ANNUAL REPORT OF MAGYAR TELEKOM TELECOMMUNICATIONS PUBLIC LIMITED COMPANY FOR THE YEAR ENDED DECEMBER 31, 2017 STANDALONE FINANCIAL STATEMENTS AND MANAGEMENT REPORT OF MAGYAR TELEKOM TELECOMMUNICATIONS PUBLIC LIMITED COMPANY FOR THE YEAR ENDED DECEMBER 31, 2017 1 INDEX TO THE STANDALONE ANNUAL REPORT STANDALONE FINANCIAL STATEMENTS...................................................................................................................................... 4 INDEPENDENT AUDITOR’S REPORT ......................................................................................................................................... 5 STATEMENTS OF FINANCIAL POSITION.................................................................................................................................. 12 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME......................................................................... 13 STATEMENTS OF CASH FLOWS.............................................................................................................................................. 14 STATEMENTS OF CHANGES IN EQUITY .................................................................................................................................. 15 NOTES TO THE STANDALONE STATEMENTS OF CHANGES IN EQUITY .................................................................................. 16 NOTES TO THE STANDALONE FINANCIAL STATEMENTS ....................................................................................................... 17 1 GENERAL INFORMATION................................................................................................................................................ 17 2 BASIS OF PREPARATION ................................................................................................................................................ 18 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS ................................................................................................. 27 4 FINANCIAL INSTRUMENTS.............................................................................................................................................. 29 5 FINANCIAL RISK MANAGEMENT ..................................................................................................................................... 47 6 INCOME TAXES............................................................................................................................................................... 55 7 INVENTORIES ................................................................................................................................................................. 60 8 ASSETS AND LIABILITIES HELD FOR SALE...................................................................................................................... 60 9 PROPERTY, PLANT AND EQUIPMENT (PPE) .................................................................................................................... 61 10 INTANGIBLE ASSETS .................................................................................................................................................... 64 11 INVESTMENTS .............................................................................................................................................................. 68 12 OTHER ASSETS ............................................................................................................................................................ 71 13 PROVISIONS ................................................................................................................................................................. 72 14 OTHER CURRENT LIABILITIES ...................................................................................................................................... 74 15 OTHER NON CURRENT LIABILITIES .............................................................................................................................. 74 16 EQUITY ......................................................................................................................................................................... 75 17 LEASES......................................................................................................................................................................... 76 18 REVENUE...................................................................................................................................................................... 80 19 DIRECT COSTS ............................................................................................................................................................. 83 20 EMPLOYEE RELATED EXPENSES .................................................................................................................................. 83 21 OTHER OPERATING EXPENSES .................................................................................................................................... 87 22 OTHER OPERATING INCOME ........................................................................................................................................ 88 23 INTEREST INCOME ....................................................................................................................................................... 88 24 INTEREST EXPENSE...................................................................................................................................................... 88 25 OTHER FINANCE EXPENSE – NET ................................................................................................................................. 89 26 RESULTS OF INVESTMENTS ......................................................................................................................................... 89 27 EARNINGS PER SHARE (EPS)........................................................................................................................................ 90 28 PURCHASE OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS ......................................................... 90 2 29 PURCHASE OF SUBSIDIARIES....................................................................................................................................... 91 30 CONTINGENT ASSETS AND LIABILITIES........................................................................................................................ 91 31 PURCHASE COMMITMENTS ......................................................................................................................................... 92 32 RELATED PARTY TRANSACTIONS ................................................................................................................................ 92 33 REPORTABLE SEGMENTS AND INFORMATION ABOUT GEOGRAPHICAL AREAS.......................................................... 96 34 PUBLIC SERVICE CONCESSION AND LICENSE ARRANGEMENTS................................................................................. 97 35 EVENTS AFTER THE REPORTING PERIOD..................................................................................................................... 99 36 UNBUNDLING OF ACTIVITIES...................................................................................................................................... 100 BUSINESS REPORT................................................................................................................................................................... 105 3 STANDALONE FINANCIAL STATEMENTS OF MAGYAR TELEKOM TELECOMMUNICATIONS PUBLIC LIMITED COMPANY FOR THE YEAR ENDED DECEMBER 31, 2017 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ENDORSED BY THE EUROPEAN UNION (EU IFRS) 4 INDEPENDENT AUDITOR’S REPORT 5 6 7 8 9 10 11 STATEMENTS OF FINANCIAL POSITION Note 01.01.2016 12.31.2016 12.31.2017 ASSETS Current assets Cash and cash equivalents ................................................................................................... 4, 5 846 1,260 948 Trade and other receivables ................................................................................................. 4, 5, 12 104,942 101,521 110,694 Other current financial assets ............................................................................................... 4, 5,17 13,336 18,941 11,173 Current income tax receivable ............................................................................................. 6 925 1,867 189 Inventories ..................................................................................................................................... 7 8,689 10,683 13,743 128,738 134,272 136,747 Assets held for sale.................................................................................................................... 8 5,760 1,540 161 Total current assets ......................................................................... 134,498 135,812 136,908 Non current assets Property, plant and equipment ............................................................................................ 9 377,736 374,751 371,732 Intangible assets ........................................................................................................................ 10 401,732 392,069 378,630 Investments ................................................................................................................................