RU

INTEGRATED REPORT 2016

Fair value of financial instruments

Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by an active quoted market price. The estimated fair values of financial instruments have been determined by the Group using available market information, where it exists, and appropriate valuation methodologies. However, judgement is necessarily required to interpret market data to determine the estimated fair value. The Russian Federation continues to display some characteristics of an emerging market and economic conditions continue to limit the volume of activity in the financial markets. Management has used all available market information in estimating the fair value of financial instruments.

Financial assets and liabilities carried at fair value. Derivatives (Level 2) are carried in the consolidated statement of financial position at their fair value. Fair values of derivative financial assets and liabilities were determined using discounting cash flows valuation techniques with inputs (discount rates for RR and US$) observable in markets.

The fair value of floating rate instruments is normally their carrying amount. The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risk and remaining maturity. Discount rates used depend on the credit risk of the counterparty. Carrying amounts of trade and other financial receivables approximate fair values. Cash and cash equivalents are carried at amortised cost which approximates current fair value.

Liabilities carried at amortised cost. The fair value is based on quoted market prices, if available. The estimated fair value of fixed interest rate instruments with stated maturity, for which a quoted market price is not available, was estimated based on expected cash flows discounted at current interest rates for new instruments with similar credit risk and remaining maturity. The fair value of liabilities repayable on demand or after a notice period (“demandable liabilities”) is estimated as the amount payable on demand, discounted from the first date that the amount could be required to be paid. As at 31 December 2016 and 31 December 2015, the estimated fair value of the current and non-current borrowings, trade and other payables is not materially different from their carrying amounts.

      31 December 2016 31 December 2015
Financial assets Stated at Level Carrying value Fair value Carrying value Fair value
Trade and other receivables Amortised cost 3 213 632 213 632 346 238 346 238
Other financial assets Amortised cost (31 December 2015: Fair value) 3, 1 68 267 68 770 67 599 67 599
Total     281 899 282 402 413 837 413 837

      31 December 2016 31 December 2015
Financial liabilities Stated at Level Carrying value Fair value Carrying value Fair value
Borrowings Amortised cost 3 6 417 874 6 417 874 5 904 664 5 904 664
Bonds Amortised cost 1 584 907 580 084 584 668 545 531
Derivative financial liabilities Fair value 2 277 125 277 125 585 603 585 603
Trade and other payables Amortised cost 3 221 813 221 813 203 859 203 859
Total     7 501 719 7 496 896 7 278 794 7 239 657
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