14.4. IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND RIGHT-OF-USE ASSETS

Impairment of property, plant and equipment, intangible assets, right-of-use assets
At the end of the reporting period, the Group assesses whether there are indicators that an asset or cash-generating unit (CGU- cash generating unit) may be impaired or any indicators that the previously recognised impairment should be reversed.
When indications of impairment have been identified, an impairment test is carried out, under which the Group estimates the recoverable amount of this asset or CGU by determining the fair value less costs to sell or value in use using an appropriate discount rate, whichever is higher.

The recoverable amount is determined on the CGU level, to which the asset belongs. Assets that do not generate the independent cash flows are grouped on the lowest level on which cash flows, independent from cash flows from other assets, are generated (CGU). 

Recognition and reversal of impairment allowance of property, plant and equipment, intangible assets and right-of-use assets is recognised in other operating costs and other operating incomes.

Impairment of property, plant and equipment, intangible assets, right-of-use assets
The Group conducted asset impairment tests based on discounted cash flow models. The assumptions made in the models with regard to the evolution of expected future cash flows, as well as the method of calculating the discount rates, are the most important areas of estimates. In the developed scenarios of future expected cash flows, the critical assumptions concerned mainly the forecasts of key macroeconomic parameters.
An important judgment adopted by the Management Board of PKN ORLEN was assigning probability weights to individual macroeconomic scenarios.

As at 31 December 2020, the ORLEN Group identified the indicators to conduct tests for impairment of assets in accordance with IAS 36 "Impairment of Assets" related to:

• the macroeconomic environment and impact of COVID-19,
• adopting new macroeconomic assumptions for the years 2021-2030 and plans for the maintenance and use of individual assets and subsidiaries of PKN ORLEN included in the ORLEN Group Strategy until 2030 announced on 30 November 2020,
• adopting new macroeconomic assumptions and financial forecasts for 2021 included in the Financial Plan of PKN ORLEN and the ORLEN Group for 2021, adopted on 28 January 2021.