Orange Polska

The Polish original should be referred to in matters of interpretation.

Translation of auditor’s report originally issued in Polish.

Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k.

Rondo ONZ 1

00-124 Warszawa

+48 (0) 22 557 70 00

+48 (0) 22 557 70 01

www.ey.com/pl

INDEPENDENT AUDITOR’S REPORT ON THE AUDIT

To the General Meeting and Supervisory Board of Orange Polska S.A.

Audit report on the annual financial statements

Opinion

We have audited the annual financial statements of Orange Polska S.A. (the ‘Company‘) located in Warsaw at Al. Jerozolimskie 160, containing: the statement of financial position as at 31 December 2020, the income statement, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows for the period from 1 January 2020 to 31 December 2020 and additional information to the financial statements, including a summary of significant accounting policies and other explanatory notes (the ‘financial statements’).

In our opinion, the financial statements:

-give a true and fair view of the financial position of the Company as at 31 December 2020 and its financial performance and its cash flows for the period from 1 January 2020 to 31 December 2020 in accordance with required applicable rules of International Financial Reporting Standards approved by the European Union and the adopted accounting policies,

-are in respect of the form and content in accordance with legal regulations governing the Company and the Company’s Statute,

-have been prepared based on properly maintained accounting records, in accordance with chapter 2 of the Accounting Act dated 29 September 1994 (the ‘Accounting Act’).

The opinion is consistent with the additional report to the Audit Committee issued on 17 February 2021.

Basis for opinion

We conducted our audit in accordance with the International Standards on Auditing in the version adopted as the National Auditing Standards by the National Council of Statutory Auditors (“NAS”) and pursuant to the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Oversight (the ‘Act on Statutory Auditors’) and the Regulation (EU) No. 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC (the ‘Regulation 537/2014’). Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report.

ERNST & YOUNG IN POLAND IS A MEMBER OF ERNST & YOUNG GLOBAL

District Court for the City of Warsaw, Economic Dept. XII of the National Court Register, KRS: 0000481039

Tax Identification Number (NIP): 526-020-79-76

We are independent of the Company in accordance with the International Ethics Standards Board of Accountants’ (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) (the ‘IESBA Code’), adopted by the National Council of Statutory Auditors and other ethical responsibilities in accordance with required applicable rules of the audit of financial statements in Poland. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. While conducting the audit, the key certified auditor and the audit firm remained independent of the Company in accordance with the independence requirements set out in the Act on Statutory Auditors and the Regulation 537/2014.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. They include the most significant assessed risks of material misstatement, including the assessed risks of material misstatement due to fraud. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we have summarized our reaction to these risks and in cases where we deemed it necessary, we presented the most important observations related to these types of risks. We do not provide a separate opinion on these matters.


Key audit matter	How the matter was addressed in our audit
Goodwill impairment analysis
The balance of goodwill in the financial statements of the Company as at 31 December 2020 amounts to PLN 2,014 million. In accordance with International Accounting Standard 36 ”Impairment of Assets”, the Company’s Management is required to annually test the amount of goodwill for impairment. Furthermore, impairment tests are largely based on assumptions made by the Company’s Management in respect to: future cash flows, including planned capital expenditures, weighted average cost of capital and perpetuity growth rate. As these assumptions are affected by future events	In the course of the audit of the financial statements we have performed, among others, the following audit procedures in response to the goodwill impairment analysis prepared by the Company’s Management: ● understanding of the goodwill impairment testing process and evaluation of the identification of the Cash Generating Units made by the Company’s Management; ● assessing of the impairment model and its assumptions, including benchmarking of the key assumptions with industry range and market expectations including benchmarking of future revenue, cost and margin trends, capital expenditure on network assets and spectrum,

they are related with significant risk considering changing market conditions. Considering the inherent uncertainty related to the realization of significant assumptions in the future and the significance of goodwill we have considered goodwill impairment analysis as a key audit matter.

Reference to related disclosures in the financial statements

The disclosure about the adopted accounting policy in respect to the goodwill impairment test is included in Note 32.17 “Impairment tests and Cash Generating Units” of the financial statements.

The disclosures about the identification of the Cash Generating Unit and goodwill impairment test are included in Note 8 “Impairment” of the financial statements, which specifically explains the key judgments, estimates and results of the test together with a sensitivity analysis.

market share, customer churn and discount rates, against external data;

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analysing the Company’s Management’s forecast through a review of actual performance against previous forecasts;

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review of the mathematical accuracy of the cash flow model and agreeing relevant underlying data to forecasts approved by the Company’s Management;

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assessing the applied levels of the weighted average cost of capital and perpetuity growth rate;

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assessing of the sensitivity analysis prepared by the Company’s Management and performing further sensitivity analysis, focused among others on changes in operating cash flows;

Furthermore, we have assessed the adequacy of the disclosures made in respect to the impairment test and sensitivity analysis.

Deferred tax assets recoverability

The balance of deferred tax assets in the financial statements of the Company as at 31 December 2020 amounts to PLN 747 million.

In accordance with International Accounting Standard 12 “Income Tax”, the Company’s Management performed a detailed analysis of

In the course of the audit of the financial statements we have performed, among others, the following audit procedures in response to the deferred tax assets recoverability analysis prepared by the Company’s Management:

the deferred tax assets recoverability as at 31 December 2020.

This matter was a key audit matter because the balance of the deferred tax assets as at 31 December 2020 was significant to the financial statements. Furthermore, the assessment of recoverability of deferred tax assets is based on significant assumptions in respect to the amount and timing of future taxable profits, against which deductible temporary differences and tax losses carried forward can be utilized.

Reference to related disclosures in the financial statements

The disclosures about deferred tax are included in Note 25.2 “Deferred Tax” of the financial statements.

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understanding of the deferred tax calculation process and evaluation of the Company’s key controls in this respect;

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performing tests of selected controls;

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assessing of the deferred tax asset recoverability model;

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review of the calculation of the current income tax and deferred income tax, as well as of the treatment of significant unusual transactions for tax purposes;

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analysis of the assumptions underlying the recognition and measurement of deferred tax assets and assessment of the alignment of the assumptions used to those supporting the goodwill impairment test.

Furthermore, we have assessed the adequacy of the disclosures made in respect to the recoverability of deferred tax assets.

Accuracy of revenue recognition

The revenues of the Company in the financial statements for the year ended 31 December 2020 amounted to PLN 10,479 million.

The accuracy of revenue recognition was considered as a key audit matter because it is an inherent industry risk.

Revenues are determined in a complex IT environment, including billing systems which

In the course of the audit of the financial statements we have assessed the appropriateness of the adopted accounting policies and related judgments and estimates in respect to revenue recognition and their adherence to International Financial Reporting Standards.

Furthermore, our audit procedures included also among others:

process large volumes of data. Furthermore, the Company sells different products and services, including bundles of products and services with often changing prices, which have different revenue recognition patterns.

The Company also enters into significant sales contracts with other telecommunications operators in respect to access to telecommunications infrastructure and wholesale, which require additional focus due to the magnitude of the transactions and complex contractual terms that introduce professional judgment into how they are accounted for.

In order to accurately recognize revenue in accordance with International Financial Reporting Standard 15 “Revenue from Contracts with Customers” (“IFRS 15”) numerous significant judgments are required from the Company’s Management in relation to sales contracts, such as e.g. identification of performance obligations and allocation of the transaction price towards them, especially in respect to bundled sales.

Reference to related disclosures in the financial statements

The disclosure about the adopted accounting policies and significant judgments in respect to revenue recognition is included in Note 32.9 “Revenue” of the financial statements.

The disclosures about revenue are included in Note 5 “Revenue” of the financial statements.

The disclosures about assets and liabilities related to contracts with customers are included in Note 13 “Assets and liabilities

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understanding of the process and assessment of the Company‘s key controls in respect to revenue recognition;

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performing tests of selected controls;

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evaluation of IT systems relevant to revenue recognition;

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assessment of the applied methods of revenue recognition in respect to significant sales contracts and types of offers;

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analysis of monthly data and trends for significant revenue streams versus budgets and forecasts;

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testing of significant balances of contract assets, contract costs and contract liabilities;

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comparison of revenue accruals to actual sales.

Furthermore, we have assessed the adequacy of the disclosures made in respect to revenue recognition and presentation of revenues in the financial statements.

relating to contracts with customers” of the financial statements.

Application of IFRS 16 “Leases”

IFRS 16 “Leases” (“IFRS 16”) requires analysis of contracts and business relationships, as well as making a significant number of key judgements and estimates relating to among others determination of the scope of the new standard, lease terms, lease payments or discount rates. Considering the above, the significance of the impact on the financial statements, the number of types and diversity of contracts the matter was considered as a key audit matter.

Considering the IFRS Interpretation Committee’s decision on Lease Term and Useful Life of Leasehold Improvements issued in December 2019, the Company’s Management decided to change its accounting policy in 2020 in respect to the determination of the lease term with a retrospective application of the new policy, as if it was applied during the initial application of IFRS 16 on 1 January 2019.

As a result of the change in accounting policy, the Company has recognized additional right-of-use assets and lease liabilities as at 1 January 2019 in the amount of PLN 559 million in comparison to the financial data presented in the financial statements for the prior financial year.

In the course of the audit of the financial statements, considering the change in accounting policy in respect to the determination of the lease term we have analysed the approach applied by the Company’s Management.

We have also tested the calculation of the impacts of the change in accounting policy on the financial statements, including comparative financial information considering the retrospective application of the change in the accounting policy in respect to the determination of the lease term, as well as assessed the adequacy of disclosures made in the financial statements in this respect.

Furthermore, we have also analysed the accounting policies in respect to accounting for contracts subject to IFRS 16 and related judgments and estimates such as among others:

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assessment of the scope of agreements subject to accounting under IFRS 16;

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determination of the lease payments;

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assessment of the lease terms;

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discount rates;

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applied practical expedients.

Furthermore, our audit procedures included also among others:

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understanding of the process of accounting for contracts subject to IFRS 16 and assessment of the key controls in this respect;

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performing tests of selected controls in relation to accounting for contracts under IFRS 16;

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performing tests of details for a sample of contracts in order to verify the accuracy of

Reference to related disclosures in the financial statements

The disclosure related to the change in accounting policy in respect to the determination of the lease term, including the impact of the change on the Company’s financial statements is included in Note 2.2 “Changes to accounting policies related to leases” of the financial statements.

The disclosures related to right-of-use assets and lease liabilities are included in Note 12 ”Leases” of the financial statements.

The disclosure about the accounting policies related to the application of IFRS 16 including key judgments and estimates is included in Note 32.15 ”Leases” of the financial statements.

parameters used in the calculation of lease liabilities and right-of-use assets and calculations of lease liabilities and right-of-use assets;

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analysis of the completeness of identification of contracts in scope of IFRS 16.

Furthermore, we have assessed the adequacy of the disclosures made in the financial statements in respect to the guidelines provided in IFRS 16, as well as, the key judgments related to accounting for lease contracts.

Responsibilities of the Company’s Management and members of the Supervisory Board for the financial statements

The Company’s Management is responsible for the preparation, based on properly maintained accounting records, of the financial statements that give a true and fair view of the financial position and the financial performance in accordance with required applicable rules of International Financial Reporting Standards approved by the European Union, the adopted accounting policies, other applicable laws, as well as the Company’s Statute, and is also responsible for such internal control as determined is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Company’s Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Company’s Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Company’s Management and the members of the Company’s Supervisory Board are required to ensure that the financial statements meet the requirements of the Accounting Act. The members of the Company’s Supervisory Board are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibility for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement due to fraud or error, and to issue an independent auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not guaranteed that an audit conducted in accordance with NAS will always detect material misstatement when it exists. Misstatements may arise as a result of fraud or error and are considered material if it can reasonably be expected that individually or in the aggregate, they could influence the economic decisions of the users taken on the basis of these financial statements.

In accordance with International Auditing Standard 320, section 5, the concept of materiality is applied by the auditor both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report. Hence all auditor’s assertions and statements contained in the auditor’s report are made with the contemplation of the qualitative and quantitative materiality levels established in accordance with auditing standards and auditor’s professional judgment.

The scope of the audit does not include assurance on the future profitability of the Company nor effectiveness of conducting business matters now and in the future by the Company’s Management.

Throughout the audit in accordance with NAS, we exercise professional judgment and maintain professional skepticism and we also:

identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or override of internal control,

-	obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control,

-	evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Company’s Management,

conclude on the appropriateness of the Company’s Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our independent auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our independent auditor’s report, however, future events or conditions may cause the Company to cease to continue as a going concern,

-	evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate to them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated to the Audit Committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other information, including the Directors’ Report

The other information comprises the Directors’ Report for the period from 1 January 2020 to 31 December 2020, the representation on the corporate governance and the representation on preparation of the statement on non-financial information, mentioned in article 49b, section 1 of the Accounting Act as a separate element of the Directors’ Report (jointly ‘Other Information’).

Responsibilities of the Company’s Management and members of the Supervisory Board

The Company’s Management is responsible for the preparation of the Other Information in accordance with the law.

The Company’s Management and members of the Company’s Supervisory Board are required to ensure that the Directors’ Report (with separate elements) meets the requirements of the Accounting Act.

Auditor’s responsibility

Our opinion on the financial statements does not include the Other Information. In connection with our audit of the financial statements, our responsibility is to read the Other Information and, in doing so, consider whether it is materially inconsistent with the financial statements or our knowledge obtained during the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this Other Information, we are required to report that fact in our independent auditor’s report. Our responsibility in accordance with the Act on Statutory Auditors is also to issue an opinion on whether the Directors’ Report was prepared in accordance with relevant laws and that it is consistent with the information contained in the financial statements.

In addition, we are required to inform whether the Company has prepared the representation on non-financial information and to issue an opinion on whether the Company has included the required information in the representation on application of corporate governance.

Opinion on the Directors’ Report

Based on the work performed during our audit, in our opinion, the Directors’ Report:

has been prepared in accordance with article 49 of the Accounting Act and paragraph 70 of the Decree of the Minister of Finance dated 29 March 2018 on current and periodic information published by issuers of securities and conditions for recognition as equivalent the information required by laws of non-EU member states (the ‘Decree on current and periodic information’),

is consistent with the information contained in the financial statements.

Moreover, based on our knowledge of the Company and its environment obtained during our audit, we have not identified material misstatements in the Directors’ Report.

Opinion on the corporate governance application representation

In our opinion, in the representation on application of corporate governance, the Company has included information stipulated in paragraph 70, section 6, point 5 of the Decree on current and periodic information.

Moreover, in our opinion, the information stipulated in paragraph 70, section 6, point 5 letter c-f, h and i of the Decree included in the representation on application of corporate governance is in accordance with applicable laws and information included in the financial statements.

Information on non-financial information

In accordance with the Act on Statutory Auditors, we confirm, that the Company has prepared a statement on non-financial information mentioned in article 49b, section 1 of the Accounting Act as a separate element of the Directors’ Report.

We have not performed any attestation procedures in respect to the statement on non-financial information and do not express any assurance in its respect.

Representation on the provision of non-audit services

To the best of our knowledge and belief, we represent that services other than audits of the financial statements, which we have provided to the Company and its subsidiaries, are compliant with the laws and regulations applicable in Poland, and that we have not provided non-audit services, which are prohibited based on article 5 item 1 of Regulation 537/2014 and article 136 of the Act on Statutory Auditors. The non-audit services, which we have provided to the Company and its subsidiaries in the audited period, have been disclosed in the Directors’ Report.

Appointment of the audit firm

We were appointed for the audit of the Company's financial statements initially based on the resolution of the Company’s Supervisory Board from 15 June 2015, then we were reappointed based on the resolution from 5 July 2018 and again based on the resolution from 6 February 2020. The financial statements of the Company have been audited by us uninterruptedly starting from the financial year ended on 31 December 2015, i.e. for the past 6 consecutive years.

Warsaw, 17 February 2021


Key Certified Auditor			Partner

Paweł Niśkiewicz			Mikołaj Rytel
certified auditor
no in the register: 13542

		on behalf of:
	Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k.
	Rondo ONZ 1, 00-124 Warsaw
	no on the audit firms list: 130