Accounting policies and classification
Foreign exchange gains (losses) comprise foreign exchange gains and losses, both realized and unrealized, resulting from daily revaluation of assets and liabilities denominated in foreign currency using the National Bank of Poland average exchange rates at the balance sheet date, and from the fair value valuation of outstanding derivatives (FX forward, FX swap, CIRS and currency options)
The Group recognises in net foreign exchange gains (losses) both realized and unrealized foreign exchange gains and losses on fair value measurement of unrealized currency options. From an economic point of view, the method of presentation of net gains (losses) on currency options applied allows the symmetrical recognition of net gains (losses) on currency options and on spot and forward transactions concluded to hedge such options (transactions hedging the currency position generated as a result of changes in the market parameters affecting the currency option position)
The effects of changes in fair value and the result realized on the Gold Index option are also included in the net foreign exchange gains (losses) due to the fact that the Group treats gold as one of the currencies, in line with the provisions of the Regulation (EU) No. 575/2013 of the European Parliament and Council dated 26 June 2013 on prudential requirements for credit institutions and investment firms (CRR Regulation).
The Group presented monetary assets and liabilities, constituting on and off-balance sheet items denominated in foreign currency, translated into Polish zloty using the average National Bank of Poland rate prevailing as at the balance sheet date.
Impairment allowances on loan exposures and other receivables denominated in foreign currencies, which are recognised in Polish zloty, are adjusted in line with a change in the valuation of the foreign currency assets for which these impairment allowances are recognised. The effect of this adjustment is recognised in net foreign exchange gains (losses).