Independent auditor's report
on the consolidated financial statements of
Public Joint Stock Company Rostelecom
and its subsidiaries
for 2021
March 2022
Independent auditor's report
on the consolidated financial statements of Public Joint Stock Company Rostelecom and its subsidiaries
Contents | Page |
Independent auditor's report | 3 |
Appendices | |
Consolidated statement of financial position | 9 |
Consolidated statement of profit or loss and other comprehensive income | 10 |
Consolidated statement of cash flows | 11 |
Consolidated statement of changes in equity | 12 |
Notes to the consolidated financial statements | 14 |
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Ernst & Young LLC | ООО «Эрнст энд Янг» | |||
Sadovnicheskaya Nab., 77, bld. 1 | Россия, 115035, Москва | |||
Moscow, 115035, Russia | Садовническая наб., 77, стр. 1 | |||
Tel: +7 | (495) | 705 9700 | Тел.: +7 (495) 705 9700 | |
+7 | (495) | 755 9700 | +7 (495) 755 9700 | |
Fax: +7 | (495) | 755 9701 | Факс: | +7 (495) 755 9701 |
www.ey.com/ru | ОКПО: 59002827 | |||
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ИНН: | 7709383532 |
Independent auditor's report
To the Shareholders and Board of Directors
Public Joint Stock Compapny
Rostelecom (PJSC Rostelecom)
Opinion
We have audited the consolidated financial statements of PJSC Rostelecom and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2021, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2021 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs).
Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Russian Federation, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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A member firm of Ernst & Young Global Limited
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements.
The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
Key audit matter | How our audit addressed the key audit matter |
Impairment of fixed and other non-current assets, including goodwill and intangible assets with indefinite useful lives
As described in Notes 8 and 9, impairment testing at the level of cash-generating units (hereinafter - "CGU") requires management to make significant estimates and assumptions. Due to this fact as well as due to the significant carrying amount of fixed and other non-current assets, including goodwill and intangible assets with indefinite useful lives, and highly sensitive value-in-use of the Group's CGUs to a variety of assertions and assumptions, this matter was one of the matters of the most significance in our audit.
Significant estimates and assumptions include discount rate used, the expected growth in projections periods and expected margin.
Impairment of accounts receivable
As disclosed in Note 16, the carrying amount of accounts receivable is RUB 66,364 million as at 31 December 2021. The assessment of an allowance for expected credit losses significantly impacts the amount of the impairment loss and, thus, the carrying amount of the accounts receivable. Therefore, this matter was one of the matters of the most significance in our audit. The management assessment of the expected credit losses is based on assumptions and estimates, in particular, on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors.
In the course of our audit procedures, we analysed assumptions and estimates used to calculate the value-in-use of the Group's CGUs, as well as tested calculations of the value-in-use of the Group's CGUs involving our valuation specialists. For this purpose, we analysed the industry growth forecasts and performed the budget-to-actual analysis of the Group's operating indicators. We also analysed the management assessment of the impairment testing sensitivity to underlying estimates and assumptions. In addition, we examined respective disclosures in the consolidated financial statements.
In the course of our audit procedures, we examined the Group's accounting policy related to recognition of allowance for impairment loss, analyzed information underlying the Group's calculations of the impairment loss, including historical data on collection of amounts due from customers and their aging analysis adjusted for forward-looking factors specific to the customers. We analyzed the assessment of the recoverability of trade accounts receivable and applied rates for impairment loss calculation adjusted for forward-looking factors. We examined respective disclosures in the consolidated financial statements.
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A member firm of Ernst & Young Global Limited
Key audit matter | How our audit addressed the key audit matter |
Recognition and measurement of revenue from telecommunication services
As disclosed in Note 29, revenue amounted to RUB 580,092 million in 2021. Recognition and measurement of revenue from telecommunication services was one of the most significant matters identified in our audit due to the Company's using complex automated accounting systems ("AAS") for revenue calculation. There are different tariff plans, multiple-element customer agreements, one-off and recurrent service payment schemes, assessment the probability of obtaining economic benefits from customers as well as recognizing revenue from cloud services required from Group management significant judgement in applying IFRS 15 Revenue
from Contracts with Customers.
Business combinations
Our audit procedures in respect of revenue included testing on a sample basis the calculation produced by AASs, including testing calculation algorithms used by AASs to calculate revenue, accounts receivable and advances received. We performed testing of automated and semi-automated controls with respect to AASs. Our audit procedures also included testing on a sample basis of data obtained from AAS.
As for recognition and accounting of certain types of revenue, we examined the Group's agreements (including contracts for the provision of cloud communications services) and analysed how the probability of inflow of economic benefits associated with the customers affects Group's revenue recognition. We analysed tariff plans and conditions of agreements with counterparties and considered the procedure of revenue recognition for various revenue streams, including those revenues generated in multi-component agreements. We examined respective disclosures in the consolidated financial statements.
As disclosed in Note 7 the Group performed several | In the course of our audit procedures we have |
acquisitions. Determining the fair value of assets | gained an understanding of the Group's procedures |
and liabilities acquired during business combination | and controls, including those related to the process |
involves significant judgments and estimates by the | of approval by the Group's Management of the |
management of the Group, including involvement of | acquisition of businesses, as well as accounting |
external independent experts. Due to the | approaches for these transactions. We have studied |
significance of judgment and the potential effect on | the terms of the relevant legal documents related to |
the consolidated financial statements, we | the acquisition of businesses and analysed the |
considered assessing the fair value of acquired | terms of transactions. We analyzed the fair value |
assets, liabilities and goodwill calculation obtained | measurement of identifiable assets and liabilities |
during business combination to be one of the key | with the involvement of our valuation specialists. |
audit matters. | We have examined the relevant disclosures in the |
consolidated financial statements. |
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A member firm of Ernst & Young Global Limited
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OAO Rostelecom published this content on 10 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 March 2022 12:42:02 UTC.