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which had been in operation, useful life is established taking into account the number of years (months) of
operation of this property by the previous owner.
The adopted standard useful lives by groups of property, plant and equipment in accordance with the
Classification of the Company's property, plant and equipment are presented below.
Property, plant and equipment group
Useful lives of property, plant and
equipment (years)
on the balance sheet
Structures
and transmitting equipment
3 to 100
Machines and equipment
1 to 40
Buildings
7 to 75
Other
1 to 20
Amortization of property, plant and equipment is accrued on a straight-line basis proceeding from their historical
values and amortization rates calculated based on their useful lives.
Amortization is not accrued on:
Land
plots and natural resources;
Housing assets commissioned prior to January 01, 2006 (similar assets acquired after January
01, 2006 are amortized in accordance with the generally accepted procedure);
Fully amortized assets that are still on the balance sheet;
Assets that are temporarily shutdown for more than three months and during the restoration
period which exceeds twelve months.
Income and expenses on disposal of property, plant and equipment are recognized in the profit and loss
statement within other income and expenses.
Construction in progress includes real estate assets under construction, which has not been put into operation,
equipment to be installed and other investments in non-current assets which are not included in PP&E.
Equipment which does not require installation, stored in the warehouse and intended for assets under
construction are recorded within construction in progress in a separate line.
These items are recognized in the balance sheet line 1150 "Property, plant and equipment".
Interest on borrowings raised for the purposes directly
related to acquisition, construction and/or manufacture of
investment assets, accrued prior to the beginning of utilisation of the assets is included in their historical cost;
that accrued after the beginning of utilisation of the assets are recognized in the statement of financial results
within other expenses.
Interest on borrowings raised for the purposes not related to acquisition, construction and/or manufacture of
investment assets, but actually used to purchase the investment assets are included in the cost of investment
assets in proportion to the share of the above borrowings in the total amount of borrowings raised for purposes
not related to acquisition, construction, manufacture of investment assets.
Income-bearing investments in tangible assets represent PP&E items acquired for leasing out to generate income.
These assets are recognized at their historical cost determined according to the procedure used for general PP&E
items.
Leased PP&E items are recognized in off-balance-sheet accounts at cost specified in the lease
agreement/determined based on the acceptance certificate. If the lease agreement and acceptance certificate do
not specify the cost of these assets, property, plant and equipment are recorded in the off-balance-sheet accounts
at the following values:
Land plots having cadastral value—at their cadastral value;
Other PP&E items—in the amount of lease payments inclusive of VAT under lease agreement
including the repurchase price of the leasing item.
1.5 Financial investments
Investments are accounted for in accordance with the Russian Accounting Standard "Accounting for
investments" (RAS 19/02).
Investments include:
Contributions to the share capital of other entities (including subsidiaries);
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Debt securities (including bonds, promissory notes);
Deposits in credit institutions except for short-term deposits classified as cash equivalents
(paragraph 2.9 of the Notes);
Loans issued to other entities;
Government and municipal securities and other investments.
Investments are initially recognized at their actual cost of acquisition.
The Company's actual costs to acquire investments represent the historical cost of investments purchased at a
charge.
The historical cost of investments in the Company's authorized capital is presented by their monetary value
agreed by the Company's founders, unless otherwise specified by Russian legislation.
Investments, the current market value of which can be determined according to the established procedure, are
recognized on the balance sheet at their current market value as of the end of each reporting period (on a
quarterly basis). The difference between the value of these investments as of the current reporting date and their
prior value is recognized within other income (expenses).
Current market value of the securities which are traded by the institutors of trading is determined at market
prices established at Moscow Exchange (http://moex.com).
Investments for which no current market value is determinable are recorded on the balance sheet at their carrying
(book) value, except for investments for which there are indications that the decline in their value (impairment)
is significant and non-temporary as of the reporting date.
Investments are tested for their impairment once a year as of December 31 of the reporting year, if there are
indications of impairment.
The Company accrues the impairment provision for the amount of difference between carrying (book) value and
estimated value of the investments with regard to investments for which significant and constant impairment
indicators are proved by impairment test. The estimated value of investments is determined based on the data
about
net assets, revenue, composition of expenses, schedule of project financing and other factors.
Despite the fact that well-grounded judgements are applied to determine the estimated value of investments,
there are unavoidable limitations as in any valuation technique. Therefore, the estimated value represents the
Company management’s best estimate based on all the information available as of the reporting date. Future
events will also have an impact on determining the estimated value and impact of such events, which may be of
significance for the Company's accounting statements.
The difference between the historical cost and nominal value of debt securities for which current market value is
not determinable is recognized on a straight-line basis during the period of their circulation and is recognized in
the Company's financial results within other income (expenses). When investments for which current market
value is not determinable are disposed, they are carried at book value of each unit of these investments except for
issuance securities (shares, bonds) which are disposed under FIFO; when investments for which current market
value is determinable under the established procedure are disposed ― based on the latest valuation.
The Company discloses information about
assessment at discounted value, the amount of the discounted value of
debt securities of other related parties and loans issued to them.
Income and expenses associated with investments are recognized within other income and expenses. Interest on
loans issued and other income from investments are recognized in line 1230 "Accounts receivable" of the
balance sheet.
1.6 Inventories
Inventories are accounted for in accordance with the Russian Accounting Standard “Accounting for Inventories”
(RAS 5/01).
Inventories are accounted for at their actual cost of acquisition (production).
If the market value of inventories as of the end of the reporting year is below their historical cost including due
to on-going (long-term) price reduction, the Company makes a provision in the amount of inventory impairment
which is charged against increase in other expenses. Such inventories are recognized on the balance sheet net of
the impairment provision of inventories.
The average cost method is applied to determine the material expenses when writing-off inventories used to
produce goods (provide services).
1.7 Expenses of future periods