A.4. Basis of preparation

Local accounting legislation requires that the Company prepares these separate financial statements in accordance with IFRS (as adopted by the EU – see Note A.3). The Company also prepares consolidated financial statements for the same period in accordance with IFRS as adopted by the EU. The Company prepares consolidated annual report.

As at the time of approval of these separate financial statements, the Company has not prepared consolidated financial statements in accordance with IFRS for the Company and its subsidiaries (the “CP Group”) as required by International Financial Reporting Standard (“IFRS”) 10 “Consolidated Financial Statements”. The Company applied an interpretation issued by the European Commission (document ARC/08/2007). According to the interpretation, the Company can prepare and file its separate financial statements independently from the preparation and filing of its consolidated financial statements.

In the consolidated financial statements, subsidiary undertakings – which are those companies which are controlled by the Company – will be fully consolidated. The Company controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The consolidated annual report will be prepared as at the date of approval of consolidated financial statements and will include both consolidated financial statements and this separate financial statements.

The Company will present the consolidated annual report on its website www.ceskapojistovna.cz in April 2016.

Users of these financial statements should read these separate financial statements together with the CP Group’s consolidated financial statements as at and for the year ended 31 December 2015, when they become available, in order to obtain full information on the financial position, financial performance and cash flows of the CP Group as a whole.

The financial statements are presented in Czech Crowns (“CZK”) which is the Company’s functional currency. The functional currency of the branch in Poland is Polish Zloty (“PLN”).

The financial statements have been prepared on the historical cost basis except for the following assets and liabilities which are stated at their fair value: derivative financial instruments, financial instruments at fair value through profit or loss, financial instruments classified as available-for-sale and investment properties.

The preparation of the financial statements requires that management make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that cannot readily be determined from other sources. The actual values may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in both the period of the revision and future periods if the revision affects both the current and future periods.

More information about assumptions and judgements is described in Note C.2.