Closed Joint Stock Company SUKHOI CIVIL AIRCRAFT

Transcription

1 Closed Joint Stock Company SUKHOI CIVIL AIRCRAFT Financial Statements for the year ended 31 December

2 Contents AUDITORS REPORT... 3 STATEMENT OF FINANCIAL POSITION... 5 STATEMENT OF COMPREHENSIVE INCOME... 6 STATEMENT OF CASH FLOWS... 7 STATEMENT OF CHANGES IN EQUITY

3 ZAO KPMG 10 Presnenskaya Naberezhnaya Moscow, Russia Telephone +7 (495) Fax +7 (495) /99 Internet Auditors Report To the Shareholders and Board of Directors Closed Joint-Stock Company Sukhoi Civil Aircraft We have audited the accompanying financial statements of Closed Joint-Stock Company Sukhoi Civil Aircraft (the Company ), which comprise the statement of financial position as at 31 December and the statements of comprehensive income, changes in equity and cash flows for, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on the fair presentation of these financial statements based on our audit. We conducted our audit in accordance with Russian Federal Auditing Standards and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the 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 auditor s 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 auditor considers 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 express an opinion on the fair presentation of these financial statements. Audited entity: Closed Join-Stock Company Sukhoi Civil Aircraft Registered by the Moscow Registration Chamber on 25 May 2000, Registration No Registered in the Unified State Register of Legal Entities on 5 September 2002 by the Moscow Inter-Regional Tax Inspectorate No.39 of the Ministry for Taxes and Duties of the Russian Federation, Registration No , Certificate series 77 No build. 23 B, Polykarpov Street, Moscow, Independent auditor: ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Registered by the Moscow Registration Chamber on 25 May 1992, Registration No Entered in the Unified State Register of Legal Entities on 13 August 2002 by the Moscow Inter-Regional Tax Inspectorate No.39 of the Ministry for Taxes and Duties of the Russian Federation, Registration No , Certificate series 77 No Member of the Non-commercial Partnership Chamber of Auditors of Russia. The Principal Registration Number of the Entry in the State Register of Auditors and Audit Organisations: No

4 Auditors Report Page 2 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at 31 December, and its financial performance and its cash flows for in accordance with International Financial Reporting Standards. Ilya O. Belyatski, Director, power of attorney dated 3 October No. 35/11 ZAO KPMG 24 April 2013 Moscow, Russian Federation

5 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER Notes ASSETS Non-current assets Intangible assets 6 868, ,393 Property, plant and equipment 7 357, ,395 Value added tax receivable 17,327 21,714 Other receivables 9 50,611 48,738 Net investment in financial leases 8 25,815 26,179 Deferred tax assets ,548 89,533 Total non-current assets 1,435,776 1,213,952 Current assets Inventories , ,012 Trade and other receivables ,307 52,595 Net investment in financial leases 8 1, Value added tax receivable 119, ,727 Cash and cash equivalents ,458 17,691 Total current assets 950, ,525 TOTAL ASSETS 2,386,186 1,609,477 EQUITY AND LIABILITIES Equity Share capital , ,856 Share premium 171, ,751 Additional paid-in-capital 55,362 55,362 Foreign currency translation reserve 31,380 43,180 Accumulated losses (635,007) (523,760) Total equity (275,658) (152,611) Non-current liabilities Loans and borrowings 15 1,126, ,965 Onerous contract provision 16 16,503 15,428 Advances from customers 77,647 77,088 Trade and other payables 9,610 12,610 Total non-current liabilities 1,230, ,091 Current liabilities Loans and borrowings , ,923 Trade and other payables , ,405 Advances from customers 217,920 50,754 Taxes payable 2,504 1,915 Total current liabilities 1,431, ,997 Total liabilities 2,661,844 1,762,088 Total equity and liabilities 2,386,186 1,609,477 The financial statements were authorised for issuance on 24 April 2013 by management and signed on its behalf. Kalinovsky A.V. President Stolina M.A. Chief accountant The accompanying notes are an integral part of these financial statements 5

6 STATEMENT OF COMPREHENSIVE INCOME Notes Revenues ,902 77,661 Cost of sales (217,338) (66,570) GROSS(LOSS)/PROFIT (19,436) 11,091 Government grants related to income 19 1, Selling expenses (5,402) (2,867) Administrative expenses 20 (55,330) (52,284) Other operating income /(expenses) (775) (1,905) Change in onerous contract provision 16 (145) 17,669 Accrual for insurance recovery 7 17,220 - Cost of disposed aircraft 7 (17,220) - Write down of work-in progress to net realisable value 11 (11,302) - Impairment of non-current assets 7 (795) (41,977) OPERATING LOSS (91,930) (69,620) Interest income 7,334 5,875 Interest expense (107,923) (102,623) Foreign exchange gains /(losses) 60,133 (38,123) LOSS BEFORE TAX (132,386) (204,491) Income tax benefit 21 21,139 32,994 LOSS FOR THE YEAR (111,247) (171,497) Effect of translation to the presentation currency (11,800) 11,546 Total comprehensive income for the year (123,047) (159,951) The accompanying notes are an integral part of these financial statements 6

7 STATEMENT OF CASH FLOWS OPERATING ACTIVITIES: Loss before tax (132,386) (204,491) Depreciation and amortisation recognised in income 37,666 7,928 Interest income (7,334) (5,875) Unrealised foreign exchange differences (65,644) 37,060 Loss/(gain) on assets disposal 106 (7,297) Write-down of value added tax receivable 1, Write-down of work-in-progress to net realisable value 11,302 - Change in onerous contract provision 145 (17,669) Impairment of non-current assets ,977 Interest expense and commission amortisation 107, ,003 Other 1,964 1,682 Cash flow from operating activities before changes in working capital and income tax (44,367) (41,328) Increase in inventories (220,918) (113,403) Increase in trade and other receivables (111,250) (17,793) Increase in other current assets (3,738) (27,915) Increase in advances from customers 156,342 98,968 Increase in trade and other payables 78,516 67,298 Increase in taxes payable Interest paid (104,704) (99,002) Cash flow used in operating activities (249,387) (133,153) INVESTING ACTIVITIES: Acquisition of property, plant and equipment (86,275) (166,603) Acquisition of intangible assets (81,628) (112,319) Increase of non-current value added tax receivable (5,558) (13,561) Interest received 2,022 2,531 Government grant related to assets Cash flows used in investing activities (171,439) (289,244) FINANCING ACTIVITIES: Proceeds from borrowings, net 1,240, ,218 Repayment of borrowings (657,694) (427,574) Finance lease payments (2,003) (4,862) Cash flows from financing activities 580, ,782 Effect of translation to foreign currency 4,853 1,919 Increase / (decrease) in cash and cash equivalents 164,767 (79,696) Cash and cash equivalents at the beginning of period (Note 13) 17,691 97,387 Cash and cash equivalents at the end of period (Note 13) 182,458 17,691 The accompanying notes are an integral part of these financial statements 7

8 STATEMENT OF CHANGES IN EQUITY Share capital Share premium Additional paid-in-capital Foreign currency translation reserve Accumulated losses Balance as at 01 January 100, ,751 3,568 31,634 (355,414) (47,605) Loss for the year (171,497) (171,497) Other comprehensive income Effect of translation to the presentation currency ,546-11,546 Total comprehensive income for the year (159,951) Transactions with owners, recorded directly in equity Transactions with entities under common control, net of related income tax effect of income of USD 788 thousand (Note 9) ,151 3,151 Contribution, net of related income tax of USD 12,949 thousand (Note 14) 51,794 51,794 Balance as at 31 December 100, ,751 55,362 43,180 (523,760) (152,611) Loss for the year (111,247) (111,247) Other comprehensive income Effect of translation to the presentation currency (11,800) - (11,800) Total comprehensive income for the year (123,047) Balance as at 31 December 100, ,751 55,362 31,380 (635,007) (275,658) Total The accompanying notes are an integral part of these financial statements 8

9 Note 1. The Company Closed Joint-Stock Company Sukhoi Civil Aircraft (hereafter the Company ) was established on 25 May 2000 with the purpose of development, testing, production and operation of new types of civil aircraft. In 28 January the Company received ARMAK Type Certificate for Sukhoi Super Jet 100 aircraft (formerly Russian Regional Jet or RRJ ) - a civil aircraft with a capacity of 95 seats in basic configuration. In February, the Company received EASA Type Certificate for Sukhoi Super Jet 100 aircraft. The Company s registered address is at: 2 build, 23B, Polykarpov Str., , Moscow, Russia. The Company has the following branches: Komsomolsk-on-Amur branch located at address: 1 Sovetskaya Str., Komsomolsk-on-Amur , Khabarobvsk Region, Russia. Novosibirsk branch located at address: 15, Polzunova Str., Novosibirsk, Russia. Voronezh branch located at address: 27, Tsiolkovskogo Str., Voronezh, Russia. Ulyanovsk branch located at address: 1, Antonova avenue, Uljyanovsk, Russia The Company has no subsidiaries. The Company s shareholders are: JSC Sukhoi Design Bureau, which owns 3.01% of ordinary shares; JSC Aviation Holding Company Sukhoi, which owns 71.99% of ordinary shares (the Parent Company ). World Wings S.A. (96% subsidiary of Alenia Aermacchi, formerly Alenia Aeronautica, ultimately controlled by Finmeccanica), which owns 25% plus one share. Russian business environment The Company s operations are located in the Russian Federation. Consequently, the Company is exposed to the economic and financial markets of the Russian Federation which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in the Russian Federation. These financial statements reflect management s assessment of the impact of the Russian business environment on the operations and the financial position of the Company. The future business environment may differ from management s assessment. Note 2. Basis of presentation Statement of compliance These financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRSs ) and related interpretations adopted by the International Accounting Standards Board ( IASB ). Basis of measurement The financial statements are prepared on the historical cost basis except that the carrying amounts of assets, liabilities and equity items in existence at 31 December 2002 include adjustments for the effects of hyperinflation, which were calculated using conversion factors derived from the Russian Federation 9

10 Consumer Price Index published by the Russian Statistics Agency, GosKomStat. Russia ceased to be hyperinflationary for IFRSs purposes as at 1 January Functional and presentation currency The national currency of the Russian Federation is the Russian Rouble ( RUB ), which is the Company s functional currency taking into account the economic environment in which the Company operates. These financial statements are presented in US dollars (USD), since management believes that this currency is more meaningful for the users of the financial statements. The assets and liabilities of the Company are translated from RUB into USD at the exchange rate at the end of the year. Revenues and expenses are translated into USD using rates approximating exchange rates at the dates of the transactions. The resulting exchange difference is recorded directly in equity in the foreign currency translation reserve. For translation purposes the following exchange rates were used: As at 01 January - RUB for USD 1; As at 31 December - RUB for USD 1; As at 31 December - RUB for USD 1; Average exchange rate for - RUB for USD 1; Average exchange rate for - RUB for USD 1. The RUB is not a readily convertible currency outside the Russian Federation and, accordingly, any conversion of RUB to USD should not be construed as a representation that the RUB amounts have been, could be, or will be in the future, convertible into USD at the exchange rate disclosed, or at any other exchange rate. Going concern These financial statements were prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue operations in the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. As at 31 December year the Company s current liabilities exceeded its current assets by USD 480,980 thousand (: USD 388,472 thousand) and its net assets were negative both at the reporting date and as at 31 December (USD 275,658 thousand and USD 152,611 thousand, respectively). The Company s net assets determined with reference to the statutory financial statements of the Company prepared in accordance with the legislation of the Russian Federation as at 31 December and at 31 December were below the Company s share capital. Under these circumstances, according to the Federal Law of Russian Federation On joint-stock companies, the Company shareholders are required to decide either to reduce the share capital to the net assets amount or to liquidate the Company before 30 June Management does not believe that this issue would impact Company s ability to continue as a going concern and developed an action plan addressing this risk. This plan, inter alia, includes future share issues and sale of assets. In particular, in January 2013 the Board of Directors approved additional shares issue (Note 27). Management assesses that the Company will continue to operate in the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. The factors that contributed most to this assessment are as follows. 10

11 The ultimate realization of the Company s assets and its long-term liquidity will be impacted by its success in completion of the Sukhoi Super Jet 100 development program (refer to Note 6). The Sukhoi Super Jet 100 program is included in the Federal Target Program Development of the civil aircraft for and for the period until 2015 approved by the Decision of the Federal Government of the Russian Federation No. 728 dated 15 October Management believes that financial support from the Federal Government, together with the Company s other capital resources, is sufficient to meet its obligations, as they become due. In 2013 the management plans to increase its sales to 27 aircraft which is expected to improve Company s financial result and reputation. Management has available borrowing facilities that are sufficient to manage liquidity, including USD 1,000,000 thousand facility provided by VEB, a Russian government owned bank, of which approximately USD 600,000 thousand was undrawn as at the reporting date (refer also to Note 15). Therefore, management does not believe that there is a material uncertainty regarding Company s ability to continue as a going concern in the foreseeable future. Use of estimates and judgments The preparation of these financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies are described in the following notes: Note 2 Going concern; Note 6 Intangible assets; Note 11 Inventories; Note 16 Onerous contract provision; Note 10 Recoverability of deferred tax assets 11

12 Note 3. Summary of significant accounting principles The following are the main principles of the Company s accounting policies that are applied consistently during all reporting periods. (a) Foreign currencies Transactions in foreign currencies are translated to RUB at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to RUB at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities denominated in foreign currencies that are stated at historical cost are translated to RUB at the foreign exchange rate ruling at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to RUB at the foreign exchange rate ruling at the dates the fair values were determined. Foreign exchange differences arising on translation are recognised in the statement of comprehensive income. (b) Intangible assets Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Company has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Furthermore, borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are included in the cost. Any related government grants are deducted from the cost. Other development expenditure is recognised in the statement of comprehensive income as an expense as incurred. Upon completion of the development phase capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Other intangible assets Other intangible assets, which are acquired by the Company, are stated at cost less accumulated amortisation and impairment losses and less any related government grants. Expenditure on internally generated goodwill and brands is recognised in profit or loss as incurred. Amortisation Intangible assets with a definite lifetime are amortised on a straight-line basis over their estimated useful lives from the date the asset is available for use. Capitalised development costs are amortised on the unit-of-production method. (c) Impairment Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of the asset. 12

13 An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-forsale financial asset recognised previously in equity is transferred to profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised, and is recognised in profit or loss. Non-financial assets The carrying amounts of the Company s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. For intangible assets that are not yet available for use, recoverable amount is estimated at each reporting date. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing 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. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit ). An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (d) Property, plant and equipment Owned assets Property, plant and equipment is stated at historical cost less depreciation and impairment loss. The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of overheads. Furthermore, borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are included in the cost. Related government grants are deducted from cost of acquired or constructed property, plant and equipment. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment. 13

14 Leased assets Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Plant and equipment acquired by way of finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Subsequent expenditure Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, is capitalised with the carrying amount of the component being written off. Other subsequent expenditure is capitalised if future economic benefits will arise from the expenditure. All other expenditure, including repairs and maintenance expenditure, is recognised in profit or loss as incurred. Depreciation Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of the individual assets. Depreciation commences on the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and ready for use. Land is not depreciated. The estimated useful lives are as follows: Buildings and Constructions years Machinery and Equipment 5-15 years Vehicles 5-10 years Other 3-10 years Depreciation methods, estimated useful lives and residual values are re-assessed annually. (e) 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. In the case of manufactured inventories and work-in-progress cost includes all direct costs such as labour, material and direct overheads, and an allocation of fixed and variable production overheads. Labour costs include taxes and employee benefit costs associated with labour that is involved directly in the production process. (f) Non-derivative financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from acquisition date that are subject to an insignificant risk if changes in their fair value and are used by the Company in the management of its short-term commitment. 14

15 Trade and other receivables are stated at amortised cost less impairment losses. Loans and borrowings are stated at amortised cost using the effective interest method, less impairment losses. Trade and other payables are stated at amortised cost. Accounting for finance income and costs is discussed in note 3(l). (g) Provisions A provision is recognised in the statement of financial position when the Company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Onerous contract provision A provision for onerous contracts is recognised when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of fulfilling the contract. The estimate of net cost of fulfilling the contract includes expected late delivery penalties, if applicable. Before a provision is established, the Company recognises any impairment loss on the assets associated with that contract. Provision for warranty costs A provision for estimated standard warranty costs is recognised in the period in which the related product sales occur. An accrual for warranty costs is recognised based on the Company s historical experience on previous deliveries of aircraft. Estimates are adjusted as necessary based on subsequent experience. (h) Employee benefits The Company makes contributions for the benefit of employees to Russia s State pension fund. The contributions are expensed as incurred. (i) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred is recognised in profit or loss except for items recognised directly in equity or in other comprehensive income. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. 15

16 A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (j) Government grants Government grants (including non-monetary grants at fair value), are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them; and the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods necessary to match them with the related costs which they are intended to compensate. A government grant, to compensate for expenses or losses already incurred is recognised as income of the period in which it becomes receivable. (k) Revenues Sale of aircraft Revenue from the sale of goods is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity, and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Any cash outflows related to customer penalties for late delivery of aircraft are deducted from gross amount of revenue. Services Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the date of the statement of financial position. The stage of completion is assessed by reference to surveys of work performed. Operating lease A lease is classified as an operating lease if it does not transfer substantially all risks and rewards incidental to ownership. Where the Company is the lessor in an operating lease agreement the leased asset is recognised in the Company s financial statements, and depreciation and lease income are recognised in profit or loss on a straight-line basis over the period. (l) Finance income and costs Finance income comprises interest income on funds invested and foreign currency gains. Interest income is recognised as it accrues in profit or loss, using the effective interest method, except for the interest income on the funds, which were borrowed specifically for the purposes of obtaining a qualifying asset which reduces the amount of capitalised borrowing costs. Finance costs comprise interest expense on borrowings, foreign currency losses and impairment losses recognised on financial assets. All borrowing costs are recognised in profit or loss using the effective interest method, except for costs directly attributable to the acquisition, construction or production of qualifying assets which are included in the cost of qualifying assets. Foreign currency gains and losses are reported on a net basis. 16

17 (m) Operating leases Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease payments made. (n) Determination and presentation of operating segments An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company s other components, and for which discrete financial information is available. All operating segment s operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segment and assess its performance. As disclosed in Note 1, the Company s current principal activity is the development of SSJ-100 program which is a start-up operation that earned the first revenues in. Nearly all of the Company s assets are associated with this program and are located in one geographical region Russian Federation. The Company expects to receive the majority of its revenues from sales of SSJ-100. Giving regard to these factors, management believes that as of 31 December and 31 December all assets and liabilities related to operating activities of the Company are associated with a single operating segment, SSJ-100 program. The reconciliation of segment revenue and segment measure of profit or loss with reported amounts required by IFRS 8 Operating Segments is disclosed in Note 5. (o) New standards and Interpretations not yet adopted A number of new Standards, amendment to Standards and Interpretations are not yet effective as at 31 December, and have not been applied in preparing these financial statements. Management of the Company does not expect these pronouncements to have a significant impact of the Company s operations. The company plans to adopt these pronouncements when they become effective. Note 4. Reclassification and changes in presentation In several loans totalling USD 733,918 thousand were disclosed as unsecured loans, including longterm and short-term part totalling USD 284,337 thousand and USD 449,581 thousand, respectively, however certain terms of the relevant loan agreements indicate that there is security pledged against them. The Company has changed the presentation of comparative information in these financial statements and the relevant loans have been presented as secured (see Note 15). 17

18 Note 5. Operating segments The Company has one reportable segment Sukhoi Super Jet-100 that includes development and production of civil aircraft, primarily (Note 3 (n)). The Board of Directors reviews internal management reports on a quarterly basis based on the statutory accounting records. The major reconciling differences between the information provided to the Board of Director and the related IFRS-based amounts relate to: Timing differences related when revenue and costs are recognised; Adjustments of net realisable value of inventories, provision for property, plant and equipment and change in onerous contracts; Administrative and selling expenses. Information regarding the results of reportable segment is included below. Segment performance is measured based on segment profit before income tax. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Reconciliation of reportable segments' profit 000 USD 000 USD Reportable segment loss before income tax (183,839) (149,891) Adjustments for: Difference in timing of recognition of revenue and cost of sales 43,993 84,775 Presentation of certain types of administrative and other expenses (13,312) (35,629) Net realisable value of inventories and fixed assets (6,462) (62,713) Reclassification of commissions 5,961 6,670 Leasing 3,937 3,690 Onerous contract provision Interest capitalised Zero-rate debt interest expense Difference in timing of recognition of other income and expenses (284) (46,764) - (3,844) (5,429) (4,383) 23,049 3,598 Loss before income tax (132,386) (204,491) 18

19 Note 6. Intangible assets In thousands USD Software Development of SSJ- 100 program Advances given for development costs Total COST At 01 January 16, ,201 31, ,985 Additions 3, ,761 8, ,524 Disposal (1,893) (3,685) (1,682) (7,260) Reclassification to property, plant and equipment - - (9,416) (9,416) Transfers 1,219 11,085 (12,304) - Government grant related to development cost - (708) - (708) Effect of translation to the presentation currency (1,086) (48,489) (496) (50,071) At 31 December 17, ,165 16, ,054 Additions 1,282 99,773 8, ,610 Disposal (2,000) - (390) (2,390) Transfers - 4,793 (4,793) - Effect of translation to the presentation currency 1,049 48,056 1,048 50,153 At 31 December 18, ,787 20, ,427 ACCUMULATED AMORTISATION At 01 January 2,884 61,521-64,405 Charge for the period 2,145 3,796-5,941 Disposal (1,893) - - (1,893) Effect of translation to the presentation currency (176) (3,616) - (3,792) At 31 December 2,960 61,701-64,661 Charge for the period 1,311 11,071-12,382 Disposal (2,000) - - (2,000) Effect of translation to the presentation currency 161 7,042-7,203 At 31 December 2,432 79,814-82,246 NET BOOK VALUE At 01 January 13, ,680 31, At 01 January 14, ,464 16, ,393 At 31 December 15, ,973 20, ,181 Capitalisation of development costs On 28 January the Company obtained the Type Certificate for serial aircraft production and subsequently commenced deliveries to the first customers. Management concluded that development costs capitalised up to the date of the Type Certificate met the requirement of IAS 38 Intangible assets as available for use which triggered commencement of amortisation of these costs based on the unit-of-production method. Management expects that certain development activities are still required to complete the development of the aircraft to ensure its operating capabilities and required aviation standards in the target markets. Management will monitor whether future development activities will result in meeting capitalisation requirements of IAS 38 and, if met, related costs will adjust the carrying amount of related intangible asset. The amortisation schedule will be adjusted prospectively as necessary. 19

20 As a consequence of substantial completion of development of the SSJ-100 program management ceased capitalisation of borrowing costs from 28 January. Additions to development costs for the year ended 31 December do not include capitalised borrowing costs (: USD 3,456 thousand). Impairment of intangible assets Management constantly monitors the SSJ-100 program for signs of impairment. As at 31 December, management performed an impairment test taking into account the current financial position of the Company as an indicator for potential impairment. Following the requirements of IAS 36 Impairment of assets and taking into account that the related development costs were considered particularly available for use, in measuring value in use management calculated the cash flow projections for a period of 10 years as the program is expected to mature in The terminal value, representing the cash flows beyond the ten-year period, was calculated based on the 10 th forecasted year with zero growth rate. Forecasted cash flow projections used for impairment test were based on the latest business plan which was revised in December. The cash flow model is substantially sensitive to changes in key assumptions. Below is the analysis of the sensitivity of the cash flow model to changes in the production capacity, sales price per aircraft and discount rate. Revised sales volume for 2013 is 27 aircraft with expected increase to maximum production capacity of 70 aircraft in 2016 (under previous year business plan maximum production capacity of 70 aircraft was also expected to be achieved in 2016, however expected sales volume for 2013 was 41 aircraft). This expectation is based on the result of recent review of achievable production capacity which will be fully utilised in An even decrease of annual production volumes by 10% after full utilisation of production capacity (i.e. annual sales volumes would be less than expected by 10% in each forecasted year starting from 2016, assuming that actual sales volumes in will be as expected) would result in an impairment loss of USD 144,867 thousand. If, in addition to lower utilisation of production capacity after 2016, an annual sales volume in would be lower than expected by 5 aircraft in each of these years, an additional impairment loss of USD 211,173 thousand would be required. The overall market demand for SSJ-100 aircraft is expected to remain the same. An annual increase in future real sales prices by 3% starting from 2013 would result in additional excess of discounted cash flows over the carrying amount of the asset by USD 875,171 thousand. An annual decrease in future real sales prices by 3% starting from 2013 would result in an impairment loss of USD 122,633 thousand. As a key assumption, the Company expects to be able to increase real sales prices by 10% starting from 2018 after introduction of the enhanced versions of basic and long-range modification of the aircraft to achieve an average real sales price of USD 28,400 thousand for SSJ-100 B and USD 29,100 thousand for SSJ-100 LR. By this time the Company would be able to demonstrate an operating usage history of SSJ-100 fleet by airline customers which should further support expected demand for existing and newer modifications of SSJ-100 family. Failure to enjoy advantage of increase in future real sales prices in 2018 and beyond would result in an impairment loss of USD 668,457 thousand. Due to adverse change in macroeconomic indicators, the pre-tax nominal rate applied for discounting of expected cash flows increased to 15.6% as compared to last year (: 15.39%). An application of 14.6% pre-tax nominal discount rate would result in additional excess of discounted cash flows over the carrying amount of the asset by USD 613,188 thousand. An application of 16.6% pre-tax nominal discount rate would result in additional excess of discounted cash flows over the 20

21 carrying amount of the asset by USD 174,097 thousand. Note 7. Property, plant and equipment In thousands USD Buildings and Constructions Machinery and equipment Aircraft in operating leases Vehicles Other Advances paid for acquisition of equipment & Building & Construction Total COST At 01 January 54, ,503-3,562 12,566 14, ,566 Additions and transfers 17,131 31, , (446) 177,767 Disposal - (557) - (91) (50) - (698) Transfer to financial lease - (27,677) (27,677) Transfer from Inventories into operating leases , ,743 Effect of translation into presentation currency (4,383) (13,164) (14,597) (184) (681) (754) (33,763) At 31 December 66, , ,730 3,310 12,002 13, ,938 Additions and transfers 12,293 21,738 59, ,002 (1,625) 92,836 Transfer from /(to) Inventories , (3,949) 19,753 Disposal (8) (37,715) - (140) (281) - (38,144) Effect of translation into the presentation currency 4,304 13,514 11, ,578 At 31 December 83, , ,880 13,485 13,461 8, ,961 ACCUMULATED DEPRECIATION At 01 January 13,046 75,852-1,726 9,075-99,699 Depreciation for the period 5,717 43,169 1, ,842-52,800 Disposal - (233) - (91) (50) - (374) Impairment losses , ,977 Effect of translation into presentation currency (1,195) (7,796) (3,783) (144) (641) - (13,559) At 31 December 17, ,992 39,582 2,175 10, ,543 Depreciation for the period 7,434 36,676 9, ,059-55,718 Disposal - (20,649) - (140) (280) - (21,069) Impairment losses Effect of translation into presentation currency 1,231 7,043 2, ,680 At 31 December 26, ,062 52,986 2,749 11, ,667 NET BOOK VALUE At 01 January 41, ,651-1,836 3,491 14, ,867 At 31 December 49, , ,148 1,135 1,776 13, ,395 At 31 December 57,197 94, , ,824 8, ,294 21

22 Disposal of machinery and equipment In May, during a demonstration flight, a test aircraft with 45 people on board crashed in Indonesia in bad weather conditions. Management of the Company does not believe that the catastrophe will have a significant impact on the future of the SSJ-100 program. The aircraft was insured against all risks and third party legal liability in respect of aircraft in favour of Closed Joint-Stock Company Sukhoi Civil Aircraft. The insurance covers the aircraft carrying amount and is expected to be received within 2013 annual reporting period. Aircraft in operating lease In the Company revised the sales contract with Aeroflot to supply aircraft. According to the revised terms the Company has a firm obligation to repurchase at later dates ten first aircraft out of 40 to be delivered. Accordingly, the first ten deliveries are accounted for as operating lease and the carrying amounts of these aircraft were transferred from inventory to property, plant and equipment. As at 31 December, ten completed aircraft with a book value of USD 193,384 thousand were delivered to Aeroflot (31 December : four completed aircraft with book value of USD 76,163 thousand were delivered to Aeroflot and six aircraft with carrying value of USD 36,985 thousand were under construction). As at 31 December the aircraft in operating leases were tested for impairment. As a result, the book value of the aircraft was reduced to its net selling price which was determined based on management s best estimate of the market sales price of the aircraft upon repurchase from Aeroflot. An additional impairment loss was recognised in the amount of USD 795 thousand (: USD 41,977 thousand). Finance lease The Company leases equipment and vehicles under a number of finance lease agreements. At the end of each of the leases the Company has the option to purchase the equipment at a beneficial price. At 31 December the net book value of leased assets was USD 4,542 thousand (31 December : USD 6,199 thousand). The leased equipment secures lease obligations (refer Note 15). Security At 31 December equipment with a carrying value of USD 11,209 thousand (31 December : 2,500) is pledged as collateral for secured loans (see note 15). Note 8. Net investment in finance leases Net investment in finance leases 26,832 26,679 of that: Current portion 1, Non-current portion 25,815 26,179 26,832 26,679 The carrying amount of net investment in finance lease is represented by a number of simulators which were transferred under finance lease arrangements to Superjet International S.A.(SJI), an entity which is a related party to the Company, in and. The gross investment in finance lease does not include any material unguaranteed residual values. The simulators leased out under finance lease arrangements secure lease receivables and are pledged as collateral for secured bank loans. 22

23 Future minimum lease payments Interest Present value of minimum lease payments Future minimum lease payments Interest Present value of minimum lease payments Less than one year 3,608 2,591 1,017 3,426 2, Between one and five years 14,032 8,070 5,962 13,706 8,536 5,170 More than five years 28,227 8,374 19,853 30,838 9,829 21,009 Total 45,867 19,035 26,832 47,970 21,291 26,679 Note 9. Other receivables In the Company disposed of certain items of machinery and equipment previously acquired under finance lease agreements. All rights and liabilities under lease agreement were transferred to JSC KnAAPO and JSC NAPO, entities under common control with the Company, which are the manufacturing and assembling sites for Sukhoi SuperJet-100 aircraft. Before this equipment was transferred, the related items of property, plant and equipment and finance lease liabilities were classified as assets held for sale. In accordance with the lease transfer agreements all payments, which include mainly finance lease payments and lease advances made by the Company in the past, shall be compensated by JSC KnAAPO and JSC NAPO by As at 31 December the related amounts of future cash inflows, adjusted for the time value of money, consisted of other non-current receivables in the amount of USD 50,611 thousand (31 December : USD 48,738 thousand) and other current receivables in the amount of USD 14,409 thousand (31 December : USD 6,832 thousand). Note 10. Deferred tax assets Deferred tax assets and liabilities attributed to the following items: Foreign currency translation 31 December Recognised in profit or loss Recognised in equity 01 January Intangible assets (50,721) 32 - (2,874) (47,879) Property, plant and equipment (68,857) (47,080) - (2,281) (19,496) Inventories (25,279) (32,906) - (309) 7,936 Trade and other accounts receivable 9, ,011 Trade and other accounts payable 35,363 20,859-1,288 13,216 Loans and borrowings (14,376) (178) - (808) (13,390) Provision 3, ,086 Tax loss carry-forwards 228,047 79,817-10, ,049 Net deferred tax assets 116,548 21,139-5,876 89, December Recognised in profit or loss Recognised in equity Foreign currency translation 01 January Intangible assets (47,879) (52,202) - 4,568 (245) Property, plant and equipment (19,496) (20,474) - 1,832 (854) Inventories 7,936 (7,640) - (175) 15,751 Trade and other accounts receivable 8,011 (1,838) (788) (381) 11,018 Trade and other accounts payable 13,216 15,929 - (1,315) (1,398) Loans and borrowings (13,390) 388 (12,949) 1,204 (2,033) Provision 3,086 (3,534) - (47) 6,667 Tax loss carry-forwards 138, ,365 - (11,117) 46,801 Net deferred tax assets 89,533 32,994 (13,737) (5,431) 75,707 23