Derivatives include financial instruments held for trading as well as financial instruments constituting a hedge of fair value or cash flows.
Derivative financial instruments held for trading are recognized at fair value on the transaction date and subsequently measured at fair value in accordance with the rules described in section 9.1.3.
Derivatives are recognized as financial assets if their fair value is positive or as financial liabilities if it is negative.
Changes of fair value of derivatives that are not hedges are recognized under “Net movement in fair value of assets and liabilities measured at fair value”.
As at 31 December 2019, PZU Group companies were not parties to agreements including embedded derivatives whose character and related risks were not closely linked to the base agreement.
The PZU Group took advantage of the option available in IFRS 9 and continues to apply hedge accounting in accordance with IAS 39.
Hedge accounting recognizes is used to recognize the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and the hedged item. Hedge accounting is applied if the following conditions are fulfilled: