7.8. Trade and other receivables

Financial receivables are initially recognized at fair value, with the fair value of trade receivables upon initial recognition being the nominal value resulting from issued sale invoices. After initial recognition, trade and other financial receivables are evaluated at amortized cost using the effective interest rate method (all trade receivables meet the SPPI test and are held in order to collect contractual cash flows), taking into account the impairment losses. Trade receivables with a date of maturity shorter than 12 months from the date of their origin (i.e. not containing a financing element) are not subject to discounting and are measured at their nominal value. Other receivables, which are not financial assets, are measured at the end of the reporting period at the due payment amount.

In the comparative period, trade receivables were classified as loans and receivables and measured at amortized cost using the effective interest rate method, taking into account impairment losses estimated based on losses incurred.

Starting from 1 January 2018, the Group as at the date ending the reporting period, estimates the expected credit loss on financial assets measured at amortized cost. The impairment model is based on a calculation of expected losses.

With regard to trade receivables which do not comprise any material financing element, a simplified approach and valuation of the loss was used on the basis of expected credit losses for the entire life of the instrument. The Group has classified its trade receivables to Stage 2 of the financial asset impairment classification envisaged in IFRS 9, except for receivables for which an impairment has been identified – these receivables have been classified to Stage 3 of that classification. The Company assumes that the moment of impairment is the moment the receivables are forwarded for collection, but no later than on the 90th day past due.

Trade receivables are the most important line item of financial assets in the Group’s consolidated financial statements and it is subject to the new rules for the calculation of expected credit losses.

To determine the impairment losses the Group has distinguished the following groups of trade receivables, determined on the basis of probability of the credit risk characteristics:

• coal and coke trade receivables from the main business partners, i.e. business partners whose percentage of sales revenues is above 2.5% in a given reporting period,
• coal and coke trade receivables from other business partners whose percentage of sales revenues is below 2.5% in a given reporting period,
• other trade receivables.

The analysis of the coal and coke trade receivables from the main business partners has been carried out individually for each business partner on the basis of the probability of insolvency determined on the basis of external ratings and publicly available rating agency information on the probability of default and the expected loss has been calculated on the basis of these probabilities, average maturity for the receivables portfolio and on the basis of the expected recovery rate.

Fair value of trade and other receivables is not significantly different from their carrying amount.

The currency structure of the Group’s trade receivables after conversion to PLN is as follows:

The table below depicts the changes in the impairment loss for trade receivables:

The table below presents the age structure of trade receivables as at 31 December 2018:

As at 31 December 2018, PLN 113.0 million of trade receivables was past due. That figure included PLN 36.1 million of receivables that were not found impaired and an impairment loss of PLN 1.1 million was recognized for them in 2018, while PLN 76.8 million were found impaired and an impairment loss of PLN 3.4 million in respect of them was reversed in 2018.

The PLN 1,056.5 million of trade receivables included trade receivables of PLN 762.9 million from coal and coke counterparties with more than 2.5% share in revenues and PLN 173.9 million from coal and coke counterparties with a share in revenues below 2.5%.

The table below presents the age structure of trade receivables as at 31 December 2017:

The changes in gross values did not materially affect the value of impairment losses.