2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements have been prepared in accordance with accounting principles contained in the International Financial Reporting Standards (IFRS), comprising International Accounting Standards (IAS) as well as Interpretations of Standing Interpretation Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC), which were adopted by the European Union (EU). The accounting principles applied by the Group are based on standards and interpretations adopted by the European Union and applicable to the period beginning on 1 January 2020 or earlier periods.

The consolidated financial statements have been prepared on a historical cost basis, except derivatives and investment property measured at fair value and assets measured at fair value through other comprehensive income. This consolidated financial statements have been prepared using the accrual basis of accounting except from the consolidated financial statement of cash flows.

The scope of consolidated financial statements is compliant with the Minister of Finance Regulation of 29 March 2018 on current and periodical information to be published by issuers of securities and conditions of consideration of information required by the law of non-member country's law as equal (Official Journal 2018, item 757) and covers the annual reporting period from 1 January to 31 December 2020 and the comparative period from 1 January to 31 December 2019.

Presented consolidated financial statements present a true and fair view of the ORLEN Group’s financial position as at 31 December 2020, results of its operations and cash flows for the year ended 31 December 2020 .

The consolidated financial statements have been prepared on the assumption that the ORLEN Group will continue to operate as a going concern in the foreseeable future.

As part of the assessment of the Group's ability to continue as a going concern, the Management Board analysed the existing risks, and in particular assessed the impact of the COVID-19 pandemic on the Group's operations, which is described in note 8.

As at the date of approval of this consolidated financial statements, there is no evidence indicating that ORLEN Group will not be able to continue its operations as a going concern.

The Parent Company and the entities comprising ORLEN Group have unlimited period of operations.