RusHydro Group
Notes to the Consolidated Financial Statements as at and for the year ended
31 December 2015
(in millions of Russian Rubles unless noted otherwise)
15
The retail market rules were approved by Resolution of the Government No. 442 dated 4 May 2013 “On
functioning of retail electricity markets, complete and (or) partial constraint of electricity consumption”
(hereinafter referred to as “the retail market rules”).
In the territories of the constituent regions of the Russian Federation integrated into pricing zones of the
wholesale market electricity is sold at unregulated prices except for electricity sales to population and
equivalent consumer categories.
Electricity is supplied to population and groups of customers equivalent to population at regulated prices
(tariffs) approved by executive authorities of the constituent regions of the Russian Federation in terms of
state tariff regulation.
Regulated prices are established based on forecast of social and economic development of Russian
Federation for the next year approved by the Government. The FTS determines the threshold levels for
regulated tariffs for electricity supplied to population and equivalent consumer categories.
The guaranteeing suppliers sell electricity at unregulated prices within the threshold limits of unregulated
prices determined and applied according to the retail market rules. Electricity sales (supply) companies sell
electricity at unregulated prices. Electricity generators in the retail markets sell electricity at unregulated
prices.
In the territories of the constituent regions of the Russian Federation integrated into non-pricing zones of the
wholesale market for determination of prices for electricity supplied to final customers in the retail markets
principles of prices translation of wholesale market are applied. Translation of prices of wholesale market is
performed for all final customers except for population and equivalent consumer categories.
Translation prices calculated by electricity sales companies according to the Rules of application of the
prices (tariffs) are determined based on regulated tariffs set up for the respective group of customers and
cost of purchase of electricity and capacity by guaranteeing supplier (electricity sales company) in the
wholesale market. Population and equivalent consumer categories pay for electricity under the tariffs set up
by executive authorities of the constituent regions of the Russian Federation.
In the territories of isolated energy systems – sales of electricity to all consumer categories are carried out at
regulated prices approved by the FTS and executive authorities of the constituent regions of the Russian
Federation in terms of state tariff regulation in the territories where such energy systems are located.
Heating market. Operations of the heating market are regulated by Federal Law No.190-FZ “On Heating”
dated 27 July 2010 and Resolution of the Government No. 1075 dated 22 October 2012 “On pricing of
heating supply”.
The Group’s entities that are included into the segment RAO ES East Group are participants on the retail
heating markets in the territories of their presence. Heat energy is supplied on the centralised basis from the
heat power plants and boiling houses operated by the energy systems. And a number of energy systems are
involved in supplies of heat, generating and distributing heat energy, while others – just generate heat
energy.
Heating market provides for:
supply of heat and heat transfer public utilities relating to hot water and heating supply needs;
supply of heat for the entities’ technological needs.
According to the Russian legislation, sales of heat energy are fully regulated.
Prices (tariffs) for heat supplied by utilities for all consumer groups are approved by executive authorities in
the Russian constituent regions responsible for state regulation of prices (tariffs) within the threshold limits of
tariffs approved by the FTS.
Service fee for maintenance of spare heat capacity when there is no heat consumption and fee for
connection to the system of heating supply are also regulated by executive authorities in the Russian
constituent regions responsible for state regulation of prices.
Note 2.
Summary of significant accounting policies
Basis of preparation. These Consolidated Financial Statements have been prepared in accordance with
International Financial Reporting Standards (hereinafter referred to as “IFRS”) under the historical cost
convention, as modified by the financial instruments initially recognised at fair value, revaluation of property,
plant and equipment and available-for-sale financial assets. The principal accounting policies applied in the
preparation of these Consolidated Financial Statements are set out below. These policies have been
RusHydro Group
Notes to the Consolidated Financial Statements as at and for the year ended
31 December 2015
(in millions of Russian Rubles unless noted otherwise)
16
consistently applied to all the periods presented, unless otherwise stated.
Each company of the Group individually maintains its own books of accounts and prepares its statutory
financial statements in accordance with Russian standards of accounting (hereinafter referred to as “RSA”).
The accompanying consolidated financial statements are based on the statutory records with adjustments
and reclassifications made for the purpose of fair presentation in accordance with IFRS.
Functional and presentation currency. The functional currency of the Company and its subsidiaries, and
the Group’s presentation currency, is the national currency of the Russian Federation, Russian Rubles.
Foreign currency translation. Monetary assets and liabilities, which are held by the Group’s entities and
denominated in foreign currencies at the end of the reporting period, are translated into Russian Rubles at
the exchange rates prevailing at that date. Foreign currency transactions are accounted for at the exchange
rates prevailing at the date of the transaction. Gains and losses resulting from the settlement of such
transactions and translation of monetary assets and liabilities denominated in foreign currencies are
recognised in the consolidated income statement.
As at 31 December 2015, the official rate of exchange, as determined by the Central Bank of the Russian
Federation, between Russian Ruble and US Dollar (hereinafter referred to as “USD”) was RR 72.88:
USD 1.00 (31 December 2014: RR 56.26: USD 1.00), between Russian Ruble and Euro was RR 79.70:
EUR 1.00 (31 December 2014: RR 68.34: EUR 1.00).
Consolidated financial statements. Subsidiaries are those investees, including structured entities, that the
Group controls because the Group (i) has power to direct relevant activities of the investees that significantly
affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the investees,
and (iii) has the ability to use its power over the investees to affect the amount of investor’s returns.
The existence and effect of substantive rights, including substantive potential voting rights, are considered
when assessing whether the Group has power over another entity. For a right to be substantive, the holder
must have practical ability to exercise that right when decisions about the direction of the relevant activities of
the investee need to be made. The Group may have power over an investee even when it holds less than
majority of voting power in an investee. In such a case, the Group assesses the size of its voting rights
relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power
over the investee. Protective rights of other investors, such as those that relate to fundamental changes of
investee’s activities or apply only in exceptional circumstances, do not prevent the Group from controlling an
investee. Subsidiaries are consolidated from the date on which control is transferred to the Group
(acquisition date) and are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries other than those
acquired from parties under common control. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interest.
The Group measures non-controlling interest that represents present ownership interest and entitles the
holder to a proportionate share of net assets in the event of liquidation on a transaction by transaction basis,
either at: (a) fair value, or (b) the non-controlling interest's proportionate share of net assets of the acquiree.
Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration
transferred for the acquiree, the amount of non-controlling interest in the acquiree and the fair value of an
interest in the acquiree held immediately before the acquisition date. Any negative amount (“negative
goodwill” or a “bargain purchase”) is recognised in profit or loss, after management reassesses whether it
identified all the assets acquired and all the liabilities and contingent liabilities assumed and reviews the
appropriateness of their measurement.
The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity
instruments issued and liabilities incurred or assumed, including fair value of assets or liabilities from
contingent consideration arrangements but excludes acquisition related costs such as advisory, legal,
valuation and similar professional services. Transaction costs related to the acquisition and incurred for
issuing equity instruments are deducted from equity; transaction costs incurred for issuing debt as part of the
business combination are deducted from the carrying amount of the debt and all other transaction costs
associated with the acquisition are expensed.
Intercompany transactions, balances and unrealised gains on transactions between the Group’s entities are
eliminated; unrealised losses are also eliminated unless the cost cannot be recovered. The Company and all
of its subsidiaries use uniform accounting policies consistent with the Group’s policies.
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