30. Intangible assets

For the year ended 31 December 2015 Software Goodwill Future income from insurance contracts concluded Relations with customers Other, including capital expenditure Total
Gross carrying amount at the beginning of the period 3 699 962 1 311 960 140 555 86 499 429 368 5 668 344
Increases, of which: 39 707 56 425 - - 353 062 449 194
purchase 28 935 - - - 351 204 380 139
classification to assets held for sale 1 141 56 425 - - 730 58 296
other 9 631 - - - 1 128 10 759
Decreases, of which: (25 987) - - - (106 792) (132 779)
sole,disposal - - - - (55 208) (55 208)
classification to assets held for sale (16 994) - - - - (16 994)
currency translation differences (6 372) - - - (271) (6 643)
other (2 621) - - - (51 313) (53 934)
Transfers from capital expenditure on software 354 650 - - - (354 650) -
Gross carrying amount at the end of the period 4 068 332 1 368 385 140 555 86 499 320 988 5 984 759
Accumulated amortisation at the beginning of the period (1 972 687) - (18 253) (19 247) (138 930) (2 149 117)
Increases, of which: (419 711) - (23 095) (19 138) (8 762) (470 706)
amortisation for the period (417 919) - (22 358) (19 138) (8 254) (467 669)
classification to assets held for sale (843) - - - (508) (1 351)
other (949) - (737) - - (1 686)
Decreases, of which: 12 621 - - - 84 764 97 385
sole,disposal 3 843 - - - 52 760 56 603
currency translation differences 3 329 - - - 16 3 345
other 5 449 - - - 31 988 37 437
Accumulated amortisation at the end of the period (2 379 777) - (41 348) (38 385) (62 928) (2 522 438)
Impairment allowances at the beginning of the period (15 373) (118 232) - - (6 121) (139 726)
Increases, of which: (287) (51 511) - - - (51 798)
recognised during the period (186) - - - - (186)
other (101) (51 511) - - - (51 612)
Decreases, of which: 186 - - - - 186
derecognition of assets 186 - - - - 186
Impairment allowances at the end of the period (15 474) (169 743) - - (6 121) (191 338)
Net carrying amount at the beginning of the period 1 711 902 1 193 728 122 302 67 252 284 317 3 379 501
Net carrying amount at the end of the period 1 673 081 1 198 642 99 207 48 114 251 939 3 270 983

For the year ended 31 December 2014 Software Goodwill Future income from insurance contracts concluded Relations with customers Other, including capital expenditure Total
Gross carrying amount at the beginning of the period 3 355 468 347 312 - - 372 625 4 075 405
Increases, of which: 64 954 1 021 074 140 555 86 499 368 145 1 681 227
take of control over subsidiaries 40 646 1 021 074 140 555 86 499 9 324 1 298 098
purchase 11 927 - - - 357 722 369 649
other 12 381 - - - 1 099 13 480
Decreases, of which: (26 239) (56 426) - - (5 623) (88 288)
sole,disposal (1 248) - - - (237) (1 485)
classification to non-current assets held for sale (1 126) (56 426) - - (710) (58 262)
currency translation differences (16 348) - - - (249) (16 597)
other (7 517) - - - (4 427) (11 944)
Transfers from capital expenditure on software 305 779 - - - (305 779) -
Gross carrying amount at the end of the period 3 699 962 1 311 960 140 555 86 499 429 368 5 668 344
Accumulated amortisation at the beginning of the period (1 576 520) - - - (115 652) (1 692 172)
Increases, of which: (406 624) - (18 253) (19 247) (24 314) (468 438)
take of control over subsidiaries (32 782) - - - (7 582) (40 364)
amortisation for the period (373 395) - (18 253) (19 247) (16 719) (427 614)
other (447) - - - (13) (460)
Decreases, of which: 10 457 - - - 1 036 11 493
sole,disposal 203 - - - 228 431
classification to assets held for sale 843 - - - 507 1 350
currency translation differences 6 958 - - - 23 6 981
other 2 453 - - - 278 2 731
Accumulated amortisation at the end of the period (1 972 687) - (18 253) (19 247) (138 930) (2 149 117)
Impairment allowances at the beginning of the period (15 373) (128 462) - - (9 176) (153 011)
Increases, of which: - (40 271) - - (796) (41 067)
recognised during the period - (40 271) - - (796) (41 067)
Decreases, of which: - 50 501 - - 3 851 54 352
released during the period - - - - 3 851 3 851
classificaton of assets held for sale - 50 501 - - - 50 501
Impairment allowances at the end of the period (15 373) (118 232) - - (6 121) (139 726)
Net carrying amount at the beginning of the period 1 763 575 218 850 - - 247 797 2 230 222
Net carrying amount at the end of the period 1 711 902 1 193 728 122 302 67 252 284 317 3 379 501

To the Group, a significant item of intangible assets relates to expenditures on the Integrated Information System (IIS). The total capital expenditures incurred for the IIS system during the years 2005–2015 amounted to PLN 1 185 473 thousand. Net carrying amount amounted to PLN 717 414 thousand as at 31 December 2015 (PLN 735 623 thousand as at 31 December 2014). The expected useful life of the IIS system is 17 years. As at 31 December 2015, the remaining useful life is 8 years.

The right to manage the fund by the acquisition of OFE POLSAT in 2015 in the net amount of PLN 47 296 thousand is recognised in the position ‘Other, including capital expenditure’ as at 31 December 2015 (in 2014: in the net amount of PLN 50 630 thousand).

In 2015 the Group did not generate internally patents and licences (in 2014 the Group generated internally patents and licences in the amount of PLN 1 404 thousand). In 2015 the Group incurred capital expenditures for the purchase of tangible fixed assets and intangible assets in the amount of PLN 787 252 thousand (2014 in the amount of PLN 716 620  thousand).

In the years ended 31 December 2015 and 31 December 2014 respectively, there were no restrictions on the Group’s rights to use its intangible assets as a result of pledges.

Goodwill

Net goodwill 31.12.2015 31.12.2014
Nordea Polska entities 985 221 985 221
PKO Towarzystwo Funduszy Inwestycyjnych SA 149 564 149 564
PKO BP BANKOWY PTE SA 51 158 51 158
Qualia spółka z ograniczoną odpowiedzialnością - Nowy Wilanów Sp.k.* 4 914 -
Goodwill related to assets taken over from Centrum Finansowe Puławska Sp. z o.o. 7 785 7 785
Total 1 198 642 1 193 728

* As at 31 December 2014 assets of Qualia Development Sp. z o.o. were classified as non-current assets held for sale.

As at December 2015, the Group conducted mandatory testing for impairment of goodwill in accordance with the models developed under the guidance in IAS 36, taking into account the specificities of each of the assets and activities of individual companies.

The Group carried out compulsory impairment test for goodwill arising from the acquisition of Nordea Bank Polska SA, according to the model developed based on the guidance in IAS 36.

The impairment test is performed by comparing the carrying value of cash-generating units (CGU) to their recoverable value.

Two CGU were distinguished to which the value of goodwill was assigned arising from the acquisition of Nordea Bank Polska SA – retail and corporate.

The recoverable amount is estimated on the basis of value in use of the CGU. Value in use is the present value of the future cash flows for the period of 10 years, taking into account the residual value of the CGU. Residual value of the CGU has been calculated by extrapolating the cash flow projections beyond the forecast period, using the growth rates adopted at the level of 1.5%. Cash flow projections are based on the assumptions contained in the financial plan of the Bank for 2015. For discounting of the future cash flows the discount rate of 7.6% was used, taking into account the risk-free rate and risk premium.

The impairment test performed as at 31 December 2015 showed a surplus of the recoverable amount over the carrying amount of each CGU and therefore no impairment CGU was recognized.

The remaining goodwill arising from the acquisition of companies Nordea Polska concerns the acquisition of the company „Nordea Polska Towarzystwo Ubezpieczeń SA” (currently PKO Życie Towarzystwo Ubezpieczeń SA) and the acquisition of Nordea Finance Polska SA. This value was assigned to the corporate segment and investment – cash generating units are as follow: entire company of PKO Życie Towarzystwo Ubezpieczeń SA, and the entire company PKO Leasing SA – as the direct superior who in connection took over the assets of Nordea Finance Polska SA.

The impairment test of PKO Życie Towarzystwo Ubezpieczeń SA has been developed on the basis of the present value of expected future cash flows for PKO Bank Polska SA including the residual value. Future cash flows are estimated on the basis prepared by the Company’s 10 year financial forecast.

The impairment test of PKO Leasing SA was carried out on the basis of the present value of expected future cash flows for five years including blanking operations after this period, developed on the basis of the financial projections of the Company.

The impairment test of goodwill arising from the acquisition of PKO Towarzystwo Funduszy Inwestycyjnych SA was carried out on the basis of the present value of expected future cash flows for PKO Bank Polski SA, prepared by the Company’s management on the basis of three-year financial forecast. The test takes into account the 2 variants of financial flows: sole dividend and also dividend and distribution fee for the sale of fund units of PKO TFI SA in the network of PKO Bank Polski SA, which in both cases is covered by the residual value.

The impairment test of the company PKO BP BANKOWY PTE SA was conducted using the method of embedded value, according to which the utility value of the Company’s share was established. The key parameters that determine the value of goodwill as at 31 December 2015 were the underlying assumptions, and introduced from 1 February 2014 with the reform of the pension system, in particular the transfer on 3 February 2014, of 51.5% of Open Pension Funds’ assets to Social Security, the voluntary continuation of the discharge of the part of pension contributions to Open Pension Fund, retirement slider mechanism and reduced contribution fee. The model has a time horizon to year 2066.

The test for impairment of goodwill related to the assets of the acquired company Centrum Finansowe Puławska Sp. z o.o was carried out based on the fair value of the acquired property as a cash-generating unit to which goodwill has been allocated.

The above-mentioned tests indicated no need for the creation of impairment.

At the same time in 2015, consistently as in previous years, an impairment loss of goodwill was recognised resulting from the acquisition of shares of the company Qualia 2 Sp. z .o. – Nowy Wilanów Sp. k. in the amount of PLN 1 010 thousand ie. in proportion to the sold part of the cash-generating units to which goodwill has been allocate.