Joint Stock Company "TENEX" Notes to the Consolidated Financial Statements for 2015 Note Page Note Page 1 General information Basis of prepara

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11 Note Page Note Page 1 General information Basis of preparation Significant accounting policies Determination of fair values Acquisition and disposals of subsidiaries Property, plant and equipment Investment property Intangible assets Goodwill Long-term investments Long-term receivables Inventories Trade and other receivables Short-term investments Cash and cash equivalents Share capital and reserves Loans and borrowings Trade and other payables Revenue Other income Cost of sales Selling and administrative expenses Other expenses Finance income and costs Deferred tax assets and liabilities Income tax expense Related parties Contingencies and operational risks Financial instruments and risk management Non-controlling interests Subsequent events

12 1 General information (a) Business environment in Russian Federation The Group s operations are primarily located in the Russian Federation. Consequently, the Group 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. The conflict in Ukraine and related events has increased the perceived risks of doing business in the Russian Federation. The imposition of economic sanctions on Russian individuals and legal entities by the European Union, the United States of America, Japan, Canada, Australia and others, as well as retaliatory sanctions imposed by the Russian government, has resulted in increased economic uncertainty including more volatile equity markets, a depreciation of the Russian Rouble, a reduction in both local and foreign direct investment inflows and a significant tightening in the availability of credit. In particular, some Russian entities may be experiencing difficulties in accessing international equity and debt markets and may become increasingly dependent on Russian state banks to finance their operations. The longer term effects of recently implemented sanctions, as well as the threat of additional future sanctions, are difficult to determine. The consolidated financial statements reflect management s assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management s assessment. (b) Organisation and operations Joint Stock Company TENEX (hereinafter referred to as the Company ) and its subsidiaries (hereinafter referred to as the Group ) comprise Russian open and closed joint stock companies, limited liability companies as defined in the Civil Code of the Russian Federation and companies located abroad. The Group structure is disclosed in the Note 2(b). Company was a legal successor of national association TENEX and on 28 January 1994 it was registered as a joint stock company on the territory of Russian Federation. The Company s registered office is 28, bld.3, Ozerkovskaya naberezhnaya, Moscow, , Russian Federation. The Company (known as TENEX) is the world s largest exporter of products and services of the Russian nuclear fuel cycle with a substantial share in the industry s total foreign trade turnover. The principal activities of TENEX are: export of goods and services of the nuclear fuel cycle (NFC) produced by Russian entities of nuclear industry; development of transport logistics infrastructure The activity of the Group is controlled by the State represented by the sole shareholder Joint Stock Company Atomic Energy Power Corporation (hereinafter referred to as Atomenergoprom JSC ) which is 100% controlled by Rosatom State Atomic Energy Corporation (ROSATOM) (hereinafter referred to as Rosatom ). 12

13 2 Basis of preparation (a) Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRSs ). Certain comparative amounts have been adjusted in order to achieve consistency in presentation with current year financial information. (b) Basis of consolidation A list of companies of the Group included in the present consolidated financial statements is set below: The name of a subsidiary INTERNEXCO GmbH INTERNEXCO GmbH TENEX-Korea Co., Ltd TENEX-Japan Co. Tradewill Limited TENAM Corporation The principal activities The principal place of business Ownership/voting rights Trading in uranium products and goods Germany 100% 100% Trading in uranium products and goods Switzerland 100% - Marketing services to the Group s companies and PR activities Korea 100% 100% Marketing services to the Group s companies and PR activities, trading in uranium products and goods Japan 100% 100% Marketing services to the Group s companies and PR activities, trading in uranium products and goods UK 100% 100% Marketing services to the Group s companies and PR activities, trading in uranium products and goods USA 100% 100% TENEX Logistics JSC Organization of freight transportation Russia 100% 100% Crown LLC Office space leasing Russia 100% 100% Saint-Petersburg Izotop JSC NPK Chimpromengineering JSC Freight forwarding services, delivery of radioisotope products, instruments, equipment and safety facilities for work with radioactive materials Russia 100% 100% Financial and industrial group and holding company management Russia % Argon LLC Manufacturing of carbon materials Russia % Plant of Carbon and Composite materials LLC Manufacturing of artificial and synthetic fibres Russia % Technology Center TENEX JSC Research and development Russia % SNV LLC Production of polyacrylic tows Russia % ALABUGA-FIBRE LLC Producing carbon fibre Russia % 13

14 (c) Basis of measurement The consolidated financial statements are prepared on the historical cost basis with the exception of measurement of financial assets classified as available-for-sale and derivative financial instruments which are stated at fair value. (d) Functional and presentation currency The functional currency of each subsidiary and equity-accounted investees is the currency of the primary economic environment in which each entity operates. The national currency of the Russian Federation is Russian Rouble (further rouble or rub), which is the functional currency of the Company. The functional currency of the subsidiaries that operate abroad is determined individually for each foreign operation. The presentation currency of the consolidated financial statements is US Dollar for convenience of the users of the consolidated financial statements. Translation from functional currencies of the Company and the Group s subsidiaries to presentation currency is made in the following manner: assets and liabilities are translated using exchange rates prevailing at the date of the consolidated statement of financial position; income and expenses items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used; the resulting exchange differences are recognised in other comprehensive income and are presented in the consolidated statement of changes in equity in the line Foreign currency translation reserve ; capital transactions are translated at exchange rates at the dates of the relevant transactions. Components of equity are translated at exchange rate of the initial transactions and are not retranslated at the reporting date. Translation of the items of the present consolidated financial statements from functional to presentation currency was made using the following exchange rates: Average rate Reporting date spot rate US Dollar to 1 Rouble EURO to 1 Rouble Due to significant fluctuations of the exchange rates during 2015 year, the translation of income and expenses from functional to presentation currency was made using the monthly average exchange rate for each month of 2015 year. Average rate January February March April May June July August September October November December US Dollar to 1 Rouble Due to significant fluctuations of the exchange rates during the last months of 2014 year, the translation of income and expenses from functional to presentation currency was made using the following exchange rates: Items for 9 months 2014 at the average exchange rates for 9 months, Items for October, November and December 2014 at the average monthly exchange rates. 14

15 Average rate 9 months October November December US Dollar to 1 Rouble All financial information presented in thousand USD has been rounded to the nearest thousand. (e) Use of estimates and judgments The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements and estimates is included in the following notes: - Note 2 (d) determination of functional currency of the Group; - Note 3 (d) (iii) useful lives of property, plant and equipment. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes: - Note 25 deferred tax assets; - Note 28 recognition and measurement of provisions and contingencies; - Note 29 fair value of financial instruments disclosed in Level 3 in fair value hierarchy. 3 Significant accounting policies Except of the changes disclosed in part (a), the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities. (a) Basis of consolidation (i) Accounting for business combinations Business acquisitions are recorded in the accounting using the acquisition method as of the date of acquisition, more specifically, as of the date of control transfer to the Group (see Note 3 (a) (iii)). The Group measures goodwill as of the date of acquisition in the following manner: The aggregate of less (i) the fair value of the consideration transferred, (ii) the fair value of the acquirer's previously-held equity interest in the acquire; (iii) the amount of non-controlling interests; after deduction of (iv) the net of the amounts (usually, fair value) of the identifiable assets acquired, liabilities and contingent liabilities assumed of the acquiree. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss for the period. 15

16 The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination, are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss for the period. (ii) Accounting for non-controlling interests acquisitions Non-controlling interests are measured at their proportionate share of the acquiree s identifiable net assets at the acquisition date. Changes in the Group s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. (iii) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to risks, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. (iv) Acquisition from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for in the following manner: the assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group s controlling shareholder s consolidated financial statements at the date of acquisition. (v) Loss of control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any noncontrolling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained. (vi) Investments in associates (equity-accounted investees) The Group s interests in equity-accounted investees comprise interests in associates. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Interests in associates are accounted for using the equity method and are recognised initially at cost. The cost of the investment includes transaction costs. The consolidated financial statements include the Group s share of the profit or loss and other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence until the date that significant influence ceases. 16

17 When the Group s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued, except to the extent that the Group has an obligation or has made payments on behalf of the investee. (vii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (b) Foreign currency (i) Foreign currency transaction Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising in retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments which are recognised in other comprehensive income. (ii) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to USD at the exchange rates at the reporting date. The income and expenses of foreign operations are translated to USD at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency translation reserve in equity. However, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is allocated to noncontrolling interests. When a foreign operation is disposed of such that control, significant influence is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate that includes a foreign operation while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such item form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented in the translation reserve in equity. 17

18 (c) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment, except for land, are measured at cost less accumulated depreciation and impairment losses. The cost of property, plant and equipment at 31 December 2002 was determined by an independent appraiser and used as its fair value at the date of transition to IFRSs. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of selfconstructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net within other income/other expenses in profit or loss. (ii) Subsequent costs The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. (iii) Depreciation Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows: buildings machinery and equipment vehicles fixtures and others years; 2-29 years; 3-8 years; 2-20 years. Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. (d) Investment property (i) Recognition and measurement Items of investment property are measured at actual cost less accumulated depreciation and impairment losses. Initial cost includes expenditure that is directly attributable to the acquisition of the asset. 18

19 (ii) Subsequent costs The cost of replacing part of an item of investment property is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of investment property are recognized in profit or loss as incurred. (iii) Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of asset, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows: buildings and constructions (e) Intangible assets (i) Goodwill 30 years. Goodwill that arises on the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see note 3(a)(i). Goodwill is measured at cost less accumulated impairment losses. In respect of equity-accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted investee. (ii) Other intangible assets Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses. (iii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in the profit or loss as incurred. (iv) Amortization Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use since this most closely reflects the expected pattern of consumption of future economic benefits embodied in the asset. The estimated useful lives of other intangible assets (licenses and software) for the current and comparative periods are 3-10 years. Depreciation methods and useful lives are reviewed at each financial year end and adjusted if appropriate. 19

20 (f) Financial instruments (i) Non-derivative financial assets 20 Non-derivative financial assets comprise investments in equity and debt securities, trade and other receivables and cash and cash equivalents. The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group classifies non-derivative financial assets into the following categories: loans and receivables and available-for-sale financial assets. Loans and receivables Loans and receivables are a category of financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables category comprise the following classes of assets: trade and other receivables (see Notes 11 and 13), loans granted (see Note 14). Cash and cash equivalents Cash and cash equivalents comprise cash balances, call deposits and highly liquid investments with maturities at initial recognition of three months or less. Financial assets available-for-sale Available-for-sale financial assets are non-derivative financial assets that are designated as availablefor-sale or are not classified in any of the above categories of financial assets. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale equity instruments, are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised or impaired, the cumulative gain or loss in equity is reclassified to profit or loss. Unquoted equity instruments whose fair value cannot reliably be measured are carried at cost. (ii) Non-derivative financial liabilities The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables. Bank overdrafts that are repayable on demand and form an integral part of the Group s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

21 (iii) Derivative financial instruments 21 The Group holds derivatives, embedded derivatives for hedging of foreign exchange risk to offset unfavourable changes in cash flows. Derivatives are recognised initially at fair value. Attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised in other comprehensive income and the disposal of a derivative is transferred to profit or loss for the period. (g) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories include expenditure that is directly attributable to the acquisition of inventories, import duties and other taxes, and transport, handling and, if applicable, labour costs and appropriate share in overheads required for delivery and other costs directly attributable to bringing the asset to a working condition for their intended use. Cost of uranium-containing goods is calculated for each batch of inventories; cost of other inventories is calculated based on the weighted average principle. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (h) Share capital (i) Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. (i) Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and the leased assets are not recognised on the Group s statement of financial position. (j) Impairment (i) Non-derivative financial assets A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. Loans and receivables The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant loans and receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics.

22 22 In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. 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 asset s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. Available-for-sale financial assets Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income. Equity-accounted investees An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognised in profit or loss, and is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. (ii) Non-financial assets The carrying amounts of the Group 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 goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its estimated recoverable amount. The recoverable amount of an asset or CGU 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 or CGU. For the purpose of impairment testing, assets that cannot be tested individually 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 CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. The Group s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of

23 CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, 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. (k) Employee benefits (i) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profitsharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. (l) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. 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 the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (m) Revenue (i) Goods sold Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised. The moment of transfer of risks and benefits of ownership depends on terms of contracts. For sales of uranium-containing products, transfer usually occurs when the product is received at the customer s warehouse; however, for some international shipments transfer occurs upon loading the goods onto the relevant carrier at the port of the seller. Generally for such products the buyer has no right of return. (ii) Services Revenue from services rendered is recognised in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed. The stage of completeness is determined by different methods providing a reliable estimate of the work performed. Depending on nature of works these methods may include: progress report; services, afforded at reporting date, percentage of the total services volume; proportional ratio of costs, incurred at the moment, to the estimated value of total costs under a contract. To the costs, incurred at the moment, includes only costs which indicate services afforded at reporting date. In estimated total costs under a contract included only those which indicate services afforded or to be afforded. In estimated total costs under a contract included only costs which indicates afforded or to be afforded services. 23

24 (iii) Commissions When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised in the net amount of commission made by the Group. (n) Other income and expenses Other income and expenses are presented separately from commercial and administrative expense due to their size, incidence or nature to enable a full disclosure of the Group s operations. Such income and expenses primarily include the following: impairment loss of non-current assets and goodwill, gain and loss from disposal of subsidiaries and associates, charity expenses, income and expenses from leases, gain and loss from disposal of other assets. (i) Lease payments 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 as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. (ii) Social expenditure To the extent that the Group s contributions to social programs benefit the community at large and are not restricted to the Group s employees, they are recognised in profit or loss as incurred. (o) Finance income and costs Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, fair value gains on financial assets at fair value through profit or loss, gains on the remeasurement to fair value of any preexisting interest in an acquire and gains on derivatives financial instruments. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group s right to receive payment is established. Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, dividends on preference shares classified as liabilities, foreign exchange loss, impairment losses recognised on financial assets. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position. (p) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss 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. Current tax payable also includes any tax liability arising from the declaration of dividends. Deferred tax is recognised in respect of 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: 24

25 25 temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and taxable temporary differences arising on the initial recognition of goodwill. 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. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. In accordance with the tax legislation of the Russian Federation, tax losses and current tax assets of a company in the Group may not be set off against taxable profits and current tax liabilities of other Group companies. In addition, the tax base is determined separately for each of the Group s main activities and, therefore, tax losses and taxable profits related to different activities cannot be offset. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they 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. Since 1 January, 2013 the Company and other companies, under common control of Atomenergoprom JSC, including parent company Atomenergoprom JCS, exercise the option to pay taxes as a consolidated tax-payer and are subject to taxation on a consolidated basis. The majority of the Group companies do not exercise such an option and current income taxes are provided on the taxable profit of each subsidiary. Most subsidiaries are subject to the Russian Federation Tax Code, under which income taxes are payable at a rate of 20% after adjustments for certain items, that are either not deductible or not taxable for tax purposes. Subsidiaries operating in countries other than the Russian Federation are subject to income tax at the applicable statutory rate in the country in which these entities operate. (q) New Standards and interpretations not yet adopted A number of new Standards, amendments to Standards and Interpretations are not yet effective as at 31 December 2015, and have not been applied in preparing these consolidated financial statements. Of these pronouncements, potentially the following will have an impact on the Group s operations. The Group plans to adopt these pronouncements when they become effective. IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group has not analyzed the possible implications from application of new the Standard on performance and financial position of the Group yet. The Group does not intend to adopt this standard early. IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. The core principle of the new standard is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the

26 entity expects to be entitled in exchange for those goods or services. The new standard results in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group has not analyzed the possible implications from application of new the Standard on performance and financial position of the Group yet. The Group does not intend to adopt this standard early. IFRS 16 replaces the existing lease accounting guidance in IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a lease, SIC-15 Operating Leases Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. It eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. Lessor accounting remains similar to current practice i.e. lessors continue to classify leases as finance and operating leases. IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019, early adoption is permitted if IFRS 15 Revenue from Contracts with Customers is also adopted. The Group has not analysed the possible implications from application of new the Standard on performance and financial position of the Group yet. The Group does not intend to adopt this standard early. The following new or amended standards are not expected to have a significant impact of the Group s consolidated financial statements. IFRS 14 Regulatory Deferral Accounts. Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11). Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38). Equity Method in Separate Financial Statements (Amendments to IAS 27). Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28). Annual Improvements to IFRSs Cycle various standards. Disclosure Initiative (Amendments to IAS 1). 4 Determination of fair values A number of the Group s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and for disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (a) Property, plant and equipment The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. When no quoted market prices are available, the fair value of property, plant and equipment is primarily determined using depreciated replacement cost. This method considers the cost to reproduce or replace the property, plant and equipment, adjusted for physical, functional or economical depreciation, and obsolescence. 26