6.6 Measurement of transactions and balances denominated in foreign currencies and FX rates used

Transactions carried out in a currency other than Polish zloty are recognized at the exchange rate set by the National Bank of Poland (NBP) for the transaction date. At the end of the reporting period, cash items denominated in foreign currencies are translated using the average NBP exchange rate in effect on that date. Non-cash items measured at fair value and denominated in foreign currencies are measured using the average NBP exchange rate in effect on the date on which the fair value is determined. Gains and losses on currency translation are recognized directly in the profit and loss account.

Financial data of foreign subsidiaries are converted into Polish zloty as follows:

• assets and liabilities – at the average exchange rate set by the National Bank of Poland at the end of the reporting period;
• items of the profit and loss account, other comprehensive income and cash flows – at the arithmetic mean of average exchange rates set by the National Bank of Poland as at the dates ending each month of the reporting period.

Translation differences are recognized under “Foreign exchange translation differences” in equity.

Due to the currency exchange restrictions in force in Ukraine and irregular quotations of the Ukrainian hryvnia by the National Bank of Poland, the PZU Group determined the exchange rate for converting the data of Ukrainian companies using the NBU Decision (https://zakon.rada.gov.ua/laws/show/v0018500-22#n67), according to which authorized institutions (banks) carry out non-cash foreign currency purchase and sale operations on behalf of clients:

• in U.S. dollars – at an exchange rate that may deviate by no more than 1% from the official National Bank of Ukraine rate in effect on the day of the transaction;
• in other foreign currencies – at the rate that may deviate by no more than 1% from the rate determined on the basis of the official exchange rate of the hryvnia to the U.S. dollar, in effect on the date of the transaction, as well as information on current exchange rates of foreign currencies to the U.S. dollar (or the U.S. dollar to foreign currencies) on international foreign exchange markets, which are received through trade information systems at the time of the transaction.

The official Ukrainian hryvnia / U.S. dollar exchange rate adopted by the NBU (as of 21 July 2022, amounting to 36.5686 UAH/USD) was converted into Polish zloty using the USD/PLN exchange rate set by the National Bank of Poland. In accordance with this methodology, the Ukrainian hryvnia exchange rate set as of 31 December 2022 was 0.1204 PLN/UAH. The average exchange rate was obtained using the above methodology at the end of each month in the period April – December 2022 (until the end of March 2022, the PZU Group used the NBP exchange rate).

The following FX rates have been used for these consolidated financial statements: