Consolidated Financial Statements in accordance with IFRS as endorsed by the European Union for the year ended 31 December 2018

Transcription

1 HELLENIC PETROLEUM S.A. Consolidated Financial Statements in accordance with IFRS as endorsed by the European Union for the year ended 31 December 2018 GENERAL COMMERCIAL REGISTRY: COMPANY REGISTRATION NUMBER: 2443/06/B/86/23

2 REGISTERED OFFICE: 8 A CHIMARRAS STR, MAROUSI, GREECE Index to the consolidated financial statements Company Information... 4 Consolidated Statement of financial position... 5 Consolidated statement of comprehensive income... 6 Consolidated statement of changes in equity... 7 Consolidated statement of cash flows General information Summary of significant accounting policies Basis of preparation Basis of Consolidation Business combinations Segment reporting Foreign currency translation Assets held for sale Property, plant and equipment Borrowing costs Intangible assets Exploration for and Evaluation of Mineral Resources Impairment of non-financial assets Financial assets Derivative financial instruments and hedging activities Government grants Inventories Trade receivables Cash, cash equivalents and restricted cash Share capital Borrowings Current and deferred income tax Employee benefits Trade and other payables Provisions Environmental liabilities Revenue recognition Leases Dividend distribution Financial guarantee contracts Changes in accounting policies Comparative figures Financial risk management Financial risk factors Capital risk management Fair value estimation Critical accounting estimates and judgements... 39

3 5 Segment information Property, plant and equipment Intangible assets Investments in associates and joint ventures Loans, Advances & Long Term assets Inventories Trade and other receivables Cash, cash equivalents and restricted cash Share capital Reserves Trade and other payables Interest bearing loans and borrowings Deferred income tax Retirement benefit obligations Provisions Trade and other payables, non-current Derivative financial instruments Expenses by nature Exploration and Development expenses Other operating income / (expenses) and other gains / (losses) Finance (Expenses) / Income - Net Currency exchange gains / (losses) Income tax expense Earnings per share Dividends per share Cash generated from operations Contingencies and litigation Commitments Related-party transactions Principal subsidiaries, associates and joint ventures included in the consolidated financial statements Events after the end of the reporting period (3) / (79)

4 Company Information Directors Efstathios Tsotsoros - Chairman of the Board & Chief Executive Officer (From 17/04/2018) Andreas Shiamishis - Deputy Chief Executive Officer Georgios Alexopoulos - Member Theodoros-Achilleas Vardas - Member Georgios Grigoriou - Member Georgios Papakonstantinou - Member (From 06/06/2018) Theodoros Pantalakis - Member Spiridon Pantelias - Member Κonstantinos Papagiannopoulos - Member Dimitrios Kontofakas - Member Vasileios Kounelis - Member Loudovikos Kotsonopoulos - Member (From 17/04/2018) Christos Tsitsikas - Member (From 29/11/2018) Other Board Members during the year Grigorios Stergioulis - Chief Executive Officer (Until 17/04/2018) Panagiotis Ofthalmides - Member (Until 06/06/2018) Ioannis Psichogios - Member (Until 29/11/2018) Registered Office 8A Chimarras Str GR Marousi General Commercial Registry These consolidated financial statements constitute an integral part of the Annual Financial Report which can be found at and which incorporates the Independent Auditor s Report. (4) / (79)

5 Consolidated Statement of financial position As at Note ASSETS Non-current assets Property, plant and equipment Intangible assets Investments in associates and joint ventures Deferred income tax assets Investment in equity instruments Loans, advances and long term assets Current assets Inventories Trade and other receivables Assets held for sale Derivative financial instruments Cash, cash equivalents and restricted cash Total assets EQUITY Share capital and share premium Reserves Retained Earnings Equity attributable to equity holders of the parent Non-controlling interests Total equity LIABILITIES Non- current liabilities Interest bearing loans and borrowings Deferred income tax liabilities Retirement benefit obligations Provisions Trade and other payables Current liabilities Trade and other payables Derivative financial instruments Income tax payable Interest bearing loans and borrowings Dividends payable Total liabilities Total equity and liabilities The notes on pages 9 to 79 are an integral part of these consolidated financial statements. These consolidated financial statements were approved by the board of directors on 28 February E. Tsotsoros A. Shiamishis S. Papadimitriou Chairman of the Board & Chief Executive Officer Deputy Chief Executive Officer & Chief Financial Officer Accounting Director (5) / (79)

6 Consolidated statement of comprehensive income For the year ended Note Reveue from contracts with customers Cost of sales 22 ( ) ( ) Gross profit Selling and distribution expenses 22 ( ) ( ) Administrative expenses 22 ( ) ( ) Exploration and development expenses 23 (1.403) (212) Other operating (expenses) / income and other gains/( losses) - net 24 (8.823) (15.888) Operating profit Finance income Finance expense 25 ( ) ( ) Currency exchange (losses) / gains (8.173) Share of profit/ (loss) of investments in associates and joint ventures 8 (1.771) Profit before income tax Income tax expense 27 ( ) ( ) Profit for the year Profit attributable to: Owners of the parent Non-controlling interests Other comprehensive income/ (loss): Other comprehensive income that will not be reclassified to profit or loss (net of tax): Actuarial losses on defined benefit pension plans (11.012) (9.589) Changes in the fair value of equity instruments 14 (695) 6 Reduction in value of land 14 - (1.669) Share of other comprehensive income/ (loss) of associates 14 (288) - (11.995) (11.252) Other comprehensive income that may be reclassified subsequently to profit or loss (net of tax): Fair value losses on cash flow hedges 14 (5.006) (4.590) Derecognition of gains/losses on hedges through comprehensive income 14 (14.920) Currency translation differences and other movements (745) 752 (20.671) (1.859) Other comprehensive (loss)/income for the year, net of tax (32.666) (13.111) Total comprehensive income for the year Total comprehensive income/(loss) attributable to: Owners of the parent Non-controlling interests Basic and diluted earnings per share (expressed in Euro per share) 28 0,69 1,25 The notes on pages 9 to 79 are an integral part of these consolidated financial statements. (6) / (79)

7 Consolidated statement of changes in equity Attributable to owners of the Parent Note Share Capital Reserves Retained Earnings Total Noncontrolling Interest Total Equity Balance at 1 January Changes of the fair value of equity inestment Currency translation gains/(losses) and other movements Reduction in value of land 14 - (907) - (907) (762) (1.669) Actuarial losses on defined benefit pension plans 14 - (9.584) - (9.584) (5) (9.589) Fair value gains on cash flow hedges 14 - (4.590) - (4.590) - (4.590) Derecognition of gains on hedges through comprehensive income Other comprehensive income / (loss) - (12.383) - (12.383) (728) (13.111) Profit /(loss) for the year Total comprehensive income/(loss) for the year - (12.383) Share based payments 13 - (653) (9.061) (9.714) - (9.714) Acquisition of treasury shares 14 - (10.245) - (10.245) - (10.245) Issue of treasury shares to employees Participation of minority holding in share capital decrease of subsidiary Transfers from Retained Earnings to Reserves (8.797) Tax on intra-group dividends - - (136) (136) - (136) Dividends to non-controlling interests (2.561) (2.561) Dividends 14 - ( ) - ( ) - ( ) Acquisition of non- controlling interests (38.298) (21.045) Balance at 31 December 2017 as originally presented Change in accounting policy (3.469) (3.303) - (3.303) Restated total equity as at 1 January Changes in the fair value of equity instruments 14 - (700) - (700) 5 (695) Currency translation gains/(losses) and other movements 14 - (740) - (740) (5) (745) Actuarial losses on defined benefit pension plans 14 - (11.002) - (11.002) (10) (11.012) Fair value losses on cash flow hedges 14 - (5.006) - (5.006) - (5.006) Share of other comprehensive income/ (loss) of associates 14 - (288) - (288) - (288) Derecognition of gains on hedges through comprehensive income 14 - (14.920) - (14.920) - (14.920) Other comprehensive loss 14 - (32.656) - (32.656) (10) (32.666) Profit for the period Total comprehensive income/(loss) for the year - (32.656) Share based payments 13 - (93) (1.121) (1.214) - (1.214) Acquisition of treasury shares 14 - (683) - (683) - (683) Issue of treasury shares to employees Participation of minority shareholders in share capital increase of subsidiary Transfers from Reserves to Retained Earnings 14 - (17.319) Tax on intra-group dividends - - (123) (123) - (123) Dividends to non-controlling interests (2.061) (2.061) Dividends - (76.408) (76.408) ( ) - ( ) Transfer to Statutory Reserve (26.170) Transfer of grant received to tax free reserves Balance at 31 December The notes on pages 9 to 79 are an integral part of these consolidated financial statements. (7) / (79)

8 Consolidated statement of cash flows For the year ended Note Cash flows from operating activities Cash generated from operations Income tax paid (4.918) (10.375) Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment & intangible assets 6,7 ( ) ( ) Proceeds from disposal of property, plant and equipment & intangible assets Settlement of consideration of acquisition of further equity interest in subsidiary (1.298) - Purchase of subsidiary, net of cash acquired 34 (16.000) - Grants received Interest received Dividends received Investment in associates - net 8 - (147) Proceeds from disposal of investments in equity instruments Net cash generated from/ (used in) investing activities ( ) Cash flows from financing activities Interest paid ( ) ( ) Dividends paid to shareholders of the Company ( ) ( ) Dividends paid to non-controlling interests (2.061) (2.561) Movement in restricted cash Acquisition of treasury shares (683) (10.245) Participation of minority shareholders in share capital increase of subsidiary Proceeds from borrowings Repayments of borrowings ( ) ( ) Net cash used in financing activities ( ) ( ) Net increase/ (decrease) in cash and cash equivalents (42.273) Cash and cash equivalents at the beginning of the year Exchange gains / (losses) on cash and cash equivalents (8.521) Net increase/(decrease) in cash and cash equivalents (42.273) Cash and cash equivalents at end of the year The notes on pages 9 to 79 are an integral part of these consolidated financial statements. (8) / (79)

9 1 General information ( the Company or Hellenic Petroleum ) is the parent company of Hellenic Petroleum Group (the Group ). The Group operates in the energy sector predominantly in Greece, South Eastern Europe and the East Mediterranean. The Group s activities include refining and marketing of oil products, production and marketing of petrochemical products and exploration for hydrocarbons. The Group also provides engineering services. Through its investments in DEPA and Elpedison, the Group also operates in the natural gas sector and in the production and trading of electricity power. The parent Company is incorporated in Greece and the address of its registered office is 8 A Chimarras Str., Marousi. The shares of the Company are listed on the Athens Stock Exchange and the London Stock Exchange through GDRs. The financial statements and the consolidated financial statements of for the year ended 31 December 2018 were authorised for issue by the Board of Directors on 28 February The shareholders of the Company have the power to amend the financial statements after their issuance. 2 Summary of significant accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. 2.1 Basis of preparation These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board ( IASB ), as endorsed by the European Union ( EU ), and present the financial position, results of operations and cash flows of the Group on a going concern basis. Management has concluded that the going concern basis of preparation of the accounts is appropriate. The consolidated financial statements have been prepared in accordance with the historical cost basis, except for the following: financial instruments measured at fair value defined benefit pension plans plan assets measured at fair value assets held for sale measured at the lower of carrying value and fair value less cost to sell The preparation of financial statements, in accordance with IFRS, requires the use of certain critical accounting estimates and assumptions. It also requires management to exercise its judgment in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4 Critical accounting estimates and judgements. Estimates and judgements are continuously evaluated and are based on historical experience and other factors, including expectations of future events as assessed to be reasonable under the present circumstances. (9) / (79)

10 2.1.1 New standards, amendments to standards and interpretations New and amended standards adopted by the Group. The accounting principles and calculations used in the preparation of the consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statements for the year ended 31 December 2017 and have been consistently applied in all periods presented in this report except for the following IFRS s which have been adopted by the Group as of 1 January The Group applied for the first time, IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments and disclosed below, as required by IAS8, the nature and effect of these changes. Several other amendments and interpretations apply for the first time in 2018 but do not have a significant impact on the consolidated financial statements of the Group for the year ended 31 December IFRS 9 Financial Instruments: The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. The Group adopted the new standard as of 1 January 2018 without restating comparative information. The cumulative effect of the adjustments arising from the new requirements are therefore recognized in the opening balance of retained earnings on 1 January The following table shows the adjustments recognized for each individual line item. Line items that were not affected by the changes have not been included. The adjustments are presented in more detail below. Impact on the statement of financial position (increase/(decrease)) as at 31 December 2017 as published: Balance sheet extract Adjustments 31 December 2017 As published IFRS 9 1 January 2018 after effect of IFRS 9 Non-current assets Investments in associates and joint ventures (b) (1.750) Deferred income tax assets (b) Available for sale financial assets (a) (1.857) - Investment in equity instruments (a) Current assets Trade and other receivables (b) (2.084) Equity Reserves (a) Retained earnings (a), (b) (3.469) (a) Classification and measurement Under IFRS 9, financial assets are subsequently measured at fair value through profit or loss (FVPL), amortized cost, or at fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the Group s business model for managing the assets; and whether the instruments contractual cash flows represent solely payments of principal and interest on the principal amount outstanding. The financial assets (equity investments) that were classified by the Group as available-for-sale (AFS) under IAS 39, are now classified as Investments in equity instruments and measured at fair value through other comprehensive income. Any changes in the fair value of such equity instruments are included in items that will not be reclassified to profit or loss. IFRS 9 permits an entity to make an irrevocable election to designate an investment in equity instruments that is not held for trading as at fair value through other comprehensive income. (10) / (79)

11 As a result of applying the classification, the Group reclassified an amount of 0,2 million from retained earnings to reserves. Derivative instruments, to the extent they are not designated as effective hedges, continue to be classified as financial assets at FVPL. The accounting for the Group s financial liabilities remain largely the same as under IAS 39. In summary, upon the adoption of IFRS 9, the Group had the following reclassifications: As at 31 December 2017 (IAS 39) IFRS 9 measurement category Fair value through profit or loss Fair value through OCI Amortised cost Loans and receivables Trade receivables Available for sale financial assets (b) Impairment The adoption of IFRS 9 has changed the Group s accounting for impairment losses for financial assets by replacing IAS 39 s incurred loss approach with a forward-looking expected credit loss (ECL) approach. For trade receivables, the Group has applied the standard s simplified approach and has calculated ECLs based on lifetime expected credit losses. The Group has established a provision matrix that is based on the Group s historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. For other financial assets, the ECL is based on the 12-month ECL. The 12-month ECL is the portion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. However, when there has been as significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. Financial assets with contractual payments over 90 days past due constitute default events. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. The effect of the above change on the statement of financial position as at 1 January 2018 resulted in a decrease of retained earnings of 3,5 million, a decrease of 2,1 million in trade receivables, an increase of 0,5 million in deferred income tax assets and a decrease of 1,8 million in investment in associates and joint ventures. (11) / (79)

12 Set out below is the reconciliation of the ending impairment allowances in accordance with IAS 39 to the opening loss allowances determined in accordance with IFRS 9: Allowance for impairment under IAS 39 as at 31 December 2017 Remeasurement ECL under IFRS 9 as at 1 January 2018 Trade receivables under IAS 39/Financial assets at amortised cost under IFRS (c) Hedge accounting At the date of the initial application, all of the Group s existing hedging relationships were eligible to be treated as continuing hedging relationships under IFRS 9 and, as such, the adoption of the hedge accounting requirements of the new standard had no significant impact on the Group s financial statements. The Group s risk management policies and hedge documentation are aligned with the requirement of the new standard and hedge accounting continues to apply. IFRS 15 Revenue from Contracts with Customers: IFRS 15 establishes a five-step model that applies to revenue earned from a contract with a customer (with limited exceptions), regardless of the type of revenue transaction or the industry. The standard s requirements also apply to the recognition and measurement of gains and losses on the sale of some non-financial assets that are not in the Group s ordinary activities (e.g. sales of property, plant and equipment or intangible). As from 1 January 2018, the Group applies the new standard using the modified retrospective method, therefore the initial application did not result in any restatement of comparative data. The new standard did not have any significant impact on the Group s consolidated financial statements, upon adoption since, no material differences from applying the new accounting policies were identified. Therefore it did not have any impact on retained earnings and no transition adjustments were required as a result of its application. Although the implementation of IFRS 15 does not generally represent a material change from the Group s current practices the Group revised its respective accounting policy as follows: The Group recognizes revenue when (or as) a contractual promise to a customer (performance obligation) is fulfilled by transferring a promised good or service (which is when the customer obtains control over the promised goods or services). If a contract contains more than one performance obligation, the total transaction price of the contract is allocated among the individual, separate performance obligations based on their relative standalone selling prices. The amount of revenue recognized is the amount allocated to the satisfied performance obligation based on the consideration that the Group expects to receive in accordance with the terms of the contracts with the customers. Variable considerations are included in the amount of revenue recognized only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur in the future. Options for prospective volume related discounts are assessed by the Group to determine whether they constitute a material right that the customer would not receive without entering into that contract. For all such options that are considered as material rights, the Group assesses the likelihood of its exercise and then the portion of the transaction price allocated to the option is deferred and recognized when it is either exercised or lapsed. Under the new requirements, the Group concluded that prospective volume discounts constitute a material right which should be deferred and recognized when exercised or lapsed. The Group provides volume discounts to customers based on thresholds specified in contracts. All such discounts are accrued within the financial year and therefore the application of the new standard has a nil effect in the annual Financial Statements. (12) / (79)

13 Revenue from contracts with customers in accordance with the Group s commercial policy is disaggregated by operating segment and distribution channel in Note 5. In addition, the Group concluded that it transfers control over its products at a point in time, upon receipt by the customer, because this is when the customer benefits from the respective products. IFRS 15 (Clarifications) Revenue from Contracts with Customers: The objective of the Clarifications is to clarify the IASB s intentions when developing the requirements in IFRS 15 Revenue from Contracts with Customers, particularly the accounting of identifying performance obligations amending the wording of the separately identifiable principle, of principal versus agent considerations including the assessment of whether an entity is a principal or an agent as well as applications of control principle and of licensing providing additional guidance for accounting of intellectual property and royalties. The Clarifications also provide additional practical expedients for entities that either apply IFRS 15 fully retrospectively or that elect to apply the modified retrospective approach. IFRS 2 (Amendments) Classification and Measurement of Share based Payment Transactions: The Amendments provide requirements on the accounting for the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments, for share-based payment transactions with a net settlement feature for withholding tax obligations and for modifications to the terms and conditions of a sharebased payment that changes the classification of the transaction from cash-settled to equity-settled. IAS 40 (Amendments) Transfers to Investment Property: The Amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The Amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management s intentions for the use of a property does not provide evidence of a change in use. IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration: The Interpretation clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation covers foreign currency transactions when an entity recognizes a nonmonetary asset or a non-monetary liability arising from the payment or receipt of advance consideration before the entity recognizes the related asset, expense or income. The Interpretation states that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the nonmonetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. The IASB has issued the Annual Improvements to IFRSs ( Cycle), which is a collection of amendments to IFRSs. - IAS 28 Investments in Associates and Joint Ventures: The amendments clarify that the election to measure at fair value through profit or loss an investment in an associate or a joint venture that is held by an entity that is venture capital organization, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial recognition. Standards issued but not yet effective and not early adopted The Group has not early adopted any other of the following standard, interpretation or amendment that has been issued but is not yet effective. In addition, the Group assessed all standards, interpretations and amendments issued but not yet effective, and concluded that, except for IFRS 16, which is analyzed below, they will not have any significant impact on the consolidated financial statements. IFRS 16 Leases: The standard is effective for annual periods beginning on or after 1 January IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer ( lessee ) and the supplier ( lessor ). IFRS 16 replaces existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Agreement contains a Lease, SIC-15 Operating Leases- Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal From of a Lease. (13) / (79)

14 The new standard requires lessees to recognize most leases on their financial statements. Lessees will have a single accounting model for all leases, with certain exemptions. Lessor accounting is substantially unchanged. More specifically, IFRS 16 introduces a single, on-balance sheet lease accounting model for leases. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard i.e. lessors continue to classify leases as finance or operating leases. The Group has set up a project team which has reviewed all of the group s leasing arrangements over the last year in light of the new lease accounting rules in IFRS 16. The standard will affect primarily the accounting for the Group s operating leases. The Group has assessed the estimated impact that initial application of IFRS 16 will have on its consolidated financial statements. Particularly, it has disclosed known or reasonably estimable information relevant to assessing the possible impact that the application of IFRS 16 will have on its financial statements in the period of initial application that was available when the financial statements were prepared, as seen below. The actual impacts of adopting the standard on 1 January 2019 may change because: The Group is in the process of finalising the testing and assessment of controls over its new IT systems; and The new accounting policies and estimates are subject to change until the Group presents its first financial statements that include the date of initial application Transition The Group plans to apply IFRS 16 initially on 1 January 2019, using the modified retrospective approach. Under this approach the Group will a) recognize a lease liability and will measure that lease liability at the present value of the remaining lease payments, discounted using the Group s incremental borrowing rate at the date of initial application and b) recognise a right-of-use asset and measure that right-of-use asset by an amount equal to the lease liability. The cumulative effect of adopting IFRS 16, if such need arises, will be recognized as an adjustment to the opening balance of retained earnings at 1 January 2019, with no restatement of comparative information. The Group plans to apply the practical expedient to grandfather the definition of a lease on transition. This means that it will apply IFRS 16 to all contracts entered into before 1 January 2019 and identified as leases in accordance with IAS 17 and IFRIC 4. Furthermore, the Group will elect to use the exemptions proposed by the standard on lease contracts for which the lease terms ends within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low value. Finally the Group decided to apply a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with similar remaining lease term for similar class of underlying assets in a similar economic environment). Leases in which the Group is a lessee The Group will recognize new assets and liabilities for its operating leases of commercial properties such as petrol stations and office buildings as well as motor vehicles and equipment. Subsequent to initial recognition, the Group will a) measure the right-of-use asset by applying the cost model and depreciate it on a straight line basis up to the end of the lease term and b) measure the lease liability by increasing and reducing the carrying amount to reflect interest on the lease liability and lease payments made, respectively. Previously, the Group recognized operating lease expense on a straight-line basis over the term of the lease, and recognized assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognized. In addition, the Group will no longer recognize provisions for operating leases that it assesses to be onerous. Instead, the Group will include amounts due under the lease in its lease liability. Based on the information currently available, and subject to the completion of the above mentioned implementation tasks the Group estimates that it will recognize additional lease liabilities in the range of (14) / (79)

15 160 million to 180 million as at 1 January 2019 and additional right-of-use assets in the range of 160 million to 180 million. The estimated impact on the EBITDA of the Group is an increase in the range of 30 million to 40 million. The Group does not expect the adoption of IFRS 16 to impact its ability to comply with Group s loan covenants. IFRS 10 (Amendment) Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture: The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. In December 2015 the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. The amendments have not yet been endorsed by the EU. IFRS 9 (Amendment) Prepayment features with negative compensation: The Amendment is effective for annual reporting periods beginning on or after 1 January 2019 with earlier application permitted. The Amendment allows financial assets with prepayment features that permit or require a party to a contract either to pay or receive reasonable compensation for the early termination of the contract (so that, from the perspective of the holder of the asset there may be negative compensation ), to be measured at amortized cost or at fair value through other comprehensive income. IAS 28 (Amendments) Long-term Interests in Associates and Joint Ventures: The Amendments are effective for annual reporting periods beginning on or after 1 January 2019 with earlier application permitted. The Amendments relate to whether the measurement, in particular impairment requirements, of long term interests in associates and joint ventures that, in substance, form part of the net investment in the associate or joint venture should be governed by IFRS 9, IAS 28 or a combination of both. The Amendments clarify that an entity applies IFRS 9 Financial Instruments, before it applies IAS 28, to such long-term interests for which the equity method is not applied. In applying IFRS 9, the entity does not take account of any adjustments to the carrying amount of long- term interests that arise from applying IAS 28. These Amendments have not yet been endorsed by the EU. IFRIC Interpretation 23: Uncertainty over Income Tax Treatments: The Interpretation is effective for annual periods beginning on or after 1 January 2019 with earlier application permitted. The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12. The Interpretation provides guidance on considering uncertain tax treatments separately or together, examination by tax authorities, the appropriate method to reflect uncertainty and accounting for changes in facts and circumstances. IAS 19 (Amendments) Plan Amendment, Curtailment or Settlement: The Amendments are effective for annual periods beginning on or after 1 January 2019 with earlier application permitted. The amendments require entities to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after a plan amendment, curtailment or settlement has occurred. The amendments also clarify how the accounting for a plan amendment, curtailment or settlement affects applying the asset ceiling requirements. These Amendments have not yet been endorsed by the EU. Conceptual Framework in IFRS standards: The IASB issued the revised Conceptual Framework for Financial Reporting on 29 March The Conceptual Framework sets out a comprehensive set of concepts for financial reporting, standard setting, guidance for preparers in developing consistent accounting policies and assistance to others in their efforts to understand and interpret the standards. IASB also issued a separate accompanying document, Amendments to References to the Conceptual Framework in IFRS Standards, which sets out the amendments to affected standards in order to update references to the revised Conceptual Framework. It s objective is to support transition to the revised Conceptual Framework for companies that develop accounting policies using the Conceptual Framework when no IFRS Standard applies to a particular transaction. For preparers who develop accounting policies based on the Conceptual Framework, it is effective for annual periods beginning on or after 1 January (15) / (79)

16 IFRS 3 Business Combinations (Amendments): The IASB issued amendments in Definition of a Business (Amendments to IFRS 3) aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020 and to asset acquisitions that occur on or after the beginning of that period, with earlier application permitted. These Amendments have not yet been endorsed by the EU. IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of material (Amendments) The Amendments are effective for annual periods beginning on or after 1 January 2020 with earlier application permitted. The Amendments clarify the definition of material and how it should be applied. The new definition states that, Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. In addition, the explanations accompanying the definition have been improved. The Amendments also ensure that the definition of material is consistent across all IFRS Standards. These Amendments have not yet been endorsed by the EU. The IASB has issued the Annual Improvements to IFRSs Cycle, which is a collection of amendments to IFRSs. The amendments are effective for annual periods beginning on or after 1 January 2019 with earlier application permitted. These annual improvements have not yet been endorsed by the EU. - IFRS 3 Business Combinations and IFRS 11 Joint Arrangements: The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business. - IAS 12 Income Taxes: The amendments clarify that the income tax consequences of payments on financial instruments classified as equity should be recognized according to where the past transactions or events that generated distributable profits has been recognized. - IAS 23 Borrowing Costs: The amendments clarify paragraph 14 of the standard that, when a qualifying asset is ready for its intended use or sale, and some of the specific borrowing related to that qualifying asset remains outstanding at that point, that borrowing is to be included in the funds that an entity borrows generally. 2.2 Basis of Consolidation (a) Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to 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. At each reporting period, the Group reassesses whether it exercises control over the investees, in case there are facts and circumstances indicating a change in one of the control elements above. Subsidiaries are consolidated from the date on which effective control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated, unless there is objective evidence that the asset is impaired. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, statement of other comprehensive income, statement of changes in equity and statement of financial position respectively. (16) / (79)

17 (b) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. (c) Disposal of subsidiaries When the Group ceases to have control over an entity, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. (d) Associates and Equity method Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, investments are initially recognised at cost and their carrying amount is increased or decreased to recognise the investor s share of the profit or loss or share of other comprehesive income of the investee after the date of acquisition. The Group s investment in associates includes goodwill identified on acquisition. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. The Group s share of its associates post-acquisition profit or loss is recognised in the statement of comprehensive income, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment in the associate and its carrying value. Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group s financial statements only to the extent of unrelated investor s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates are changed where necessary to ensure consistency with the policies adopted by the Group. (e) Joint arrangements Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group s share of the postacquisition profits or losses and movements in other comprehensive income. When the Group s share of losses in a joint venture equals or exceeds its interest in the joint ventures, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group s interest in the joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset (17) / (79)

18 transferred. Accounting policies of joint ventures are changed where necessary to ensure consistency with the policies adopted by the Group. A joint operation arises where the Group has rights to the assets and obligations of the operation. The Group recognizes its share of the assets, obligations, revenue and expenses of the jointly controlled operation, including its share of those held or incurred jointly, in each respective line of its financial statements. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss within Share of profit of investments in associates and a joint ventures in the statement of profit or loss. 2.3 Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest (previously minority interests) in the acquiree. For each business combination, the Group measures the noncontrolling interest in the acquiree at the proportionate share of the acquiree s identifiable net assets. Acquisition costs incurred are expensed. The consideration transferred for the acquisition of a subsidiary is the total of the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of acquisition. The discount rate used is the entity s incremental borrowing rate, being the rate at which similar borrowing could be obtained from an independent financier under comparable terms and conditions. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date and is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognized in profit or loss, in accordance with the appropriate IFRS. Amounts classified as equity are not remeasured. Goodwill (as disclosed in Note 2.9) is initially measured as the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest and any previous interest held over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the Group reasseses whether it has correctly indentified all of the assets acquired and liabilities assumed and reviews their measurement, before any remaining difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. 2.4 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The executive committee which is comprised of the Chairman of the Board of Directors and Chief Executive Officer, the Deputy Chief Executive Officer and six General Managers of the Group, is the chief operating decision-maker, who makes strategic decisions and is responsible for allocating resources and assessing performance of the operating segments. The Group s key operating segments are disclosed in note 5. (18) / (79)