rates. The Parent Company is the main entity exposed to the interest rate risk affecting deposits and cash, while other companies that use external financing are exposed to the risk of volatile interest rates affecting liabilities under loans. The Group does not use derivatives to hedge against interest rate risk. However in 2012, in order to minimize the adverse effect of the declining interest rates on the Parent Company's performance, action was taken to maintain income on term deposits, i.e. before the announced interest rate decrease, term deposits maturing in over 3 months were concluded which may be terminated without waiving any interest.

The tables below present the potential impact of a +/- 50 basis point change in interest rates on net profit.

The impact of an interest rate increase on net profit:

	31 Dec 2012	31 Dec 2011
Volatility in basis points	50bp	50bp

Change in the value of financial assets:	13.2	14.2
Change in the value of financial liabilities	(1.3)	(2.1)
Impact on pre-tax profit	11.9	12.1
Tax effect	(2.2)	(2.3)
Impact on net profit	9.7	9.8

Effect of an interest rate decrease on net profit:

	31 Dec 2012	31 Dec 2011
Volatility in basis points	(50)bp	(50)bp

Change in the value of financial assets:	(13.2)	(14.2)
Change in the value of financial liabilities	1.3	2.1
Impact on pre-tax profit	(11.9)	(12.1)
Tax effect	2.2	2.3
Impact on net profit	(9.7)	(9.8)

d. Credit risk

Credit risk in the Group is concentrated in the following areas:

trade receivables,
cash and bank deposits,
derivatives,
debt securities and loans granted.

Credit risk identified in trade receivables is linked to reliability of the customers. Internal changes in the Group's coke sales policy, resulting in credit risk shifting from related entities (coking plants and Polski Koks S.A.) directly to JSW S.A. had no material effect on the credit risk associated with receivables. The ArcelorMittal Group and companies controlled by the State Treasury remain the principal buyers, responsible for respectively 36.2% and 12.4% of receivables as at 30 September 2011.

In order to mitigate the risk of uncollectible receivables, the following security interest is established:

blank promissory notes,
sureties extended by companies with a strong position on the market,
assignment of receivables,
letters of credit.

In the case of new customers or customers with an uncertain financial position, the Group makes the sale after the business partner has made a prepayment. In the case of some buyers using commercial credit, their trade receivables are covered by trade receivables insurance from insurance companies. The Group does not require any security interest from buyers with a strong market position, considering the strategic nature of the cooperation and the ability to assess their financial documents. Taking into account the above security interest and the history of cooperation, the risk of uncollectible receivables is deemed to be very low. As at 31 December 2012, the insurance covered 13.2 % of the Group's trade receivables; additionally, 46.7 % receivables were secured through one of the aforementioned contractual securities.

The Group believes that the maximum exposure to sales-related credit risk on the final day of the reporting period is the full book value of trade receivables without the fair value of security accepted, cash and cash equivalents and financial assets in the form of bank term deposits.

In order to mitigate the risk associated with investing its temporarily free financial resources, the Group reduced the number of financial institutions with which it cooperates to solely banks with an established market position. The current number of such institutions on the financial services market allows the Group to diversify the level of cash held in respective banks thus minimizing credit risk.

Concentration of free financial resources in respective banks:

Bank	Rating	Rating organization	31 Dec 2012	31 Dec 2011
A	A	Moody's	21.5%	14.7%
B	Baa2	Moody's	21.0%	0.7%
C	A2	Moody's	14.8%	15.0%
D	A2	Moody's	13.4%	22.7%
E	Aa2	Moody's	12.1%	21.0%
F	Baa1	Moody's	7.4%	1.2%

The table above presents concentration of cash and deposits above the 5% level.

e. Liquidity risk

Prudent management of liquidity risk requires the Company, among others, to maintain an appropriate level of cash and an available credit facilities. The Group regularly forecasts and monitors liquidity based on expected cash flows.

Group companies have active overdraft facility limit in the aggregated amount of PLN 209.0 million. In 2012, Group companies used overdraft financing quite rarely.

Taking into account the Group’s accumulated financial reserves and the level of liabilities, we may assume that the risk of losing financial liquidity is slight.

The table below contains an analysis of the Group's financial liabilities in respective age groups, distributed according to time to contractual maturity on the final day of the reporting period. The amounts presented in the table represent undiscounted contractual cash flows. The balance to be repaid within 12 months is posted at book values, since the impact of discounting is not significant.

	Under	From 1 up to 2 years	From 2 up to 5 years	Above 5 years	Total
As at 31 Dec 2011
Loans and borrowings	187.6	62	179.2	-	428.8
Trade liabilities and other financial liabilities	1,081.8	34.3	10.9	-	1,127.0
Financial derivatives (gross settled)	288.8	-	-	-	288.8
Total	1,558.2	96.3	190.1	-	1,844.6

As at 31 Dec 2012
Loans and borrowings	86.8	97.9	111.6	-	296.3
Trade liabilities and other financial liabilities	1,016.8	21.6	11.3	5.9	1,055.6
Financial derivatives (gross settled)	208.7	-	-	-	208.7
Total	1,312.3	119.5	122.9	5.9	1,560.6

3.2. Capital risk management

The key objective of capital risk management is to safeguard the Group’s ability to continue as a going concern and carry out the planned investment projects, while increasing returns to shareholders.

In 2012, the level of short-term external financing was lower than the value of the Group’s liquid financial resources (cash and cash equivalents). Accordingly, equity is considered to be the capital employed to finance the Group’s operations.

3.3. Estimation of fair value

Financial instruments carried at fair value in the consolidated statement of financial position are analyzed for valuation procedures. The hierarchy of valuation procedures has been defined as follows:

Listed (unadjusted) prices from active markets for identical assets or liabilities (Level 1).
Input data other than the listings covered by this level which may be determined or observed for an asset or liability item directly (i.e. in the form of price) or indirectly (i.e. through calculations based on prices) (level 2).
Input data for the valuation of assets or liabilities, which are not based on the observable market data (i.e. data which cannot be observed) (level 3).

As at 31 December 2012 and 31 December 2011, the only financial instruments carried at fair value in the Group were financial derivatives. With respect to valuation procedures, they are classified as level 2 in the above hierarchy.

Group's financial assets and liabilities carried at fair value:

	31 Dec 2012 Level 2	31 Dec 2011 Level 2
Financial assets – financial derivatives	3.9	4.0
Financial liabilities – financial derivatives	0.3	0.1

The fair value of financial instruments which are not traded on active markets exists is measured by using adequate valuation techniques. Such valuation techniques optimize the use of observable market data where they are available and rely to the smallest possible extent on the entity-specific estimations. Where all the significant data used for measurement at fair value are observable, the financial instrument is classified as level 2. This group includes financial derivatives.

4. Significant accounting estimations and judgments

These result from the past experience and other factors, including anticipated future events that seem reasonable in the current situation. Accounting estimations and judgments are subject to regular evaluation.

Estimations

The Group makes estimations and adopts assumptions concerning the future. By definition, the resulting accounting estimations will rarely match the actual performance. The estimations and assumptions which carry a significant risk of making significant adjustment of the book value of assets and liabilities during the next financial year are discussed below.

Estimating the provision for mining plant decommissioning costs

The Group establishes a provision for mining plant decommissioning costs, which it is obligated to do by the applicable provisions of law. The main assumptions made when determining the cost of mine decommissioning include the assumptions with regards to the life of a mine, anticipated inflation and long-term discounting rates and the expected nominal cost of decomissioning the respective mining plants, which are determined inside the Company. Any changes to these assumptions affect the book value of the provision.

a. Assumptions of the life of a mine:

Based on the concessions held for the mining of black coal and methane as a concomitant mineral, the size of the documented resource base of the mines according to an official evaluation of the resources and forecasts of the mining capacity of the mines, the following periods for conducting production activities by particular mining facilities within the organizational structure of the Parent Company are anticipated:

	According to the status
	as at 31 Dec 2012	as at 31 Dec 2011
Zakład Górniczy KWK “Borynia-Zofiówka” Mining Plant
– “Borynia” Section	till 31.12.2030	till 31.12.2030
– “Zofiówka” Section	till 31.12.2051	till 31.12.2051
Zakład Górniczy KWK “Budryk” Mining Plant	till 31.12.2077	till 31.12.2077
Zakład Górniczy KWK “Jas-Mos” Mining Plant	till 31.12.2022	till 31.12.2022
Zakład Górniczy KWK “Krupiński” Mining Plant	till 31.12.2030	till 31.12.2030
Zakład Górniczy KWK “Pniówek” Mining Plant	till 31.12.2051	till 31.12.2051

The Management Board of the Parent Company believes that development of new deposits or parts of new deposits or development of mined deposits on greater depths may extend the lives of mines mentioned above.

b) Other significant assumptions relating to the calculation of the mining plant decomissioning costs:

	2012	2011
Inflation rate	2.7%	2.5%
Nominal discount rate	4.5%	5.75%

If the discount rates used were 0.5% points lower than the Management Board's estimates then the book value of the provision for mining plant decomissioning costs would be PLN 48.1 million more and if the discount rates used were 0.5% points higher then the book value of the reserve would be PLN 40.1 million less.

Estimations of coal resources

Coal resources are the estimated volumes of coal which may be extracted legally and in an economically-justified manner from the mining areas where the Group operates. The Group estimates the size of the resources based on information prepared by properly qualified persons pertaining to the geological data about the size, depth and shape of the resources. Interpretation of this information requires complex judgments to be applied. Estimation of coal resources that are suitable for extraction is based on factors such as coal prices, future investment requirements, cost of production and assumptions and judgments regarding the deposit's geological parameters. Any changes in coal resource estimations may affect the anticipated life of mines and thus, indirectly, also the book value of property, plant and equipment, provisions for mining plant decomissioning costs, deferred tax assets and depreciation costs.

Employee benefits

The present value of employee benefit liabilities depends on a number of factors that are determined using actuarial methods, with several assumptions. The assumptions used to determine the provision for and costs of employee benefits include the discount rate assumption. The main assumptions for provisions for employee benefits are disclosed in Note 19. Any changes to these assumptions affect the book value of the provision for employee benefits. If the discount rates used were 0.5% points lower than the Management Board's estimates then the book value of the provision for employee benefits would be PLN 122.9 million more and if the discount rates used were 0.5% points higher then the book value of the reserve would be PLN 112.5 million less.

Property tax on mine workings

After a positive ruling of the Constitutional Tribunal and the judgments of the Voivodship Court of Administration, the Parent Company estimates the risk of further administrative proceedings in courts, as a result of which some of the property, plant and equipment components located in mine workings may be taxed and revalues the provisions for potential disputes with municipalities as described in Notes 20 and 27.

Any changes in assumptions adopted on the basis of the pending administrative proceedings affect the carrying value of the provision for the disputed property tax and receivables on account of the disputed property tax on underground mine workings. A change in the taxable base by 1% of the total gross value of “capital pits” results in a PLN 3.2 million change in the current provision and a PLN 2.1 revaluation charge to receivables on account of the disputed property tax on underground mine workings.

Mining damages

The provision for removing mining damages is established for reported damages based on a reliable estimation of cost of repairing the facilities, structures and compensation being the effect of the mining operations. The provision is presented as the present value of expenditures necessary to fulfill this obligation. Details are described in Note 20.

Settlement of expensable mining pits

As described in Note 2.5.1, expensable mining pits are settled pro rata to the production of coal in respective wall areas. The length of the settlement period depends on the estimated quantity of coal in the stratum made available as part of the expensable mining pit.

Useful life period of property plant and equipment

The Management determines the estimated useful lives and consequently the depreciation rates for particular property, plant and equipment. This estimate is based on the anticipated period of economic usefulness of those assets. If any circumstances arise that change the anticipated period of use (e.g. technological changes, retirement, etc.), the depreciation rates may change. As a result the value of depreciation charges and net book value of property, plant and equipment will change.

Accounting judgments

Combination of business entities under common control

When defining the accounting principles, the Management Board was guided by its judgment relating to the accounting principles applicable to business combinations. The accounting principles adopted by the Management Board are described in Note 2.2 (d).

5.1. Employee package for eligible employees

Since JSW S.A. was incorporated as a result of transformation of state-owned enterprises into a joint-stock company, pursuant to the provisions of the Act on Commercialization and Privatization, employees and other eligible persons are entitled to gratuitous receipt of 15% shares of JSW S.A. from the State Treasury. On 6 July 2011, the State Treasury introduced 39,496,196 shares into trading. Starting on 10 October 2011, JSW S.A. began to dispose, free of charge, 14,928,603 series A shares with a par value of PLN 5.00 each to eligible employees. The shares received may not be sold for a period of 2 years (or 3 years for Management Board members), starting from 7 July 2011, regardless of the date when the eligible persons actually received the shares (“lock-up”).

5.2. Employee package for ineligible employees

On 12 May 2011, the Extraordinary Shareholder Meeting adopted a resolution to issue 3,954,210 series C shares with a par value of PLN 5.00 each. The share capital increase associated with the issue of new series C shares, which was used to distribute shares to ineligible employees of JSW S.A. and related companies, was registered on 19 September 2011. The share capital increase was funded with the reserve capital established by with Resolution no. 4 adopted by the Extraordinary Shareholder Meeting on 12 May 2011 and charged to the reserve capital established from the Company's profit.

According to the provisions of IFRS 2, in 2011 JSW S.A. measured its employee share ownership plan. The difference amount between the par value of the issued series C shares and their fair value, determined on the basis of the Parent Company's market value, was recognized as the surplus of the issue price of the shares over their par value. The effects of the measurement are included in the financial result item “Employee share ownership plan”. The plan was fully settled in the year in which it was implemented.

The following table presents the financial effect of the share issue carried out in 2011:

	Share capital	Share premium account	Retained earnings	Financial result
Measurement of the employee share ownership plan	19.8	282.2	(9.0)	(293.0)

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On 27 February 2012, the Supervisory Board approved the JSW S.A. Management Board's resolution setting the number of shares earmarked for each group of Ineligible Employees grouped by periods of employment. In effect of the distribution of series C shares among respective employee tenure groups eligible to receive shares in this series, 2,157,886 out of 3,954,210 issued series C shares were designated for gratuitous disposal. Accordingly, there will be 1,796,324 unused series C shares remaining. The Supervisory Board issued a positive opinion on the Management Board's proposal to recommend retirement of 1,796,324 series C shares to the Shareholder Meeting of JSW S.A. On 17 April 2012, the Extraordinary Shareholder Meeting adopted a resolution to retire the surplus shares. The allocation process of series C shares started on 1 March 2012.

6. Property, plant and equipment

	Land	Buildings and structures	Expensable mining pits *	Technical equipment and machinery	Other property, plant and equipment	Property, plant and equipment under construction **	Total
As at 1 January 2011
Gross value	36.2	4,292.8	633.8	4,158.1	259.1	739.5	10,119.5
Accumulated depreciation ***	-	(1,146.3)	-	(2,070.3)	(185.2)	-	(3,401.8)
Net book value	36.2	3,146.5	633.8	2,087.8	73.9	739.5	6,717.7

2011
Net book value at the beginning of the year	36.2	3,146.5	633.8	2,087.8	73.9	739.5	6,717.7
Acquisition of subsidiaries	7.5	381.7	-	672.4	16.4	80.8	1,158.8
Increases	-	0.2	288.6	0.5	-	1,167.4	1,456.7
Transfers from property, plant and equipment under construction	3.9	275.2	-	831.5	65.6	(1,176.2)	-
Decreases	-	(16.1)	-	(4.3)	(0.2)	(0.4)	(21.0)
Depreciation	-	(153.7)	(241.1)	(409.3)	(34.5)	-	(838.6)
Revaluation charge	-	-	-	(14.8)	-	-	(14.8)
Net book value	47.6	3,633.8	681.3	3,163.8	121.2	811.1	8,458.8
As at 31 Dec 2011
Gross value	47.6	5,111.1	681.3	5,787.5	336.5		12,775.1
Accumulated depreciation ***	-	(1,477.3)	-	(2,623.7)	(215.3)	-	(4,316.3)
Net book value	47.6	3,633.8	681.3	3,163.8	121.2	811.1	8,458.8

2012
Net book value at the beginning of the year	47.6	3,633.8	681.3	3,163.8	121.2	811.1	8,458.8
Increases	-	13	487.2	0.7	-	1,293.5	1,794.4
Other increases – recalculation of the mining plant decomissioning provision	-	86.7	-	-	-	-	86.7
Transfers from property, plant and equipment under construction	3.8	223.3	-	718.3	50	(995.4)	-
Decreases ****	(0.9)	(7.3)	(8.6)	(19.5)	(0.3)	(17.9)	(54.5)
Depreciation	-	(177.1)	(304.0)	(528.6)	(39.8)	-	(1,049.5)
Revaluation charge	-	-	-	(5.0)	-	-	(5.0)
Net book value	50.5	3,772.4	855.9	3,329.7	131.1	1,091.3	9,230.9
As at 31 Dec 2012
Gross value	50.5	5,374.8	855.9	6,396.1	377.6	1,091.3	14,146.2
Accumulated depreciation ***	-	(1,602.4)	-	(3,066.4)	(246.5)	-	(4,915.3)
Net book value	50.5	3,772.4	855.9	3,329.7	131.1	1,091.3	9,230.9

* Expensable mining pits are settled according to the extraction volumes from respective wall areas. Upon settlement, an expensable mining pit is actually liquidated; therefore, the table does not contain any accumulated depreciation numbers
** The capital expenditures incurred by the Group companies (except for expenditures for expensable mining pits) are accumulated in the “Property, plant and equipment under construction” item and in the month they are commissioned for use they are transferred to the appropriate type group of property, plant and equipment.
*** This item includes accumulated depreciation and revaluation charges for property, plant and equipment
****This item also includes reclassification of property, plant and equipment to investment property

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As at 31 December 2012, revaluation changes for property, plant and equipment are PLN 30.6 million (PLN 41.3 million as at 31 December 2011). PLN 15.7 million of the revaluation charge was used in the current period.

Establishment and reversal of revaluation charges for property, plant and equipment is captured as other costs/income in the financial result.

As at 31 December 2012, the net book value of property, plant and equipment components securing the repayment of liabilities was PLN 4.2 million (PLN 112.2 million on 31 December 2011). In 2012, a mortgage of PLN 101.7 million securing other liabilities was stricken off the land and mortgage registers. Moreover, property, plant and equipment which secures liabilities on account of loans and borrowings is presented in Note 17.

7. Intangible assets

	Geologic information	Perpetual usufruct right to land	Other intangible assets	Total
As at 1 January 2011
Gross value	23.3	19.7	30.7	73.7
Accumulated depreciation *	(7.2)	(0.4)	(24.3)	(31.9)
Net book value	16.1	19.3	6.4	41.8

2011
Net book value at the beginning of the year	16.1	19.3	6.4	41.8
Increases	-	1.1	21.9	23
Decreases	-	-	(0.7)	(0.7)
Depreciation	(1.4)	(0.2)	(4.1)	(5.7)
Acquisition of subsidiaries	-	3.4	3.1	6.5
Net book value	14.7	23.6	26.6	64.9
As at 31 Dec 2011
Gross value	23.3	25.5	58.2	107
Accumulated depreciation *	(8.6)	(1.9)	(31.6)	(42.1)
Net book value	14.7	23.6	26.6	64.9

2012
Net book value at the beginning of the year	14.7	23.6	26.6	64.9
Increases	3.3	0.1	27.4	30.8
Decreases	-	(0.1)	-	(0.1)
Depreciation	(1.2)	(0.5)	(15.1)	(16.8)
Revaluation charge	-	-	(1.5)	(1.5)
Net book value	16.8	23.1	37.4	77.3
As at 31 Dec 2012
Gross value	26.5	25.9	85.4	137.8
Accumulated depreciation *	(9.7)	(2.8)	(48.0)	(60.5)
Net book value	16.8	23.1	37.4	77.3

* This item includes accumulated depreciation and revaluation charges for intangible assets

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As at 31 December 2012, revaluation changes for intangible assets are PLN 2.1 million (PLN 0.6 million as at 31 December 2011).

Establishment and reversal of revaluation charges for intangible assets is captured as other costs/income in the financial result.

The Group holds the following perpetual usufruct rights which are not recorded in the consolidated financial statements:

	31 Dec 2012	31 Dec 2011
Surface area (thous. sqm)	13.170	13.209
Value of land (PLN million)	94.4	94.4

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8. Investment property

	2012	2011
As at 1 January
Net book value at the beginning of the period	-	-
Reclassified from property, plant and equipment, including:	20.8	-
- gross value	21.7	-
- accumulated depreciation	(0.9)	-
Current expenditures	7.6	-
Depreciation	(0.3)	-
Revaluation charge	(5.0)	-
Net book value	23.1	-
As at 31 December
Gross value	29.3	-
Accumulated depreciation *	(6.2)	-
Net book value	23.1	-

* This item includes accumulated depreciation and a revaluation charge for investment property

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In 2012, the Parent Company reclassified PLN 20.8 million worth of property, plant and equipment to investment property. The investment property components is the “Różany Gaj” building, currently handed over to an operator for commercial activity. The further expenditures incurred in 2012 after the reclassification are PLN 7.6 million. The property was commissioned for use in Q4 2012. The expected useful life of the investment property is 40 years. Investment properties are depreciated using the straight-line method over their useful life.

JSW S.A. uses the purchase price or manufacturing cost model to measure the value of investment property.

In 2012, the Parent Company made a revaluation charge of PLN 5.0 million due to impairment of the investment property down to the fair value calculated by an independent appraiser using the income method. Establishment of revaluation charges for investment property is captured as other costs in the financial result.

9. Financial instruments by type

Financial assets:

	Financial assets carried at fair value through profit or loss	Financial assets available for sale	Financial assets held to maturity	Loans and receivables	Total
As at 31 Dec 2011
Ownership interest and shares not listed on a stock exchange	-	0.3	-	-	0.3
Ownership interest and shares listed on a stock exchange	-	0.3	-	-	0.3
Trade receivables	-	-	-	919.3	919.3
Bank deposits	-	-	-	24.4	24.4
Cash and cash equivalents *	-	-	-	2,822.0	2,822.0
Financial derivatives	4	-	-	-	4
Others	-	-	-	1.8	1.8
Total	4	0.6	-	3,767.5	3,772.1

As at 31 Dec 2012
Ownership interest and shares not listed on a stock exchange	-	0.3	-	-	0.3
Ownership interest and shares listed on a stock exchange	-	0.3	-	-	0.3
Trade receivables	-	-	-	705.3	705.3
Bank deposits*	-	-	-	967.3	967.3
Cash and cash equivalents *	-	-	-	1,728.0	1,728.0
Financial derivatives	3.9	-	-	-	3.9
Others	-	-	1.2	0.2	1.4
Total	3.9	0.6	1.2	3,400.8	3,406.5

* This item includes also funds accumulated to finance the decomissioning of a mining plant, as described in Note 10 of the Consolidated financial statement of JSW S.A. Capital Group for 2012

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Financial liabilities:

	Financial liabilities at fair value through profit or loss	Financial liabilities measured at amortized cost	Total
As at 31 Dec 2011
Financial derivatives	0.1	-	0.1
Loans and borrowings	-	428.8	428.8
Liabilities under financial lease agreements	-	19.1	19.1
Trade liabilities and other financial liabilities	-	1,103.9	1,103.9
Total	0.1	1,551.8	1,551.9

As at 31 Dec 2012
Financial derivatives	0.3	-	0.3
Loans and borrowings	-	265.6	265.6
Liabilities under financial lease agreements	-	17.8	17.8
Trade liabilities and other financial liabilities	-	1,034.9	1,034.9
Total	0.3	1,318.3	1,318.6

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None of the significant financial asset components that were not overdue were renegotiated during the last year.

10. Other long-term assets

	31 Dec 2012	31 Dec 2011
Long-term financial assets:	257.2	235.8
Bank deposits	-	1
Bank deposits of the Mining Plant Decomissioning Fund *	18.5	-
Treasury bonds	1.2	1.1
Financial receivables	0.2	0.7
Cash and cash equivalents of the Mining Plant Decomissioning Fund *	237.3	233
Ownership interest and shares in other entities	0.5	0.6
Other non-financial receivables	8	2.8
Total other long-term assets	265.7	239.2

* This item includes funds accumulated to finance the decomissioning of a mining plant. According to the provisions of the Geological and Mining Law Act (Journal of Laws No. 163 Item 981 of 2011, as amended) and the Minister of Economy's Regulation on the principles of establishing and managing a mining plant decomissioning fund, the Parent Company is obligated to accumulate funds on a separate bank account of the Mining Plant Decomissioning Fund (Fundusz Likwidacji Zakładów Górniczych – FLZG), which may be expended solely and exclusively to finance a total or partial decomissioning of a mining plant

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All the long-term financial assets are denominated in Polish zloty.

11. Financial derivatives

Financial assets:

	31 Dec 2012	31 Dec 2011
FX forward:
– EUR	3.9	3.9
– USD	-	0.1
Total, of which:	3.9	4
long-term part	-	-
short-term part	3.9	4

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Financial liabilities:

	31 Dec 2012	31 Dec 2011
FX forward:
– EUR	0.1	0.1
– USD	0.2	-
Total, of which:	0.3	0.1
long-term part	-	-
short-term part	0.3	0.1

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A derivative financial instrument is classified as a short-term financial instrument if the settlement date of that instrument of its part is within one year from the final day of the reporting period. If the settlement date of the financial instrument is over one year from the final day of the reporting period then such an instrument or part thereof is classified as a long-term financial instrument.

The nominal values of contracts in respective currencies are presented in the table below:

Contract	Currency	31 Dec 2012	31 Dec 2011
FX forward	EUR	36.6	63.2
	USD	19	2.9
	CZK	2.3	-

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12. Inventories

	31 Dec 2012	31 Dec 2011
Materials	105.8	147.8
Production in progress	3.7	0.9
Finished products	681.9	551.6
Merchandise	14.7	39.4
Total	806.1	739.7

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Revaluation charges for inventories are presented in the table below:

	2012	2011
As at 1 January	13.4	12.5
Charge establishment	47.7	9
Utilization of charges	(5.8)	(1.7)
Reversal of charges	(3.9)	(12.3)
Acquisition of subsidiaries	-	5.9
As at 31 December	51.4	13.4

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The establishment and reversal of impairment charge amounts for inventories was recognized in the cost of products, materials and merchandise sold.

13. Trade receivables and other receivables

	31 Dec 2012	31 Dec 2011
Gross trade receivables	814.9	1,029.9
Minus: revaluation charge	(109.6)	(110.6)
Trade receivables (net)	705.3	919.3
Prepayments and accruals	5	5.3
Prepayments	5	0.5
Receivables related to taxes and social security	105.8	251.3
Other receivables *	199.3	186.8
Total trade receivables and other receivables	1,020.4	1,363.2

* This item presents receivables from municipalities on account of the disputed property tax on underground mine workings, which are PLN 163.8 million as at 31 December 2012 (PLN 163.9 million as at 31 December 2011). It may take more than 10 years to receive these payments.

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air value of trade receivables and other receivables is not significantly different from their book value.
The age structure of the Group's trade receivables is as follows:

	31 Dec 2012	31 Dec 2011
Trade receivables [PLN]	435.5	685.4
Trade receivables [EUR]	206.5	229.7
Trade receivables [USD]	62.5	4
Trade receivables [CZK]	0.8	0.2
Total trade receivables	705.3	919.3

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The age structure of overdue trade receivables which do not show signs of impairment is presented in the table below:

	31 Dec 2012	31 Dec 2011
Up to 1 month	66.8	23.6
From 1 to 3 months	2.4	3.5
From 3 to 6 months	0.5	0.5
From 6 to 12 months	0.7	0.7
Above 12 months	-	1
Total	70.4	29.3

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Changes in the balance of revaluation charge for trade receivables are presented in the following table:

	2012	2011
As at 1 January	110.6	61.6
Charge establishment	21.2	16.6
Utilization of the revaluation charge for uncollectible receivables	(2.7)	(8.0)
Reversal of unused amounts	(19.5)	(8.0)
Acquisition of subsidiaries	-	48.4
As at 31 December	109.6	110.6

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Establishment and reversal of revaluation charges for receivables is shown in administrative costs (the principal) and in other cost/income (overdue interest).

14. Other short-term financial assets

	31 Dec 2012	31 Dec 2011
Bank deposits	948.8	23.4
Others	0.1	1.2
Total other short-term financial assets	948.9	24.6

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The appreciation of other short-term financial assets is caused by the establishment of bank deposits with maturities of 3 to 12 months.

15. Cash and cash equivalents

	31 Dec 2012	31 Dec 2011
Cash at bank and in hand	239.9	275
Short-term bank deposits	1,250.8	2,314.0
Total	1,490.7	2,589.0

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On 31 December 2012, the restricted cash amount was PLN 18.8 million (PLN 22.4 million on 31 December 2011) and included primarily bid deposits and accrued interest.

The currency structure of the Group's cash and cash equivalents is as follows:

	31 Dec 2012	31 Dec 2011
PLN
Cash at bank and in hand	140.5	262.3
Short-term bank deposits	1,218.0	2,310.1
Total	1,358.5	2,572.4
EUR
Cash at bank and in hand	98.9	12.5
Short-term bank deposits	1.7	3.9
Total	100.6	16.4
USD
Cash at bank and in hand	-	0.2
Short-term bank deposits	31.1	-
Total	31.1	0.2
CZK
Cash at bank and in hand	0.5	-
Short-term bank deposits	-	-
Total	0.5	-

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16. Share capital

	Number of shares (thousand)	Par value of ordinary shares	Hyperinflation adjustment	Total
As at 1 Jan 2011 *	10.885	544.2	664.9	1,209.1
As at 31 Dec 2011	119.208	596	664.9	1,260.9
As at 31 Dec 2012	117.412	587	664.9	1,251.9

* Number of shares before a 1:10 split

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The shares forming the Parent Company’s share capital have been issued and paid up in full.

Pursuant to a resolution adopted by the Shareholder Meeting on 12 May 2011, the share capital of JSW S.A. was increased by the following amounts:
1. PLN 32,020,550 through the issue of 6,404,110 series D shares with a par value of PLN 5.00 each, for the total issue price of PLN 267.4 million, offered to the State Treasury in exchange for 5,610,000 ordinary bearer shares in Kombinat Koksochemiczny Zabrze S.A. The share subscription agreement between JSW S.A. and the State Treasury was entered into on 29 June 2011. The share capital increase was registered pursuant to the decision made by the District Court in Gliwice on 20 July 2011. The transaction is described in Note 38.
2. PLN 19,771,050 through the issue of 3,954,210 series C shares with a par value of PLN 5.00 each. The condition for the filing of an application with the District Court to register the share capital increase resulting from the series C share issue was a prior registration of the share capital increase resulting from the series D issue described above. The share capital increase was registered by a decision of the District Court in Gliwice on 19 September 2011.
On 7 June 2011, the Financial Supervision Commission approved the issue prospectus of JSW S.A. In the IPO, 39,496,196 JSW S.A. shares were offered for sale, including: 30,170,616 series A shares and 9,325,580 series B shares. All shares were purchased at PLN 136.00 each. The value of the transaction exceeded PLN 5,371.5 million. The above shares were approved for trade on 4 July 2011 and introduced to trade on 6 July 2011.
On 17 April 2012 the Extraordinary Shareholder Meeting adopted a resolution to retire 1,796,324 series C shares, resolution to authorize the JSW S.A. Management Board to acquire treasury shares of JSW S.A. free of charge for the purpose of retirement and resolution to reduce the share capital by PLN 8,981,620, i.e. from PLN 596,039,600 to PLN 587,057,980 and create additional reserve capital. The share capital is reduced by retiring 1,796,324 series C shares with a par value of PLN 5.00 each following the voluntary retirement procedure involving a purchase of the shares by JSW S.A. from a Shareholder Powszechna Kasa Oszczędności Bank Polski S.A. – the PKO BP Brokerage House Branch in Warsaw. The share capital reduction was registered by the decision of the District Court in Gliwice on 26 April 2012.

As at 31 December 2012, the Parent Company's share capital was PLN 587,057,980 and was divided into 117,411,596 common shares with no voting preference. All the shares were issued and registered as at the end date of the reporting period.

The Parent Company's share capital as at 31 December 2012 consists of the following share series:

Series	Number of shares
A	99,524,020
B	9,325,580
C	2,157,886
D	6,404,110
Total	117,411,596

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17. Loans and borrowings

	31 Dec 2012	31 Dec 2011
Long-term:
Bank loans	109.1	137.9
Loans	80.8	103.3
Short-term:
Bank loans	37.3	158
Loans	38.4	29.6
Total	265.6	428.8

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The currency structure of the Group's loans is as follows:

	31 Dec 2012	31 Dec 2011
PLN	146.4	243.8
EUR	-	52.1
Total	146.4	295.9

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The currency structure of the Group's borrowings is as follows:

	31 Dec 2012	31 Dec 2011
PLN	119.2	132.9
Total	119.2	132.9

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The Group has at its disposal the following unused credit facilities:

	31 Dec 2012	31 Dec 2011
Unused credit facilities	200.2	252.5

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Average interest rate on loans and borrowings:

	31 Dec 2012	31 Dec 2011
PLN	5.79%	5.22%
EUR	-	1.85%

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The fair value of loans and borrowings is not significantly different from their book value.

As at 31 December 2012, loans and borrowings were secured as follows:

real estate mortgage of PLN 584.9 million,
blank promissory notes of PLN 368.3 million,
registered pledge agreements on movable assets of PLN 800.0 million,
transfer of receivables under selected product sale contracts of PLN 12.7 million,
bank guarantees of PLN 4.3 million.

Additionally, optional security up to PLN 150.0 million has been established for some of the loans and borrowings.

18. Deferred income tax

Deferred income tax assets and liabilities are offset at the level of financial statements of individual Group companies and therefore the following amounts are shown in the consolidated financial statements:

	31 Dec 2012	31 Dec 2011
Deferred income tax assets before offsetting
– to be realized after the period of 12 months	509.2	401.2
– to be realized within the period of 12 months	182.7	166.1
Total	691.9	567.3
Deferred income tax liabilities before offsetting
– to be realized after the period of 12 months	528.1	395.4
– to be realized within the period of 12 months	27	70.3
Total	555.1	465.7

Deferred income tax assets	184.2	101.6

Deferred income tax liabilities	47.4	-

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Movement in deferred income tax is as follows:

	2012	2011 restated
Surplus of deferred income tax assets over deferred income tax liabilities – as at 1 January	101.6	230.1
Acquisition of subsidiaries	-	(52.9)
Charged to net profit	(9.2)	(71.0)
Increase/(decrease) of other comprehensive income	44.4	(4.6)
Surplus of deferred income tax assets over deferred income tax liabilities – as at 31 December, of which:	136.8	101.6
Deferred income tax assets	184.2	101.6
Deferred income tax liabilities	47.4	-

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Movement in deferred income tax asset and liabilities before offsetting

Deferred income tax assets	Employee benefit liabilities	Provisions	Unpaid remuneration and other benefits	Tax loss	Others	Total
As at 1 January 2011	369.6	87.3	15.5	98.1	22.6	593.1
Acquisition of subsidiaries	6.5	1.9	0.9	0.2	28.5	38
(Charged)/credited to net profit	2.9	(8.1)	0.4	(84.4)	30	(59.2)
Decrease of other comprehensive income	(4.6)	-	-	-	-	(4.6)
As at 31 Dec 2011	374.4	81.1	16.8	13.9	81.1	567.3
Credited to net profit	29.6	9	2.7	25.7	13.2	80.2
Increase of other comprehensive income	44.4	-	-	-	-	44.4
As at 31 Dec 2012	448.4	90.1	19.5	39.6	94.3	691.9

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Deferred income tax liabilities	Value of expensable mining pits	Valuation of other property, plant and equipment	Others	Total
As at 1 January 2011	120.6	198.8	43.6	363
Acquisition of subsidiaries	-	88.8	2.1	90.9
Charged/(credited) to net profit	8.5	13.7	(10.4)	11.8
As at 31 Dec 2011	129.1	301.3	35.3	465.7
Charged to net profit	33.6	37.9	17.9	89.4
As at 31 Dec 2012	162.7	339.2	53.2	555.1

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19. Employee benefit liabilities

	31 Dec 2012	31 Dec 2011
Employee benefit liabilities captured in the consolidated statement of financial position on account of:
– retirement and disability severance pays	209.1	175
– jubilee awards	315.5	246.7
– adjustment disability benefits	224.1	186.4
– in-kind allowance of coal for pensioners and recipients of disability benefits	1,360.7	1,202.5
– write-offs for the Company Social Benefit Fund for pensioners and recipients of disability benefits	164.1	147.2
– other employee benefits	80.9	56.2
Total	2,354.4	2,014.0
of which:
– long-term part	2,084.7	1,774.3
– short-term part	269.7	239.7

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	2012	2011 restated
Employee benefit costs captured in pre-tax profit on account of:
– retirement and disability severance pays	17.7	15.9
– jubilee awards	120.6	67.7
– adjustment disability benefits	9.6	9
– in-kind allowance of coal for pensioners and recipients of disability benefits	82	78.3
– write-offs for the Company Social Benefit Fund for pensioners and recipients of disability benefits	12.1	15.7
– other employee benefits	27.5	17.8
Total	269.5	204.4

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	2012	2011 restated
Employee benefit costs captured in other comprehensive income on account of:
– retirement and disability severance pays	35.6	20
– adjustment disability benefits	47.8	27.1
– in-kind allowance of coal for pensioners and recipients of disability benefits	138.3	(62.6)
– write-offs for the Company Social Benefit Fund for pensioners and recipients of disability benefits	11.4	(8.6)
– other employee benefits	0.9	-
Total	234	(24.1)

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Movement in employee benefit liabilities

	2012	2011 restated
As at 1 January	2,014.0	1,945.3
Current headcount cost	73.8	69.4
Interest cost	109.6	93.7
Actuarial loss/(profit) captured in pre-tax profit	86.1	41.3
Actuarial loss /(profit) captured in other comprehensive income	234	(24.1)
Total captured in comprehensive income	503.5	180.3
Benefits paid out	(163.1)	(156.0)
Acquisition of subsidiaries	-	44.4
As at 31 December	2,354.4	2,014.0

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Total amount of employee benefit costs captured in the consolidated statement of comprehensive income:

	2012	2011 restated
Cost of products, materials and merchandise sold	126.9	84.3
Cost of sales	0.8	(0.1)
Administrative costs	32.2	26.5
Financial costs	109.6	93.7
Total captured in pre-tax profit	269.5	204.4
Amount captured in other comprehensive income	234	(24.1)
Total captured in comprehensive income	503.5	180.3

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Key actuarial assumptions adopted for days ending the reporting periods:

	2012	2011
Discount rate	4.5%	5.5%-5.75%
Assumed average annual increase in the basis for calculating the provision for retirement and disability severance pays, jubilee awards, adjustment disability benefits	2.6%	2.3%-2.6%
Assumed average annual increase in the basis for calculating the provision for in-kind allowance of coal	2.7%	2.7%
Assumed average annual increase in the basis for calculating the provision for write-offs for the Company Social Benefit Fund	4.5%	4.6%
Weighted average employee mobility ratio	2.46%	2.21%

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Assumptions regarding future mortality rates and probability of the employee becoming a disability benefit recipient were estimated based on the statistical data from Polish survival tables for men and women published by the Central Statistical Office, as at the measurement date.

20. Provisions

	Property tax	Mining damages	Decommissioning of a mining plant	Environmental fee and environ-mental protection	Other provisions	Total
As at 1 January 2011
Long-term	-	73.3	274.8	21.2	2.4	371.7
Short-term	239.7	99.2	-	3.8	66.8	409.5
	239.7	172.5	274.8	25	69.2	781.2
2011
Establishment of additional provisions	52.4	189	-	1.6	10.1	253.1
Dissolution of unused provisions	(205.5)	(6.7)	(48.3)	(4.0)	(11.5)	(276.0)
Interest expenses	34.8	-	15.7	1.8	1.3	53.6
Provisions used during the year	(54.7)	(86.3)	-	(0.6)	(2.1)	(143.7)
Acquisition of subsidiaries	6.6	-	-	-	8.2	14.8

As at 31 Dec 2011
Long-term	-	169.5	242.2	23.2	1.7	436.6
Short-term	73.3	99	-	0.6	73.5	246.4
	73.3	268.5	242.2	23.8	75.2	683
2012
Establishment of additional provisions	71.2	95.1	86.7	0.3	13.9	267.2
Dissolution of unused provisions	(21.3)	(34.0)	-	(0.6)	(10.7)	(66.6)
Interest expenses	14.2	-	10.9	2.1	-	27.2
Provisions used during the year	(34.3)	(85.4)	-	-	(1.5)	(121.2)

As at 31 Dec 2012
Long-term	-	148.1	339.8	13.2	1.8	502.9
Short-term	103.1	96.1	-	12.4	75.1	286.7
	103.1	244.2	339.8	25.6	76.9	789.6

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Property tax

The property tax provision associated with the possibility of taxation of certain property, plant and equipment components located in underground mine workings, is updated by the Parent Company on an ongoing basis. As at 31 December 2012, this provision amounts to PLN 83.4 million, which is described in more detail in Note 27.

Koksownia Przyjaźń was a party to tax and administrative court proceedings to determine the aggregated amount of the property tax liability for the years 2003-2009. In 2012, all the pending proceedings ended with decisions of the Local Government Appeal Court in Katowice, in which the 2nd instance tax authority recognized the correctness of the methodology used by Koksownia Przyjaźń to split coking furnace batteries into construction elements and non-construction elements, while repealing all the earlier decisions which were not positive for the company. Accordingly, in 2012, the company dissolved the property tax provision in the total amount of PLN 21.2 million.

The property tax provision associated with the taxation of the construction parts of coking furnace batteries, determined on the basis of KK Zabrze's assessment of risk related to the classification of property, plant and equipment for property tax purposes, is PLN 13.9 million as at 31 December 2012.

Mining damages

Under the adopted policy, the Group creates present-value provisions for future liabilities and recognizes and captures provisions for mining damage resulting from the extraction operations of mining enterprises in amounts resulting from documented claims which have been submitted or approved or are being examined by courts.

Decommissioning of a mining plant

The Group establishes a provision for future costs associated with the decommissioning of a mining plant based on the obligations existing under the applicable law. As at 31 December 2012, the amount of the mining plant decomissioning provision is PLN 339.8 million. The amount of the mine decommissioning costs is calculated on the basis of assumptions about the life of a mine, anticipated inflation and long-term discounting rates and the expected nominal cost of decomissioning the respective mining plants, which are determined inside the Company. Any changes to these assumptions affect the book value of the provision. The assumptions made to calculate this reserve are described in Note 4.

Environmental fee and environmental protection

Provisions for the environmental fee and environmental protection include a provision for waste storage fee which reached PLN 21.4 million as at 31 December 2012 (PLN 19.5 million on 31 December 2011). In connection with the termination of a landfill management agreement in 2007 and consequently lack of confirmations that waste has been accepted at the landfill site, there is a risk that the Group could be charged with waste storage fees for the period from 1 June 2007 to 15 August 2008. The Act of 10 July 2008 on Mining Waste (Journal of Laws of 2008 No. 138 Item 865) removes the obligation of calculating and paying waste storage fees after 15 August 2008. It is expected that the provision may be used in 2014.

Other provisions

In the past years, the Group created a provision for compensatory claims related to coke sales in the amount of PLN 22.5 million. After the Supreme Court judgment of 8 February 2012 abolishing the judgment issued by the Court of Appeals in Katowice on 22 October 2010, this matter is re-examined by the Court of Appeals in Katowice. Since the matter has not been ultimately resolved and there is no information about the date of another hearing, it is justified to keep the provision for the liability in the amount equal to the pending dispute.

Third parties have a potential claim for compensation for non-contractual use of real property occupied for Koksownia Przyjaźń installations and of the areas previously included in the protective zone which are affected by the company's installations, for a 10-year period. The Company must now obtain the legal title to the properties included in the “protective zone”. The greatest risk is related to the impact that the company's installations may have on land and to the use of such land whose legal status cannot be regulated, while the probability of negative effects is relatively high. In connection with the above risk, the existing provision is updated on an ongoing basis, along with the elapse of time causing prescription of non-contractual use claims. As at 31 December 2012, the provision amount is PLN 15.4 million.

21. Trade liabilities and other liabilities

	31 Dec 2012	31 Dec 2011
Financial liabilities
Trade liabilities	598.5	704.6
Liabilities under financial lease agreements	17.8	19.1
Accruals and deferred income	5.5	0.9
Other liabilities of a financial nature, including:	430.9	398.4
– investment liabilities	353	364.1
– other liabilities	77.9	34.3
Total	1,052.7	1,123.0

Non-financial liabilities
Deferred income	182.8	178.7
Other liabilities of a non-financial nature, including:	760	742.4
liabilities for social security and other taxes	440.6	458
– trade advances	32.3	2
– payroll	242.4	228.3
– other	44.7	54.1
Total	942.8	921.1
Total trade liabilities and other liabilities, including:	1,995.5	2,044.1
Long-term	211.2	208
Short-term	1,784.3	1,836.1

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The deferred income item contains subsidies associated with the Group's acquisition or production of non-current assets. A subsidy is settled through the financial result over the useful life of the non-current assets funded fully or partially by the subsidy.

The Group has received subsidies under which it is obligated to use the funds received solely and exclusively for the performance of tasks specified in the relevant subsidy agreements and to meet the conditions set forth in the agreements. During the years 2012 and 2011, the Group met those conditions.

22. Liabilities under financial lease agreements

As at 31 December 2012 and 31 December 2011, the Group as a lessee had concluded financial lease agreements.

Financial lease liabilities captured in the consolidated statement of financial position:

	31 Dec 2012	31 Dec 2011
Nominal amount of future minimum leasing fees:
Up to 1 year	7.5	6.8
Between one and five years	12.2	14.4
Total	19.7	21.2

Future financial costs on account of the financial lease:
Up to 1 year	(1.0)	(1.0)
Between one and five years	(0.9)	(1.1)
Total	(1.9)	(2.1)

Present value of future minimum leasing fees:
Up to 1 year	6.5	5.7
Between one and five years	11.3	13.4
Total	17.8	19.1

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The currency structure of the Group's liabilities on account of financial leases is as follows:

	31 Dec 2012	31 Dec 2011
PLN	7.5	5.2
EUR	10.3	13.9
Total	17.8	19.1

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Net book value per each group of assets in financial leases:

	31 Dec 2012	31 Dec 2011
Property, plant and equipment
Technical equipment and machinery	18.4	20.2
Other property, plant and equipment	6.2	5.9
Total	24.6	26.1

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23. Future contractual liabilities and operating lease liabilities

Future contractual liabilities

Future contractual liabilities incurred on the dates ending the reporting periods which are not included in the consolidated statement of financial position include:

	31 Dec 2012	31 Dec 2011
Contractual liabilities incurred to purchase property, plant and equipment	910.2	830.1
Others	66	5.1
Total	976.2	835.2

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Operating lease liabilities – Group as lessee (user)

The Group uses property, plant and equipment, including among others: longwall shearers, heading machines, mining machines, under operating leasing agreements (lease, hire). The lease periods are 1 to 5 years, with a termination period of 1 month.

As at 31 December 2012, the cost of leasing fees under operating leases (lease or hire agreements) is PLN 84.6 million (PLN 80.9 million as at 31 December 2011).

The total amounts of future minimum leasing fees under an irrevocable operating lease are:

	31 Dec 2012	31 Dec 2011
Up to 1 year	7.4	6.8

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24. Sales revenues

	2012	2011
Coal sales	4,134.9	4,943.3
Sales of coke	3,777.6	3,860.0
Sales of coal derivatives	530.3	360
Other business	378.2	213.5
Total sales revenues	8,821.0	9,376.8

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25. Costs by type

	2012	2011 restated
Depreciation	1,066.6	844.3
Consumption of materials and energy	1,661.4	1,399.2
External services	1,542.8	1,410.1
Employee benefits	3,562.6	3,194.2
Employee share ownership plan	-	293
Taxes and fees	203.9	228
Other costs by type	65.5	13
Value of materials and merchandise sold	121.4	203.7
Total costs by type	8,224.2	7,585.5
Cost of sales	(361.9)	(272.2)
Administrative costs	(662.5)	(508.9)
Disputed property tax on underground mine workings *	(36.6)	-
Employee share ownership plan	-	(293.0)
Value of performances and property, plant and equipment produced for own use	(644.3)	(468.4)
Movement in products	(133.1)	(75.9)
Cost of products, materials and merchandise sold	6,385.8	5,967.1

* The PLN 11.9 million difference between the amount PLN 48.5 million shown in the consolidated statement of comprehensive income in the “Disputed property tax on underground mine workings” and the PLN 36.6 million presented above consists of the interest on the property tax liability calculated on an accrual basis

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In 2011, JSW S.A. acquired control over: KK Zabrze, WZK Victoria and PEC. Due to the date of the acquisition, data in the consolidated statement of comprehensive income for the financial year ended 31 December 2011 do not include any amounts relating to WZK Victoria and PEC (as control was acquired in December 2011), while data pertaining to KK Zabrze are included only for the period from 1 July to 31 December 2011. The data for the current reporting period include costs by type of those entities for the entire financial year ended 31 December 2012. Therefore, the costs for 2012 and 2011 are not comparable. The total amount of costs by type (after consolidation adjustments) of WZK Victoria and PEC for the financial year ended 31 December 2012 and KK Zabrze for H1 2012 is PLN 793.6 million, of which the cost of consumption of materials and energy of PLN 428.4 million.

26. Other income

	2012	2011
Interest	17.5	13.1
Claims and penalties received	13.2	19.2
Subsidies (written off according to their amortization)	8.2	7.1
Others	14.6	10
Total other income	53.5	49.4

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27. Disputed property tax on underground mine workings

The table below presents items of the consolidated statement of financial position, where the assets or liabilities relating to the disputed property tax are recognized:

	31 Dec 2012	31 Dec 2011
Provision for property tax	103.1	73.3
of which:
provision for the disputed property tax on underground mine workings	83.4	33.6

Liabilities for social security contributions and other taxes	440.6	458
of which:
liabilities for disputed property tax	64.2	31.6

Contingent assets	14.6	36.5
of which:
contingent assets on account of the disputed property tax	-	-

Other receivables	199.3	186.8
of which:
gross receivables on account of the disputed property tax	204.8	204.9
revaluation charge on account of the disputed property tax	(41.0)	(41.0)
receivables from municipalities on account of the disputed property tax	163.8	163.9

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Since 2008, JSW S.A. has become a party to administrative court proceedings regarding real property tax on mine workings. Accordingly, the Parent Company established a provision for property tax, while the liability was recognized after tax authorities issued administrative decisions. After the liabilities were paid, JSW S.A. treated the amounts paid as contingent assets.

In 2011 the Constitutional Tribunal unambiguously excluded underground mine workings (tunnel costs) from the property tax base and ruled that the taxation of plant and facilities situated in these workings depends on their classification as structures within the meaning of the Construction Law. As a result, JSW S.A. dissolved part of its provisions for underground mine workings in the net amount of PLN 195.8 million and recognized a receivable on overpaid disputed property tax in the net amount of PLN 163.9 million.

Taking into account the Constitutional Tribunal's judgment and the course of administrative proceedings in this matter, in 2012 the Parent Company re-estimated the provision for the disputed property tax and re-evaluated collectibility of the receivables on account of the disputed property tax, updating the level of provisions for long-term proceedings for disputed property tax by PLN 48.5 million.

The table below presents the effect of the disputed property tax on underground mine workings on pre-tax profit.

	2012	2011
Current year costs associated with the settlement of the disputed property tax with interest	(30.7)	(66.1)
(Costs)/income associated with the disputed property tax captured in the ledgers for the current financial year, which were incurred in the previous years or updated in the current year, including:	(48.5)	359.7
- net dissolution of the provision for the disputed property tax	-	195.8
- recalculation of the provision for the disputed property tax with interest	(48.5)	-
- recognized receivables from municipalities on account of the disputed property tax	-	163.9
Impact on pre-tax profit	(79.2)	293.6

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28. Other costs

	2012	2011
Interest	68.8	31.2
Donations	3.3	2.8
Enforcement fees and penalties	13.6	1.8
Others	25.8	13
Total other costs	111.5	48.8

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29. Other net profits

	2012	2011
Loss on the disposal of property, plant and equipment	(12.8)	(3.8)
FX gains and losses	17	15.1
Losses on financial derivatives	(0.5)	(0.6)
Others	0.2	1.9
Total other net profits	3.9	12.6

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30. Financial income and costs

	2012	2011
Interest income on cash and cash equivalents	115.1	116
Other	4.7	2.1
Total financial income	119.8	118.1

Interest cost:
– bank loans	26	8.6
– settlement of the discount on account of long-term provisions	123.3	140.2
Other	3.8	3.9
Total financial costs	153.1	152.7
Net financial costs	33.3	34.6

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31. Operating segments

The corporate authority making key decisions within the Group is the Management Board of the Parent Company. The measure of the financial results generated by the Group’s distinct operating segments analyzed by the Management Board is the segment’s operating profit/loss determined according to the IFRS rules..

Segment-specific information for reporting purposes:

	Coal	Coke	Other segments	Consoli-dation adjustments *	Total
For the period ended 31 December 2011 restated
Total sales revenues of the segment, including:	8,036.3	4,220.0	806	(3,685.5)	9,376.8
- Intersegment sales revenues	3,093.0	-	592.5	(3,685.5)	-
- Sales revenues to external customers	4,943.3	4,220.0	213.5	-	9,376.8

Gross sales profit of the segment	3,149.6	452.1	89.2	(281.2)	3,409.7

Operating profit of the segment	2,736.3	171.4	20.4	(219.6)	2,708.5

Depreciation	(685.8)	(125.6)	(36.6)	3.7	(844.3)
Disputed property tax on underground mine workings	359.7	-	-	-	359.7
Employee share ownership plan	(223.4)	(56.9)	(12.7)	-	(293.0)
Revaluation charges established for non-current assets	(14.7)	-	(0.1)	-	(14.8)

Total assets, including	8,945.2	4,071.7	887.1	(688.4)	13,215.6
Increases in non-current assets (other than financial instruments and deferred income tax assets) **	1,294.1	1,112.4	249.3	(10.8)	2,645.0

For the period ended 31 December 2012
Total sales revenues of the segment, including:	7,040.9	4,307.9	1,025.4	(3,553.2)	8,821.0
- Intersegment sales revenues	2,906.0	-	647.2	(3,553.2)	-
- Sales revenues to external customers	4,134.9	4,307.9	378.2	-	8,821.0

Gross sales profit of the segment	1,973.0	251.9	151.3	59	2,435.2

Operating profit of the segment	1,268.6	(97.8)	73.7	63.7	1,308.2

Depreciation	(806.0)	(201.1)	(65.3)	5.8	(1,066.6)
Disputed property tax on underground mine workings	(48.5)	-	-	-	(48.5)
Dissolution of the property tax provision for coking furnace batteries	-	21.2	-	-	21.2
Revaluation charges established for non-current assets	(9.3)	(1.5)	(0.7)	-	(11.5)

Total assets, including	8,512.8	3,643.1	974.9	(482.3)	12,648.5
Increases in non-current assets (other than financial instruments and deferred income tax assets) **	1,564.8	213.3	148.7	(7.3)	1,919.5

* The “Consolidation adjustments” column eliminates the effects of intra-segment transactions within the Capital Group
** The increases in non-current assets also include increases resulting from mergers and acquisitions of businesses

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Revenues from transactions with external entities are measured in a manner consistent with the method applied for consolidated financial result.

Revenues from transactions between segment are eliminated in the consolidation process. Sales between segments are conducted on an arm’s length basis.

In 2011, JSW S.A. acquired subsidiaries KK Zabrze and WZK Victoria, the results of which are consolidated by JSW S.A. from 1 July 2011 and 1 January 2012, respectively. The Group's revenues on sales of coal to the aforementioned entities in H1 2011 and for the financial year ended 31 December 2011, respectively, are captured in this consolidated statement of comprehensive income (as comparative data) as revenues on sales to external buyers and presented in Segment 1 – Coal in the amount of PLN 465.5 million.

On the other hand, in the financial year ended 31 December 2012, financial data of those companies are consolidated for the entire reporting period. To enable comparison of data of the current reporting period with the benchmark period, it is announced that revenues on the sale of coke and hydrocarbons achieved by KK Zabrze in H1 2012 and by WZK Victoria in the financial year ended 31 December 2012 are captured in Segment 2 – Coke in the total amount of PLN 1,154.6 million. The sale of coal to those entities was recognized in the above periods accordingly as inter-segment revenues on sales in Segment 1 – Coal in the amount of PLN 528.4 million.

Presented below is reconciliation of the results (operating profit) generated by the segments with pre-tax profit.

	2012	2011 restated
Operating profit	1,308.2	2,708.5
Financial income	119.8	118.1
Financial costs	(153.1)	(152.7)
Share in profits of associates	2	1.1
Pre-tax profit	1,276.9	2,675.0

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The amounts of total assets are measured in a manner consistent with the method applied in the consolidated statement of financial position. These assets are allocated by segment's business and by physical location of the asset component.

Assets of the Group are located in Poland.

Presented below is reconciliation of the segment assets with the Group's all assets:

	31 Dec 2012	31 Dec 2011
Segment assets	12,648.5	13,215.6
Investments in associates	10.8	9.1
Deferred income tax assets	184.2	101.6
Other long-term assets	265.7	239.2
Income tax overpaid	4.2	22
Financial derivatives	3.9	4
Other short-term financial assets	948.9	24.6
Non-current assets available for sale	0.9	0.9
Total assets according to the consolidated statement of financial position	14,067.1	13,617.0

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Information on geographic structure of sales

Revenues on sales by the buyer's country of origin:

	2012	2011
Sales in Poland, of which:
Coal	3,281.7	4,204.7
Coke	928.4	1,031.3
Other segments	378.1	210.7
Total	4,588.2	5,446.7

Sales abroad, including:
EU states, of which:	3,533.4	3,531.6
Coal	851.2	734.5
Coke	2,682.2	2,794.3
Other segments	-	2.8
Non-EU Europe, of which:	415.5	144.1
Coal	2	3.9
Coke	413.5	140.2
Other states, of which:	283.9	254.4
Coal	-	0.2
Coke	283.9	254.2
Total, of which:	4,232.8	3,930.1
Coal	853.2	738.6
Coke	3,379.6	3,188.7
Other segments	-	2.8

Total sales revenues	8,821.0	9,376.8

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In the period from 1 January 2012 to 31 December 2012, revenues on sales to two external buyers exceeded 10% of the Group's sales for each of them. Revenues on sales to one of them were PLN 2,916.5 million and to the other PLN 918.1 million. Revenues on sales to those buyers were included in the Coal segment and in the Coke segment.

In the period from 1 January 2011 to 31 December 2011, revenues on sales to one external buyer exceeded 10% of the Group's sales. Revenues on sales to that buyer were included in the Coal segment and in the Coke segment.

32. Income tax

Income tax captured in net profit:

	2012	2011 restated
Current tax	279.6	518
– current tax liability	279.7	515.1
– adjustments posted in the current period relating to tax from the previous years	(0.1)	2.9
Deferred tax	9.2	71
Total income tax captured in net profit	288.8	589

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Income tax captured in other comprehensive income

	2012	2011
Current tax	-	-
Deferred tax	(44.4)	4.6
Total income tax captured in other comprehensive income	(44.4)	4.6

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Reconciliation of the theoretical tax calculated on gross profit and the statutory tax rate to the income tax liability shown in net profit:

	2012	2011 restated
Pre-tax profit	1,276.9	2,675.0
Tax calculated at the rate of 19%	242.6	508.2
Tax effect of income not classified as income according to tax regulations	(7.3)	(34.2)
Tax effect of costs which are not tax-deductible expenses according to tax regulations, including:	53.6	112.1
– employee share ownership plan	-	55.7
– profit-sharing payment for employees	28.5	30.4
– other	25.1	26
Adjustments posted in the current period relating to tax from the previous years	(0.1)	2.9
Income tax charges to the net profit	288.8	589

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Tax authorities may conduct inspection of accounting ledgers and tax settlements within 5 years after the end of the year in which tax returns were filed and charge the Group with additional tax liability, penalties and interest.

The Parent Company’s Management Board does not anticipate any significant tax liabilities to arise on this account.

In these consolidated financial statements, income tax was calculated at the effective tax rate of 22.62% for 2012 which resulted from recognition in comprehensive income of the profit-sharing payments to employees in the amount of PLN 150.0 million (of which PLN 130.0 million for JSW S.A. employees).

The effective tax rate in 2011 was 22.02%, which resulted from recognition in comprehensive income of the costs of the employee share ownership program in the amount of PLN 293.0, profit-sharing payments to employees in the amount of PLN 160.0 million and income on account of interest on property tax in the amount of PLN 75.8 million.

In connection with the adoption of IFRS and new tax interpretations being issued, on 15 June 2012 JSW S.A. filed a request with the Director of the Katowice Treasury Chamber to issue an individual interpretation on recognition of profit-sharing payments to employees as tax-deductible expenses. On 18 September 2012, JSW S.A. received a negative individual tax interpretation, which on 4 December 2012 it challenged before the Voivodship Court of Administration in Gliwice.

33. Earnings per share

Basic earnings per share

Basic earnings per share are calculated as the quotient of profit attributable to the Parent Company’s shareholders and the weighted average number of ordinary shares during the year.

	2012	2011 restated
Profit attributable to shareholders of the Parent Company	985.1	2,067.1
Weighted average number of ordinary shares	117,980,923	113,239,743
Basic earnings per share (in PLN per share)	8.35	18.25

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Diluted earnings per share

Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares in a manner allowing for a potential complete conversion into ordinary shares causing dilution. The Parent Company has no instruments that would cause dilution of the potential common shares. Accordingly, diluted earnings per share are equal to the basic earnings per share of the Parent Company.

34. Dividends paid and proposed

Per share dividend

The per share dividend ratio is calculated as the quotient of the dividend payable to the Parent Company’s shareholders and the number of ordinary shares outstanding as at the dividend date.

	2012	2011
Dividends	631.7	257
Number of ordinary shares as at the dividend date	117,411,596	119,207,920
Dividend per share (in PLN per share)	5.38	2.16

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In 2011, the dividend consists of obligatory payments to the State Treasury treated as an interim dividend of PLN 127.0 million and a dividend payment of PLN 130.0 million to the State Treasury from the profit generated in 2010.

According to a Resolution adopted by the Ordinary Shareholder Meeting of JSW S.A. on 31 May 2012 in the matter of net profit distributions, the amount of PLN 631.7 million, i.e. PLN 5.38 per share was earmarked for a dividend payment to Parent Company's shareholders out of the net profit for the financial year 2011. The dividend date was set at 6 July 2012 and the dividend was paid out on 24 July 2012.

In accordance with the recommendation included in the JSW S.A. prospectus (page 59), in 2013 the Parent Company’s Management Board will propose to the Shareholder Meeting of JSW S.A. to pay out a dividend in the amount of no less than 30% of the consolidated net profit for 2012.

35. Net cash inflows on operating activity

	2012	2011 restated
Pre-tax profit	1,276.9	2,675.0
Depreciation	1,066.6	844.3
Profit on the sale of property, plant and equipment	12.8	0.8
Interest and profit-sharing	(102.6)	(101.7)
Change in employee benefit liabilities	106.4	51.2
Movement in reserves	7.3	(112.6)
Movement in inventories	(66.4)	(99.6)
Change in the balance of trade receivables and other receivables	342.8	(116.8)
Change in the balance of trade liabilities and other liabilities	(45.2)	(114.5)
Employee share ownership plan	-	293
Other adjustments	9.5	15.1
Cash inflows on operating activity	2,608.1	3,334.2

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Reconciliation the movement in employee benefit liabilities in the consolidated cash flow statement:

	2012	2011
Movement in employee benefit liabilities in the balance sheet	340.4	68.7
Actuarial profit/(loss) captured in other comprehensive income	(234.0)	24.1
Acquisition of subsidiaries	-	(41.6)
Movement in employee benefit liabilities in the consolidated cash flow statement	106.4	51.2

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Reconciliation the movement in provisions in the consolidated cash flow statement:

	2012	2011
Movement in provisions in the balance sheet	106.6	(98.2)
Movement in the mining plant decomissioning provision	(99.3)	0.3
Acquisition of subsidiaries	-	(14.7)
Movement in provisions in the consolidated cash flow statement	7.3	(112.6)

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36. Contingent items

Contingent assets

Until 2008 the Parent Company in its property tax declarations included a tax on underground infrastructure. In 2008-2010 the Parent Company gradually adjusted the declarations filed and submitted applications to assert an overpayment. Since the municipalities rejecting these applications and on account of the dispute pending with the municipalities on this subject, the Parent Company recognizes payments for the underground infrastructure tax as contingent assets. Contingent assets concerning the overpayment of the property tax on underground infrastructure as at 31 December 2012 are PLN 14.6 million and did not change from the same period of the previous year.

After a court judgment dismissing KK Zabrze's claim for a payment under a good performance guarantee for a construction contract, the balance of contingent assets as at 31 December 2012 decreased by PLN 20.9 million as compared to the previous year.

Contingent liabilities

disputed claims
In its judgment of 27 September 2012, the Arbitration Court at the Polish Chamber of Commerce in Warsaw, resolved a dispute between KK Zabrze and ZARMEN Sp. z o.o., the leader of the “Concord-Radlin II” Consortium, for payment by KK Zabrze for the performance of a construction contract no. DN/NR/RI-35 dated 17 October 2006. As at 31 December 2012, the aggregated liability resulting from the court judgment was PLN 68.5 million. Accordingly, in 2012 KK Zabrze derecognized the contingent liability in the amount of PLN 85.0 million which was recognized in 2011.
land reclamation
KK Zabrze has land in Zabrze, Gliwice and Knurów left over from coking plants that have been shut down and closed. By the power of the regulations of prevailing law on remedial actions concerning damages to the environment, there is a duty of reclaiming land and liquidating the remaining elements left after closing coking plants. The decision regarding the scope of reclamation work, the method thereof and the time of performance is issued by a public administration authority, as a rule after agreement with the entity burdened with the obligation of reclamation. In the last several years, the Group reclaimed some land on the basis of the received decision and sold a considerable amount thereof. However, the Group has not received any decisions regarding the other pieces of land. On the basis of hitherto experience (costs incurred) and after considering the possible methods of rectifying damages to the environment, according to the Management Board the future costs of reclamation will not be material, however the final estimate of the costs of reclamation will not be possible until the relevant decisions of the public administration authorities specifying the scope, methods and deadline for completing the reclamation or similar work (or the lack of their necessity) are received.
mining damages
Under its provisioning policy, the Group establishes provisions for mining damages in the consolidated financial statements which are the result of operating the black coal mines belonging to the Company in the amount of documented claims reported, recognized or being reviewed by the courts. The Group is not aware of a method for establishing the value of future mining damages that would make it possible to estimate in a credible manner future costs of rectifying mining damages resulting from mining operations.
guarantee of employment
As a result of discussions conducted with the social side in the Voivodship Social Dialog Commission pertaining to, among others, guarantee of employment and matters associated with the public offering, on 5 May 2011, the Management Board of the Parent Company signed and the unions operating in JSW S.A. initialed a memorandum of agreement with the Management Board (“Memorandum of Agreement”). In the Memorandum of Agreement, the parties agreed among others that by principle the employment guarantee period for Parent Company employees is 10 years from the date the JSW S.A.'s shares are made public. If the Parent Company does not fulfill its employment guarantee, JSW S.A. will be obligated to pay compensation equal to the product of the average monthly remuneration in the Parent Company in the year preceding the termination of employment and the number of months remaining until the expiration of the employment guarantee period (in the case of administrative employees – no more than 60 times the average salary in the previous year). The provisions relating to the employment guarantee came into force on the date the shares of JSW S.A. were made public on the Warsaw Stock Exchange.
Moreover, on 18 May 2011, KK Zabrze and JSW S.A. concluded a memorandum of agreement with the trade unions operating in KK Zabrze regarding the social guarantee package for KK Zabrze employees; its content with respect to employment guarantees is the same as the content of the Memorandum of Agreement agreed upon in JSW S.A. JSW S.A. took the responsibility of a guarantor of KK Zabrze's commitments.
On 6 September 2011 the Parent Company concluded a memorandum of agreement with the trade unions operating in WZK Victoria regarding the social package for WZK Victoria employees, including among others the guarantee of employment in the company for 7 years from the effective date of the WZK Victoria share purchase agreement.
investment commitments
Under the agreement of 7 December 2010 on the sale of a 90.59% stake in Przedsiębiorstwo Gospodarki Wodnej i Rekultywacji S.A. (“PGWiR”), concluded between the State Treasury and JSW S.A., JSW S.A. accepted an obligation that, within no more than 5 years after the agreement date, it will procure that PGWiR acquires property, plant and equipment with an aggregated value on the acquisition date of no less than PLN 20.0 million and will contribute as contribution-in-kind the property, plant and equipment items used by PGWiR on the date of the foregoing agreement under leases concluded with JSW S.A. as the lessor, worth no less than PLN 12.0 million.
As at 31 December 2012, PLN 9.9 million has been expended for the purchase of property, plant and equipment, which represents 49.5% of the total commitment amount mentioned above. As at 31 December 2012, JSW S.A. has not yet increased the capital of PGWiR by contributing property, plant and equipment as contribution-in-kind. On 22 February 2013, JSW S.A. and PGWiR signed an agreement transferring the ownership title to property, perpetual usufruct right to land and the ownership title to buildings and equipment and other property, plant and equipment. This agreement is described in Note 39.
On 29 September 2011, the State Treasury Minister signed a share sale agreement pertaining to the 85% stake in PEC with SEJ, a member company of the Capital Group. Based on the agreement, SEJ accepted an unconditional obligation to procure and ensure that, by 31 December 2014, PEC acquires property, plant and equipment components for the overall amount of PLN 71.7 million.
The Management Board of SEJ asked the Treasury Minister to change the terms of the investment commitment in connection with the development of the investment and modernization program entitled “Business Plan 2016 of the SEJ-Energetyka Group”, which aligns the investment plans of SEJ and PEC in order to achieve the synergies resulting from the operation in the SEJ Capital Group and implementation of the modernization and development program following a consistent vision for a joint business activity in the regional market. The parties eventually agreed that the deadline for fulfilling the commitment cannot exceed the duration of the guaranteed investment in property, plant and equipment, i.e. 31 December 2014. As at 31 December 2012, investments for the overall amount of PLN 11.7 million have been realized, which represented 16.3% of the total commitment amount mentioned above.
On 5 October 2011, the Parent Company and the State Treasury concluded an agreement on the sale of 399,500 shares constituting 85% of the share capital of WZK Victoria for PLN 413.9 million. As a result of the aforementioned agreement, an investment commitment was made, under which the Buyer (JSW S.A.) undertakes to procure that within 60 months of the Transaction Closing (19 December 2011), WZK Victoria will make investments in the amount of at least PLN 220.0 million. At the same time, in connection with the acquisition of the WZK Victoria shares, JSW S.A. submitted a Statement of submitting to enforcement up to the amount not exceeding PLN 300.0 million.
As at 31 December 2012, capital expenditures of PLN 36.8 million have been made, which represented 16.7% of the total commitment amount mentioned above.
other contingent liabilities
In 2012, Polski Koks S.A. received an interest note for years 2009-2011 from ArcelorMittal Poland S.A. for the amount of EUR 1.0 million (PLN 4.6 million). After analysis, the note was not recorded in Polski Koks' ledgers since it was not consistent with contractual provisions and it was returned to AMP. Provisions of the cooperation agreement stated that the term of payment for coke is automatically extended if the payments due to Polski Koks S.A. from its buyers, i.e. ArcelorMittal Group companies are delayed. In such a situation, the due and payable date was set by the parties as the date of receipt of cash from the buyer to the bank account of Polski Koks S.A. or the following day. Until the date of these consolidated financial statements, the Group received no information from ArcelorMittal Poland about the cancellation of that note. As at 31 December 2012, the value of the foregoing interest note was updated to PLN 2.9 million, as part of the interest was prescribed.
WZK Victoria has a contingent liability resulting from a guarantee bond issued by insurance companies which secures the correct performance of the contract with ThyssenKrupp Metallurgical Products GmbH. As at 31 December 2012, the amount of the guarantee bond issued by insurance companies is EUR 15.0 million. The guarantee bond is secured with a blank promissory note, assignment of receivables, ownership transfer of property, plant and equipment, pledge on coal.

37. Transactions with related entities

As at 31 December 2012, the State Treasury was the majority shareholder of the Group.

Information on transactions with related entities

In 2012, the State Treasury was a higher-level parent. Accordingly, all companies owned by the State Treasury (directly or indirectly) are the Group’s related entities. In these consolidated financial statements, the Management Board of the Parent Company has disclosed transactions with significant affiliated entities identified as such according to the best knowledge of the Management Board.

In 2012, no individual transactions were identified between the Group and the State Treasury and entities related to the State Treasury which would be significant due to a non-standard scope or amount.

In the period from 1 January 2011 to 31 December 2011, three individual transactions were identified between the Group and the State Treasury which were significant due to a non-standard scope or amount. The transactions are: acquisition of WZK Victoria for PLN 413.9 million and PEC for PLN 144.5 million and acquisition of shares in KK Zabrze in exchange for a share issue of PLN 267.4 million. A detailed description of the acquisitions is provided in Note 38.

Other transactions in the period from 1 January 2012 to 31 December 2012 and from 1 January to 31 December 2011 concluded by the Group with State Treasury subsidiaries, which are significant in aggregate, pertain to the purchases of materials and services for the purposes of the ongoing operational activity (coal, electricity, forwarding and transportation services) from: Kompania Węglowa S.A., Grupa PKP S.A., Grupa Energa S.A., and coal sales to buyers such as PGE Polska Grupa Energetyczna S.A., Węglokoks S.A., Grupa Tauron S.A., Grupa Energa S.A.

Transactions with associates and a co-subsidiary are presented below:

	2012	2011
Transactions with associates and co-subsidiary
Purchases in the period	47	23.9
Balance of liabilities at the end of the period *	14.5	7.2

Total purchases	47	23.9
Total balance of liabilities	14.5	7.2

* including VAT.

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In 2012, all transactions between the Group and its related entities were typical and were executed in the normal course of business on an arm’s length basis.

Information on transactions with Management Board and Supervisory Board members

The Management Board of the Parent Company is the Group's key management personnel.

Remuneration of the Parent Company’s Management Board

	2012 (PLN thous.)	2011 (PLN thous.)
Short-term employee benefits:
- remuneration, management services*	4,146.1	1,454.2
- annual bonus **	2,055.0	1,378.5
- benefits, income from other sources	-	350.4
- income earned in subsidiaries	-	206.3
Total	6,201.1	3,389.4

* This item includes remuneration paid out under management contracts
** For 2012, this item includes the annual bonus due for 2012 in the maximum contractual amount. The bonus is paid out upon request of the President of the Management Board, depending on the level of KPIs achieved, after a Supervisory Board approval. For 2011, this item includes the annual bonus paid out in 2010 and the annual bonus due for 2011

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The management contracts stipulate that if the contract is terminated, the member of the Parent Company's Management Board is entitled to a severance pay equal to 6 times the fixed monthly remuneration. Moreover, under non compete agreements, members of the Parent Company's Management Board will receive compensation in the period of 12 months after their management contract is dissolved. Details of the agreements concluded with the managers are provided in section 1.6. Management Board Reports on the activity of the Jastrzębska Spółka Węglowa S.A. Capital Group for the financial year ended 31 December 2012.

Remuneration of the Parent Company's Supervisory Board

	2012 (PLN thous.)	2011 (PLN thous.)
Short-term benefits	478.3	434.4
Total	478.3	434.4

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Additional information about the remuneration of members of the JSW S.A. Management and Supervisory Boards are provided in Item 1.5 of the Management Board Report on the activity of Jastrzębska Spółka Węglowa S.A. Capital Group for the financial year ended 31 December 2012.

In 2012, no loans were granted to any members of the JSW S.A. Management or Supervisory Boards.

Information on transactions with Management Board members of Subsidiary Companies

	2012	2011
Short-term employee benefits	13	7.9
Jubilee awards	0.1	0.1
Termination benefits (severance pay)	0.2	-
Other	1.3	1.6
Total	14.6	9.6

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Information on transactions with Supervisory Board members of Subsidiary Companies

	2012	2011
Short-term benefits	2.8	2.9
Other	0.4	0.3
Total	3.2	3.2

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In 2012, no loans were granted to any members of Management or Supervisory Boards of the Subsidiary Companies.

38. Business combinations

Business combinations in 2012

Acquisition of non-controlling interest in Koksownia Przyjaźń

On 20 November 2012, the Extraordinary Shareholder Meeting of Koksownia Przyjaźń Sp. z o.o. adopted a resolution to transform Koksownia Przyjaźń Sp. z o.o. into Koksownia Przyjaźń S.A. As at 31 December 2012, the Group has information that one thousand of the previous Shareholders of Koksownia Przyjaźń Sp. z o.o. holding jointly 10,968 shares corresponding to 0.65% of votes at the Shareholder Meeting have not yet submitted their statements to accede to the transformed company. It is highly probable that they raise claims for payment of amounts equivalent to their shares. Accordingly, this operation is treated in these consolidated financial statements as a share purchase from non-controlling interest, for the amount equal to the expected future payment amounts, i.e. PLN 12.3 million (this value was set on the basis of the financial statements of Koksownia Przyjaźń Sp. z o.o. drawn up for the purpose of the transformation and is PLN 1,124.95 per share). As a result of this transaction, the Parent Company will control 98.43% of votes at the Shareholder Meeting of Koksownia Przyjaźń S.A.

Acquisition of non-controlling interest in Przedsiębiorstwo Energetyki Cieplnej S.A.

SEJ is a party to the privatization agreement concluded with the State Treasury on the sale of shares of Przedsiębiorstwo Energetyki Cieplnej S.A. (“PEC”) and to the Social Guarantee Package linked to that agreement which secures interests of PEC employees. In accordance with the agreements mentioned above, the Group recognized liabilities of PLN 17.8 million for the purchase of PEC employee shares, which are to be repaid by the end of 2014. In these consolidated financial statements, the purchase of PEC employee shares was treated as a share purchase transaction from non-controlling interest, in the amount equal to the expected amount of future payments, i.e. PLN 17.8 million. As a result of that transaction, 100% of the capital and votes at the Shareholder Meeting of PEC will be held/controlled by the Group.

Acquisition of non-controlling interest in SEJ-SERWIS Sp. z o.o.

On 28 November 2012, PEC concluded an agreement to purchase from non-controlling interest 90 shares in SEJ-SERWIS Sp. z o.o. with a par value of PLN 1,000.00 each, which represented 45% of the share capital, for PLN 0.2 million. As at 31 December 2012, 100% of the capital and votes at the Shareholder Meeting of SEJ-SERWIS Sp. z o.o. is held/controlled by the Group.

Non-controlling interest in 2012

	Koksownia Przyjaźń	PEC	SEJ-SERWIS	Total
Non-controlling interest before the transaction	47.3	20.1	0.2	67.6
Remuneration	(12.3)	(17.8)	(0.2)	(30.3)
Net assets acquired	12.2	20.1	0.2	32.5
Change in the balance of non-controlling interest	(12.2)	(20.1)	(0.2)	(32.5)
Difference amount captured in retained earnings	(0.1)	2.3	-	2.2

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Other changes in the structure of the Capital Group in 2012 are described in section 1.1.3. Management Board Reports on the activity of the Jastrzębska Spółka Węglowa S.A. Capital Group for the financial year ended 31 December 2012.

Business combinations in 2011

Subscription for Kombinat Koksochemiczny Zabrze S.A. shares in exchange for a share issue

In 2011, JSW S.A. and the State Treasury signed an agreement to subscribe for shares in the increased share capital by power of which the State Treasury made a contribution-in-kind to JSW S.A. in the form of 5,610,000 shares of Kombinat Koksochemiczny Zabrze S.A. (“KK Zabrze”), representing 85% of the share capital. Accordingly, this company joined the JSW S.A. Capital Group. In exchange for the above shares, the State Treasury subscribed for 6,404,110 JSW S.A. series D shares of a new issue with a par value of PLN 5.00 each. The total value of the issue of series D shares was PLN 267.4 million.

Acquisition of Wałbrzyskie Zakłady Koksownicze Victoria S.A.

Under the agreement of 5 October 2011, JSW S.A. acquired 399,500 shares of Wałbrzyskie Zakłady Koksownicze Victoria S.A. (“WZK Victoria”) representing 85% of the company's share capital from the State Treasury. The ownership title to the company's shares was transferred on 19 December 2011.

Acquisition of Przedsiębiorstwo Energetyki Cieplnej S.A.

On 29 September 2011, the State Treasury Minister signed a share sale agreement with Spółka Energetyczna Jastrzębie S.A. (“SEJ”) under which it sold 72,250,000 shares representing 85% of the share capital of Przedsiębiorstwo Energetyki Cieplnej S.A. (“PEC”). The ownership title to the company's shares was transferred on 20 December 2011.

The following table summarizes the price paid for the acquired shares, net value of the acquired assets measured as at the acquisition date and fair value of non-controlling interest in 2011.

	KK Zabrze	WZK Victoria	PEC	Total
Value of issued shares at issue price	(267.4)	-	-	(267.4)
Purchase price	-	(413.9)	(144.5)	(558.4)
Net assets as at the acquisition date	407.4	408.1	129	944.5
Non-controlling interest	(61.1)	(61.2)	(19.4)	(141.7)
Difference amount captured in retained earnings	78.9	(67.0)	(34.9)	(23.0)

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The table below presents the reconciliation of acquisitions under common control, as shown in the consolidated cash flow statement in 2011:

	KK Zabrze	WZK Victoria	PEC	Total
Cash acquired	73.8	10	4.5	88.3
Cash paid	-	(413.9)	(144.5)	(558.4)
Cash flows for purposes of the consolidated cash flow statement	73.8	(403.9)	(140.0)	(470.1)

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Acquisition of non-controlling interest in Koksownia Przyjaźń

Under the agreement of 19 January 2011, the parent company acquired 36 shares in Koksownia Przyjaźń Sp. z o. o. from Huta Batory S.A. in bankruptcy and under the agreement of 8 June 2011 the parent company acquired 160,690 shares in Koksownia Przyjaźń Sp. z o.o. from the State Treasury; as at 31 December 2011, it held 1,626,407 shares representing 97.78% of votes at the Shareholder Meeting of Koksownia Przyjaźń.

Acquisition of non-controlling interest in Polski Koks S.A.

The Shareholder Meeting of Polski Koks S.A. held on 31 May 2011 retired 245 founding shares and 9,800 series B shares with the total par value of PLN 1,004,500.00 acquired from ArcelorMittal Poland S.A. with its registered office in Dąbrowa Górnicza, thus decreasing the Company’s share capital by the par value of the retired shares. On 5 August 2011, decrease of the share capital was registered in the registry court. As a result of this operation, the Parent Company holds 67.55% of the votes at the Shareholder Meeting whereas Koksownia Przyjaźń controlled by the Parent Company holds 10,045 shares and has 32.45% of the votes at the Shareholder Meeting. As a result, 100% of the capital and votes are held/controlled by the JSW Group.

Non-controlling interest in 2011

	Koksownia Przyjaźń	Polski Koks	Total
Non-controlling interest before the transaction	230.7	19.5	250.2
Remuneration (in cash)	(167.5)	(19.4)	(186.9)
Net assets acquired	189.5	18.9	208.4
Change in the balance of non-controlling interest	(189.5)	(18.9)	(208.4)
Difference amount captured in retained earnings	22	(0.5)	21.5

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39. Events taking place after the final day of the reporting period

According to our knowledge, after 31 December 2012, i.e. after the end of the reporting period, in addition to the ones described below, there were no material events that could have a significant effect on the evaluation of the assets, financial standing and financial result, which would not be incorporated in the consolidated financial statements for the financial year ended 31 December 2012.

In connection with a PLN 8.3 million increase of PGWiR's share capital through an issue of 831,729 new shares with the par value of PLN 10.00 each, on 22 February 2013 JSW S.A. and PGWiR signed an agreement transferring the ownership title to property, perpetual usufruct right to land and the ownership title to buildings and equipment and other property, plant and equipment in exchange for a subscription to all the shares in the increased share capital of PGWiR by JSW S.A. following a private subscription procedure. The subscription agreement pertaining to the subscription of series C shares of PGWiR was concluded on 25 February 2013. The 831,729 shares in the increased share capital were covered by an in-kind contribution of JSW's assets with a fair value of PLN 27.1 million and a cash contribution of PLN 3.98.