OJSC International Airport Sheremetyevo. Consolidated financial statements

Transcription

1 Consolidated financial statements For the year ended December 31, 2011

2 Consolidated financial statements For the year ended December 31, 2011 Contents Independent auditors report... 1 Consolidated financial statements Consolidated statement of comprehensive income... 3 Consolidated statement of financial position... 4 Consolidated statement of cash flows... 5 Consolidated statement of changes in equity... 6 Notes to the consolidated financial statements... 7

3 Ernst & Young LLC Sadovnicheskaya Nab., 77, bld. 1 Moscow, , Russia Tel: +7 (495) (495) Fax: +7 (495) ООО «Эрнст энд Янг» Россия, , Москва Садовническая наб., 77, стр. 1 Тел: +7 (495) (495) Факс: +7 (495) ОКПО: Independent auditors report To the shareholders of OJSC International Airport Sheremetyevo We have audited the accompanying consolidated financial statements of OJSC International Airport Sheremetyevo and its subsidiaries ( the Group ), which comprise consolidated statement of financial position as at December 31, 2011 and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. A member firm of Ernst & Young Global Limited

4 Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2011, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. June 27, 2012

5 Consolidated statement of comprehensive income For the year ended December 31, 2011 (Amounts in millions of Russian Roubles) Notes Continuing operations Revenue 6 11,415 9,551 Operating costs 7 (11,313) (8,598) Gain on disposal of investments 308 Gain/(Loss) on disposal of property, plant and equipment (155) 34 Profit from operating activities (53) 1,295 Share of profits of associates Interest expense (769) (528) Interest income Impairment of PP&E (45) Foreign exchange gain/(loss), net (921) (79) Other gains and losses, net Profit before income tax from continuing operations (1,519) 849 Income tax 10 (566) (183) Profit for the year from continuing operations (2,085) 666 Discontinued operations Profit for the year from discontinued operations 14 4, Profit for the year 2,172 1,390 Total comprehensive income for the year 2,172 1,390 Attributable to: Equity holders of the parent 2,136 1,131 Non-controlling interests ,172 1,390 The accompanying notes form an integral part of these consolidated financial statements. 3

6 Consolidated statement of financial position As of December 31, 2011 (Amounts in millions of Russian Roubles) Assets Notes Current assets Cash and cash equivalents 11 2,642 1,737 Other financial assets Income tax receivable Accounts receivable and prepayments, net 12 2,109 1,721 Inventories ,062 4,080 Assets classified as held for sale 14 2,076 4,979 8,138 9,059 Non-current assets Investments in associates Other financial assets Intangible assets Advances for acquisition of long-term assets Property, plant and equipment 16 50,764 22,547 52,830 23,854 Total assets 60,968 32,913 Liabilities and equity Current liabilities Accounts payable 17 3,767 2,999 Current portion of finance lease liabilities Interest bearing loans and borrowings 18 9, ,986 3,930 Liabilities directly associated with the assets classified as held for sale 14 2,983 12,986 6,913 Non-current liabilities Interest bearing loans and borrowings 18 30,229 9,374 Finance lease liabilities Deferred income tax liability 10 1,120 1,049 31,525 10,609 Equity Share capital 20 1,790 1,790 Reserve capital APIC Retained earnings 13,449 12,193 15,725 14,079 Non-controlling interests 732 1,312 16,457 15,391 Total equity and liabilities 60,968 32,913 The accompanying notes form an integral part of these consolidated financial statements. 4

7 Consolidated statement of cash flows For the year ended December 31, 2011 (Amounts in millions of Russian Roubles) Notes restated Cash flows from operating activities: Profit/(loss) before income tax from continuing operations (1,519) 849 Profit before income tax from discontinued operations 14 4, Profit before income tax 2,792 1,808 Non-cash adjustments to reconcile profit before income tax to net cash provided by operating activities: Depreciation of property, plant and equipment 16 1,955 1,457 Amortisation of intangible assets (Gain)/loss on disposal of property, plant and equipment 155 (34) Gain on disposal of investments 14 (308) Gain from disposal of discontinued operations 14 (4,181) Share of profits of associates 15 (47) (53) Increase in Group s share in an associate resulting from contribution by other party 9 (76) (84) Increase in allowance for doubtful debts Interest expense Interest income (71) (46) Foreign exchange (gain)/loss Movements in provisions ,417 3,697 (Increase)/decrease in accounts receivable 7 (1,144) (Increase) /decrease in inventories 27 (12) Increase/(decrease) in accounts payable and accrued liabilities (268) 499 2,183 3,040 Income tax paid (1,214) (426) Income tax refund Net cash provided by/(used in) operating activities 1,792 2,912 Cash flows from investing activities: Purchases of property, plant and equipment (3,912) (4,799) Capitalized borrowing costs (a) 16 (201) (340) Purchases of intangible assets (91) (27) Short-term bank deposits placed (73) (606) Short-term bank deposit returned Advance received under conditions of a tender held to sell shares of a subsidiary Advance received under agreement for sale of PP&E Proceeds from sale of investments in subsidiaries and associates, net of cash disposed 14 2, Cash acquired on acquisition of OJSC Terminal Proceeds from disposal of property, plant and equipment Interest received Dividends received 4 6 Net cash provided by/(used in) investing activities 59 (4,195) Cash flows from financing activities: Loans received 1,187 10,590 Loans repaid (1,784) (8,219) Interest paid (a) (846) (696) Dividends paid 22 (234) Dividends paid to non-controlling interests in subsidiaries (25) (40) Cash contributions to subsidiaries by non-controlling interests Payments under finance leases (30) (60) Net cash provided by/(used in) financing activities (1,467) 1,781 Net increase in cash and cash equivalents Cash and cash equivalents at January ,224 1,686 Effect of foreign exchange rate changes on cash and cash equivalents Cash and cash equivalents at December ,642 2,224 (a) The total amount of interest paid during the year ended December 31, 2011 was 1,047 RUR (2010: RUR 1,036). The accompanying notes form an integral part of these consolidated financial statements. 5

8 Consolidated statement of changes in equity For the year ended December 31, 2011 (Amounts in millions of Russian Roubles, unless stated otherwise) Number of shares (millions) Attributable to equity holders of the parent Additional Share paid-in Reserve Retained capital capital capital earnings Total Noncontrolling interests Total equity At December 31, ,308 1, ,327 12, ,353 Profit for the year 1,131 1, ,390 Total comprehensive income 1,131 1, ,390 Issue of share capital (Note 20) Appropriation of profit (Note 21) 31 (31) Dividends (Note 22) (234) (234) (234) Dividends to non-controlling interests in subsidiaries (40) (40) Contribution from noncontrolling interest owners (Note 1) At December 31, ,911 1, ,193 14,079 1,312 15,391 Profit for the year 2,136 2, ,172 Total comprehensive income 2,136 2, ,172 Acquisition of OJSC Terminal in exchange for shares of the Company (Note 8) 390 (684) (294) (294) Dividends (Note 22) (196) (196) (196) Dividends to non-controlling interests in subsidiaries (25) (25) Contribution from noncontrolling interest owners (Note 1) Disposal of CJSC TZK Sheremetyevo (Note 14) (622) (622) At December 31, ,911 1, ,449 15, ,457 The accompanying notes form an integral part of these consolidated financial statements. 6

9 Notes to the consolidated financial statements For the year ended December 31, 2011 (Amounts in millions of Russian Roubles, unless stated otherwise) 1. Corporate information International Airport Sheremetyevo was formed in 1959 following a Government decree on the transfer of the Airdrome of Military Air Forces to the Head Civil Air Transport Department. In 1996 International airport Sheremetyevo was reorganised into open joint stock company International Airport Sheremetyevo ( the Company ). The principal activities of the Company and its subsidiaries ( the Group ) are the management and operation of Airport Sheremetyevo, including service of international and domestic passenger and cargo flights. In addition, the Group lease part of its properties to retail outlets and other businesses operating at the airport premises, and other provides airport-related services. Associate undertakings mainly comprise duty-free retail businesses, customs brokerage services and aviation security. As of December 31, 2011, the Company was controlled by the Government of the Russian Federation. The Company s headquarters are located in Moscow region at Sheremetyevo airport. The principal subsidiary undertakings are: Company name Place of registration and operation Activity Percentage held as of December 31, 2011 Percentage held as of December 31, 2010 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 (i) Vladivostok Airport terminal services 52.16% 52.16% CJSC Terminal Vladivostok Vladivostok Terminal construction 74.99% 51.38% LLC Rusport Moscow region Aircraft ground servicing 51.0% 51.0% On June 22, 2010, the Company agreed with State Corporation Vnesheconombank ("VEB") to increase charter capital of CJSC Terminal Vladivostok ("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, the ownership interest of the Company in CJSC TV was reduced to 51.38%. On March 17, 2011, the Company agreed with VEB to increase charter capital of TV. In April 2011, TV issued 854,500,000 new shares with par value 1 rouble. The entire issue has been acquired by the Company at par. Thus the ownership interest of the Company in TV was increased to 74.99%. Under the agreement dated December 29, 2009 the Company together with LLC Cargo Terminal 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 into the share capital of a newly established subsidiary, which represents 51% ownership. 7

10 1. Corporate information (continued) In 2011, the Company agreed with LLC AK AirBridgeCargo and LLC Cargo Terminal Sheremetyevo to increase charter capital of LLC Rusport proportionally to their shares in it by contributing cash in the amount of RUR 31 (the contribution was made by LLC AK AirBridgeCargo and LLC Cargo Terminal Sheremetyevo) and property, plant and equipment in the amount RUR 33 (the contribution was made by the Company). Share of the Company in LLC Rusport remains 51%. 2. Basis of preparation Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated financial statements of the Group represent the results and financial position of OJSC International Airport Sheremetyevo and its subsidiaries. The consolidated financial statements are presented in millions of Russian roubles ( RUR ), except where it is specifically stated otherwise. The Group maintains its accounting records in Russian roubles and in accordance with the Russian accounting legislation and regulations. These consolidated financial statements are based on the underlying accounting records, appropriately adjusted and reclassified for fair presentation in accordance with IFRS. The consolidated financial statements have been prepared under the historical cost convention, except for certain items of property, plant and equipment acquired prior to the date of transition of the Group to IFRS, which were recognised at a deemed cost being the fair value of those assets at that time as determined by an independent appraisers. Deficit in Working Capital These financial statements have been prepared on a going concern basis that contemplates the realisation of assets and satisfaction of liabilities and commitments in the normal course of business. As at December 31, 2011, the Group s current liabilities were RUR 12,986 which exceeded current assets by RUR 4,848. This deficit in working capital mainly relates to the amounts payable under a long-term syndicated loan facility provided by HSH Nordbank AG ( Nordbank ) and Sberbank of Russian Federation ( Sberbank ) with the carrying amount of US$204 million (RUR 6,559 at the exchange rate as of December 31, 2011), which was classified as current because the syndicated facility is being currently restructured (Note 18). Taking into consideration the ongoing negotiations with the lenders under this syndicated loan facility and the current economic environment, management believes that the Company has adequate resources to continue in operational existence for the foreseeable future and anticipates that the Company successfully completes the restructuring of the syndicated loan facility with maturity in 2020 and complies with the terms of other loan agreements in

11 3. Changes in accounting policy and disclosures In preparation of these consolidated financial statements the Group 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, New/Revised standards and interpretations adopted in 2011 IAS 24 Related Party Disclosures (revised) The revision clarifies the definition of a related party. The new definitions emphasise a symmetrical view of related party relationships and clarify in which circumstances persons and key management personnel affect related party relationships of an entity. The revision introduces an exemption from the general related party disclosure requirements for transactions with a government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. IAS 24 applies for accounting periods beginning on or after January 1, The Group applied partial exemption in respect of the disclosures for government-related entities, which has an impact on Note 23, Related Party Transactions, of these consolidated financial statements. IAS 32 Financial Instruments: Presentation (amended) Classification of Rights Issues The amendment alters the definition of a financial liability in order to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing owners of the same class of an entity s non-derivative equity instruments, to acquire a fixed number of the entity s own equity instruments for a fixed amount in any currency. The amendment did not have effect on the financial position or performance of the Group. IFRIC 14 Prepayments of a Minimum Funding Requirement (amended) The amendment removes an unintended consequence when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover such requirements. The amendment permits an entity to recognise a prepayment of future service cost as pension assets. The amendment had no impact on the financial position or performance of the Group. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 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 had no effect on the financial position or performance of the Group. Improvements to IFRSs 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. 9

12 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 Group s financial statements are listed below. This listing is of standards and interpretations issued, which the Group reasonably expects to be applicable at a future date. The Group intends to adopt those standards when they become effective. IFRS 7 Financial Instruments: Disclosures (amended) In October 2010, the International Accounting Standards Board issued amendments to IFRS 7 Disclosures Transfers of Financial Assets. These amendments require additional disclosure about financial assets that have been transferred but not derecognised to enable users of the Group s financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendments require disclosures about continuing involvement in derecognised assets to enable users to evaluate the nature of, and risks associated with, the Group s continuing involvement in those derecognised assets. These amendments become effective for financial years beginning on or after July 1, In December 2011, the International Accounting Standards Board further amended IFRS 7 by clarifying requirements for offsetting financial assets and financial liabilities. These amendments become effective for financial years beginning on or after January 1, The amendments affect disclosure only and will have no impact on the Group s financial position or performance. IFRS 9 Financial Instruments (effective for financial years beginning on or after January 1, 2015) The standard as issued reflects the first phase of the International Accounting Standards Boards work on the replacement of IAS 39 Financial Instruments: Recognition and Measurement 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 phase of IFRS 9 will have an effect on the classification and measurement of the Group s financial assets and financial liabilities. The Group will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture. IFRS 10 Consolidated Financial Statements (effective for financial years beginning on or after January 1, 2013) IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in IAS 27. The Group expects that the adoption of the new standard will not have a significant 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) IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities Nonmonetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities using proportionate consolidation. Jointly controlled entities must be accounted for using the equity method. The Group expects that the adoption of the new standard will not have a significant impact on its financial position or performance in the period of initial application. 10

13 3. Changes in accounting policy and disclosures (continued) Standards issued but not yet effective (continued) IFRS 12 Disclosure of Involvement with Other Entities (effective for financial years beginning on or after January 1, 2013) IFRS 12 includes all of the disclosures that were previously in IAS 27 Consolidated and Separate Financial Statements related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 Interests in Joint Ventures and IAS 28 Investments in Associates. These disclosures relate to an entity s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. The amendment affects disclosures only and will have no impact on the Group s financial position or performance. IFRS 13 Fair Value Measurement (effective for financial years beginning on or after January 1, 2013) IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance. IAS 1 Financial Statement Presentation (amended) Presentation of Items of Other Comprehensive Income (effective for financial years beginning on or after July 1, 2012) The amendments change the grouping of items presented in other comprehensive income. Items that could be reclassified to profit or loss at a future point in time would be presented separately from items that will never be reclassified. The amendments affect presentation only and will have no impact on the Group s financial position or performance. IAS 12 Income Taxes (amended) Deferred Tax: Recovery of Underlying Assets (effective for financial years beginning on or after January 1, 2012) The amendment clarifies the determination of deferred tax on investment property measured at fair value. The amendment introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the basis that its carrying amount will be recovered through sale. Furthermore, it introduces the requirement that deferred tax on non-depreciable assets that are measured using the revaluation model in IAS 16 always be measured on a sale basis of the asset. The Group 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 19 Employee Benefits (revised) (effective for financial years beginning on or after January 1, 2013) The revision includes a number of changes that range from fundamental changes such as removing the corridor mechanism (the revised standard requires actuarial gains and losses to be recognised in other comprehensive income when they occur) and the concept of expected returns on plan assets to new and revised disclosure requirements and simple clarifications and re-wording. The Group expects that the adoption of the amended standard will affect disclosures and presentation of financial statements only and will have no impact on the Group s financial position or performance as the Group s current accounting policy is to recognise actuarial gains and losses in the income statement in the period in which they occurred without using the corridor mechanism. 11

14 3. Changes in accounting policy and disclosures (continued) Standards issued but not yet effective (continued) IAS 27 Separate Financial Statements (revised) (effective for financial years beginning on or after January 1, 2013) As a consequence of the new IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure of Involvement with Other Entities, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The revision will have no impact on the consolidated financial statements of the Group. IAS 28 Investments in Associates and Joint Ventures (revised) (effective for financial years beginning on or after January 1, 2013) As a consequence of the new IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Involvement with Other Entities, IAS 28 has been renamed to IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The Group 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. 4. Summary of significant accounting policies The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below. Consolidation The consolidated financial statements incorporate the financial statements of the Group and its subsidiaries. Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All intra-group balances, income and expenses, unrealised gains and losses and dividends resulting from intra-group transactions are eliminated in full. Non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests at the end of the reporting period represent the non-controlling interest shareholders portion of the fair values of the identifiable assets and liabilities of the subsidiary at the acquisition date and the non-controlling interests portion of movements in equity since the date of the combination. Non-controlling interest is presented within equity, separately from the parent s shareholders equity. Investments in associates Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies and are accounted for under the equity method of accounting. Significant influence is usually demonstrated by the Group s owning, directly or indirectly, between 20 percent and 50 percent of the voting share capital or by exerting significant influence through other means. 12

15 4. Summary of significant accounting policies (continued) Business combinations and acquisitions Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the fair value of consideration transferred, measured at acquisition date, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets. Acquisition costs are included in administrative expenses in the periods in which the costs are incurred. Transfers of controlling interests in entities in transactions with entities under common control The Company applies pooling of interests method for accounting for transfers of controlling interest in entities in transactions with entities under common control. Under this method of accounting the Company recognizes assets and liabilities of the acquired entity at the values which would be recognized in accordance with IFRS by the transferring entity in its IFRS financial statements. Difference between consideration transferred and net assets acquired is recognized in equity as contribution to or distribution by the Company depending on the circumstances. Foreign currency translation The Russian rouble is the functional currency of the Group and is also the currency in which these consolidated 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 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. 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; (iv) Other charges levied for passenger and luggage handling. Revenue from airport and other traffic charges is recognised when the definite services have been rendered. 13

16 4. Summary of significant accounting policies (continued) Revenue recognition (continued) Property and operational facilities: (i) (ii) Rental income is recognised in the 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; Usage charges made for operational systems (e.g. check-in-desks) are recognised and invoiced on a monthly basis as the services are provided; Other invoiced sales are recognised as the services are rendered. Other revenue: Revenue from the sale of goods is recognised in the consolidated statement of comprehensive income when the significant risks and rewards of ownership have been transferred to the buyer. Dividend and interest income: (i) (ii) Leases Dividends from investments are recognised in the statement of comprehensive income when the shareholder s right to receive payment has been established; 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. 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 fulfilment 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 Group as a lessee Finance leases, which transfer to the Group 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. Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group 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 statement of comprehensive income on a straight line basis over the lease term. The Group as a lessor Leases where the Group 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. 14

17 4. Summary of significant accounting policies (continued) Interest expense Interest expense included interest payable on borrowings and interest expense component of finance lease payments is recognised in the consolidated 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 Group 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 Group 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 16 for details of accounting for infrastructure assets. The Group 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 Group uses only part of a property it owns, utilisation 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. (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 recognised 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. 15

18 4. Summary of significant accounting policies (continued) Property, plant and equipment (continued) (d) Subsequent costs The Group 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 Group and the cost of the item can be measured reliably. All other costs are recognised in the statement of comprehensive income as an expense as incurred. (e) Depreciation Depreciation is charged to the consolidated statement of comprehensive income on a straightline 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 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. (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 consolidated statement of comprehensive income. Intangible assets Intangible assets that are acquired by the Group represent mainly purchased software and licenses and are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the 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. 16

19 4. Summary of significant accounting policies (continued) Impairment of non-current assets At each reporting date, the Group 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 Group 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 value in use, the estimated future cash flows are discounted to their present value using a pretax 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 statement of comprehensive income. Where an impairment loss subsequently reverses, the carrying amount of the asset (cashgenerating 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. 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 Group 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 Group commits to purchase or sell the asset. The Group 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. 17

20 4. Summary of significant accounting policies (continued) Financial assets (continued) 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. Availablefor-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 statement of comprehensive 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, 2011 and Held-to-maturity investments Investments in non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity, other than loans and receivables originated by the Group are classified as held-to-maturity financial assets. Heldto-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, 2011 and 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. 18

21 4. Summary of significant accounting policies (continued) 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 instruments, any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income. Financial liabilities The Group 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. Financial liabilities are classified as of 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 resultant 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 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. 19