Recognition and classification
Financial assets are recognized in the statement of financial position at the moment when a PZU Group company becomes a party to a binding contract, under which it assumes risk and becomes a beneficiary of the benefits associated with the financial instrument. In the case of transactions concluded on an organized market, the purchase or sale of financial assets are recognized in the books on the date of the transaction.
Financial instruments are classified upon purchase to one of four categories: held to maturity, available for sale, at fair value through profit or loss, or loans. Upon purchase, financial instruments are initially recognized at fair value adjusted by transaction costs that may be linked directly to the purchase or issue of that financial instrument. Financial assets at fair value through profit or loss are an exception, since transaction costs applicable to them are deducted once from the “Net investment income” item. The fair value of a financial instrument at initial recognition is usually its transaction price, unless the nature of the financial instrument suggests otherwise.
In the case of interest-bearing financial instruments, interest accrues from the day following the transaction settlement date.
Principles of measurement
The principles of measurement of the individual financial instrument categories are presented in subsequent sections:
Derecognition from statement of financial position
Financial assets are derecognized from the consolidated statement of financial position when the contractual rights to receive cash flows of the asset expire or are transferred to another entity. The transfer also occurs if the contractual rights to receive the cash flows of the financial asset are retained, but a contractual obligation to transfer such cash flows to a non-PZU Group entity is accepted.
When a financial asset is transferred, the extent to which it retains the risks and rewards of ownership of the asset is evaluated.
If control is retained then the financial asset is recognized in the consolidated statement of financial position up to the amount arising from permanent exposure; if there is no control then the financial asset is derecognized from the consolidated statement of financial position.