97
96
Report
and consolidated financial statements
Annual
Report
Initial
measurement
•
The frequency, volume and timing of
sales of financial assets
in
prior periods, the reasons for such sales and expectations
about
future sales activity
Individually
significant financial assets are tested
be
subject to enforcement activities in order to comply
with
the Group’s procedures
for recovery of amounts due.
Financial
assets and financial liabilities are initially measured
at
fair value plus or minus correspondingly of any directly
attributable
transaction costs.
for
impairment on an individual basis. The remaining financial
assets
are assessed collectively in groups that share
similar
credit risk characteristics. The Group measures loss
allowances
at an amount equal to lifetime ECLs.
Transfers
of financial assets to third parties in transactions that
do
not qualify for derecognition are not considered sales for this
purpose,
consistent with the Group’s continuing
recognition
of the
assets.
An
impairment loss is reversed if the reversal can be related
objectively
to an event occurring after the impairment loss
was
recognised. For financial assets measured at amortised
cost
the reversal is recognised in profit or loss.
Subsequent
Measurement
When
determining whether the credit risk of a financial
asset
has increased significantly since initial recognition
and
when estimating ECLs, the Group considers
Financial
assets at amortised cost:
Financial
assets – Assessment whether contractual
cash
flows are solely payments of principal
and
interest
Derecognition
of financial assets
These
assets are subsequently measured at amortised cost
using
the effective interest method. The amortised cost
is
reduced by impairment losses. Interest income, foreign
exchange
gain and losses and impairment are recognised
in
profit or loss. Any gain or loss on derecognition
is
recognised in profit or loss.
reasonable
and supportable information that is relevant
and
available without undue cost or effort. This includes both
quantitative
and qualitative information and analysis, based
on
the Group’s historical
experience and informed credit
assessment,
that includes forward-looking information.
A
financial asset (or, where
applicable a part of a financial
asset
or part of a group of similar financial assets)
is
derecognised when:
For the
purposes of this assessment, ‘principal’ is defined
as
the fair value of the financial asset on initial recognition.
‘Interest’
is defined as consideration for the time value
of
money and for the credit risk associated with the principal
amount
outstanding during a particular period of time
and for
other basic lending risks and costs (e.g. liquidity risk
and
administrative costs), as well as a profit margin.
•
The rights to receive cash flows from
the asset have
expired
The
Group assumes that the credit risk on a financial asset
has
increased significantly if it is more than 90 days past
due.
•
The Group retains the right to
receive cash flows
from
the asset, but has assumed an obligation to pay
them
in full without material delay to a third party
under
a “pass through” arrangement, or
Trade and
other receivables are amounts due from customers
for
services performed in the ordinary course of business
and
are stated after deducting the appropriate allowances
for any
impairment.
The
Group considers a financial asset to be in default
when
the debtor is unlikely to pay its credit obligations
to
the Group in full, without recourse by the Group to actions
such
as realising security (if any is held).
•
The Group has transferred its rights
to receive cash
flows
from the asset and either (a) has transferred
substantially
all the risks and rewards of the asset, or (b)
has
neither transferred nor retained substantially all
the
risks and rewards of the asset, but has transferred
control
of the asset
In
assessing whether the contractual cash flows are solely
payments
of principal and interest, the Group considers
the
contractual terms of the instrument. This includes assessing
whether
the financial asset contains a contractual term that
could
change the timing or amount of contractual cash
flows
such that it would not meet this condition. In making
this
assessment, the Group considers:
For the
purpose of the statement of cash flows, cash and cash
equivalents
include cash in hand, cash at bank and short-term
highly
liquid investments with maturity of three months or less
from
the acquisition date that are subject to an insignificant
risk
of changes in their fair value and are used by the Group
in the
management of its short term investments.
Credit-impaired
financial assets
Any
interest in such derecognised financial assets
that
is created or retained by the Group, is recognised
as a
separate asset or liability.
At
each reporting date, the Group assesses whether
financial
assets carried at amortised cost are credit-impaired.
A
financial asset is credit-impaired. when one or more events
that
have a detrimental impact on the estimated future cash
flows
of the financial asset have occurred.
•
Сontingent
events that would change the amount or timing
of cash
flows
Financial
liabilities at amortised cost:
•
Terms that may
adjust the contractual coupon rate, including
variablerate
features
Derecognition
of financial liabilities
Other
financial liabilities are subsequently measured
at
amortised cost using the effective interest method. Interest
expense
and foreign exchange gains and losses are recognised
in
profit or loss. Any gain or loss on derecognition is also
recognised
in profit or loss.
•
Prepayment and extension features
A
financial liability is derecognised when the obligation
under
the liability is discharged or cancelled or expires.
•
Terms that
limit the Group’s claim to cash
flows
from
specified assets (e.g. nonrecourse features)
A
prepayment feature is consistent with the solely payments
of
principal and interest criterion if the prepayment amount
substantially
represents unpaid amounts of principal
and
interest on the principal amount outstanding, which may
include
reasonable compensation for early termination
of the
contract. Additionally, for a
financial asset acquired
at
a discount or premium to its contractual par amount,
a
feature that permits or requires prepayment at an amount
that
substantially represents the contractual par amount
plus
accrued (but unpaid) contractual interest (which may
also
include reasonable compensation for early termination)
is
treated as consistent with this criterion if the fair value
of
the prepayment feature is insignificant at initial recognition.
Evidence
that a financial asset is credit-impaired includes
the
following observable data:
•
Significant financial difficulty of
the debtor
•
It is probable that the debtor will
enter bankruptcy
or
other financial reorganisation or
When
an existing financial liability is replaced by another
from
the same lender on substantially different terms,
or
the terms of an existing liability are substantially
modified,
such an exchange or modification is treated
as
a derecognition of the original liability and the recognition
of a
new liability, and the
difference in the respective carrying
amounts
is recognised in profit or loss.
Impairment
of non-derivative financial assets
•
The
disappearance of an active market for a security
because
of financial difficulties
At
each balance sheet date the Group recognises a loss
allowance
for expected credit losses on financial assets
measured
at amortised cost.
Write-off
The
gross carrying amount of a financial asset is written
off
when the Group has no reasonable expectations
of
recovering a financial asset in its entirety or a portion
thereof.
For individual customers, the Group has
a
policy of writing off the gross carrying amount when
the
financial asset is 3 years without movements past due
based
on Russian legislation. For corporate customers,
the
Group individually makes an assessment with respect
to
the timing and amount of writeoff based on whether
there
is a reasonable expectation of recovery. The Group
expects
no significant recovery from the amount written
off.
However, financial assets that are written off could still
The
loss allowance for financial assets at amortised cost
is
recognised in profit or loss in respondence with a balance
sheet
account reducing the carrying amount of the financial
asset.
Expected credit losses for counterparties, including
banks,
are determined based on historical data of relevant
probability
of default and loss given default. Impairment
on
cash and cash equivalents is measured on a 12-month
expected
loss basis and reflects the short maturities
of
the exposures. The Group considers that its cash and cash
equivalents
have low credit risk based on the external credit
ratings
of the counterparties.
Changes
in cash flows on existing financial liabilities
are
not considered as modification, if they result
from
existing contractual terms, e.g. changes in fixed
interest
rates initiated by banks due to changes in the CBR
key
rate, if the loan contract entitles banks to do so
and
the Group has an option to either accept the revised
rate
or redeem the loan at par without penalty. The
Group
treats
the modification of an interest rate to a current
market
rate using the guidance on floating-rate financial
instruments.
This means that the effective interest rate
is
adjusted prospectively.
The
Group’s financial
liabilities comprise of trade and other
payables
and borrowings. They are classified as current
liabilities
unless there is an unconditional right to defer
settlement
for at least twelve months after the balance sheet
date,
in which case they are classified as long-term liabilities.
