CD Projekt - Audit Report / Information 2022

Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 2 Disclaimer This English language translation has been prepared solely for the convenience of English speaking readers. Despite all the efforts devoted to this translation, certain discrepancies, omissions or approximations may exist. In case of any differences between the Polish and the English versions, the Polish version shall prevail. CD PROJEKT, its representatives and employees decline all responsibility in this regard. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 3 Selected financial data translated into EUR PLN EUR 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Net sales of products, services, goods for resale and materials 772 500 692 196 164 772 151 217 Cost of sales of products, services, goods for resale and materials 118 275 111 002 25 228 24 249 Operating profit/(loss) 370 998 265 323 79 133 57 962 Profit/(loss) before tax 384 893 254 234 82 096 55 540 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 341 073 240 113 72 750 52 455 Net cash from operating activities 435 369 1 039 282 92 863 227 041 Net cash from investing activities (340 989) (611 597) (72 732) (133 609) Net cash used in financing activities (203 102) (504 804) (43 321) (110 279) Net increase/(decrease) in cash and cash equivalents (108 722) (77 119) (23 190) (16 847) Number of shares (in thousands) 100 741 100 718 100 741 100 718 Net earnings/(loss) per share (in PLN) 3.39 2.38 0.72 0.52 Diluted earnings/(loss) per share (in PLN/EUR) 3.38 2.38 0.72 0.52 Book value per share (in PLN/EUR) 19.87 18.56 4.24 4.03 Diluted book value per share (in PLN/EUR) 19.87 18.55 4.24 4.03 Dividend declared or paid per share (in PLN/EUR) 1.00 5.00 0.21 1.09 PLN EUR 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Total assets 2 183 974 2 061 164 465 676 448 138 Liabilities and provisions for liabilities (excluding accruals) 163 511 162 670 34 864 35 368 Non-current liabilities 36 106 29 756 7 699 6 470 Current liabilities 146 103 162 359 31 153 35 300 Equity 2 001 765 1 869 049 426 825 406 368 Share capital 100 771 100 739 21 487 21 903 The financial data presented above was translated into EUR as follows:  Items of the separate income statement and the separate cash flow statement were translated at exchange rates calculated as an arithmetic mean of the exchange rates announced by the National Bank of Poland for the euro applicable as at the last day of each month in a given reporting period. These rates were, respectively, as follows: from 1 January to 31 December 2022: 4.6883 PLN/EUR and from 1 January to 31 December 2021: 4.5775 PLN/EUR.  Items of assets, liabilities and equity in the separate statement of financial position were translated at exchange rates announced by the National Bank of Poland for the euro applicable on the last day of the reporting period. These rates were, respectively, as follows: 4.6899 PLN/EUR as at 31 December 2022 and 4.5994 PLN/EUR as at 31 December 2021. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 4 Table of contents Key financial data of CD PROJEKT S.A. ............................................................................................................................................................................. 6 Income statement ................................................................................................................................................................................................................. 7 Statement of comprehensive income ............................................................................................................................................................................ 7 Statement of financial position ......................................................................................................................................................................................... 8 Statement of changes in equity ..................................................................................................................................................................................... 10 Statement of cash flows ................................................................................................................................................................................................... 12 Notes to the separate financial statements ..................................................................................................................................................................... 14 General information ........................................................................................................................................................................................................... 15 Changes in accounting policies ..................................................................................................................................................................................... 15 Going concern assumption ............................................................................................................................................................................................. 15 Quotations on the regulated market ............................................................................................................................................................................ 16 Compliance with the International Financial Reporting Standards ..................................................................................................................... 16 Amendments to standards or interpretations effective from 1 January 2022 applicable and adopted by the Company ......... 16 Description of adopted accounting policies ....................................................................................................................................................................18 Revenue and operating expenses .........................................................................................................................................................................18 Finance income and costs ........................................................................................................................................................................................18 State subsidies .............................................................................................................................................................................................................18 Current and deferred income tax ...........................................................................................................................................................................18 Value added tax (VAT) .............................................................................................................................................................................................. 19 Property, plant and equipment ............................................................................................................................................................................... 19 Intangible assets - Expenditure on development projects ............................................................................................................................ 19 Intangible assets - Other .......................................................................................................................................................................................... 21 Goodwill ......................................................................................................................................................................................................................... 21 Mergers of business entities under common control ...................................................................................................................................... 21 Impairment of non-financial assets ........................................................................................................................................................................ 21 Investment properties .............................................................................................................................................................................................. 22 Rights to perpetual usufruct of land ..................................................................................................................................................................... 22 Leases ........................................................................................................................................................................................................................... 22 Investments in subordinated entities ................................................................................................................................................................... 22 Financial assets ...........................................................................................................................................................................................................23 Financial liabilities .......................................................................................................................................................................................................23 Inventories ....................................................................................................................................................................................................................24 Trade and other receivables ...................................................................................................................................................................................24 Prepayments and accruals .......................................................................................................................................................................................24 Cash and cash equivalents ......................................................................................................................................................................................24 Assets held for sale and discontinued operations ...........................................................................................................................................24 Equity ..............................................................................................................................................................................................................................24 Provisions for liabilities ............................................................................................................................................................................................. 25 Employee benefits ..................................................................................................................................................................................................... 25 Loans granted ............................................................................................................................................................................................................. 25 Trade and other payables ....................................................................................................................................................................................... 25 Payment of dividend ................................................................................................................................................................................................. 25 Functional currency and presentation currency ........................................................................................................................................................... 25 Functional currency and presentation currency .............................................................................................................................................. 25 Transactions and balances ..................................................................................................................................................................................... 25 Critical accounting estimates and judgements ............................................................................................................................................................. 26 Professional judgement ........................................................................................................................................................................................... 26 Uncertainty of estimates .......................................................................................................................................................................................... 26 Assumption of comparability of the financial statements, changes in accounting policies and estimates ................................................. 27 Changes in accounting policies ............................................................................................................................................................................. 27 Presentation changes ................................................................................................................................................................................................ 27 Notes – other explanatory notes to the separate financial statements ................................................................................................................ 28 Note 1. Sales revenue ............................................................................................................................................................................................... 29 Note 2. Operating segments .................................................................................................................................................................................. 30 Note 3. Operating expenses .................................................................................................................................................................................. 30 Note 4. Other operating income and expenses ................................................................................................................................................. 31 Note 5. Finance income and costs ........................................................................................................................................................................32 Note 6. Corporate income tax and deferred income tax................................................................................................................................ 33 Note 7. Discontinued operations .......................................................................................................................................................................... 36 Note 8. Earnings per share ..................................................................................................................................................................................... 36 Note 9. Dividend paid (or declared) and received .......................................................................................................................................... 36 Note 10. Disclosure of other comprehensive income items and their tax effect ................................................................................... 36 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 5 Note 11. Property, plant and equipment ............................................................................................................................................................... 37 Note 12. Intangible assets and expenditure on development projects....................................................................................................... 41 Note 13. Goodwill ........................................................................................................................................................................................................ 44 Note 14. Investment properties ............................................................................................................................................................................... 44 Note 15. Investments in subordinated entities .................................................................................................................................................. 46 Note 16. Other financial assets ...............................................................................................................................................................................48 Note 17. Joint operations ..........................................................................................................................................................................................48 Note 18. Inventories....................................................................................................................................................................................................48 Note 19. Trade receivables ..................................................................................................................................................................................... 49 Note 20. Other receivables .................................................................................................................................................................................... 52 Note 21. Prepayments and deferred costs ..........................................................................................................................................................53 Note 22. Cash and cash equivalents ................................................................................................................................................................... 54 Note 23. Share capital .............................................................................................................................................................................................. 54 Note 24. Treasury shares ........................................................................................................................................................................................ 55 Note 25. Other reserves .......................................................................................................................................................................................... 55 Note 26. Retained earnings / (Accumulated losses) ....................................................................................................................................... 58 Note 27. Loans and borrowings ............................................................................................................................................................................ 58 Note 28. Other financial liabilities ......................................................................................................................................................................... 58 Note 29. Other non-current liabilities .................................................................................................................................................................. 59 Note 30. Trade payables ......................................................................................................................................................................................... 59 Note 31. Other current liabilities ............................................................................................................................................................................ 60 Note 32. Social assets and the Company’s Social Fund liabilities .............................................................................................................. 61 Note 33. Contingent liabilities ................................................................................................................................................................................. 61 Note 34. Lease and sublease contracts ............................................................................................................................................................. 63 Note 35. Deferred income ...................................................................................................................................................................................... 66 Note 36. Provision for retirement and similar benefits .................................................................................................................................... 67 Note 37. Other provisions ....................................................................................................................................................................................... 68 Note 38. Information on financial instruments .................................................................................................................................................. 69 Note 39. Capital management ................................................................................................................................................................................ 78 Note 40. Employee benefit schemes ................................................................................................................................................................... 78 Note 41. Transactions with related entities ......................................................................................................................................................... 79 Note 42. Remuneration of the senior management and the Supervisory Board.....................................................................................81 Note 43. Number of employees ..............................................................................................................................................................................81 Note 44. Capitalization of borrowing costs ........................................................................................................................................................ 82 Note 45. Tax settlements ........................................................................................................................................................................................ 82 Note 46. Post-balance sheet date events .......................................................................................................................................................... 82 Note 47. Transactions with entities performing the audits of the financial statements ........................................................................83 Note 48. Explanations to the statement of cash flows ....................................................................................................................................84 Note 49. Cash flows and non-monetary changes resulting from changes in liabilities in financing activities .............................. 86 Note 50. Research and development expenditure .......................................................................................................................................... 87 Representations of the Management Board .................................................................................................................................................................. 87 Approval of the financial statements................................................................................................................................................................................ 88 Key financial data of CD PROJEKT S.A. 1 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 7 Income statement Note 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Sales revenue 772 500 692 196 Sales of products 1 761 508 678 566 Sales of services 1 1 745 5 502 Sales of goods for resale and materials 1 9 247 8 128 Cost of sales of products, services, goods for resale and materials 118 275 111 002 Costs of products and services sold 3 110 851 102 946 Cost of goods for resale and materials sold 3 7 424 8 056 Gross profit/(loss) on sales 654 225 581 194 Selling expenses 3 184 162 241 785 Administrative expenses 3 63 651 59 030 Other operating income 1,4 17 192 19 321 Other operating expenses 4 52 599 34 371 (Impairment)/reversal of impairment of financial instruments (7) (6) Operating profit/(loss) 370 998 265 323 Finance income 1,5 64 712 3 876 Finance costs 5 50 817 14 965 Profit/(loss) before tax 384 893 254 234 Income tax 6 43 820 14 121 Net profit/(loss) 341 073 240 113 Net earnings/(loss) per share (in PLN) Basic for the reporting period 8 3.39 2.38 Diluted for the reporting period 8 3.38 2.38 Statement of comprehensive income Note 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Net profit/(loss) 341 073 240 113 Other comprehensive income subject to reclassification to gains or losses after specific conditions have been met: 10 (12 724) 4 342 Measurement of derivative financial instruments - fair value through other comprehensive income, taking into account the tax effect (12 724) 4 342 Other comprehensive income not subject to reclassification to gains or losses 10 - - Total comprehensive income 328 349 244 455 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 8 Statement of financial position Note 31.12.2022 31.12.2021 NON-CURRENT ASSETS 1 094 596 887 663 Property, plant and equipment 11 143 439 103 986 Intangible assets 12 70 324 59 086 Expenditure on development projects 12 471 537 347 822 Investment properties 14 42 560 57 082 Goodwill 12,13 49 168 49 168 Investments in subordinated entities 15 53 566 43 447 Prepayments and deferred costs 21 5 314 4 741 Other financial assets 16,38 207 437 178 540 Deferred tax assets 6 50 868 43 418 Other receivables 20.38 383 373 CURRENT ASSETS 1 089 378 1 173 501 Inventories 18 9 886 13 539 Trade receivables 19,38 164 708 123 821 Other receivables 20 54 677 113 163 Prepayments and deferred costs 21 6 189 4 015 Other financial assets 16,38 279 515 308 168 Bank deposits over 3 months 38 337 330 265 000 Cash and cash equivalents 22,38 237 073 345 795 TOTAL ASSETS 2 183 974 2 061 164 * restated data Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 9 Note 31.12.2022 31.12.2021 EQUITY 2 001 765 1 869 049 Share capital 23 100 771 100 739 Supplementary capital 25 1 539 437 1 366 952 Share premium 25 116 700 115 909 Treasury shares 25 (99 993) - Other reserves 25 3 777 49 515 Retained earnings /(Accumulated losses) 26 - (4 179) Net profit (loss) for the period 341 073 240 113 NON-CURRENT LIABILITIES 36 106 29 756 Other financial liabilities 28,34,38 18 883 14 757 Other liabilities 29 2 620 2 860 Deferred income 35 3 666 6 403 Provision for retirement and similar benefits 36 339 368 Other provisions 37 10 598 5 368 CURRENT LIABILITIES 146 103 162 359 Other financial liabilities 28,34,38 1 788 18 620 Trade payables 30,38 39 587 16 028 Current income tax liabilities 2 116 24 445 Other liabilities 31 4 350 4 059 Deferred income 35 15 032 23 042 Provision for retirement and similar benefits 36 9 5 Other provisions 37 83 221 76 160 TOTAL LIABILITIES AND EQUITY 2 183 974 2 061 164 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 10 Statement of changes in equity Share capital Supplementary capital Share premium Treasury shares Other reserves Retained earnings / (Accumulated losses) Net profit (loss) for the period Total equity 01.01.2022 – 31.12.2022 Equity as at 01.01.2022 100 739 1 366 952 115 909 - 49 515 235 934 - 1 869 049 Costs of the incentive scheme - - - - 4 275 - - 4 275 Share-based payments 32 1 549 791 - (1 548) - - 824 Purchase of treasury shares for redemption - - - (99 993) - - - (99 993) Release of reserve capital from previous years created for the purpose of purchasing treasury shares - 35 741 - - (35 741) - - - Payment of dividend - - - - - (100 739) - (100 739) Appropriation of the net profit/offset of loss - 135 195 - - - (135 195) - - Total comprehensive income - - - - (12 724) - 341 073 328 349 Equity as at 31.12.2022 100 771 1 539 437 116 700 (99 993) 3 777 - 341 073 2 001 765 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 11 Share capital Supplementary capital Share premium Treasury shares Other reserves Retained earnings / (Accumulated losses) Net profit (loss) for the period Total equity 01.01.2021 – 31.12.2021 Equity as at 01.01.2021 100 655 737 542 113 844 - 47 068 1 132 235 - 2 131 344 Corrections of errors - - - - - (4 179) - (4 179) Equity, as adjusted 100 655 737 542 113 844 - 47 068 1 128 056 - 2 127 165 Costs of the incentive scheme - - - - (1 025) - - (1 025) Share-based payments 84 869 2 065 - (869) - - 2 149 Payment of dividend - - - - - (503 694) - (503 694) Appropriation of the net profit/offset of loss - 628 541 - - - (628 541) - - Total comprehensive income - - - - 4 341 - 240 113 244 454 Equity as at 31.12.2021 100 739 1 366 952 115 909 - 49 515 (4 179) 240 113 1 869 049 The Company adjusted the calculation of the deferred tax asset as at 31 December 2020 by re-classifying a part of deductible temporary differences from the category of taxed at 19% to taxed at 5%. As a result of the adjustment, equity decreased by PLN 4 179 thousand. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 12 Statement of cash flows Note 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 OPERATING ACTIVITIES Net profit /(loss) 341 073 240 113 Total adjustments: 48 91 805 802 191 Depreciation and amortization of property, plant and equipment, intangible assets, expenditure on development projects and investment properties 10 676 12 658 Amortization of development projects recognized as cost of goods sold 103 530 82 736 Foreign exchange gains/(losses) 4 584 (15 118) Interest and participation in profits (41 131) (343) Gains/(Losses) on investing activities 44 980 41 323 Increase/(Decrease) in provisions (3 651) (307 704) (Increase)/Decrease in inventories 3 653 (9 712) (Increase)/Decrease in receivables (43 660) 1 067 693 Increase/(Decrease) in liabilities, excluding loans and borrowings 18 175 (57 773) Change in other assets and liabilities (13 736) (13 846) Other adjustments 8 385 2 277 Cash from operating activities 432 878 1 042 304 Income tax expense 11 550 8 263 Withholding tax paid abroad 32 270 5 858 Income tax (paid)/refunded (41 329) (17 143) Net cash from operating activities 435 369 1 039 282 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 13 Note 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 INVESTING ACTIVITIES Inflows 1 291 485 263 407 Sale of intangible assets and property, plant and equipment 266 1 015 Expenditure on development projects provided as part of a consortium - 152 Repayment of loans granted 13 220 5 301 Sale of shares in a subsidiary 76 19 Expiry of bank deposits over 3 months 975 860 164 368 Redemption of bonds 268 426 82 715 Interest on bonds 7 879 1 703 Interest received on deposits 25 481 68 Inflows from execution of forward contracts - 7 887 Other inflows from investing activities 277 179 Outflows 1 632 474 875 004 Acquisition of intangible assets and property, plant and equipment 47 676 27 789 Expenditure on development projects 207 435 155 265 Acquisition of investment properties and capitalization of expenditure 214 2 085 Loans granted 4 787 7 339 Acquisition of a subsidiary - 7 679 Contribution to the capital of a subsidiary 40 149 13 018 Placement of bank deposits over 3 months 1 048 190 265 000 Purchase of private equity interests in the gaming sector 2 556 - Purchase of bonds and cost of their purchase 253 580 396 829 Outflows from execution of forward contracts 27 887 - Net cash from investing activities (340 989) (611 597) FINANCING ACTIVITIES Inflows 861 2 189 Net proceeds from the sale of shares and issue of shares in the execution of the incentive scheme 822 2 149 Payment of finance lease liabilities 39 40 Outflows 203 963 506 993 Purchase of treasury shares for redemption 99 993 - Dividends and other distributions to shareholders 100 739 503 694 Payment of lease liabilities 2 685 2 834 Interest paid 546 465 Net cash used in financing activities (203 102) (504 804) Net increase/(decrease) in cash and cash equivalents (108 722) (77 119) Change in cash and cash equivalents in the balance sheet (108 722) (77 119) Cash and cash equivalents as at the beginning of the period 345 795 422 914 Cash and cash equivalents at the end of the period 237 073 345 795 * restated data Notes to the separate financial statements 2 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 15 General information Name of reporting entity: CD PROJEKT S.A. (there have been no changes in the name of the reporting entity since the end of the prior reporting period) Legal form: a joint stock company (spółka akcyjna) Registered office: ul. Jagiellońska 74, 03-301 Warsaw Country of registration: Poland Core activities: Production and publishing of video games and associated products Principal place of business: Warsaw Registration body: District Court for the Capital City of Warsaw in Warsaw, 14th Business Department of the National Court Register Statistical number REGON: 492707333 Tax identification number NIP: 7342867148 Number in the BDO register (national waste management database): 000141053 Duration of the Company: Unspecified Changes in accounting policies The accounting policies applied in these separate financial statements, material judgements made by the Management Board with regard to the accounting policies applied by the Company and the main sources of estimating uncertainties are consistent, in all material respects, with the policy adopted for preparing the separate annual financial statements of CD PROJEKT for 2021, with the exception of changes in accounting policies and presentation changes described in the section “Assumption of comparability of the financial statements, changes in accounting policies and estimates” Going concern assumption These separate financial statements have been prepared based on the assumption that the Company will continue in operation as a going concern in the foreseeable future, i.e. in the period of at least 12 months after the balance sheet date. As at the date of signing these separate financial statements, the Management Board of the Company has not identified any facts or circumstances which would indicate any threats to the Company continuing in operation as a going concern for a period of 12 months after the end of the reporting period as a result of the intended or forced discontinuation or significant curtailment of its existing operations. By the date of preparing the separate financial statements for the period from 1 January to 31 December 2022, the Management Board of the Company did not become aware of any events which should have been but were not recognized in the accounting records for the reporting period. At the same time, no significant prior year events have been disclosed in these separate financial statements. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 16 Quotations on the regulated market General Information Stock exchange Giełda Papierów Wartościowych w Warszawie S.A. ul. Książęca 4 00-498 Warsaw Symbol at WSE CDR Deposit and settlements system Deposit and settlements system Krajowy Depozyt Papierów Wartościowych S.A. (KDPW) ul. Książęca 4 00-498 Warsaw Contact with investors Investor relations [email protected] Compliance with the International Financial Reporting Standards The Company’s financial statements have been prepared in accordance with International Financial Reporting Standards (hereinafter “IFRS”), as adopted by the European Union, effective for annual periods beginning on 1 January 2022. Amendments to standards or interpretations effective from 1 January 2022 applicable and adopted by the Company In preparing the separate financial statements for 2022, the Company applies the same accounting policies as in preparing the annual financial statements for 2021, with the exception of amendments to standards and new standards and interpretations endorsed by the European Union, which are effective for reporting periods beginning on 1 January 2022:  Amendments to IFRS 3 Business combinations, IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets and Annual Improvements to IFRS 2018-2020 (IFRS 1, IFRS 9, IFRS 16 and IAS 41) - endorsed on 28 June 2021, applicable to periods beginning on or after 1 July 2022. Amendments to IFRS 3 Business Combinations, concerning references to the Conceptual Framework. The amendments introduce an exception to the recognition principle under IFRS 3 to avoid the issue of potential “day two” gains and losses with reference to liabilities and commitments that were within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies, if they occurred separately. The exception requires the application of the criteria under IAS 37 or IFRIC 21, as applicable, rather than the requirements under the Conceptual Framework to determine whether they have occurred at a particular date. The amendments do not have a material impact on the accounting policies adopted by the Company with regard to the Company’s operations or its financial results. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 17 Amendments to IAS 16 Property, Plant and Equipment, relating to revenue earned before an item of property, plant and equipment is commissioned. The amendments prohibit entities from reducing the cost of purchase or manufacture of property, plant and equipment by the amount of proceeds from the sale of products made in the course of bringing an asset to the desired location and condition necessary for it to be able to operate in the manner intended by management. Instead, the entity recognizes the proceeds from the sale of such products and the costs of their manufacture in the statement of comprehensive income. The amendments do not have a material impact on the accounting policies adopted by the Company with regard to the Company’s operations or its financial results. Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, relating to the costs of fulfilling onerous contracts. In May 2020, the IASB published amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the purpose of which is to specify which costs should be taken into account by an entity when assessing whether a contract is an onerous contract or brings losses. In making the changes, the “directly related costs” approach was applied. Costs directly attributable to a contract for the provision of goods or services include both incremental costs (e.g. direct labour costs) and the allocation of costs directly attributable to contract activities (e.g. depreciation of equipment used to perform the contract or contract management and supervision costs). General and administrative expenses are excluded as they do not directly relate to a contract. The exception is when such costs are re-invoiced to the other party of the contract. The amendments do not have a material impact on the accounting policies adopted by the Company with regard to the Company’s operations or its financial results. Standards published and endorsed by the EU which are not yet effective and their impact on the Company’s financial statements The Management Board analysed the impact of the application of the new standards on future financial statements. When approving these financial statements, the Company did not apply the following standards, amendments and interpretations published and endorsed by the EU, but not yet effective:  IFRS 17, Insurance Contracts - endorsed on 19 November 2021, applicable to reporting periods beginning on or after 1 January 2023;  Amendments to IAS 1 and Practice Statement 2: Disclosure of Accounting Policies (published on 12 February 2021) – endorsed on 2 March 2022 and applicable to annual periods beginning on or after 1 January 2023;  Amendments to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors – endorsed on 2 March 2022 and applicable to periods beginning on or after 1 January 2023;  Amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction – endorsed on 11 August 2022 and applicable to periods beginning on or after 1 January 2023;  Amendments to IFRS 17, Insurance Contracts concerning Initial Application of IFRS 17 and IFRS 9 – Comparative Information – endorsed on 8 September 2022 and applicable to periods beginning on or after 1 January 2023. The Company does not expect the introduction of these amendments to have a material impact on the accounting policies adopted by the Company with regard to the Company’s operations or its financial results. Standards and interpretations adopted by the IASB but not yet endorsed by the EU When approving these financial statements, the Company did not apply the following standards, amendments and interpretations which have not yet been endorsed by the EU:  Amendment to IAS 1 Presentation of financial statements: Classification of liabilities as current or non-current - applicable to reporting periods beginning on or after 1 January 2024;  Amendments to IFRS 16, “Leases”: Lease Liability in a Sale and Leaseback – applicable to reporting periods beginning on or after 1 January 2024. The Company is analysing the estimated impact of the standards and amendments listed above on the Company’s financial statements. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 18 Description of adopted accounting policies Revenue and operating expenses Revenue constitutes inflows of economic benefits, gross, for a given period, arising as a result of ordinary business activities of the Company, resulting in an increase in equity other than the increases due to contributions made by shareholders. The Company recognizes revenue using the so-called Five-Step Model provided for in IFRS 15. Revenue includes only amounts received or receivable equal to the transaction prices that accrue to the Company upon fulfilment (or in the process of fulfilment) of the performance obligation to transfer the promised good or service (i.e. asset) to the customer. Payment from the customer is required to meet this performance obligation. The transaction price is the amount of consideration that the Company expects to receive in exchange for the transfer of the promised goods or services, less any applicable value added tax. In the case of revenue in the form of royalties from the sale of licences for the distribution of games, which is the Company’s main source of revenue, revenue depends on the volume of sales realized by the distributor at any given time during the reporting period. Thus, revenue from the sale of a particular product is recognized in the sales period no sooner than after the delivery of the materials to start the actual distribution of the completed game, based on sales reports successively provided by the distributor. Payment from the customer is required upon the distributor submitting the sales reports. The Company recognizes the costs of materials used, goods for resale and products and service costs in the same period as sales of these items or sales of the services for which the items are used, in accordance with the principle of matching revenues and costs. The Company receives short-term advances from its customers and avails itself of the simplification permitted by IFRS 15 by presenting advance payments as deferred income instead of recognizing a financing component, if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Finance income and costs Finance income consists mainly of interest on deposits of surplus cash on bank accounts, commission and interest on loans granted, interest on late payment of receivables, release of provisions relating to financing activities, proceeds from sale of securities, foreign exchange gains, restoration of the impaired value of financial investments, forgiven loans and advances and gains on settlement of derivative instruments. Finance costs mainly comprise interest on loans and advances, interest on late payment of liabilities, provisions recorded against certain or probable losses on financial operations, the cost of shares and securities sold, commission and handling charges, write- downs of interest receivables and the value of short-term investments, discounts and net foreign exchange losses on financing activities and, in the case of leases, other charges except for capital instalments. State subsidies State subsidies are not recorded until obtaining reasonable assurance that the Company will comply with the required terms and conditions and obtain a subsidy. State subsidies, the principal condition of which is the purchase or manufacture of fixed assets by the company, are recognized in the balance sheet as deferred income and taken to the income statement on a pro rata basis over the expected economic useful life of the assets. Current and deferred income tax The mandatory profit reductions consist of current tax, withholding tax paid abroad and deferred tax. Current income tax is calculated on the basis of taxable income (tax base) for a given financial year. Taxable profit/(loss) differs from accounting profit/(loss) before tax due to the different timing of the recognition of income and expenses for tax and accounting purposes, as well as due to the permanent differences between the tax and accounting treatment of certain income and expense items. Tax expense is calculated based on the tax rates in effect for the financial year. Current income tax relating to items recognized directly in equity is recognized in equity rather than in the income statement. Deferred tax is calculated using the liability method as tax payable or reimbursable in the future in respect of differences between carrying amounts of assets and liabilities and the corresponding tax amounts used for the calculation of the tax base. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 19 Deferred tax provision is recorded on all taxable temporary differences, and a deferred tax asset is recorded to the extent that the future tax profits are likely to be reduced by the amount of recognized deductible temporary differences. An asset or liability does not arise if the temporary difference arises either from goodwill or from the initial recognition of another asset or liability in a transaction that affects neither the tax nor the accounting profit or loss. Deferred tax provision is recognized on temporary differences arising from investments in subsidiaries, associates and joint ventures, unless the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The amount of deferred tax asset is analysed at each balance sheet date, and it is written down if the expected future taxable income is not sufficient to utilize the asset or its portion. Deferred tax is calculated using the tax rates which will be binding at the moment when a given asset is realized or a liability becomes due. Deferred tax is recognized in the income statement, apart from the situations when it relates to items recorded directly in equity. In the latter case, deferred tax is also recognized directly in equity. Value added tax (VAT) Revenues, expenses and assets are recognized net of value added tax, except for  where the value added tax paid on the purchase of assets or services is not recoverable from the tax authorities, in which case it is recognized as part of the cost of acquiring the asset or as an expense, as appropriate,  receivables and payables which are recorded including the amount of value added tax. The net amount of value added tax recoverable from or payable to the tax authorities is recognized in the balance sheet as part of receivables or payables. Property, plant and equipment Property, plant and equipment items are initially recognized at cost (cost of purchase or manufacture) and reduced in subsequent periods by depreciation and impairment. Borrowing costs directly related to the purchase or manufacture of assets that require an extended period of time to adapt them for use or resale are added to the cost of such assets until such assets are commissioned. Investment income generated from the short-term investment of funds raised and related to the purchase or manufacture of fixed assets reduces the value of capitalized borrowing costs. Other borrowing costs are recognized in the income statement in the period in which they were incurred. Depreciation is calculated for property, plant and equipment items, excluding land and assets under construction, over their estimated useful lives, using the straight-line method. The expected useful life for each category of property, plant and equipment is: Category Useful life Buildings and structures 5 – 25 years Plant and machinery 2 – 10 years Vehicles 5 years Other fixed assets 2 – 10 years Fixed assets with a low initial unit cost of not more than PLN 5 thousand are depreciated in a simplified way by making a one-off write-off. Gains or losses on disposal / scrapping or decommissioning of fixed assets are determined by comparing proceeds on disposal with net book amounts of these assets and included in the Income statement. Intangible assets - Expenditure on development projects The Company classifies expenditure on development of games under Expenditure on development projects. Game development costs incurred prior to the commencement of sales or the application of new solutions are recognized as Expenditure on development projects in progress. This expenditure includes expenses that are directly related to the project in question. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 20 At the time of completion, the Company verifies whether an intangible asset arising from a development project meets the following conditions: a) it is technically feasible to complete the intangible asset so that it is suitable for use or sale; b) there is a demonstrable intention to complete the asset and use or sell it; c) the intangible asset can be used or sold; d) the manner, in which the asset will generate probable future economic benefits is known; e) adequate technical, financial and other resources will be ensured to complete the development project and to use or sell the intangible asset; f) there exists a possibility to reliably determine the expenditure incurred during a development project, which is attributable to the intangible asset. When these conditions are met, the Company reclassifies the expenditure from Expenditure on development projects in progress to Expenditure on development projects completed. In the case of projects for which it is possible to determine reliable estimates of the volume and value of the sales budget, the Company amortizes the value of these projects based on the consumption of economic benefits related to the number of copies sold. The Company determines the amortization period and rates after the release of each title in the course of working on the interim financial statements while being in possession of the preliminary results of release sales and game ratings. The Company then establishes: (i) the useful life based on the historical useful lives of previous comparable titles, normally not less than 3 years and not more than 6 years due to the possibility of making reliable estimates in an industry subject to dynamic change; (ii) sales forecasts are the basis for determining amortization rates over the useful life; (iii) then, based on professional judgement, the Company estimates what proportion of the benefits will be realized in the quarter of release and, in subsequent periods, smooths out the input distribution, eliminating the effect of periodic and one-off promotions and anticipated but uncertain one-off events (such as the release of the series Cyberpunk: Edgerunners on Netflix), in order to achieve the effect of constant reducing balance or straight-line amortization from quarter to quarter. In justified cases, the settlement of expenditure incurred may be of a one-off nature (e.g. Anime Cyberpunk: Edgerunners). In the table below, the Company presents projects for which reliable estimates of sales volumes and budgets can be determined, together with the useful lives or amortization rates applied: Amortization for the period Title Release period Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 The Witcher 3: Wild Hunt on Nintendo Switch Q4 2019 40% 12% 8% 6% 6% 6% 6% 4% 4% 3% 3% 2% Cyberpunk 2077 Q4 2020 40% 60% straight line over 5 years (1% per month) In other cases, the Company amortizes the value of projects using the straight-line method. Amortization related to Expenditure on development projects is presented under the Cost of products and services sold in the Income statement. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 21 Intangible assets - Other Intangible assets are presented at historical cost less amortization and impairment losses. Amortization is recognized on a straight line basis. Costs of research work are not capitalized and are presented in the Income statement as expenses in the period in which they are incurred. The expected useful life for each category of intangible assets is as follows: Category Useful life Patents and licenses 2 – 15 years Computer software 2 – 10 years Assets with a low initial unit cost not exceeding PLN 5 thousand are amortized on a simplified basis by making a one-off write-off. The Company’s separate financial statements show the commodity brand The Witcher and the corporate brand CD PROJEKT. Brands have been valued using the Relief from Royalty capitalization method representing the income approach, which is one of the primary methods for valuing brands and other intangible assets for the purpose of accounting for business combinations in accordance with IFRS 3, Business Combinations. Neither of the brands has got a definite useful life. Goodwill of the brands is subject to an annual impairment test. Goodwill Goodwill (gain) is calculated as the balance of two amounts:  the sum of the consideration transferred for control, the non-controlling interests (measured as a proportion of the net assets acquired) and the fair value of the blocks of interests (shares) held by the acquiree prior to the acquisition date; and  the fair value of the identifiable net assets acquired of the entity. The excess of the sum calculated as indicated above over the fair value of the identifiable net assets acquired of the entity is recognized as goodwill on the assets side of the separate statement of financial position. Goodwill represents the payment made by the acquirer in anticipation of future economic benefits from assets that cannot be individually identified or separately recognized. After initial recognition goodwill is stated at cost, less accumulated impairment losses. If the aforementioned sum is less than the fair value of the identifiable net assets acquired of the entity, the difference is recognized directly in profit or loss. The Company recognizes gain on the acquisition under other operating income. Mergers of business entities under common control The legal merger of the parent company with its subsidiary is recognized using the amounts relating to the subsidiary shown in the parent company’s separate financial statements; these amounts include amounts recognized in the parent company’s consolidated financial statements arising from the acquisition of the subsidiary. The subsidiary’s results and statement of financial position are recognized prospectively from the date of the legal merger. Impairment of non-financial assets At each balance sheet date, the Company reviews the net book amounts of non-current assets to determine whether there are indications of their impairment. If such indications are found the recoverable amount of an asset is estimated to determine the amount of the potential write-down. If an asset does not generate cash flows that are considerably independent of the cash flows generated by other assets, the analysis is performed for a group of assets generating cash flows (a cash generating unit) to which the asset belongs. In the case of intangible assets with an indefinite useful life, impairment tests are carried out annually and additionally when there are indications of possible impairment. The recoverable amount is determined as the higher of fair value less costs to sell and value in use. The latter amount corresponds to the present value of estimated future cash flows discounted using a discount rate that takes into account the current market time value of money and the risks specific to a given asset. If the recoverable amount is lower from the net book amount of an asset (or a group of assets) the book value is reduced to recoverable amount. An impairment loss is recognized as an expense in the period in which it occurs, except when the asset was recognized in a revalued amount (impairment is then treated as a reversal of previous revaluation). If impairment is subsequently reversed, the net book value of an asset (or a group of assets) is increased to the lower of the new estimated recoverable amount and the net book value of the asset that would have been set had impairment not been recognized in previous years. Reversals of impairment are recognized in income. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 22 Investment properties Investment properties include properties held for rental income, appreciation in value or both. Consequently, the cash flows generated by investment properties are largely independent of other assets held by the Company. Investment properties are valued using the purchase price model. Rights to perpetual usufruct of land Land owned by the State Treasury, local government units or their associations may be subject to perpetual usufruct. Perpetual usufruct is a special type of property right entitling natural or legal persons to use land to the exclusion of others. The perpetual lessee may also dispose of its right. The right of perpetual usufruct is granted for a period of 99 years or, in exceptional cases – where the economic purpose of perpetual usufruct does not require the land to be let for such a period – for a shorter period, however not shorter than 40 years. The Company has recognized the right of perpetual usufruct of land as a lease in accordance with IFRS 16. The right to use the leased asset has been presented in accordance with its purpose in the balance sheet either as Investment properties or Property, plant and equipment. Leases The Company as a lessee classifies an agreement as a lease or as containing a lease if it transfers the right to control the use of an identified asset for a given period in return for a consideration. Where the Company acts as a lessor, an agreement is treated as a finance lease if substantially all the risks and rewards of ownership of the underlying asset are transferred. If substantially all the risks and rewards of ownership of the underlying asset are not transferred, an agreement is treated as an operating lease. The right to control the use of an asset used under a lease contract primarily means the right to obtain substantially all economic benefits from the use of the asset and the right to direct the use of the identified asset. Risks consist of the possibility of losses due to underutilization of capacity, loss of technical usefulness or changes in the level of return achieved due to changes in economic conditions. Benefits may include the expectation of profitable operation of the asset over its useful life and the expectation of a profit arising from an increase in its value or the realization of the residual value. At inception the Company, recognizes the right-of-use asset and the corresponding lease liability. The right of use is initially measured at cost, consisting of the initial lease liability, initial direct costs, an estimate of the costs expected to be incurred in dismantling the underlying asset and lease payments made at or before the inception, less lease incentives. The Company depreciates the right-of-use assets on a straight line basis from the inception to the end of the useful life of the right- of-use asset or the end of the lease term, whichever is earlier. If there are indications to do so, the rights of use are tested for impairment in accordance with IAS 36. At the inception, the Company measures the lease liability at the present value of the lease payments outstanding using the interest rate on the lease if this can be readily determined. Otherwise, the incremental borrowing rate of the lessee is applied. Lease payments included in the value of the lease liability consist of fixed lease payments, variable lease payments dependent on an index or rate, amounts expected to be paid as guaranteed residual value and call option payments if it is reasonably certain that the option will be exercised. In subsequent periods, the lease liability is reduced by repayments made and increased by accrued interest. The valuation of the lease liability is updated to reflect changes in the agreement and the reassessment of the lease term, the exercise of the call option, the guaranteed residual value or index- or rate-dependent lease payments. In principle the remeasurement of the liability is recognized as an adjustment of the right-of-use asset. The Company applies the practical expedients permitted by the standard to short-term leases and leases where the underlying asset is of low value. For such agreements, instead of recognizing right-of-use assets and lease liabilities, lease payments are recognized in profit or loss on a straight-line basis over the lease term. Investments in subordinated entities Shares in subordinated entities are initially measured at cost. As at the balance sheet date, investments in subordinated entities are stated at cost less impairment losses. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 23 Financial assets The Company classifies each financial asset upon initial recognition into of one of four categories of financial assets, which are distinguished based on the Company’s business model for managing the assets and the characteristics of the contractual cash flows:  assets measured at amortized cost after initial recognition;  assets measured at fair value through other comprehensive income after initial recognition;  assets measured at fair value through profit or loss;  hedging financial instruments. The classification of financial assets is made upon initial recognition and can only be changed if the business model for managing financial assets changes. The principal models for managing financial assets include the model of holding for receiving contractual cash flows, the model of holding for receiving contractual cash flows and selling, and the model of holding for purposes other than those indicated in the two preceding models (in principle, it is a model of holding assets for disposal). The Company adopts the principle that the sale of a financial asset just before its maturity does not constitute a change in the business model from holding for receiving contractual cash flows to holding for receiving contractual cash flows and selling or holding for other purposes. The Company does not apply hedge accounting and therefore the regulations of IFRS 9 in this respect do not apply to it. The Company assesses the credit risk associated with assets constituting financial instruments based on the expected loss model. The primary method of determining impairment losses under the expected loss model is the method under which the Company monitors changes in the level of credit risk associated with a given financial asset in relation to its initial recognition and classifies financial assets into one of the three stages of impairment loss determination: stage 1 – financial assets serviced on an ongoing basis (applied to assets if their credit risk has not materially increased since initial recognition); stage 2 – financial assets with deteriorated servicing (applied if credit risk has increase materially since initial recognition, while there is no objective evidence of impairment); stage 3 –– financial assets not serviced (applied when there is objective evidence of impairment). The Company applies the simplification permitted by IFRS 9 (using an allowance matrix, based on historical data adjusted for the impact of future factors). The matrix is created on the basis of historical data. The Company does not apply the matrix separately to receivables portfolios as its business is fairly homogeneous. The Company’s customers are mainly large multinational companies that settle their liabilities on time. The Company uses quarterly ageing for years X-1 and X-2 in relation to the year for which allowances are estimated. In addition to the allowances calculated according to the matrix, the Company also calculates allowances for receivables on a case-by-case basis on the basis of an expert analysis of information on receivables considered to be lost or at risk, carried out by the finance department. These are usually unique events that are not indicative of the Company’s operations and business environment, but only of a delay in settlement of a particular customer’s receivables. Financial liabilities A financial liability is each liability being:  a contractual obligation to issue cash or another financial asset to another entity or exchange financial assets or liabilities with another entity on potentially unfavourable terms;  a contract which will be or may be settled in own equity instruments of the entity and is a non-derivative instrument from which an obligation arises or may arise for the entity to deliver a variable number of its own equity instruments, or a derivative instrument which will be or may be settled other than through exchanging a fixed amount of cash or another financial asset for a fixed number of own equity instruments of the entity. For this purpose, pre-emptive rights, options and warrants to purchase a fixed number of an entity’s own equity instruments in exchange for a fixed amount of cash in any currency are equity instruments if the entity offers pre-emptive rights, options and warrants pro rata to all current owners of the same class of the entity’s non-derivative equity instruments. The Company classifies each component of financial liabilities upon initial recognition as:  financial liabilities measured at fair value through profit or loss;  other financial liabilities measured at amortized cost. Financial liabilities are initially stated at fair value plus transaction costs, which can be directly attributed to the financial liability, for financial liabilities not carried at fair value through profit or loss. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 24 Inventories The initial cost of inventories includes all costs (cost of purchase, production and other) incurred in bringing inventories to their present location and condition. The purchase price of inventories comprises the purchase price plus import duties and other taxes (not subsequently recoverable from the tax authorities), transport, loading, unloading and other costs directly related to the acquisition of the inventories, less discounts, rebates and other similar reductions. Inventories are stated at the lower of the initial cost (cost of purchase or production) and net realizable value. The net realizable value corresponds to the estimated selling price less any costs necessary to complete production and the costs of bringing the inventories to market or finding a buyer (i.e. selling, marketing, etc.). For inventories, cost is determined using the “weighted average” method. Trade and other receivables Trade receivables are measured in the books of account at the value corresponding to the transaction prices adjusted for appropriate impairment allowances under the expected losses model. The value of receivables corresponding to the revenue from the sale of products, which arose and were recognized during the reporting period and were reported after the end of the period (in accordance with the contracts concluded), is presented in trade receivables. Prepayments and accruals The Company recognizes accrued income for the purpose of allocating such income to future reporting periods when the income is realized. Deferred income includes proceeds received or receivable from royalties on pre-orders for digital distribution of games, or advances on royalties and advances on goods received from distributors, as well as deferred settlements of subsidies. Accruals are liabilities falling due for goods or services that have been received or provided, invoiced or formally agreed with the supplier. The Company recognizes costs that have been incurred in advance but relate in whole or in part to subsequent periods in prepayments and deferred costs. Cash and cash equivalents Cash consists of cash in hand, demand deposits and bank deposits with a maturity of up to three months. Cash equivalents are short-term investments with high liquidity easily exchangeable for specific amounts of cash and exposed to insignificant risk of value fluctuations. Outstanding overdrafts are presented in cash flows from financing activities under Loans and advances. Assets held for sale and discontinued operations Non-current assets (and groups of net assets) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets (and groups of net assets) are classified as designated for disposal if it is probable that their carrying value will be recovered through disposal rather than through their continued use. This condition is considered as met only if the sale transaction is highly probable and the asset (or a group of net assets designated for disposal, a disposal group) is available in its current condition for immediate sale. An asset is classified as designated for disposal under the assumption that the Company’s management intends to complete the transaction within one year from the moment of changing the classification. Equity Equity is recorded in the accounting books by types of equity components and in accordance with the binding regulations of the law and the provisions of the Company’s Articles of Association. Share capital is shown at the nominal value in an amount consistent with the Company’s Articles of Association and the entry in the court register. Supplementary capital is created from profits generated. Share premium is formed out of the surplus of the issue price of shares above the nominal value, less issue costs. Share issue costs incurred on formation of a joint stock company or increasing share capital reduce supplementary capital to the amount of share premium. Other reserves include Costs of the incentive programme, Reserve capital created for share buybacks and Revaluation reserve. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 25 Provisions for liabilities Provisions for liabilities are recognized when the Company has a current obligation (legal or constructive) as a result of past events and it is probable that the discharge of the obligation will result in an outflow of the resources embodying the Company’s economic benefits and a reliable estimate of the amount of the obligation can be made. No provisions are recorded against future operating losses. A provision for restructuring costs is only recognized when the Company has announced a detailed and formal restructuring plan to all stakeholders. Employee benefits Short-term employee benefits other than employment termination benefits and share-based payments are recognized as liabilities, net of any amounts already paid, and simultaneously as an expense for the period, unless the benefit should be included in the production cost of an asset. The Company does not offer participation in any post-employment benefit plans to its employees. In 28 July 2020, a resolution was adopted by the Annual General Meeting of CD PROJEKT S.A. to introduce an incentive scheme for the years 2020–2025 for selected persons in CD PROJEKT S.A. and its Group companies. Targets have been set for the realization of which persons selected by the Management and Supervisory Boards of the Company will be granted subscription warrants entitling to subscribe for shares in the Company as part of a conditional increase in the Company’s share capital, subject to the fulfilment of the performance and market targets. The incentive scheme is accounted for in accordance with the principles of IFRS 2, Share-based Payment. Loans granted Loans granted are measured at amortized cost using the effective interest rate. Trade and other payables Trade payables are shown in the balance sheet at amortized cost. Financial liabilities and equity instruments are classified according to their contractual economic content. An equity instrument is a contract giving the right to a share of the Company’s assets less all liabilities. Payment of dividend Dividends are recorded at the moment of establishing the rights of the Company’s shareholders to their receipt. Functional currency and presentation currency Functional currency and presentation currency The items contained in the financial statements are valued in the currency of the basic economic environment in which the Company conducts operations (“the functional currency”). The financial statements are presented in Polish zloty (PLN), which is the functional and presentation currency of the Company. Transactions and balances Transactions expressed in foreign currencies are translated into functional currency based on the exchange rate valid as at the transaction date. Exchange gains and losses on the settlement of these transactions and on the balance sheet valuation of monetary assets and liabilities denominated in foreign currencies are recognized in the Income statement. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 26 Critical accounting estimates and judgements Professional judgement The Company’s Management Board, based on its assessment performed as at the end of 2021 of the feasibility of achieving the performance targets set in the 2020–2025 incentive scheme, maintains its assessment, considering it most likely that the performance targets cannot be achieved over the full duration of the plan. As at the end of each reporting period, the Company reviews the expected useful lives of internally generated intangible assets. In the case of intangible assets for which it is possible to determine reliable estimates of the volume and value of the sales budget, the Company amortizes the value of these projects based on the consumption of economic benefits related to the number of copies sold. The premiere-linked nature of the game’s life cycle justifies the use of a reducing balance depreciation method, as the highest sales volumes are achieved during the premiere period, which decline in subsequent periods. In the remaining cases, the Company amortizes the value of the projects on a straight-line basis over three years. As the video game market is characterized by technology rotation cycles, a three-year period is the maximum horizon over which the Company can assess whether and what impact future technological changes will have on the value of an asset. Uncertainty of estimates The following are the key assumptions about the future and other key sources of uncertainties at the balance sheet date that carry a significant risk of material adjustments to the carrying amounts of assets and liabilities in the next financial year. Impairment of assets Impairment tests for assets such as goodwill and brand value require estimating the value in use of a cash-generating unit. Estimating the value in use means forecasting the future cash flows expected to be generated by cash-generating units, and requires determining a discount rate to be used in order to calculate the present value of these cash flows. The last test of the CD PROJEKT corporate brand, The Witcher product brand and goodwill was carried out as at 31 December 2022. No indications of impairment of the brands or goodwill were identified and no impairment of the assets was recognized on the basis of these tests. Impairment tests were also performed on the shares in subsidiaries as at 31 December 2022. The tests showed no indications of impairment and no impairment of the shares was recognized on the basis of these tests. A separate test was performed for Spokko sp. z o.o. in connection with its planned merger with CD PROJEKT S.A. using a valuation model up to the share of the net assets of the subsidiary. Assumptions adopted in the valuation of the CD PROJEKT brand, The Witcher trademark and goodwill: Trademarks Goodwill Cash flow forecast period 2023-2026 (4 years) 2023-2026 (4 years) Discount rate (WACC) 13.35% 13.35% Growth rate (g) for residual value 3% 3% Valuation of provisions Provisions for retirement benefits and the share-based incentive scheme were estimated using actuarial methods. The Company creates provisions for performance-related remuneration and other bonuses. Provisions for performance-related remuneration are created on an aggregate basis for individual employee groups. As a general rule, provisions are calculated (depending on the employee group) on the basis of the net profit of the Group, the operating segment or a smaller business segment economically identified for the purpose of calculating performance-related remuneration. Provisions for performance-related remuneration are calculated under the principle of recursion - the value of the provisions reduces the underlying results accordingly. The Company records provisions for refunds, expected adjustments to licence reports and costs not invoiced by suppliers up to the balance sheet date. Deferred income tax asset The Company recognizes a deferred tax asset based on the assumption that a tax profit will be generated in the future enabling its utilization. Deterioration of tax results in the future might result in the assumption becoming unjustified. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 27 Deferred tax provision The Company recognizes a deferred tax provision based on the assumption that a future tax obligation will arise from taxable temporary differences, leading to its utilization. In estimating deferred tax, the Company uses an income ratio calculated on the basis of the following year’s budget to allocate positive and negative temporary differences. Fair value of financial instruments The fair value of financial instruments for which no active market exists is determined using appropriate valuation techniques. The Company uses professional judgement in selecting appropriate methods and assumptions. Depreciation and amortization rates The depreciation and amortization rates are established based on the expected useful lives of property, plant and equipment and intangible assets. The Company verifies the adopted useful lives on an annual basis, taking into account the current estimates. For projects for which reliable estimates of sales volumes and budgets can be determined, the Company determines the amortization method for the published titles based on historical sales data of previous own titles (no useful predictive sales data of other publishers’ titles is available) and, to a lesser but significant extent, professional judgement. Assumption of comparability of the financial statements, changes in accounting policies and estimates Changes in accounting policies The accounting policies applied in these interim condensed separate financial statements, material judgements made by the Management Board with regard to the accounting policies applied by the Company and the main sources of estimating uncertainties are consistent, in all material respects, with the policy adopted for preparing the annual financial statements of CD PROJEKT S.A. for 2021, with the exception of changes in the accounting policies and presentation changes described below. Presentation changes In these separate financial statements for the period from 1 January to 31 December 2022 changes were introduced in the presentation of and adjustments of errors in selected financial data. In order to ensure comparability of the financial data in the reporting period, presentation of the data as at 31 December 2021 was changed. The data is presented after the following adjustments:  In the statement of financial position as at 31 December 2021, presentation of some of the land held by the Company changed. Consequently, the following items changed: - Property, plant and equipment – an increase of PLN 4 354 thousand - Investment properties – a decrease of PLN 4 354 thousand The change did not affect the net profit or loss and equity.  In the cash flow statement for the period from 1 January 2021 to 31 December 2021, presentation of interest received on deposits was changed. Consequently, the following items changed: - Other inflows from investing activities – a decrease of PLN 68 thousand - Interest on deposits – an increase of PLN 68 thousand. Notes – other explanatory notes to the separate financial statements 3 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 29 Note 1. Sales revenue Under IFRS 15 revenue from sales of products, goods, materials and services, net of value added tax, rebates and discounts, is recognized when the performance obligation to deliver the promised goods or services (i.e. assets) to the customer has been fulfilled (or is in the process of being fulfilled). 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Sales revenue 772 500 692 196 of which revenue from research and development projects 299 720 281 564 Sales of products 761 508 678 566 Sales of services 1 745 5 502 Sales of goods for resale and materials 9 247 8 128 Other income 81 904 23 197 Other operating income 17 192 19 321 Finance income 64 712 3 876 Total 854 404 715 393 Sales revenue – geographical structure 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 in PLN in % in PLN in % Domestic sales 25 169 3.26% 23 468 3.39% Export sales, including: 747 331 96.74% 668 728 96.61% Europe 89 326 11.56% 42 566 6.15% North America 598 510 77.48% 568 645 82.15% South America - - 144 0.02% Asia 58 519 7.58% 58 066 8.39% Australia 1 152 0.14% (693) (0.10)% Africa (176) (0.02)% - - Total 772 500 100% 692 196 100% * The data presented relates to the place of residence of the Company’s customers (distributors) and not the end users Sales revenue – by type of production 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Own production 761 508 678 566 Third party production 9 247 8 128 Other revenue 1 745 5 502 Total 772 500 692 196 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 30 Sales revenue – by distribution channel 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Games - box issues 31 375 87 141 Games - digital issues 676 520 581 016 Other revenue 64 605 24 039 Total 772 500 692 196 Note 2. Operating segments Information on business segments is provided in Chapter 3 “Notes – Operating segments” of the Consolidated Financial Statements of the CD PROJEKT Group for the period from 1 January to 31 December 2022. Note 3. Operating expenses 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Depreciation and amortization of property, plant and equipment, intangible assets, expenditure on development projects and investment properties, including: 10 676 12 658 depreciation on leased buildings 846 1 323 depreciation of leased vehicles 330 147 Materials and energy used 3 171 2 735 External services, including: 103 598 155 407 costs of short-term leases and low value leases 455 462 Taxes and fees 1 325 1 081 Salaries and wages, social insurance and other benefits 124 271 126 840 Business travel 3 063 519 Cost of using company cars 229 206 Cost of goods for resale and materials sold 7 424 8 056 Costs of products and services sold 110 851 102 946 Other costs 1 480 1 369 Total 366 088 411 817 Selling expenses 184 162 241 785 Total administrative expenses, including: 63 651 59 030 cost of research work 4 593 23 985 Cost of sales 118 275 111 002 Total 366 088 411 817 * restated data Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 31 Depreciation and amortization and impairment write-downs recognized in the income statement 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Items included in cost of sales 1 346 905 Depreciation of tangible fixed assets 1 274 795 Amortization of intangible assets 72 110 Items included in selling expenses 6 832 9 565 Depreciation of tangible fixed assets 5 639 7 565 Amortization of intangible assets 1 193 2 000 Items included in administrative expenses 3 844 3 093 Depreciation of tangible fixed assets 3 074 2 363 Amortization of intangible assets 770 730 Items included in other operating expenses 36 413 22 911 Depreciation of investment properties 2 127 2 105 Impairment of expenditure on development projects 34 286 20 806 Total 48 435 36 474 Costs of employee benefits 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Salaries and wages 112 510 112 956 Social insurance and other benefits 7 716 9 819 Other employee benefits 4 045 4 065 Total costs of employee benefits 124 271 126 840 Items included in selling expenses 82 944 94 810 Items included in administrative expenses 41 327 32 030 Note 4. Other operating income and expenses Other operating income 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Rental income 7 718 7 122 Other sales 3 696 161 Subsidies 3 188 7 929 Income from re-invoicing 1 206 2 886 Settlement of the financial liabilities in respect of leases 602 - Fixed assets and goods for resale received free of charge 431 283 Gains on disposal of non-current assets 261 136 Damages received - 468 Release of unused provisions for costs - 271 Other 90 65 Total other operating income 17 192 19 321 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 32 Other operating expenses 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Impairment write-downs of property, plant and equipment, intangible assets and expenditure on development projects 34 286 20 806 Cost of rental 4 838 4 908 Cost of sales on other sales 4 402 - Cost of destruction of materials and goods for resale 2 755 963 Depreciation of investment properties 2 127 2 105 Donations and charity 1 211 415 Costs relating to re-invoicing 1 206 2 887 Scrapping of property, plant and equipment items and intangible assets 1 039 668 Costs incurred on redevelopment of the car park 551 - Provision for the uninsured portion of the US court settlement costs 126 1 502 Scrapping of investment properties - 51 Help Me Refund – funds to be returned - 33 Other 58 33 Total other operating expenses 52 599 34 371 Note 5. Finance income and costs Finance income 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Interest income 41 946 1 594 on current bank deposits 25 481 68 on bonds 16 231 1 321 on loans 234 205 Other finance income 22 766 2 282 gain on redemption of bonds 22 752 - forward contracts - Management Board 2 6 settlement and measurement of derivative financial instruments - 2 271 other finance income 12 5 Total finance income 64 712 3 876 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 33 Finance costs 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Interest expense 836 1 288 on lease contracts 546 464 on bonds 269 787 on liabilities to the State Treasury 21 37 Other finance costs 49 981 13 677 net foreign exchange losses 17 312 10 207 impairment of non-current financial assets 30 171 1 668 settlement and measurement of derivative financial instruments 2 172 - commission and fees on purchase of bonds 326 364 loss on redemption of bonds - 1 436 other finance costs - 2 Total finance costs 50 817 14 965 Net finance income/expense 13 895 (11 089) Note 6. Corporate income tax and deferred income tax The main items of income tax expense for the years ended 31 December 2022 and 31 December 2021 are as follows: 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Current income tax 51 270 46 149 For the financial year 18 912 40 291 Adjustments relating to prior years 88 - Withholding tax paid abroad 32 270 5 858 Deferred income tax (7 450) (32 028) Related to temporary differences arising and reversed (7 450) (32 028) Income tax expense shown in the income statement 43 820 14 121 Effective tax rate 11.38% 5.55% Deferred tax shown in the income statement is the difference between the balance of deferred tax provisions and assets as at the end and the beginning of the reporting periods. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 34 Current income tax 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Income from other sources of revenue Income from capital gains Income from other sources of revenue Income from capital gains Profit/(loss) before tax 403 822 (18 929) 273 636 (19 402) Income increasing the tax base 967 6 646 2 377 1 606 Income relating to subsequent periods (34 296) - 908 111 - Non-taxable income (4 183) (10 359) (9 009) 5 530 Income from advance payments disclosed for tax purposes 7 596 - - - Costs reducing the tax base (110 005) - (14 100) - Non-deductible costs 153 532 28 822 (95 940) 19 983 Taxable income 417 433 6 180 1 065 075 7 717 Deductions from income – loss - (6 180) (226 106) (7 717) Deductions from income – donation and charity (1 169) - - - Deductions from income – research and development relief (37 567) - (31 741) - Deductions from income – tax-free income (453) - (1 403) - Tax base, including: 378 244 - 805 825 - tax base at 5% (profit) 378 244 - 805 825 - Income tax calculated in Poland at 5% 18 912 - 40 291 - Income tax 18 912 - 40 291 - The current part of the income tax was determined either at the corporate income tax rate of 19% for the tax base corresponding to income from other sources, and at the rate of 5% for the tax base corresponding to income from qualifying intellectual property rights (the so-called IP BOX). Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 35 Deductible temporary differences underlying the deferred tax asset 31.12.2021 Differences affecting the deferred tax recognized in the profit or loss 31.12.2022 Provision for other employee benefits 372 (24) 348 Provision for costs of performance-related and other remuneration 39 400 9 319 48 719 Foreign exchange losses 2 286 4 832 7 118 Difference between the carrying and tax amount of expenditure on development projects 24 792 10 056 34 848 Salaries and wages and social security payable in future periods 61 (14) 47 Other provisions 47 501 (14 219) 33 282 Research and development relief 301 954 15 973 317 927 Prepayments recognized as revenue for tax purposes 1 469 6 054 7 523 Total deductible differences, including: 417 835 31 977 449 812 taxed at 5% 60 417 11 234 71 651 taxed at 19% 357 418 20 743 378 161 Deferred income tax asset 70 930 4 503 75 433 Taxable temporary differences underlying the deferred tax provision 31.12.2021 Differences affecting the deferred tax recognized in the profit or loss 31.12.2022 Difference between the net carrying amount and tax amount of property, plant and equipment and intangible assets 14 129 2 229 16 358 Current period revenue invoiced in the subsequent period/accrued income 128 789 4 098 132 887 Foreign exchange gains 14 786 (6 369) 8 417 Difference between the carrying and tax amount of expenditure on development projects 271 672 (18 078) 253 594 Other 91 94 185 Total taxable differences, including: 429 467 (18 026) 411 441 taxed at 5% 386 323 (3 413) 382 910 taxed at 19% 43 144 (14 613) 28 531 Deferred tax provision 27 513 (2 948) 24 565 The deferred part of the income tax was determined either at the corporate income tax rate of 19% for the tax base corresponding to income from other sources, or at the rate of 5% for the tax base corresponding to income from qualifying intellectual property (the so-called IP BOX). When determining the appropriate tax rate for temporary differences, the Company relied on forecasts of which tax base will give rise to the realization of the temporary differences recognized. Net deferred tax asset/provision 31.12.2022 31.12.2021 Deferred tax asset 75 433 70 931 Deferred tax provision 24 565 27 513 Net deferred tax – asset/(provision) 50 868 43 418 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 36 Note 7. Discontinued operations The Company did not discontinue any operations in the current nor in the previous year. Note 8. Earnings per share Basic earnings per share are calculated by dividing the net profit for the period attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue outstanding during the period. Diluted earnings per share are calculated by dividing the net profit for the period attributable to ordinary shareholders of the Company (net of interest on redeemable preference shares convertible to ordinary shares) by the weighted average number of ordinary shares in issue during the year (adjusted for the inflow of diluting options or warrants and diluting redeemable preference shares convertible into ordinary shares). During the 12 months ended 31 December 2022, the diluting instruments comprised subscription warrants allotted under the incentive schemes, entitling the holder to take up shares in the Company in the future. Net profit and number of shares underlying the calculation of earnings per share 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Weighted average number of shares for the calculation of basic earnings per share (no. of units) 100 741 467 100 717 756 Weighted average number of shares for the calculation of diluted earnings per share (no. of units) 100 764 969 100 763 966 Net profit/(loss) shown for the purpose of calculating diluted earnings per share 341 073 240 113 Basic net earnings/(loss) per share 3.39 2.38 Diluted net earnings/(loss) per share 3.38 2.38 Note 9. Dividend paid (or declared) and received On 28 June 2022, the Ordinary Shareholders Meeting of CD PROJEKT S.A. decided to set aside a part of the Company’s net profit for 2021 for distribution to shareholders as dividend. In accordance with the Resolution adopted, on 12 July 2022, the Company paid out PLN 100,739 thousand, i.e. 1 PLN per share. The number of the Company’s shares giving right to the dividend was 100,738,800. Note 10. Disclosure of other comprehensive income items and their tax effect 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Net profit/(loss) 341 073 240 113 Measurement of bonds issued by foreign governments (12 724) 4 238 Tax effect of the measurement of bonds - 104 Total comprehensive income 328 349 244 455 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 37 Note 11. Property, plant and equipment Ownership structure of property, plant and equipment 31.12.2022 31.12.2021 Own assets 122 595 88 350 Used under lease contracts 20 844 15 636 Total 143 439 103 986 * restated data Property, plant and equipment with restricted legal title 31.12.2022 31.12.2021 Used under lease contracts 20 844 15 636 Total 20 844 15 636 Amounts of contractual commitments to purchase property, plant and equipment in future 31.12.2022 31.12.2021 Leasing of passenger cars 599 429 Total 599 429 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 38 Changes in property, plant and equipment (by category) for the period 01.01.2022 – 31.12.2022 Land Buildings and structures Civil and marine engineering facilities Plant and machinery Vehicles Other fixed assets Assets under construction Total Gross carrying amount as at 01.01.2022 40 435 57 033 1 876 43 728 2 986 4 844 2 225 153 127 Increase due to: - 21 055 277 9 254 1 303 1 026 26 973 59 888 purchase - 512 - 8 740 - 987 26 853 37 092 lease contracts concluded - 6 831 4 - 1 303 - - 8 138 transfer from assets under construction - 197 - 2 - 39 - 238 transfer from investment properties - 13 515 273 - - - 120 13 908 reclassification - - - 81 - - - 81 free of charge receipt - - - 431 - - - 431 Decrease due to: - 1 341 228 2 355 1 348 175 1 191 6 638 sale - - - 283 739 1 - 1 023 scrapping - 816 228 1 840 609 93 24 3 610 transfer from assets under construction - - - - - - 238 238 reclassification - - - - - 81 929 1 010 lease contracts terminated - 525 - - - - - 525 other - - - 232 - - - 232 Gross carrying amount as at 31.12.2022 40 435 76 747 1 925 50 627 2 941 5 695 28 007 206 377 Accumulated depreciation as at 01.01.2022 1 250 15 200 558 27 888 1 630 2 615 - 49 141 Increase due to: 567 6 889 239 9 416 458 923 - 18 492 depreciation charge 567 5 654 210 9 365 458 923 - 17 177 transfer from investment properties - 1 235 29 - - - - 1 264 reclassification - - - 51 - - - 51 Decrease due to: - 1 341 80 2 340 810 124 - 4 695 sale - - - 278 739 1 - 1 018 scrapping - 816 80 1 828 71 72 - 2 867 reclassification - - - - - 51 - 51 lease contracts terminated - 525 - - - - - 525 other - - - 234 - - - 234 Accumulated depreciation as at 31.12.2022 1 817 20 748 717 34 964 1 278 3 414 - 62 938 Impairment write-downs as at 01.01.2022 - - - - - - - - Impairment write-downs as at 31.12.2022 - - - - - - - - Net carrying amount as at 01.01.2022 39 185 41 833 1 318 15 840 1 356 2 229 2 225 103 986 Net carrying amount as at 31.12.2022 38 618 55 999 1 208 15 663 1 663 2 281 28 007 143 439 * restated data Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 39 Changes in property, plant and equipment (by category) for the period 01.01.2021 – 31.12.2021 Land Buildings and structures Civil and marine engineering facilities Plant and machinery Vehicles Other fixed assets Assets under construction Total Gross carrying amount as at 01.01.2021 35 986 62 145 1 834 31 863 2 538 3 083 1 651 139 100 Increase due to: 4 449 9 231 53 13 164 1 253 1 765 9 429 39 344 purchase - 1 199 53 13 164 17 1 534 9 429 25 396 lease contracts concluded - 77 - - 1 236 - - 1 313 transfer from assets under construction - 7 955 - - - 231 - 8 186 transfer from investment properties 4 449 - - - - - - 4 449 Decrease due to: - 14 343 11 1 299 805 4 8 855 25 317 sale - 815 - 328 189 - - 1 332 scrapping - 186 11 971 616 4 - 1 788 transfer from assets under construction - - - - - - 8 855 8 855 transfers to investment properties - 13 342 - - - - - 13 342 Gross carrying amount as at 31.12.2021 40 435 57 033 1 876 43 728 2 986 4 844 2 225 153 127 Accumulated depreciation as at 01.01.2021 588 11 181 275 22 454 1 588 1 964 - 38 050 Increase due to: 662 4 733 286 6 582 386 654 - 13 303 depreciation charge 567 4 733 286 6 582 386 654 - 13 208 transfer from investment properties 95 - - - - - - 95 Decrease due to: - 714 3 1 148 344 3 - 2 212 transfers to investment properties - 638 - - - - - 638 sale - - - 274 180 - - 454 scrapping - 76 3 874 164 3 - 1 120 Accumulated depreciation as at 31.12.2021 1 250 15 200 558 27 888 1 630 2 615 - 49 141 Impairment write-downs as at 01.01.2021 - - - - - - - - Impairment write-downs as at 31.12.2021 - - - - - - - - Net carrying amount as at 01.01.2021 35 398 50 964 1 559 9 409 950 1 119 1 651 101 050 Net carrying amount as at 31.12.2021 39 185 41 833 1 318 15 840 1 356 2 229 2 225 103 986 * restated data Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 40 Property, plant and equipment under construction 01.01.2022 Expenditure incurred in the financial year Reclassification of costs Settlement of capital expenditure 31.12.2022 Redevelopment of the Jagiellońska 74 property 2 011 1 815 61 228 3 537 Redevelopment of car park - 25 158 862 - 24 296 Other 214 - 7 33 174 Total 2 225 26 973 930 261 28 007 01.01.2021 Expenditure incurred in the financial year Reclassification of costs Settlement of capital expenditure 31.12.2021 Redevelopment of the Jagiellońska 74 property 1 612 9 254 - 8 855 2 011 Other 39 175 - - 214 Total 1 651 9 429 - 8 855 2 225 Right-of-use assets relating to property, plant and equipment 31.12.2022 31.12.2021 Gross amount Accumulated depreciation Net amount Gross amount Accumulated depreciation Net amount Land 14 540 669 13 871 14 540 464 14 076 Real properties 10 734 5 348 5 386 4 718 4 357 361 Civil and marine engineering facilities 99 99 - 94 47 47 Vehicles 1 930 343 1 587 1 236 84 1 152 Total 27 303 6 459 20 844 20 588 4 952 15 636 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 41 Note 12. Intangible assets and expenditure on development projects Changes in intangible assets and expenditure on development projects for the period 01.01.2022 – 31.12.2022 Expenditure on development projects in progress Expenditure on completed development projects Trademarks Patents and licenses Copyright Computer software Goodwill Intangible assets under construction Total Gross carrying amount as at 01.01.2022 95 172 798 492 34 467 1 497 18 331 30 132 49 168 9 1 027 268 Increase due to: 261 841 88 101 - 2 475 628 14 074 - 422 367 541 purchase - - - 2 475 520 13 599 - 422 17 016 assets internally generated 261 841 - - - - - - - 261 841 transfer from intangible assets under construction - - - - 108 - - - 108 reclassification from expenditure on development projects in progress - 88 101 - - - - - - 88 101 reclassification - - - - - 475 - - 475 Decrease due to: 109 217 - - 473 - 13 - 431 110 134 scrapping 283 - - - - 13 - - 296 utilization of impairment write- downs 20 806 - - - - - - - 20 806 transfer from intangible assets under construction - - - - - - - 108 108 transfer from expenditure on development projects in progress 88 101 - - - - - - - 88 101 reclassification 27 - - 473 - - - 323 823 Gross carrying amount as at 31.12.2022 247 796 886 593 34 467 3 499 18 959 44 193 49 168 - 1 284 675 Accumulated amortization as at 01.01.2022 - 525 036 - 1 273 173 23 904 - - 550 386 Increase due to: - 103 530 - 834 128 4 482 - - 108 974 depreciation charge - 103 530 - 834 128 4 482 - - 108 974 Decrease - - - - - - - - - Accumulated amortization as at 31.12.2022 - 628 566 - 2 107 301 28 386 - - 659 360 Impairment write-downs as at 01.01.2022 20 806 - - - - - - - 20 806 Increase due to: 34 286 - - - - - - - 34 286 impairment 34 286 - - - - - - - 34 286 Decrease due to: 20 806 - - - - - - - 20 806 reversal of write- downs (write-off) 20 806 - - - - - - - 20 806 Impairment write-downs as at 31.12.2022 34 286 - - - - - - - 34 286 Net carrying amount as at 01.01.2022 74 366 273 456 34 467 224 18 158 6 228 49 168 9 456 076 Net carrying amount as at 31.12.2022 213 510 258 027 34 467 1 392 18 658 15 807 49 168 - 591 029 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 42 Changes in intangible assets and expenditure on development projects for the period 01.01.2021 – 31.12.2021 Expenditure on development projects in progress Expenditure on completed development projects Trademarks Patents and licenses Copyright Computer software Goodwill Intangible assets under construction Total Gross carrying amount as at 01.01.2021 28 890 798 035 34 467 1 435 18 331 26 277 49 168 1 129 957 732 Increase due to: 66 891 457 - 153 - 3 855 - 209 71 565 purchase - - - 153 - 2 526 - 209 2 888 transfer from intangible assets under construction - - - - - 1 329 - - 1 329 reclassification from expenditure on development projects in progress - 457 - - - - - - 457 assets internally generated 66 891 - - - - - - - 66 891 Decrease due to: 609 - - 91 - - - 1 329 2 029 scrapping - - - 91 - - - - 91 transfer from intangible assets under construction - - - - - - - 1 329 1 329 transfer from expenditure on development projects in progress 457 - - - - - - - 457 transfer of expenditure on development projects within the consortium 152 - - - - - - - 152 Gross carrying amount as at 31.12.2021 95 172 798 492 34 467 1 497 18 331 30 132 49 168 9 1 027 268 Accumulated amortization as at 01.01.2021 - 442 300 - 1 043 48 20 423 - - 463 814 Increase due to: - 82 736 - 321 125 3 481 - - 86 663 amortization charge - 82 736 - 321 125 3 481 - - 86 663 Decrease due to: - - - 91 - - - - 91 scrapping - - - 91 - - - - 91 Accumulated amortization as at 31.12.2021 - 525 036 - 1 273 173 23 904 - - 550 386 Impairment write-downs as at 01.01.2021 - - - - - - - - - Increase due to: 20 806 - - - - - - - 20 806 impairment 20 806 - - - - - - - 20 806 Impairment write-downs as at 31.12.2021 20 806 - - - - - - - 20 806 Net carrying amount as at 01.01.2021 28 890 355 735 34 467 392 18 283 5 854 49 168 1 129 493 918 Net carrying amount as at 31.12.2021 74 366 273 456 34 467 224 18 158 6 228 49 168 9 456 076 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 43 Intangible assets – ownership structure 31.12.2022 31.12.2021 Own assets 70 324 59 086 Total 70 324 59 086 Intangible assets under construction 01.01.2022 Expenditure incurred in the financial year Reclassification of costs Settlement of capital expenditure 31.12.2022 Document flow system 9 - 9 - - System for virtualization and cloud computing - 314 314 - - cdprojektred.com website - 108 - 108 - Total 9 422 323 108 - 01.01.2021 Expenditure incurred in the financial year Reclassification of costs Settlement of capital expenditure 31.12.2021 HR management support system 1 129 200 - 1 329 - Document flow system - 9 - - 9 Total 1 129 209 - 1 329 9 Amounts of contractual commitments to purchase intangible assets in future Not applicable. Intangible assets – restriction on disposal Not applicable. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 44 Note 13. Goodwill Goodwill recognized in business combinations and acquisitions CD Projekt Red sp. z o.o. Strange New Things business Total Gross carrying amount as at 01.01.2022 39 147 10 021 49 168 Gross carrying amount as at 31.12.2022 39 147 10 021 49 168 Impairment write-downs as at 01.01.2022 - - - Impairment write-downs at 31.12.2022 - - - Net carrying amount as at 01.01.2022 39 147 10 021 49 168 Net carrying amount as at 31.12.2022 39 147 10 021 49 168 Impairment tests of goodwill require estimating the value in use of the cash-generating unit. In estimating the value in use, the Company prepared forecasts of the future cash flows to be generated by the cash-generating unit and determined the discount rate to be applied to calculate the present value of these cash flows. The Company performed the most recent impairment test of goodwill as at 31 December 2022. The Company identified no indications of impairment of goodwill. Business combinations Not applicable. Note 14. Investment properties The Company owns a real estate complex located at ul. Jagiellońska 76 in Warsaw. Given that a part of the properties purchased is leased out to third parties, including CD PROJEKT Group companies, the Company decided to partly classify these properties as investment properties. The remaining part of the property is used for own needs of the activities conducted. The Company measures the properties purchased at cost less accumulated depreciation. The last appraisal report by the expert surveyor, for the buildings recognized as investment properties, was prepared on the basis of unit prices for the construction of buildings with the most similar parameters included in the Bistyp Catalogue of Unit Prices for Works and Investment Facilities 2021. The valuation of the individual assets amounted to PLN 60 692 thousand for the building at ul. Jagiellońska 74, and PLN 13 212 thousand for the building at ul. Jagiellońska 76. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 45 Movements in investment properties for the period 01.01.2022 – 31.12.2022 and 01.01.2021 – 31.12.2021 31.12.2022 31.12.2021 Gross carrying amount as at the beginning of the period 61 573 50 650 Increase due to: 282 15 428 capitalized expenditure 282 2 086 reclassification of expenditures from property, plant and equipment after commissioning of the investment property - 13 342 Decrease due to: 13 908 4 505 scrapping - 56 reclassification to other asset categories 13 908 4 449 Gross carrying amount as at the end of the period 47 947 61 573 Accumulated depreciation as at the beginning of the period 4 491 1 809 Increase due to: 2 160 2 782 amortization charge 2 160 2 144 reclassification from perpetual usufruct of land and from property, plant and equipment - 638 Decrease due to: 1 264 100 scrapping - 5 reclassification to other asset categories 1 264 95 Accumulated depreciation as at the end of the period 5 387 4 491 Impairment write-downs as at the beginning of the period - - Increase - - Decrease - - Impairment write-downs as at the end of the period - - Net carrying amount as at the end of the period 42 560 57 082 * restated data Contractual liabilities on purchase of investment properties Not applicable. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 46 Note 15. Investments in subordinated entities Investments in subordinated entities measured at cost 31.12.2022 31.12.2021 Shares in subordinated entities – subsidiaries 53 566 43 447 Total 53 566 43 447 Movements in investments in subsidiaries 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 As at the beginning of the period 43 447 24 567 Increase due to: 40 475 23 585 acquisition/formation of an entity - 7 679 equity element of the incentive scheme 326 2 888 payments towards increasing share capital of a subsidiary 40 149 13 018 Decrease due to: 30 356 4 705 disposal of a subsidiary/shares in a subsidiary 76 19 impairment write-downs recorded 30 171 1 668 equity element of the incentive scheme 109 3 018 As at the end of the period 53 566 43 447 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 47 Investments in subsidiaries as at 31.12.2022 GOG sp. z o.o. CD PROJEKT Inc. Spokko sp. z o.o. CD PROJEKT RED STORE sp. z o.o. CD PROJEKT RED Vancouver Studio Ltd. Registered office Warsaw Los Angeles, Venice Warsaw Warsaw Vancouver Percent of shares held as at 31.12.2022 100% 100% 87.6% 100% 100% Percent of votes held as at 31.12.2022 100% 100% 87.6% 100% 100% Equity investment 15 092 23 344 5 143 - 9 987 Investments in subsidiaries as at 31.12.2021 GOG sp. z o.o. CD PROJEKT Inc. CD PROJEKT Co., Ltd. (liquidated) Spokko sp. z o.o. CD PROJEKT RED STORE sp. z o.o. CD PROJEKT RED Vancouver Studio Ltd. Registered office Warsaw Los Angeles, Venice Shanghai Warsaw Warsaw Vancouver Percent of shares held as at 31.12.2021 100% 100% 100% 74% 100% 100% Percent of votes held as at 31.12.2021 100% 100% 100% 74% 100% 100% Equity investment 14 978 13 810 - 6 481 500 7 678 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 48 Note 16. Other financial assets 31.12.2022 31.12.2021 Loans granted 739 9 292 Bonds 475 848 477 416 Derivative financial instruments 7 809 - Private equity interests in the gaming sector 2 556 - Other financial assets, including: 486 952 486 708 short-term 279 515 308 168 long-term 207 437 178 540 In 2022, CD PROJEKT S.A. granted loans to related parties: CD PROJEKT RED STORE sp. z o.o., Spokko sp. z o.o. and The Molasses Flood LLC. Under the loan agreement of 10 February 2022, CD PROJEKT RED STORE sp. z o.o. was granted a loan in the amount of PLN 1 000 thousand. The first of the three contractual tranches, in the amount of PLN 600 thousand, was disbursed on 14 February 2022. Subsequent tranches of the loan have not been disbursed. The loan was repaid out on 9 May 2022. In 2022, four tranches were disbursed under the loan agreement of 5 May 2021 granted to Spokko sp. z o.o. in the amount of PLN 5 870 thousand: on 25 February in the amount of PLN 500 thousand, on 30 March and 28 April in the amount of PLN 1 000 thousand each, and on 5 May in the amount of PLN 500 thousand. The amount of the tranches disbursed in 2021 was PLN 2 800 thousand, while the total amount of funds disbursed under this agreement was PLN 5 800 thousand. The loan was repaid in full on 27 May 2022. At the same time, on 27 May 2022, the other two loans granted to Spokko sp. z o.o. under the loan agreements of 25 May 2020 in the amount of PLN 3 000 thousand and 12 November 2020 in the amount of PLN 3 040 thousand were repaid in full. Under the loan agreement dated 16 September 2022, a loan of USD 1 150 thousand was granted to The Molasses Flood. The agreement provides for the loan to be disbursed in tranches. In 2022, one tranche of USD 166 thousand was paid out. The payment took place on 2 November 2022. The interest rate on the loan is variable and is subject to quarterly updates. According to the agreement the loan should be repaid by 31 March 2025. In March 2022, the Company changed the rules on diversification of investment of current cash surpluses, increasing the possibility of holding in debt securities up to 80% of the present value of financial resources defined as the sum of the total amount of: cash and cash equivalents, bank deposits of more than 3 months, bonds of the State Treasury of the Republic of Poland, bonds secured by a guarantee of the State Treasury of the Republic of Poland, bonds of foreign governments and bonds secured by a guarantee of foreign governments together with concluded forward hedging transactions. In addition, under the amended assumptions, the Company may acquire foreign government bonds issued by countries with a rating not lower than Aa3 according to Moody’s rating agency and foreign bonds backed by a guarantee of countries with a rating not lower than Aa3 according to Moody’s rating agency. As a result of these changes, the portfolio of bonds held has expanded to include securities of issuers from Canada and Finland. For more information on the bond portfolio held, see Financial risk management objectives and policies – Liquidity and credit risk. Note 17. Joint operations Not applicable. Note 18. Inventories 31.12.2022 31.12.2021 Goods for resale 9 882 13 535 Other materials 4 4 Gross inventories 9 886 13 539 Inventory write-downs - - Net inventories 9 886 13 539 Other materials include marketing materials. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 49 Inventories in the period from 01.01.2022 to 31.12.2022 Goods for resale Total Inventories recognized as an expense during the period 7 424 7 424 Total 7 424 7 424 Inventories in the period from 01.01.2021 to 31.12.2021 Goods for resale Total Inventories recognized as an expense during the period 8 056 8 056 Total 8 056 8 056 Changes in inventory write-downs Not applicable. Inventories set up as collateral Not applicable. Note 19. Trade receivables 31.12.2022 31.12.2021 Trade receivables, gross 164 794 123 900 Write-downs 86 79 Trade receivables 164 708 123 821 from related entities 4 540 3 507 from other entities 160 168 120 314 Changes in write-downs of trade receivables 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 RELATED ENTITIES Write-downs as at the beginning of the period - - Increase - - Decrease - - Write-downs as at the end of the period - - OTHER ENTITIES Write-downs as at the beginning of the period 79 126 Increases, including: 18 12 write-downs recognized for past-due and disputed receivables 18 12 Decreases, including: 11 59 utilization of impairment write-downs - 53 release of write-downs 11 6 Write-downs as at the end of the period 86 79 Total write-downs as at the end of the period (related and other entities) 86 79 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 50 Current and overdue trade receivables as at 31.12.2022 Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 RELATED ENTITIES gross receivables 4 540 3 574 442 35 489 - - default ratio 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually - - - - - - - total expected credit losses - - - - - - - Net receivables 4 540 3 574 442 35 489 - - Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 OTHER ENTITIES gross receivables 160 254 159 850 318 - - - 86 default ratio 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually 86 - - - - - 86 total expected credit losses 86 - - - - - 86 Net receivables 160 168 159 850 318 - - - - Total gross receivables 164 794 163 424 760 35 489 - 86 impairment write- downs 86 - - - - - 86 Net receivables 164 708 163 424 760 35 489 - - Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 51 Current and overdue trade receivables as at 31.12.2021 Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 RELATED ENTITIES gross receivables 3 507 2 496 1 010 1 - - - default ratio 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually - - - - - - - total expected credit losses - - - - - - - Net receivables 3 507 2 496 1 010 1 - - - Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 OTHER ENTITIES gross receivables 120 393 120 103 162 - 8 - 120 default ratio 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually 79 - - - - - 79 total expected credit losses 79 - - - - - 79 Net receivables 120 314 120 103 162 - 8 - 41 Total gross receivables 123 900 122 599 1 172 1 8 - 120 impairment write- downs 79 - - - - - 79 Net receivables 123 821 122 599 1 172 1 8 - 41 Trade receivables – by currency 31.12.2022 31.12.2021 Value in foreign currency Value in PLN Value in foreign currency Value in PLN PLN 134 184 134 184 117 545 117 545 USD 6 777 29 831 102 413 CAD 212 689 316 1 008 EUR 1 4 1 056 4 855 JPY 7 - - - Total 164 708 123 821 * Under receivables in PLN, the Company also recognizes amounts receivable in respect of licence reports received for the current period expressed in foreign currencies, invoiced in subsequent periods and charged to the current period directly in PLN. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 52 Note 20. Other receivables 31.12.2022 31.12.2021 Other gross receivables, including: 55 792 114 268 tax receivables, other than corporate income tax 41 766 75 562 prepayments for inventories 6 826 5 076 settlements with suppliers of property, plant and equipment items 4 160 - prepayments for development projects 1 433 30 435 security deposits 687 650 prepayments for property, plant and equipment and intangible assets 135 34 settlements with payment operators 7 - settlements with members of the Management Boards 2 7 consortium settlements - 1 659 prepayments on investment properties - 79 settlements with employees - 3 other 776 763 Write-downs 732 732 Other receivables, including: 55 060 113 536 short-term 54 677 113 163 long-term 383 373 * restated data Other tax receivables, other than corporate income tax also include withholding tax in the amount of PLN 33 217 thousand to be deducted by the Company in its annual CIT return after obtaining certificates from foreign counterparties confirming their payment of tax abroad. 31.12.2022 31.12.2021 Other gross receivables 55 792 114 268 Write-downs 732 732 Other receivables 55 060 113 536 from related entities 995 1 672 from other entities 54 065 111 864 Other receivables claimed in court 31.12.2022 31.12.2021 Other receivables in court 732 732 Write-downs of disputed receivables 732 732 Net other receivables claimed in court - - Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 53 Other receivables – by currency 31.12.2022 31.12.2021 Value in foreign currency Value in PLN Value in foreign currency Value in PLN PLN 47 988 47 988 77 909 77 909 USD 1 343 5 038 4 545 17 214 CAD 303 1 003 - - EUR 122 569 182 837 GBP 82 425 33 161 JPY 1 109 37 496 092 17 214 CNY - - 336 201 Total 55 060 113 536 * Receivables in PLN comprise, among others, receivables in respect of withholding tax deducted by foreign counterparties in foreign currencies and remaining to be settled with the local Tax Office in the annual corporate income tax return. Trade and other receivables from related entities 31.12.2022 31.12.2021 Receivables from related entities, gross 5 535 5 179 trade 4 540 3 507 other 995 1 672 Write-downs - - Receivables from related entities, net 5 535 5 179 Note 21. Prepayments and deferred costs 31.12.2022 31.12.2021 Software, licences 6 155 3 545 Costs of future marketing services 1 589 1 722 Costs of repairs and maintenance 1 142 1 470 Fees for pre-emptive rights 1 271 1 378 Property and personal insurance 505 344 Costs in connection with redevelopment of the car park 260 - Business travel (tickets, hotels, insurance) 32 34 Domains, servers 218 9 Marketing campaigns - 7 Other prepayments and deferred costs 331 247 Prepayments and deferred costs, including: 11 503 8 756 short-term 6 189 4 015 long-term 5 314 4 741 * restated data Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 54 Note 22. Cash and cash equivalents 31.12.2022 31.12.2021 Cash in hand and at bank: 152 68 187 current bank accounts 152 68 187 Cash equivalents: 236 921 277 608 short-term deposits maturing up to 3 months 236 590 239 586 cash on investment accounts 331 38 022 Total 237 073 345 795 Restricted cash and cash equivalents Not applicable. Note 23. Share capital The structure of share capital as at 31.12.2022 Series Number of shares in pcs. Series/issue at par value Method of covering share capital A 500 000 500 000 Monetary contribution B 2 000 000 2 000 000 Monetary contribution C 6 884 108 6 884 108 Monetary contribution C1 18 768 216 18 768 216 Monetary contribution D 35 000 000 35 000 000 In-kind contribution E 6 847 676 6 847 676 Monetary contribution F 3 500 000 3 500 000 Monetary contribution G 887 200 887 200 Monetary contribution H 3 450 000 3 450 000 Monetary contribution I 7 112 800 7 112 800 Monetary contribution J 5 000 000 5 000 000 Monetary contribution K 5 000 000 5 000 000 Monetary contribution L 1 170 000 1 170 000 Monetary contribution M 4 650 800 4 650 800 Monetary contribution Total 100 770 800 100 770 800 - On 9 December 2022, as a result of registering in the securities depository maintained by the Polish Central Securities Depository (KDPW) of 32 000 M-series ordinary bearer shares of the Company with a nominal value of PLN 1.00 each, issued in connection with the implementation of the incentive scheme operating in the years 2016-2019, the shares were recorded in the securities account of an authorized participant in the aforementioned scheme, who took them up upon exercising the rights from subscription warrants, and thus, share capital of the Company was increased from PLN 100 738 800 to PLN 100 770 800. The aforementioned shares were listed on the GPW Main Market after the balance sheet date - as of 28 February 2023. The total number of votes arising from all the shares of the Company as at 31 December 2022 was 100 770 800 (subject to 860 290 shares in the Company remaining in its possession as a result of the share buyback carried out on 5-24 October 2022). There were no changes in the Company’s share capital after the balance sheet date. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 55 Changes in share capital 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Share capital as at the beginning of the period 100 739 100 655 Increase due to: 32 84 issue of shares paid up in cash – incentive scheme 32 84 Decrease - - As at the end of the period 100 771 100 739 Note 24. Treasury shares On 4 October 2022, the Company’s Management Board informed that based on the resolution no. 4 of the Extraordinary General Meeting of the Company dated 29 November 2016, the Management Board decided on the conditions of and procedure for conducting a buyback of the Company’s treasury shares with a view to their voluntary redemption. As a result of the buyback conducted based on that decision, between 5 October 2022 and 24 October 2022, the Company purchased 860 290 of its treasury shares with a nominal value of PLN 1 each, representing 0.85% of its share capital, for the total price of PLN 99 943 thousand for this purpose. The treasury shares were purchased on the official stock exchange market operated by the Warsaw Stock Exchange. The Management Board of the Company provided detailed information on the commencement and course of the buyback in current reports no. 40/2022, 40/2022K, 42/2022, 44/2022 i 45/2022 . As at the date of publication of this report, the aforementioned treasury shares have not yet been cancelled and remain held by the Company. Note 25. Other reserves 31.12.2022 31.12.2021 Supplementary capital 1 539 437 1 366 952 Share premium 116 700 115 909 Revaluation reserve (7 941) 4 783 Treasury shares (99 993) - Other reserve capital - 35 741 Other reserves – incentive scheme 11 718 8 991 Total 1 559 921 1 532 376 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 56 Change in other reserves Supplementary capital Share premium Treasury shares Revaluation reserve Reserve capital Other reserves – incentive scheme Total As at 01.01.2022 1 366 952 115 909 - 4 783 35 741 8 991 1 532 376 Increase due to: 172 485 791 - - - 4 939 178 215 share-based payments 1 549 791 - - - - 2 340 appropriation of the net profit/offset of loss 135 195 - - - - - 135 195 release of reserve capital from previous years created for share buybacks 35 741 - - - - - 35 741 the equity element of the incentive scheme - - - - - 4 939 4 939 Decrease due to: - - 99 993 12 724 35 741 2 212 150 670 purchase of treasury shares for redemption - - 99 993 - - - 99 993 release of reserve capital from previous years created for share buybacks - - - - 35 741 - 35 741 share-based payments - - - - - 1 548 1 548 the equity element of the incentive scheme - - - - - 664 664 total comprehensive income - - - 12 724 - - 12 724 As at 31.12.2022 1 539 437 116 700 (99 993) (7 941) - 11 718 1 559 921 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 57 Supplementary capital Share premium Treasury shares Revaluation reserve Reserve capital Other reserves – incentive scheme Total As at 01.01.2021 737 542 113 844 - 442 35 741 10 885 898 454 Increase due to: 629 410 2 065 - 4 341 - 41 249 677 065 share-based payments 869 2 065 - - - - 2 934 appropriation of the net profit/offset of loss 628 541 - - - - - 628 541 the equity element of the incentive scheme - - - - - 41 249 41 249 total comprehensive income - - - 4 341 - - 4 341 Decrease due to: - - - - - 43 143 43 143 share-based payments - - - - - 869 869 the equity element of the incentive scheme - - - - - 42 274 42 274 As at 31.12.2021 1 366 952 115 909 - 4 783 35 741 8 991 1 532 376 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 58 Note 26. Retained earnings / (Accumulated losses) 31.12.2022 31.12.2021 Retained earnings / (accumulated losses) - (4 179) Total - (4 179) Change in retained earnings / (accumulated losses) 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 As at the beginning of the period (4 179) - Corrections of errors - (4 179) Retained earnings / (accumulated losses), as adjusted (4 179) (4 179) Increase due to: 240 113 1 132 235 appropriation of profit / (loss) from previous years 240 113 1 132 235 Decrease due to: 235 934 1 132 235 payment of dividend 100 739 503 694 transfer to supplementary capital 135 195 628 541 As at the end of the period - (4 179) Note 27. Loans and borrowings Not applicable. Note 28. Other financial liabilities 31.12.2022 31.12.2021 Lease liabilities 20 671 15 471 Cash flow hedges - 17 906 Total financial liabilities 20 671 33 377 Short-term, including: 1 788 18 620 up to one month 98 17 964 from one to three months 445 179 from three months to one year 1 245 477 Long-term, including: 18 883 14 757 from 1 to 5 years 5 171 938 more than 5 years 13 712 13 819 * restated data As a lessee, the Company is potentially exposed to future cash outflows that are not included in the measurement of lease liabilities, comprising:  with regard to the contracts indicated in Note 34, the subject matter of which are plots of land located at ul. Jagiellońska 74 and 76, constituting in essence rights of perpetual usufruct of land – variable lease payments resulting from updating the annual fee for perpetual usufruct of land, meaning a change to the existing fee amount in order to adjust it to the current value of the property or in order to determine the appropriate rate at which the fee is calculated;  with regard to the contract indicated in Note 34, the subject matter of which is an office space in a building in Kraków, which is in fact a rental contract – variable lease payments resulting from the building owner’s right to index the amount of fees for the use of the premises based on the consumer price index;  with regard to the contract indicated in Note 34, the subject matter of which is an office space in a building in Wrocław, which is in fact a rental contract – variable lease payments resulting from the building owner’s right to index the amount of fees for the use of the premises based on the consumer price index. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 59 Note 29. Other non-current liabilities 31.12.2022 31.12.2021 Other non-current liabilities, including: 2 620 2 860 liabilities in respect of marketing costs 1 456 1 589 liabilities in respect of pre-emptive rights 1 164 1 271 Other non-current liabilities – maturity structure 31.12.2022 31.12.2021 Other non-current liabilities, including: 2 620 2 860 payable after one to three years 720 720 payable after three to five years 480 480 payable after five years 1 420 1 660 Other non-current liabilities (by currency) 31.12.2022 31.12.2021 Value in foreign currency Value in PLN Value in foreign currency Value in PLN PLN 2 620 2 620 2 860 2 860 Total 2 620 2 860 Note 30. Trade payables 31.12.2022 31.12.2021 Trade payables, including: 39 587 16 028 to related entities 5 954 2 407 to other entities 33 633 13 621 Trade payables – ageing analysis Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 As at 31.12.2022 39 587 34 831 2 286 8 9 186 2 267 to related entities 5 954 4 480 1 474 - - - - to other entities 33 633 30 351 812 8 9 186 2 267 Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 As at 31.12.2021 16 028 12 257 1 578 10 43 2 083 57 to related entities 2 407 2 252 155 - - - - to other entities 13 621 10 005 1 423 10 43 2 083 57 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 60 Trade payables – by currency 31.12.2022 31.12.2021 Value in foreign currency Value in PLN Value in foreign currency Value in PLN PLN 19 881 19 881 7 024 7 024 USD 3 470 15 276 1 638 6 652 EUR 691 3 240 322 1 483 CNY 1 088 691 1 015 648 JPY 9 921 330 707 25 GBP 22 117 5 29 RUB 846 52 52 3 KZT 7 - - - CAD - - 51 164 Total 39 587 16 028 Note 31. Other current liabilities 31.12.2022 31.12.2021 Taxes (other than corporate income tax), customs duty, social security and other payables 3 843 3 584 Withholding tax 32 905 Personal income tax 1 841 1 704 Social security contributions 1 757 876 State Disabled Persons Fund (PFRON) 64 45 PIT-8AR (personal income tax) settlements 132 54 Other 17 - Other liabilities 507 475 Other settlements with employees 235 125 Other settlements with members of the Management Boards 32 37 Other liabilities 240 313 Total other current liabilities 4 350 4 059 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 61 Other current liabilities – ageing analysis Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 As at 31.12.2022 4 350 4 096 253 1 - - - to related entities 32 - 32 - - - - to other entities 4 318 4 096 221 1 - - - Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 As at 31.12.2021 4 059 3 935 123 - 1 - - to related entities 162 38 123 - 1 - - to other entities 3 897 3 897 - - - - - Other current liabilities – by currency 31.12.2022 31.12.2021 Value in foreign currency Value in PLN Value in foreign currency Value in PLN PLN 4 200 4 200 3 978 3 978 USD 23 102 17 70 EUR 6 29 2 11 GBP 2 12 - - JPY 156 5 - - AUD 1 2 - - Total 4 350 4 059 Note 32. Social assets and the Company’s Social Fund liabilities Not applicable. Note 33. Contingent liabilities Bills of exchange payable in respect of loans received Not applicable. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 62 Contingent liabilities in respect of granted guarantees, sureties and collateral Specification Currency 31.12.2022 31.12.2021 mBank S.A. Voluntary submission to execution Agreement for payment cards PLN - 920 Bill of exchange agreement Framework agreement on financial market transactions PLN 50 000 50 000 Bill of exchange agreement Bank guarantee securing a rental contract PLN - 667 Bill of exchange agreement Bank guarantee securing a rental contract PLN 427 - Ingenico Group S.A. (previously: Global Collect Services BV) Contractual surety Surety against liabilities of GOG sp. z o.o. EUR - 155 Mazowiecka Jednostka Wdrażania Programów Unijnych Contractual commitment Commitment to incur operating and renovation expenditures on leased space PLN 20 58 Narodowe Centrum Badań i Rozwoju Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0105/16 PLN 7 711 7 711 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0110/16 PLN 3 846 3 846 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0112/16 PLN 3 692 3 692 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0118/16 PLN 1 358 5 324 Pekao Leasing Sp. z o.o. Bill of exchange agreement Lease contract 37/1991/21 PLN 314 442 Santander Bank Polska S.A. (previously: BZ WBK S.A.) Bill of exchange agreement Framework agreement on financial market transactions PLN 23 500 23 500 Bank Polska Kasa Opieki Spółka Akcyjna Bill of exchange agreement Framework agreement on financial market transactions PLN 50 000 35 000 BNP Paribas Bank Polska S.A. Bill of exchange agreement Framework agreement on financial market transactions PLN 26 600 26 600 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 63 Note 34. Lease and sublease contracts Information on the depreciation of leased assets is presented in Note 3. Interest expense on lease contracts is presented in Note 5. Information on additions to right-of-use assets and the carrying value of right-of-use assets as at the end of the reporting period by category of an underlying asset is presented in Note 11. Note 49 provides information on the total cash outflows from leases. Lease liabilities Present value of payments 31.12.2022 31.12.2021 Within one month 98 58 From one to three months 445 179 From three months to one year 1 245 477 From one to five years 5 171 938 More than five years 13 712 13 819 Present value of lease payments, including: 20 671 15 471 short-term 1 788 714 long-term 18 883 14 757 * restated data Gross lease commitments (before deduction of finance costs) 31.12.2022 31.12.2021 Within one month 187 218 From one to three months 714 400 From three months to one year 1 659 440 From one to five years 6 977 2 071 More than five years 24 006 24 387 Total 33 543 27 516 short-term 2 560 1 058 long-term 30 983 26 458 * restated data Income received through subleasing of right-of-use assets 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Revenue 39 40 Costs 39 40 Income - - Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 64 Lease and sublease contracts as at 31.12.2022 Leased assets Lessor Contract no. Cost Opening balance (currency) Currency Agreement expiry date Liabilities as at the balance sheet date Terms of extension or possibility of purchase Lease contracts Passenger car Pekao Leasing Sp. z o.o. 37/1991/21 614 614 PLN 2023-12-14 267 The lessee has the right to purchase the subject matter of the lease – according to the contract, the net residual value is PLN 135 thousand. Passenger car BMW Financial Services Polska Sp. z o.o. LO/40953/0421 377 377 PLN 2023-04-08 161 The lessee has the right to purchase the subject matter of the lease – according to the contract, the net residual value is PLN 135 thousand. Passenger car Carefleet S.A. UG20002163 118 118 PLN 2023-08-06 105 The lessee has the right to purchase the subject matter of the lease – according to the contract, the net residual value is PLN 85 thousand. Passenger car Sobiesław Zasada Automotive Sp. z o.o. Spółka jawna L4 10439 622 622 PLN 2024-11-15 374 The lessee has the right to purchase the subject matter of the lease – according to the contract, the net residual value is PLN 134 thousand. Jagiellońska 74 – plots 12 and 13 State Treasury Notarial Deed of 31.10.2019 8 623 8 623 PLN 2089-12-05 8 440 The lessee does not have the right to buy back the subject matter of the lease Jagiellońska 74 – plot 14 Capital City of Warsaw Notarial Deed of 31.10.2019 1 468 1 468 PLN 2100-04-12 1 444 The lessee does not have the right to buy back the subject matter of the lease Jagiellońska 76 State Treasury Notarial Deed of 31.12.2018 4 449 4 449 PLN 2089-12-05 4 345 The lessee does not have the right to buy back the subject matter of the lease Kraków Office Prestige Property Group Sp. z o.o. Rental contract dated 20.07.2016 with subsequent annexes 3 715 864 EUR 2025-05-31 2 798 The lessee does not have the right to buy back the subject matter of the lease Wrocław Office Cavatina SPV 12 Sp. z o.o. Rental contract dated 04.11.2022 2 702 576 EUR 2027-10-31 2 737 The lessee does not have the right to buy back the subject matter of the lease Parking at ul. Jagiellońska 78 Sokołowo Sp. z o.o. D20001730 with subsequent annexes 174 174 PLN 2023-04-30 27 The lessee does not have the right to buy back the subject matter of the lease Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 65 Sub-lease contracts Parking at ul. Jagiellońska 78 CD PROJEKT S.A. Contract No. WPA 469/17 dated 31.07.2017, with subsequent annexes 79 79 PLN 2023-04-30 27 The lessee does not have the right to buy back the subject matter of the lease Total 22 783 20 671 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 66 Leases of low-value assets and short-term leases The Company concluded lease contracts for office equipment (multifunctional photocopiers, kitchen appliances) and residential premises which potentially meet recognition criteria for leases under the new IFRS 16. However, the Company considered these contracts to be short-term leases and leases of low-value assets and decided not to apply the new requirements for leases to these assets, as permitted by paragraph 5 of the standard. In such cases, lease payments are charged to costs of the period to which they relate, either on a straight-line basis or in some other systematic way that reflects the distribution of costs over the life of the contract (information on the cost of these leases incurred in the period from 1 January to 31 December 2022 is included in Note 3). As at 31 December 2022 and 31 December 2021, future minimum payments in respect of irrevocable short-term leases and leases of low-value assets were as follows: 31.12.2022 31.12.2021 Up to 1 year 459 118 From 1 to 5 years 334 149 More than 5 years - - Total 793 267 Note 35. Deferred income 31.12.2022 31.12.2021 Subsidies 5 490 8 224 Animation Excellence (GameINN) 1 385 1 846 City Creation (GameINN) 2 776 3 701 Seamless Multiplayer (GameINN) - 905 Cinematic Feel (GameINN) 1 329 1 772 Deferred income 13 208 21 221 Sales relating to future periods 13 173 21 186 Rental of company phones 35 35 Total deferred income, including: 18 698 29 445 short-term 15 032 23 042 long-term 3 666 6 403 Sales related to future periods include royalty income received or receivable from pre-orders completed by players as part of the digital distribution of PC games with a release date in future periods, royalty advances received or receivable from publishers and distribution partners, and advances on goods received from customers. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 67 Note 36. Provision for retirement and similar benefits 31.12.2022 31.12.2021 Provision for retirement and disability bonuses 348 373 Total, including: 348 373 short-term 9 5 long-term 339 368 The main assumptions adopted by the actuary as at the reporting date for the calculation of the provision are as follows: 31.12.2022 31.12.2021 Discount rate (%) 6.87 3.41 Expected inflation rate (%) 6.87 3.41 Employee turnover rate (%) - Age average 12% – 34 years 11.6% – 34 years Expected salary growth rate (%) 45% – year 2023; 6% – subsequent years 10% – years 2022 – 2023; 6% - subsequent years CSO mortality tables from the year 2021 2020 Probability of disability during the year 0.1% 0.1% Using statistical methods, the actuary built and calibrated a Multiple Decrement model of employee mobility for the Company. Historical data provided by the Company was used to calibrate the model. Based on publicly available statistical data and actuarial studies, the mobility rate was assumed to decrease with age. The valuation model shows significant sensitivity to changes in mobility parameters and should therefore be continuously reviewed and updated for subsequent estimates. Change in provisions for retirement and similar benefits Provisions for retirement and disability bonuses Total As at 01.01.2022 373 373 Provision released 25 25 As at 31.12.2022, including: 348 348 short-term 9 9 long-term 339 339 Provisions for retirement and disability bonuses Total As at 01.01.2021 380 380 Provision released 7 7 As at 31.12.2021, including: 373 373 short-term 5 5 long-term 368 368 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 68 Note 37. Other provisions 31.12.2022 31.12.2021 Provision for liabilities, including: 93 819 81 528 provision for costs of performance-related and other remuneration 67 121 44 714 provision for costs of the audit and review of the financial statements 137 102 provision for other costs 26 561 36 712 Total, including: 93 819 81 528 short-term 83 221 76 160 long-term 10 598 5 368 Change in other provisions Provision for returns Provision for costs of performance- related and other remuneration Other provisions Total As at 01.01.2022 - 44 714 36 814 81 528 Provisions recorded during the year - 67 121 57 001 124 122 Provisions utilized/released - 44 714 67 117 111 831 As at 31.12.2022, including: - 67 121 26 698 93 819 short-term - 67 121 16 100 83 221 long-term - - 10 598 10 598 Provision for returns Provision for costs of performance- related and other remuneration Other provisions Total As at 01.01.2021 194 537 246 278 34 131 474 946 Provisions recorded during the year 42 635 46 880 94 956 184 471 Provisions utilized/released 237 172 248 444 92 273 577 889 As at 31.12.2021, including: - 44 714 36 814 81 528 short-term - 44 714 31 446 76 160 long-term - - 5 368 5 368 * restated data Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 69 Note 38. Information on financial instruments Fair values of specific classes of financial instruments The Management Board of the Company analysed specific classes of financial instruments. Based on the analysis, it was concluded that the carrying amounts of the instruments does not materially differ from their fair values, as at both 31 December 2022 and 31 December 2021. 31.12.2022 31.12.2021 LEVEL 1 Assets measured at fair value Assets measured at fair value through other comprehensive income 243 091 228 661 bonds issued by foreign governments – EUR 25 111 24 517 bonds issued by foreign governments – USD 217 980 204 144 LEVEL 2 Assets measured at fair value through profit or loss Derivatives 7 809 - currency forwards – EUR 1 249 - currency forwards – USD 6 560 - Private equity interests in the gaming sector 2 556 - private equity interests in the gaming sector – SEK 1 085 - private equity interests in the gaming sector – USD 1 471 - Liabilities measured at fair value through profit or loss Derivatives - (17 906) currency forwards – EUR - (455) currency forwards – USD - (17 451) * restated data Financial Instruments measured at fair value are classified to 3-stage fair value hierarchy: Level 1 – quoted prices in active markets for identical assets or liabilities. Level 2 – fair value based on observable market data. Level 3 – fair value based on market data that is not observable in the market. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 70 Financial assets – classification and measurement 31.12.2022 31.12.2021 Financial assets measured at amortized cost 972 990 993 036 Other non-current receivables 383 373 Trade receivables 164 708 123 821 Cash and cash equivalents 237 073 345 795 Bank deposits over 3 months 337 330 265 000 Treasury bonds and bonds guaranteed by the State Treasury 232 757 248 755 Loans granted 739 9 292 Financial assets measured at cost 53 566 43 447 Investments in subordinated entities 53 566 43 447 Assets measured at fair value through other comprehensive income 243 091 228 661 Bonds issued by foreign governments 243 091 228 661 Financial assets measured at fair value through profit or loss: 10 365 - Derivative financial instruments 7 809 - Private equity interests in the gaming sector 2 556 - Total financial assets 1 280 012 1 265 144 Financial liabilities – classification and measurement 31.12.2022 31.12.2021 Financial liabilities measured at amortized cost 60 258 31 499 Trade payables 39 587 16 028 Other financial liabilities in respect of lease 20 671 15 471 Financial liabilities at fair value through profit or loss - 17 906 Derivative financial instruments - 17 906 Total financial liabilities 60 258 49 405 * restated data In accordance with the requirements of IFRS 9 Financial Instruments, the Company analysed the business model for managing financial assets and examined the characteristics of contractual cash flows for each component of the bond portfolio, and concluded that:  the purpose of investments in domestic and foreign Treasury bonds and domestic bonds guaranteed by the Polish State Treasury is to hold them to maturity and to collect contractual cash flows;  investment mandates for managing the foreign bonds portfolio allow selling bonds before maturity as part of the adopted strategy;  all bonds purchased meet the SPPI test. As a result of the analysis conducted, purchased bonds were classified into two financial asset management model which differ in terms of the entity managing the bond portfolio. Polish Treasury bonds and bonds guaranteed by the Polish State Treasury are measured at amortized cost, because they are held to collect contractual cash flows. Foreign Treasury bonds are measured at fair value through other comprehensive income, because of the investment mandate which allows the possibility of the portfolio being managed by an Asset Manager. In accordance with the requirements of IFRS 13 Fair Value Measurement, the Company analysed the valuation of financial instruments measured at amortized cost in the consolidated statement of financial position to determine their fair value and their classification in the fair value hierarchy. Listed debt securities were classified as Level 1. These are State Treasury Bonds and bonds secured with a guarantee by the State Treasury, the fair value of which was determined on the basis of the market valuation provided by the brokerage firm under the applicable brokerage services agreement. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 71 31.12.2022 31.12.2021 LEVEL 1 Fair value of bonds measured at amortized cost 219 713 240 753 Treasury bonds and bonds guaranteed by the State Treasury 219 713 240 753 Other financial assets and liabilities have been classified as Level 3. With reference to equity shares in other entities, the Company estimates the fair value of the shares held using the method of forecasting the future cash flows to be generated by a cash-generating unit, and requires determining a discount rate to be used in order to calculate the present value of these cash flows. Where appropriate, the Company adopts historical cost as an acceptable approximation of fair value. The Company did not measure the fair value of trade receivables and payables, cash and cash equivalents, bank deposits over 3 months and loans granted at variable interest rates as their carrying amount is considered by the Company to be a reasonable approximation of fair value. There were no movements between the Levels in the fair value hierarchy in the Company during the reporting period and the comparative period. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 72 Gains and losses on financial assets and liabilities 01.01.2022 – 31.12.2022 Financial assets measured at amortized cost Financial assets measured at cost Financial assets and liabilities measured at fair value through profit or loss Financial assets measured at fair value through other comprehensive income Financial liabilities measured at amortized cost Total Trade receivables Treasury bonds and bonds secured with a guarantee by the State Treasury Loans granted Cash and cash equivalents and bank deposits over 3 months Investments in subordinated entities Derivative financial instruments Foreign bonds Other financial liabilities Interest income/(expense) - 7 778 234 25 481 - - 8 184 (546) 41 131 Write-downs recorded (18) - - - - - - - (18) Write-downs released 11 - - - - - - - 11 Gains /(losses) on disposal of debt instruments - - - - - - 22 752 - 22 752 Commission and fees on purchase of debt instruments - - - - - - (326) - (326) Measurement of forward contract - - - - - (2 172) - - (2 172) Measurement of shares in related entities - - - - (30 171) - - - (30 171) Measurement of foreign bonds - - - - - - (12 724) - (12 724) Total gains/(losses) (7) 7 778 234 25 481 (30 171) (2 172) 17 886 (546) 18 483 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 73 01.01.2021 – 31.12.2021* Financial assets measured at amortized cost Financial assets measured at cost Financial assets and liabilities measured at fair value through profit or loss Financial assets measured at fair value through other comprehensive income Financial liabilities measured at amortized cost Total Trade receivables Treasury bonds and bonds secured with a guarantee by the State Treasury Loans granted Cash and cash equivalents and bank deposits over 3 months Investments in subordinated entities Derivative financial instruments Foreign bonds Other financial liabilities Interest income/(expense) - 1 084 205 68 - - (550) (464) 343 Write-downs recorded (12) - - - - - - - (12) Write-downs released 6 - - - - - - - 6 Gains /(losses) on disposal of debt instruments - - - - - - (1 436) - (1 436) Commission and fees on purchase of debt instruments - - - - - - (364) - (364) Measurement of forward contract - - - - - 2 271 - - 2 271 Measurement of shares in related entities - - - - (1 668) - - - (1 668) Measurement of foreign bonds - - - - - - 4 342 - 4 342 Total gains/(losses) (6) 1 084 205 68 (1 668) 2 271 1 992 (464) 3 482 * restated data Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 74 Financial risk management objectives and policies Credit risk Risk description: The Company is exposed to credit risk in connection with sales with deferred payment, royalty income customarily reported and settled after the end of the period for which the royalties are due, advance payments and also in connection with cooperation with banks or Treasury bond issuers. There are instances where the concentration of sales to the largest customers exceeds 10% of the Company’s total sales revenue. Actions taken: I n order to reduce the credit risk related to buyers, the Company is constantly monitoring the settlement of receivables and collection of difficult cases is outsourced to external specialized entities. As part of its efforts to mitigate the credit risk of financial institutions, the Company works with several banks, diversifying the allocations of its cash and bank deposits, both by entity and geography. In addition, in accordance with the policy adopted in March 2022, the Company may invest part of its financial reserves in the following types of bonds:  domestic Treasury bonds of the Republic of Poland;  domestic bonds secured with a guarantee of the State Treasury of the Republic of Poland;  foreign Treasury bonds issued by countries with the rating not lower than Aa3 according to Moody’s rating agency;  foreign bonds secured with a guarantee of countries with the rating not lower than Aa3 according to Moody’s rating agency. These bonds are highly liquid securities, which allows the Company to sell them at any time before maturity. Liquidity risk Risk description: Inadequate capital and liquidity risk management may generate liquidity risk resulting in delays or the inability to settle liabilities. Actions taken – managing liquidity risk: Capital and liquidity risk management at the Company is aimed at ensuring the financing of its activities, including the long-term investment projects implemented by the Company. The pillars of liquidity risk management are as follows:  constantly maintained and updated short-term and long-term cash flow forecasts;  periodic verification, based on cash flow forecasts, of the achievement of liquidity risk management targets in the medium term, for example, one year after the release of the Company’s next major production;  maintaining its own financial reserves – the Company has no external interest-bearing debt from loans, borrowings or bonds;  the management of financial reserves (held in the form of cash, bank deposits, domestic and foreign Treasury bonds) in the Company is carried out taking into account the maturity dates of the individual instruments, the ratings of the banks or issuers of the Treasury bonds purchased, the interest rates or yields of the investments concerned and always respecting the principle of diversification in the allocation of the accumulated financial reserves (both by entity and geography). As at 31 December 2022, CD PROJEKT S.A. held bank deposits with a carrying amount of PLN 573 920 thousand. Maturity of the deposit Carrying amount Quarter 1 of 2023 337 490 Quarter 2 of 2023 229 070 Quarter 3 of 2023 7 360 Total carrying amount 573 920 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 75 As at 31 December 2022. CD PROJEKT S.A. held Treasury bonds with a carrying value of PLN 475 848 thousand. Bonds by country of issuer at 31.12.2022 S&P Fitch Moody’s Carrying amount Poland A- A- A2 232 757 USA AA+ AAA Aaa 186 439 Germany AAA AAA Aaa 35 316 Canada AAA AA+ Aaa 10 695 Finland AA+ AA+ Aa1 10 641 Total carrying amount 475 848 Bond portfolio as at 31.12.2022 by instrument maturity Redemption date of purchased bonds as at 31.12.2022 Carrying amount 2023 87 433 2024 106 844 2025 94 053 2026 159 857 2027 27 661 Total carrying amount 475 848 Currency risk Risk description: Due to the global nature of the Company’s business, where the majority of revenue is generated in foreign currencies, it is exposed to the risk of sudden changes in exchange rates, including in particular the risk of the strengthening of the Polish zloty. The majority of publishing and distribution contracts to which CD PROJEKT S.A. is a party as the game developer are based on settlement in foreign currencies – mainly in USD and EUR. Therefore, a weakening of the USD or EUR exchange rate in relation to PLN is an undesirable scenario for the Company, resulting in a reduction of sales revenue. The Company also purchases goods and services in transactions settled in foreign currencies – in such cases, a weakening of the PLN exchange rate against the relevant currency of the transaction may result in exchange rate differences unfavourable to the Company’s results. Actions taken: The Company seeks to minimize currency exposure in its operations, but nevertheless it is not possible to completely eliminate the currency risk that is incumbent on it. In the case of the risk associated with CD PROJEKT S.A.’s investment in foreign Treasury bonds denominated in the issuer’s currency, exposure to exchange rate fluctuations is mitigated by entering into forward sales of the relevant currency symmetrical to each currency feed to the investment account. The value of forward contracts concluded as at 31.12.2022 is presented in the table below. Forward contract currency Value of forward contracts in foreign currency Value of forward contracts in PLN at forward exchange rates Fair value measurement of forward contracts as at 31.12.2022 in PLN EUR 5 550 27 895 1 249 USD 49 740 228 686 6 560 Total 256 581 7 809 At the same time, in accordance with the policy adopted in March 2022 to diversify the investment of current cash surpluses, CD PROJEKT S.A. may hold up to 15% of total funds in unhedged positions in USD and EUR. As at 31 December 2022, the Company had an unhedged position in foreign currencies amounting to USD 20 463 thousand. and EUR 40 thousand respectively. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 76 Interest rate and inflation risk Risk description: The condition of the global economy, including the effects of global political, economic or military crises or the development of pandemics, may affect the Company’s business, financial position and results. A negative situation related to the impact of a pandemic, either macroeconomic or political, may result in difficulties in access to finance, changes in the prices of goods, services and products, conservative consumer attitudes or the emergence of restrictions on sales opportunities as a consequence of economic sanctions or local regulations introduced. The monetary policy pursued by the National Bank of Poland in shaping the level of interest rates and consequently influencing the level of inflation in Poland may affect the financial income achieved by the Company. As surplus cash is invested in, among other things, bank deposits and Treasury bonds, a drop in interest rates may have a negative impact on the Company’s financial income. Moreover, financial income generated from bank deposits or investments in Treasury bonds in relation to the Company’s cash reserves may not compensate for losses caused by inflation. A change in the level of interest rates affects the carrying value of foreign Treasury bonds and bonds secured with their guarantee, which are measured at fair value through other comprehensive income. An increase in interest rates may also reduce the valuation of the Company’s assets (e.g. shares in related entities, brands) carried out as part of impairment tests, potentially leading to the need to restate their value in the books of account. Actions taken: The Company endeavours to monitor the impact of the global situation on the markets in which it operates and, as far as possible, to adapt its operations as much as possible to the changes observed. The Company mitigates some of the risk associated with interest rate volatility and market inflation expectations by investing a portion of its cash surpluses in deposits, Polish Treasury bonds, bonds secured by the State Treasury guarantee and foreign Treasury bonds of issuers with credit ratings not lower than Aa3 according to Moody’s, while diversifying the maturities of the aforementioned instruments. In addition, some of the Treasury bonds are floating rate securities. In the current macroeconomic situation, while maintaining the safety of accumulated funds, it is in practice not possible to fully protect the value of financial reserves held against the negative effects of inflation. Sensitivity analysis In accordance with the requirements of IFRS 7, Financial Instruments: Disclosures, the Company performed an analysis for the identified market risks showing what impact changes in the relevant risk factors would have on the results of operations and equity. Due to the linear nature of the impact of a change in a factor on the value of the Company’s profit or loss and equity, 5 pps were adopted for the analysis of the impact of changes in exchange rates and 1 pp for the analysis of the impact of changes in interest rates and fair value. The tables below show the sensitivity of profit before tax and equity to the risks identified by the Company over the horizon to the date of the next financial statements, assuming other risk factors remain constant. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 77 Currency risk concerning the net value of foreign currency assets and liabilities as at the end of 2022 Impact on net profit/loss Impact on equity EUR USD Other currencies Total EUR USD Total Exchange rate fluctuations 5% 5% 5% 5% 5% As at 31.12.2022 Exchange rate growth (722) (1 516) (75) (2 313) 1 256 10 899 12 155 Exchange rate decline 722 1 516 75 2 313 (1 256) (10 899) (12 155) As at 31.12.2021 Exchange rate growth (354) (5 562) 842 (5 074) 1 226 10 207 11 433 Exchange rate decline 354 5 562 (842) 5 074 (1 226) (10 207) (11 433) Exposure to currency risk changes during the year depending on the volume of transactions concluded in the currency. Nevertheless, the above sensitivity analysis can be considered representative of the Company’s exposure to currency risk as at the balance sheet date. Interest rate risk relating to interest income on cash held in bank accounts and Polish floating-rate bonds 31.12.2022 31.12.2021 Interest rate fluctuations Impact on net profit/loss Interest rate fluctuations Impact on net profit/loss Interest rate growth 1 p.p. 6 751 1 p.p. 7 197 Interest rate decline 1 p.p. (6 751) 1 p.p. (7 197) Fair value change risk relating to the valuation of foreign bonds carried at fair value, which depends on the volatility of market prices 31.12.2022 31.12.2021 Fluctuation amount Impact on equity Impact on net profit/loss Fluctuation amount Impact on equity Impact on net profit/loss Fair value growth 1 p.p. 2 431 104 1 p.p. 2 287 (175) Fair value decline 1 p.p. (2 431) (104) 1 p.p. (2 287) 175 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 78 Note 39. Capital management The principal objective of capital management within the Company is to maintain sound credit rating and safe capital ratios to support the Company’s operating activity and to increase shareholder value. The Company manages the capital structure and introduces changes to it based on changes in economic circumstances. In order to maintain or adjust the capital structure, the Company may pay a dividend to the shareholders, buy back its treasury shares from the market or issue new shares. The Company monitors its capital balances using the leverage ratio, which is calculated as the ratio of net debt to total equity plus net debt. As at 31 December 2022, the Company’s balance of cash and cash equivalents was greater than its trade and other payables, thus the Company had a positive net cash balance. Note 40. Employee benefit schemes Incentive scheme for the years 2016–2019 On 24 May 2016, the General Shareholders’ Meeting of the Company passed a resolution introducing an incentive scheme for the years 2016-2021 for key personnel of the Group. A total of 5 167 500 entitlements were exercisable for eligible persons as a result of the positive result of the verification performed in 2020, of the achievement of the scheme’s objectives for the period 2016-2019. As part of the settlement of the scheme, in 2020 the Company sold to the eligible persons 516 700 treasury shares purchased from the market for this purpose. The remaining part of entitlements was realized in the form of issuing 4 650 800 subscription warrants. By 31 December 2021, the total of 4 618 800 warrants issued had been exercised. In December 2022, as a result of the exercise of the last 32 000 subscription warrants issued under the programme by an eligible person, 32 000 M-series ordinary bearer shares of the Company with a nominal value of PLN 1.00 each were registered in the securities depository maintained by the Polish Central Securities Depository; the shares were registered in the securities account of the aforementioned eligible scheme participant, and thus also the share capital of the Company was increased from PLN 100 738 800 to PLN 100 770 800. These shares were introduced to stock exchange trading on the GPW Main Market after the balance sheet date - as of 28 February 2023. Thus, as at the date of publication of this report, all shares which the eligible persons were entitled to take up based on the subscription warrants granted under the incentive scheme in operation in 2016-2019 had been introduced to trading on the main market. As the 2016–2019 incentive scheme is considered to be completed, the details of the minimum vesting rights awarded under the scheme in previous financial years and their valuation are available in the previous interim financial statements of the Company and the Group. Incentive scheme for the years 2020–2025 Based on the resolutions of the Company’s General Shareholders Meeting of 28 July 2020 and 22 September 2020, another, third issue of the incentive scheme was introduced for 2020-2025. In accordance with the adopted assumptions, a maximum of 4 000 000 entitlements, understood as a conditional right to take up subscription warrants, entitling to take up shares in the Company issued separately as part of a conditional share capital increase, or alternatively to purchase, on preferential terms, the Company’s treasury shares may be granted as part of the implementation of the scheme. Taking up and exercising of rights from the subscription warrants or, as the case may be, purchasing the Company’s shares by the eligible persons will be conditional upon the Company’s determination that the objectives and criteria of the scheme have been met. The scheme includes performance- related objectives (80% of entitlements), market related objectives (20% of entitlements), individual objectives in selected cases and, in each case, the loyalty criterion which applies until the date of determining that the scheme objectives and criteria have been met. As at the date of publication of these financial statements, 2 113 000 of the entitlements granted remained in the incentive scheme for 2020-2050. Assumptions adopted to value the incentive scheme Date of granting the entitlements CDR volatility index WIG volatility index Correlation with WIG index Risk-free rate; Entitlements granted on 30.10.2020 38% 17% 44% 0.7% Entitlements granted on 10.11.2020 38% 17% 44% 0.7% Entitlements granted on 12.08.2021 42% 17% 42% 1.3% Valuation Date During 2020, the Company granted entitlements to participate in the scheme in two tranches. In 2021, additional entitlements were granted once, as set out in the resolution of the Management Board of 10 August 2021. No new entitlements were granted in 2022. The fair value of the entitlements was in each case valued as at the grant date using financial engineering methods and numerical methods (which are a development of the so-called Black-Scholes-Merton model) by a licensed actuary registered in the register of actuaries maintained by the Polish Financial Supervision Authority in accordance with the information in the table above. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 79 Classification of measurement conditions The condition relating to the change in the price of the Company’s shares in relation to the change in the WIG index and the condition that the market price on the exercise date will be above the exercise price have been treated as market conditions. The conditions relating to net profit growth were treated as non-market. The conditions related to completing paperwork (including the correct filing of documents within a certain time limit), loyalty conditions and other conditions unrelated to the share price were treated as non-market conditions. The condition of living to the date of exercising the entitlement rights and other similar conditions were treated likewise. Number of shares at the grant date As at the grant dates in 2020, the Company had 96 120 000 shares in issue. As at the date of granting additional rights in 2021, the Company had 100 738 800 shares in issue. No new entitlements were granted in 2022. Execution of the programme Based on the results achieved in 2020 and 2021 and the assumptions for the subsequent years of the scheme, the Management Board assessed the possibility of achieving the performance targets set in the scheme over the entire period of the scheme’s duration and revised the estimates, considering it most likely that the performance targets would not be achieved over that period. The above assessment remains valid as at the date of publication of these financial statements. On 20 December 2022, the Extraordinary General Meeting of the Company passed the resolution no. 5 concerning the discontinuation of the incentive scheme for the financial years 2020–2025, but as its entry into force was subject to the General Meeting of the Company adopting certain resolutions on introducing a new incentive scheme, which had not taken place by the date of publication of this report, the resolution no. 5 had not yet entered into force. Although the resolution on the introduction of the Incentive scheme for the financial years 2023–2027 was formally adopted, the required majority was not achieved with respect to the resolution necessary for the implementation of this scheme, i.e. the resolution on the issue of subscription warrants and conditional increase in the share capital of the Company. Thus, as at the date of publication of this report, the Company has no actual possibility to implement the Incentive Scheme for the financial years 2023–2027. Changes in the entitlements granted under the 2020–2025 incentive scheme Specification 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Number of entitlements (not in thousands) Exercise price in PLN Number of entitlements (not in thousands) Exercise price in PLN Unrealized as at the beginning of the period 4 000 000 390.59 or 371.06 4 000 000 390.59 or 371.06 Granted but not realized as at the beginning of the period 2 275 000 390.59 or 371.06 2 592 000 390.59 or 371.06 Granted during the year - 390.59 or 371.06 30 000 390.59 or 371.06 Lost during the year 162 000 390.59 or 371.06 347 000 390.59 or 371.06 Not realized as at the end of the period 4 000 000 390.59 or 371.06 4 000 000 390.59 or 371.06 Granted but not realized as at the end of the period 2 113 000 390.59 or 371.06 2 275 000 390.59 or 371.06 Note 41. Transactions with related entities Terms and conditions of transactions with related entities The terms and conditions of intra-group transactions were determined on an arm’s length basis. The essence of this principle is based on the premise that the terms and conditions agreed in transactions between related parties should not differ from those that would be agreed between independent parties in a comparable situation. Controlled transactions entered into by related parties belonging to the CD PROJEKT Group are verified to determine whether the agreed terms of the transactions are similar to the market terms, based on the recommendations and methods provided for in the OECD Guidelines as well as in national legislation. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 80 Transactions with related parties Sales to related parties Purchases from related parties Receivables from related parties Liabilities to related parties 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 31.12.2022 31.12.2021 31.12.2022 31.12.2021 SUBSIDIARIES GOG sp. z o.o. 15 612 14 048 4 968 1 978 2 798 3 411 2 610 232 CD PROJEKT Inc. 314 515 15 156 12 203 43 511 1 185 948 CD PROJEKT Co., Ltd. (liquidated) - - - 6 629 - - - - Spokko sp. z o.o. 1 321 1 417 - - 156 9 113 - - CD PROJEKT RED STORE sp. z o.o. 1 229 1 222 128 243 839 421 19 158 CD PROJEKT RED Vancouver Studio Ltd. 68 - 16 762 2 889 1 694 1 008 2 746 164 The Molasses Flood LLC 6 - 31 213 2 616 742 - 2 579 1 018 MANAGEMENT BOARD Marcin Iwiński 1 18 - - - - 7 20 Adam Kiciński - 4 - - - - 13 5 Piotr Nielubowicz 2 5 - - 2 - 13 - Michał Nowakowski 3 22 - - - - 4 7 Adam Badowski 6 9 - - - 7 6 5 Piotr Karwowski - 1 - - - - 2 - Paweł Zawodny 7 - - - - - - - Jeremiah Cohn 1 - - - - - - - Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 81 Note 42. Remuneration of the senior management and the Supervisory Board Remuneration paid to the Management Board members 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Basic remuneration from the employment relationship 95 62 Remuneration for the functions performed 3 932 1 985 Bonuses and remuneration linked to the previous year’s result 18 301 106 198 Total 22 328 108 245 Remuneration paid to other members of the Company’s key management personnel 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Basic remuneration from the employment relationship 20 362 24 600 Remuneration for the functions performed 516 547 Bonuses and remuneration linked to the previous year’s result 6 721 36 898 Total 27 599 62 045 Remuneration paid to members of the Supervisory Board 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Remuneration for the functions performed 602 481 Total 602 481 Note 43. Number of employees Average number of employees 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Average number of employees 453 384 Total 453 384 Employee turnover 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Number of new employees 165 106 Number of dismissed employees 61 65 Total 104 41 Employment in research and development activities 31.12.2022 31.12.2021 Number of employees 262 195 Total 262 195 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 82 Note 44. Capitalization of borrowing costs Not applicable. Note 45. Tax settlements Tax settlements and other activities regulated by the tax law may be subject to inspections by administrative bodies which are entitled to impose high penalties or sanctions. The lack of reference to established legal regulations in Poland results in ambiguities and inconsistencies in the binding regulations. Frequent differences of opinion as to the legal interpretation of tax regulations, both internally within the state bodies and between the state bodies and enterprises, result in uncertainty and conflict arising. Due to these factors, the tax risk in Poland is considerably higher than that usually existing in countries with better developed tax systems. In accordance with the general rule, tax settlements may be subject to inspections within five years from the end of the calendar year in which tax was paid. Following the fulfilment of the criteria set out in Article 19 of the Act of 30 May 2008 on certain forms of innovation support (consolidated text, Journal of Laws of 2022, item 2474), the Minister of Development and Technology, by decision No. DNP- V.4241.16.2022 of 11 August 2022, maintained the status of a research and development centre granted to the Company by decision No. 4/CBR/18 of 19 June 2018. The status allows the Company to use more broadly the research and development relief provided for in the Act of 15 February 1992 on corporate income tax (consolidated text, Journal of Laws of 2022, item 2587, as amended). With effect from 1 January 2019, provisions were introduced into the Act on corporate income tax granting preferential taxation at the 5% tax rate for qualified income earned by a taxpayer from qualified intellectual property rights. Having met the prerequisites and formal conditions contained in the said legislation, the Company accounts for income (in respect of selected sources of income) taking this tax relief into account. Note 46. Post-balance sheet date events  Issuance of the decision on preliminary approval of a class action settlement in the USA, as reported by the Company in current report no. 1/2023 On 5 January 2023, the Company announced that it has been advised by the law firm representing the Company in the US class action that the US District Court for the District of Central California has issued an order granting preliminary approval of the settlement. The order approves the terms of the settlement relating specifically to the plaintiffs’ complete withdrawal of any claims against the Company and its Management Board members and the payment to the plaintiffs of USD 1 850 thousand by the Company and its insurer, Colonnade Insurance S.A.  Acquisition of the remaining shares in the subsidiary Spokko sp. z o.o. On 31 January 2023, as a result of the Company concluding agreements for the sale of shares with the other shareholders of the subsidiary Spokko sp. z o.o., the Company acquired from those shareholders a total of 135 shares in Spokko sp. z o.o. with a nominal value of PLN 50.00 each, as a result of which the Company became the owner of 100% (i.e. 1089) of shares in that subsidiary.  Introducing 32 000 of the Company’s M-series shares to trading on the main market operated by the Warsaw Stock Exchange and their assimilation with other shares of the Company on the main market, of which the Company informed in current reports no. 5/2023 and 6/2023 On 21 February 2023, the Management Board of the Warsaw Stock Exchange adopted a resolution on admitting and introducing to trading on the GPW Main Market of 32 000 M-series ordinary bearer shares of the Company, pursuant to which these shares (designated with the ISIN code: PLOPTTC00060) were admitted to trading on the main market operated by the WSE. Pursuant to the aforementioned resolution, as well as a statement issued on 23 February 2023 by Krajowy Depozyt Papierów Wartościowych S.A. (the Polish Central Securities Depository), as of 28 February 2023 these shares were listed and assimilated with the other shares of the Company traded on the stock exchange with the ISIN code: PLOPTTC00011. The said shares were issued in connection with the Company’s incentive scheme operating in 2016-2019 and were subscribed for as a result of a participant in the aforementioned scheme exercising his rights under 32 000 subscription warrants.  Registration of the merger between the Company and its subsidiary - CD PROJEKT RED STORE sp. z o.o., about which the Company informed by current report no. 7/2023 On 28 February 2023, the District Court for the Capital City of Warsaw in Warsaw entered in the Register of Businesses the merger through acquisition of the Company, as the surviving company, with its subsidiary CD PROJEKT RED STORE sp. z o.o. with its registered office in Warsaw, as the target company. The merger was carried out in accordance with the merger plan announced on 17 November 2022, i.e. by transferring all the assets of CD PROJEKT RED STORE sp. z o.o. to the Company, without increasing the share capital of the Company and without exchanging shares of the target company for shares of the Company due to the fact that the Company holds 100% of the shares in the target company. The merger was intended to simplify the structure of the CD PROJEKT Group in view of the plans to continue the existing activities of the target company in cooperation with a specialized external entity. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 83  The decision to create a write-down relating to the Sirius Project, which the Company announced in current report no. 8/2023 On 20 March 2023, the Company’s Management Board announced that it has decided to recognize an impairment charge in its books of account in relation to the expenditure incurred to date on Project Sirius developed by The Molasses Flood studio. The decision was based on the results of evaluation of the scope and commercial potential of the Sirius Project in its original format and the ongoing work performed to define a new framework for this project. Expenditure on development projects related to Project Sirius incurred until the end of 2022 amounted to PLN 33.4 million. It is charged to the profit or loss of the Company and the CD PROJEKT Group for 2022. Expenditure recognized as at the date of publication of the aforementioned report in the Company’s books of account in January and February 2023 amounted to PLN 9.5 million and will be charged to profit or loss for Q1 2023.  Convening the Extraordinary General Meeting of the Company to which the Company’s current reports no. 9/2023 and 10/2023 relate. On 22 March 2023, the Company’s Management Board convened an Extraordinary General Meeting of the Company for 18 April 2023. The most important items on the agenda of the Meeting will include the adoption of resolutions on the introduction of new incentive schemes in the Company for the years 2023–2027 and the redemption of Treasury shares purchased by the Company as part of the buyback carried out in October 2022, as well as the related reduction of the Company’s share capital. The full content of the draft resolutions was published in current report no. 10/2023. Other information on events after the balance sheet date is included in the Directors’ Report on the operations of the CD PROJEKT Group and CD PROJEKT S.A. for 2022. Note 47. Transactions with entities performing the audits of the financial statements Fees paid or payable for the financial year 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 For the audit of the annual financial statements and the separate financial statements 117 100 For other assurance services, including a review of the financial statements and separate financial statements 85 60 Total 202 160 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 84 Note 48. Explanations to the statement of cash flows 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Cash and cash equivalents reported in the statement of cash flows 237 073 345 795 Cash and cash equivalents in the balance sheet 237 073 345 795 Depreciation and amortization 10 676 12 658 Amortization of intangible assets 1 962 2 730 Depreciation of property, plant and equipment 8 681 9 889 Depreciation of investment properties 33 39 Foreign exchange gains/(losses) arise on the following items: 4 584 (15 118) Foreign exchange gains/(losses) on measurement of bonds 4 506 (15 047) Foreign exchange gains/(losses) on measurement of loans granted as at the balance sheet date 78 (71) Interest and shares in profits comprise: (41 131) (343) Interest on bank deposits (25 481) (68) Interest on bonds (15 962) (534) Interest accrued on loans granted (234) (205) Interest on lease contracts 546 464 (Gains)/losses on investing activities arise on the following items: 44 980 41 323 Proceeds from sale of property, plant and equipment (261) (1 014) Net carrying amount of property, plant and equipment - 878 Net carrying amount of non-current assets scrapped 743 668 Net carrying amount of intangible assets scrapped 296 - Net carrying amount of investment properties scrapped - 51 Impairment write-downs of property, plant and equipment, intangible assets and expenditure on development projects 34 286 20 806 Write-downs of shares in subsidiaries 30 171 1 668 Settlement and measurement of derivative financial instruments 2 172 16 466 Commission and fees on purchase of bonds 326 364 Proceeds from redemption of bonds (202 849) (82 718) Value of bonds purchased 180 096 84 154 Change in provisions results from the following items: (3 651) (307 704) Increase/(Decrease) in provisions for liabilities 12 291 (393 418) Change in provisions for employee benefits (25) (7) Change in provision for costs of performance-related and other remuneration recognized under expenditure on development projects (15 917) 85 721 Change in inventories results from the following items: 3 653 (9 712) (Increase)/Decrease in inventories 3 653 (9 712) Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 85 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Change in receivables results from the following items: (43 660) 1 067 693 Change in current receivables in the balance sheet 17 599 1 067 805 Change in non-current receivables in the balance sheet (10) (341) Change in prepayments for investment properties (79) 9 Income tax settled against withholding tax 36 260 8 197 Withholding tax paid abroad (32 268) (5 858) Adjusted for current income tax (36 260) (8 197) Change in prepayments for development projects (29 002) 6 082 Change in prepayments for property, plant and equipment and intangible assets 100 (4) Change in current liabilities, excluding financial liabilities, results from the following items: 18 175 (57 773) Change in current receivables in the balance sheet (15 311) (18 154) Adjusted for current income tax 22 330 (23 149) Change in financial liabilities 16 832 (16 567) Change in liabilities resulting from purchase of property, plant and equipment (5 092) 118 Change in liabilities resulting from purchase of intangible assets (594) 62 Change in liabilities resulting from purchase of investment properties 10 (10) Adjustment for liabilities with the double entry shown under prepayments and deferred costs - (73) Change in other assets and liabilities results from the following items: (13 736) (13 846) Change in prepayments and accruals in the balance sheet (2 747) 145 Change in deferred income in the balance sheet (10 747) (13 751) Adjusted for prepayments and deferred costs with the double entry in liabilities (242) (240) “Other adjustments” comprise: 8 385 2 277 Costs of the incentive scheme 4 058 (895) Amortization and depreciation written off, reported under cost of sales, consortium settlements and other operating expenses 1 097 3 190 Amortization and depreciation reported under cost of sales and other operating expenses 3 524 - Other adjustments (294) (18) Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 86 Note 49. Cash flows and non-monetary changes resulting from changes in liabilities in financing activities 01.01.2022 Cash flows Non-monetary changes 31.12.2022 Takeover of leased fixed assets Termination of a lease contract Foreign exchange differences Interest accrued Transfer of own shares Adopting a resolution on purchase of treasury shares Adopting a resolution on the payment of dividend Lease liabilities 15 471 (3 192) 8 232 (293) (93) 546 - - - 20 671 Liabilities to shareholders in respect of dividend payment - (100 739) - - - - - - 100 739 - Receivables from eligible persons in the incentive scheme - 822 - - - - (822) - - - Liabilities in respect of purchase of treasury shares - (99 993) - - - - - 99 993 - - Total 15 471 (203 102) 8 232 (293) (93) 546 (822) 99 993 100 739 20 671 01.01.2021 Cash flows Non-monetary changes 31.12.2021 Takeover of leased fixed assets Termination of a lease contract Foreign exchange differences Interest accrued Transfer of own shares Adopting a resolution on purchase of treasury shares Adopting a resolution on the payment of dividend Lease liabilities 16 970 (3 259) 1 236 (18) 78 464 - - - 15 471 Liabilities to shareholders in respect of dividend payment - (503 694) - - - - - - 503 694 - Receivables from eligible persons in the incentive scheme - 2 149 - - - - (2 149) - - - Total 16 970 (504 804) 1 236 (18) 78 464 (2 149) - 503 694 15 471 Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 87 Note 50. Research and development expenditure 01.01.2022 – 31.12.2022 01.01.2021 – 31.12.2021 Salaries and wages 47 256 17 614 Remuneration of associates 59 318 27 020 Capital expenditure, including: 17 953 6 762 Plant and machinery 4 213 4 750 Computer software 12 995 1 859 Intangible assets 745 153 External services 81 247 31 225 Total expenditure on research and development projects 205 774 82 621 The information contained in the Note relates to research as well as development projects, presented in Note 12 under the headings Expenditure on development projects in progress and Expenditure on development projects completed. More information on the research and development projects conducted by the Company has been provided in the Directors’ Report on the operations of the CD PROJEKT Group and CD PROJEKT S.A. for 2022. Representations of the Management Board On the fairness of preparation of the annual separate financial statements In accordance with the requirements of the Regulation of the Minister of Finance of 29 March 2018 on current and periodical information submitted by issuers of securities and conditions for considering as equivalent the information required under the legislation of a non-Member State, the Management Board of the Company declares that, to the best of its knowledge, these annual separate financial statements and comparative data have been prepared in accordance with the accounting policies applicable in CD PROJEKT S.A. and that they reflect in a true, fair and clear manner the Company’s financial position and its results of operations. These separate financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) endorsed by the European Union published and effective as at 31 December 2022, and to the extent not governed by the said standards, in accordance with the Accounting Act of 29 September 1994 and the implementing legislation issued on the basis thereof and to the extent required by Regulation of the Minister of Finance of 29 March 2018 on current and periodical information submitted by issuers of securities and conditions for considering as equivalent the information required under the legislation of a non-Member State. On the entity authorized to audit the fairness of preparation of the annual separate financial statements On 9 March 2022, the Supervisory Board of the Company selected Grant Thornton Polska Prosta spółka akcyjna with its registered office in Poznań, as recommended by the Audit Committee, as auditor to carry out the review of the semi-annual and the audit of the annual financial statements of the Company and its Group for 2022 and 2023. Grant Thornton Polska Prosta spółka akcyjna has been entered on the list of entities authorized to audit financial statements by the Polish Chamber of Statutory Auditors with the number 4055. As stated by the Company’s Supervisory Board: - The audit firm Grant Thornton Polska Prosta spółka akcyjna with its registered office in Poznań and the members of the audit team fulfilled the conditions for the preparation of an impartial and independent report on the audit of the annual separate financial statements of CD PROJEKT S.A. and the consolidated financial statements of the CD PROJEKT S.A. Group for the financial year ending on 31 December 2022, in accordance with the applicable regulations, professional standards and principles of professional ethics; - The CD PROJECT Group complies with the applicable regulations relating to the rotation of the audit firm and the key auditor, as well as mandatory grace periods; - CD PROJEKT S.A. has a policy on the selection of the audit firm and the provision of additional non-audit services, including prohibited services conditionally exempted, to CD PROJEKT S.A. by the audit firm, an affiliate of the audit firm or a member of its network. Separate financial statements of CD PROJEKT S.A. for the period from 1 January to 31 December 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 88 Approval of the financial statements These separate financial statements of CD PROJEKT S.A. were approved for publication by the Management Board of CD PROJEKT S.A. on 30 March 2023 and signed on 30 March 2023 pursuant to Art. 52(2b) of the Accounting Act of 29 September 1994 (consolidated text, Journal of Laws of 2023, item 120, as amended). The financial statements will be subject to approval by the General Meeting of CD PROJEKT S.A. Warsaw, 30 March 2023 Piotr Nielubowicz Krystyna Cybulska Vice-President of the Management Board Chief Accountant 89 90

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