The functional currency of Arricano Real Estate PLC is the US dollar (USD). The Group entities are located in Ukraine and in the Russian Federation and have the Ukrainian Hryvnia (UAH) and Russian Rouble (RUB) as their functional currencies, since substantially all transactions and balances of these entities are denominated in the aforementioned currencies. The Group entities located in Cyprus, Estonia, Isle of Man and BVI have the US dollar as their functional currency, since substantially all transactions and balances of these entities are denominated in US dollar.

For the benefits of principal users, the management choose to present the consolidated interim condensed financial statements in USD, rounded to the nearest thousand.

In translating the consolidated interim condensed financial statements into USD the Group follows a translation policy in accordance with International Financial Reporting Standard IAS 21 The Effects of Changes in Foreign Exchange Rates and the following rates are used:

-- Historical rates: for the equity accounts, except for net profit or loss and other comprehensive income(loss) for the year.

-- Year-end rate: for all assets and liabilities.

-- Rates at the dates of transactions: for the statement of profit or loss and other comprehensive incomeand for capital transactions.

UAH and RUB are not freely convertible currencies outside Ukraine and the Russian Federation, and, accordingly, any conversion of UAH and RUB amounts into USD should not be construed as a representation that UAH and RUB amounts have been, could be, or will be in the future, convertible into USD at the exchange rate shown, or any other exchange rate.

The principal USD exchange rates used in the preparation of these consolidated interim condensed financial statements are as follows: 


Currency      30 June 2021 31 December 2020 
UAH           27.18        28.27 
RUB           72.37         73.88

Average USD exchange rates for the six months period ended 30 June are as follows: 


Currency       2021  2020 
UAH            27.78 25.98 
RUB            74.33 69.34

As at the date that these consolidated interim condensed financial statements are authorised for issue, 22 September 2021, the exchange rate is UAH 26.71 to USD 1.00 and RUB 73.21 to USD 1.00. d. Going concern

As at 30 June 2021, the Group's current liabilities exceeded its current assets by USD 36,681 thousand (unaudited).

At the same time, the Group had positive equity of USD 125,234 thousand (unaudited) as at 30 June 2021, and generated positive cash flows from operating activities of USD 9,967 thousand (unaudited) for the six months then ended.

Management is undertaking the following measures in order to ensure the Group's continuing operation on a going concern basis:

-- Management makes all efforts to keep occupancy rates of its shopping centers at current levels. Besides,the Group managed to gradually increase its rental rates during the reporting period for existing tenants.

-- The Group expects it will be able to draw on existing facilities granted from entities under commoncontrol, should this be required for operational and other needs of the Group.

-- In accordance with the forecast for 2021 that is being revised on ongoing basis, taking into accountalready existing and potential future impact of COVID-19 on the Group's financial performance, the Group plans toearn revenue that together with other measures undertaken by the Group's management, including negotiations withlenders, will give an ability to settle the Group's current liabilities in the normal course of business.

-- In addition, management expects that certain lenders will not exercise their right to require settlementof accrued interest for total amount of USD 8,126 thousand, and thus according to the respective agreements, after1 August 2021 this accrued interest will be capitalised and reclassified to non-current liabilities in accordancewith contractual terms (see Note 15).

Management believes that notwithstanding any material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern in the foreseeable future exists, the measures that management undertakes, as described above, will allow the Group to maintain positive working capital, generate positive operating cash flows and continue business operations on going concern basis.

These consolidated financial statements are prepared on a going concern basis, which contemplates the realisation of assets and the settlement of liabilities in the normal course of business. e. Measurement of fair values

A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

-- Note 4(b) - investment property; and

-- Note 12(a) - fair values. f. Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. Management believes that during the six months ended 30 June 2021 and the year ended 31 December 2020, the Group operated in and was managed as one operating segment, being property investment.

3 Significant accounting policies

The accounting policies applied in these consolidated interim condensed financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2020.

The changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2021.

A number of other new pronouncements are effective from 1 January 2021 but they do not have a material effect on the Group's financial statements.

4 Investment property

(a) Movements in investment property

Movements in investment properties for the six months ended 30 June 2021 are as follows: fair value loss on revaluation in the amount of USD 9,027 thousand (unaudited) (six months ended 30 June 2020: fair value gain on revaluation in the amount of USD 30,096 thousand (unaudited)); currency translation gain in the amount of USD 10,179 thousand (unaudited) (six months ended 30 June 2020: loss USD 33,049 thousand (unaudited)); and additions in the amount of USD 4,987 thousand (unaudited) (six months ended 30 June 2020: USD 8,040 thousand(unaudited)).

As at 30 June 2021, in connection with loans and borrowings, the Group pledged as security investment property with a carrying value of USD 160,500 thousand (unaudited) (31 December 2020: USD 160,500 thousand) (refer to Note 13(a)). a. Determination of fair value

The fair value measurement, developed for determination of fair value of the Group's investment property, is categorised within the Level 3 category due to the significance of unobservable inputs to the entire measurement, except for certain land held on the leasehold which is not associated with completed property and is therefore categorised within the Level 2 category. As at 30 June 2021, the fair value of investment property categorised within the Level 2 category is USD 29,400 thousand (unaudited) (31 December 2020: USD 29,400 thousand).

The most recent independent revaluation of investment property took place as at 31 December 2020. To assist with the estimation of the fair value of the Group's investment property, which is represented by the shopping centres, management engaged registered independent appraiser Expandia LLC, part of the CBRE Affiliate network, having a recognised professional qualification and recent experience in the location and categories of the projects being valued.

Group Management carefully considered investment property revaluation as at 30 June 2021. In light of the analysis of the retail property market, Group Management took a decision not to engage an independent property appraiser as at 30 June 2021. The reason for the decision is that the estimated value of property denominated in USD did not change significantly as compared to 31 December 2020.

The fair values are based on the estimated rental value of property. A market yield is applied to the estimated rental value to arrive at the gross property valuation. When actual rents differ materially from the estimated rental value, adjustments are made to reflect actual rents. The valuation is prepared in accordance with the practice standards contained in the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors ("RICS") or in accordance with International Valuation Standards published by the International Valuation Standards Council.

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