Revenues arising from ordinary operating activities of the Group, i.e. revenues from sales of products, merchandise and materials, are recognised in the statement of profit or loss as revenues from contracts with customers.
The Group generates its revenues mainly from the sale of: copper, silver and gold. Other, smaller streams of revenues arise from the sale of services (including distribution of electricity, other utilities and mine construction services) and other products (including electricity), merchandise and materials (including steel, petroleum and its derivatives).
The Group recognises revenue from contracts with customers when the Group satisfies a performance obligation by transferring a promised good or providing a service to a customer, which is when the customer obtains control of that asset, i.e. the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset, as well as the ability to prevent other entities from directing the use of, and obtaining the benefits from, the asset. Since in the majority of sales transactions, following the shipment of the promised good and transferring control over it, the Group has an unconditional right to consideration from the customer, and the only condition of receiving it is time lapse, the Group recognises the consideration from contracts with customers as receivables and therefore the Group does not recognise contractual assets.
Moreover, revenues from the sale of services are recognised by the Group in profit or loss over time if one of the following criteria is met:
- the customer simultaneously receives and consumes the benefits provided by the Group’s performance to the extent that it performs its obligations, or
- the Group satisfies a performance obligation and creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced, or
- the Group satisfies a performance obligation and creates an asset without an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.
If the Group recognises revenues on the basis of assessment pursuant to the adopted method of measurement the degree of advancement, prior to the issue of the invoice, it recognises due consideration as a contractual asset and transfers it to receivables at the moment the right to consideration becomes unconditional.
The Group recognises as a performance obligation every contractual promise to transfer to a customer a good or provide a service that is distinct, or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. For each performance obligation, the Group determines (based on contractual terms), whether the obligation will be performed over time or at a specified moment. In particular, in contracts for the sale of copper, silver and gold, every measurement unit of a transferred good (e.g. 1 tonne of copper or 1 kg of silver) is a separate performance obligation. Therefore, for every sale or transfer of goods, constituting a multiplication of a measurement unit of a transferred product, which is realised at the same time, the Group fulfils its performance obligation and at the same time recognises revenues.
In trade contracts in which the performance obligation is met at a specified time, the Group uses various payment conditions, including prepayments of up to several days before delivery and deferred payments of up to 120 days, although the deferred payments do not concern silver. Payment dates depend on the evaluation of the recipient’s credit risk and the possibility of securing receivables. The consideration becomes due depending on contractual conditions, that is prior to the realisation of the delivery (prepayment) by the Group or after the Group meets its performance obligation. If the Group receives payment from the customer before it meets its performance obligation, it recognises it as contractual payables. However, in the case of deferred payments terms, the Group recognises due consideration from the customer as a receivable only after the transfer of promised products to the customer and the issuance of the invoice.
Revenues from contracts with customers are recognised in the amount of the transaction price, consisting of the amount of consideration to which – in accordance with the Group’s expectations – it will be given in return for the transfer of promised goods or services to the customer, excluding consideration collected on behalf of third parties.
The transaction price also reflects the effects of the time value of money if a contract with a customer contains a significant financing element, which is determined based on the contractual payment terms, regardless of whether the promise of financing is explicitly stated in the contract. In determining whether a financing component is significant for a given agreement, all of the facts and circumstances are taken into consideration, including the eventual difference between the promised consideration and the cash selling price of the promised goods and services, as well as the total impact of the following two factors: (i) the estimated period from the moment an entity transfers the promised goods or services to a customer to the moment the customer pays for these goods or services, and (ii) prevailing interest rates on a given market. In the realised contracts of sales to customers in 2021 and 2020, the Group identified a significant financing component in the contract with Franco Nevada (contract described below in Important estimates, assumptions and judgments).
The Group presents the results of financing (interest costs) in revenues from contracts with customers in the statement of comprehensive income. In the Franco Nevada contract, there is also an element of variable consideration. In such a situation, the Group recognises revenues by estimating the amount of consideration, to which it will be entitled to in exchange for transferring the good to the customer and includes a part or all of the amount of variable consideration in the transaction price only to such an extent to which it is highly probable that there will not be a reversal of a significant part of previously recognised accumulated revenues at the moment when uncertainty as to the amount of consideration ceases to be.
In the case of copper and silver products sales transactions for which the price is set after the date of recognition of a given sale, at the moment of initial recognition of a transaction an adjustment of revenues from sales is made, arising from the difference between the forward price of a metal expressed in USD from the date of recognition of a sale in the period corresponding to the period of settlement of the transaction, and the price from provisional invoice. This adjustment brings the amount of the transaction to the expected amount as a transaction price at the moment of initial recognition. This only concerns cases where the change in transaction price arises from a change in the metal’s price. For these types of variable revenues, the limitation of IFRS 15 on recognising variable consideration only to the amount in respect of which it is highly probable that a reversal will not be recognised, is not applicable. Changes to the booked amount after the moment of recognition do not impact the revenues from sales but are fair value gains/losses on measurement of receivables pursuant to the accounting policies presented in Note 10.2.
Sales revenue is adjusted for the gain or loss on the settlement of cash flow hedging derivatives, in accordance with the general principle that the portion of gain or loss on a derivative hedging instrument that is determined to be an effective hedge is recognised in the same position of profit or loss in which the gain or loss on the hedged item is recognised at the moment when the hedged item affects profit or loss.
