SISTEMA PJSFC AND SUBSIDIARIES

Consolidated Financial Statements for 2022 and Independent Auditor's Report

SISTEMA PJSFC AND SUBSIDIARIES

TABLE OF CONTENTS

Page

INDEPENDENT AUDITOR'S REPORT

1-6

CONSOLIDATED FINANCIAL STATEMENTS FOR 2022:

Consolidated statement of profit or loss

7

Consolidated statement of comprehensive income

8

Consolidated statement of financial position

9-10

Consolidated statement of changes in equity

11

Consolidated statement of cash flows

12-13

Notes to the consolidated financial statements

1.

General

14

2.

Basis of preparation

14

3.

Significant accounting policies, judgements, estimates and assumptions

14

4.

Segment information

19

5.

Discontinued operations and subsidiaries disposals

22

6.

Business combinations

26

7.

Capital transactions of subsidiaries

37

8.

Revenue

38

9.

Impairment of long-lived assets

44

10.

Impairment of financial assets

44

11.

Income taxes

45

12.

Employee benefits expenses

47

13.

Property, plant and equipment

48

14.

Investment property

51

15.

Goodwill

52

16.

Other intangible assets

56

17.

Investments in associates and joint ventures

59

18.

Other financial assets

64

19.

Restricted cash

71

20.

Inventories

71

21.

Accounts receivable

72

22.

Equity

73

23.

Accumulated other comprehensive income

73

24.

Loans and borrowings

74

25.

Lease liabilities and right-of-use assets

78

26.

Bank deposits and liabilities

79

27.

Other financial liabilities

80

28.

Provisions

80

29.

Earnings/(loss) per share

82

30.

Capital and financial risk management

82

31.

Derivative instruments

86

32.

Fair values

88

33.

Related party transactions

91

34.

Subsidiaries

92

35.

Non-cash transactions

93

36.

Reconciliation of liabilities arising from financing activities

94

37.

Contingencies and commitments

95

38.

Subsequent events

100

AO BST

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Russia

Tel: +7 (495) 787 06 00

Fax: +7 (495) 787 06 01 delret.ru

INDEPENDENT AUDITOR'S REPORT

To the Shareholders and the Board of Directors of Sistema Public Joint Stock Financial Corporation

Opinion

We have audited the consolidated financial statements of Sistema Public Joint Stock Financial Corporation ("Sistema") and its subsidiaries (the "Group"), which comprise the consolidated statement of financial position as at 31 December 2022 and the consolidated statement of profit or loss, consolidated statement of 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 2022, 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 Auditor's Independence Rules and the Auditor's Professional Ethics Code, that are relevant to our audit of the financial statements in the Russian Federation together with the ethical requirements of the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (the "IESBA Code"), 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.

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.

1

Why the matter was determined to be

How the matter was addressed in the audit

a key audit matter

Significant non-routine transactions

In light of its strategy, the Group regularly conducts complex acquisitions and disposals, debt restructurings and other significant non-routine transactions. In 2022 the non-routine transactions were conducted in the course of changing operating environment (see Note 37 to the consolidated financial statements).

We focus on these matters because the appropriate accounting treatment of such transactions is often complex and requires exercise of significant judgement, in particular, in determining whether or not the Group has control over its investees, and whether or not the Group has assumed obligations to third-party investors.

In the current period, these included, among others, sale of a stake in SFH Invest S.A., recognition of EWUB as assets held for sale, and other transactions involving the sale of shares in subsidiaries resulting in the loss of control by the Group.

See Note 5 to the consolidated financial statements.

Our procedures included reviewing legal documents to fully understand the terms and conditions of each transaction and therefore the associated accounting implications and evaluating documentation of management's positions on how IFRSs were applied to the transactions.

In relation to the previously mentioned specific transactions, we:

  • analysed legal documents and evaluated the appropriateness of management's conclusions on whether or not the Group has control over the investees in the context of investee's governance structure, size of the Group's shareholding relative to other shareholders, dispersion of other vote holdings and other factors relevant to determining whether the Group has current ability to direct relevant activities of the investees;
  • analysed agreements and key terms of transactions on the disposal of Group's subsidiaries and reviewed the reflection of the disposal in the consolidated financial statements;
  • analysed management's calculation of the expected credit losses allowance for the financial assets arising as a result of disposal;
  • verified the compliance of the disclosures contained in the consolidated financial statements with IFRS requirements.

In addition, we analysed management's assessment

of the impact of changes in the operating

environment on the Group's operations and

significant non-routine transactions.

Diversified structure of the Group

We obtained an understanding of the group-wide

Sistema is a holding company that owns

controls over the consolidation process and the

preparation of the consolidated financial

mainly controlling stakes in its subsidiaries,

statements, including instructions of the Group's

whose results are included in the

management to its subsidiaries.

consolidated financial statements. The

large number of entities of the Group and

Our audit approach was developed considering the

diversified nature of their operations

Group's diversified structure and associated risks of

require the Group's management to design

material misstatement of the consolidated financial

and implement group wide controls,

statements. It included determination of necessary

including monitoring and control activities

procedures and audit scope in relation to each

2

Why the matter was determined to be

How the matter was addressed in the audit

a key audit matter

to ensure timely, reliable and complete financial information received from its subsidiaries.

Audit procedures regarding the financial information of the subsidiaries included in the consolidated financial statements may be performed by us or by the auditors of those subsidiaries ("components") acting under our supervision. As the group auditor, we are fully responsible for conducting the audit and forming our audit opinion.

We focused on this matter because the diversified structure of the Group has a significant impact on our audit approach, and the nature and extent of our involvement in component auditors' work is significant.

component's financial information, depending on its significance for the Group and identification of risks of misstatement of their financial information. The nature and extent of our involvement in the component auditors' work was also dependent on our assessment of their professional competence in the context of allocated scope.

To obtain reasonable assurance of fair presentation of the components' financial information, we assessed risks and determined audit procedures performed by the component auditors, and evaluated the results of the procedures. This included a critical analysis of the component auditors' documentation, discussion of significant matters with the component auditors, component or Group management and, if applicable, designing and performing additional audit procedures.

We also performed procedures with respect to consolidation adjustments to the financial information of the subsidiaries in order to assess their nature, completeness and accuracy.

Compliance with anti-bribery laws and regulations and associated accounting and disclosure implications

In March 2019, the Group's subsidiary MTS reached a resolution with the United States Securities and Exchange Commission ("SEC") and the United States Department of Justice ("DOJ") relating to the investigation concerning the Group's former subsidiary in Uzbekistan. The Group consented to the commencement of an administrative cease-and-desist order (the "Order") by the SEC and entered into a deferred prosecution agreement ("DPA"). Under the DPA and the Order in September 2019 the Group appointed an independent compliance monitor ("Independent Monitor") for, inter alia, review, testing and improving MTS' anti-corruption compliance code, policies, and procedures for a period of three years. In 2021, the DOJ and SEC approved a one year extension of the monitorship, which is permitted by the terms of the DPA and the Order.

Our audit procedures related to the Group's estimation of any contingencies related to any potential instance of non-compliance with anti- corruption laws and regulations included the following, among others:

  • We inspected the laws and regulations MTS has to comply with in order to obtain an understanding of the relevance and applicability to MTS and to assess any potential penalties that may arise for non- compliance;
  • We read the procedures performed by the Independent Monitor and evaluated the implications of their findings, including discussing these with management as well as internal and external legal advisors;
  • We inquired management regarding their follow up on the results of internal and external investigations and on the design and operational effectiveness of the MTS's compliance programs and internal controls relating to the prevention and detection of fraud and corruption;

3

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Afk Sistema OAO published this content on 10 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 April 2023 07:36:06 UTC.