14.4.2. RECOGNITION AND REVERSAL OF IMPAIRMENT ALLOWANCES OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS, RIGHTS-OF-USE ASSETS AS AT 31 DECEMBER 2020

Asset impairment tests based on the aforementioned revisions showed the necessity to write down the production assets of the ORLEN Lietuva Refining segment in the amount of USD (22) million which corresponds to PLN (81) million. The discount rate for ORLEN Lietuva assets is 6.22%.

In the UNIPETROL Group, an impairment allowance was recognised on PARAMO's assets related to the approval of the new business strategy and the decision to close the production plant in Kolin in the amount of CZK (387) million, which corresponds to PLN (66) million. The discount rate for the refining assets of UNIPETROL CG is 5.64%.

ORLEN Oil, after restructuring, has been showing positive and stable financial results since 2019. Impairment tests carried out as at 31 December 2020 using the 3.82% discount rate confirmed the positive valuation of the value in use of ORLEN Oil's assets, as a result of which ORLEN Oil reversed the impairment loss for the amount of PLN 30 million.

The levels of impairment losses and reversals on the assets of ORELN Oil and PARAMO estimated as a result of the valuation are not sensitive to the change of the discount rate +/- 1p.p. and EBITDA +/- 5%.
For other assets of the Refining segment, the impairment tests performed as at 31 December 2020 did not confirm the necessity to the recognition of impairments or the reversal of impairment allowances on assets.

Each exploration project and production area within the Upstream segment is treated as a separate CGU.

The current assessment of the prospects of exploited fields and oil and gas discoveries in Poland revealed a decrease in the level of assets compared to the last verification of resources by 31%.

As a result of the tests and the withdrawal from some exploration projects, in 2020 the ORLEN Upstream Polska Group recognized a write-down in the amount of PLN (553) million (in the Płotki project, concerning extraction assets in the amount of PLN (211) million and exploration assets in the amount of PLN (342) million. PLN, of which PLN (36) million in the Edge project, PLN (40) million in the Sieraków project, PLN (123) million in the Płotki project, PLN (135) million in the Bieszczady project, in the Karpaty project ( 8) PLN million). In the same period, write-downs were made in the amount of PLN 216 million, of which PLN 13 million related to mining assets in the Płotki project, PLN 203 million related to exploration assets, of which PLN 174 million in the Płotki project, PLN 13 million in the Bieszczady project, and for investment materials in the amount of PLN 16 million. The valuations used a discount rate of 7.10%. The recoverable amount for Polish mining assets was determined using the value in use method due to the lack of an active market.

The current assessment of the prospects of producing fields and exploration assets in Canada revealed a decline in asset levels from the last resource review by 35%.

As a result of the tests, in 2020 the ORLEN Upstream Canada Group recognized a net asset impairment loss in the amount of PLN (1,085) million. The total value of recognized write-downs amounted to PLN (1,134) million and related mainly to the assets of CGU Kakwa and CGU Ferrier. The total value of reversals of write-offs was PLN 49 million and concerned CGU Ferrier and CGU Southern Alberta. The valuations used discount rates ranging from 11% to 16.4%. The recoverable amount of the Canadian mining assets was determined using the fair value less costs to sell method. The valuation was based on Level 3 of the valuation hierarchy.

In 2020, the ORLEN Group, as a result of carrying out impairment tests at individual fuel stations, made impairment losses on the net value of the Retail segment assets in the amount of PLN (39) million. This applies mainly to the assets of PKN ORLEN (PLN 13) million (discount rates used during 2020 from 5.14% to 5.92%), Unipetrol Group (8) million PLN (discount rates used during 2020 from 3.84% % to 5.74%) and the ORLEN Deutschland Group (PLN 17) million (discount rates used during 2020 from 1.98% to 3.64%).

Summary of the results of the impairment analysis
The total effect of the recognized net impairments on the fixed assets of the ORLEN Group in 2020 amounts to PLN (1,591) million.

The reversal and recognition of impairment losses on property, plant and equipment, intangible assets and right-of-use assets were recognised in other operating income in note 13.9 and in other operating expenses in note 13.10, respectively.