PJSC Gazprom Financial Report 2017 Financial Report 2017 Financial Report PJSC Gazprom
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www.gazprom.com PJSC Gazprom Financial Report 2017 PJSC Gazprom Financial ReportFinancial 2017 Gazprom PJSC PJSC Gazprom Financial Report 2017 PJSC Gazprom Financial Report 2017 Contents 1 PJSC Gazprom Statutory Financial Statements for 2017 4 2 PJSC Gazprom IFRS Consolidated Financial Statements 31 December 2017 76 1 PJSC Gazprom Statutory Financial Statements for 2017 4 PJSC Gazprom Financial Report 2017 Independent Auditor’s Report 6 Balance Sheet as at 31 December 2017 11 Statement of Financial Results for 2017 15 Statement of Changes in Equity for 2017 17 Cash Flow Statement for 2017 21 Explanatory Notes to the Balance Sheet and the Statement of Financial Results 24 Statutory Financial Statements Explanatory Notes to the Balance Sheet and the Statement of Financial Results in the Statutory Financial Statements for 2017 40 5 PJSC Gazprom Financial Report 2017 Independent Auditor’s Report (Translation from Russian original) To the Shareholders of PJSC Gazprom Opinion We have audited the accompanying financial statements of PJSC Gazprom, which comprise the balance sheet as at 31 December 2017, statement of financial results, supplements to the balance sheet and the statement of financial results, including the statement of changes in equity and cash flow statement for the year then ended, and explanatory notes to the balance sheet and the statement of financial results. In our opinion, the financial statements present fairly, in all material respects, the financial position of PJSC Gazprom as at 31 December 2017, its financial performance and its cash flows for the year then ended in accordance with Russian accounting standards. 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 Financial Statements section of our report. We are independent of the audited entity in accordance with the Rules of Independence of the Auditors and Audit Organisations and The Code of Professional Ethics of the Auditors, which are in accordance with International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these require ments. 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 financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Revenue recognition — Note 14 to the financial statements We focused on revenue recognition in our audit because there were various revenue streams with significantly different terms underlying revenue recognition, including the procedure for price determination, price change, and transfer of ownership, risks and rewards. We assessed the consistency in the application of the revenue recognition accounting policy against various types of revenue and geographic segments. Our audit procedures with respect to the risk of material misstatement included, specifically, evaluation of the design of controls, assessment of the risk of fraud or error and performance of substantive procedures with respect to the sales transactions. Based on the results of our audit procedures, we found the position of the management of PJSC Gazprom on the revenue recognition to be appropriate. Revaluation of fixed assets — Note 5 to the financial statements We consider this area to be one of the most significant audit areas in view of the significant balances of fixed assets. PJSC Gazprom performs regular revaluation of fixed assets to ensure that the value of fixed assets at which they are recognised in accounting records and financial statements does not significantly differ from their current (replacement) cost. No revaluation of fixed assets was performed as at 31 December 2017 because of insignificant change in the current (replacement) cost identified during testing of the need for revaluation of fixed assets. We engaged our valuation experts to make a conclusion on the assumptions and methodo logy applied to test the need for revaluation of fixed assets. Our audit procedures with respect to the testing of the need for revaluation of fixed assets included assessment of competency, qualification, experience and objectivity of the management’s experts, sample testing of the accuracy of the models and methods used for the testing. 6 PJSC Gazprom Financial Report 2017 Independent Auditor’s Report (Translation from Russian original) Based on the results of the audit procedures we believe that the significant assumptions and methodology applied to test the need for revaluation of fixed assets are acceptable for the purposes of the preparation of the financial statements. Measurement of doubtful receivables — Note 8 to the financial statements One of highrisk audit areas is the evaluation of sufficiency of doubtful debt provision. We assessed the assumptions and professional judgment applied by the management of PJSC Gazprom, including critical assessment of the information used by PJSC Gazprom to make projections of the ability of its customers to repay their debts. We also performed proce dures to test controls over the recognition and repayment of the receivables. We also checked whether disclosures made by PJSC Gazprom about the use of judgment for calculation of the Statutory Financial Statements doubtful debt provision were sufficient. Based on the results of the procedures performed, we found the criteria and assumptions applied by the management to accrue doubtful debt provision to be appropriate. Evaluation, recognition and disclosure of information about litigations — Notes 19 and 20 to the financial statements Evaluation, recognition and disclosure of information about liabilities in respect of litigations require significant professional judgments. We consider this area to be one of most significance in our audit due to the material amounts subject to contestation and essential difficulties associ ated with the assessment issue. PJSC Gazprom is a party to a number of significant litigations, including litigations with NJSC Naftogaz of Ukraine. Procedures we performed included analysis of the rulings delivered by the Arbitration Institute of the Stockholm Chamber of Commerce, Sweden, and the rulings of the courts of various jurisdictions of Ukraine, discussions of signifi cant matters with the staff of PJSC Gazprom, including staff responsible for providing judicial and legal support to PJSC Gazprom in its activities, evaluation and testing of terms underlying the recognition of liabilities and their disclosure. Based on the results of the procedures performed, we found the criteria and estimates applied by the management, as well as the recognitions and disclosures to be consistent and appropriate. Other Information Management is responsible for the other information. The other information comprises the infor mation included in the Quarterly issuer’s reports for the first, second, third and fourth quarters of 2017 (but does not include the financial statements and our auditor’s report thereon), which were made available to us prior the date of this auditor’s report, and in the Company’s Annual report for 2017, the Quarterly issuer’s report for the first quarter of 2018, which are expected to be made available to us after the date of this auditor’s report. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in regard to the Quarterly issuer’s reports for the first, second, third and fourth quarters of 2017. When we read the Annual report of the Company for 2017 and the Quarterly issuer’s report for the first quarter of 2018, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. 7 PJSC Gazprom Financial Report 2017 Independent Auditor’s Report (Translation from Russian original) Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Russian accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the audited entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the audited