Echo Investment S.a.GPW: ECH

Consolidated annual report of the Echo Investment Capital Group for 2025

Apr 14, 2026 at 1:38 PM UTC · Issued by Echo Investment S.A.

Consolidated Annual Report of Echo Investment Group

2025

Office House in Warsaw

Spis treści

Consolidated financial statements of Echo Investment Group for 2025 5

Consolidated profit and loss account 7
Consolidated statement of financial position 8
Consolidated statement of comprehensive income 10
Statement of changes in equity 11
Consolidated cash flow statement 12

General information, basis for preparing the financial statements, and other explanatory information 14

About the Company - business description 15
Information on the financial statement 16
Echo Investment Group 17
Main accounting principles 27
Methods of determining the financial result 38
New standards and interpretations that are effective as of 1 January 2025 44
Published standards and interpretations which are not effective yet and have not been adopted by the Group 45

Explanatory Notes 47

Explanatory notes to the consolidated income statement 48

NOTE 1 Sales revenues 48

NOTE 2 Cost of sales 58

NOTE 3 Net profit (loss) on investment properties 59

NOTE 4 Amounts regarding properties included in profit and loss account 59

NOTE 5 Sale of investment properties 60

NOTE 6 Other operating income 61

NOTE 7 Other operating expenses 62

NOTE 8 Financial income 62

NOTE 9 Financial costs 63

NOTE 10 Profit (loss) due to exchange rate differences 64

NOTE 11 Change in deferred income tax assets (+) and deferred tax provisions (-) 65

NOTE 12 Income tax - effective tax rate 67

Explanatory notes to the consolidated financial statements 68

NOTE 13 Changes in investment properties 68

NOTE 14 Changes in investment properties under construction 69

NOTE 15 Change in assets held for sale 70

NOTE 16 Changes in intangible assets 71

NOTE 17 Changes in property, plant and equipment 73

NOTE 18 Investments in associates and joint ventures accounted for using the equity method 74

NOTE 19 Financial assets 85

NOTE 20 Inventories 86

NOTE 21 Short-term receivables 88

NOTE 22 Change in allowances for expected credit losses - short-term receivables 89

NOTE 23 Trade and other receivables (gross) - broken down by receivables outstanding

during the period 89

NOTE 24 Derivative financial instruments 90

NOTE 25 Cash and other financial assets 91

NOTE 26 Share capital 92

NOTE 27 Supplementary capital 93

NOTE 28 Non-controlling interests 94

NOTE 29 Book value and earnings (loss) per share 95

NOTE 30 Credit, loans and bonds 96

NOTE 31 Leases 100

NOTE 32 Change in provisions 103

NOTE 33 Trade and other liabilities 104

NOTE 34 Information on financial instruments 106

NOTE 35 List of mortgages on investment properties and inventory 108

Explanatory notes to operating segments 109

NOTE 36 Notes on business segments [PLN '000] 109

Explanatory notes to the consolidated cash flow statement 112

NOTE 37 Change of liabilities resulting from financial activities 112

NOTA 38 Change of short-term liabilities, excluding borrowings and loans 113

Other explanatory notes 114

NOTE 39 Off-balance sheet items 114

NOTE 40 Changes in the structure of guarantees and sureties issued by the Echo Investment Group 115

NOTE 41 Transactions with related entities 117

NOTE 42 Significant events after the balance sheet day 118

NOTA 43 Remuneration of the Management Board and Supervisory Board 119

NOTE 44 Agreements concluded with an auditor 122

Explanatory information to the notes 123

Explanatory information on significant estimates and judgments

made by the Group's Management Board 124

Significant estimates and judgments of the Group's Management Board 125
Explanatory information on financial and capital risk management 137
Financial risk management 138
Capital risk management 147

Statement of the Management Board 148

Contact 150

‌Consolidated financial statements of Echo Investment Group for 2025

Office house in Warsaw
CitySpace office

‌Consolidated profit and loss account [PLN '000]
		1.01.2025 -	1.01.2024 -
	Note	31.12.2025	31.12.2024
Sales revenues	1	2 012 720	1 083 405
Cost of sales	2	(1 348 973)	(718 167)
Gross sales profit		663 747	365 238

Profit (loss) on investment properties	3	(188 649)	(4 530)
Administrative costs associated with project implementation	2	(81 409)	(82 883)
Selling expenses	2	(99 042)	(80 631)
General and administrative expenses	2	(95 040)	(97 961)
Other operating income	6	13 076	26 795
Other operating expenses	7	(27 389)	(15 926)
Operating profit		185 294	110 102

Financial income	8	47 097	52 642
Financial expenses	9	(204 418)	(229 535)
Profit (loss) on derivatives	24	(1 648)	327
Foreign exchange profit	10	6 770	21 070
Share of profits of undertakings accounted for using the equity method	18	22 932	129 017
Profit before tax		56 027	83 623

Income tax	12	(67 570)	(68 000)
- current tax		(106 514)	(97 712)
- deferred tax	11	38 944	29 712
Net profit (loss), including:		(11 543)	15 623
Profit (loss) attributable to equity holders of the parent company		(33 535)	(14 175)
Profit of non-controlling intrest		21 992	29 798

Profit (loss) attributable to equity holders of the parent company		(33 535)	(14 175)
Weighted average number of ordinary shares ('000) without shares held		412 691	412 691

Profit (loss) per one ordinary share (PLN)		(0,08)	(0,03)
Diluted profit (loss) per one ordinary share (PLN)		(0,08)	(0,03)

1.1 Consolidated profit and loss account

‌Consolidated statement of financial position [PLN '000]
	Note	As at 31.12.2025	As at 31.12.2024
Assets
Non-current assets
Intangible assets	16	81 553	81 579
Property, plant and equipment	17	123 748	74 497
Investment property	13	630 757	1 493 493
Investment property under construction	14	559 071	519 218
Investment in associates and joint ventures	18	833 988	876 309
Long-term financial assets	19	436 296	483 780
Lease receivables	21	4 884	5 070
Other assets		456	167
Deferred tax asset	11	184 319	151 928
Lands for development		78 546	83 930
		2 933 618	3 769 971

Current assets
Inventory	20	2 664 975	2 161 728
Current tax assets		7 162	21 437
Other taxes receivable	21	105 942	81 738
Trade and other receivables	21	182 869	252 221
Short-term financial assets	19	16 874	1 674
Other financial assets *	25	149 266	117 912
Cash and cash equivalents	25	377 452	366 205
		3 504 540	3 002 915

Fixed assets (disposal group) held for sale	15	138 539	-
		3 643 079	3 002 915

Total assets		6 576 697	6 772 886

1.2 Consolidated statement of financial position

Consolidated statement of financial position [PLN '000]
	Note	As at 31.12.2025	As at 31.12.2024
Equity and liabilities
Equity
Share capital	26	20 635	20 635
Supplementary capital	27	967 356	1 057 735
Capital from option programs		20 896	-
Retained earnings		309 058	596 814
Foreign exchange adjustments from conversion of foreign undertakings		(1 526)	300
Equity attributable to equidity holders of the parent company		1 316 419	1 675 484
Non-controlling interest	28	342 150	336 698
		1 658 569	2 012 182

Long-term liabilities
Loans, borrowings and bonds	30	1 826 082	2 268 961
Derivative financial instruments	24,33	-	554
Long-term provisions	32	9 864	8 304
Deferred income tax provision	11	159 613	163 377
Lease liabilities	31,33	161 301	171 610
Other liabilities	33	76 836	85 736
		2 233 696	2 698 542
Short-term liabilities
Loans, borrowings and bonds	30	944 771	714 387
Loans, borrowings and bonds financing properties held for sale	30	83 659	-
Derivative financial instruments	24,33	76	-
Income tax liabilities		33 034	11 985
Other taxes liabilities	33	45 669	65 676
Trade liabilities	33	192 922	158 121
Dividend liabilities	33	-	-
Lease liabilities	31,33	69 113	90 428
Short-term provisions	32	24 550	28 327
Other liabilities	33	191 573	152 975
Liabilities from contracts with clients	1	1 084 120	840 263
		2 669 487	2 062 162

Liabilities directly associated with assets held for sale	15	14 945	-
		2 684 432	2 062 162

Total equity and liabilities		6 576 697	6 772 886

‌Consolidated statement of comprehensive income [PLN '000]
	1.01.2025 -	1.01.2024 -
	31.12.2025	31.12.2024
Profit for the current financial year	(11 543)	15 623
Components of other comprehensive income that may be reclassified to profit or loss in later periods

- foreign exchange adjustments on conversion of foreign undertakings	(1 826)	(394)
Other comprehensive net income	(1 826)	(394)

Total income for the period, including:	(13 369)	15 229
Comprehensive income attributable to equdity holders of the parent company	(35 361)	(14 569)
Total comprehensive income attributable to non-controlling interest	21 992	29 798

1.3 Consolidated statement of comprehensive income 1.4 Statement of changes in equity

‌Statement of changes

in consolidated equity [PLN '000]

						Equity
					Exchange	attributable
		Supple-	Capital	Accumula-	adjust-	to equity	Non-con-
	Share	mentary	from option	ted retained	ments from	holders of	trollng	Total
	capital	capital	programs	earnings	conversion	the parent	share	equity
For the period 1.01.2025 - 31.12.2025
Opening balance	20 635	1 057 735	-	596 814	300	1 675 484	336 698	2 012 182
Net profit (loss) for the period	-	-	-	(33 535)	-	(33 535)	21 992	(11 543)
Other comprehensive income	-	-	-	-	(1 826)	(1 826)	-	(1 826)
Total net income for the period	-	-	-	(33 535)	(1 826)	(35 361)	21 992	(13 369)

Transactions with non-controlling shareholders	-	-	-	(13 052)	-	(13 052)	13 230	178
Costs of the option program	-	-	20 896	-	-	20 896	-	20 896
Advances on dividends	-	(288 152)	-	(42 000)	-	(330 152)	-	(330 152)
Dividend paid	-	-	-	-	-	-	(29 770)	(29 770)
Transactions with owners	-	(288 152)	20 896	(55 052)	-	(322 308)	(16 540)	(338 848)

Distribution of previous years' profit/loss	-	197 773	-	(197 773)	-	-	-	-
Other	-	-	-	(1 396)	-	(1 396)	-	(1 396)

Closing balance	20 635	967 356	20 896	309 058	(1 526)	1 316 419	342 150	1 658 569

For the period 1.01.2024 - 31.12.2024
Opening balance	20 635	1 057 378	-	611 346	694	1 690 053	338 036	2 028 089
Net profit (loss) for the period	-	-	-	(14 175)	-	(14 175)	29 798	15 623
Other comprehensive income	-	-	-	-	(394)	(394)	-	(394)
Total net income for the period	-	-	-	(14 175)	(394)	(14 569)	29 798	15 229

Advances on dividends	-	-	-	-	-	-	(21 416)	(21 416)
Dividend paid	-	-	-	-	-	-	(9 720)	(9 720)
Transactions with owners	-	-	-	-	-	-	(31 136)	(31 136)

Distribution of previous years' profit/loss	-	357	-	(357)	-	-	-	-
Closing balance	20 635	1 057 735	-	596 814	300	1 675 484	336 698	2 012 182

‌Standalone cash fiow statement [PLN '000]
		1.01.2025 -	1.01.2024 -
	Note	31.12.2025	31.12.2024
A. Operating cash fiow - indirect method
I. Profit before tax		56 027	83 623
II. Total adjustments
Share in net (profits) of undertakings accounted for using the equity method		(22 933)	(129 017)
Depreciation of fixed assets and intangible assets	2	18 764	15 786
Foreign exchange (gains) losses		(14 523)	(21 006)
Interest and share in profits (dividends)		157 668	182 636
Profit (loss) on investment properties		188 649	4 530
Loss on investing activities		1 654	3 311
Change in provisions		(1 428)	(3 992)
Costs of the option program		20 896	-
(Profit) loss on realization of financial instruments		374	(550)
		349 121	51 698

III. Changes in working capital
Change in inventories		(243 922)	(570 852)
Change in amounts receivable		(118 636)	(57 352)
Change in short-term liabilities, except for loans and borrowings	38	331 345	483 929
Change in other financial assets		(31 354)	(58 181)
		(62 567)	(202 456)


IV. Net cash generated from operating activities (I+/-II+/-III)		342 581	(67 135)
Income tax paid		(71 191)	(96 777)

V. Net cash fiow from operating activities		271 390	(163 912)

B. Cash fiow from investing activities
I. Infiows
Disposal of intangible assets and tangible fixed assets		197	1 689
Disposal of investments in properties		502 361	144 693
Refund of borrowings granted, including interest		152 284	87 901
Lease interest		394	353
Repayment of lease receivables		819	544

1.5 Consolidated cash fiow statement

Standalone cash fiow statement [PLN '000]
		1.01.2025 -	1.01.2024 -
	Note	31.12.2025	31.12.2024
Disposal of investments		77 326	4
		733 381	235 184

II. Outfiow
Purchase of intangible assets and tangible fixed assets		(6 762)	(22 495)
Investments in properties		(332 793)	(253 658)
Borrowings granted		(81 533)	(221 887)
Due to the acquisition of subsidiaries, less cash and cash equivalents in the acquired underta-		(445)	-
kings
Cash flows from the sale of shares in subsidiaries		(613)	-
Capital increase in joint ventures		(7 454)	(100 196)
		(429 600)	(598 236)


III. Net cash fiow from investing activities (I+II)		303 781	(363 052)

C. Cash fiow from financing activities
I. Infiows

Loans and borrowings	30	482 873	237 773
Issue of debt securities	30	119 040	855 120
		601 913	1 092 893

II. Outfiows
Dividends and other payments to owners	27	(360 648)	(38 123)
Repayment of loans and borrowings	30	(398 288)	(116 809)
Redemption of debt securities	30	(111 814)	(594 610)
Payments of lease liabilities		(47 208)	(48 258)
Interest paid		(247 879)	(214 880)
Expenditures related to the issue of Archicom S.A. shares carried out in the previous year		-	(880)
		(1 165 837)	(1 013 560)


III. Net cash fiow from financing activities (I+III)		(563 924)	79 333
D. Total net cash fiows (A.V +/- B.III +/- C.III)		11 247	(447 631)
E. Change in cash in the consolidated statement of financial position		11 247	(447 631)
F. Cash and cash equivalents at the beginning of the period		366 205	813 836
G. Cash and cash equivalents at the end of the period (D+F)		377 452	366 205

‌General information, basis for preparing the financial statements, and other explanatory information

2.1 About the Company - business description

‌The Echo Investment Group's core activity consists of the construction and sale of residential buildings, construction, lease and sale of office and retail buildings, as well as trade in real estate.

The parent company - Echo Investment S.A. with its headquarter in Kielce, at al. Solidarności 36 - was registered in Kielce on 30 June 1994 and is entered into the National Court Register under number 0000007025 by the District Court in Kielce, 10th Commercial Division of the National Court Register.

Since 5 March 1996, the Company's shares are quoted at the Warsaw Stock Exchange on the regulated market. They are included into Warsaw Stock Exchange Index WIG, sWIG80 subindex as well as WIG-Real Estate sector index. The main place where

the Company runs its business is Poland. The parent entity is Lisala Sp. z o.o., and the parently company of the highest level of the group is Dayton-Invest Kft., which is controlled at the highest level by Tibor Veres. The Company was established for an indefinite period.

There have been no changes in the name of the reporting entity or other identifying data since the end of the previous reporting period.

Information on the Management Board and Supervisory Board is presented in the Report of the Management Board on the activities of Echo Investment S.A. and its Capital Group for 2025 in part 01 "Basic information about the Company and the Group".

2.2 Information on the financial statement

‌The consolidated statements of the Echo Investment S.A. present financial data for the 12-month period ending on 31 December 2025 and comparative data for the 12-month period ending on 31 December 2024.

The Group's financial statement in this financial statements is presented in thousands of Polish zloty (PLN), if not indicated differently.

Declaration of conformity

The statements have been prepared in compliance with the International Financial Reporting Standards (IFRS), as adopted for use in the European Commission.

Assumption of continuity in operations

The statements have been drawn up according to the going concern principle as there are no circumstances indicating a threat to continued activity.

Approval of financial statements

The Consolidated Financial Statement for the year ended 31 December 2025 was approved for publication on 25 March 2026.

2.3 Echo Investment Group

‌Composition of the Group

As at 31 December 2025 the Capital Group included 137 subsidiaries consolidated according to the full method and 58 jointly controlled companies consolidated according to the equity method.

The most important role in the Group's structure belongs to Echo Investment S.A., which supervises, co-delivers and provides funds for carrying out ongoing developer projects. Most of the Group's companies have been established or acquired for the purpose of carrying out specific project-based tasks, including those arising from the process of execution of specific projects.

Echo Investment S.A. directly and indirectly - through DKR Echo Investment Sp. z o.o., -is a major shareholder of Archicom S.A., in which it held 73,40% of shares entitling it to 75.95% of votes at the General Meeting of Shareholders as at 31 December 2025. Echo Investment S.A. consolidates all companies of the Archicom S.A. group according to the full method.

The Group also holds minority interests in a number of joint ventures - mostly in companies owning finished, under construction or planned projects with apartments for rent Resi4Rent, the shopping centre Galeria Młociny in Warsaw or the planned multifunctional project Towarowa 22 in Warsaw.

Information on market trends and the industry environment is presented in sections 1.11 to 1.14 of the Management Board's Report on the activities of Echo Investment S.A. and the Echo Investment Capital Group.

Subsidiaries

No	Subsidiary	Registered office	% of capital held	Parent entity
1	City Space - GP sp. z o.o. w likwidacji	Warszawa	100%	Echo Investment S.A.
2	City Space Management sp. z o.o.	Warszawa	100%	Echo Investment S.A.
3	Dellia Investments - Projekt Echo - 115 sp. z o.o. sp.k.	Kielce	100%	Pudsey sp. z o.o.
4	DKR Echo Investment sp. z o.o.	Kielce	100%	Echo Investment S.A.
5	Duże Naramowice - Projekt Echo - 111 sp. z o.o. S.K.A.	Kielce	100%	Echo Investment S.A.
6	Echo - Advisory Services sp. z o.o.	Kielce	100%	Echo Investment S.A.
7	Echo - Arena sp. z o.o.	Kielce	100%	Echo Investment S.A.
8	Echo - Aurus sp. z o.o.	Kielce	100%	Echo Investment S.A.
9	Echo Investment Project Management S.R.L.	Brasov	100%	Echo Investment S.A.
10	Echo - SPV 7 sp. z o.o.	Kielce	100%	Echo Investment S.A.

Subsidiaries

No	Subsidiary	Registered office	% of capital held	Parent entity
11	Elektrownia RE sp. z o.o.	Kielce	100%	Echo Investment S.A.
12	Face2Face - Grupa Echo sp. z o.o. S.K.A.	Kielce	100%	Echo Investment S.A.
13	Fianar Investments sp. z o.o.	Warszawa	100%	Echo Investment S.A.
14	Galeria Libero - Projekt Echo 120 sp. z o.o. sp.k.	Kielce	100%	Fianar Investments sp. z o.o.
15	GRO Nieruchomości sp. z o.o.	Kielce	100%	Echo Investment S.A.
16	Grupa Echo sp. z o.o.	Kielce	100%	Echo Investment S.A.
17	Metropolis - Grupa Echo sp. z o.o. S.K.A.	Kielce	100%	Echo Investment S.A.
18	Midpoint 71 - Grupa Echo sp. z o.o. S.K.A.	Kielce	100%	Echo Investment S.A.
19	Opolska Business Park - Grupa Echo sp. z o.o. sp.k.	Warszawa	100%	Pudsey sp. z o.o.
20	Projekt 17 - Grupa Echo sp. z o.o. S.K.A.	Kielce	100%	Echo Investment S.A.
21	Projekt 144 - Grupa Echo sp. z o.o. sp.k.	Kielce	100%	Echo - Arena sp. z o.o.
22	Projekt Beethovena - Grupa Echo sp. z o.o. S.K.A.	Kielce	100%	Echo Investment S.A.
23	Projekt Echo - 99 sp. z o.o.	Kielce	100%	Echo Investment S.A.
24	Projekt Echo - 108 sp. z o.o.	Kielce	100%	Echo Investment S.A.
25	Projekt Echo - 111 sp. z o.o.	Kielce	100%	Echo Investment S.A.
26	Projekt Echo - 115 sp. z o.o.	Kielce	100%	Echo Investment S.A.
27	Projekt Echo - 120 sp. z o.o.	Kielce	100%	Echo Investment S.A.
28	Projekt Echo - 123 sp. z o.o.	Kielce	100%	Echo Investment S.A.
29	Projekt Echo - 129 sp. z o.o.	Kielce	100%	Selmer Investments sp. z o.o. sp.k.
30	Projekt Echo - 130 sp. z o.o.	Kielce	100%	Echo Investment S.A.
31	Projekt Echo 139 - Seaford sp. z o.o. sp.k.	Kielce	100%	Echo Investment S.A.
32	Projekt Echo - 140 sp. z o.o.	Kielce	100%	Echo Investment S.A.
33	Projekt Echo - 142 sp. z o.o.	Kielce	100%	Echo Investment S.A.
34	Projekt Echo - 144 sp. z o.o.	Kielce	100%	Echo Investment S.A.
35	Projekt Echo - 145 sp. z o.o.	Kielce	100%	Echo Investment S.A.
36	Projekt Naramowice - Grupa Echo sp. z o.o. S.K.A.	Kielce	100%	Echo Investment S.A.
37	Pudsey sp. z o.o.	Warszawa	100%	Echo Investment S.A.
38	Q22 - Grupa Echo sp. z o.o. sp.k.	Kielce	100%	Pudsey sp. z o.o.
39	React - Grupa Echo sp. z o.o. S.K.A.	Kielce	100%	Pudsey Sp z o.o.
40	Sagittarius - Grupa Echo sp. z o.o. sp.k.	Kielce	100%	Pudsey sp. z o.o.
41	Seaford sp. z o.o.	Warszawa	100%	Echo Investment S.A.
42	Selmer Investments sp. z o.o.	Warszawa	100%	Echo Investment S.A.
43	Selmer Investments sp. z o.o. sp.k.	Warszawa	100%	Echo Investment S.A.
44	Strood sp. z o.o.	Warszawa	100%	Echo Investment S.A.
45	Swanage sp. z o.o. w likwidacji	Warszawa	100%	Echo Investment S.A.
46	Taśmowa - Grupa Echo sp. z o.o S.K.A.	Kielce	100%	Echo Investment S.A.
47	Villea Investments sp. z o.o.	Warszawa	100%	Echo Investment S.A.
48	Wołoska Development Capital Prosta S.A.	Warszawa	100%	Echo Investment S.A.
49	Service Hub sp. z o.o.	Kielce	86,70%	Echo Investment S.A.
50	Service Hub Commercial - Grupa Echo sp. z o.o. sp.k.	Kielce	86,70%	Service Hub sp. z o.o.
51	Service Hub Resi sp. z o.o.	Wrocław	86,70%	Service Hub sp. z o.o.
52	12 - Archicom Projekt 127 sp. z o.o. S.K.A.	Wrocław	73,40%	Archicom S.A.
53	AD Management sp. z o.o.	Wrocław	73,40%	Archicom Residential 2 sp. z o.o.
54	Altona Investments sp. z o .o.	Wrocław	73,40%	Archicom Nieruchomości Residential sp. z o.o.
55	Archicom Advisory sp. z o.o.	Wrocław	73,40%	Archicom S.A.
56	Archicom Bowen sp. z o.o.	Wrocław	73,40%	Archicom Browary Warszawskie sp. z o.o. sp.k.
57	Archicom Browary Warszawskie sp. z o.o.	Wrocław	73,40%	Archicom S.A.
58	Archicom Browary Warszawskie sp. z o.o. sp.k.	Wrocław	73,40%	Archicom S.A.
59	Archicom Byczyńska 1 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
60	Archicom Cadenza Hallera sp. z o.o.	Wrocław	73,40%	Archicom S.A.

Subsidiaries

No	Subsidiary	Registered office	% of capital held	Parent entity
61	Archicom Dobrzykowice Park sp. z o.o.	Wrocław	73,40%	Archicom Residential 2 sp. z o.o.
62	Archicom Fin sp. z o.o.	Wrocław	73,40%	Archicom S.A.
63	Archicom Gdańsk sp. z o.o.	Wrocław	73,40%	Archicom S.A.
64	Archicom Gosford Investments sp. z o.o.	Wrocław	73,40%	Archicom S.A.
65	Archicom Investment sp. z o.o.	Wrocław	73,40%	Archicom S.A.
66	Archicom Jagodno 5 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
67	Archicom Jagodno sp. z o.o.	Wrocław	73,40%	Archicom Residential 2 sp. z o.o.
68	Archicom Jagodno sp. z o.o. sp.k.	Wrocław	73,40%	Archicom S.A.
69	Archicom Kraków sp. z o.o.	Kraków	73,40%	Archicom S.A.
70	Archicom Lofty Platinum 1 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
71	Archicom Łódź 1 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
72	Archicom Marina 3 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
73	Archicom Marina 4 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
74	Archicom Marina 5 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
75	Archicom Nieruchomości sp. z o.o.	Wrocław	73,40%	Archicom Holding sp. z o.o.
76	Archicom Nieruchomości 2 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
77	Archicom Nieruchomości 3 sp. z o.o.	Wrocław	73,40%	Archicom Residential 2 sp. z o.o.
78	Archicom Nieruchomości 4 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
79	Archicom Nieruchomości 5 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
80	Archicom Nieruchomości 6 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
81	Archicom Nieruchomości 7 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
82	Archicom Nieruchomości 8 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
83	Archicom Nieruchomości 9 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
84	Archicom Nieruchomości 10 sp. z o.o.	Wrocław	73,40%	Archicom Residential 2 sp. z o.o.
85	Archicom Nieruchomości 11 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
86	Archicom Nieruchomości 12 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
87	Archicom Nieruchomości 14 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
88	Archicom Nieruchomości 17 sp. z o.o.	Wrocław	73,40%	Archicom Nieruchomości 20 sp. z o.o.
89	Archicom Nieruchomości 18 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
90	Archicom Nieruchomości 19 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
91	Archicom Nieruchomości 20 sp. z o.o.	Wrocław	73,40%	Archicom Residential 2 sp. z o.o.
92	Archicom Nieruchomości JN1 sp. z o.o.	Wrocław	73,40%	Altona Investments sp. z o.o.
93	Archicom Nieruchomości JN2 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
94	Archicom Nieruchomości JN3 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
95	Archicom Nieruchomości Residential sp. z o.o.	Wrocław	73,40%	Archicom Residential 2 sp. z o.o.
96	Archicom Nowy Mokotów sp. z o.o.	Wrocław	73,40%	Archicom S.A.
97	Archicom Perth sp. z o.o.	Wrocław	73,40%	Archicom S.A.
98	Archicom Potton sp. z o.o.	Wrocław	73,40%	Archicom S.A.
99	Archicom Poznań sp. z o.o.	Wrocław	73,40%	Archicom S.A.
100	Archicom Projekt 127 sp.z o.o.	Wrocław	73,40%	Archicom S.A.
101	Archicom Projekt 136 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
102	Archicom Projekt 136 sp. z o.o. sp.k.	Wrocław	73,40%	Archicom S.A.
103	Archicom Projekt 139 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
104	Archicom Residential sp. z o. o.	Wrocław	73,40%	Archicom S.A.
105	Archicom Residential 2 sp. z o. o.	Wrocław	73,40%	Archicom S.A.
106	Archicom RW sp. z o.o.	Wrocław	73,40%	Archicom S.A.
107	Archicom S.A.	Wrocław	73,40%	DKR Echo Investment sp. z o.o./Echo Investment S.A.
108	Archicom Sales Services sp. z o.o.	Wrocław	73,40%	Archicom Residential 2 sp. z o.o.
109	Archicom Senja 2 sp. z o.o.	Wrocław	73,40%	Archicom Browary Warszawskie sp. z o.o. sp.k.
110	Archicom Services sp. z o.o.	Wrocław	73,40%	Archicom S.A.

Subsidiaries

No	Subsidiary	Registered office	% of capital held	Parent entity
111	Archicom sp. z o.o.	Wrocław	73,40%	Archicom S.A.
112	Archicom sp. z o.o. Realizacja Inwestycji sp.k.	Wrocław	73,40%	Archicom S.A.
113	Archicom sp. z o.o. Śląsk sp.k.	Wrocław	73,40%	Archicom S.A.
114	Archicom Stabłowice sp. z o.o.	Wrocław	73,40%	Archicom Residential 2 sp. z o.o.
115	Archicom Warszawa sp. z o.o.	Wrocław	73,40%	Archicom S.A.
116	Archicom Warszawa 2 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
117	Archicom Warszawa 3 sp. z o.o.	Kraków	73,40%	Archicom S.A.
118	Archicom Wrocław sp. z o.o.	Wrocław	73,40%	Archicom S.A.
119	Archicom Wrocław 3 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
120	Archicom Wrocław 4 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
121	Archicom ZAM sp. z o.o	Wrocław	73,40%	Archicom S.A.
122	Bartoszowice 1 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
123	EASS500 sp. z o.o.	Kraków	73,40%	Archicom S.A.
124	EASS5003 sp. z o.o.	Kraków	73,40%	Archicom S.A.
125	Galeria Nova - Archicom Projekt 127 sp. z o.o. S.K.A.	Wrocław	73,40%	Archicom S.A.
126	Himawari Investment sp. z o.o.	Kraków	73,40%	Archicom S.A.
127	Keshi sp. z o.o.	Kraków	73,40%	Archicom S.A.
128	Mioga Investment sp. z o.o.	Kraków	73,40%	Archicom S.A.
129	P16 Inowrocławska sp. z o.o.	Wrocław	73,40%	Archicom S.A.
130	Projekt Echo - 137 sp. z o.o.	Wrocław	73,40%	Archicom S.A.
131	Projekt Echo - 143 sp. z o.o.	Kielce	73,40%	Archicom S.A.
132	Rentierresidence sp. z o.o.	Kraków	73,40%	Archicom S.A.
133	RPGZ 16 sp. z o.o.	Kraków	73,40%	Archicom S.A.
134	Space Investment Strzegomska 3 Kamieńskiego sp. z o.o.	Wrocław	73,40%	Archicom S.A.
135	Space Investment Strzegomska 3 Otyńska sp. z o.o.	Wrocław	73,40%	Archicom S.A.
136	Strzegomska Nowa sp. z o.o.	Wrocław	73,40%	AD Management sp. z o.o.
137	TN Stabłowice 1 sp. z o.o.	Wrocław	73,40%	Archicom S.A.

Joint ventures

No Subsidiary

Registered

office

% of capital

held Parent entity

GALERIA MŁOCINY
1 Berea sp. z o.o.		Warszawa	30%	Rosehill Investments sp. z o.o.
2 Rosehill Investments sp. z o.o.		Warszawa	30%	Echo Investment S.A.
TOWAROWA 22
3 Projekt Echo - 138 sp. z o.o.		Warszawa	30%	Echo Investment S.A.
4 Project Towarowa 22 sp. z o.o.		Warszawa	30%	Strood sp. z o.o.
5 Talea Sp z o.o.
RESI4RENT
6 Hotel Gdańsk Zielony Trójkąt sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
7 Hotel Kraków Młyńska sp. z o.o.		Kraków	30%	R4R Poland sp. z o.o.
8 Hotel Kraków Romanowicza sp. z. o.o.		Kraków	30%	R4R Poland sp. z o.o.
9 Hotel Kraków Zabłocie sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
10 Hotel Poznań Dmowskiego sp. z o.o.		Poznań	30%	R4R Poland sp. z o.o.
11 Hotel Warszawa Wołoska sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
12 Hotel Wrocław Bardzka sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
13 Hotel Wrocław Grabiszyńska sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
14 M2 Biuro sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
15 M2 Hotel sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
16 Pimech Invest sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
17 R4R Gdańsk Kołobrzeska sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
18 R4R Gdańsk Stocznia sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
19 R4R Kraków 3 Maja sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
20 R4R Kraków JPII sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
21 R4R Leasing sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
22 R4R Łódź Kilińskiego sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
23 R4R Łódź Wodna sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
24 R4R Poland sp. z o.o.		Warszawa	30%	Echo Investment S.A.
25 R4R Poznań Nowe Miasto sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
26 R4R Poznań Szczepanowskiego sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
27 R4R RE sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
28 R4R RE Wave 3 sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
29 R4R RE Wave 4 sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
30 R4R SPV 10 sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
31 R4R Warszawa Browary sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
32 R4R Warszawa Opaczewska sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
33 R4R Warszawa Taśmowa sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
34 R4R Warszawa Wilanowska sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
35 R4R Warszawa Woronicza sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
36 R4R Wrocław Jaworska II sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
37 R4R Wrocław Kępa sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
38 R4R Wrocław Park Zachodni sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
39 R4R Wrocław Rychtalska sp. z o.o.		Warszawa	30%	R4R Poland sp. z o.o.
RESI ARCHICOM
40	Projekt Browarna sp. z o.o.	Wrocław	55%	Archicom S.A.
StudentSpace
41 SGE JVco SARL		Luxemburg	30%	Echo Investment S.A./SGE Poland Holdco S.a.r.l.
42 SGE Operating company sp. z o.o.		Warszawa	30%	SGE JVco SARL
43 SGE Propco 1 SARL		Luxemburg	30%	SGE JVco SARL
44 SGE Propco 1 SARL sp. z o.o. Oddział w Polsce		Warszawa	30%	SGE JVco SARL
45 SGE Propco 2 SARL		Luxemburg	30%	SGE JVco SARL
46 SGE Propco 2 SARL sp. z o.o. Oddział w Polsce		Warszawa	30%	SGE JVco SARL

Joint ventures

No	Subsidiary	Registered office	% of capital held	Parent entity
47	SGE Propco 3 SARL	Luxemburg	30%	SGE JVco SARL
48	SGE Propco 3 SARL sp. z o.o. Oddział w Polsce	Warszawa	30%	SGE JVco SARL
49	SGE Propco 4 SARL	Luxemburg	30%	SGE JVco SARL
50	SGE Propco 4 SARL sp. z o.o. Oddział w Polsce	Warszawa	30%	SGE JVco SARL
51	SGE Propco 5 SARL	Luxemburg	30%	SGE JVco SARL
52	SGE Propco 5 SARL sp. z o.o. Oddział w Polsce	Warszawa	30%	SGE JVco SARL
53	SGE Propco 6 SARL	Luxemburg	30%	SGE JVco SARL
54	SGE Propco 6 SARL sp. z o.o. Oddział w Polsce	Warszawa	30%	SGE JVco SARL
55	SGE Propco 7 SARL	Luxemburg	30%	SGE JVco SARL
56	SGE Propco 8 SARL	Luxemburg	30%	SGE JVco SARL
57	SGE Propco 7 SARL sp. z o.o. Oddział w Polsce	Warszawa	30%	SGE JVco SARL
58	SGE Propco 8 SARL sp. z o.o. Oddział w Polsce	Warszawa	30%	SGE JVco SARL

Changes in the structure of the Group in 2025

Increase of the Group
Entity	Action	Date	Share capital
EASS500 sp. z o.o.	Purchase of shares in the company by Archicom	19.02.2025	5 000 PLN
Fit-out Center Archicom sp. z o.o.	Purchase of shares in the company by Archicom	17.04.2025	50 000 PLN
RPGZ 16 sp. z o.o.	Purchase of shares in the company by Archicom	18.07.2025	5 000 PLN

Decrease of the Group
Entity	Action	Date	Share capital (PLN)
Avatar - Grupa Echo sp. z o.o. S.K.A.	Takeover of the company by Projekt Echo - 116 Sp. z o.o. S.K.A.	10.01.2025	12 794 350
Cinema Asset Manager - Grupa Echo sp. z o.o. S.K.A.	Takeover of the company by Projekt Echo - 116 Sp. z o.o. S.K.A.	10.01.2025	50 000
Galaxy - Grupa Echo sp. z o.o. S.K.A.	Takeover of the company by Projekt Echo - 116 Sp. z o.o. S.K.A.	10.01.2025	3 825 990
Galeria Tarnów - Grupa Echo sp. z o.o. S.K.A.	Takeover of the company by Projekt Echo - 116 Sp. z o.o. S.K.A.	10.01.2025	767 053
PPR - Grupa Echo sp. z o.o. S.K.A.	Takeover of the company by Projekt Echo - 116 Sp. z o.o. S.K.A.	10.01.2025	327 661
Symetris - Grupa Echo sp. z o.o. sp.k.	Takeover of the company by Projekt Echo - 116 Sp. z o.o. S.K.A.	10.01.2025	50 000
Projekt Saska sp. z o.o.	Dissolution of the company	28.02.2025	50 000
Park Rozwoju III - Grupa Echo sp. z o.o. sp.k.	Dissolution of the company	4.03.2025	10 505 000
Park Rozwoju III- Grupa Echo sp. z o.o. sp.k.	Deletion from the Register of Entrepreneurs	2.04.2025	10 505 000
Rondo 1 City Space - GP sp. z o.o. sp.k.	Dissolution of the company	22.09.2025	5 000
Rondo 1 City Space - GP sp. z o.o. sp.k.	Deletion from the Register of Entrepreneurs	07.11.2025	5 000
Dagnall sp. z o.o.	Takeover of the company by Projekt Echo - 115 Sp. z o.o.	27.11.2025	5 000
Echo - Property Poznań 1 sp. z o.o.	Takeover of the company by Projekt Echo - 115 Sp. z o.o.	27.11.2025	2 755 000
Malta Office Park - Grupa Echo sp. z o.o. S.K.A.	Takeover of the company by Projekt Echo - 115 Sp. z o.o.	27.11.2025	74 995
PHS - Grupa Echo sp. z o.o. sp.k.	Takeover of the company by Projekt Echo - 115 Sp. z o.o.	27.11.2025	1 637 007
Projekt 16 - Grupa Echo sp. z o.o. S.K.A.	Takeover of the company by Projekt Echo - 115 Sp. z o.o.	27.11.2025	50 000
RPGZ IX sp. z o.o.	Takeover of the company by Projekt Echo - 115 Sp. z o.o.	27.11.2025	5 000
Fit-out Center Archicom sp. z o.o.	Sale of shares in the company by Archicom S.A.	18.12.2025	50 000
Echo Investment Project 1 S.R.L.	Sale of shares in the company by Echo - Aurus Sp. z o.o.	19.12.2025	121 941 144
Projekt Saska sp. z o.o.	Deletion from the Register of Entrepreneurs	29.12.2025	50 000

The acquisition of Fit-Out Center Archicom sp. z o.o.

On 17 April 2025, the Issuer entered into a share purchase agreement with natural persons, pursuant to which it acquired 100% of shares in Fit-Out Center Archicom

sp. z o.o. with its registered office in Wrocław (formerly Anicar sp. z o.o. with its registered office in Warsaw) for the amount of PLN 500 thous. The transaction was a business acquisition. The assets acquired and liabilities taken over, whose fair value, in the opinion of the Management Board, does not differ significantly from their book value, are presented below.

In addition to the assets and liabilities listed below, the acquired company has intangible assets in the form of know-how, understood as technical and non-technical (commercial, administrative, organizational, financial) expertise and experience necessary to effectively conduct its business. These resources, in accordance with IFRS 3, do not meet the criteria for being recognized

separately from the company's goodwill. The fair value of these off-balance sheet intangible assets was estimated to be PLN 12,107 thous.

The company, in addition to its know-how, possesses elements such as a logo, internet domain, and website. Due to its limited brand recognition and mixed customer reviews visible in online ratings, these elements were not considered crucial from an economic value perspective.

The fair value measurement of the acquired assets and liabilities focused on those assets and operational aspects which have the actual significance for a

prospective independent investor and may influence its purchasing decision.

The fair values of the assets and liabilities acquired are shown in the table below:

Acquired assets

Non-current assets

Property, plant and equipment 58

Current assets

Inventories 3 151

Trade receivables and others 3 465

Receivables from other taxes 45

Cash and cash equivalents 63

6 724

Total assets A 6 782

Acquired liabilities Long-term liabilities

Loans, borrowings and bonds 3 630

Long-term provisions 1 324

4 954

Current liabilities

Trade liabilities 8 154

Income tax liabilities 21

Other taxes liabilities 193

8 368

Total liabilities B 13 322

Net asset value C = A-B (6 540)

Purchase price D 500

Recognized goodwill E=D-C 7 040

Revenue and net profit of the acquired entity included in the consolidated profit and loss account for the reporting period
	18.04.2025 -
	31.12.2025
Sales revenues	6 300
Other operating income	413
Net profit (loss)	(12 135)

The revenues and net financial results of the combined entities that would have been included in the consolidated statement of profit or loss for the reporting period if the merger date had been the beginning of that period.

1.01.2025 -

31.12.2025

Sales revenues 13 326

Other operating income 631

Financial income 28

Net profit (loss) (13 576)

The sales of Fit-Out Center Archicom sp. z o.o. and Echo Investment Project 1 s.r.l.

On 18 December 2025, Archicom S.A. transferred, under a share sale agreement, the title to 100% of the shares in its subsidiary Fit-Out Center Archicom sp. z o.o. (currently Fit-Out Center Polska sp. z o.o., with its registered office in Warsaw) to an unrelated party for a price of PLN 500 thous. As a result of the share sale, the Group lost control of the subsidiary.

On 19 December 2025, Echo - Aurus Sp. z o.o. had a liability under a loan granted by Echo Investment

Project 1 s.r.l. in the amount of RON 7,379 thous., which was transferred to an unrelated party. In exchange for the assumption of the debt, Echo - Aurus Sp. z

o.o. transferred the shares it held, representing 100% of the share capital of its subsidiary Echo Investment

Project 1 S.R.L., to that unrelated party. As a result of this transaction, the Group lost control of the subsidiary.

Value of assets and liabilities as at the date of disposal [PLN '000]
	Fit-Out Center Archicom sp. z o.o.	Echo Investment Project 1 S.R.L.
Non-current assets
Goodwill	7 040	-
Property, plant and equipment	2 407	-
Other	3 398	-
	12 845	-
Current assets
Inventories	3 170	-
Trade receivables and others	3 851	1
Short-term financial assets	-	6 107
Receivables from other taxes	-	1 255
Cash and cash equivalents	1 113	334
Other	155	-
	8 289	7 697

Total assets	21 134	7 697


Long-term liabilities
Lease liabilities	1 386	-
Other	1 940	-
	3 326	-
Current liabilities
Trade liabilities	9 733	10
Other taxes liabilities	-	20
Other	2 111	1 256
	11 844	1 286

Total liabilities	15 170	1 286

2.4 Main accounting principles

‌The most important accounting principles applied in the preparation of these financial statements are presented below. These rules were applied in all presented periods in a continuous manner unless stated otherwise.

Functional currency and currency of presentation

Items in the financial statements of each Group's entities are presented in the main currency of the economic environment in which given subsidiary operates (functional currency). The Group's financial statement

is presented in the Polish zloty (PLN) - the presentation currency and the functional currency of the parent company.

Any differences in totals result from mathematical rounding to the nearest thousand Polish zloty (PLN).

Transactions denominated in foreign currencies are translated into the functional currency at the exchange rate effective on the transaction or measurement day when items are revalued. Gains and losses arising from the settlement of such transactions and measurement of assets and liabilities denominated in foreign currencies are recognised in profit or loss, except for foreign exchange gains and losses related to interest costs to the extent that such interest is capitalized in the value of the asset, which is recognized in the carrying amount of the asset.

The Group comprises entities with a functional currency other than PLN. The reporting data of those companies included in these statements have been converted to PLN in accordance with IAS 21, excluding capital items, that should be recalculated according to historical currency exchange. Balance sheet items are translated at the exchange rate on the balance sheet, the profit

and loss account items are translated at the average exchange rate for the period (unless this average is not a reasonable approximation of cumulative effect of the rates effective on the transaction days - in which case income and expenses are translated at the dates of the transaction days). The resulting exchange differences are recognised in other comprehensive income and

the cumulative amounts are recognised in a separate component of equity. In the moment of the foreign entity disposal, its accumulated currency differences recognised in equity are recognised in profit and loss account as profit on disposal.

Property, plant and equipment

Property, plant and equipment include fixed assets owned by the Group.

The composition of the Group's fixed assets include:

real estate (not leased and not intended for trade) used by the Group,
plant and machinery,
vehicles,
other complete and serviceable items with an expected service life of more than one year.

Fixed assets are valued and presented in the statement according to purchase prices or production costs, less depreciation and impairment write-offs.

Fixed assets are posted on collective accounts according to the groups of the Classification of Fixed Assets and a detailed register of fixed assets is kept.

Fixed assets are depreciated using the straight-line method of tax rates, which reflect the period of economic usefulness.

Fixed assets are depreciated on a straight-line basis by using the rates shown in the table below, which reflect the economic useful life indicated:

Depreciation

Intangible assets are amortized using the straight-line method.

Intangible assets are tested for impairment, if certain events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss is disclosed in the amount by which the carrying

Property, plant and equipment

rates

value of an asset exceeds the recoverable value.

Right of perpetual usufruct of land 1.3% - 1.5%

Buildings 2.5% - 4.5%

Technical devices and machinery 10% - 60%

Means of transport 20.00%

Other property, plant and equipment 4.5% - 20%

Subsequent expenditure is included in the asset's carrying amount or recognized as a separate asset (where appropriate) only when it is probable that economic benefits will flow to the Company from the item and the cost of the item can be reliably measured. All other repair and maintenance expenses are charged to the profit and loss account in the financial period in which they were incurred.

Property, plant and equipment are verified for impairment if events or changes in circumstances indicate that the carrying amount may not be realizable. An impairment loss is recognized for the amount by which the carrying amount of an asset or cash-generating unit exceeds the recoverable amount and is recognized in the profit and loss account. The recoverable amount is the higher of the fair value less costs to sell or value in use.

Gains and losses on disposal of fixed assets, representing the difference between the sales proceeds and the carrying amount of the fixed asset sold are recognised in the profit and loss account under other operating income / expenses.

Intangible assets

Intangible assets are recognized if it is probable that they will result in future economic benefits that can be directly related to these assets. Initial recognition of intangible assets is made at cost of acquisition or cost of manufacturing.

After initial recognition, intangible assets are measured at cost of acquisition or cost of manufacturing reduced by amortization (except for assets that have an indefinite useful life) and impairment losses. Intangible asset records are kept according to analytical methods. The amortization plan adopts amortization rates from

2.5 % to 50 %, which reflect the economic useful life.

If a trademark is identified among the acquired assets, the Management Board assesses whether the intangible asset has a definite or indefinite useful life.

An intangible asset with an indefinite useful life is not amortized. The Group con-ducts an analysis of possible impairment by comparing the carrying amount of the trademark with its recoverable amount, at least once

a year, and any writedowns of the trademark value are charged to the Group's current financial result.

Investment properties, investment properties under construction

Investment properties include properties owned by the Group which are leased out together with land directly related to these properties, as well as land purchased and maintained in order to in-crease their value. Investment properties under construction are investments carried out by the Group intended for lease and under construction. The Group classifies investment properties under construction as investment properties when they are available for use - obtain an occupancy permit for the building.

In addition, as investment properties, the Group includes properties acquired for future development projects that currently generate significant rental revenues. Such presentation under investment properties is until such time as a development project is launched and such property is demolished.

Investment properties are initially recognized at purchase price / manufacturing cost. Subsequent expenditure is included in the carrying amount of the investment property or recognized as a separate investment property (where applicable) only when it is probable that an economic benefit will flow to the Group from the item and the cost of the item can be reliably measured. All other repair and maintenance expenses are charged to the statement of

comprehensive income in the financial period in which they are incurred. The value of investment properties under construction includes costs directly related

to the project not yet completed. They consist of expenses incurred for the purchase of land real estate,

outlays for the design and implementation of buildings (mainly external services), activated financial costs and other costs incurred during the implementation directly related to the investment.

After initial recognition, as at each balance sheet date, investment property under construction that meets the premises for their valuation, and investment property are disclosed at fair value. The fair value measurement is updated at least quarterly. Profits

or losses resulting from changes in the fair value of investment properties are recognized in the statement of comprehensive income in the period in which they arise. The result on the valuation of

investment properties is presented in the profit / loss on investment property item.

For investment properties under construction, the premises for valuation are deemed to be met in the case of projects where a significant part of the risks related to the construction process has been

eliminated and it is possible to measure reliably at fair value. In other cases, when it is not possible to reliably determine the fair value, the value of real estate under construction is valued according to the purchase price or production cost less impairment losses.

The Group has specified the conditions under which it begins the process of analyzing whether

significant risks relating to investment properties under construction have been eliminated. These conditions include:

obtaining a building permit,
contracting construction works with a value of at least 30 % of the investment budget,
renting at least 20% of the area in the project under implementation.
The presented conditions constitute the boundary criteria of the analysis. Each investment property under construction is analyzed individually in terms of the possibility of obtaining a reliable valuation to fair value, taking into account, in addition to
the conditions described above, also the general economic and market situation, the availability of data for similar properties and expectations regarding the volatility of factors underlying the valuation and the method of financing investment project.
The fair values of land and buildings measured at fair value are updated in such a way as to reflect the market conditions prevailing at the end of the
reporting period. The fair value of investment property is the price that would have been received for the sale of an asset or paid for the transfer of a liability
in a transaction between market participants carried out on normal conditions at the valuation date.
Property fair values are subject to verification by internal Analyse Department in cooperation with the Management Board, based on transaction concluded on active market, offers, preliminary agreements, knowledge and experience, or based on external vauations prepared by experts. As a rule, valuations of office real estate, for which the Group carries out an active sales preparation process, are prepared internally, based on available market data, in
particular a level of discount rate (yield) discussed with potential buyers, and based on levels of rent and oter rental conditions. The discounted net cash flow (DCF) method is used to determine the fair value. In the
case of investment property under construction, the valuation is reduced by the discounted expenditure necessary to complete the investment, taking into account the development margin. As part of the fair value measurement of real estate, the Group estimates the area that remains vacant for certain periods.
In the event of a change in the use of the property, it shall be appropriately reclassified in the financial
statements. The property is transferred and recognized in the item of property, plant and equipment or inventory at the previously disclosed carrying amount.
The result on the sale of in-vestment property is recognized under 'profit / loss on investment property'.
The Group transfers investment properties to the category of assets held for sale only when a property is subject to sale outside of its standard operating cycle and when the criteria of IFRS 5 are fulfilled. This is due to the adopted strategy of the Echo Investment Group, according to which real estate is maintained by the Group and sold at the best moment - in the opinion of the Management Board - that takes into account expectations regarding return on invested capital, availability of capital for other investments, as well as basing the decision on the market situation and expectations for its further development. The Group's goal is to build properties and increase their value through active management of investment projects. Therefore, the Group classifies in-vestment projects as investment properties (or investment properties under construction) and re-classifies them to assets held for sale only in rare situations.
Assets held for sale
Assets (or a disposal group) are classified as held for sale if their carrying amount is recovered principally through a sale transaction and not through its further use. This condition is considered to be fulfilled only when the occurrence of the sale transaction is
highly likely and the asset (or the disposal group) is available for immediate disposal in its current state (in accordance with generally accepted commercial terms). Classification of an asset as held for sale assumes the intention of the Group's management to make a sale transaction within one year from the change of classification.
Investment properties measured at fair value in accordance with IAS 40, after reclassification to assets held for sale, continue to be measured at fair value and at the same time are excluded from IFRS 5 valuation rules.
Inventories
The item of inventories comprises: semi-finished products and work in process, finished products, and goods. Due to the nature of the business, newly purchased plots of land are presented as land and plots of land to be developed are divided by the Group between fixed and current assets based on the estimated duration of the operating cycle. The operating cycle is a period of approx. 5 years on average, individually estimated for each project, consisting of 2 phases: (1) the preparatory phase
(which includes obtaining all necessary administrative arrangements, permits, environmental decisions, building permits or drawing up the architectural concept and design) lasting most often up to 3 years, and then (2) the construction phase lasting from the end of the preparatory phase until the granting of the occupancy permit. Projects that are in the operational cycle (phase 1 or 2) are presented in short-term assets under Inventories (Work in progress), and projects beyond the operational cycle are presented in longterm assets under "Land held for development".
The individual evaluation of each project, in terms of meeting the classification criteria, is carried out at each balance sheet date. The work in progress includes also the expenses incurred over the process of construction of facilities and sites for sale (design
services, construction works, etc. provided by external contractors). Finished products mainly include residential and business premises completed and sold under final sale contracts.
The inventories of tangible items of current assets are measured at the value corresponding to the purchase price of land and the cost of production of developers' business products increased by activated financial costs, being not higher than the net realizable value. This value is collected from information on the active market. Reversal of impairment loss of inventories appears either on the sale of inventories exor due to
increased net sales price. Both the amount of writedowns of inven-tories recognised as an expense in the period and the amount of any reversal of any writedowns decreasing the value of inventories recognised in the period as reduction in cost are stated in the profit and loss accounts under cost of sales.
Leasing
The Group as a lessee
In order for a contract to be classified as a leasing agreement, the following conditions must be met:
the contract must relate to an identified asset for which the supplier does not have a significant converting right,
the contract should give the beneficiary the right to control the use of the identified asset for a specified period of time. This means that the user has the right to take advantage of the economic benefits of using a given component and the right to decide on its use,
the contract must be payable.
The Group applies the following simplifications, based on not including the lease liability:
short-term lease: a short-term lease agreement is a contract with no option to purchase an asset,
concluded for a period shorter than 12 months from the beginning of the contract,
low-value lease: the basis for the assessment of the
"low" value should be the value of the new asset. The Management Board of the Group has decided that this applies to lease agreements regarding assets whose value did not exceed PLN 15,000 (when new), which can be treated as the upper limit of recognition as a low value item.
The Group recognizes a right of perpetual usufruct of land granted by an administrative decision as a leasing contract. This applies to all land, including those related to development projects presented in stock.
The Group applies the straight-line method of depreciation and depreciation rates: the perpetual annuity method or over the period covered by the use, depending on the contract.
If leasing and non-leasing elements are identified in the contract, the Group chooses a practical solution according to which it recognizes each leasing element
and any accompanying non-leasing elements as a single leasing element.
In addition, in the case of a portfolio of leases with similar characteristics, the Group applies the standard to the entire portfolio when it reasonably expects
that the impact that the application of this standard will have on the financial statements will not be significantly different from the impact of applying it to individual leases under this portfolio.
The duration of the lease agreement is defined as the irrevocable period of the lease agreement including also possible periods of renewal of the
lease agreement if the lessee has sufficient certainty that this option will be used and the possible periods of notice for the lease agreement if the lessee has sufficient certainty that this option will be used.
At the time of the first recognition, the Group recognizes the lease liability measured at the current value of lease payments due to the lessor over the lease period discounted at the marginal lending rate typical for a given asset, and if it is not available, at the incremental borrowing rate specific to the asset.
Lease payments include:
fixed payments less any incentives due,
variable lease payments, that depend on the index or the rate, initially priced using the index or the rate effective as at the starting date of the contract,
amounts whose payment by the lessee is expected within the guaranteed residual value,
the exercise price of the purchase option, if it can be assumed with sufficient certainty that the lessee will use this option,
penalty payments for termination of the lease, if the lease terms stipulate that the lessee may use the option of termination of the lease.
At the same time, the Group recognises an asset for the right to use in the same amount as a liability, adjusted for all lease payments paid on or before the start date, less any lease incentives received and increased by any initial direct costs incurred by the
lessee. After initial recognition, the Group recognises a lease liability by:
increasing the carrying amount to reflect interest on a lease liability,
reducing the carrying amount to reflect lease payments paid, and
updating the valuation of the carrying amount to take account of any reassessment or changes in the leases listed below (changes in the lease contract), or to reflect substantially updated constant lease payments.
Changes to the lease agreement that make it necessary to update the value of the liability include:
change in the leasing period,
change in the assessment of the call option of the underlying asset.
For the above changes, the Group applies an unchanged discount rate.
For the following changes:
change in the amount expected to be paid under the residual value guarantee,

a change in future lease payments resulting from a change in the index or rate used to determine

these payments, including, for example, a change to take account of changes in rental rates on the free market following a review of these rentals.

The Group applies an unchanged discount rate, unless the change in lease payments results from a change in variable interest rates. In this case, the Group applies an updated discount rate that reflects changes in the interest rate.

The Group shall recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. However, if the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Group recognizes the remaining amount of the revaluation in the result.

After the date of commencement of the lease, the asset under the right of use is measured at cost less total depreciation and amortization (impairment) and total impairment loss and the revised lease liability adjusted for any revaluation. Depreciation is calculated using the straight-line method over the estimated useful life. If the lease agreement transfers to the Group the title of the asset before the end of the lease period or when the cost of the asset due to the right of use reflects the fact that the Group will exercise the option to buy the residual value of the leased asset, the Group depreciates the asset from the right of use from the moment of commencement of the leasing contract until the end of the estimated economic useful life of the asset. In other cases, the Group depreciates assets due to the right of use from the date of commencement of the contract to the earlier of two dates: the date of the end of the

economic life of the asset or the end date of the lease. For lease contracts, the subject of which is an asset which, in accordance with the Group's accounting policies, is measured at fair value, the Group does

not depreciate such assets due to the right of use but measures them at fair value.

The Group has decided to include assets due to the right of use in the same line of the statement of

financial position, in which the corresponding leased assets are presented when they are the property of

the Group. Liabilities are presented appropriately in long-term - when the asset due to the right of use is classified as a fixed asset, investment property or

investment property under construction, or shortterm -when perpetual usufruct concerns assets classified as inventory.

Contract type and presentation in the balance sheet	Valuation method as at the balance sheet date	Impact on the income statement
Office space lease agreements:
- investment property, or	Valuation at fair value	Yes
- fixed assets	Depreciation	Yes
Rental agreement on means of transport:
- fixed assets	Depreciation	Yes
Perpetual usufruct of land:
- investment property, or	Valuation at fair value	Yes
- investment property under construction, not valued at fair value, or	Depreciation with simultaneous capitalization of depreciation costs in the value of investment property under construction	No
- fixed assets	Depreciation	Yes
inventory	Depreciation with simultaneous capitalization of depreciation costs in inventory	No

The Group classifies assets due to the right of use resulting from contracts / decisions issued to the following balance sheet items and applies the appropriate accounting policy for certain items:

Lease liabilities are covered by IFRS 9 with respect to determining when these liabilities meet the criteria for removing them from the balance sheet. A liability in accordance with IFRS 9 par. B.3.31-B.3.34 is removed from the balance sheet once it has been settled, expired or the debtor has been legally released from debt, e.g. by transferring the debt to another party. The right

of perpetual usufruct of land, in relation to which the Group is legally released from the debt arising from the obligation to pay fees for perpetual usufruct or transformation fees only at the time of legal (notarial)

transfer of a share in the land belonging to the premises sold to the buyer, is a special case. Therefore, until the transfer of the above ownership, the liabilities of the lease of land, as well as the corresponding assets due to the right to use the land in perpetual usufruct, remain on the balance sheet, although in accordance with the policies described in part 2.5 Methods for determining the financial result, revenues from the sale of residential

and service premises are recognized when the property is delivered to the buyer.

For this reason, when the premises are transferred to the buyer (which is also the moment when the proceeds from the sale of the premises are recognized), a portion of

the related leasing asset is transferred from inventory to receivables from the buyer, in the amount corresponding to the recognized liability for the leasing of the given land. Until the (notarial) transfer of the property to the purchaser, both the receivable and the liability are disclosed as short-term, because they will be settled by transfer to the buyer during the "operating cycle". On the date of transfer of ownership to the buyer, the liability

for land lease and receivables from the purchaser of premises are derecognized.

The Group as a lessor

In the case of contracts where the Group acts as a lessor, each lease contract is classified as operating or finance lease. Lease agreements under which the lessor retains a

significant portion of the risks and rewards of ownership of the leased asset are classified as operating leases. A leasing contract is classified as a financial leasing if, as a result of this contract, substantially all of the risk and rewards of ownership of the leased asset are transferred to the lessee.

In the case of operating lease agreements, the Group recognizes lease revenues on an straight-line basis in the statement of comprehensive income. In the case of finance leases, the Group derecognises the asset that is the subject of the agreement while recognizing the lease receivable.

Sub-leasing - a transaction for which an underlying asset is re-leased by a lessee ('intermediate lessor') to a third party, and the lease ('head lease') between the head lessor and lessee remains in effect.

The Group classifies sub-leasing as follows:

if it was decided to choose a short-term lease exemption for main lease, subleasing is classified as operating lease,
otherwise, sub-leasing is classified in relation to the asset due to the right to use the principal lease and not the underlying asset.
If the sub-lease agreement is classified as operating lease, the indirect lessor (the Group) continues to recognize the lease liability and asset due to the right to use of the main lease. At the same time, it recognizes sublease leasing revenues during the lease period basis. If the sub-lease agreement is classified as financial lease, the indirect lessor (the Group):
ceases to recognize the asset due to the right to use the main lease as at the date of the initial sublease agreement,
recognizes the net investment from sub-leasing instead and assesses it for impairment (lease receivable),
continues to recognize the original lease liability.
Financial assets
In accordance with IFRS 9, the Group classifies its financial assets into the following categories:
financial assets measured at amortized cost,
financial assets measured at fair value through other comprehensive income,
financial assets at fair value through profit or loss.
The classification of assets takes place at the moment of initial recognition. It depends on the financial instruments
management model adopted by the entity and analysis of the characteristics of contractual cash flows from these instruments.
Loans granted, trade and other receivables and restricted cash that do not meet the definition of cash equivalents in accordance with IAS 7 Statement of Cash Flows (i.e. collateral for bank guarantees and funds held in open housing fiduciary accounts) are measured by the Group at amortized cost, as two conditions are met for them: the assets are held in a business model whose intention is to hold the assets to obtain contractual flows and the contractual terms of these financial assets give rise to cash flows at certain times that are only repayments of principal and interest on outstanding capital.
Assets are entered into the books on the trade date and are excluded from the balance sheet when the contractual rights to cash flows from the financial asset expire or when the financial asset is transferred along with all the risks and rewards of ownership of the asset. The Group uses a weighted average of financial
instruments of the same type and risk as the applicable cost method for financial instruments.
If the renegotiation or other type of modification of the contractual cash flows generated by the financial asset results in its derecognition in accordance with IFRS 9, the modified instrument is treated as new. In the event of a renegotiation or other modification of the contractual cash flows generated by a given asset that does not result in derecognition, the Group revalues the gross carrying amount of that financial asset (ie the amount of its amortized cost before allowance for credit losses). The revaluation is the discounting of new expected contractual cash flows (after modification) using the original effective interest rate. The resulting difference
is recognized as profit / loss in profit or loss. From that point on, an entity assesses whether the credit risk of the financial instrument has increased significantly after its initial recognition by comparing the credit risk at the reporting date (under the modified terms) with that at initial recognition (under the pre-modification terms).
Receivables
Trade and other receivables constituting financial assets are recognized in the balance sheet at transaction price and then at amortized cost using the effective interest method, reducing them by impairment losses using
the expected credit loss model. When the difference between the value at amortized cost and the value of the amount of the payment required does not have a significant effect on the Group's financial results, such
receivables are recognized in the balance sheet as the amount of the payment required.
The value of receivables is updated taking into account the degree of probability of their payment by making a write-down. The rules for creating revaluation writeoffs are described below in the section Impairment of financial assets.
Advances for deliveries are valued according to cash disbursed and in accordance with received VAT invoices documenting the granting of advance payments.
Borrowings granted
Borrowings granted are debt instruments held for the purpose of obtaining contractual cash flows that consist solely of principal and interest repayments ("SPPI").
These assets are booked under at the date of the transaction, and derecognized when the contractual rights to cash flows from a financial asset expire or when the financial asset is transferred along with all the risks and benefits of ownership of the asset.
Borrowings granted are recognized as at the date of entering the books at fair value plus transaction costs, then as at the balance sheet date at amortized cost determined using the effective interest method.
The rules for recognition of impairment write-downs are described below in the section 'Impairment of financial assets'.
Loss of value
of financial assets ('ECL')
Pursuant to IFRS 9, as at each reporting day, the Group estimates the amount of the impairment loss equal to the expected credit loss ('ECL').
The Group calculates the write-off as follows for individual asset categories:
Trade receivables
The Group uses a simplified approach and therefore does not monitor changes in credit risk over the lifetime,
and measures the impairment loss at an amount equal to the expected credit losses ('ECL') over the lifetime horizon of the receivables. To calculate the impairment loss on trade receivables, the Group uses a provision matrix made once a year as of 31 December, based on historical data (for the past 5 years adjusted for the time value of money and information that is available without undue cost or effort at the reporting date regarding past events, current conditions and projections of
future economic conditions) concerning the payment of receivables by counterparties.
Impairment losses are updated as at each reporting day. The provision matrix is based on the analysis of the payment of receivables in individual past due groups and determining the probability of non-payment of receivables from a given age range based on historical data. For the purposes of the analysis, trade receivables are divided into two groups: receivables from the sale of apartments, the lease and other receivables.
The calculated probability of non-payment of receivables in each of the past due groups for specific categories of receivables is applied to the current balance of receivables in each of the past due groups and the write-off for the expected credit losses of receivables is calculated.
Additionally, the Group analyzes individual trade receivables and other receivables where it is highly probable they will become uncollectible, in cases justified by the type of business or the client structure
- and recognizes the write-off in a reliably estimated value. Classification of an asset to this category is made on the basis of information about the current financial situation of the counterparty and information about other events that may have a significant impact on the recoverability of the asset.
Such receivables are excluded from the matrix analysis, and a possible write-off is recognized on the basis of an individual analysis.
Loans granted
and covered bonds
The Group calculates the expected credit losses ('ECL') for loans and bonds as the difference between the cash flows arising from the contracts signed and the cash flows that the entity expects to receive.
If, as at the reporting date, the credit risk related to loans granted has not increased significantly since initial recognition, the Group measures the allowance for
expected credit losses on this financial instrument in the amount equal to 12-month expected credit losses.
A significant increase follows analyses of the financial situations of the entities to which the Group has granted loans, in particular:
financial projections and the fair value of the properties held, and information on the investment projects carried out by these companies,
analysis of the value of the equities of these companies and its changes in the analyzed periods,
analysis of financial results.
In the case of an increase in credit risk from the initial recognition, the expected credit losses are calculated over the entire life of a given financial instrument.
The Group estimates the cash flows it expects to receive based on the default rate determined with reference
to the credit risk of entities to which loans have been granted or for which bonds have been issued, adjusted by the recovery rate as a reliable estimate of the level of credit risk.
In addition, the Group provides the individual analysis of loans granted and bonds covered with a significant level of probability of default, in cases justified by the type of business or the client structure - and recognizes the write-off in a reliably estimated value. Such loans and bonds are excluded from the matrix analysis, and a possible write-off is recognized on the basis of an individual analysis.
Derivatives
Derivatives are ecognized in the books at the time where the Group becomes a party to a binding agreement. The Group takes recourse to derivative instruments to mitigate the risks associated with changes in ex-change rates or interest rates. The Group does not apply hedge accounting.
At the balance sheet date, derivatives are measured at fair value. Whereas derivatives with fair value greater than zero are financial assets, those with negative fair value are financial liabilities.
Profit or loss on derivatives is recognized in financial income or expenses (IRS) or in profits/losses on derivatives (Forwards), respectively, and in the consolidated statement of cash flows as cash flows from operating (forwards) and financing activities (IRS).
Cash
Cash at bank and in hand as well as short-term deposits (up to 3 months from the date of establishment), as well as other financial assets that meet the definition of cash equivalents are measured at nominal value plus accrued interest. At each balance sheet date, the Group assesses the premises for impairment of cash value, including the need to create a write-down for expected credit losses.
Foreign currency cash is measured as of the reporting date. The same definition of cash applies to the cash flow statement.
Liabilities
Financial liabilities
Financial liabilities include loans, borrowings, debt securities, not payable interest on bank loans accounted for according to the accrual principle as well as the discount of debt securities to be settled in subsequent accounting periods. Foreign currency loans are measured at the selling rate of the National Bank of Poland. The credits, bonds and loans line also includes profit share liabilities, and the revaluation is recognized as interest expense in the period when the revaluation occurred. Profit share is an integral part of the loan, which results from contractual provisions. The loan plus accrued additional interest is the lender's interest in the borrower, which is redeemable when the project is sold (or at final maturity).
Financial liabilities are initially recognized at fair value less transaction costs, and then measured using the "amortized cost" method. The valuation of liabilities includes all costs of obtaining financing, including directly related to financing costs of bank fees, costs of brokers and agents, legal costs, experts and a bank monitor.
Other liabilities
Trade liabilities are initially measured at fair value, and subsequently, long-term liabilities are measured at amortized cost using the effective interest method. In cases where the difference between the value at amortized cost and the value in the amount of the payment required does not have a significant effect on the financial results of the Group, such liabilities are
recognized in the balance sheet in the amount of the payment required.
Income tax liabilities and other taxes include the Group's liabilities arising from public-law settlements, i.e. mainly taxes: income tax, VAT, taxes on property, social security, etc.
Under dividend payables, the Group presents unpaid dividends to shareholders as of the balance sheet date. The Group has liabilities due to deposits from contractors, which are a form of security for the due performance of the work performed by the contractors and their compliance with the warranty period, or are used to cover any costs arising from their failure to do so. The deposits are discounted as of the balance sheet date based on the maturity date and the discount
rate adopted as of the date the deposit is posted. The discount is recognized in the inventory value if it meets the capitalization criteria.
Liabilities due to contracts with clients include payments from residential clients blocked in escrow accounts and payments released from these accounts. Liabilities due to contracts with clients are presented within current liabilities. The Management Board does not identify a significant financing component within these liabilities.
Contracts of issued financial guarantees
After initial recognition, the Group measures granted financial guarantees at the higher of the following values:
1. the amount of the allowance for expected credit losses, and
2. the amount initially recognized, if applicable, less the cumulative amount of income recognized in accordance with the principles of IFRS 15.
According with IFRS 9 principles the Group calculates the expected credit loss ('ECL') regarding the guarantees given as expected payments to compensate the guarantee holder for the incurred credit loss. The Group first determines the value of the Group's exposure due
to guarantees granted (the actual total value of the contingent liability as at the balance sheet date).
The net exposure resulting from the guarantee thus determined is multiplied by the default ratio (determined on the basis the credit risk of the entities to which the guarantee was granted . and adjusted for the recovery ratio).
Income tax
Income tax on the profit or loss for the financial year includes current and deferred income tax. Income tax is recognised in the profit and loss account, except for
amounts related to items recognised directly in equity or in other comprehensive income; in this case, income tax is disclosed in equity and other comprehensive income respectively
The current portion of income tax is the expected amount of tax on taxable income for a given year, calculated based on the tax rates determined as of the balance sheet date along with any tax adjustments for previous years.
Deferred tax is calculated with the balance sheet method as tax to be paid or reimbursed in the future on the differences between the carrying values of assets and liabilities and the corresponding tax values used to calculate the tax base, except for temporary differences which arise at the time of initial recognition of an asset or liability, and do not affect the accounting or tax result. At the commencement of the lease, the right-of-use asset and the lease liability are equal, so there is no temporary difference and no deferred tax is created. During the lease term, a difference arises between the value of the asset and the lease liability. The Group charges deferred income tax on the difference between these values. This approach aims to reflect the relationship between the right-of-use asset and the lease liability, and account for deferred tax based on cumulative temporary differences. This method provides an effective tax rate that better reflects the economics of the entire lease transaction.
In accordance with the recent amendments to IAS 12, as described above, the Group recognizes temporary differences separately for assets and liabilities in the statement of financial position.
Deferred tax is not created for temporary differences on investments in subsidiaries, jointly controlled entities and associates, if the Group controls the reversal of these differences and they will not be reversed in foreseeable future.
Deferred income tax assets due to tax loss are created, if the settlement of the loss in the following years is probable.
Deferred income tax is estimated on every balance sheet date by recognising differences in the profit and loss account, other comprehensive income or equity, depending where the temporary difference from which the deferred tax is subtracted was recognised.
Equity
The Group has the following types of equity:
share capital,
supplementary capital
retained earnings,
foreign exchange differences on translation of foreign entities,
capital of non-controlling interests.
The share (initial) capital is valued at nominal value as reported in the National Court Register
Differences between the fair value of the payment received and the nominal value from the sale of shares are recognized in the supplementary capital.
Share issue costs reduce the Group's supplementary capital.
Capital related to share-based incentive schemes pertains to a long-term incentive programme based on the amount of dividends paid, under which members of the Management Board participate.
Within retained earnings, the Group recognises the net profit (loss) for the current financial year as well as undistributed profit or uncovered loss from the current and previous financial years.
Foreign exchange differences on translation of foreign entities - the Group recognizes foreign exchange differences arising on translation of individual items of the statement of financial position of a foreign entity into the Polish currency.
Provisions
The provisions are recognised when the Group is under a present obligation resulting from past events, it is probable that fulfilment of this obligation will cause
an outflow of resources representing economic costs and a reliable estimate of the amount of the obligation can be made. Provisions are measured at the present value of the costs estimated in accordance with the best knowledge of the management of the Group, the
incursion of which is required to settle the present liability at the balance sheet date.
The Group creates provisions for unused leaves of employees. The provision is calculated on a quarterly basis. The provision is estimated for each employee individually, as the product of gross remuneration increased by social security contributions, which are the
employer's expense, and the days of the due leave and unused leave as at the balance sheet date for which the provision is calculated. Provisions for unused leaves are presented under short-term pro visions in the statement of financial position, and the change in the value of the provision in the period is charged to remuneration costs.
The Group creates provisions for retirement gratuities. Retirement benefits are paid on a one-off basis upon the employee's retirement. The amount of the retirement benefits depends on the length of service and the employee's average salary. The Group creates a provision for future liabilities due to retirement benefits in order to assign costs to the periods of acquiring
rights by employees. The calculated provisions are equal to discounted payments to be made in the future and relate to the period until the balance sheet date. Demographic information and information on employment rotation are based on historical data.
The effects of the valuation of the provision for future liabilities due to retirement benefits are recognized in profit or loss.
The Group creates provisions for warranty repairs. The provision is made quarterly, on a given project at the time of putting it into operation - ultimately for a period of 5 years. The value of the provision is calculated as the product of the value of the costs of completing
the project and the provision level ratio. This ratio is determined on the basis of historical data. The initial amount of the provision each quarter is adjusted by the expenses already incurred for the execution of repairs. The Group conducts a quarterly analysis of incurred and future expenditures on individual projects. If the initial amount of the provision adjusted for the incurred expenditures is less than the value of repairs assumed
by the warranty service department, then the amount of the provision is the value given by the aforementioned department. The effects of the valuation of the provision are recognized in the Profit and Loss Account under "Cost of sales."
The Group presents the above provisions in the statement of financial position divided into long-term provisions and short-term provisions.
Share-based payments
In cash-settled share-based payment transactions, the Group measures the services acquired and the liability incurred at fair value of the liability. Until the liability is settled, the Group at the end of each reporting period, as well as at the date of settlement, measures the liability at fair value and recognizes any changes of the value in profit or loss for the period
‌2.5 Methods of determining the financial result
Revenue
In accordance with IFRS 15, the Company recognises revenues when the obligation is fulfilled (or in the course of fulfilling) by transferring a promised goods or services (i.e. an asset) to a customer. The asset
is transferred when the customer obtains control of that asset. After fulfilling (or in the course of fulfilling) obligations, the entity recognises an amount equal to a transaction price as income, which has been assigned to that performance obligation. To determine the transaction price, the entity shall consider the terms of the contract and its usual commercial practices. The transaction price is the amount of remuneration that the entity expects to be entitled to in exchange for the transfer of promised goods or services to the customer, excluding amounts collected on behalf of third parties (for example, certain sales taxes). The remuneration specified in the contract with the client may include fixed amounts, variable amounts or both.
Revenue from the sale of residential and service premises are recognised on the date of handover of real estate to the buyer. This occurs on the basis of the acceptance protocol signed by the parties providing only after completion of the construction
of real estate and receiving the occupancy permit on condition that the buyer will pay 100 % towards the purchase price of real estate. Paid apartments are also considered to be cases of minor underpayments (up
to PLN 500), larger underpayments, which the Group decides not to collect from customers, or in the event of receivables from tenant changes, which, according to arrangements, are payable later than the moment of handover of the premises.
Revenue from the sale of real estate is recognized when control over the investment property is transferred to the buyer, which takes place when the ownership is legally transferred and the property is handed over to the buyer.
Bonuses of persons with employment contracts (other than sales office managers) involved in the sale of apartments in a given residential project are subject to capitalization into inventory during the period up to the date on which a given residential project is delivered for use.
Revenues from the rental of residential and commercial space are recognised on a straight-line basis over the term of the contracts concluded. Revenue from other contracts for the provision of services (legal, consulting, IT, financial, marketing, security and other services)
is recognised by the Group when the performance obligation is met.
The Group analyses if a sales contract contains several performance obligations. In general, the sales contract may include the following performance obligations:
the sale of the property,
the performance of fit-out and other finishing works after transferring control of the property to the buyer,
the performance of property leasing agency services (finding clients that rent the property).
The Group allocates transaction prices to the individual performance obligations on the basis of their proportional individual sales price.
Revenues from the sale of investment properties, together with the costs of their sale, are presented
under "Profit (loss) from investment properties" in the profit and loss account.
The Group recognises revenues from the sale of services (the performance of fit-out works and leasing agency services) within the period of fulfilling the performance obligation.
The Group measures the service advancement based on the advancement of the services/works provided.
The Group acts as a the principal in respect of all such services and recognises, on account of their performance, own costs and revenues in the period of fulfilment of the performance obligation.
The component of the transaction price allocated to the performance of fit out and other finishing works, once control of the property is transferred to the buyer, and the performance of property agency services (finding clients that rent the property) are recognised as liabilities due to contracts with clients.
Revenues from residential and commercial leases are recognized on a straight-line basis during the
term of the concluded contracts. This also applies to situations of potential rent reductions and rent-free periods granted.
Revenues from other service contracts (legal, consulting, IT, financial, marketing, security and other services) are recognized by the Group when the performance obligation is fulfilled.
Cost of sales
Costs of goods, products and services sold consist of costs incurred in respect of revenues of a given financial year and overheads not yet incurred.
The cost of goods and products sold is measured at the production cost, using the method of detailed identification of the actual cost of assets sold or the percentage share e.g. of the land or shares sold, etc. In particular, the cost of sales of premises and land sold is determined proportionally to their share in the total cost of construction of the facility and the entire land constituting a given project.
As part of cost of sales, the Group recognizes provisions for warranty repairs.
Administrative costs associated with projects
Administrative costs related to projects include administrative costs indirectly related to the implementation of development projects which include: real estate tax, maintenance fees, property protection, administrative staff remuneration costs and maintenance costs of employees responsible for construction of projects in the part where cannot be assigned to a specific project or they relate to projects
completed and other costs related to the maintenance of development projects. Costs of employees responsible for construction of projects in the part where cannot be assigned to a specific project, during the construction period are capitalised in the value of project. Costs are allocated on the basis of working hours reported by employees.
These costs, despite their indirect connection with development projects, are not capitalized in the value of stock / investment property because:
in the light of IAS 2, they are excluded from the purchase price or cost of stock production as they are not incurred in order to bring the stock to its current status and location,
in the light of IAS 40 in relations to IAS 16, does not allow to capitalize general and administrative costs in the value of investment properties.

Cost of financing

Financial costs related to the current period are recognized in the profit and loss account according to the amortized cost method described in the Liabilities section, except for costs subject to activation in accordance with the solution included in IAS 23.

The Group activates the part of financial expenses which is directly related to the acquisition and production of financial assets recognized as stock and projects commenced. In case of targeted financing, incurred to implement a project, the amount of financial costs, less income from temporary deposits of cash (i.e. amounts of interest on bank deposits, except for deposits resulting from blocking accounts, letters of credit agreement) is activated. Regarding general financing, capitalized financing costs are determined by applying the weighted average of all borrowing costs to expenditures incurred for a given asset, reduced by funds paid by clients. In the case of

leasing, interest costs on the leasing obligation related

to a specific project are capitalized in the cost of this project (targeted financing).

Pursuant to the requirements of IAS 23, the Group begins to activate financial costs when the Group undertakes actions necessary to prepare an asset for its intended use or sale. These activities involve more than just activities related to its manual construction. They also include technical and administrative work preceding manual construction, such as activities related to obtaining necessary permits, design and preparatory. The beginning of cost capitalization takes place when no significant time difference is

expected between the administrative activities started and the construction work launched. However, such activities exclude the holding of an asset if there are no accompanying processes that affect the change

in the asset's condition. The Group terminates the capitalization of finance costs when the asset is placed in service.

Consolidation of subsidiaries

Subsidiaries are all entities over which the Group exercises control, which occurs when the Company exercises authority over the entity, is exposed to changing returns or holds rights to variable returns, is capable of using the authority exercised over the entity in which the investment was made to influence the amount of their financial returns.

Subsidiaries are consolidated in the full method from the date of extending authority over them to the time of losing it.

Financial statements of subsidiaries present data for the same accounting period as the parent company, using consistent accountancy methods. The process of consolidation eliminates all intra-group transactions and accounting balances. Elimination also extends to the value of shares held by the Company and other consolidated entities in subsidiaries which represents the share of the Company and other Group entities subject to consolidation in the equity of subsidiaries.

The most important role in the structure of the Group is played by Echo Investment S.A., which is the owner of units of the Group, supervises, co-participates and provides funds for the implementation of ongoing developer's projects. The companies included in its

composition have been established or acquired in order to carry out specific investment tasks and mostly do not engage in business operations other than that which

would result from the process of execution of specific project, and next from the provision of services of lease assets already completed or other services.

Combinations of business entities

The Group has subsidiaries which hold real estate. At the time of the acquisition, the Group considers whether the acquisition is the acquisition of an enterprise or the acquisition of an asset. The Group

analyzes whether the acquisition meets the definition of a venture in accordance with IFRS 3. In particular, the Group performs a concentration test that enables a simplified assessment of whether the acquired

set of activities and assets constitutes a venture. A positive concentration test result means that the acquisition does not constitute a business and no additional assessment is required. The concentration test is positive when substantially all of the fair value of the acquired gross assets is concentrated in a single identifiable asset or group of similar identifiable assets. A negative result requires a detailed analysis of whether the acquisition meets the definition of a project.

The acquisition of subsidiaries by the Group, except for the acquisition of entities under common control, is accounted for according to the acquisition method.

The payment transferred in the business combination transaction is measured at fair value, calculated as the collective fair value of the Group's assets transferred, liabilities contracted to the previous owners of the acquired entity and capital instruments issued by the Group in exchange for acquisition of control over the acquired entity. The costs related to the acquisition are recognized in the result at the time they are incurred.

Goodwill is valued as the excess of the amount of payment transferred, the amount of non-controlling interest in the acquired entity and the fair value of shares in the acquiree previously held the acquirer over the fair value of identifiable net assets acquired and liabilities measured at the acquisition date. If, after

re-verification, the net value of identifiable assets and liabilities valued at the date of acquisition, exceeds the sum of the payment transferred, the value of non-controlling interests in the acquiree and the fair value of shares in that entity previously held by the acquirer, this surplus is recognized directly in the result as a gain on bargain purchase.

Non-controlling shares that form part of ownership interests and entitle owners to a proportionate

Earlier from Echo Investment

Echo Investment S A: Statement of the Management Board of ECHO Investment S.A.Apr 14

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