18. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
1. Financial assets
|
|
|
December 31, |
|
December 31, |
|
||
|
Trade and other receivables (Note 9) |
|
|
28,017 |
|
|
29,805 |
|
|
Accounts receivable, related parties (Note 22) |
|
|
11,360 |
|
|
8,094 |
|
|
Cash and Cash equivalents (Note 5) |
|
|
30,586 |
|
|
18,470 |
|
|
Other financial assets: |
|
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss: |
|
|
|
|
|
|
|
|
Assets in Sistema-Capital trust management |
|
|
9,600 |
|
|
3,721 |
|
|
|
|
|
|
|
|
|
|
|
Total financial assets at fair value through profit or loss |
|
|
9,600 |
|
|
3,721 |
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through OCI: |
|
|
|
|
|
|
|
|
Notes |
|
|
57 |
|
|
65 |
|
|
Cross-currency swap designated as cash flow hedge |
|
|
8,403 |
|
|
13,632 |
|
|
|
|
|
|
|
|
|
|
|
Total financial assets at fair value through OCI |
|
|
8,460 |
|
|
13,697 |
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables: |
|
|
|
|
|
|
|
|
Bank deposits |
|
|
27,836 |
|
|
30,906 |
|
|
Loans and receivables |
|
|
5,415 |
|
|
8,221 |
|
|
Notes |
|
|
8,480 |
|
|
804 |
|
|
Other |
|
|
1,810 |
|
|
1,504 |
|
|
|
|
|
|
|
|
|
|
|
Total loans and receivables |
|
|
43,541 |
|
|
41,435 |
|
|
|
|
|
|
|
|
|
|
|
Total other financial assets |
|
|
61,601 |
|
|
58,853 |
|
|
|
|
|
|
|
|
|
|
|
Total financial assets |
|
|
131,564 |
|
|
115,222 |
|
|
Total current financial assets |
|
|
(120,719 |
) |
|
(61,333 |
) |
|
|
|
|
|
|
|
|
|
|
Total non-current financial assets |
|
|
10,845 |
|
|
53,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2. Financial liabilities
|
|
|
December 31, |
|
December 31, |
|
||
|
Trade and other payables |
|
|
47,314 |
|
|
41,473 |
|
|
Accounts payable, related parties (Note 22) |
|
|
1,102 |
|
|
1,014 |
|
|
Financial liabilities at amortised cost: |
|
|
|
|
|
|
|
|
Loans and borrowings: |
|
|
|
|
|
|
|
|
Notes |
|
|
108,776 |
|
|
78,186 |
|
|
Bank and other loans |
|
|
182,937 |
|
|
195,088 |
|
|
Finance lease obligations |
|
|
11,857 |
|
|
11,046 |
|
|
|
|
|
|
|
|
|
|
|
Total loans and borrowings |
|
|
303,570 |
|
|
284,320 |
|
|
Guarantee payment received |
|
|
996 |
|
|
2,907 |
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities at amortized cost |
|
|
304,566 |
|
|
287,227 |
|
|
|
|
|
|
|
|
|
|
|
Other financial liabilities at fair value: |
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or loss: |
|
|
|
|
|
|
|
|
Deliverable currency forward not designated as hedge |
|
|
— |
|
|
142 |
|
|
Liabilities under option agreements (Note 28) |
|
|
2,424 |
|
|
2,243 |
|
|
Interest rate swaps designated as cash flow hedges |
|
|
390 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities at fair value through profit or loss |
|
|
2,814 |
|
|
2,385 |
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through OCI: |
|
|
|
|
|
|
|
|
Interest rate swaps designated as cash flow hedges |
|
|
— |
|
|
531 |
|
|
Cross-currency swap designated as cash flow hedge |
|
|
274 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities at fair value through OCI |
|
|
274 |
|
|
531 |
|
|
|
|
|
|
|
|
|
|
|
Total other financial liabilities at fair value |
|
|
3,088 |
|
|
2,916 |
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities |
|
|
356,070 |
|
|
332,630 |
|
|
Total current financial liabilities |
|
|
(115,926 |
) |
|
(92,743 |
) |
|
|
|
|
|
|
|
|
|
|
Total non-current financial liabilities |
|
|
240,144 |
|
|
239,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group financial liabilities are represented by trade and other payables, notes and bank loans. The main purpose of these financial liabilities is to finance the Group's operations and capital expenditures. The Group's principal financial assets include loans and investments, trade and other receivables, cash and deposits.
The Group accounts for its financial assets and liabilities at amortized cost, except for derivative instruments, marketable securities, assets in Sistema-Capital trust management and liabilities under option agreements, which are accounted for at fair value.
In May 2016, the Group entered into a trust agreement with the asset management company Sistema-Capital, a subsidiary of Sistema. The main purpose of the agreement is short-term profit-taking from operations with securities.
The fair value measurement of the Group's derivative instruments and investments in Sistema-Capital trust management is based on the observable yield curves for similar instruments and represents the estimated amount the Group would receive or pay to terminate these agreements at the reporting date, taking into account current interest rates, foreign exchange spot and forward rates.
The table below presents the fair value of financial instruments:
|
|
|
Level of inputs |
|
December 31, |
|
December 31, |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
|
Sistema International Funding S.A. Bonds due in 2019 (related party) (Note 6, 22) |
|
Level 1 |
|
|
57 |
|
|
65 |
|
|
Derivative instruments |
|
Level 2 |
|
|
8,403 |
|
|
13,632 |
|
|
Cross-currency interest rate swap |
|
|
|
|
8,403 |
|
|
13,632 |
|
|
Assets in Sistema-Capital trust management (related party) (Note 6, 22) |
|
Level 2 |
|
|
9,600 |
|
|
3,721 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Derivative instruments |
|
Level 2 |
|
|
(664 |
) |
|
(673 |
) |
|
Interest rate swap |
|
|
|
|
(390 |
) |
|
(531 |
) |
|
Cross-currency interest rate swap |
|
|
|
|
(274 |
) |
|
— |
|
|
Deliverable currency forward |
|
|
|
|
— |
|
|
(142 |
) |
|
Liabilities under option agreements |
|
Level 3 |
|
|
(2,424 |
) |
|
(2,243 |
) |
|
Contingent consideration |
|
Level 3 |
|
|
(180 |
) |
|
(3 |
) |
For the year ended December 31, 2017, 2016 and 2015, net realized gains and losses of Level 3 liabilities resulting from fair value measurements amounted to RUB 120 million gain, RUB 199 million gain and RUB 1,014 million gain, respectively and were recognized as a part of change in fair value of financial instruments' in consolidated statement of profit or loss. No unrealized gains or losses of Level 3 liabilities resulted from fair value measurements were recognized during the years ended December 31, 2017, 2016 and 2015.
The liability under put option agreement for redeemable NCI in MTS Armenia in amount of RUB 2,012 million is measured at fair value using a discounted cash flow technique. The most significant quantitative inputs used to measure the fair value of the liability under put option agreement for redeemable NCI in MTS Armenia are presented in the table below:
|
Unobservable inputs |
|
December 31, |
|
December 31, |
|
Post-tax discount rate |
|
13% |
|
13% |
|
Revenue growth rate |
|
0.0 - (0.5)% (av. –0.2%) |
|
(0.9) - (2.9)% (av. –1.8%) |
|
OIBDA margin |
|
40.2 - 41.2% (av. 40.7%) |
|
42.0 - 45.0% (av. 43.5%) |
The liability under option agreement for redeemable NCI in Oblachny Retail in amount of RUB 412 million is calculated based on agreed fixed formula, which includes future operating and financial indicators. The most significant quantitative inputs used to measure the fair value of the liability under option agreement for redeemable NCI in Oblachny Retail are presented in the table below:
|
Unobservable inputs |
|
December 31, |
|
|
|
Discount rate |
|
|
10 |
% |
|
Revenue, average amount per year |
|
|
632 |
|
|
EBITDA margin, average rate |
|
|
13,0 |
% |
|
Net debt, average amount per year |
|
|
(129 |
) |
The carrying value of the Group's financial instruments accounted for at amortized cost approximates their fair value due to their short-term nature and market interest rates, except for borrowings, gross of debt issuance cost, as disclosed in the table below:
|
|
|
|
|
December 31, 2017 |
|
December 31, 2016 |
|
||||||||
|
|
|
Level of |
|
Fair value |
|
Carrying |
|
Fair value |
|
Carrying |
|
||||
|
Notes (Note 15) |
|
Level 1 |
|
|
(112,531 |
) |
|
(109,000 |
) |
|
(81,462 |
) |
|
(78,381 |
) |
|
Bank and other loans (Note 15) |
|
Level 3 |
|
|
(183,543 |
) |
|
(183,787 |
) |
|
(199,131 |
) |
|
(196,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(296,074 |
) |
|
(292,787 |
) |
|
(280,593 |
) |
|
(274,763 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
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|
The fair value of the Group's bank and other loans is measured using a discounted cash flow technique. The discount rate used in the discounted cash flow analysis is determined on the base of the market rate for bank loans available to the Group.
While management has used available market information in estimating the fair value of its financial instruments, the market information may not be fully reflective of the value that could be realized in the current circumstances.
There were no transfers between levels of inputs within the hierarchy during the years ended December 31, 2017, 2016 and 2015.
There were no transfers between the accounting categories of financial instruments during the years ended December 31, 2017, 2016 and 2015.