9. Income and expenses

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9.1 Expenses by nature

PLN ’000 Note Year ended
Dec 31 2013		 Year ended
Dec 31 2012
(restated)
Depreciation and amortisation 8 656,065 666,465
Raw material and consumables used   24,223,055 28,191,721
- including exchange differences (1) 31.3 (76,694) 31,196
Services   1,253,948 1,135,525
Taxes and charges   175,888 175,491
Employee benefits expense 9.2 677,053 645,983
Other expenses by nature   160,130 197,513
Merchandise and materials sold   1,752,528 1,320,772
Total expenses by nature   28,898,667 32,333,470
Change in products and adjustments to cost of sales   (444,669) (495,100)
Total   28,453,998 31,838,370
including:      
Cost of sales   26,913,268 30,339,959
Distribution costs   1,106,746 1,051,962
Administrative expenses   433,984 446,449

(1) Exchange differences related to operating activities are recognised in cost of sales.

9.2 Employee benefits expense

PLN ’000 Year ended
Dec 31 2013		 Year ended
Dec 31 2012
(restated)
Current salaries and wages 496,130 483,860
Social security and other employee benefits 151,468 141,980
Length-of-service awards. retirement and other post-employment benefits 29,455 20,143
Total employee benefits expense 677,053 645,983
Change in products and adjustments to cost of sales (8,209) (13,534)
Total 668,844 632,449
including:    
Cost of sales 394,493 365,060
Distribution costs 34,344 32,625
Administrative expenses 240,007 234,764

9.3 Other income

PLN ’000 Note Year ended
Dec 31 2013

Year ended
Dec 31 2012
(restated)
Gain on disposal of non-financial non-current assets   - 16,706 (2)
Grants 30.2 2,075 2,059
Provisions   2,900 -
- provision for deficit in CO2 emission allowances 34 (1,527) -
- other provisions   (1,276) -
- release of provisions for retired refinery installations 30.1 5,077 -
- release of other provisions   626 -
Reversal of impairment losses on receivables 18.1;
31.3		 - 5,012
- reversal of impairment loss   - 8,536
- impairment loss   - (3,524)
Revaluation of estimated provision related to the offshore oil production facility in the YME field in Norway   6,447 -
Compensation   7,988 9,647
Gain on sale of organised part of business   379 -
Reimbursed excise duty   6,143 (1) -
Other   4,405 8,539
Total   30,337 41,963

(1) Including PLN 1,673 thousand under reimbursed excise duty on intra-Community supplies of heavy fuel oil and PLN 3,634 thousand of excise duty on consumption of electricity and fuel additives reimbursed due to exemption from excise duty under Art. 47.1.1 of the Excise Duty Act.

(2) Including PLN 14,469 Grupa LOTOS S.A.'s income from sale of carbon dioxide (CO2) emission allowances.

The Group offsets similar transaction items pursuant to IAS 1 – Presentation of Financial Statements, sections 34 and 35.The Group discloses material items of other income and expense charged to operating profit or loss separately, as presented in the table above.

9.4 Other expenses

PLN ’000 Note Year ended
Dec 31 2013		 Year ended
Dec 31 2012
(restated)
Loss on disposal of non-financial non-current assets   3,098 -
Impairment losses on receivables: 18.1;
31.3		 6,012 -
- impairment losses   7,291 -
- reversal of impairment losses   (1,279) -
Impairment losses on property, plant and equipment and other intangible assets:   17,927 1,064,025
Impairment losses on:   74,200 1,064,025
- YME field assets 13 - 935,247
- Norwegian exploration licences 15 4,744 74,481
- Lithuanian exploration and production licences 15 26,420 14,504
- assets associated with Lithuanian fields   - 12,837
- assets associated with the B-28 field 13 26,842 -
- service stations 13 11,912 -
- the Waterproofing Materials Production Plant assets 13 - 22,840
- other   4,282 4,116
Reversal of impairment losses on:   (56,273) -
- assets related to the B-4 and B-6 fields, contributed to Baltic Gas (1) 13 (48,273) -
- the Waterproofing Materials Production Plant assets 13 (8,000) -
Provisions   - 2,116
- provision for deficit in CO2 emission allowances 34 - 910
- other provisions   - 2,541
- release of other provisions   - (1,335)
Fines and compensation   1,277 2,255
Property damage incurred during ordinary course of business   2,516 3,139
Cost brought forward   2,947 5,498
Charitable donations   2,483 2,277
Other   4,399 5,143
Total   40,659 1,084,453

(1) For more information see w Note 2.

The Group offsets similar transaction items pursuant to IAS 1 – Presentation of Financial Statements, sections 34 and 35.The Group discloses material items of other income and expense charged to operating profit or loss separately, as presented in the table above.

9.5 Finance income

PLN '000 Note Year ended
Dec 31 2013		 Year ended
Dec 31 2012
Dividend received   840 700
Interest   17,361 25,555
- on trade receivables 31.3 5,995 8,804
- on finance lease receivables 31.3 193 287
- on cash 31.3 1,267 1,309
- on deposits 31.3 8,413 14,592
- other   1,493 563
Exchange differences:   - 156,112
- on foreign-currency denominated bank borrowings 31.3 - 167,476
- on foreign-currency denominated intra-Group borrowings (1) 31.3 - (19,503)
- on realised foreign-currency transactions in bank accounts 31.3 - 25,560
- on intra-Group notes (1) 31.3 - (3,454)
- on cash 31.3 - (30,144)
- on investment commitments 31.3 - 14,624
- on other financial assets and liabilities 31.3 - 1,553
Gain on disposal of investments   - 150
Revaluation of financial assets:   112,861 117,772
- valuation of derivative financial instruments 31.3 55,148 159,096
- settlement of derivative financial instruments 31.3 57,713 (41,324)
Provisions   - 1,699
Other   4,100 20
Total   135,162 302,008

(1) According to IAS 21 – The Effects of Changes in Foreign Exchange Rates, foreign exchange gains and losses on intra-group foreign currency transactions are recognised in the Group's net profit or loss.

The Group offsets similar transaction items pursuant to IAS 1 – Presentation of Financial Statements, sections 34 and 35.The Group discloses material items of income and expense charged to profit or loss separately, as presented in the table above.

9.6 Finance costs

PLN ’000 Note Year ended
Dec 31 2013		 Year ended
Dec 31 2012
(restated)
Interest. including:   203,183 230,777
- on bank borrowings 31.3 151,875 169,218
- on non-bank borrowings 31.3 575 817
- on notes 31.3 423 1,607
- on trade payables 31.3 53 88
- on finance lease liabilities 31.3 16,132 20,112
- on factoring arrangements   11,823 18,215
- on other financial liabilities 31.3 125 380
- discount related to provisions for oil production facilities, for land reclamation and other provisions 30.1 15,284 12,344
- discount related to future employee benefit obligations 29.3 6,138 6,544
- other   755 1,452
Exchange differences:   115,541 -
- on bank borrowings 31.3 (8,142) -
- on intra-Group borrowings (1) 31.3 119,223 -
- on realised foreign-currency transactions in bank accounts 31.3 (7,278) -
- on notes (1) 31.3 15,767 -
- on cash 31.3 3,516 -
- on cash blocked in bank accounts 31.3 (15,075) -
- on investment commitments 31.3 7,563 -
- on other financial assets and liabilities 31.3 (33) -
Bank fees   19,358 12,856
Other   4,545 4,790
Total   342,627 248,423

(1) According to IAS 21 – The Effects of Changes in Foreign Exchange Rates, foreign exchange gains and losses on intra-group foreign currency transactions are recognised in the Group's net profit or loss.

The Group offsets similar transaction items pursuant to IAS 1 – Presentation of Financial Statements, sections 34 and 35.The Group discloses material items of income and expense charged to profit or loss separately, as presented in the table above.