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ЕВРАЗ. Годовой отчет за 2021 год - часть 10

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FINANCIAL STATEMENTS

Additional information

ANNUAL REPORT & ACCOUNTS 2021

Сonsolidated statement of comprehensive income

CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US dollars)

Year Ended 31 December 2021

Year ended 31 December

Сonsolidated statement of operations

Notes

2021

2020

2019

(in millions of US dollars, except for per share information)

Net profit

$ 3,107

$ 858

$ 365

Year ended 31 December

Other comprehensive income/(loss)

Notes

2021

2020*

2019*

Other comprehensive income to be reclassified to profit or loss in

Continuing operations

subsequent periods, net of tax

Revenue

Sale of goods

$ 13,224

$ 9,222

$ 11,117

Rendering of services

262

230

327

Exchange differences on translation of foreign operations into presentation

(36)

(894)

757

currency

13,486

9,452

11,444

Accumulated translation (gains)/losses recycled to profit or loss on disposal of

4, 12

(3)

Cost of revenue

(7,454)

(5,992)

(7,554)

foreign operations

Gross profit

6,032

3,460

3,890

Net gains/(losses) on cash flow hedges

–

Net (gains)/losses on cash flow hedges recycled to profit or loss

7, 25

–

(33)

Selling and distribution costs

(827)

(788)

(867)

(39)

(894)

782

General and administrative expenses

(545)

(493)

(536)

Social and social infrastructure maintenance expenses

(30)

(29)

(23)

Effect of translation to presentation currency of the Group’s joint ventures and

Gain/(loss) on disposal of property, plant and equipment, net

(7)

(3)

–

(13)

associates

Impairment of non-financial assets

(22)

(313)

(335)

–

(13)

Foreign exchange gains/(losses), net

296

(311)

Other operating income

Other operating expenses

(45)

(43)

(42)

Items not to be reclassified to profit or loss in subsequent periods, net of tax

Profit from operations

4,583

2,106

1,801

Gains/(losses) on re-measurement of net defined benefit liability

(3)

(15)

Interest income

Income tax effect

(20)

(1)

Interest expense

(212)

(315)

(320)

(1)

(16)

Share of profits/(losses) of joint ventures and associates

Impairment of non-current financial assets

–

(56)

Gain/(loss) on financial assets and liabilities, net

(20)

(71)

Total other comprehensive income/(loss), net of tax

(908)

774

Gain/(loss) on disposal groups classified as held for sale, net

Other non-operating gains/(losses), net

–

Total comprehensive income/(loss), net of tax

$ 3,133

$ (50)

$ 1,139

Profit before tax from continuing operations

4,371

1,742

1,500

Attributable to:

Income tax expense

(847)

(373)

(418)

Equity holders of the parent entity

$ 3,058

$ (41)

$ 1,078

Net profit from continuing operations

3,524

1,369

1,082

Non-controlling interests

(9)

$ 3,133

$ (50)

$ 1,139

Discontinued operations

Net loss from discontinued operations

(417)

(511)

(717)

The accompanying notes form an integral part of these consolidated financial statements.

Net profit

3,107

$ 858

$ 365

Attributable to:

Equity holders of the parent entity

$ 3,034

$ 848

$ 326

Non-controlling interests

$ 3,107

$ 858

$ 365

Earnings per share for profit attributable to equity holders of the parent entity,

US dollars:

Basic

$ 2.08

$ 0.58

$ 0.23

Diluted

$ 2.07

$ 0.58

$ 0.22

Earnings per share for profit from continuing operations attributable to equity

holders of the parent entity, US dollars:

Basic

$ 2.38

$ 0.94

$ 0.74

Diluted

$ 2.37

$ 0.94

$ 0.73

180

*The amounts shown here do not correspond to the 2020 and 2019 financial statements and reflect adjustments made in connection with

181

the presentation of discontinued operations (Note 13).

The accompanying notes form an integral part of these consolidated financial statements.

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FINANCIAL STATEMENTS

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ANNUAL REPORT & ACCOUNTS 2021

Сonsolidated statement of financial position

Сonsolidated statement of cash flows

(in millions of US dollars)

The financial statements of EVRAZ plc (registered number 7784342) on pages 180-269 were approved by the Board of Directors on 24 February 2022 and signed on its

Year ended 31 December

behalf by Deborah Gudgeon, director.

Notes

2021

2020

2019

31 December

Cash flows from operating activities

Notes

2021

2020

2019

Net profit

$ 3,107

$ 858

$ 365

ASSETS

Adjustments to reconcile net profit to net cash flows from operating activities:

Non-current assets

Deferred income tax (benefit)/expense

(142)

Property, plant and equipment

$ 3,169

$ 4,314

$ 4,925

Depreciation, depletion and amortisation

563

605

578

Intangible assets other than goodwill

126

138

185

(Gain)/loss on disposal of property, plant and equipment, net

(3)

Goodwill

457

594

Impairment of non-financial assets

310

442

Investments in joint ventures and associates

100

Foreign exchange (gains)/losses, net

(34)

(408)

341

Deferred income tax assets

183

245

152

Interest income

(5)

(6)

(8)

Receivables from related parties

Interest expense

232

328

336

Other non-current financial assets

Share of (profits)/losses of associates and joint ventures

(14)

(2)

(9)

Other non-current assets

Impairment of non-current financial assets

4,125

5,304

6,043

(Gain)/loss on financial assets and liabilities, net

(17)

Current assets

(Gain)/loss on disposal groups classified as held for sale, net

(2)

(1)

(29)

Inventories

1,565

1,085

1,480

Other non-operating (gains)/losses, net

(3)

(14)

Trade and other receivables

626

378

534

Allowance for expected credit losses

(1)

(2)

Prepayments

Changes in provisions, employee benefits and other long-term assets and

(17)

Loans receivable

–

liabilities

Receivables from related parties

Expense arising from equity-settled awards

Income tax receivable

Other

(1)

(2)

Other taxes recoverable

171

178

175

4,000

1,593

2,057

Other current financial assets

Changes in working capital:

Cash and cash equivalents

1,027

1,627

1,423

Inventories

(567)

250

3,560

3,406

3,804

Trade and other receivables

(332)

304

Assets of disposal groups classified as held for distribution to owners

2,169

Prepayments

(29)

5,729

3,406

3,804

Receivables from/payables to related parties

(19)

(114)

Taxes recoverable

(93)

(30)

Total assets

$ 9,854

$ 8,710

$ 9,847

Other assets

(11)

(1)

EQUITY AND LIABILITIES

Trade and other payables

429

(35)

219

Equity

Contract liabilities

(68)

(13)

Equity attributable to equity holders of the parent entity

Taxes payable

121

(155)

Issued capital

$ 75

Other liabilities

(7)

(10)

(9)

Treasury shares

(148)

(154)

(169)

Net cash flows from operating activities

3,424

1,928

2,430

Additional paid-in capital

2,522

2,510

2,492

Relating to:

Revaluation surplus

–

109

Continuing operations

3,663

2,262

2,932

Accumulated profits

3,472

2,187

2,217

Discontinued operations

(239)

(334)

(502)

Translation difference

(1,928)

(3,936)

(3,048)

Reserves of disposal group held for distribution to owners

(1,939)

Cash flows from investing activities

2,054

791

1,676

Issuance of loans receivable to related parties

(1)

Non-controlling interests

180

129

252

Issuance of loans receivable

(1)

(9)

2,234

920

1,928

Proceeds from repayment of loans receivable, including interest

–

Non-current liabilities

Purchases of subsidiaries, net of cash acquired

–

(3)

Long-term loans

3,440

3,759

4,599

Purchases of disposal groups held for sale

–

(22)

Deferred income tax liabilities

194

253

352

Investments in associates and joint ventures

(10)

(3)

Employee benefits

143

240

271

Sale of associates

–

Provisions

182

272

321

Proceeds from sale of other investments

–

Lease liabilities

Short-term deposits at banks, including interest

Other long-term liabilities

102

Purchases of property, plant and equipment and intangible assets

(963)

(667)

(767)

4,085

4,683

5,666

Proceeds from government grants related to property, plant and equipment

Current liabilities

Proceeds from disposal of property, plant and equipment

Trade and other payables

1,539

1,264

1,378

Proceeds from sale of disposal groups classified as held for sale, net of transaction

Contract liabilities

250

314

348

costs

Short-term loans and current portion of long-term loans

101

1,078

140

Dividends received

11,17

Lease liabilities

Other investing activities, net

Payables to related parties

Dividends payable to shareholders

292

Net cash flows used in investing activities

(905)

(624)

(665)

Income tax payable

108

Relating to:

Other taxes and duties payable

145

169

153

Continuing operations

(689)

(482)

(435)

Provisions

Discontinued operations

(216)

(142)

(230)

Amounts payable under put options for shares in subsidiaries

–

2,503

3,107

2,253

Liabilities directly associated with disposal groups classified as held for distribution

Consolidated cash flows include amounts of discontinued operations (Note 13).

1,032

to owners

3,535

3,107

2,253

Continued on the next page

Total liabilities

7,620

7,790

7,919

The accompanying notes form an integral part of these consolidated financial statements.

Total equity and liabilities

$ 9,854

$ 8,710

$ 9,847

182

183

The accompanying notes form an integral part of these consolidated financial statements.

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FINANCIAL STATEMENTS

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ANNUAL REPORT & ACCOUNTS 2021

Сonsolidated statement of cash flows (continued)

Сonsolidated statement of changes in equity

(in millions of US dollars)

Year ended 31 December

Attributable to equity holders of the parent entity

Notes

2021

2020

2019

Reserves of

disposal

Cash flows from financing activities

group held

Purchases of non-controlling interests

$ (38)

$ (66)

$ (71)

Additional

for

Non-

Issued

Treasury

paid-in

Revaluation Accumulated Translation

distribution

controlling

Total

Payments for property, plant and equipment on deferred terms

(10)

capital

surplus

profits

difference

to owners

Total

interests

equity

Payments for investments on deferred terms

–

(8)

Dividends paid by the parent entity to its shareholders

(1,531)

(872)

(1,086)

At 31 December 2020

$ 75

$ (154)

$ 2,510

$ 109

$ 2,187

$ (3,936)

$ –

$ 791

$ 129

$ 920

Dividends paid by the Group’s subsidiaries to non-controlling shareholders

(18)

(5)

Net profit

–

3,034

–

3,034

3,107

Proceeds from bank loans and notes

2,325

1,218

2,805

Other comprehensive income/(loss)

–

(39)

–

Repayment of bank loans and notes, including interest

(3,403)

(1,304)

(3,035)

Reclassification of revaluation surplus to

Net proceeds from/(repayment of) bank overdrafts and credit lines, including interest

(1)

(25)

accumulated profits in respect of

Payments under covenants reset

(10)

the disposed items of property, plant and

Restricted deposits at banks in respect of financing activities

–

equipment

–

(1)

–

Realised gains/(losses) on derivatives not designated as hedging instruments

(11)

Total comprehensive income/(loss) for

Realised gains/(losses) on hedging instruments

–

(23)

the period

–

(1)

3,098

(39)

–

3,058

3,133

Payments under leases, including interest

(33)

(37)

Reclassification of cumulative income or

Other financing activities, net

–

expense recognised in other comprehensive

Net cash flows used in financing activities

(2,707)

(1,107)

(1,415)

income relating to discontinued operations

–

(108)

–

2,047

(1,939)

–

Acquisition of non-controlling interests in

Relating to:

subsidiaries (Note 4)

–

(19)

–

(19)

(38)

Continuing operations

(3,031)

(1,053)

(1,366)

Reversal of derecognition of non-controlling

Discontinued operations

324

(54)

(49)

interest in subsidiaries (Note 4)

–

Transfer of treasury shares to participants of

Effect of foreign exchange rate changes on cash and cash equivalents

(12)

the Incentive Plans (Notes 20 and 21)

–

(6)

–

Share-based payments (Note 21)

–

Dividends declared by the parent entity to its

Net increase/(decrease) in cash and cash equivalents

(200)

204

356

shareholders (Note 20)

–

(1,823)

–

(1,823)

–

(1,823)

Cash and cash equivalents at the beginning of the year

1,627

1,423

1,067

Dividends declared by the Group’s subsidiaries

Decrease/(increase) in cash of disposal groups classified as held for distribution to

to non-controlling shareholders (Note 32)

–

(35)

(400)

owners

At 31 December 2021

$ 75

$ (148)

$ 2,522

$ –

$ 3,472

$ (1,928)

$ (1,939)

$ 2,054

$ 180

$ 2,234

Cash and cash equivalents at the end of the year

$ 1,027

$ 1,627

$ 1,423

Supplementary cash flow information:

Cash flows during the year:

The accompanying notes form an integral part of these consolidated financial statements.

Interest paid

$ (243)

$ (284)

$ (283)

Interest received

Income taxes paid (included in operating activities)

(999)

(536)

(581)

Consolidated cash flows include amounts of discontinued operations (Note 13).

The accompanying notes form an integral part of these consolidated financial statements.

184

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ANNUAL REPORT & ACCOUNTS 2021

Сonsolidated statement of changes in equity (continued)

(in millions of US dollars)

Attributable to equity holders of the parent entity

Additional

Unrealised

Non-

Additional

Unrealised

Non-

Issued

Treasury

paid-in

Revaluation

gains and Accumulated Translation

controlling

Total

Issued

Treasury

paid-in

Revaluation

gains and Accumulated

Translation

controlling

Total

capital

surplus

losses

profits

difference

Total

interests

equity

capital

surplus

losses

profits

difference

Total

interests

equity

At 31 December 2018

$ 75

$ (196)

$ 2,480

$ 110

$ 6

$ 3,026

$ (3,820)

$ 1,681

$ 257

$ 1,938

At 31 December 2019

$ 75

$ (169)

$ 2,492

$ 109

$ -

$ 2,217

$ (3,048)

$ 1,676

$ 252

$ 1,928

Net profit

326

365

Net profit

848

858

Other comprehensive income/(loss)

(6)

(14)

772

752

774

Other comprehensive income/(loss)

(1)

(888)

(889)

(19)

(908)

Reclassification of revaluation surplus to

Total comprehensive income/(loss) for

accumulated profits in respect of

the period

847

(888)

(41)

(9)

(50)

the disposed items of property, plant and

Acquisition of non-controlling interests in

equipment

(1)

subsidiaries (Note 4)

–

(34)

(27)

Reclassification of additional paid-in capital in

Change in non-controlling interests due to

respect of the disposed subsidiaries

(1)

reorganisation (Note 4)

–

(45)

Total comprehensive income/(loss) for

Decrease in non-controlling interests due to put

the period

(1)

(6)

314

772

1,078

1,139

options (Note 4)

(35)

(30)

(65)

Acquisition of non-controlling interests in

Transfer of treasury shares to participants of

subsidiaries (Note 4)

(10)

(61)

(71)

the Incentive Plans (Notes 20 and 21)

–

(15)

Transfer of treasury shares to participants of

Share-based payments (Note 21)

the Incentive Plans (Notes 20 and 21)

(27)

Dividends declared by the parent entity to its

Share-based payments (Note 21)

shareholders (Note 20)

–

(872)

Dividends declared by the parent entity to its

Dividends declared by the Group’s subsidiaries

shareholders (Note 20)

(1,086)

to non-controlling shareholders (Note 32)

–

(5)

Dividends declared by the Group’s subsidiaries

to non-controlling shareholders (Note 32)

(5)

At 31 December 2020

$ 75

$ (154)

$ 2,510

$ 109

$ -

$ 2,187

$ (3,936)

$ 791

$ 129

$ 920

At 31 December 2019

$ 75

$ (169)

$ 2,492

$ 109

$ -

$ 2,217

$ (3,048)

$ 1,676

$ 252

$ 1,928

The accompanying notes form an integral part of these consolidated financial statements.

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ANNUAL REPORT & ACCOUNTS 2021

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Notes to the consolidated financial statements

Basis of Preparation (continued)

Year ended 31 December 2021

Going Concern

1. CORPORATE INFORMATION

These consolidated financial statements have been prepared on a going concern basis.

The Group’s financial position at 31 December 2021 including its cash flows, liquidity position and borrowing facilities are set out in these financial

These consolidated financial statements were authorised for issue by the Board of Directors of EVRAZ plc on 24 February 2022.

statements and the Financial Review section. The Group’s net debt as at 31 December 2021 was $2,667 million (31 December 2020 and 2019:

EVRAZ plc (“EVRAZ plc” or “the Company”) was incorporated on 23 September 2011 as a public company limited by shares under the laws of the

$3,356 million and $3,445 million, respectively) and its cash plus committed undrawn facilities were $2,050 million (31 December 2020 and 2019:

United Kingdom. The Company was incorporated under the Companies Act 2006 with the registered number in England 7784342. The Company’s

$2,564 million and $1,870 million, respectively).

address is 2 Portman street, London, W1H 6DU, United Kingdom.

As disclosed in Note 30, macroeconomic uncertainty and instability have arisen due to the COVID-19 pandemic. However, the majority of the Group’s

The Company is a holding company which owns steel, mining and trading companies. The Company, together with its subsidiaries (the “Group”), is

businesses were relatively unaffected with no significant issues for production, supply or shipments. Moreover, during 2021 there was a very

involved in the production and distribution of steel and related products, vanadium products and coal and iron ore mining. The Group is one of

significant increase in demand for, and prices of, almost all of the Group’s products leading to the Group’s strong financial performance.

the largest steel producers globally.

The management of EVRAZ plc has considered the Group’s cash flow forecasts for the period to 30 June 2023, the going concern assessment period,

At 31 December 2021, 2020 and 2019, EVRAZ plc was jointly controlled by a group of 3 shareholders: Greenleas International Holdings Limited (BVI),

forecasting both liquidity and covenant compliance. It initially evaluated two financial performance scenarios, being a base case and a pessimistic case

reflecting a reduction in forecast prices to the lower end of market analysts' current forecasts. Both scenarios reflect the effect of the highly probable

Abiglaze Limited (Cyprus) and Crosland Global Limited (Cyprus).

demerger of the coal business (Note 13), the scheduled repayment of debt, most significantly $750 million of US-denominated notes due in 2023

The major subsidiaries included in the consolidated financial statements of the Group were as follows at 31 December:

(Note 22), and the effect of the new excise tax on liquid steel and higher taxes on mineral extraction imposed by the government of the Russian

Federation from 1 January 2022 (Note 30). Management has considered whether the effects of risks associated with climate change, including

Effective

decarbonisation (Note 6), will impact the going concern period, concluding that they will not have any significant impact. Under both scenarios,

ownership interest, %

the Group is forecast to maintain sufficient liquidity for the period to 30 June 2023 and to operate within its debt covenants. In the pessimistic case

Business

Subsidiary

2021

2020

2019

activity

Location

the amount of cash is assumed to be close to the minimum operating level in the first half of 2023. These scenarios do not however include actions at

management’s disposal to strengthen projected liquidity, including the deferral of uncommitted capital expenditure.

EVRAZ Nizhny Tagil Metallurgical Plant (“EVRAZ NTMK”)

100.00

Steel production

Russia

In order to further test the resilience of the going concern assessment to potential uncertainties, particularly with respect to the worsening situation

EVRAZ Consolidated West-Siberian Metallurgical Plant (“EVRAZ ZSMK”)

100.00

Steel production

Russia

relating to Ukraine and heightened risk of the economic sanctions, management performed a severe downside sensitivity. This assumed that capital

expenditure was reduced to $500 million per annum and then determined the extent to which EBITDA could fall throughout the period, whilst

EVRAZ Inc. NA

100.00

Steel production

USA

maintaining an operating level of liquidity. Such a fall would reflect a highly material interruption to the Group’s current business including reducing

Russian export sales outside the CIS to nil throughout the going concern period combined with a further reduction in EBITDA as a result of other

EVRAZ Inc. NA Canada

100.00

Steel production

Canada

possible factors, including further international sanctions. The directors have also considered additional mitigating actions that would be available in

Raspadskaya

93.24

95.15*

88.17

Coal mining

Russia

such circumstances including further reductions in costs, capital expenditure and the deferral of dividends.

Yuzhkuzbassugol

93.24

95.15*

100.00

Coal mining

Russia

None of the scenarios modelled reflect any new financing beyond that currently committed. In managing the financing of the Group, management

Ore mining &

continues to monitor opportunities for future raising of finance, including as current notes mature.

EVRAZ Kachkanarsky Mining-and-Processing Integrated Works

100.00

Russia

processing

The directors, having considered the scenarios above, conclude that the likelihood of a scenario that would eliminate liquidity or breach covenants is

remote. Based on this analysis and other currently available facts and circumstances the directors and management have a reasonable expectation

* In 2020, the ownership interest in Raspadskaya and Yuzhkuzbassugol reflected the potential purchase of 4.25% in Raspadskaya under the share

that the Company and the Group have adequate resources to continue as a going concern.

buyback offer (Note 4 Put Option for the Shares of Raspadskaya).

In 2021, in connection with the highly probable demerger of Raspadskaya together with its subsidiary Yuzkuzbassugol they were classified as disposal

Discontinued Operations

groups held for distribution to owners (Note 13).

On 31 December 2021, the criteria for the classification of Raspadskaya and its subsidiaries (“Raspadskaya Group”) as a disposal group held for

The full list of the Group’s subsidiaries and other significant holdings as of 31 December 2021 is presented in Note 34.

distribution to owners were met. Starting from this date the Group applied the classification, measurement and presentation requirements of IFRS 5

“Non-current Assets Held for Sale and Discontinued Operations” to Raspadskaya Group and re-presented the statements of operations and

the relevant disclosures for prior periods. More details are provided in Significant Accounting Judgements section below and in Note 13.

2. SIGNIFICANT ACCOUNTING POLICIES

Changes in Accounting Policies

Basis of Preparation

New/Revised Standards and Interpretations Adopted in 2021:

These consolidated financial statements of the Group have been prepared in accordance with UK-adopted international accounting standards. These

•

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16: Interest Rate Benchmark Reform, phase 2

standards are International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standard Board (“IASB”), as endorsed by

the UK Endorsement Board.

The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an

alternative nearly risk-free interest rate (RFR). The amendments include the following practical expedients:

The consolidated financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.

Exceptions include, but are not limited to, property, plant and equipment at the date of transition to IFRS accounted for at deemed cost, equity

A practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes

instruments measured at fair value, assets classified as held for sale measured at the lower of their carrying amount or fair value less costs to sell and

to a floating interest rate, equivalent to a movement in a market rate of interest.

post-employment benefits measured at present value.

Permit changes required by IBOR (reform to be made to hedge designations and hedge documentation without the hedging relationship being

discontinued.

Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a

hedge of a risk component.

These amendments had no impact on the consolidated financial statements of the Group. The Group intends to use the practical expedients in future

periods if they become applicable.

The Group has a number of short-term and long-term borrowings with variable interest rates. It is expected that IBORs will be replaced by a rate based

on Secured Overnight Financing Rate (“SOFR”) in 2022-2023. All new loan agreements contain some fallback language.

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ANNUAL REPORT & ACCOUNTS 2021

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Changes in Accounting Policies (continued)

Significant Accounting Judgements and Estimates (continued)

Accounting Judgements (continued)

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

•

In 2019, an independent trader entered into contracts with two of the Group’s subsidiaries: for the purchase of semi-finished steel products with

one subsidiary of the Steel segment and for the sale of semi-finished steel products with another subsidiary of the Steel North America segment.

Standards Issued But Not Yet Effective

The Group analysed the nature of the contracts and determined that they require a separate recognition of the sales and purchase transactions

as there is neither a tripartite agreement, nor a call or put option, which would require these contracts to be treated as a single arrangement.

Effective for annual periods

Standards not yet effective for the financial statements for the year ended 31 December 2021

Specifically, the trader bears full inventory and market risks, and it has a full discretion in establishing prices for each contract separately based

beginning on or after

on prevailing market conditions. In 2021, the Group sold to the independent trader 144 thousand metric tonnes of slabs for $101 million (2020:

•

Amendment to IFRS 16: Covid-19-Related Rent Concessions beyond 30 June 2021

1 April 2021

357 thousand metric tonnes of slabs for $157 million; 2019: 330 thousand metric tonnes of slabs for $161 million) and purchased from it

•

Amendments to IFRS 3: Reference to the Conceptual Framework

1 January 2022*

130 thousand metric tonnes for $98 million (2020: 308 thousand metric tonnes for $157 million; 2019: 192 thousand metric tonnes for

$108 million).

•

Amendments to IAS 16: Proceeds before intended use

1 January 2022*

•

Amendments to IAS 37: Onerous Contracts — Cost of Fulfilling a Contract

1 January 2022*

•

In 2021 and 2020, certain of the Group’s suppliers sold their accounts receivable from the Group under factoring contracts to banks with no

recourse. The Group analysed these factoring arrangements and determined that they do not significantly change the terms and conditions of

•

Amendments to Annual improvements 2018-2020

1 January 2022*

payments, i.e. they do not contain a financing component and, consequently, should continue to be presented as trade payables in

•

IFRS 17 “Insurance Contracts”, including amendments

1 January 2023*

the consolidated statement of financial position and in cash flows from operating activities in the consolidated statement of cash flows.

At 31 December 2021 and 2020, $265 million and $188 million were unpaid under these factoring liabilities.

•

Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies

1 January 2023*

•

Amendments to IAS 8: Definition of Accounting Estimates

1 January 2023*

Estimation Uncertainty

•

Amendments to IAS 12: Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction

1 January 2023*

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant

risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below.

•

Amendments to IAS 1: Classification of Liabilities as Current or Non-current

1 January 2024*

Assessment of Recoverable Amount of Property, Plant and Equipment

*Subject to UK endorsement

At each reporting date the Group assesses whether there is any indication that an asset may be impaired or if a past impairment should be reversed.

The Group expects that the adoption of the amendments and the standard listed above will not have a significant impact on the Group’s results of

A large number of factors are considered, such as changes in current competitive conditions, expectations of growth in the industry, increased cost of

operations and financial position in the period of initial application.

capital, changes in the future availability of financing, technological obsolescence, discontinuance of service, current replacement costs and other

changes in circumstances. If any such indication exists, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable

amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset,

Significant Accounting Judgements and Estimates

unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying

Accounting Judgements

amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. A previously

recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimates,

the last impairment loss was recognised.

which have the most significant effect on the amounts recognised in the consolidated financial statements:

The determination of the recoverable amount of a cash-generating unit involves the use of estimates by management. Methods used to determine

•

In June 2020 and January 2021, the Board of directors discussed the possible demerger of a group of coal companies consolidated under

the value in use include discounted cash flow-based methods, which require the Group to make an estimate of the expected future cash flows from

Raspadskaya, which constitutes a major part of the coal segment. However, at 31 December 2020 and 30 June 2021 it remained uncertain

the cash-generating unit and also to choose a suitable pre-tax discount rate in order to calculate the present value of these cash flows. The pre-tax

whether this transaction would be finally approved by the directors and executed as there were a number of additional significant uncertainties

discount rate reflects current market assessment of the time value of money and the risks specific to the assets. The expected future cash flows

and potential conditions pending, most significantly, the approval of the transaction by shareholders and bondholders, but also by the regulatory

depend on the estimated volumes of production and sales, future prices, costs, growth rates, capital and maintenance expenditure, inflation, foreign

authorities of the UK and the Russian Federation. Accordingly, the classification, measurement and presentation requirements of IFRS 5 “Non-

exchange rates, the future impact risks associated with climate change and other factors. These estimates, including the methodologies used, may

current Assets Held for Sale and Discontinued Operations” were not applied to Raspadskaya Group in the consolidated financial statements for

have a material impact on the value in use and, ultimately, the amount of any impairment. The principal assumptions used in determining the

the year ended 31 December 2020 and for the six-month period ended 30 June 2021. On 14 December 2021, the Board of directors approved

recoverable amounts of cash-generating units and sensitivity to changes in assumptions are disclosed in Note 6.

the proposed demerger, and a circular containing the details of the transaction was published. The Company assessed the potential outcome of

the shareholders’ voting on the demerger using an independent experts’ opinion received in late 2021. As a result, it was determined that

In 2021, 2020 and 2019, the Group recognised a net impairment reversal/(loss) of $(30) million, $(162) million and $(142) million, respectively

(Notes 6 and 9).

the required votes to approve the demerger are expected to be collected. At 31 December 2021, management concluded that the demerger has

become highly probable within 1 year and Raspadskaya Group meets all criteria to be classified as a disposal group held for distribution to owners

Management has considered how the Group’s identified climate risks and climate related goals (as discussed in Climate Change and GHG Emissions in

and, consequently, it shall be accounted for as discontinued operations (Note 13).

this Annual Report) may impact the estimation of the recoverable value of cash-generating units tested for impairment.

•

In 2019, the Group concluded a contract with Xcel Energy Inc. for the construction of a solar power plant in Pueblo (Colorado, USA) to be owned

The anticipated extent and nature of the future impact of climate on the Group’s operations and future investment, and therefore estimation of

and operated by a third party and for the supply of electricity to the Group’s steel and rail mills in Pueblo for a long-term period on a take-or-pay

recoverable value, is not uniform across all cash-generating units. In particular, this is impacted by the activity of the cash-generating unit, current

basis. The Group determined based on the criteria in IFRS 16 “Leases” that the supply contract with Xcel Energy Inc. does not contain a lease.

technologies and production processes employed and the current level of emissions, energy efficiency and use of renewable energy. The most

Management believes that this arrangement does not convey a right to the Group to use the assets as the Group does not have an ability to

significant effects are expected to arise in relation to the Group’s steel production in Russia. The sensitivity of the Group’s impairment assessment to

operate the assets or to direct other parties to operate the assets; it does not control physical access to the assets; and it is expected that more

these factors is also impacted by the extent that estimated recoverable value exceeds the carrying value of an individual cash-generating unit -- where

than an insignificant amount of the assets’ output will be sold to the parties unrelated to the Group. The commitments under the contract are

this is lower there is an increased risk of a future impact. Such headroom for the Group’s cash-generating units in Russia is generally materially higher

disclosed in Note 30.

than that of those in North America.

The Group is in the process of identifying a range of actions and initiatives to progress towards the Group’s goals, including reduction of greenhouse

•

The Group determined based on the criteria in IFRS 16 “Leases” that the supply contracts with PraxAir Rus LLC (“PraxAir Rus”) and Air Liquide

gas emissions, wastewater discharges and increase of waste utilisation. In certain cases the costs of such actions have been quantified and are

Kuzbass LLC (“Air Liquide Kuzbass “) do not contain a lease. These contracts include the construction of air separation plants by PraxAir Rus and

included in the Group’s forecasts which are used to estimate recoverable value for the Group’s cash-generating units, most significantly sulfur dioxide

Air Liquide Kuzbass to be owned and operated by them and the supply of oxygen and other industrial gases produced by the entities to

(SO2) capture at a sinter plant of EVRAZ ZSMK and closed loop water systems at EVRAZ ZSMK and EVRAZ NTMK. Other actions and initiatives continue

the Group’s steel plants in Russia (EVRAZ NTMK and EVRAZ ZSMK) for a long-term period on a take or pay basis. Management believes that these

to be explored by the Group but are not sufficiently certain to be reflected in the Group’s forecasts of estimated recoverable value. The most significant

arrangements do not convey a right to the Group to use the assets as the Group does not have an ability to operate the assets or to direct other

of these, along with related investments, are expected to relate to the Russian steel segment -- however, related assets currently benefit from

parties to operate the assets; it does not control physical access to the assets; and it is expected that more than an insignificant amount of

significant estimated headroom.

the assets’ output will be sold to the parties unrelated to the Group. The commitments under the contracts are disclosed in Note 30.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Significant Accounting Judgements and Estimates (continued)

The following exchange rates were used in the consolidated financial statements:

Estimation Uncertainty (continued)

2021

2020

2019

Assessment of Recoverable Amount of Property, Plant and Equipment (continued)

31 December

Average

31 December

average

31 December

average

USD/RUB

74.2926

73.6541

73.8757

72.1464

61.9057

64.7362

There is a range of inherent uncertainties in the extent that responses to climate change may impact the recoverable value of the Group’s cash-

EUR/USD

1.1326

1.1827

1.2271

1.1422

1.1234

1.1195

generating units, with many of these being outside the Group’s control. These include the impact of future changes in government policies, legislation

USD/CAD

1.2632

1.2537

1.2740

1.3413

1.2968

1.3269

and regulation, societal responses to climate change, the future availability of new technologies and changes in supply and demand dynamics. Most

significant to the Group is expected to be the nature and timing of any future carbon taxes that may be introduced in Russia. This has been considered

Transactions in foreign currencies in each subsidiary of the Group are initially recorded in the functional currency at the rate ruling at the date of the

by way of a sensitivity in Note 6.

transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value

The Group may also be impacted by changes in demand for its products. In particular, demand for products from the Large diameter pipes and Oil

was determined. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at

Country Tubular Goods cash-generating units is driven by ongoing investment in the oil and gas industry. As a result of limited headroom of recoverable

the end of the reporting period. All resulting differences are taken to the statement of operations. Any goodwill arising on the acquisition of a foreign

value over carrying value for these cash-generating units, a sensitivity has been performed of the impact of a future decline in demand (Note 6).

operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities

of the foreign operation and translated at the closing rate.

At present there are few reasonable alternatives to the use of steel in areas such as construction and automotive industries. Management has not

sought to estimate any beneficial impact of future opportunities or the potential for price inflation as a result of higher costs of production.

Basis of Consolidation

Impairment Testing of Goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating

Subsidiaries

units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from

Subsidiaries, which are those entities in which the Group has an interest of more than 50% of the voting rights and over which the Group has control, or

the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

otherwise has power to exercise control over their operations, are consolidated. Subsidiaries are consolidated from the date on which control is

The carrying amount of goodwill at 31 December 2021, 2020 and 2019 was $457 million, $457 million and $594 million, respectively. In 2021, 2020

transferred to the Group and are no longer consolidated from the date that control ceases.

and 2019, the Group recognised an impairment loss in respect of goodwill in the amount of $Nil, $132 million and $300 million, respectively. More

All intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also

details of the assumptions used in estimating the value in use of the cash-generating units to which goodwill is allocated are provided in Note 6.

eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, accounting policies for subsidiaries

have been changed to ensure consistency with the policies adopted by the Group.

Non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are presented in

Deferred Income Tax Assets

the consolidated statement of financial position within equity, separately from the parent’s shareholders’ equity.

At 31 December 2021, 2020 and 2019, the Group recognised net deferred tax assets of $183 million, $245 million and $152 million, respectively

(Note 8). These assets mostly related to the US and Canadian subsidiaries and mainly consisted of the unused tax losses and tax credits. Such assets

Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling

interests having a deficit balance.

are recognised only to the extent that there are sufficient taxable temporary differences or there is convincing evidence that sufficient taxable profits

will be available against which the deductible temporary differences can be utilised.

The assumptions about generation and likelihood of future taxable profits depend on management’s estimates of future cash flows and are contained

Acquisition of Subsidiaries

in yearly budgets and long-term forecasts. Judgements and assumptions are also required about the application of income tax legislation, expiration of

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration

tax losses carried forward and tax planning strategies. The principal assumptions used in these forecasts include operating results, profitability,

transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the

an appropriate outlook period and tax rates. Assumptions underlying the forecasts of future taxable profits that support the recoverability of deferred

Group measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.

tax assets should be consistent with assumptions underlying cash flows forecasts used in the impairment test models.

Acquisition costs incurred are expensed and included in administrative expenses.

All these judgements and assumptions are subject to risks and uncertainties, hence there is a possibility that changes in circumstances will alter

expectations, which may impact the amount of deferred tax assets recognised in the consolidated statement of financial position and the amount of

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is

other tax losses and temporary differences not yet recognised. In such circumstances some or all of the carrying amounts of the recognised deferred

remeasured to fair value at the acquisition date through profit or loss.

tax assets may require a material adjustment within the next year, resulting in a corresponding credit or charge to the consolidated statement of

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value

operations.

of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IFRS 9 either in profit or loss or as

a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled

within equity.

Post-Employment Benefits

The Group uses an actuarial valuation method for the measurement of the present value of post-employment benefit obligations and related current

The initial accounting for a business combination involves identifying and determining the fair values to be assigned to the acquiree’s identifiable

assets, liabilities and contingent liabilities and the cost of the combination. If the initial accounting for a business combination can be determined only

service cost. This involves the use of demographic assumptions about the future characteristics of the current and former employees who are eligible

provisionally by the end of the period in which the combination is effected because either the fair values to be assigned to the acquiree’s identifiable

for benefits (mortality, both during and after employment, rates of employee turnover, disability and early retirement, etc.) as well as financial

assets, liabilities or contingent liabilities or the cost of the combination can be determined only provisionally, the Group accounts for the combination

assumptions (discount rate, future salary and benefit levels, expected rate of return on plan assets, etc.). More details are provided in Note 23.

using those provisional values. The Group recognises any adjustments to those provisional values as a result of completing the initial accounting within

twelve months of the acquisition date.

Foreign Currency Transactions

Comparative information presented for the periods before the completion of initial accounting for the acquisition is presented as if the initial

The presentation currency of the Group is the US dollar because presentation in US dollars is most relevant for the major current and potential users of

accounting had been completed from the acquisition date.

the consolidated financial statements.

The functional currencies of the Group’s subsidiaries are the Russian rouble, US dollar, euro, Czech koruna and Canadian dollar. At the reporting date,

Increases in Ownership Interests in Subsidiaries

the assets and liabilities of the subsidiaries with functional currencies other than the US dollar are translated into the presentation currency at the rate

The differences between the carrying values of net assets attributable to interests in subsidiaries acquired and the consideration given for such

of exchange ruling at the end of the reporting period, and their statements of operations are translated at the exchange rates that approximate the

increases is either added to additional paid-in capital, if positive, or charged to accumulated profits, if negative, in the consolidated financial

exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to a separate component of

statements.

equity. On disposal of a subsidiary with functional currency other than the US dollar, the deferred cumulative amount recognised in equity relating to

that particular subsidiary is recognised in the statement of operations.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Purchases of Controlling Interests in Subsidiaries from Entities under Common Control

Property, Plant and Equipment (continued)

Purchases of controlling interests in subsidiaries from entities under common control are accounted for using the pooling of interests method.

The table below presents the useful lives of items of property, plant and equipment.

The assets and liabilities of the subsidiary transferred under common control are recorded in these financial statements at the historical cost of the

Useful lives

Weighted average

controlling entity (the “Predecessor”). Related goodwill inherent in the Predecessor's original acquisition is also recorded in the financial statements.

(years)

remaining useful life (years)

Any difference between the total book value of net assets, including the Predecessor's goodwill, and the consideration paid is accounted for in

the consolidated financial statements as an adjustment to the shareholders' equity.

Buildings and constructions

15-60

Machinery and equipment

4-45

The financial statements, including corresponding figures, are presented as if a subsidiary had been acquired by the Group on the date it was originally

Transport and motor vehicles

7-20

acquired by the Predecessor.

Other assets

3-15

Put Options over Non-controlling Interests

The Group determines the depreciation charge separately for each significant part of an item of property, plant and equipment.

The Group derecognises non-controlling interests if non-controlling shareholders have a put option over their holdings. The difference between

Depletion of mining assets including capitalised site restoration costs is calculated using the units-of-production method based upon proved and

the amount of the liability recognised in the statement of financial position and the carrying value of the derecognised non-controlling interests is

probable mineral reserves. The depletion calculation takes into account future development costs for reserves which are in the production phase.

charged to accumulated profits.

Maintenance costs relating to items of property, plant and equipment are expensed as incurred. Major renewals and improvements are capitalised,

and the replaced assets are derecognised.

Investments in Associates

The Group has the title to certain non-production and social assets, primarily buildings and facilities of social infrastructure, which are carried at their

recoverable amount of zero. The costs to maintain such assets are expensed as incurred.

Associates are entities in which the Group generally has between 20% and 50% of the voting rights, or is otherwise able to exercise significant

influence, but which it does not control or jointly control.

Investments in associates are accounted for under the equity method of accounting and are initially recognised at cost including goodwill. Subsequent

Mineral Reserves

changes in the carrying value reflect the post-acquisition changes in the Group’s share of net assets of the associate and goodwill impairment charges,

if any.

The Group estimates its mineral reserves in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore

Reserves (“JORC Code”). Estimation of reserves in accordance with the JORC Code involves some degree of uncertainty. The uncertainty depends

The Group’s share of its associates’ profits or losses is recognised in the statement of operations and its share of movements in reserves is recognised

mainly on the amount of reliable geological and engineering data available at the time of the estimate and the interpretation of this data, which also

in equity. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise

requires use of subjective judgement and development of assumptions.

further losses, unless the Group has legal or constructive obligations to make payments to, or on behalf of, the associate. If the associate subsequently

reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

The changes in the pricing environment and geology-related risk factors may lead to a revision of mining plans, decisions to abandon or to mothball

certain parts of a mine, to a reassessment of the capital expenditures required for the extraction of the proved and probable reserves, as well as to

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates;

the changes in the resources classified as proved and probable reserves. These changes may have an impact on the depletion charge and impairment,

unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

which may arise as a result of a decline in the recoverable amounts of the affected mines.

Interests in Joint Ventures

Exploration and Evaluation Expenditures

The Group’s interest in its joint ventures is accounted for under the equity method of accounting whereby an interest in jointly ventures is initially

Exploration and evaluation expenditures represent costs incurred by the Group in connection with the exploration for and evaluation of mineral

recorded at cost and adjusted thereafter for post-acquisition changes in the Group's share of net assets of joint ventures. The statement of operations

resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. The expenditures include

reflects the Group's share of the results of operations of joint ventures.

acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling, activities in

relation to evaluating the technical feasibility and commercial viability of extracting mineral resources. These costs are expensed as incurred.

When the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, the Group commences recognition of

Property, Plant and Equipment

expenditures related to the development of mineral resources as assets. These assets are assessed for impairment when facts and circumstances

The Group’s property, plant and equipment is stated at purchase or construction cost, excluding the costs of day-to-day servicing, less accumulated

suggest that the carrying amount of an asset may exceed its recoverable amount.

depreciation and any impairment in value. Such cost includes the cost of replacing part of plant and equipment when that cost is incurred and

recognition criteria are met.

Leases

The Group’s property, plant and equipment include mining assets, which consist of mineral reserves, mine development and construction costs and

capitalised site restoration costs. Mineral reserves represent tangible assets acquired in business combinations. Mine development and construction

Group as a Lessee

costs represent expenditures on developing access to mineral reserves (after technical feasibility and commercial viability of extracting a mineral

resource are demonstrable) and preparations for commercial production, including sinking shafts and underground drifts, roads, infrastructure,

The determination of whether an arrangement is, or contains, a lease is done at contract inception and includes the assessment of whether

buildings, machinery and equipment.

the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

At each end of the reporting period management makes an assessment to determine whether there is any indication of impairment or, where relevant,

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use

impairment reversal of property, plant and equipment. If any such indication exists, management estimates the recoverable amount, which is

assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.

the higher of an asset’s fair value less cost to sell and its value in use. The carrying amount is reduced to the recoverable amount, and the difference is

The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before

recognised as impairment loss in the statement of operations or other comprehensive income. An impairment loss recognised for an asset in previous

the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end

years is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount. The reversal is limited so that the

of the lease term or exercise a purchase option, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its

carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of

estimated useful life and the lease term. Otherwise, the lessee depreciates the right-of-use asset from the commencement date to the end of

depreciation, had no impairment loss been recognised for the asset in prior years.

the useful life of the underlying asset. Right-of-use assets are subject to impairment. The right-of-use assets are included in the Property, plant and

equipment caption of the statement of financial position (Note 9).

Land is not depreciated. Depreciation of property, plant and equipment, except for mining assets, is calculated on a straight-line basis over

the estimated useful lives of the assets. The useful lives of items of property, plant and equipment and methods of their depreciation are reviewed, and

adjusted as appropriate, at each fiscal year end.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Leases (continued)

Intangible Assets Other Than Goodwill

Group as a Lessee (continued)

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is

fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over

accumulated impairment losses. Expenditures on internally generated intangible assets, excluding capitalised development costs, are expensed as

the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease

incurred.

payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include

the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful

term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as

economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and

expense (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

the amortisation method for an intangible asset with a finite life are reviewed at least at each year end. Changes in the expected useful life or

the expected pattern of consumption of future economic benefits embodied in the asset are treated as changes in accounting estimates. Intangible

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate

assets with indefinite useful lives are not amortised, they are tested for impairment annually either individually or at the cash-generating unit level.

implicit in the lease is not readily determinable. The incremental borrowing rate is determined based on the Group’s borrowing rates for similar terms

and currencies in an economic environment, in which the lessee operates. After the commencement date, the amount of lease liabilities is increased to

The table below presents the useful lives of intangible assets.

reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is

Useful lives

Weighted average

a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment of plans to purchase the

(years)

remaining useful life (years)

underlying asset.

The lease term is a non-cancellable period for which a lessee has the right to use an underlying asset, together with any periods covered by an option

Customer relationships

1-15

to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain not to

Contract terms

be exercised.

Other

5-19

The lease term of cancellable or renewable leases is dependent of the enforceability of the contract beyond the date on which it can be terminated.

Certain water rights and environmental permits are considered to have indefinite lives as management believes that these rights will continue

The contract is enforceable if only one party of the lease contract has the right to terminate the lease without permission from the other party with no

indefinitely. The most part of the Group’s intangible assets represents customer relationships arising on business combinations (Note 10).

more than an insignificant penalty. In this case the Group, as a lessee, assesses whether it is reasonably certain to exercise an extension option, or not

to exercise a termination option.

Lease payments for contracts with a duration of 12 months or less or leases for which the underlying assets are of low value are not recognised as

Financial Assets

lease liabilities. They are expensed to the statement of operations on a straight-line basis over the lease term and included in cost of revenues, selling,

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income, and

general and administrative expenses.

fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow

characteristics and the Group’s business model for managing them, i.e. how the Group manages its financial assets in order to generate cash flows.

Information about lease arrangements is disclosed in Note 25.

The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

With the exception of trade and other receivables that do not contain a significant financing component or for which the Group has applied the practical

Group as a Lessor

expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss,

Finance leases, in which the Group acts as a lessor, when substantially all the risks and benefits incidental to ownership of the leased item are

transaction costs.

transferred to the lessee, are recognised as net investments in finance lease from the commencement of the lease term at the present value of

The Group measures financial assets at amortised cost if both of the following conditions are met:

the minimum lease payments. Lease payments are apportioned between the finance income and reduction of the lease receivable so as to achieve

a constant rate of interest on the remaining balance of receivables. Finance income is included in the interest income caption.

•

The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows and

•

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases (Note 9). Operating

the principal amount outstanding.

lease income is recognised within the rendering of services caption on a straight-line basis over the lease term.

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are

recognised in profit or loss when the asset is derecognised, modified or impaired.

Goodwill

Goodwill represents the excess of the aggregate of the consideration transferred for an acquisition of a subsidiary or an associate and the amount

Trade and Other Accounts Receivable

recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value

Trade and other receivables are recognised at their transaction price as defined in IFRS 15 “Revenue” if they do not contain a significant financing

of the net assets of the acquiree, the difference is recognised in the consolidated statement of operations.

component or if the Group expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer

Goodwill on acquisition of a subsidiary is included in intangible assets. Goodwill on acquisition of an associate is included in the carrying amount of the

and when the customer pays for that good or service will be one year or less.

investments in associates.

For trade and other receivables, the Group applies a simplified approach for calculating the expected credit losses. Therefore, the Group does not track

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more

changes in credit risk, but, instead, it recognises a loss allowance based on the lifetime expected credit losses at each reporting date. The Group

frequently, if events or changes in circumstances indicate that the carrying amount may be impaired. For the purpose of impairment testing, goodwill

separately determines the expected credit losses for individually significant balances or collectively for trade and other receivables that are not

acquired in a business combination is allocated to each of the Group’s cash-generating units that are expected to benefit from the combination,

individually significant.

irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

The expected credit losses for individually significant balances are estimated using debtors’ historical credit loss experience adjusted for forward-

Impairment is determined by assessing the recoverable amount of the cash-generating unit, or the group of cash-generating units, to which the goodwill

looking factors specific to the debtors and economic environment.

relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. An impairment

loss recognised for goodwill is not reversed in a subsequent period.

Inventories

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation

disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in

Inventories are recorded at the lower of cost and net realisable value. Cost of inventory is determined on the weighted average basis and includes

this circumstance is measured based on the relative fair values of the operation disposed of and the portion of the cash-generating unit retained.

expenditure incurred in acquiring or producing inventories and bringing them to their existing location and condition. The cost of finished goods and

work in progress includes an appropriate share of production overheads based on normal operating capacity, but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary

to make the sale.

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Strategic report

Corporate governance

FINANCIAL STATEMENTS

Additional information

ANNUAL REPORT & ACCOUNTS 2021

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Value Added Tax

Non-cash Distributions to Owners (continued)

The tax authorities permit the settlement of sales and purchases value added tax (“VAT”) on a net basis.

When an entity settles the dividend liability, it recognises the difference, if any, between the carrying amount of the assets distributed and the carrying

amount of the dividend payable in profit or loss.

The Group’s subsidiaries apply the accrual method for VAT recognition, under which VAT becomes payable upon invoicing and delivery of goods or

rendering services as well upon receipt of prepayments from customers. VAT on purchases, even if not settled at the end of the reporting period, is

Information about non-cash distributions to owners is disclosed in Note 13.

deducted from the amount of VAT payable.

Where provision has been made for impairment of receivables, an impairment loss is recorded for the gross amount of the debtor, including VAT.

Equity

Cash and Cash Equivalents

Share Capital

Cash and cash equivalents comprise cash at bank and in hand and deposits with an original maturity of three months or less.

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction in equity from the

proceeds. Any excess of the fair value of consideration received over the par value of shares issued is recognised as additional paid-in capital.

Non-current Assets Held for Sale or for Distribution to Owners

Treasury Shares

The Group classifies non-current assets and disposal groups as held for sale or for distribution to owners if their carrying amounts will be recovered

Own equity instruments which are acquired by the Group (treasury shares) are deducted from equity. No gain or loss is recognised in statement of

principally through a sale transaction or distribution rather than through continuing use. Non-current assets and disposal groups classified as held for

operations on the purchase, sale, issue or cancellation of the treasury shares. Any difference between the carrying amount and the consideration, if

sale/distribution to owners are measured at the lower of their carrying amount and fair value less costs to sell/distribute. Costs to sell/distribute are

reissued, is recognised in additional paid-in capital.

the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense.

Dividends

The criteria for held for sale/distribution classification is regarded as met only when the sale/distribution is highly probable, and the asset or disposal

group is available for immediate sale/distribution in its present condition. Actions required to complete the sale/distribution should indicate that it is

Dividends are recognised as a liability and deducted from equity only if they are declared before the end of the reporting period. Dividends are

unlikely that significant changes to the sale/distribution plan will be made or that the decision to sell or to distribute to owners will be withdrawn.

disclosed when they are proposed before the end of the reporting period or proposed or declared after the end of the reporting period but before

Management must be committed to the plan to sell/to distribute the asset and the sale/distribution is expected to be completed within one year from

the financial statements are authorised for issue.

the date of the classification.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale or distribution. Assets and

Borrowings

liabilities classified as held for sale or distribution are presented separately as current items in the statement of financial position.

Borrowings are initially recognised at fair value, net of directly attributable transaction costs. After initial recognition, borrowings are measured at

Further details are provided in Notes 2 (Accounting Judgements), 12 and 13.

amortised cost using the effective interest rate method; any difference between the amount initially recognised and the redemption amount is

recognised as interest expense over the period of the borrowings.

Discontinued Operations

Borrowing costs relating to qualifying assets are capitalised (Note 9).

A discontinued operation is a component of an entity that has been disposed of, or is classified as held for sale or distribution to owners and represents

a separate major line of business or geographical area of operations.

Provisions

According to IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” discontinued operations are excluded from the results of

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of

continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss.

resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Statements of operations for prior periods are re-presented so that all operations that have been classified as discontinued by the end of the current

Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset

reporting period are presented according to IFRS 5 requirements. No adjustments to comparative data are made for the assets and liabilities in

but only when the reimbursement is virtually certain.

the statement of financial position and statement of cash flows.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that

Intragroup transactions between continuing and discontinued operations are eliminated on consolidation. Only transactions with external parties are

reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used,

presented as discontinued operations. Consequently, the prescibed approach does not present real results of both operations, continuing and

the increase in the provision due to the passage of time is recognised as an interest expense.

discontinued. The statement of operations for the current period and the re-presented comparatives do not reflect the amounts, which could be

recognised and presented had the disposal of the discontinued operation already occurred.

Site Restoration Provisions

In case of a subsidiary with functional currency other than the US dollar, upon its disposal the deferred cumulative amount of exchange difference

The Group reviews site restoration provisions at each reporting date and adjusts them to reflect the current best estimate in accordance with IFRIC 1

recognised in equity relating to that particular subsidiary is written down to the statement of operations and recognised within the “Profit/(loss) after

“Changes in Existing Decommissioning, Restoration and Similar Liabilities”.

tax from discontinued operations” caption.

Provisions for site restoration costs are capitalised within property, plant and equipment.

Discontinued operations are disclosed in Note 13.

Employee Benefits

Non-cash Distributions to Owners

Social and Pension Contributions

Dividends in specie refer to a distribution to owners settled by assets other than cash. For accounting of such transactions the Group applies IFRIC 17

“Distributions of Non-cash Assets to Owners”, IFRS 13 “Fair Value Measurement” and IFRS 5 “Non-current Assets Held for Sale and Discontinued

Defined contributions are made by the Group to the Russian state pension, social insurance and medical insurance funds at the statutory rates in force

Operations”.

based on gross salary payments. The Group has no legal or constructive obligation to pay further contributions in respect of those benefits. Its only

obligation is to pay contributions as they fall due. These contributions are expensed as incurred.

The liability to pay a dividend is recognised when the dividend is appropriately authorised and is no longer at the discretion of the entity. An entity

measures a liability to distribute non-cash assets as a dividend to its owners at the fair value of the assets to be distributed.

If an entity gives its owners a choice of receiving either a non-cash asset or a cash alternative, the entity estimates the dividend payable by calculating

the fair value of each alternative and the associated probability of owners selecting each alternative.

At the end of each reporting period and at the date of settlement, the entity reviews and adjusts the carrying amount of the dividend payable, with any

changes in the carrying amount of the dividend payable recognised in equity as adjustments to the amount of the distribution.

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