Straight-line method of amortized cost of a financial asset. Depreciable cost - what is it? Depreciation according to accounting rules. Fixed assets subject to depreciation

In the new accounting standards in microfinance organizations, a new concept for microfinance organizations appears when issuing loans - effective interest rate (ERR). ESP should be calculated using the discounted cash flow method.

To understand this issue, you must first understand what this rate means, how to calculate it, and what needs to be done when receiving it. Therefore, the analysis of this issue will be determined by the following stages:

1. What is ESP?

2. What is discounting?

4. What needs to be done after calculating the ESP?

Point 1. What is ESP?

ESP (effective interest rate) is the annual interest rate at which a loan is issued, which takes into account all payments that accompany the process of issuing a loan from the organization, and also takes into account the depreciation of money over time.

This rate is also called “fair” because it reflects the real interest rate on the loan, taking into account the time factor.

Point 2. What is discounting?

Taking the definition from Wikipedia:

"Discounting is the determination of the value of cash flow by bringing the value of all payments to a certain point in time. Discounting is the basis for calculating the value of money taking into account the time factor."

It's no secret that money loses its value over time. For example, with 1000 rubles today, we will be able to buy more than 1000 rubles in a year.

So, discounting is a procedure that allows you to determine the future value of money “today.” Those. how much will our 1000 rubles cost in a year (month/week), two, etc. For example, 1000 rubles today, in a year will have a value of 900 rubles. This means that a discounted thousand is 900 rubles.

The mathematical formula for discounting in the general case will be as follows:

PP - discounted payment, i.e. in our example, it is 900 rubles.

PDD - payment before discounting, i.e. in our example, this is 1000 rubles.

N is the number of years from a date in the future to the current moment; for the case of issued loans, this may be the difference between the date of the loan issuance and the date of the next payment divided by 365 days. Then in the formula, instead of the indicator N, you can use the indicators Dв and Dп, where Dв is the date the loan was issued, Dп is the date of the next payment. The formula will look like this:

So in this discounting formula: R – and will be the ESP interest rate that we need to find.

Clause 3. Calculation of ESP using the discounting method.

1) Build cash flows. Cash flow refers to the movement of money during the issuance and repayment of a loan. To calculate ESP, the first cash flow is the issuance of a loan and this flow has a minus sign. The remaining flows are payments according to the schedule and they have a plus sign. If the schedule has one payment, as in the case of short-term loans, then there will be only two flows.

In fact, constructing cash flows means constructing a payment schedule, where the first payment will be the amount of the loan issued with a minus sign.

For example, a loan was issued at a rate of 91.25% per annum for 6 months, while the borrower paid an issuance fee of 2,000 rubles. The annuity payment schedule will look like this:

2) Find an interest rate R (ESP) at which the sum of all discounted (reduced to future value) flows at a given rate will be equal to zero.

Those. if you look at it, essentially we need to find an interest rate (ERR) at which the amount of the loan and the interest received on it in the future, taking into account the depreciation of the money issued over time, will be equal to the originally issued loan.

Once again, all payments in the schedule, taking into account interest and other payments after discounting each payment, must be equal to the original loan amount.

The remaining task is to discount each payment in the schedule. But the question arises: how to choose such a rate? Doing this manually is quite labor-intensive. This can only be done by selection, which from the point of view of calculations on paper is not realistic, since the iterations that need to be done to accurately determine the rate can be hundreds and thousands.

What options are there?

Actually, there are two of them:

1. Use the NET INDEX function, which is available in any spreadsheet editor such as Excel.

Enter a payment schedule in which the first line is the loan amount with a minus, open the NET INC function and select the entire table as a range of values, press Enter - you get the interest rate, i.e. ESP.

2. Use tools your software product, which you use in your work when issuing loans.

When calculating, the table with the original schedule will be supplemented with a schedule of discounted flows and will look like this:

As can be seen from the graph, the sum of all discounted payments is close to 0.

Such calculations are possible using the discount rate:

ESP = 174.96% per annum.

But that is not all. Here we move on to the next point.

4. What needs to be done after calculating the ESP?

After the ESP has been calculated, it is necessary to compare it with market ESP values. Each company must determine market values ​​independently, i.e. analyze retrospectively the ESP values ​​of other companies, from the Central Bank website, from the media and other sources and approve the maximum ESP values ​​(min/max) in your accounting policy for each type of loan. In addition, we need to determine the rate that will be used to discount payments according to the schedule in case our calculated ESP rate does not fall within market values.

That. we need to define three values:

The lower limit of the market rate, for example, 130%

The upper limit of the market rate, for example, 140%

The discount rate at which we will discount payments and which falls within a given interval, for example, let it be 137%.

If the received ESP does not fall within the range of the maximum values ​​of market rates, for example, our rate turned out to be 197.5%, it is necessary to discount all future payments according to the schedule at a predetermined discount rate. In our example, the rate is 140%.

As a result, having discounted all future flows, we get an amount of 51,851.99 rubles. In the chart below, this is the outermost yellow cell - the sum of all payments discounted at a rate of 140%:

We compare this amount with the amount of the loan issued and determine whether it is more or less.

In our example, it turned out to be higher, and this is logical since our ESP turned out to be higher than the market one.

If it turns out to be more, then we must reflect the profit at initial recognition, i.e. make the appropriate entry in accounting.

The wiring will look like this:

Dt 488.07 - Kt 715.01 in the amount of 1,851.99 rubles.

In this case, each account will have its own personal account.

Instead of account 488.07, there may be another loan account, depending on the situation. In this example, an account for microloans with individuals is selected. face.

If it had turned out to be less, then we would have to reflect the loss at initial recognition, i.e. make the appropriate entry in accounting.

The wiring will look like this:

Dt 715.02 - Kt 488.08

Next, with each change in cash flow, namely when repaying a loan or accruing interest, we must again discount all future cash flows and reflect the adjustments. Such adjustments must be made before the loan is repaid. As a result of all adjustments during the final repayment of the loan, all our adjustments on an accrual basis will be equal to zero.

Thus, the profit or loss previously reflected at the very beginning will return to 0.

The effective interest rate is used in IFRS to calculate the amortized cost of financial instruments. According to definition effective interest method— a method of calculating the amortized cost of a financial asset or financial liability and allocating interest income or interest expense over the relevant period. In the Dipifra exam, you need to be able to calculate the amortized cost of financial instruments without thinking. This is what this article will focus on.

The two previous articles on the effective interest rate were written for people interested in finance. This article will be useful to those who are planning to take the Dipifr exam. It is no secret that the topic of financial instruments appears in every exam, so the calculation of amortized cost should be practiced very well. Ideally, it should be done on Deepifr in literally a minute. I hope that this article will help you understand this issue.

Other aspects related to the effective interest rate have been discussed previously:

Calculation of amortized cost of a financial instrument in examples

In the Dipifra exam, tasks on calculating the amortized cost of financial instruments appear regularly. The goal is to calculate the balance of a financial instrument at the end of the period for reflection in the general financial statement and the amount of financial expenses/income for reflection in the general financial statement.

The simplest example of a financial instrument does not involve payments throughout the year, but only accrual of interest. This is similar to the fact that you deposited money in a bank and are going to withdraw the entire accumulated amount at the end of the deposit period.

Example 1. Interest accrual without annual debt repayment

On January 1, 2015, Delta issued bonds and received $20 million for them. The effective interest rate on the bonds is 8% per annum. How should this financial instrument be reflected in the financial statements of Delta Company as of December 31, 2015?

The Delta company issued bonds, which means it sold debt financial obligations and received cash for them:

The following dimensions are usually used in the Dipifr exam: 20 million = 20,000, i.e. the last three zeros are not written. During 2015, interest must be accrued for the use of funds. On Dipif, for ease of calculation, interest is calculated annually at the end of the annual period. According to IFRS, you need to use the effective interest rate method, that is, apply this rate to the balance of the debt. This will result in an increase in financial liability.

December 31, 2015:

The easiest way to solve such problems is using a table:

The amount of accrued interest is found by multiplying the opening balance by the effective interest rate: 20,000 * 8% = 1,600

• OFP: Financial obligation - 21,600

The second row of the table will correspond to the second year, that is, 2016. But the task required to report only data as of December 31, 2015. In most cases, the Dipifra exam requires calculating the value of a financial instrument for one year, so only one row of the table is needed. The second line is here for illustration.

Usually in the exam there is a more complex example when there is a partial repayment of the obligation, usually at the end of the year. It’s as if you were to withdraw some money from your deposit before the New Year, thereby reducing your income next year.

Example 2. Interest accrual and annual partial repayment of debt

On January 1, 2015, Delta issued bonds and received $20 million for them. The bonds pay a coupon of $1.2 million annually at the end of the period. The effective interest rate on the bonds is 8% per annum. How should this financial instrument be reflected in the financial statements of Delta Company as of December 31, 2015?

The beginning will be similar to example 1.

• January 01, 2015: Dr Cash Cr Financial liabilities - 20,000
• December 31, 2015: Dr Financial expenses Kr Financial liability - 1,600 (=20,000*8%)

Payment of a bond coupon means partial repayment of a debt financial obligation. This was done at the end of the year:

The repayment amount must be deducted from the balance of the financial liability after accrual of interest for 2015. Therefore, the amount 1,200 in the third column of the table is in parentheses (negative).

Opening balance	Interest at 8%	Annual payment	Opening balance
	(b)=(a)*%

Thus, at December 31, 2015, the financial liability will be 20,000 + 1,600 - 1,200 = 20,400

• OFP: Financial obligation - 20,400
• OSD: Financial expenses - (1,600)

The second line in the table for 2016 is given to illustrate the principle of filling out the table. The amount of accrued interest for the second year is calculated from the debt balance as of December 31, 2015: 1.632 = 20.400*8%.

Real exam problems are more difficult. Firstly, because the figures necessary for the calculation often need to be calculated in advance, and secondly, because the examiner includes a lot of unnecessary information in the task in order to confuse the test takers. But the essence is the same: to calculate the amortized cost of a financial instrument, you need to find in the task the amount of 1) the opening balance, 2) the effective interest rate and 3) the amount of the annual payment.

1) The amount of the opening balance– interest will be accrued on it (in life, this is the amount of your deposit in the bank). The first column in the table. This amount may be called depending on the condition: “net proceeds from the issue of bonds” , “net proceeds from the issue of redeemable preferred shares” , “borrowed funds” for such and such an amount. Net revenue NOT equal to the face value of the bonds, since bonds can be issued at a premium or discount.

2) Interest rate, according to which the debt grows can be called as follows: “effective”, “market”, “current cost of borrowing”. This is the effective market rate. In the example, it is 8% (as a rule, it is indicated at the end of the condition). This bet is placed in the second column of the table.

3) Amount of annual payments– third column in the table. (This is the amount that you withdraw from your bank deposit annually; if you do not withdraw, it is zero). It is either given by the amount or given by the words: “annual interest”, “annual payment”, “dividend on preferred shares”, “coupon on bonds”. If this amount is given as a percentage, then it must be multiplied by denomination bonds. For example, the condition may say: “The coupon rate on the bonds was 6% with interest paid annually at the end of the year.” This means that the face value of the bond must be multiplied by 6% and the resulting amount will be the annual repayment of the bond. And yes, this amount can be zero, as in the first example.

After all the necessary quantities have been found, you need to build a table based on the sample. As a rule, one row of the table is always enough to answer.

The rate for convertible instruments is not effective

I would like to draw your attention to convertible instruments. In Note 8 to the December 2013 consolidation, Paul Robins deliberately provoked everyone into error by giving two discount rates to choose from. Moreover, one rate was called “the effective annual interest rate on this loan,” and the other was “the annual interest rate that these investors require on a non-convertible loan.” It was necessary to use the second one, the one that is not effective. Because the discounted cash flows from the convertible instruments do not equal the net proceeds from their issue. Buyers of convertible bonds are willing to pay slightly more for them than for regular bonds because of the conversion option. A portion of the proceeds from such instruments is allocated to the equity component.

Note 8 - Long-term borrowings
Alpha's long-term borrowings include a loan with a carrying value of $60 million received on October 1, 2012. There is no interest accrual on the loan, but the amount of $75.6 million is due on September 30, 2015. The effective annual interest rate on this loan for investors is 8%. As an alternative to repayment, investors may exchange this asset in the form of a loan for ordinary shares of Alpha on September 30, 2015. The annual interest rate these investors would require on a non-convertible loan would be 10%. Alpha did not accrue any finance charges in respect of this loan in the year ended 30 September 2013. The present value of $1 paid/received at the end of year 3 is:
79.4 cents at a discount rate of 8% per annum.
75.1 cents at a discount rate of 10% per annum.

Correct answer:

• 75.600*0.751 = 56.776 - debt component
• 60,000 - 56,776 = 3,224 - equity component

If we take the discounting factor for a rate of 8%, we get 75.600*0.794 = 60.026. Thus, this rate links the proceeds today to 60,000 and the present value in 3 years to 75,600, which is the effective interest rate for such a financial instrument. 26 is a slight discrepancy due to rounding because the examiner wanted to use a round figure of 8%, and the effective rate here would be approximately 8.008%.

More details about this can be found at the link.

As of the reporting date of January 1, 2011, using amortized cost to evaluate financial assets and financial liabilities, the following financial instruments were recognized in the bank’s balance sheet:

financial asset - long-term bond with interest income;

financial asset - a loan to a client - a legal entity;

financial asset - loan to client - individual I;

financial asset - loan to client - individual II;

financial liability - a debt security with interest income.

The terms of these financial instruments are as follows:

Bond with a nominal value of 10,000 rubles. with interest income was acquired by the bank during the initial placement on 01/01/2009. for 11,000 rub. Interest income is set at 5%, receivable annually, in a lump sum. The circulation period is 5 years.

As of the reporting date 01/01/2011. The book value of the bond is RUB 11,000.

Loan to a legal entity in the amount of RUB 600,000. issued in the reporting period 05/01/2010. for a period of 2 years at 3% per annum with repayment of the principal debt and payment of interest for using the loan during the term of the agreement at intervals of once every four months. Payments to repay the principal debt amount to 100,000 rubles. Interest is calculated on the actual balance of the debt. The market rate for similar loans at the date of issue was 12% per annum.

As of the reporting date 01/01/2011. The balance of the borrower's debt on the loan is RUB 400,000.

Loan to individual I in the amount of RUB 18,000. issued on November 1, 2009 for a period of 3 years at the refinancing rate plus 2 percentage points. For this loan, the client paid a commission in the amount of 300 rubles. upon receipt. This amount is recognized by the bank in the relevant commission income accounts. As of the date the loan is issued, the refinancing rate is 12% per year. Repayment of the principal debt and payment of interest for using the loan is carried out once every two months. Payments to repay the principal debt amount to 1,000 rubles. Interest is calculated on the actual balance of the debt.

Loan to individual II in the amount of RUB 10,000. issued on 07/01/2009 for a period of 2 years at 2% per annum with repayment of the principal debt and payment of interest for using the loan during the term of the agreement at intervals of once every six months. Payments to repay the principal debt amount to 2,500 rubles. Interest is calculated on the actual balance of the debt. The market rate for similar loans at the date of issue was 10% per annum.

As of the reporting date 01/01/2011. The balance of the borrower's debt on the loan is RUB 2,500.

Debt security with a par value of RUB 1,000,000. with interest income, sold upon issue on 01/01/2010 for RUB 470,000. The security will be redeemed by the issuer after 10 years at a par value of RUB 1,000,000. Interest income is set at 3% per annum payable annually in a lump sum. Bank expenses associated with the issue of securities (transaction costs) in the amount of 20,000 rubles. recognized by the bank in the period of their occurrence in the corresponding expense accounts.

As of the reporting date of January 1, 2011, the book value of the security is RUB 1,000,000.

Table 1 - Initial data on financial instruments

No.	Indicators	Date of recognition	nominal cost	Discount/premium	Transaction costs	Duration (years)
	Financial assets
1.1	bond	01.01.2009	10 000	1 000	-
1.2	loan to a legal entity	01.05.2010	600 000	-	-
1.3	loan to individual I	01.11.2009	18 000	-					2,333
1.4	loan to individual II	01.07.2009	10 000	-	-
	Financial obligations
2.1		01.01.2010	1 000 000	-530 000	-20 000

1. Amortized cost and effective interest rate at the recognition date are determined as follows.

1.1. interest bearing bond:

Amortized cost is determined as the total value of cash flows upon recognition and amounts to 10,000 + 1,000 = 11,000 rubles;

The effective interest rate is determined by formula (2) by substituting the amortized cost value and calculating the interest rate, and is 2.827%;

1.2. loan to a legal entity:

The effective interest rate is equal to the prevailing rate of return on the market for similar financial instruments and is 12% per annum at the date of recognition;

Amortized (fair) cost is determined by discounting future cash flows in accordance with the contractual terms of this financial instrument at the market interest rate on the date of recognition and amounts to RUB 543,161. Recognition expenses at fair value are 600,000 - 543,161 = 56,839 rubles. and relate to the reporting period;

1.3. loan to individual I:

Amortized cost is determined as the total value of cash flows upon recognition and is: 18,000-300 = 17,700 rubles;

The effective interest rate is determined by formula (2) by substituting the amortized cost value and calculating the interest rate, and is 2.539%;

1.4. loan to individual II:

The effective interest rate is equal to the prevailing rate of return on the market for similar financial instruments and is 10% per annum at the date of recognition;

Amortized (fair) cost is determined by discounting future cash flows in accordance with the contractual terms of this financial instrument at the market interest rate on the date of recognition and amounts to RUB 9,092. Expenses from recognition at fair value are 10,000 - 9,092 = 908 rubles. and relate to the period preceding the reporting period;

1.5. interest bearing debt security:

Amortized cost at the date of recognition is determined as the total value of cash flows upon recognition and amounts to 470,000 - 20,000 = 450,000 rubles;

The effective interest rate is determined by formula (2) by substituting the amortized cost value and calculating the interest rate, and is 13.2288%.

We summarize the found values ​​in Table 2:

Table 2 – Effective interest rate on financial instruments

No.	Indicators	Duration (years)	Announced interest rate (annual)	Effective interest rate (annual)	Number of income payment periods	Announced interest rate (per period)	Effective interest rate (per period)
	Financial assets
1.2	bond			2,827			2,827
1.3	loan to a legal entity
1.4	loan to individual I			15,234		2,333	2,539
1.5	loan to individual II
	Financial obligations
2.1	interest-bearing debt security			13,228 8			13,2288

2. For each financial instrument, an amortization schedule is drawn up:

2.1. financial asset - bond with interest income:

Start of period (year)				Interest income at the effective interest rate (column 2 x 2.827%)		End of period (year)
01.01.09		-11 000
	11 000				-189	31.12.09	10 811
01.01.10	10 811				-194	31.12.10	10 617
01.01.11	10 617				-200	31.12.11	10 417
01.01.12	10 417				-205	31.12.12	10 211
01.01.13	10 211	10 000			-211	31.12.13
Total		-1 000	2 500	1 500	-1 000

2.2. financial asset - loan to a legal entity:

Start of period (4 months)	Amortized cost at the beginning of the period	Cash flows (principal)	Cash flows (income at stated interest rate)	Interest income at the effective (market) interest rate (column 2 x 4%)	Amortization of the difference between the value at the date of recognition and the amount at the maturity date (column 5 – column 4)	End of period (4 months)	Amortized cost at the end of the period (gr. 2 – gr. 3 + gr. 6)
01.05.2010		-600 000
	543 161	100 000	6 000	21 726	15 726	31.08.2010	458 887
01.09.2010	458 887	100 000	5 000	18 355	13 355	31.12.2010	372 242
01.01.2011	372 242	100 000	4 000	14 890	10 890	30.04.2011	283 132
01.05.2011	283 132	100 000	3 000	11 325	8 325	31.08.2011	191 457
01.09.2011	191 457	100 000	2 000	7 658	5 658	31.12.2011	97 115
01.01.2012	97 115	100 000	1 000	3 885	2 885	30.04.2012
Total			21 000	77 839	56 839

2.3. financial asset - loan to legal entity I:

Beginning of period (2 months)	Amortized cost at the beginning of the period	Cash flows (principal)	Cash flows (income at stated interest rate)	Interest income at the effective (market) interest rate (column 2 x 2.539%)	Amortization of the difference between the value at the date of recognition and the amount at the maturity date (column 5 – column 4)	End of period (2 months)	Amortized cost at the end of the period (gr. 2 – gr. 3 + gr. 6)
01.11.2009		-17 700
	17 700	1 000				31.12.2009	16 730
01.01.2010	16 730	1 000				28.02.2010	15 758
01.03.2010	15 758	1 000				30.04.2010	14 785
01.05.2010	14 785	1 000				30.06.2010	13 811
01.07.2010	13 811	1 000				31.08.2010	12 835
01.09.2010	12 835	1 000				30.10.2010	11 858
01.11.2010	11 858	1 000				31.12.2010	10 879
01.01.2011	10 879	1 000				28.02.2011	9 898
01.03.2011	9 898	1 000				30.04.2011	8 916
01.05.2011	8 916	1 000				30.06.2011	7 932
01.07.2011	7 932	1 000				31.08.2011	6 946
01.09.2011	6 946	1 000				30.10.2011	5 959
01.11.2011	5 959	1 000				31.12.2011	4 970
01.01.2012	4 970	1 000				29.02.2012	3 979
01.03.2012	3 979	1 000				30.04.2012	2 987
01.05.2012	2 987	1 000				30.06.2012	1 993
01.07.2012	1 993	1 000				31.08.2012
01.09.2012		1 000				30.10.2012
Total			3 990	4 290

2.4. financial asset - loan to individual II:

Start of period (6 months)	Amortized cost at the beginning of the period	Cash flows (principal)	Cash flows (income at stated interest rate)	Interest income at the effective (market) interest rate (column 2 x 5%)	Amortization of the difference between the value at the date of recognition and the amount at the maturity date (column 5 – column 4)	End of period (6 months)
01.07.2009		-10 000
	9 092	2 500				31.12.2009	6 947
01.01.2010	6 947	2 500				30.06.2010	4 719
01.07.2010	4 719	2 500				31.12.2010	2 405
01.01.2011	2 405	2 500				30.06.2011
Total				1 158

2.5. financial liability - a debt security with interest income:

Start of period (year)	Depreciation value at the beginning of the period	Cash flows (principal)	Cash flows (income at stated interest rate)	Interest expense at the effective interest rate (column 2x13.2288%)	Amortization of the difference between the value at the date of recognition and the amount at the maturity date (column 5 – column 4)	End of period (year)	Amortized cost at the end of the period (gr. 2 + + gr. 3 – gr. 6)
01.01.2010		450 000
	450 000		-30 000	-59 529	-29 529	31.12.2010	479 529
01.01.2011	479 529		-30 000	-63 436	-33 436	31.12.2011	512 965
01.01.2012	512 965		-30 000	-67 859	-37 859	31.12.2012	550 824
01.01.2013	550 824		-30 000	-72 867	-42 867	31.12.2013	593 692
01.01.2014	593 692		-30 000	-78 538	-48 538	31.12.2014	642 230
01.01.2015	642 230		-30 000	-84 959	-54 959	31.12.2015	697 189
01.01.2016	697 189		-30 000	-92 229	-62 229	31.12.2016	759 418
01.01.2017	759 418		-30 000	-100 462	-70 462	31.12.2017	829 880
01.01.2018	829 880		-30 000	-109 783	-79 783	31.12.2018	909 663
01.01.2019	909 663	-1 000 000	-30 000	-120 337	-90 337	31.12.2019
Total		-550 000	300 000	-850 000	-550 000

3. Data on all financial instruments as of the reporting date 01/01/2011 will be entered into general tables to calculate the amounts of adjustments to the balance sheet and profit and loss statement as follows:

Table 3 - Data for calculating balance adjustment amounts
No.	Indicators	Carrying amount at the reporting date	Amortized cost at the reporting date	Difference between depreciated and carrying amount at the reporting date
	Financial assets
1.2	bond	11 000	10 617	-383
1.3	loan to a legal entity	400 000	372 242	-27 758
1.4	loan to individual I	11 000	10 879	-121
1.5	loan to individual II	2 500	2 405	-95
	Financial obligations
2.1	interest-bearing debt security	1 000 000	479 529	-520 471

Table 4 - Data for calculating the amounts of adjustments to the profit and loss statement
No.	Indicators	Income/expenses at the declared interest rate	Income/expense at the effective interest rate	Difference between income/expenses at effective and declared interest rates
reporting year	Total	reporting year	Total	reporting year	Total
	Financial assets
1.1	bond		1 000			-194	-383
1.2	loan to a legal entity	11 000	11 000	40 081	40 081	29 081	29 081
1.3	loan to individual I	2 030	2 450	2 179	2 629
1.4	loan to individual II				1 038
	Total income	13 655	14 675	43 149	44 365	29 494	29 690
	Financial obligations
3.1	interest-bearing debt security	30 000	30 000	59 529	59 529	29 529	29 529
	Total expenses	30 000	30 000	59 529	59 529	29 529	29 529
	TOTAL	-16 345	-15 325	-16 380	-15 164	-35

4. When recognizing financial instruments, the following amounts were allocated to the relevant income and expense accounts for which adjustments should be made:

In this case, the amounts are 530,000 and 20,000 rubles. relate to the reporting period, and the amount is 300 rubles. - to the periods preceding the reporting period.

In addition, for some of the loans originated (because their terms are not at market) there is a difference between their amortized (fair) amount and their carrying amount at the date of recognition, at which adjustment must also be made.

We will determine the amount of adjustments based on the data as of the recognition date as follows:

In this case, the amount is 56,839 rubles. refers to the reporting period, and the amount is 908 rubles. - to the periods preceding the reporting period.

5. To prepare the reports as of 01/01/2011, the following adjustments to the financial statements are made using the available data (table of adjustments to the statements for 2010):

The balance sheet reflects the amortized cost of the financial instrument as of the reporting date, determined on the basis of data from amortization schedules or using formula (2). The adjustment is made for the difference between the book value and the amortized cost of the financial instrument as of the reporting date using the data in Table 3 (column 4 of the table of adjustments to the reporting for 2010);

The amounts of discount and transaction costs are excluded using the data in Table 5 (column 5 of the table of adjustments to reporting for 2010);

The difference between the fair (amortized) value of a financial instrument (loan issued on non-market terms) and its book value as of the date of recognition is recognized using the data in Table 6 (column 6 of the table of adjustments to the reporting for 2010);

For the difference between income (expenses) at the declared and effective interest rates, income (expenses) on these financial instruments are adjusted using the data in Table 4 (column 7 of the table of adjustments to reporting for 2010).

6. In the next reporting year, for reporting as of 01/01/2012 for these financial assets, the corrected data for 2011 will be included.

In 2011, the following actions took place.

For a loan to a legal entity, a special reserve was created to cover possible losses on assets exposed to credit risk (there was a fact of non-payment) (hereinafter referred to as the reserve). As of 01/01/2012, the actual debt on the loan is 200,000 rubles. The reserve was created in the amount of 50%, which is 100,000 rubles. The amortized cost as of the same date is RUB 191,457.

To determine the depreciable cost as of January 1, 2012, it is necessary to calculate the impairment loss. Cash flows (CF) for this financial asset, estimated taking into account expected losses, will amount to RUB 100,000. (200,000 x 50%). The number of remaining payment periods (n) according to the contractual terms of the financial asset is 1. Let us substitute the values ​​of DP, n and the effective interest rate for this financial asset determined upon its recognition (EPR = 4%) into the formula and determine the impairment loss. The amount of impairment loss will be RUB 96,154. Let's draw up a new depreciation schedule based on the amortized cost of the financial asset, taking into account the impairment loss and future cash flows for this financial asset (the new EIR value will be 4.9285%):

financial asset - a loan to a legal entity after the creation of a reserve:

Start of period (4 months)	Amortized cost at the beginning of the period	Cash flows	Interest income at nominal interest rate	Interest income at the effective (market) interest rate (column 2 x x 4.928 5%)	Amortization of the difference between the value at the date of recognition and the amount at the maturity date (column 5 – column 4)	End of period (4 months)	Impairment losses	Amortized cost at the end of the period (gr. 2 – gr. 3 + gr. 6 – gr. 8)
01.09.2011	191 457	-	-	-	-	31.12.2011	-96 154	95 303
01.01.2012	95 303	100 000	-	4 697	4 697	30.04.2012		-
Total

In addition, in 2011, the refinancing rate was reduced from 09/01/2011 by 2 percentage points and is 10% per annum. Since the loan to individual I provides for the payment of interest in the amount of the financing rate plus two percentage points, the amortization schedule for this loan changes. The new amortization schedule is drawn up based on the amortized cost of the loan on the date the interest rate changed, which amounted to RUB 6,947, and the expected payment streams calculated at the newly established announced interest rate (10% + 2% = 12% per annum, or 2% for the period ). In this case, the new EPS value will be 2.202% for the period. To make adjustments, we will draw up a new depreciation schedule in accordance with the available data:

financial asset - loan to individual I from the moment the refinancing rate changes:

Beginning of period (2 months)	Amortized cost at the beginning of the period	Cash flows (principal)	Cash flows (income at stated interest rate)	Interest income at the effective (market) interest rate (column 2 x x 2.202%)	Amortization of the difference between the value at the date of recognition and the amount at the maturity date (column 5 – column 4)	End of period (2 months)	Amortized cost at the end of the period (group 2 - group 3 + group 6)
01.09.2011	6 946	1 000				30.10.2011	5 959
01.11.2011	5 959	1 000				31.12.2011	4 970
01.01.2012	4 970	1 000				29.02.2012	3 979
01.03.2012	3 979	1 000				30.04.2012	2 987
01.05.2012	2 987	1 000				30.06.2012	1 993
01.07.2012	1 993	1 000				31.08.2012
01.09.2012		1 000				30.10.2012
Total

When reporting, the balance sheet reflects the amortized cost of the financial instrument at the reporting date as the amortized cost at the date of recognition, minus the amount of principal repayment, plus (minus) amortization of the difference between the amount at the recognition date and the amount at the maturity date and minus the impairment loss. The amortized cost of a financial instrument as of the reporting date (for example, 01/01/2012) is determined as its amortized cost as of the previous reporting date (for example, 01/01/2011) minus the amount of principal repayment in the reporting year plus (minus) amortization of the difference between the amount on the date of recognition and the amount on the maturity date related to the reporting year.

To bring the value of various assets to a “single denominator”, new concepts are introduced in the unified chart of accounts - effective interest rate (ERR) And amortized cost (AC) .

Effective interest rate (ESP) - a tool that allows you to compare the profitability of various assets with previously known cash flows. These primarily include loans, deposits and debt securities.

Risk issues will not be addressed in this article; We will consider all financial instruments risk-free.
The ESP of a financial instrument is determined so that the amount calculated using the formula is equal to zero:

Where: ESP - effective interest rate, in percent per annum; i - the serial number of the cash flow in the period between the date of determining the amortized cost using the ESP method until the maturity date of the financial instrument; d 0 - date of the first cash flow (for example, the purchase of a security or the provision of a loan); d i - date of the i-th cash flow; DP i - the amount of the i-th cash flow. In this case, cash flows can be both positive and negative. For example, DP 0 - the amount spent on the purchase of a security (in par currency) is always a negative cash flow.

When calculating the ESP, all commissions and fees paid and received by the parties under the agreement, which form an integral part in calculating the ESP, are taken into account.

In most cases, the ESP is determined when a loan is issued or when purchasing a package of debt securities and does not change until repayment. But in some cases, the ESP may change, for example, for a bond with a variable coupon.

Having determined the ESP, we can calculate Amortized cost asset (AS). Just as ESP allows you to compare the profitability of different assets, amortized cost allows you to compare their value at any point in time.
Amortized cost represents the sum of the expected discounted cash flows over the entire life of the asset and is determined by the formula:

Where: t - current date; k is the number of cash flows from the current date of determining amortized cost using the ESP method until the maturity date of the financial instrument; j is the serial number of the cash flow in the period between the date of determination of the amortized cost (t) using the ESP method until the maturity date of the financial instrument; DP j - the amount of cash flow not yet received with serial number j; d j -t - the number of days remaining until the j-th cash flow; ESP is the effective interest rate for a given financial asset, expressed as a percentage per annum.

It is important to note that, unlike ESP, amortized cost changes with each cash flow and only cash flows not yet received are taken into account to calculate it.

Thus, for loans and debt securities, we have a difference between interest income calculated in accordance with the ESP method and interest income accrued in accordance with the terms of the contract. That is, in fact, we have additional interest income (or expenses) that must be reflected in accounting.

To account for these additional income/expenses, the new chart of accounts provides a new concept - adjustment. Unfortunately, this term refers to various concepts that are interrelated.

Let's present them in the form of a general table:

Concept	Description
Adjustment amount	“The difference between interest income (expenses) calculated in accordance with the ESP method and interest income (expenses) accrued in accordance with the agreement”(according to the Methodological Recommendations of the Bank of Russia No. 59-T). “Interest income under the terms of issue”, in this case, it is the total income that will be received based on the terms of the debt security and the cost of its acquisition, divided by the time to maturity of the security.
Adjustment account (example for a debt security)	An account indicating how much the amortized cost of an AC security, calculated using ESP, differs from its value under the terms of the contract. Adjustment accounts reflect adjustment operations (or postings for adjustments). Adjustment accounts are divided into two types: adjustments that increase the value of an asset. For example, 50354 - “Adjustments that increase the cost of debt securities of credit institutions.” Balance on this adjustment account (more precisely, not on a second-order account, but on a twenty-digit account opened on a second-order account) shows that the amortized cost of a debt security issued by a credit institution and held to maturity under an ESP is higher than its contractual value. adjustments that reduce the value of an asset. For example, 50355 – “Adjustments that reduce the value of debt securities of credit institutions. The balance in this adjustment account indicates that the amortized cost of the debt security issued by the credit institution and held to maturity under the ESA is greater than its contractual value.
Adjustment operation (example for a debt security)	Wiring: If the interest income on the ESP is greater than the interest income under the terms of the issue: Dt adjustment account Kt 71005 Amount (= adjustment amount ) If the interest income on the ESP is less than the interest income under the terms of the issue: Dt 71006 Kt adjustment account Amount (= adjustment amount )

Adjustment accounts are opened for loans, debt securities and bills of exchange. For debt securities and bills of exchange, adjustment accounts are opened in various secondary accounts, depending on the category of the security and the type of issuer.

For example, on a first order account 503 “Debt securities held to maturity” 16 adjustment accounts have been opened, both increasing and decreasing the value of debt securities - from the second order account 50350 “Adjustments that increase the cost of debt securities of the Russian Federation” up to second order count 50367 “Adjustments that reduce the value of debt securities transferred without derecognition.”

Now let's move on to the most difficult question - how to calculate the adjustment amount and how the adjustment amounts are related to the balances in the adjustment accounts.

Let's look at the calculations of adjustments using the example of a debt security with the following parameters:
So, here is the calculation of the adjustment (if you are only interested in the final result, then see the final formulas below):

Adjustment account balance = BalanceCorr(di) = AC(di) – StPriobr - Accumulated interest income using the linear method = AC(di) - StPriobr – PKD(di) – Accumulated discount (di) =
Respectively,

OstChCorr(di-30)

Wherein:
Adjustment amount = Corr (d i) = interest income on ESP for the month – interest income using the linear method for the month = interest income on ESP for the month - accumulated PCD for the month – accumulated discount for the month =
Thus, we obtain a general rule linking the adjustment amount and the adjustment account balances (which is logical)
This means that the adjustment amount is always equal to the change in the balance on the adjustment account or, in other words, the movement in the adjustment account.
Substituting the above formula for calculating the adjustment amount into this expression, we obtain the formula for calculating the adjustment amount
It is this amount that is inserted into the adjustment entry Dt 50354 Kt71005.

In general the amount of the adjustment calculated at the reporting date is equal to:

• Amortized cost
• Minus acquisition cost
• Minus accumulated percentage coupon income
• Minus accumulated discount(or bonus)
• Minus opening balance On account adjustments that increase OstChCorrIncrease )
• Plus opening balance On account adjustments that reduce the value of the financial asset ( OstChCorrReduce )

In other words, the adjustment is calculated using the following formula:
Corr(d i ) = AC(d i ) – StPriobr - Discount(d i ) - Prize(d i ) - PKD(d i ) + OstChCorrIncrease(d i-1 ) - OstChCorrReduce(d i-1 )

This formula is convenient to use to calculate adjustments when using the ESP method to calculate amortized cost.

It is worth noting that at the time of purchasing a security, the balance in the adjustment account is zero. When the bond matures, the adjustment account balance also becomes zero, since the only expected cash flow is the redemption of the security, and d j -d i becomes zero.

It should also be noted that according to clause 3.14 of Regulation No. 494-P “...the originally calculated ESP...may be considered non-market if it falls outside the range of observed market rates.” In the case where the ESP calculated using the above formula is recognized as non-market, the amortized cost is calculated based on the market interest rate.

This results in an additional adjustment on the date the security was acquired. The adjustment reflects the income/expense resulting from the fact that the market interest rate is lower/higher, respectively, than calculated. The graph shows a simplified example of how amortized cost and the adjustment account balance can change:
Please note that the graph shows the dynamics of amortized cost (according to the ESP method) and the balance in the adjustment account for zero coupon bond (i.e., a bond originally placed by the issuer at a discount). For clarity, the graphs of AC and the balance on the adjustment account are shown as continuous, although in practice the calculation and reflection of adjustments occur only on specific dates (for example, on the last day of the month, on the coupon payment date, on the maturity date of the security).

We have considered a relatively simple case, but it already demonstrates that calculating ESP, amortized cost and adjustments is not an elementary task and requires special attention. Needless to say, an accounting system that meets the requirements of the new chart of accounts must perform all these calculations automatically, and not only upon user request, but also upon the occurrence of certain events.

In addition, the solution must provide an explanation of the formulas used in the calculation, that is, show how the ESP, amortized cost or amortized interest income for a particular security is calculated. These transcripts are useful both to specialists of the organization itself and to representatives of regulators.

In conclusion, we would like to add that the legislator, taking into account the complexity of calculations using the effective interest rate method, has provided in a number of cases the possibility of using the linear method of calculating interest income. In this case, of course, no adjustments are made.

PB Bulletin, October 2016

Amortized cost

The amortized cost of a financial asset or financial liability is the cost obtained by subtracting from the cost of the asset or liability at initial recognition any payments made (received), adjusted by the cumulative amortization of the difference between the amount initially recognized and the amount actually received (paid) for the financial instrument. as well as the amount of impairment losses recognized in respect of the specified instrument.

The difference is amortized using the effective interest rate. Accrued interest includes amortization of deferred transaction costs at initial recognition and premiums or discounts on redemptions using the effective interest method.

Accrued interest income and accrued interest expenses, including accrued coupon income and amortized discount and premium, are not shown separately, but are included in the carrying amount of the corresponding assets and liabilities.

For financial assets and financial liabilities with a floating rate, at the time a new coupon (interest) rate is established, cash flows and the effective rate are recalculated. The effective rate is recalculated based on current amortized cost and expected future payments. In this case, the current amortized cost of the financial instrument does not change, and further calculation of the amortized cost is carried out using the new effective rate.

The effective interest method is a method of calculating the amortized cost of a financial asset or financial liability and accruing interest income or interest expense over the relevant period of the life of the financial asset or liability.

The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument or, if appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. In calculating the effective interest rate, the Bank estimates cash flows taking into account all contractual terms of the financial instrument (for example, the possibility of early repayment), but does not take into account future credit losses.

This calculation includes all significant commissions and fees paid and received by the parties to the contract that form an integral part in the calculation of the effective interest rate, transaction costs, and all other premiums and discounts.

In this case, materiality should be understood as an assessment of the impact of such commissions and fees on the value of the effective interest rate. For these purposes, the Bank has established a materiality criterion of 10%.

When the repayment of loans originated is in doubt, their carrying amount is adjusted to their recoverable amount and interest income is subsequently recorded based on the interest rate that was used to discount future cash flows to determine the recoverable amount. It is assumed that the cash flows and settlement lives of a group of similar financial instruments can be estimated reliably. However, in those rare cases where it is not possible to estimate the cash flows or expected life of a financial instrument, the Bank uses the contractual cash flows over the entire contractual life of the financial instrument.

Basic Accounting Principles – These financial statements of the Bank have been prepared on an accrual basis.

Accounting is maintained by the Bank in accordance with Russian legislation. The accompanying financial statements, which have been prepared from accounting records maintained in accordance with Russian accounting rules, have been restated accordingly to comply with International Financial Reporting Standards (IFRS).

Reporting currency - The currency used in the preparation of these financial statements is the Russian Ruble, abbreviated as “RUB”.

Cash and cash equivalents. Cash and cash equivalents are items that are easily converted into a specific amount of cash and are subject to minor changes in value. Funds that have restrictions on their use at the time of provision are excluded from cash and cash equivalents. Cash and cash equivalents are stated at amortized cost. When preparing cash flow statements, the amount of required reserves deposited with the Central Bank of the Russian Federation was not included in cash equivalents due to existing restrictions on their use (see Comment 11).

Financial assets accounted for at fair value through profit or loss - The Bank classifies assets as at fair value through profit or loss if the assets:

1) are acquired or accepted primarily for the purpose of selling or repurchasing in the short term;

2) are part of a portfolio of identifiable financial instruments that are managed on an aggregate basis and in which recent transactions indicate actual profitability in the short term.

Derivatives that have a positive fair value are also designated as financial assets at fair value through profit or loss unless they are derivatives that are designated as an effective hedging instrument.

Initially and subsequently, financial assets carried at fair value through profit or loss are carried at fair value, which is calculated either based on quoted market prices or using various valuation techniques that assume that the financial assets can be sold in the future. Depending on the circumstances, different assessment techniques may be applicable. The availability of published price quotations from an active market is best used to determine the fair value of an instrument. In the absence of an active market, techniques are used that include information on recent market transactions between knowledgeable, willing parties in an arm's length manner, reference to the current fair value of another, substantially identical instrument, discounted cash flow analysis and pricing models. options. If there is a valuation technique that is widely used by market participants to determine the price of an instrument and has proven reliable estimates of price values ​​obtained as a result of actual market transactions, then such a technique is used.

Realized and unrealized gains and losses on financial assets at fair value through profit or loss are recognized in the income statement for the period in which they arise as gains less losses on financial assets at fair value through profit or loss. fair value through profit or loss. Interest income on financial assets at fair value through profit or loss is reflected in the income statement as income on financial assets at fair value through profit or loss. Dividends received are reflected in the line “Dividend income” in the income statement as part of operating income.

Purchases and sales of financial assets at fair value through profit or loss that are required to be delivered within the time limits specified by law or convention for that market (purchases and sales under “standard contracts”) are recorded at the trade date, which is the date when the Bank undertakes to buy or sell a given asset. In all other cases, such transactions are recorded as derivative financial instruments until settlement occurs.

The Bank classifies financial assets at fair value through profit or loss into the appropriate category at the time of their acquisition. Financial assets classified in this category may be reclassified only in the following cases:

(a) in very rare circumstances, it may be possible to reclassify financial assets from the fair value through profit or loss held for trading category to the held-to-maturity available-for-sale category if the asset is no longer held for the purpose of sale or repurchase in the near future; and (b) a reclassification may be made from financial assets at fair value through profit or loss held for trading to loans and receivables if the entity has the intent and ability to hold the financial asset for the foreseeable future to maturity.

Available-for-sale financial assets – This category includes non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments, financial assets at fair value through profit or loss . The Bank classifies financial assets into the appropriate category at the time of their acquisition.

Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset. In this case, as a rule, fair value is the transaction price for the acquisition of a financial asset. Subsequent measurement of available-for-sale financial assets is carried out at fair value based on quoted market prices. Certain available-for-sale investments that are not quoted from external independent sources are measured by the Bank at fair value, which is based on recent sales of similar equity securities to unrelated third parties and an analysis of other information such as discounted cash flows. and financial information about the investee, as well as the application of other valuation techniques. Depending on the circumstances, different assessment methods may be applied. Investments in equity instruments for which quoted market prices are not available are valued at cost.

Unrealized gains and losses arising from changes in the fair value of available-for-sale financial assets are recognized in equity. When available-for-sale financial assets are disposed of, the corresponding accumulated unrealized gains and losses are included in the income statement as gains less expenses from operations with available-for-sale financial assets. Impairments and reversals of previously impaired amounts of available-for-sale financial assets are recognized in the income statement.

The value of available-for-sale financial assets is reduced if their carrying amount exceeds their estimated recoverable amount. Recoverable amount is determined as the present value of expected cash flows, discounted at current market interest rates for a similar financial asset.

Interest income on financial assets available for sale is recognized in the income statement as interest income. Dividends received are recorded in the line “Dividend income” in the income statement as part of operating income.

Subject to standard settlement terms, purchases and sales of available-for-sale financial assets are recorded at the trade date, which is the date the Bank commits to buy or sell the asset. All other purchases and sales are recorded as forward transactions until the transaction is settled.

Loans and receivables - This category includes non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, except:

a) those for which there is an intention to sell immediately or in the near future and which should be classified as held for trading, measured on initial recognition at fair value through profit or loss;

b) those that are determined to be available for sale after initial recognition;

c) those for which the owner will not be able to cover the entire substantial amount of his initial investment for reasons other than a decline in creditworthiness and which should be classified as available for sale.

Initial recognition loans and receivables are carried at fair value plus transaction costs incurred (ie the fair value of consideration paid or received). When there is an active market, the fair value of loans and receivables is measured as the present value of all future cash receipts (payments) discounted at the prevailing market interest rate for a similar instrument. In the absence of an active market, the fair value of loans and receivables is determined by applying one of the valuation methods.

Loans and receivables are subsequently measured at amortized cost using the effective interest method. When deciding whether to discount an asset, the principles of materiality, moderation, comparability and prudence are also taken into account.

Loans and receivables are reflected from the moment funds are issued to borrowers (clients and credit institutions). Loans originated at interest rates other than market interest rates are measured at origination at fair value, which is future interest payments and principal amounts discounted at market interest rates for similar loans. The difference between the fair value and the nominal value of the loan is reflected in the income statement as income from assets placed at rates above market or as an expense from assets placed at rates below market. Subsequently, the carrying amount of these loans is adjusted to reflect the amortization of loan income (expense) and the related income is recognized in the income statement using the effective interest method.

The Bank avoids the occurrence of impairment losses upon initial recognition of loans and receivables.

Loans and receivables are impaired only if there is objective evidence of impairment as a result of events that occurred after the initial recognition of the asset and losses that affect the estimated future cash flows of the financial asset or group of financial assets can be reliably estimated. When assessing impairment, the quality of collateral provided for loans is taken into account.

The amount of the loss is determined as the difference between the carrying amount of the asset and the discounted value of estimated future cash flows calculated at the original effective interest rate for the financial asset. The carrying amount of loans and receivables is reduced through an allowance account for loan impairment.

Once objective evidence of impairment is determined on an individual basis, and to the extent that no such evidence exists, loans are included in a group of financial assets with similar credit risk characteristics to be assessed for evidence of impairment on a collective basis.

It should be taken into account that the assessment of possible loan losses involves a subjective factor. The Bank's management believes that the reserve for loan losses is sufficient to cover losses inherent in the loan portfolio, although it is possible that in certain periods the Bank may incur losses that are greater than the reserve for loan losses.

Loans that cannot be repaid are written off against the corresponding impairment reserve created on the balance sheet. Write-off is carried out only after completion of all necessary procedures and determination of the amount of loss. The recovery of previously written off amounts is reflected in the income statement for the loan in the line “Formation of provisions for loan impairment.” A decrease in the previously created reserve for impairment of the loan portfolio is reflected in the income statement for the loan in the line “Formation of reserves for loan impairment.”

Other credit obligations - In the normal course of business, the Bank enters into other credit commitments, including letters of credit and guarantees. The Bank records special reserves for other credit related obligations if there is a high probability of incurring losses on these obligations.

Bills purchased - Acquired promissory notes are classified depending on the purpose of their acquisition in the category of financial assets: financial assets measured at fair value through profit or loss, loans and receivables, financial assets available for sale, and are subsequently accounted for in accordance with the accounting policies presented in this note for these categories of assets.

Fixed assets Property, plant and equipment are stated at historical cost less accumulated depreciation and allowance for impairment. The historical cost for buildings available on the Bank's balance sheet at the time of the first application of IFRS (except for construction in progress and capital investments in leased facilities) is understood as the revalued value at the time of the first application of IFRS; for other fixed assets - the acquisition cost adjusted to the equivalent of the Russian purchase price ability of the ruble as of December 31, 2002. If the carrying amount of an asset exceeds its estimated recoverable amount, the asset's carrying amount is reduced to its recoverable amount and the difference is recognized in the income statement. The estimated recoverable amount is determined as the greater of the asset's net realizable amount and its value in use. In the latter case, the amount of the revaluation gain realized is the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on its original cost.

Construction in progress and capital investments in leased facilities are accounted for at historical cost, adjusted to the equivalent of the purchasing power of the currency of the Russian Federation as of December 31, 2002, for facilities in progress before December 31, 2002, less an allowance for impairment. Upon completion of construction, assets are transferred to the appropriate category of property, plant and equipment or investment property and are recorded at their carrying amount at the time of transfer. Construction in progress is not subject to depreciation until the asset is put into use.

Office and computer equipment are stated at acquisition cost, adjusted to the equivalent purchasing power of the Russian ruble as of December 31, 2002, less accumulated depreciation.

Gains and losses arising from the disposal of property, plant and equipment are determined on the basis of their carrying amount and are taken into account when calculating the amount of profit/(loss). Repair and maintenance costs are recognized in the income statement when incurred.

Depreciation - Depreciation is calculated using the straight-line method over the useful life of the assets using the following depreciation rates:

Buildings and constructions
Investment property
Computer technology
Office equipment
Motor transport

Depreciation is recognized even if the fair value of an asset exceeds its carrying amount, provided that the asset's residual value does not exceed its carrying amount. Repair and maintenance of an asset does not eliminate the need for depreciation.

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