Public Joint Stock Company “National Joint Stock Company ... FS 2012-2013_ENG_FINAL_wi“National Joint Stock Company ... SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ... 2013 of Public Joint Stock Company “National Joint Stock Company “Naftogaz

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  • Public Joint Stock Company

    National Joint Stock Company

    NAFTOGAZ OF UKRAINE

    Consolidated Financial Statements

    as at 31 December 2013 and 2012

    and for the Years Ended

  • 1

    PUBLIC JOINT STOCK COMPANY NATIONAL JOINT STOCK COMPANY

    NAFTOGAZ OF UKRAINE

    CONTENTS

    Page

    INDEPENDENT AUDITORS REPORT 2-5

    CONSOLIDATED FINANCIAL STATEMENTS

    Consolidated Statements of Financial Position 6

    Consolidated Statements of Profit or Loss 7

    Consolidated Statements of Comprehensive Income 8

    Consolidated Statements of Changes in Equity 9

    Consolidated Statements of Cash Flows 10-11

    Notes to the Consolidated Financial Statements

    1. THE ORGANISATION AND ITS OPERATIONS...................................................................... 12 2. OPERATING ENVIRONMENT .................................................................................................. 13 3. RESTATEMENT OF COMPARATIVE INFORMATION ......................................................... 17 4. SEGMENT INFORMATION ....................................................................................................... 21 5. BALANCES AND TRANSACTIONS WITH RELATED PARTIES ......................................... 29 6. PROPERTY, PLANT AND EQUIPMENT .................................................................................. 30 7. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES ................................................. 32 8. OTHER NON-CURRENT ASSETS............................................................................................. 37 9. INVENTORIES ............................................................................................................................ 38 10. TRADE ACCOUNTS RECEIVABLE ......................................................................................... 38 11. PREPAYMENTS MADE AND OTHER CURRENT ASSETS .................................................. 40 12. CASH AND CASH EQUIVALENTS .......................................................................................... 40 13. SHARE CAPITAL ........................................................................................................................ 41 14. BORROWINGS ............................................................................................................................ 42 15. PROVISIONS ............................................................................................................................... 43 16. ADVANCES RECEIVED AND OTHER CURRENT LIABILITIES ......................................... 45 17. COST OF SALES ......................................................................................................................... 46 18. OTHER OPERATING EXPENSE ............................................................................................... 46 19. FINANCE COSTS ........................................................................................................................ 47 20. INCOME TAX .............................................................................................................................. 47 21. CONTINGENCIES, COMMITMENTS AND OPERATING RISKS .......................................... 50 22. FINANCIAL RISK MANAGEMENT ......................................................................................... 54 23. FAIR VALUE ............................................................................................................................... 58 24. SUBSEQUENT EVENTS............................................................................................................. 60 25. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .................................................... 64 26. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS.............................................. 77 27. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS .................. 80

  • Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each

    of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte

    Touche Tohmatsu Limited and its member firms.

    2015 PJSC "Deloitte & Touche USC". All rights reserved.

    PJSC Deloitte & Touche USC

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    Ukraine

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    www.deloitte.ua

    PUBLIC JOINT STOCK COMPANY NATIONAL JOINT STOCK COMPANY

    NAFTOGAZ OF UKRAINE

    INDEPENDENT AUDITORS REPORT

    To the shareholder of Public Joint Stock Company National Joint Stock Company Naftogaz of

    Ukraine:

    We have audited the accompanying consolidated statement of financial position as at 31 December 2013 of Public Joint Stock Company National Joint Stock Company Naftogaz of Ukraine

    (the Company) and its subsidiaries (collectively, the Group), and we were engaged to audit the

    consolidated statement of financial position as at 31 December 2012, and the consolidated statements of profit or loss, the consolidated statements of comprehensive income, consolidated statements of

    changes in equity and the consolidated statements of cash flows of the Group for the years ended

    31 December 2013 and 2012, and a summary of significant accounting policies and other explanatory

    information.

    Managements Responsibility for the Consolidated Financial Statements

    Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), and for such

    internal control as management determines is necessary to enable the preparation of consolidated

    financial statements that are free from material misstatement, whether due to fraud or error.

    Auditors Responsibility

    Our responsibility is to express an opinion on the consolidated statement of financial position as at 31 December 2013 based on our audit.

    Because of the matters described in the Basis for Qualified Opinion and Disclaimer of Opinion paragraphs below, we were not able to obtain sufficient and appropriate audit evidence to provide a

    basis for an audit opinion on the Groups consolidated financial position as at 31 December 2012, and

    the consolidated results of its operations and cash flows of the Group for the years ended 31 December 2013 and 2012.

    We conducted our audit of the consolidated statement of financial position as at 31 December 2013 in

    accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the

    consolidated statement of financial position is free from material misstatement.

    An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated statement of financial position. The procedures selected depend on the auditors

    judgment, including the assessment of the risks of material misstatement of the consolidated statement

    of financial position, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated

    statement of financial position in order to design audit procedures that are appropriate in the

    circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and

    the reasonableness of accounting estimates made by management, as well as evaluating the overall

    presentation of the consolidated statement of financial position.

  • 3

    We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to

    provide a basis for our qualified audit opinion on the Groups consolidated financial position as at

    31 December 2013.

    Basis for Qualified Opinion on the Consolidated Financial Position of the Group as at 31 December 2013 and Disclaimer of Opinion on the Consolidated Financial Position of the Group as at

    31 December 2012, and on the Consolidated Results of its Operations and Cash Flows for the Years

    Ended 31 December 2013 and 2012

    1) As discussed in Note 25 to the consolidated financial statements, the Group has adopted the revaluation model for measurement of property, plant and equipment, which requires revaluations to

    be carried out with sufficient regularity so that the carrying amount of property, plant and equipment

    as at the reporting date does not differ materially from its fair value. The Groups property, plant and

    equipment were last independently revalued on 31 December 2009. Significant economic developments since that date, including changes in natural gas transportation tariffs and costs, selling

    prices of the Groups own extracted natural gas, and construction costs provide indications of

    a possible material change in the fair values of property, plant and equipment. In the absence of a current independent revaluation, we were unable to obtain sufficient and appropriate audit evidence

    about the impact of these matters on the Groups property, plant and equipment with carrying amounts

    of UAH 89,526 million and UAH 93,460 million as at 31 December 2013 and 2012, respectively, and

    the related impact on revaluation reserve and deferred tax liabilities as at those dates, the deprecia

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