Separate financial statements - Шереметьево · 2018-05-21 · These separate financial...

OJSC International Airport Sheremetyevo

Separate financial statements

For the year ended December 31, 2010


Separate financial statements


Contents Independent auditors’ report Separate financial statements Statement of management’s responsibilities for the preparation and approval of the separate financial statements for the year ended December 31, 2010 ........................................ 1 Separate statement of comprehensive income ............................................................................ 2 Separate statement of financial position ..................................................................................... 3 Separate statement of cash flows ................................................................................................ 4 Separate statement of changes in equity ..................................................................................... 5 Notes to the separate financial statements .................................................................................. 6


Notes to the separate financial statements


(Amounts in millions of Russian Roubles unless stated otherwise)

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1. Corporate information International Airport Sheremetyevo was established in 1959 following a Government decree on the transfer of the Airdrome of Military Air Forces to the Head Civil Air Transportation Department. In 1996 International Airport Sheremetyevo was reorganised into open joint stock company International Airport Sheremetyevo (the “Company”). The principal activities of the Company are the management and operation of Airport Sheremetyevo, including service of international and domestic passenger and cargo flights. In addition, the Company leases part of its properties to retail and other businesses operating at the airport premises. As of December 31, 2010 and 2009, the Government of the Russian Federation controlled 100% of the Company. The Company’s headquarters are located in Moscow region at Sheremetyevo airport. 2. Basis of preparation Basis of presentation The separate financial statements of the Company have been prepared in accordance International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The separate financial statements of the Company represent the results and financial position of OJSC International Airport Sheremetyevo and do not include results and financial position of subsidiaries and associates. Preparation of separate financial statements is required by the terms of certain loan agreements. These separate financial statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2010 which are available to the users at the Company’s premises. The separate financial statements are presented in millions of Russian roubles (“RUR”), except where it is specifically stated otherwise. The Company maintains its accounting records in Russian roubles and in accordance with Russian accounting legislation and regulations. The accompanying separate financial statements are based on the underlying accounting records, appropriately adjusted and reclassified for separate financial statements presentation in accordance with IFRS. The separate financial statements have been prepared under the historical cost convention, except for items of property, plant and equipment acquired prior to January 1, 2004, the date of transition of the Company to IFRS, which were stated at deemed cost being the fair value of those assets at that date as determined by an independent appraiser.


Notes to the separate financial statements (continued)

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3. Changes in accounting policy and disclosures In preparation of these separate financial statements the Company followed the same accounting policies and methods of computation as compared with those applied in the previous year, except for the adoption of new standards and revision of the existing standards as of January 1, 2010. New/Revised standards and interpretations adopted in 2010 IFRS 2 Share-based Payment (Revised) The standard has been amended to clarify the accounting for group cash-settled share-based payment transactions. This amendment also supersedes IFRIC 8 and IFRIC 11. The adoption of this amendment did not have any impact on the financial position or performance of the Company. IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) IFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after becoming effective. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results. IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by IFRS 3 (Revised) and IAS 27 (Amended) will affect future acquisitions or loss of control of subsidiaries and transactions IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items The amendment clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations. The Company has concluded that the amendment will have no impact on the financial position or performance of the Company, as the Company has not entered into any such hedges. IFRIC 17 Distribution of Non-cash Assets to Owners This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The interpretation has no effect on either, the financial position nor performance of the Company. Certain amendments to standards following April 2009 Improvement to IFRSs project These amendments clarify wording and remove inconsistencies in the standards. There are separate transitional provisions for each standard.



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3. Changes in accounting policy and disclosures (continued) Standards issued but not yet effective Standards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt those standards when they become effective. IAS 12 Income Taxes (amended) – Deferred Tax: Recovery of Underlying Assets (effective for financial years beginning on or after January 1, 2012) The amendments provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. The Company expects that the adoption of the amended standard will not have a significant impact on its financial position or performance in the period of initial application. IAS 24 Related Party Disclosures (revised) (effective for financial years beginning on or after January 1, 2011) The revision clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government related entities. The Company does not expect a significant impact of the revised standard on its results of operations and financial position in the period of initial application. IAS 32 Financial Instruments: Presentation (amended) – Classification of Rights Issues (effective for financial years beginning on or after February 1, 2010) The amendment alters the definition of a financial liability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rights are given pro rata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, or to acquire a fixed number of the entity’s own equity instruments for a fixed amount in any currency. The Company does not expect a significant impact of the revised standard on its results of operations and financial position in the period of initial application. IFRS 7 Financial Instruments: Disclosures (amended) – Disclosures – Transfers of Financial Assets (effective for financial years beginning on or after July 1, 2011) The International Accounting Standards Board has amended the required disclosures relating to transfers of financial assets. The objective of the amendments is to help users of financial statements evaluate the risk exposures relating to such transfers and the effect of those risks on an entity’s financial position. The Company expects that the adoption of the amended standard will not have a significant impact on its financial position or performance in the period of initial application. IFRS 9 Financial Instruments (effective for financial years beginning on or after January 1, 2013) The standard as issued reflects the first phase of the International Accounting Standards Boards work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities. In subsequent phases, the International Accounting Standards Board will address impairment methodology and hedge accounting. The adoption of the first phrase of IFRS 9 will have an effect on the classification and measurement of the Company’s financial assets and financial liabilities. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.



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3. Changes in accounting policy and disclosures (continued) Standards issued but not yet effective (continued) IFRS 10 Consolidated Financial Statements (effective for financial years beginning on or after January 1, 2013) The standard as issued provides a single consolidation model that identifies control as the basis for consolidation for all types of entities. The standard sets out requirements for situations when control is difficult to assess, including cases involving potential voting rights, agency relationships, control of specified assets and circumstances in which voting rights are not the dominant factor in determining control. In addition IFRS 10 introduces specific application guidance for agency relationships. The standard also contains accounting requirements and consolidation procedures, which are carried over unchanged from IAS 27. IFRS 10 replaces the consolidation requirements in SIC-12 Consolidation - Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. Earlier application is permitted. The Company expects that the adoption of this standard will have no impact on its financial position or performance in the period of initial application. IFRS 11 Joint Arrangements (effective for financial years beginning on or after January 1, 2013) The standard as issued improves the accounting for joint arrangements by introducing a principle-based approach that requires a party to a joint arrangement to recognise its rights and obligations arising from the arrangement. The classification of a joint arrangement is determined by assessing the rights and obligations of the parties arising from that arrangement. There are only two types of arrangements provided in the standard - joint operation and joint venture. IFRS 11 also eliminates proportionate consolidation as a method to account for joint arrangements. IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities—Non-monetary Contributions by Venturers. Earlier application is permitted. Currently the Company evaluates possible effect of the adoption of IFRS 11 on its financial position and performance. IFRS 12 Disclosure of Interests in Other Entities (effective for financial years beginning on or after January 1, 2013) The standard as issued is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. Earlier application is permitted. Adoption of the standard will require new disclosures to be made in the financial statements of the Company but will have no impact on its financial position or performance. IFRS 13 Fair Value Measurement (effective for financial years beginning on or after January 1, 2013) IFRS 13 Fair Value Measurement defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. The standard applies when other IFRSs require or permit fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is measured at fair value in IFRSs or address how to present changes in fair value. Earlier application is permitted. The adoption of the IFRS 13 may have effect on the measurement of the Company’s assets and liabilities accounted for at fair value. Currently the Company evaluates possible effect of the adoption of IFRS 13 on its financial position and performance. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for financial years beginning on or after July 1, 2010) The new interpretation addresses the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability. The interpretation has no effect on either, the financial position nor performance of the Company.



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3. Changes in accounting policy and disclosures (continued) Standards issued but not yet effective (continued) Amendments to IFRIC 14/IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction – Prepayments of a Minimum Funding Requirement (effective for financial years beginning on or after January 1, 2011) The amendment provides guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to recognise a prepayment of pension contributions as an asset rather than an expense. The interpretation has no effect on either, the financial position nor performance of the Company. Improvements to IFRSs (effective for financial years beginning on or after either July 1, 2010 or January 1, 2011) In May 2010 the International Accounting Standards Board issued “Improvements to IFRSs”, primarily with a view to removing inconsistencies and clarifying wording. These are separate transitional provisions for each standard. The document sets out amendments to International Financial Reporting Standards, which are mainly related to changes for presentation, recognition or management purposes terminology or editorial changes. 4. Summary of significant accounting policies The significant accounting policies adopted in the preparation of these separate financial statements are set out below. Investments in subsidiaries and affiliates Investments in subsidiaries, associates and joint ventures are stated at cost less any recognized impairment losses. Historical cost of certain investments made or acquired prior to January 1, 2003 has been restated in accordance with IAS 29 Financial Reporting in Hyperinflationary Economies. Foreign currency translation Russian rouble is the functional currency of the Company and is also the currency in which these separate financial statements are presented. Transactions in currencies other than the functional currency are initially recorded at the spot rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies at the date of financial position are translated into the functional currency at the year-end exchange rate. Exchange differences arising from such translation are included into the separate statement of comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Russian rouble at spot exchange rates ruling at the dates the fair value was determined.



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4. Summary of significant accounting policies (continued) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of sales related taxes. Airport and other traffic charges:

(i) Passenger charges levied on departing passengers;

(ii) Aircraft landing charges levied according to weight;

(iii) Aircraft parking charges based on a combination of weight and time parked;

(vi) Other charges levied for passenger and luggage handling. Revenue from airport and other traffic charges is recognised when the definite services have been rendered. Property and operational facilities:

(i) Rental income is recognised in the separate statement of comprehensive income on a straight-line basis over the term of the lease. Initial direct costs incurred in negotiating an operating lease such as lease incentives granted to a lessor are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income;

(ii) Usage charges made for operational systems (e.g. check-in-desks) are recognised and invoiced on a monthly basis as the services are rendered;

(iii) Other invoiced sales are recognised as the services are rendered. Dividend and interest income:

(i) Dividends from investments are recognised in the separate statement of comprehensive income when the shareholder’s right to receive payment has been established;

(ii) Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts over the expected life of the financial asset to that asset’s net carrying amount.

Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. The Company as a lessee Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised from the commencement of the lease term at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to interest expense.



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4. Summary of significant accounting policies (continued) Leases (continued) Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognised as an expense in the separate statement of comprehensive income on a straight line basis over the lease term. The Company as a lessor Leases where the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. Contingent rents are recognised as revenue in the period in which they are earned. Interest expense Interest expense includes interest payable on borrowings and the interest expense component of finance lease payments is recognised in the separate statement of comprehensive income using the effective interest rate method. Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense when incurred. Property, plant and equipment Property, plant and equipment are stated at cost, or appraised value, as described below. Depreciation is calculated in order to amortise the cost or appraised value (less estimated salvage value where applicable) over the remaining useful lives of the assets. (a) Owned assets and infrastructure assets used by the Company Items of property, plant and equipment are stated at cost, determined on the basis of independent valuation as of January 1, 2004 (“deemed cost”) or the actual cost of acquisition or construction for the assets acquired after that date, less accumulated depreciation and impairment losses. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The Company uses certain items of property plant and equipment, including but not limited to runways, taxi strips, air navigation equipment, etc. (the “Infrastructure”) which are owned by state authorities. Refer to Note 15 for details of accounting for infrastructure assets. The Company leases parts of terminal buildings to other entities, including its related parties. In accordance with IAS 40, if a property has both investment property and non-investment property uses, but no separation (sale or lease-out under finance lease) is possible and where the Company uses only part of a property it owns, utilization of less than 30% is regarded immaterial, which means that the whole property is stated at historical cost and accounted for in accordance with IAS 16.



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4. Summary of significant accounting policies (continued) Property, plant and equipment (continued) (b) Assets under construction Assets under construction comprise costs directly related to the construction of property, plant and equipment including an appropriate allocation of directly attributable variable overheads that are incurred in construction as well as costs of purchase of other assets that require installation or preparation for their use less impairment, if any. Depreciation of these assets, on the same basis as for other property assets, commences when the assets are put into operation. (c) Leased assets At the commencement of the lease term, the owner-occupied property acquired under finance lease (as described above) is recognized at an amount equal to the lower of its fair value and the present value of the minimum lease payments each determined at the inception of the lease. Lease payments are accounted for as described above. (d) Subsequent costs The Company recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Company and the cost of the item can be measured reliably. All other costs are recognised in the separate statement of income as an expense when incurred. (e) Depreciation Depreciation is charged to the separate statement of comprehensive income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Terminal complex 27 years Airfield 17 years Other buildings 28 years Technical equipment and machinery 9 years Vehicles 7 years Other equipment 10 years

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the separate statement of comprehensive income when the asset is derecognised. The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate. Assets held under finance lease arrangements and operating leasehold improvements are depreciated over the shorter of their estimated useful lives and lease terms. Land areas are not depreciated.



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4. Summary of significant accounting policies (continued) Property, plant and equipment (continued) (f) Gain or loss on disposal The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the separate statement of comprehensive income. Intangible assets Intangible assets that are acquired by the Company represent mainly purchased software and licenses and are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the separate statement of comprehensive income on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets are amortised from the date they are available for use. The estimated useful lives for existing assets range from 3 to 5 years. Impairment of non-current assets At each reporting date, the Company reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets have impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the separate statement of comprehensive income. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. Cash and cash equivalents Cash and cash equivalents comprise of cash on hand, balances with banks and short-term interest-bearing deposits with original maturities of no more than three months.



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4. Summary of significant accounting policies (continued) Financial assets Initial recognition and measurement Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss (FVTPL), loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset. The Company’s financial assets include cash and short-term deposits, trade and other receivables, loan and other receivables, quoted and unquoted financial instruments, and derivative financial instruments. Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: Investments available-for-sale Financial assets available-for-sale represent debt and equity instruments that are intended to be held for an indefinite period of time. Such instruments are initially recorded at cost which approximates the fair value of the consideration given and are subsequently measured at fair value, with such re-measurement recognised in other comprehensive income. Where the financial asset is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in other comprehensive income is charged to income. Non-marketable securities that do not have fixed maturities are stated at cost, less allowance for impairment unless there are other reasonable and reliable methods of estimating their fair value. Available-for-sale financial assets are classified as current assets if management intends to dispose them within twelve months of the reporting date. Financial assets at fair market value through profit or loss Investments acquired principally for the purpose of generating a profit from short-term fluctuations in price and those investments specifically designated by management at fair value through profit or loss are classified as financial assets at fair market value through profit or loss. Realised and unrealised gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are included in the income in the period in which they arise. There were no financial assets at fair market value through profit or loss as of December 31, 2010 and 2009.



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4. Summary of significant accounting policies (continued) Held-to-maturity investments Investments in non-derivative financial assets with fixed or determinable payments and fixed maturity that the Company has the positive intent and ability to hold to maturity, other than loans and receivables originated by the Company, are classified as held-to-maturity financial assets. Held-to-maturity financial assets are recorded at amortised cost using the effective interest method, less any impairment, with interest income recognised on an effective yield basis. There were no held to maturity investments as of December 31, 2010 and 2009. Loans receivable Loans receivable are measured at amortised cost using the effective interest rate method. Trade and other receivables Trade and other receivables are stated at their nominal value as reduced by appropriate allowances for impairment of estimated irrecoverable amounts. Receivables with fixed maturities due in more than a year are measured at amortised cost using the effective interest rate method. Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of available-for-sale equity investments, any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income. Financial liabilities The Company recognises financial liabilities on its statement of financial position when it becomes a party to a contractual obligation. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.



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4. Summary of significant accounting policies (continued)

Financial liabilities (continued)

Financial liabilities are classified as fair value through profit or loss where the financial liability is either held for trading or it is designated as FVTPL. Financial liabilities at FVTPL are stated at fair value, with any resulting gain or loss recognised in profit or loss. There were no financial liabilities at fair market value through profit or loss as of December 31, 2010 and 2009.

Other financial liabilities are initially recognised at cost, which is the fair value of the consideration received, taking into account transaction costs. After initial recognition, financial liabilities are carried at amortised cost. The amortised cost of a financial liability is the amount at which the financial liability was measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation of any difference between that initial amount and the maturity amount.

Accounts payable

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, because the expected term of accounts payable is short, the value is stated at the nominal amount without discounting, which corresponds with fair value.

Short-term borrowings

Short-term borrowings comprise the short-term portion of interest-bearing long-term borrowings, i.e. the portion of the loans that is amortised in the coming year, as well as other current interest-bearing liabilities with a term shorter than one year. These liabilities are measured at amortised cost and reported on the settlement date.

Long-term borrowings

Long-term borrowings, i.e. liabilities with a term longer than one year, consist of interest-bearing loans are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method, as of the settlement date.

Effective interest rate method

The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial asset or liability, or, where appropriate, a shorter period.

Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The cost of inventories is based on the average cost principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

Dividends

Dividends are recognised at the date they are declared by the shareholders at a general meeting.

Retained earnings legally distributable by the Company are based on the amounts available for distribution in accordance with applicable legislation and reflected in the statutory financial statements. These amounts may differ significantly from the amounts calculated on the basis of IFRS.



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4. Summary of significant accounting policies (continued) Employee benefits The Company makes contributions for the benefit of employees to the State Pension fund at the statutory rates in force during the year. The contributions are expensed as incurred. Current income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, by the reporting date, in the country where the Company operates and generates taxable income. Current income tax relating to items recognised directly in equity is recognised in equity and not in the separate statement of comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. The Company’s applicable tax rate is the income tax rate of 20% (2009: 20%). Deferred income tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except:

• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.



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5. Significant accounting judgments and estimates Accounting judgments The preparation of separate financial statements in conformity with IFRS requires that management makes judgments, apart from those involving estimates, that have the most significant effect on the amounts recognized in the separate financial statements: Infrastructure used by the Company The Company uses exclusively for its benefits and manages infrastructure which belongs to the Federal State Authorities. Prior to May 2003 the Company directly owned these assets. In May 2003, following the imposed regulation which required Federal Government ownership of such assets, the Company transferred legal title to the infrastructure to Administration of Civil Airports (“ACA”), a federal unitary enterprise, for free and continued to use the assets for its benefits. In 2006 the Company and ACA signed an agreement (“the Agreement”) for indefinite period of time which acknowledged the Company’s rights to use the assets and obliged the Company to maintain the assets in operating condition. In addition, the Agreement imposed a monthly fee for the use of the assets. The fee is subject to the agreement between the parties to the Agreement is contingent on market conditions and changes in a legal environment. Monthly fee payable by the Company to ACA was RUR 16.7 in 2010 (2009: RUR 16.7). Although the Agreement contains certain features of a concession, the Company believes that the arrangement is scoped out of IFRIC 12, Service Concession Arrangements, as the grantor does not control the Infrastructure based on the terms of the Agreement. As such, the Company continues to recognize the Infrastructure in its separate statement of financial position following the transfer of legal title to the Infrastructure to the shareholder, which is treated under IFRS as a sale-leaseback transaction that took place in 2003. Changes in fees, which became payable to ACA subsequent to 2003 are contingent rents and charged as expenses in the periods in which they are incurred. Estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Useful lives of items of property, plant and equipment The Company assesses the remaining useful lives of items of property, plant and equipment at least at each financial year-end and, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Error”. These estimates may have a material impact on the amount of the carrying values of property, plant and equipment and on depreciation expense for the period. In 2009, the change in estimates of useful lives of property, plant and equipment resulted in a decrease of depreciation expense by RUR 148 as compared to the amount that would have been charged had no change in estimate occurred. No such changes took place in 2010.



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5. Significant accounting judgments and estimates (continued) Income tax Russian tax, currency and customs legislation is subject to varying interpretations and changes occurring frequently. Further, the interpretation of tax legislation by tax authorities as applied to the transactions and activity of the Company may not coincide with that of management. As a result, tax authorities may challenge transactions and the Company may be assessed additional taxes, penalties and interest, which can be significant. In Russia the periods remain open to review by the tax and customs authorities with respect to tax liabilities for three calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods. More details are provided in Note 25. Provisions Provisions are recognised when, and only when, the Company has a present obligation (legal or constructive) as a result of a past event, and it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is significant, the amount of a provision is the present value of the expenditures required to settle the obligation. Allowances The Company makes allowances for doubtful receivables to account for estimated losses resulting from the inability of customers to make required payments. When evaluating the adequacy of an allowance for doubtful accounts, management bases its estimates on the current overall economic conditions, the ageing of accounts receivable balances, historical write-off experience, customer creditworthiness and changes in payment terms. Changes in the economy, industry or specific customer conditions may require adjustments to the allowance for doubtful accounts recorded in the separate financial statements. As of December 31, 2010 and 2009, allowances for doubtful accounts in respect of trade and other receivables have been made in amount of RUR 201 and RUR 255, respectively (Note 11). The Company makes an allowance for obsolete and slow-moving raw materials and consumables and other inventories (Note 12). Contingencies Contingent liabilities are not recognised in the separate financial statements unless they arise as a result of a business combination. Contingences attributed to specific events are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognised in the separate financial statements but are disclosed when an inflow of economic benefits is probable.



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6. Revenue 2010 2009

To airlines Airport and other traffic charges Passenger charges levied on departing passengers 1,847 2,024 Aircraft landing charges levied according to weight 1,273 1,251 Aircraft parking charges based on a combination of weight and time

parked 108 99 Other charges levied for passenger and baggage handling 18 14 Aviation security 325 254 Maintenance and commercial services to airlines 571 633 Other sales to airlines 806 633

Other revenue

Rental income 2,461 2,253 Other services 802 531

8,211 7,692

7. Operating costs 2010 2009

Staff costs Wages and salaries 2,703 2,666 Social insurance costs 559 543

Depreciation and amortisation (Note 15) 1,378 1,234 Materials 446 390 Cost of auto fuel 288 267 State-owned infrastructure assets usage costs 200 176 Taxes other than income tax 326 211 Public utilities 314 256 Cleaning services in airport 240 199 Aircraft servicing 104 96 Repair and maintenance expenses 236 315 Consulting, audit and other services 148 217 Rent payment for land 49 84 Allowance for doubtful debts (16) 109 Insurance expenses 63 73 Aviation security services 17 33 Passengers servicing 53 – Bank charges 6 21 Charity 13 17 Expenses for corporate events 49 82 Other expenses 256 278

7,432 7,267

8. Other gains and losses, net 2010 2009

Gain/(Loss) on disposal of property, plant and equipment 26 76 Gain/(Loss) on disposal of investments (Note 14) 489 (1) Other gains/(losses) 41 (14)

556 61



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9. Income tax

2010 2009

Current income tax expense 171 282 Current income tax benefit relating to adjustments in respect of tax of

previous years (344) (219) Deferred income tax expense relating to origination and reversal of

temporary differences 338 66

165 129

Income before taxation for financial reporting purposes is reconciled to income and expense for the years as follows: 2010 2009

Profit before income tax 917 594

Income tax at statutory income tax rate of 20% 183 119 Adjustments in respect of income tax of previous years (58) (161) Non-deductible expenses and other permanent differences 40 171

165 129

The statutory tax rate effective in the Russian Federation was 20% for the years ended December 31, 2010 and December 31, 2009. Total accumulated temporary differences that arise between the Russian statutory tax base of assets and liabilities and their carrying amounts in the accompanying separate statements of financial position give rise to the following deferred tax effects:

2010 2009

Net liability at the beginning of the year (667) (659) Adjustments in respect of income tax of previous year – 58 Deferred income tax benefit relating to origination and reversal of

temporary differences recognized in the statement of comprehensive income (338) (66)

Net liability at the end of the year (1,005) (667)

Deferred income tax liability, net Property, plant and equipment (1,211) (842) Accounts payable (28) 38 Unused vacation accrual 35 42 Accounts receivable 299 78 Bank loans (12) (14) Financial lease 27 6 Intangible assets (23) 11 Other (92) 14

(1,005) (667)

10. Cash and cash equivalents

2010 2009

RUR denominated cash at banks and on hand 1,051 696 USD denominated cash at banks 549 613 EURO denominated cash at banks 17 7 Other - 2

1,617 1,318



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11. Accounts receivable and prepayments, net

2010 2009

Trade accounts receivable

- RUR denominated 737 779 - foreign currency denominated (mainly in USD) 395 328

Advances given to suppliers 102 64 Other receivables 130 126 Allowance for doubtful trade and other receivables (201) (255)

1,163 1,042 VAT and other taxes recoverable, other than income tax 155 190

1,318 1,232

2010 2009

Allowance for doubtful trade receivables (196) (220) Allowance for doubtful advances given to suppliers (3) (31) Allowance for doubtful other receivables (2) (4)

(201) (255)

Included in the Company’s receivable balance are debtors with a carrying amount of RUR 329 and RUR 318 as of December 31, 2010 and 2009, respectively, which are past due at the respective reporting dates and which the Company still considers to be recoverable (i.e. not impaired). The Company does not hold any collateral over these outstanding balances. As at 31 December, the ageing analysis of trade receivables is as follows:

Total

Neither past due

nor impaired

Past due but not impaired

< 30 days 30–60 days

61–90 days

91–120 days

> 120 days

2010 936 607 25 85 56 135 28 2009 887 569 120 97 30 25 46

Movement in the allowance for impairment of trade and other receivables is as follows:

2010 2009

Balance at the beginning of the year (255) (169) Charged to income 16 (109) Amounts written-off as uncollected 38 23

Balance at the end of the year (201) (255)

12. Inventories

2010 2009

Spare parts (at cost) 132 140 Raw materials and consumables (at cost, net of provision for

obsolescence) 60 78 Auto fuel (at cost) 20 18 Other inventories (at cost, net of provision for obsolescence) 27 22

239 258

The amount of inventories recognised as an expense is RUR 734 (2009: RUR 657) which is included in operating costs in the separate statement of comprehensive income.



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13. Assets held for sale

In September 2010, the Board of Directors announced its decision to dispose certain investments of the Company in subsidiaries and associates which, therefore, are classified as assets held for sale in the amount of RUR 32.

Company name

Place of registration

and operation Activity

Percentage held as of

December 31, 2010


December 31, 2009

CJSC TZK Sheremetyevo Moscow region Fuel trading company 69.0% 69.0%

CJSC Profilactory Moscow region Hotel and catering

services 99.0% 99.0%

CJSC SVT – Avia Moscow region Customs brokerage

services 40.0% 40.0% LLC Air-Food Catering Moscow region Catering 26.0% 26.0%

The Company considered these subsidiaries and associates met the criteria to be classified as held for sale for the following reasons:

• In December 2010, TNK BP won tender held by the Company to sell shares of CJSC TZK Sheremetyevo, under tender conditions TNK BP paid an advance to the Company in the amount of RUR 293;

• In March 2011, shares of CJSC Profilactory were sold to OJSC Lobnenskaya obshegorodskaya stroitelnaya company for RUR 62;

• CJSC SVT – Avia and LLC Air-Food Catering are available for immediate sale and can be sold to a potential buyer in its current condition, the Company scheduled sale of investments in these entities for 2011.

14. Investments in subsidiaries and associates

2010 2009

Investments in subsidiaries 744 628 Investments in associates 609 168

1,353 796

The Company’s principal subsidiary undertakings are:

Company name

Place of registration

and operation Activity


December 31, 2010


December 31, 2009

CJSC Mosleasing Moscow region Leasing of equipment

and vehicles 99.9% 99.9% LLC Sheratop Moscow region Luggage transportation 99.0% 99.0% CJSC VIP –

International Moscow VIP passenger services 51.0% 51.0%

CJSC SVO-Changi Moscow region

Provision of operator services for new

Sheremetyevo terminal 51.0% 51.0% OJSC International

Airport Vladivostok Vladivostok Airport terminal services 52.16% 52.16% CJSC Terminal

Vladivostok Vladivostok Terminal construction 51.38% 99.99% LLC Rusport Moscow region Aircraft ground servicing 51.0% –



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14. Investments in subsidiaries and associates (continued) The Company’s associates, the entities in which the Company holds more than 20% but less than controlling interest are as follows:

Company name

Place of incorporation and operation Activity


December 31, 2010


December 31, 2009

CJSC Aerofirst Moscow region Duty free retail – 33.3% CJSC AeroMASH – AB Moscow region Aviation security 45.0% 45.0% LLC Avia Group Moscow region Business aviation 26.0% 26.0% LLC Air-Food Catering Moscow region Catering 26.0% 26.0%

OJSC Sheremetyevo -4 Moscow region

Servicing international and domestic

passenger and cargo air flights 50.0% 50.0%

LLC Cargo complex Sheremetyevo Moscow region

Direction of cargo complex 25.1% 25.1%

LLC "RN-Sheremetyevo" Moscow region

Aircrafts fueling and storage 49.0% –

All the companies listed above are incorporated in the Russian Federation. 2010 2009

Cost at the beginning of the year 796 173 Additions 599 624 Disposals (10) (1) Reclassification to assets held for sale (32) –

Cost at the end of the year 1,353 796

On October 19, 2009 the Company established a new subsidiary, CJSC Terminal Vladivostok (CJSC TV). The Company contributed RUR 5 to the share capital of that entity which represents 100% of share capital of CJSC TV less one share. CJSC TV was established for construction of a new passenger terminal at International Airport of Vladivostok. In 2010, the Company agreed with State Corporation "Bank for Development and Foreign Economic Affairs" (VEB) to increase charter capital of CJSC TV. TV issued 900,000,000 new shares with par value 1 ruble. The Company acquired 460,000,000 issued shares and VEB acquired 440,000,000 issued shares for cash at par. Thus share of the Company in CJSC TV was reduced to 51.38%. In 2009, the Company completed registration of share issue and issued 275,830,000 of new shares to its sole shareholder in exchange for 274,122,793 shares of OJSC International Airport Vladivostok (“MAV”) with par value or RUR 1 representing a 52.156% ownership interest in that entity. The Company estimated that the fair value on this controlling interest in MAV at the date of exchange was RUR 276. Under agreement dated December 29, 2009 the Company together with LLC Cargo Complex Sheremetyevo, the Company’s associate, and AK Airbridgecargo established a new entity, LLC Rusport. On January 12, 2010 the Company paid its contribution of RUR 0.0051 into the share capital of a newly established subsidiary, which represents 51% ownership.



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14. Investments in subsidiaries and associates (continued) In January 2010, the Board of Directors of the Company approved the issue of additional 603,125,000 ordinary shares with par value of RUR 1 to its parent (Russian Federation) in exchange for 100% less one share of OJSC Aviation Scientific and Technical Centre (“ANTC”). The issue of the shares has been registered in March 2010. The controlling interest in ANTC was acquired with a view of its contribution into share capital of LLC Avia Group, the Company’s associate. In October 2010, the Company contributed all the shares in ANTC to capital of LLC Avia Group. As such, the acquisition of controlling interest in ANTC has not been regarded as a business combination and was accounted for as investment in associate in the amount of RUR 482, which is an estimated fair value of the shares in ANTC at the date of transaction. In December 2010, the Company sold 33.33% share in CJSC Aerofirst to Aeroflot for RUR 500 and recognized gain from this transaction in the amount of RUR 489 (Note 8). 15. Property, plant and equipment

Terminal complex Airfield

Other buildings

Technical equipment

and machinery Vehicles

Other equipment

Capital expenditure Total

Cost

At December 31, 2008 5,013 4,809 2,561 1,507 937 561 5,132 20,520

Additions – 67 45 34 96 20 4,651 4,913 Transfers 572 108 577 93 – 70 (1,420) – Disposals (75) – (366) (32) (53) (34) (166) (726)

At December 31, 2009 5,510 4,984 2,817 1,602 980 617 8,197 24,707

Additions – – 1 78 131 94 1,910 2,215 Transfers 4,078 – 848 3,776 – 195 (8,897) – Disposals (11) – (12) (9) (7) (35) (329) (404)

At December 31, 2010 9,577 4,984 3,654 5,447 1,104 871 881 26,518

Accumulated

depreciation At December 31, 2008 (1,003) (2,045) (558) (662) (506) (448) – (5,222)

Charge for the year (276) (287) (193) (222) (135) (79) – (1,192) Disposals 37 – 23 24 48 27 – 159

At December 31, 2009 (1,242) (2,332) (728) (860) (593) (500) – (6,255)

Charge for the year (344) (325) (201) (329) (111) (33) – (1,343) Disposals 6 – – 7 – 19 – 32

At December 31, 2010 (1,580) (2,657) (929) (1,182) (704) (514) – (7,566)

Net book value

At December 31, 2008 4,010 2,764 2,003 845 431 113 5,132 15,298

At December 31, 2009 4,268 2,652 2,089 742 387 117 8,197 18,452

At December 31, 2010 7,997 2,327 2,725 4,265 400 357 881 18,952

Gross carrying amount of fully depreciated property, plant and equipment that is still in use was RUR 1,601 and RUR 1,332 at December 31, 2010 and 2009, respectively. The amount of borrowing costs capitalised during the year ended December 31, 2010 was RUR 157 (2009: RUR 247). The rate used to determine the amount of borrowing costs eligible for capitalisation was 7.06% (2009: 6.29%), which is the effective interest rate of the specific borrowings.



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15. Property, plant and equipment (continued) Infrastructure assets used by the Company

The movement in infrastructure used but not directly owned by the Company, included in property, plant and equipment, was as follows:

Terminal complex Airfield

Other buildings

Technical equipment

and machinery

Other equipment

Capital expenditure Total

Cost

At December 31, 2008 9 3,236 74 3 1 105 3,428

Additions – – – – – 9 9 Transfers – – 108 6 – (114) – Disposals – – (2) – – – (2)

At December 31, 2009 9 3,236 180 9 1 – 3,435

Additions – – – – – – – Transfers – – (7) – 7 – – Disposals (5) – (47) – (6) – (58) Reclassification to PP&E owned by

the Company – (469) (108) (6) – – (583)

At December 31, 2010 4 2,767 18 3 2 – 2,794

Accumulated depreciation

At December 31, 2008 – (1,852) (13) (3) (1) – (1,869)

Charge for the year – (230) (2) – – – (232) Disposals – – 1 – – – 1

At December 31, 2009 – (2,082) (14) (3) (1) – (2,100)

Transfers – – 1 – (1) – – Charge for the year – (168) (1) – – – (169) Disposals – – 4 – 2 – 6 Accumulated depreciation on objects

reclassified to PP&E owned by the Company – 123 5 – – – 128

At December 31, 2010 – (2,127) (5) (3) – – (2,135)

Net book value

At December 31, 2008 9 1,384 61 – – 105 1,559

At December 31, 2009 9 1,154 166 6 – – 1,335

At December 31, 2010 4 640 13 – 2 – 659

16. Trade and other accounts payable 2010 2009

Trade accounts payable in:

- RUR 680 471 - foreign currencies (mainly in EURO) 39 179

Advances received 420 677 Unused vacation accrual 176 208 Taxes payable other than income tax 307 192 Accounts payable to employees 183 175 Other accounts payable 463 99 Social insurance payable 36 27 Provision for income tax 30 30 Provisions for legal claims 1 2

2,335 2,060



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16. Trade and other accounts payable (continued) Below is the maturity analysis for trade and other accounts payable showing the remaining contractual maturities. The analysis is applied to other payables, excluding advances received, taxes, social insurance payable and provisions. 2010 2009

Due within 30 days 994 546 Due from 30 to 90 days 192 173 Due from 91 to 120 days 7 161 Due after 121 days 348 252

1,541 1,132

17. Interest-bearing loans and borrowings Currency Interest rate 2010 2009

Current interest-bearing loans and borrowings

HSH Nordbank AG / Sberbank (i)

USD 6.96% / 7.51% 339 178 Sberbank

(ii) USD 8.5% - 9.5% 188 188

KFW (iii)

EUR Euribor+3.25% 73 79

Total current interest-bearing loans and borrowings 600 445

Non-current interest-bearing

loans and borrowings HSH Nordbank AG / Sberbank

(i) USD 6.96% / 7.51% 6,199 6,484

Sberbank (ii)

USD 8.5% - 9.5% 959 1,138 KFW

(iii) EUR Euribor+3.25% 147 237

Total non-current interest-bearing loans and borrowings 7,305 7,859

(i) The syndicated long-term loan facility (“the Facility”) maturing in 2020 was received by

the Company in 2009 from Sberbank and HSH Nordbank AG with a purpose of construction and development of an additional wing (the left wing) of Terminal F (including a link to Terminal D), including the purchase of necessary equipment and furniture, engineering and infrastructure works, technical and preparatory works, construction of necessary access and improvement of the adjacent area. As of December 31, 2010 funds received under this facility agreement amounted to USD 222 million. In 2010, the interest rate under this facility was fixed (6.96% for HSH Nordbank tranche and 7.51% for Sberbank tranche). The loan provides for certain covenants in respect of the Company, including financial covenants.

(ii) In 2006 and in 2009 the Company obtained from Sberbank few USD denominated credit lines totaling to USD 51.5 million for the purpose of financing of reconstruction of Terminal B. These credit lines bear interest rate varying from 8.5% to 9.5% per annum and mature in 2016-2018. The Company issued its promissory notes as a collateral under these credit lines with a total nominal value of RUR 1,116 as of December 31, 2010 (2009: RUR 1,116) and pledged its property, plant and equipment with carrying value of RUR 984 as of December 31, 2010 (2009: RUR 212).

(iii) Two long-term loans were obtained by the Company from KFW in 2006 to finance the purchase of special airfield equipment. Total credit limit of these loans is EUR 10 million, the loans bear interest of Euribor+3.25% per annum and mature in 2013. The Company pledged the airport equipment with carrying value of RUR 373 as of December 31, 2010 (2009: RUR 214) to secure the liabilities under those loans.

The Company had no unused credit facilities as of December 31, 2010 and December 31, 2009.



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18. Finance lease liabilities In 2010 the Company concluded several lease agreements under which it has an option to acquire the leased assets at the end of lease term of 5 years. The estimated remaining useful life of the leased assets varies from 3 to 5 years. The leases were accounted for as finance leases in the separate financial statements. The carrying value of the leased assets amounted to RUR 208 and RUR 91 as at December 31, 2010 and December 31, 2009. The leased assets are included in property, plant and equipment in the separate statement of financial position. Future minimum lease payments were as follows at December 31, 2010:

2010

Minimum lease

payments Interest Principal

Not later than one year 99 32 67 Between one and five years 211 45 166

310 77 233

19. Issued capital In 2009 the share capital of the Company was increased by 275,830,000 ordinary shares with par value of RUR 1 issued in exchange for 274,122,793 shares (52.156%) of MAV (Note 14). In January 2010 the Board of Directors of OJSC International Airport Sheremetyevo approved the issue of additional 603,125,000 ordinary shares with par value of RUR 1 to its parent in exchange for 100% less one share of OJSC Aviation Scientific and Technical Centre (OJSC ANTC). The issue of the shares has been registered in March 2010. The Company involved independent appraiser in determining the fair value of OJSC ANTC. As a result the Company determined that fair value of those shares is RUR 482. The Company acquired those shares with a view to contribute them into LLC Avia Group, the Company’s associate (Note 14). 20. Reserve capital According to the Company’s charter, the Company is to maintain a reserve capital through the allocation of 5% of net profit determined under Russian accounting principles. The total amount of the reserve capital may not exceed 5% of the Company’s share capital. The reserve capital may only be used to cover losses of the Company, as well as to redeem issued debt instruments or to purchase treasury shares. In 2010, the reserve capital was increased by RUR 31 (2009: RUR 13). As of December 31, 2010 and 2009, reserve capital was at this maximum level. 21. Retained earnings and dividends In accordance with the Russian legislation, dividends may only be declared to the shareholders of the Company from accumulated undistributed and unreserved earnings as shown in the Company’s Russian statutory financial statements. The Company had approximately RUR 8,545 and RUR 8,086 of undistributed and unreserved earnings as of December 31, 2010 and 2009, respectively. The amount of dividends in respect of 2010 has not been defined yet as there was no decision of ultimate controlling party. In 2010 the Company declared dividends in respect of 2009 in the amount of RUR 234.



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22. Related party transactions The ultimate controlling party of the Company is the Government of the Russian Federation and therefore all companies controlled by the Government of the Russian Federation are treated as related parties of the Company for the purpose of these separate financial statements. In 2010 and 2009 there were no related party transactions other than transactions with the state, state-controlled companies and its subsidiaries and associates. The separate financial statements of the Company include the following balances and transactions with state, state-controlled entities and its subsidiaries and associates: 2010 2009

Current assets Cash and cash equivalents:

State controlled entities 1,616 1,318 Current financial assets:

Subsidiaries and affiliates 70 37 Accounts receivable and prepayments, net:

State controlled entities 401 519 Subsidiaries and affiliates 233 604

Income tax receivable 83 63

2,403 2,541

Non-current assets Non-current financial assets:

Subsidiaries and affiliates 44 60

Total assets 2,447 2,601

Current liabilities Trade and other accounts payable:


Short-term loans: State controlled entities 357 366 Subsidiaries and affiliates – –

Short-term financial lease liabilities: State controlled entities 67 32

1,388 979

Non-current liabilities Long-term loans:

State controlled entities 7,387 7,622 Long-term financial lease liabilities:

State controlled entities 167 94

7,554 7,716

Total liabilities 8,942 8,695



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22. Related party transactions (continued)

2010 2009

Revenue: State controlled entities 2,628 3,044 Subsidiaries and affiliates 966 1,029

3,594 4,073 Interest income:


20 25

Total revenue and other income 3,614 4,098

Expenses Operating costs:

State controlled entities (1,957) (1,586) Subsidiaries and affiliates (310) (329)

(2,267) (1,915) Interest expense:

State controlled entities (115) (116)

Total expenses (2,382) (2,031)

The amounts outstanding to and from state-controlled entities are unsecured, except as disclosed in Notes 16 and 17, and will be settled in cash. No significant expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.

In 2010, the Company acquired 100% less one share of OJSC Aviation Scientific and Technical Centre from Russian Federation and contributed these shares to capital of LLC Avia Group (Note 14).

Transactions with entities under common control

As a part of its normal operations, the Company enters into various transactions with state-controlled and governmental bodies. Majority of such transactions are with the following state controlled companies: OJSC Aeroflot – Russian Airlines (“Aeroflot-RA”) and its subsidiaries, OJSC Vneshtorgbank, OJSC Sberbank.

Compensation of key management personnel

The remuneration of directors and other members of key management (the members of the Management Committee as well as managers of key departments who have significant power and responsibilities on key control and planning decisions of the Company) consisted of short-term benefits including salary and bonuses as well as short-term compensation for serving on the management bodies of the Company. Such amounts are stated before personal income tax but exclude unified social tax. According to Russian legislation, the Company makes contributions to the Russian State pension fund as part of unified social tax for all its employees including key management personnel. Government officials, acting as members of the Board of Directors, do not receive any remuneration from the Company.

2010 2009

Salaries 82 88 Bonus and other performance related payments 74 71 Benefits in-kind 6 5

Total short-term benefits 162 164



32

22. Related party transactions (continued) Pricing policy Pricing policy for the Company’s revenue from airport and other traffic charges and aviation security services is set and controlled by Federal Tariff Service of the Government of Russian Federation. 23. Commitments under operating leases

Future minimum lease payments under non-cancellable operating leases are as follows as of December 31: 2010 2009

Less than one year 51 51 Between one and five years 205 201 More than five years 3,508 3,549

3,764 3,801

The Company leases land from the local State authorities on which the airport complex is located. The leases typically run for an initial period from 25 to 99 years with an option to renew the lease after that date. Lease payments are reviewed regularly to reflect market rentals.

24. Capital commitments

The Company’s capital commitments related to construction of terminals and modernisation of existing assets as of December 31 are disclosed below: 2010 2009

Development of Terminal F of Sheremetyevo airport 364 1,400 Development of northern part of Sheremetyevo airport 575 190 Development of Terminal E of Sheremetyevo airport 113 – Construction of terminal in Vladivostok 189 1,404

1,241 2,994

25. Contingent liabilities and operating risks

Operating environment

Russia continues economic reforms and development of its legal, tax and regulatory frameworks as required by a market economy. The future stability of the Russian economy is largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary measures undertaken by the Government.

The Russian economy is vulnerable to market downturns and economic slowdowns elsewhere in the world. In 2010 the Russian Government continued to take measures to support the economy in order to overcome the consequences of the global financial crisis. Despite some indications of recovery there continues to be uncertainty regarding further economic growth, access to capital and cost of capital, which could negatively affect the Group’s future financial position, results of operations and business prospects.

While management believes it is taking appropriate measures to support the sustainability of the Company’s business in the current circumstances, unexpected further deterioration in the areas described above could negatively affect the Company’s results and financial position in a manner not currently determinable.



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25. Contingent liabilities and operating risks (continued) Environmental matters The enforcement of environmental regulation in Russian Federation is continually evolving. The Company periodically evaluates its obligations under environmental regulations. Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or legislation, cannot be estimated but could be material. In the current enforcement climate under existing legislation, management believes that the Company has met the Government’s federal and regional requirements concerning environmental matters; therefore there are no significant liabilities for environmental damage or remediation. Taxation Russian tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Management's interpretation of such legislation as applied to the transactions and activity of the Company may be challenged by the relevant regional and federal authorities. Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive position in its interpretation of the legislation and assessments and, as a result, it is possible that transactions and activities that have not been challenged in the past may be challenged. As such, significant additional taxes, penalties and interest may be assessed. Management believes that it has paid or accrued all taxes that are applicable. Where uncertainty exists, the Company has accrued tax liabilities based on the management’s best estimate of the probable outflow of resources embodying economic benefits, which will be required to settle these liabilities. As a result of on-site tax audit of the Company covering the period from January 1, 2006 to December 31, 2008 tax authorities claimed additional taxes, fines and penalties in the total amount of RUR 605. The Company initiated the pre-trial dispute with tax authorities and intends to defend its position in the courts. Management believes that the Company’s position is justified and it is not probable that the ultimate outcome of these matters will result in additional losses for the Company. Consequently, the amounts of tax claims being contested by the Company were not accrued in the separate financial statements for the year ended December 31, 2010. Insurance Insurance program of the Company is designed to cover a majority of risks inherent in airport operation without any substantial gaps in coverage. The main operational risks of the Company are covered by property damage policy and airport civil liability policy while other insurance contracts are designed to cover minor frequency losses or to provide additional benefits for employees and to meet current legislation requirements without any major influence to airport business. Property and civil liability of the Company are insured by well known international and Russian insurance companies through coordination of insurance and reinsurance broker. The full coverage insurance value of the property is RUR 15,000 (2009: RUR 12,500). Third party civil liability of the Company owners is insured for the amount of RUR 23,500 (2009: RUR 14,500).



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26. Financial risk management objectives and policies The Company’s principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial instruments is to raise finances for the Company’s operations and capital construction projects. The Company has various financial assets such as trade and other receivables, cash and cash equivalents, other financial assets that arrive directly from its operations. Management of risk is an essential element of the Company’s operations. The Company is exposed to market risk, credit risk and liquidity risk. Market risks Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures, while optimising the return on risk. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company borrows on both a fixed and variable rate basis and has other interest-bearing liabilities, such as finance lease liabilities. The Company does not have any financial assets with variable interest rate. Fair value sensitivity analysis for fixed rate instruments The Company does not account for any fixed rate financial assets or liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect the Company’s profits. The Company does not account for any fixed rate financial assets as assets available for sale. Therefore, a change in interest rates at the reporting date would not affect the Company’s equity.

Cash flow sensitivity analysis for variable rate instruments

In 2009, financial liabilities with variable interest rates were represented by long-term bank loan from Sberbank and HSH Nordbank AG and KFW long-term loan. In 2010, financial liabilities with variable interest rates were represented by KFW long-term loan only. For the years ended December 31, 2010 and 2009 borrowings costs under these loans were capitalised in the cost of qualified assets. Thus, a reasonably possible change in the interest rates at the reporting date would not have material effect on profit or loss.



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26. Financial risk management objectives and policies (continued) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a different currency from the Company’s functional currency). The Company is exposed to currency risk on sales, purchases and loans and borrowings. The Company does not have formal arrangements to mitigate currency risks of the Company’s operations. However, management believes that the Company is secured from currency risks as foreign currency denominated sales are used to partly cover repayments of foreign currency denominated borrowings. The Company does not use any hedging instruments to mitigate foreign exchange risks of its operations. Carrying amounts of the Company’s foreign currency (USD and EURO) denominated monetary assets and liabilities as of the reporting date are as follows: US Dollar EURO

2010 2009 2010 2009

Assets Cash 549 613 17 7 Trade accounts receivable 328 281 67 47

Total assets 877 894 84 54

Liabilities Trade accounts payable 21 141 18 38 Short-term borrowings 527 366 73 79 Long-term borrowings 7,158 7,622 147 237

Total liabilities 7,706 8,129 238 354

Total net position (6,829) (7,235) (154) (300)



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26. Financial risk management objectives and policies (continued) Foreign currency sensitivity The following table demonstrates the sensitivity to a reasonably possible change in the USD and EURO exchange rate, with all other variables held constant, of the Company’s profit before tax. In 2009 and 2010, the Company assessed reasonably possible changes based on the volatility of foreign exchange rates during the reporting periods. The Company’s exposure to foreign currency changes for all other currencies is not material.

Change in USD

rate Effect on profit

before tax Change in EURO

rate Effect on profit

before tax

2010 8.9% (608) 11.05% (17)

(8.9%) 608 (11.05%) 17 2009 14.8% (1,071) 14% (42)

(14.8%) 1,071 (14%) 42

Credit risk Credit risk is the risk that a counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade accounts receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and trade accounts receivable. To manage credit risk related to cash, the Company maintains its available cash, mainly in USD and RUR, in major Russian banks. Management periodically reviews the creditworthiness of the banks in which it deposits cash. The Company has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The carrying amount of accounts receivable, net of provision for impairment, represents the maximum amount exposed to credit risk. Although collection of receivables could be influenced by economic factors, management believes that there is no significant risk of loss to the Company beyond the provision already recorded. The maximum exposure to credit risk is equal to the carrying amount of financial assets, which is disclosed below: 2010 2009

Cash and cash equivalents 1,617 1,318 Trade and other receivables 1,064 1,009 Other financial assets 151 101

2,832 2,428

As of December 31, 2010 40% of the total amount of net trade and other receivables related to the five largest customers of the Company (December 31, 2009: 44%).



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26. Financial risk management objectives and policies (continued) Credit risk (continued) The summary below shows the outstanding balances of top five counterparties as of the respective reporting date: 2010

OJSC Aeroflot-RA 130 CJSC Terminal Vladivostok 112 CJSC Airlines Aerosvit 77 LLC Dufree - Moscow Sheremetyevo 73 CJSC VIP International 38

430

2009

OJSC Aeroflot- RA 149 CJSC TZK Sheremetyevo 97 CJSC Aerofirst 84 CJSC Airlines Aerosvit 62 LLC Aeroexpress 49

441

Fair value of financial instruments The carrying amounts of financial instruments, such as cash, investments and other financial assets, short-term accounts receivable and payable and short-term loans payable approximate their fair value. At December 31, 2010, the Company did not hold any financial instruments classified as financial asset or liability at fair value through profit or loss.

The following table shows financial instruments which carrying amounts differ from fair values. 2010 2009

Carrying amount

Fair Value

Carrying amount

Fair value

Financial liabilities Interest-bearing loans and borrowings

HSH Nordbank AG / Sberbank 6,536 6,507 6,662 5,475 Sberbank 1,149 1,204 1,326 1,378 KFW 220 201 316 295

7,905 7,912 8,304 7,148



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26. Financial risk management objectives and policies (continued)

Fair value of financial instruments (continued) The fair value of fixed-rate bank loans was calculated based on the present value of future principal and interest cash flows, discounted at prevailing interest rates of 7.6% per annum for loans denominated in US dollar as at December 31, 2010 (8.7% per annum for loans denominated in US dollar as at December 31, 2009). Liquidity risk Liquidity risk is the risk that the Company will not be able to settle all liabilities as they fall due. The Company’s liquidity position is carefully monitored and managed. The Company has in place a detailed budgeting and cash forecasting process to ensure that it has adequate cash available to meet its payment obligations. The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments, including interest payments.

Less than 1 month 1 – 3 months 3 -12 months 1-2 years 3-5 years After 5 years Total

2010

Borrowings with fixed rate (principal and interest) 14 344 727 1,250 2,708 5,409 10,452

Borrowings with variable rate (principal and interest) – – 81 78 75 – 234

Trade and other payables 994 192 355 – – – 1,541

Finance lease liabilities 12 11 44 56 110 – 233

1,020 547 1,207 1,384 2,893 5,409 12,460

Less than 1 month 1 – 3 months 3-12 months 1-2 years 3-5 years After 5 years Total

2009

Borrowings with fixed rate (principal and interest) 17 48 230 291 764 438 1,788

Borrowings with variable rate (principal and interest) – 23 420 691 2,900 4,641 8,675

Trade and other payables 546 173 413 – – – 1,132

Finance lease liabilities 9 4 19 25 69 – 126

572 248 1,082 1,007 3,733 5,079 11,721



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26. Financial risk management objectives and policies (continued) Capital risk management The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximising the return to its shareholder through the optimisation of the debt and equity balance. Capital includes equity attributable to the shareholder. The Company’s management reviews the capital structure on a regular basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. The Board of directors reviews the Company’s performance and establishes key performance indicators. In addition, the Company is subject to externally imposed capital requirements (loans and borrowings covenants disclosed in Note 17) which are used for capital monitoring. There were no changes in the objectives, policies and processes during 2010. The Company monitors the compliance of the amount of legal reserve with the statutory requirements and makes appropriations of profits to legal reserve. In addition, the Company monitors distributable profits on a regular basis and determines the amounts and timing of dividends payments. 27. Subsequent events Following tender held by the Company in December 2010 to sell shares of CJSC TZK Sheremetyevo (“TZK”), in February 2011, the Company and TNK BP signed an agreement, under which TNK BP acquired from the Company 43.9% share in TZK for RUR 3,575. As a result, the Company ceased its control over TZK. In January 2011, the Board of Directors of the Company decided to provide RUR 1,925.5 loan to CJSC Terminal Vladivostok to provide CJSC Terminal Vladivostok with funds required to continue construction of a new passenger terminal at International Airport of Vladivostok.

Separate financial statements - Шереметьево · 2018-05-21 · These separate financial...

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