ANNUAL REPORT 2020

Železiarne Podbrezová a.s. ANNUAL REPORT 2020 56 12 comprehensive income. In the event the fair value of available - for - sale investments cannot be reliably estimated, the investments are carried at cost less any items reflecting their permanent impairment. These provisions are recognised in the statement of comprehensive income. (j) Trade and other receivables Trade and other receivables are measured at expected realisable value, including provisions for bad and doubtful receivables. (k) Inventories Inventories are measured at the lower of cost, own costs, or net realisable value. Net realisable value represents the estimated selling price less the estimated costs of completion and costs of distribution. A provision is mainly created for slow - moving and obsolete inventories based on an individual assessment. Material is measured by weighted average cost that includes the cost of acquisition of thematerial and other costs related to acquisition that arose on bringing the assets to their current condition and location. Work in progress, semi - finishedgoods andfinished goodsaremeasured at owncosts, which includethe costs of material, wages andsalaries, other direct expenses and production overheads depending on the stage of completion of the inventory. A provision is created for slow - moving and obsolete inventories based on an individual assessment. (l) Cash and cash equivalents Cashandcash equivalentscomprisecash in hand,cash inbankaccounts,placementsand otherhighly liquid investmentsthatare readilyconvertible to a known amount of cash and are subject to an insignificant risk of changes in value. (m) Impairment of assets The Group assesses at each reporting date the carrying amounts of its non - current tangible and intangible assets to determine whether there is any indication that those assets have suffered impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to determine the recoverable amount of an individual asset, the Group determines the recoverable amount of the cash - generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre - tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash - generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash - generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income (“other operating expenses”). Where an impairment loss subsequently reverses, the carrying amount of the asset (cash - generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash - generating unit) in prior years. A reversal of an impairment loss is recognised directly in the statement of comprehensive income. The recoverable amount of the Group’s receivables is calculated as the present value of expected future cash flows, discounted by the original effective interest rate inherent in the asset. Short - term receivables are not discounted. The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre - tax discount rate that reflects the current market value of the time value of money and the risks specific to the asset. For assets not generating sufficient independent cash flows, the realisable value is determined for the cash - generating unit to which the assets pertain. In accordance with IFRS9,the Group implementeda simplifiedmodelforthe impairment of tradereceivables, underwhich theGroupcreates provisionsfortrade receivables without a significant element of financing in the amount of lifetime expected losses. (n) Dividends Dividends paid are recognised as a liability in the period in which they are declared. (o) Interest-bearing loans and borrowings Interest - bearing loans and borrowings are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method. Any difference between cost and redemption value of the borrowing on an effective interest rate basis is recognised in the statement of comprehensive income over the period of the borrowings on a straight - line basis. (p) Provision for employee benefits The Group operates unfunded defined long - term benefit programs – the defined benefit plan comprising one - off retirement benefits, long service and jubilee benefits. According to IAS 19 “Employee benefits”, the employee benefits costs are assessed using the projected unit credit method. Under this method, the cost of providing pensions is charged to the statement of comprehensive income so as to spread the regular cost over the service lives of employees. The liabilities relatedtothe benefits aremeasuredatthe presentvalue ofthe estimated future cash outflows discounted by market yields on government bonds, which have maturity periods approximating the maturity periods of the related liability. All actuarial gains and losses are recognised in the statement of comprehensive income. Past service cost is recognised when incurred up to the amount of benefits paid, and the remaining amount is amortised on a straight - line basis during the average period until the moment of the settlement of benefits. (q) Social security and pension schemes The Group is required to make contributions to various obligatory Government insurance schemes, together with contributions by employees. The cost ofsocial security payments is charged to the statement of comprehensive income in the same periodas the relatedsalary cost. The Group contributes to a supplementary pension plan administered by a private pension fund, based on the employment period of the employee. No additional liabilities arise to the Group from the payment of pensions to employees in the future. (r) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. A provision is measured on the basis of the best estimate made by themanagement of the cost of the liability settlement as at the reporting date. If the effect is material, provisions are determined by discounting the expected future cash flows by a pre - tax discount rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (s) Accruals The Group makes an estimate of expenses and liabilities that have not been invoiced at the reporting date. These expenses and liabilities are recorded in the accounting records on an accrual basis and recognised in the financial statements in the period to which they relate. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 (IN EUROS)