Subject: Re: Topicus: Not Constellation
... the acquisition was purchase accounting, then it converted to equity method, which triggered a revaluation, but there were also derivatives on the position in the mean time which booked a profit...blah blah blah, something along those lines.

In case anybody is a deep enough geek to want a deep dive on that accounting treatment, see below.

But before you read that, the bottom line here is that the total cost of the position was €523,550, they owned 23.14% of Asseco at December 31, Asseco is still a publicly listed company with a market cap (in zloty) that equates to about €3.684 billion, so the market value of Topicus' position is €852,450, which is about €329m *more* than the cost. So despite triggering an "expense" of about €222m on the books for the reasons outlined below, they seem to be doing just fine on the deal so far.

Usually you have to really dig and understand the notes to find the bad stuff. In this case it's more like a treasure hunt. I'm sure it had a pleasant influence on their income taxes last year.

Jim



5. Investments accounted for using the equity method
Investment in Asseco:
On January 31, 2025, the Company purchased 8,300,029 shares in Asseco Poland S.A. (“Asseco”)
representing approximately 9.99% of the issued shares in Asseco. The Asseco shares were acquired at a
price of 85 PLN per share for total consideration of EUR 167,977. Asseco offers comprehensive,
proprietary IT solutions for certain sectors of the economy and is listed on the Polish Warsaw Stock
Exchange (the “WSE”). The Company has made an irrevocable election at the time of initial recognition to
present subsequent changes in fair value in other comprehensive income (“FVOCI”). The Company
designated the Asseco investment as equity securities at FVOCI because the investment in Asseco
represents an investment that the Company intends to hold for the long term. At the time the Company
purchased shares of Asseco, the trading price per Asseco share on the WSE was in excess of the purchase
price of 85 PLN per share. The Company recorded a gain of EUR 32,789 in the statement of income (loss)
at the time of purchase. During year ended December 31, 2025, the Company recorded a gain of EUR
190,618 based on the Asseco share price as at September 25, 2025, the date at which the Company
received the last outstanding regulatory approval for the acquisition of the treasury shares and commenced
the equity method of accounting, within other comprehensive income reduced by transaction costs of EUR
1,659. During the three months ended June 30, 2025, the Company received a dividend of EUR 7,710
from Asseco. The dividend has been included in net income and included in the line item “Finance and
other (income) expenses”.
On February 4, 2025, the Company entered into a binding agreement in respect of the acquisition of
12,318,863 treasury shares of Asseco for 85 PLN/share. These shares represent 14.84% of Asseco’s
issued share capital. The contract to acquire the additional shares of Asseco was a derivative under IFRS
Accounting Standards and had been recorded at fair value. The significant assumption associated with the
valuation of derivative is the blockage discount which includes the unobservable inputs of the percentage
of the block of shares that can be sold relative to the daily trading volume of Asseco shares and the discount
rate. The estimated fair value of the derivative asset decreases as the discount increases. The estimated
fair value of the asset increases as the discount decreases. The key observable input is the share price of
Asseco. As the Asseco share price increases, the fair value of the derivative increases. As the Asseco
share price decreases, the fair value of the derivative decreases. During the year ended December 31,
2025, income of EUR 101,686 was recorded within Finance and other (income) expenses (note 17). The
acquisition of the 14.84% interest in Asseco’s share capital was completed on October 1, 2025, increasing
the Company’s total shareholding to 24.84% and the derivative is no longer presented on the balance sheet.
The fair value of the derivative has been included as part of the carrying value of the total investment in
Asseco.
On September 25, 2025 and subsequent to this date, the Company applied the equity method of accounting
to its existing 9.99% investment in Asseco as a result of its ability to exercise significant influence over
Asseco. The Company elected to record the investment in Asseco at cost under the equity method of
accounting which comprised of the initial investment of EUR 167,977 and transaction fees of EUR 1,659
for a total cost of EUR 169,636. As a result, Topicus reversed previous fair value adjustments and recorded
a loss in the consolidated statement of income of EUR 221,748 for the year ended December 31, 2025.
Under the equity method of accounting, the investment is initially recognized at cost and is subsequently
adjusted to reflect Topicus’ share of profit or loss and other comprehensive income of Asseco. The
Company has elected to use “lag reporting” in relation to its investment in Asseco. The Company will record
its share of profit or loss and other comprehensive income on a “three-month lag” because the concurrent
financial information is impracticable to obtain from Asseco. Due to the complexity and timing of the
investment, the Company is in the process of determining and finalizing the estimated fair value of the net
assets acquired. The provisional purchase price allocation may differ from the final purchase price
allocation, and these differences may be material. Revisions to the allocation will occur as additional
information about the fair value of assets and liabilities becomes available.
The aggregate cost of the investment in Asseco is comprised of the following:
• Cash paid to acquire initial 8,300,029 shares at 85 PLN/share – EUR 167,977
• Cash paid to acquire 12,318,863 shares at 85 PLN/share – EUR 245,269
• Fair value of derivative asset reclassified to investment in affiliate – EUR 101,686
• Transaction fees – EUR 8,618
The initial cost of the investment in Asseco is EUR 523,550.
On February 3, 2025, Topicus announced the signing of a shareholders’ agreement which was entered into
with the Adam Góral Family Foundation governing their cooperation as shareholders in Asseco. Under the
terms of the agreement, certain parties had the right to buy up to 1.7% (1,411,006 shares) of Asseco’s
shares from the Company at a purchase price of PLN 85. The contract was a derivative under IFRS
Accounting Standards and had been recorded at fair value. The key observable input is the share price of
Asseco. As the Asseco share price increases, the fair value of the derivative liability increases. As the
Asseco share price decreases, the fair value of the derivative liability decreases. During the year ended
December 31, 2025, an expense of EUR 37,712 was recorded. On December 4, 2025, the agreement was
exercised for 1.7% (1,411,006 shares) of Asseco and the company received total proceeds of EUR 28,368
and the derivative is no longer presented on the balance sheet. As a result, Topicus’ shareholding
decreased to 23.14% as at December 31, 2025. The Company recorded a dilution gain of EUR 30,106 as
a result of this disposition and has been included in “Finance and other (income) expenses”.