X5 Retail Group. Годовой отчет за 2022 год (на английском)

Annual fees are as follows:

Ad (1) Base remuneration

Ad (3) Total remuneration

No other remuneration has been granted or allocated by subsidiaries or other companies
whose financials are consolidated by the Company to members of the Supervisory Board.

Under the remuneration policy for the Supervisory Board, the remuneration of
Supervisory Board members is composed of a fixed cash remuneration and an equity-
based reward. The equity-based reward is not subject to performance criteria and was
awarded in the form of restricted stock units that are converted into X5 global
depositary receipts (X5 GDRs) upon vesting. When the trading of X5 GDRs at the
London Stock Exchange was suspended in March, the Nomination and Remuneration
Committee initiated a restructuring of the Supervisory Board's equity-based
remuneration into a phantom stock plan comparable in terms and size of awards, based
on the GDR trading value on the Moscow Exchange. The necessary adjustment to the
remuneration policy for the Supervisory Board was submitted to, and approved by, the
Extraordinary General Meeting of Shareholders in November.

All other awards to Supervisory Board members were forfeited in accordance with the rules
of the Restricted Stock Unit Plan.

Under the new Phantom Stock Unit Plan, each remunerated Supervisory Board member is
entitled to an annual equity award in the form of phantom stock units (PSUs), for an award
value equal to his/her annual cash allowance.

Supervisory Board members Peter Demchenkov, Olga Vysotskaya, Fedor Ovchinnikov,
Dmitry Alekseev, and Vassilis Stavrou were each awarded a number of PSUs, calculated by
dividing 100% of their fixed cash remuneration in 2022 by the volume-weighted average
closing market price of one GDR over the thirty immediate calendar days preceding 19 May
2022, i.e. RUB 1,055.66. The PSUs awarded under tranche 1 will vest on 19 May 2025. Upon
vesting, the eligible Supervisory Board members are entitled to a cash pay-out based on the
market value of the awarded PSUs on the vesting date. The number of PSUs awarded and
outstanding to the members of the Supervisory Board is shown below.

Ad (2) Equity-based compensation

Role

Fee (EUR)

Supervisory Board Chair

250,000

Supervisory Board member

100,000

Additional allowance for:

Supervisory Board Vice Chair

50,000

Committee Chair

100,000

Committee member

16,000

For Peter Demchenkov, Chair of the Supervisory Board, the 2022 Extraordinary General
Meeting approved a transition scheme for restricted stock units awarded in 2019, 2020
and 2021; i.e. vesting of his 2019 RSU awards based on the X5 GDR value at the Moscow
Exchange on 22 September 2022.

At the same meeting, the accelerated vesting and cash settlement of restricted stock
units (RSUs) awarded in 2019, 2020 and 2021 to Stephan DuCharme, who stepped down
from the Supervisory Board on 1 March 2022, and Nadia Shouraboura, whose term in
office came to an end at the 2022 Annual General Meeting, was approved. The proposed
cash settlement was based on the X5 GDR value on the Moscow Exchange on
22 September 2022, the date the Supervisory Board resolved to terminate the restricted
stock plan.

Restricted Stock Unit Plan

RSUs outstanding

as at 31/12/2021

Accelerated

vesting

MOEX GDR value

on vesting date

in EUR

(22/09/2022)

Gross

settlement

amount

S. DuCharme

24,190

21.06

EUR 509,441.40

N. Shouraboura

16,171

13,571

21.06

EUR 285,805.26

Total

40,361

37,761

EUR 795,246.66

Tranche

PSUs awarded

in 2022

Year of vesting

PSUs outstanding

as at 31/12/2022

P. Demchenkov

23,095

2025

23,095

O. Vysotskaya

7,849

2025

7,849

F. Ovchinnikov

4,489

2025

4,489

D. Alekseev

1,746

2025

1,746

V. Stavrou

1,746

2025

1,746

Total

38,925

RSUs outstanding

as at 31/12/2021

Accelerated

vesting of

2019 awards

MOEX GDR value

on vesting date

in EUR

(22/09/2022)

Gross

settlement

amount

P. Demchenkov

32,189

8,941

21.06

EUR 188,297.46

1 MOEX value on vesting date in EUR is calculated as average GDR price

on the MOEX on 22 September (RUB 1,268.00) divided by respective
EUR exchange rate on 22 September, as set by the Central Bank of
Russia (RUB 60.211 per EUR 1).

2 The vesting of the 2020 (9,800 RSUs) and 2021 (13,448 RSUs) RSU

awards will remain in line with the vesting schedule under the restricted
stock plan, with the option to settle RSUs in cash upon vesting in 2023
and 2024, respectively, based on the X5 GDR value at the Moscow
Exchange or another exchange where X5 GDRs are primarily traded
at the time of vesting.

CORPORATE GOVERNANCE

REMUNERATION REPORT

146

Other policy information and contract terms

Other information

The annual remuneration for Management Board and
Supervisory Board members during 2022 amounted to
RUB 990 million (2021: RUB 640 million).

Total remuneration

No (personal) loans were granted to the members of
the Management Board or of the Supervisory Board,
and no guarantees or the like were granted in favour of
any of the members of the Management Board or of
the Supervisory Board. No severance payments were
granted to members of the Management Board or of
the Supervisory Board in 2022, and no variable
remuneration was clawed back.

Other arrangements

This Remuneration Report will be submitted to the
2023 Annual General Meeting of Shareholders for an
advisory vote.

Shareholder voting

Supervisory Board members beneﬁt from liability insurance

coverage and reimbursement of expenses. The Company
does not grant variable remuneration to Supervisory Board
members; they do not accrue any pension rights and are
not eligible for personal loans or guarantees.

Supervisory Board members do not receive any other

beneﬁts or entitlements and are not entitled to any
severance payment or beneﬁts upon termination of their

appointment. Supervisory Board members are appointed
and reappointed based on the provisions of the law and
the Company’s Articles of Association.

The table on the right reﬂects the total remuneration of
each member of the Supervisory Board in the ﬁve most
recent ﬁnancial years (in millions of Russian roubles).

The Supervisory Board

31 May 2023

1 Vadim Zingman, Leonid Afendikov, Mikhail Fridman, and Marat

Atnashev, in their role as representatives of CTF Holdings S.A.,
have waived any entitlement to Supervisory Board remuneration,
whether in cash or restricted stock units.

2 On 30 November 2022, the General Meeting of Shareholders

approved to substitute 75% of Igor Shekhterman’s termination
bonus for a contract extension bonus, whereby the remaining
part (25%) was allocated to Stephan DuCharme in recognition
of his contribution to the Company since 2008, both as member
and later Chairman of the Supervisory Board, and CEO from
2012 to 2015.

2018

2019

2020

2021

2022

Peter Demchenkov

Olga Vysotskaya (appointed on 30 June 2022)

–

Fedor Ovchinnikov (appointed on 30 June 2022,
stepped down on 8 March 2023)

–

Vadim Zingman (appointed on 30 June 2022)

–

Dmitry Alekseev (appointed on 30 November 2022)

–

Vassilis Stavrou (appointed on 30 November 2022)

–

Leonid Afendikov (appointed on 30 November 2022)

–

Geoff King (stepped down on 11 March 2022)

(26)

Michael Kuchment (stepped down on 25 March 2022)

(11)

Nadia Shouraboura (term expired in 2022)

Marat Atnashev (stepped down on 22 July 2022)

–

Alexander Tynkovan (stepped down on 25 May 2022)

–

Mikhail Fridman (stepped down on 1 March 2022)

–

Stephan DuCharme (stepped down on 1 March 2022)

112

Richard Brasher (stepped downon 4 March 2022)

–

(0)

Karl-Heinz Holland (stepped down on 12 May 2021)

–

Andrei Elinson (stepped down on 12 May 2020)

–

Alexander Torbakhov (stepped down on 3 July 2020)

–

Pawel Musial (stepped down on 22 June 2018)

–

Christian Couvreux (stepped down on 10 May 2018)

–

CORPORATE GOVERNANCE

REMUNERATION REPORT

147

150

FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

X5 Retail Group N.V.

Consolidated

Statement of

Financial Position

at 31 December 2022

expressed in millions of Russian Roubles, unless otherwise stated

Note

31 December 2022

31 December 2021

ASSETS

Non-current assets

Property, plant and
equipment

315,612

332,144

Right-of-use assets

508,543

502,325

Investment properties

4,573

4,461

Goodwill

112,929

105,028

Other intangible assets

38,327

39,006

Investments in associates
and joint ventures

−

Other non-current assets

4,164

4,209

Deferred tax assets

27,482

23,047

1,011,630

1,010,270

Current assets

Inventories

208,661

166,840

Indemnification asset

7, 35

6,391

435

Trade, other accounts
receivable and prepayments

21,382

20,190

Current income tax
receivable

1,622

4,057

VAT and other taxes
receivable

9,007

8,802

Short-term financial
investments

50,067

50,092

Cash and cash equivalents

43,255

26,062

340,385

276,478

Total assets

1,352,015

1,286,748

Igor

Shekhterman

CHIEF EXECUTIVE OFFICER

31 May 2023

Note

31 December 2022

31 December 2021

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent

Share capital

2,458

Share premium

46,127

Retained earnings

84,125

38,926

Other capital reserves

432

−

Share-based payment
reserve

−

118

133,142

87,629

Total equity

133,142

87,629

Non-current liabilities

Long-term borrowings

147,386

206,571

Long-term lease liabilities

519,317

507,099

Deferred tax liabilities

6,954

928

Other non-current liabilities

7, 28

6,206

1,670

679,863

716,268

Current liabilities

Trade accounts payable

238,641

212,949

Short-term borrowings

87,146

87,767

Interest accrued

1,143

1,792

Short-term lease liabilities

71,843

70,264

Short-term contract liabilities

3,767

2,392

Current income tax payable

6,020

3,014

Provisions and other
liabilities

130,450

104,673

539,010

482,851

Total liabilities

1,218,873

1,199,119

Total equity and liabilities

1,352,015

1,286,748

The financial statements are unaudited

151

FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

X5 Retail Group N.V.

Consolidated

Statement of

Profit or Loss

for the year ended 31 December 2022

expressed in millions of Russian Roubles, unless otherwise stated

Note

2022

2021

Revenue

2,605,232

2,204,819

Cost of sales

(1,970,036)

(1,643,502)

Gross profit

635,196

561,317

Selling, general and administrative expenses

(519,757)

(467,468)

Net impairment losses on financial assets

(346)

(154)

Lease/sublease and other income

23,025

23,877

Operating profit

138,118

117,572

Finance costs

(73,727)

(57,815)

Finance income

5,310

586

Net foreign exchange (loss)/gain

(2,032)

399

Profit before tax

67,669

60,742

Income tax expense

(22,481)

(18,004)

Profit for the year

45,188

42,738

Profit for the year attributable to:

Equity holders of the parent

45,199

42,738

Non-controlling interests

(11)

−

Basic earnings per share for profit attributable to the equity holders of the parent
(expressed in RUB per share)

665.78

629.55

Diluted earnings per share for profit attributable to the equity holders of the parent
(expressed in RUB per share)

665.78

629.54

Igor

Shekhterman

CHIEF EXECUTIVE OFFICER

31 May 2023

The financial statements are unaudited

153

FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

X5 Retail Group N.V.

Consolidated

Statement of

Cash Flows

for the year ended 31 December 2022

expressed in millions of Russian Roubles, unless otherwise stated

Note

2022

2021

Profit before tax

67,669

60,742

Adjustments for:

Depreciation, amortisation and impairment
of property, plant and equipment, right-of-use
assets, investment properties, other intangible
assets and goodwill

164,731

150,278

Gain on disposal of property plant and
equipment, investment properties and
intangible assets and gain on derecognition
of right-of-use assets

(2,276)

(3,345)

Finance costs, net

68,417

57,229

Net impairment losses on financial assets

346

154

Impairment of prepayments

412

221

Share-based compensation expense

Net foreign exchange loss/(gain)

2,032

(399)

Other non-cash items

(576)

559

Net cash from operating activities before

changes in working capital

300,768

265,528

Increase in trade, other accounts receivable
and prepayments and VAT and other taxes
receivable

(1,388)

(1,198)

Increase in inventories

(37,060)

(22,447)

Increase in trade payable

22,833

42,108

Increase in other accounts payable and
contract liabilities

21,539

13,952

Net cash flows from operations

306,692

297,943

Interest paid

(73,067)

(56,561)

Interest received

5,276

Income tax paid

(17,977)

(13,980)

Net cash flows from operating activities

220,924

227,462

Note

2022

2021

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment
and initial direct costs associated with right

(59,554)

(76,574)

Acquisition of businesses, net of cash acquired

(5,495)

(1,771)

Proceeds from disposal of property, plant
and equipment, investment properties and
intangible assets

3,192

4,392

Purchase of other intangible assets

(14,121)

(15,482)

Proceeds from short-term financial investments

30,000

−

Payments for financial investments

(30,000)

(50,000)

Net cash flows used in investing activities

(75,978)

(139,435)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from loans

148,974

132,345

Repayment of loans

(210,615)

(99,585)

Purchase of treasury shares

−

(34)

Payments of principal portion of lease liabilities

(66,014)

(64,610)

Dividends paid to equity holders of the parent

−

(50,006)

Net cash flows used in financing activities

(127,655)

(81,890)

Effect of exchange rate changes on cash
and cash equivalents

(98)

(83)

Net increase in cash and cash equivalents

17,193

6,054

MOVEMENTS IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at the beginning
of the year

26,062

20,008

Net increase in cash and cash equivalents

17,193

6,054

Cash and cash equivalents

at the end of the year

43,255

26,062

Igor

Shekhterman

CHIEF EXECUTIVE OFFICER

31 May 2023

The financial statements are unaudited

154

FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

X5 Retail Group N.V.

Consolidated

Statement of

Changes

In Equity

for the year ended 31 December 2022

expressed in millions of Russian Roubles, unless otherwise stated

Number of

capital

premium

Share-based

payment

reserve

Other

capital

reserves

Retained

earnings

Total share-

holders’

equity

Non-

controlling

interests

Total

Balance as at 1 January 2021

67,882,444

2,458

46,086

104

−

46,194

94,842

−

94,842

Profit for the period

−

42,738

−

42,738

Total comprehensive income for the period

−

42,738

−

42,738

Dividends (Note 22)

−

(50,006)

–

(50,006)

Share-based payment compensation
(Note 29)

−

Transfer and waiving of vested equity rights
(Note 29)

6,252

−

(75)

−

(34)

−

(34)

Balance as at 31 December 2021

67,888,696

2,458

46,127

118

−

38,926

87,629

−

87,629

Balance as at 1 January 2022

67,888,696

2,458

46,127

118

−

38,926

87,629

−

87,629

Profit for the period

−

45,199

(11)

45,188

Total comprehensive income for the period

−

45,199

(11)

45,188

Share-based payment compensation
(Note 29)

−

(3)

−

(3)

−

(3)

Transfer (Note 29)

−

(38)

−

Modification of share-based payments
(Note 29)

−

(77)

−

(77)

−

(77)

Acquisition of subsidiaries (Note 7)

−

2,609

Purchase commitments for non-controlling
interests’ shares (Note 7)

−

(2,204)

−

(2,204)

−

(2,204)

Impact of changes in non-controlling interests
with purchase commitments (Note 7)

−

2,598

–

2,598

(2,598)

−

Balance as at 31 December 2022

67,888,696

2,458

46,127

−

432

84,125

133,142

−

133,142

ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

Igor

Shekhterman

CHIEF EXECUTIVE OFFICER

31 May 2023

The financial statements are unaudited

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

(expressed in millions of Russian Roubles,
unless otherwise stated)

155

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Principal activities

and the Group

structure

These consolidated financial statements are for the
economic entity comprising X5 Retail Group N.V. (the
“Company”) and its subsidiaries, as set out in Note 6 (the
“Group”).

X5 Retail Group N.V. is a joint stock limited liability
company established in August 1975 under the laws of
the Netherlands. The principal activity of the Company
is to act as a holding company for a group of companies
that operate retail grocery stores. The Company’s address
and tax domicile is Zuidplein 196, 1077 XV Amsterdam, the
Netherlands.

The main activity of the Group is the development and
operation of grocery retail stores. As at 31 December 2022
the Group operated a retail chain of 21,323 proximity
stores, supermarket, hypermarket, hard discounter,
online hypermarket stores, dark kitchens, “Krasny
Yar” & “Slata” stores and joint dark stores under the brand
names “Pyaterochka”, “Perekrestok”, “Karusel”, “Chizhik”,
“Perekrestok Vprok”, “Mnogo Lososya”, “Krasny Yar” and
“Slata” (each representing separate format) in major
population centres in Russia, including but not limited to
Moscow, St. Petersburg, Nizhniy Novgorod, Rostov-on-Don,
Kazan, Samara, Lipetsk, Chelyabinsk, Perm, Ekaterinburg,
Krasnoyarsk, Irkutsk (31 December 2021: 19,121 proximity
stores, supermarket, hypermarket, hard discounter, online
hypermarket stores and dark kitchens under the brand
names “Pyaterochka”, “Perekrestok”, “Karusel”, “Chizhik”,
“Perekrestok Vprok” and “Mnogo Lososya”), with the
following number of stores:

As at 31 December 2022 and 31 December 2021 the
principal shareholder exerting significant influence over
the Company was CTF Holdings S.A. (“CTF”). As at 31
December 2022 and 31 December 2021 CTF directly owned
47.87% and 47.87% of total issued shares in the Company
respectively. CTF is not an ultimate controlling party for the
Group. As at 31 December 2022 and 31 December 2021 the
Company’s shares were listed on the London and Moscow
Stock Exchanges in the form of Global Depositary Receipts
(GDRs) with each GDR representing an interest of 0.25 in
an ordinary share (Note 22).

31 December 2022

31 December 2021

“Pyaterochka” −
Proximity store

19,164

17,972

“Perekrestok” −
Supermarket

971

990

“Krasny Yar” & “Slata”
stores

595

–

“Chizhik” – Hard
discounter

517

“Mnogo Lososya” –
Dark kitchen

“Karusel” − Hypermarket

Joint dark stores

–

“Perekrestok Vprok” –
Online hypermarket

Total stores

21,323

19,121

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

(expressed in millions of Russian Roubles,
unless otherwise stated)

156

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Summary of significant

accounting policies

The principal accounting policies applied in the preparation
of these consolidated financial statements are set out
below. These policies have been consistently applied to all
years presented, unless otherwise stated.

2.1

Basis of preparation

These consolidated financial statements for the year ended
31 December 2022 have been prepared in accordance
with and comply with International Financial Reporting
Standards (IFRS) as adopted by the European Union and
with Part 9 Book 2 of the Dutch Civil Code.

The consolidated financial statements have been
prepared under the historical cost convention, except for
financial assets and financial liabilities (including derivative
instruments) that have been measured at fair value. The
preparation of the consolidated financial statements in
conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management
to exercise its judgement in the process of applying
the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note
3. Management prepared these consolidated financial
statements on a going concern basis. In making this
judgment management considered the Group’s financial
position, current intentions, profitability of operations,
access to financial resources (Note 31) and the potential
impact of COVID 19 and the sanctions being imposed
against certain entities and individuals in Russia. On 31 May
2023, the Management Board authorised the consolidated
financial statements for issue. Publication is on 31 May
2023.

2.2

Basis of consolidation

Subsidiaries are those investees, including structured
entities, that the Group controls because the Group (i) has
power to direct relevant activities of the investees that
significantly affect their returns, (ii) has exposure, or rights,
to variable returns from its involvement with the investees,
and (iii) has the ability to use its power over the investees to
affect the amount of investor’s returns. The existence and
effect of substantive rights, including substantive potential
voting rights, are considered when assessing whether
the Group has power over another entity. For a right to
be substantive, the holder must have practical ability to
exercise that right when decisions about the direction of
the relevant activities of the investee need to be made.
The Group may have power over an investee even when it
holds less than majority of voting power in an investee. In
such a case, the Group assesses the size of its voting rights
relative to the size and dispersion of holdings of the other
vote holders to determine if it has de-facto power over the
investee. Protective rights of other investors, such as those
that relate to fundamental changes of investee’s activities
or apply only in exceptional circumstances, do not prevent
the Group from controlling an investee. Subsidiaries are
consolidated from the date on which control is transferred
to the Group (acquisition date) and are deconsolidated
from the date on which control ceases.

The acquisition method of accounting is used to account
for the acquisition of businesses other than those acquired
from parties under common control. The consideration
transferred is measured at the fair value of the assets
given up, equity instruments issued and liabilities incurred
or assumed at the date of exchange, including fair value
of assets or liabilities from contingent consideration
arrangements but excludes acquisition related costs
such as advisory, legal, valuation and similar professional
services. Transaction costs related to the acquisition and
incurred for issuing equity instruments are deducted
from equity; transaction costs incurred for issuing debt

as part of the business combination are deducted from
the carrying amount of the debt and all other transaction
costs associated with the acquisition are expensed. The
date of exchange is the acquisition date where a business
combination is achieved in a single transaction. However,
when a business combination is achieved in stages by
successive share purchases, the date of exchange is the
date of each exchange transaction; whereas the acquisition
date is the date on which acquirer obtains control of the
subsidiary.

Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
at their fair values at the acquisition date.

Goodwill is initially measured at cost (being the excess
of the aggregate of the consideration transferred and
the amount recognised for non-controlling interests and
any previous interest held over the net identifiable assets
acquired and liabilities assumed). If the fair value of the net
assets acquired is in excess of the aggregate consideration
transferred, the Group re-assesses whether it has correctly
identified all of the assets acquired and all of the liabilities
assumed and reviews the procedures used to measure
the amounts to be recognised at the acquisition date. If
the reassessment still results in an excess of the fair value
of net assets acquired over the aggregate consideration
transferred, then the gain is recognised in profit or loss.

Intercompany transactions, balances and unrealised
gains on transactions between group companies are
eliminated; unrealised losses are also eliminated unless
the cost cannot be recovered. The Company and all of its
subsidiaries use uniform accounting policies consistent
with the Group’s policies.

157

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

(expressed in millions of Russian Roubles,
unless otherwise stated)

monetary assets and liabilities into the functional currency
at period-end official exchange rates of the CBRF are
recognised in profit or loss. Translation at period-end rates
does not apply to non-monetary items.

2.4

Segment reporting

Operating segment is reported in a manner consistent
with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker has
been identified as the Management Board. The chief
operating decision-maker is responsible for allocating
resources and assessing performance of the operating
segments. The Group identifies retail chains of each
format and dark kitchens (Note 1) as separate operating
segments in accordance with the criteria set forth in IFRS
8. Reportable segments whose revenue, result or assets
are ten percent or more of all the segments are reported
separately.

2.5

Property, plant and equipment

Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment,
where required. Cost includes expenditure that is directly
attributable to the acquisition or construction of the item.

Costs of minor repairs and maintenance are expensed
when incurred. Costs of replacing major parts or
components of property, plant and equipment are
capitalised and the replaced parts are retired. Capitalised
costs are depreciated over the remaining useful life of the
property, plant and equipment or part’s estimated useful
life whichever is sooner.

2.2 Basis of consolidation (continued)

The Group recognises any non-controlling interest in the
acquired entity on an acquisition-by-acquisition basis
either at fair value or at the non-controlling interest’s
proportionate share of the acquired entity’s net identifiable
assets.

Pending specific guidance from IFRSs regarding
accounting for put options not giving present ownership
interest in the non-controlling share of subsidiaries the
Group accounts for such transactions as follows:

(a)

Determine the amount that would have been

recognised for the non-controlling interest (NCI), including
an update to reflect allocations of profit or loss, allocations
of changes in OCI and dividends declared for the reporting
period, as required by IFRS 10 Consolidated financial
statements.

(b)

Derecognise the NCI as if it was acquired at the

acquisition date or reporting date for the subsequent
periods.

(c)

Recognise a financial liability at the present value

of the amount payable on exercise of the NCI put in
accordance with IFRS 9 Financial Instruments with no
separate accounting for the unwinding of the discount due
to the passage of time.

(d)

The difference between (b) and (c) is accounted for as

an equity transaction within “Other reserves” in equity.

(e)

When the NCI put is exercised the amount recognised

as the financial liability at that date is extinguished by the
payment of the exercise price.

Purchases of subsidiaries from parties under common
control are accounted for using the pooling of interest
method (also referred as “the predecessor values method”).

Under this method the consolidated financial statements of
the combined entity are presented as if the businesses had
been combined from the beginning of the earliest period
presented or, if later, the date when the combining entities
were first brought under common control. The assets
and liabilities of the subsidiary transferred under common
control are at the predecessor entity’s carrying amounts.

The predecessor entity is considered to be the highest
reporting entity in which the subsidiary’s IFRS financial
information was consolidated. Related goodwill inherent
in the predecessor entity’s original acquisitions is also
recorded in these consolidated financial statements. Any
difference between the carrying amount of net assets,
including the predecessor entity’s goodwill, and the
consideration for the acquisition is accounted for in these
consolidated financial statements as an adjustment to
other reserve within equity.

2.3

Foreign currency translation

and transactions

(a)

Functional and presentation currency

The functional currency of the Group’s entities is the
national currency of the Russian Federation, the Russian
Rouble (“RUB”). The presentation currency of the Group is
the Russian Rouble (“RUB”), which management believes
is the most useful currency to adopt for users of these
consolidated financial statements.

(b)

Transactions and balances

Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at
the official exchange rate of the Central Bank of Russian
Federation (“CBRF”) at the respective reporting dates.
Foreign exchange gains and losses resulting from the
settlement of the transactions and from the translation of

Summary of significant

accounting policies

158

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

(expressed in millions of Russian Roubles,
unless otherwise stated)

2.5 Property, plant and equipment (continued)

Leasehold improvements are capitalised when it is
probable that future economic benefits associated with the
improvements will flow to the Group and the cost can be
measured reliably.

At each reporting date management assesses whether
there is any indication of impairment of property, plant and
equipment including construction in progress. If any such
indication exists, management estimates the recoverable
amount, which is determined as the higher of an asset’s
fair value less costs of disposal and its value in use. The
carrying amount is reduced to the recoverable amount
and the impairment loss is recognised in the consolidated
statement of profit or loss. An impairment loss recognised
for an asset in prior years is reversed if there has been
a favourable change in circumstances affecting estimates
used to determine the asset’s value in use or fair value less
costs of disposal.

Gains and losses on disposals determined by comparing
the proceeds with the carrying amount are recognised in
profit or loss.

Land and assets under construction are not depreciated.
Depreciation on other items of property, plant and
equipment is calculated using the straight-line method
to allocate their cost to their residual values over their
estimated useful lives. Buildings are divided into foundation
and frame with a depreciation period of 40–50 years and
other parts of 7–8 years. Other parts mainly include fixtures
and fitting.

The depreciation periods, which approximate the estimated
useful economic lives of the respective assets, are as
follows:

Useful lives

Buildings (foundation and frame)

40–50 years

Buildings (other parts)

7–8 years

Machinery and equipment

>1–10 years

Refrigerating equipment

7–10 years

Vehicles

4–7 years

Other

3–5 years

The residual value of an asset is the estimated amount
that the Group would currently obtain from the disposal of
the asset less the estimated costs of disposal, if the asset
were already of the age and in the condition expected at
the end of its useful life. The residual value of an asset is
nil if the Group expects to use the asset until the end of its
physical life. The assets’ residual values and useful lives are
reviewed, and adjusted prospectively if appropriate, at each
reporting date.

2.6

Investment properties

Investment properties consist of buildings held by the
Group to earn rental income or for capital appreciation, or
both, and which are not occupied by the Group. The Group
recognises the part of owned shopping centres that are
leased to third party retailers as investment properties,
unless they represent insignificant portions of the property
and are used primarily to provide auxiliary services to
retail customers not provided by the Group rather than
to earn rental income. After purchase or construction of
the building the Group assesses the main purpose of its
use and, if the main purpose is to earn rental income or for
capital appreciation, or both, the building is classified as
investment property.

Investment properties are stated at cost less accumulated
depreciation and provision for impairment, where required.
If any indication exists that investment properties may be
impaired, the Group estimates the recoverable amount
as the higher of value in use and fair value less costs of
disposal. Subsequent expenditure is capitalised only when
it is probable that future economic benefits associated
with it will flow to the Group and the cost can be measured
reliably. All other repairs and maintenance costs are
expensed when incurred.

Transfers are made to (or from) investment properties
only when there is a change in use. Transfers between
investment property and owner occupied property do not
change the carrying amount of the property transferred
and they do not change the cost of that property for
measurement or disclosure purposes. Depreciation on
items of investment properties is calculated using the
straight-line method to allocate their cost to their residual
values over their estimated useful lives. The depreciation
periods, which approximate the estimated useful economic
lives of the respective assets, are 40–50 years.

Investment properties are derecognised either when
they have been disposed of (i.e., at the date the recipient
obtains control) or when they are permanently withdrawn
from use and no future economic benefit is expected
from their disposal. The difference between the net
disposal proceeds and the carrying amount of the asset is
recognised in profit or loss in the period of derecognition.
The amount of consideration to be included in the gain or
loss arising from the derecognition of investment property
is determined in accordance with the requirements for
determining the transaction price in IFRS 15.

Fair value determined for the disclosure purposes (Note 12)
represents the price that would be received to sell an asset
in an orderly transaction between market participants at
the measurement date. The measurement is classified in
level 3 of the fair value hierarchy.

Summary of significant

accounting policies

159

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

(expressed in millions of Russian Roubles,
unless otherwise stated)

2.7

Intangible assets

(a)

Goodwill

Goodwill is carried at cost less accumulated impairment
losses. Goodwill represents the excess of the consideration
transferred for the acquiree, the amount of non-controlling
interest in the acquiree and fair value of an interest in the
acquiree held immediately before the acquisition date over
the fair value of the net assets of the acquired subsidiary
at the date of exchange. Goodwill is not deductible for tax
purposes.

The Group tests goodwill for impairment at least annually
and whenever there are indications that goodwill may be
impaired. Goodwill is tested on the operating segment level.

(b)

Brand and private labels

Brand and private labels acquired in a business
combination are recognised initially at fair value. Private
labels are amortised using the straight-line method over
their useful lives. The useful life of “Pyaterochka” brand is
estimated to be indefinite-lived as there is no foreseeable
limit to the period over which the brand is expected to
generate net cash inflows for the Group. In 2021 and 2022
the Group revised the useful live of brand “Karusel” in
view of continuing operating segment reorganisation and
determined that the remaining useful life of 5 years and
3 months as of 31 December 2021 and 31 December 2022,
respectively, fairly reflects the period over which the Group
expects net cash inflows from the asset.

Useful lives

Brands “Krasny Yar”, “Baton”,
“Slata”, “KhlebSol”

3 years

Private labels

1–8 years

Summary of significant

accounting policies

(c)

Software and other intangible assets

Expenditure on acquired patents, licenses and software
development is capitalised and amortised using the
straight-line method over their useful lives ranging from 1 to
10 years (5 on average).

Research costs related to software development are
expensed as incurred. Software development expenditures
on an individual project are recognised as an intangible
asset when the following criteria are met:

•

It is technically feasible to complete the intangible asset
so that the asset will be available for use or sale;

•

The Group intends to complete the asset and use or sell
it;

•

There is an ability to use or sell the asset;

•

It can be demonstrated how the asset will generate
probable future economic benefits;

•

Adequate technical, financial and other resources to
complete the development and to use or sell the asset
are available;

•

The expenditure attributable to the asset during its
development can be reliably measured.

Following initial recognition of the development
expenditure as an asset, the asset is carried at cost
less any accumulated amortisation and accumulated
impairment losses. Amortisation of the asset begins when
development is complete and the asset is ready for use.

(d)

Impairment of intangible assets

Where an indication of impairment exists, the recoverable
amount of any intangible asset, including goodwill, is
assessed and, when impaired, the asset is written down
immediately to its recoverable amount. Goodwill and

intangible assets not yet available for use are tested for
impairment at least annually and whenever impairment
indicators exist.

2.8

Leases

The Group assesses at contract inception whether
a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset
for a period of time in exchange for consideration.

GROUP AS A LESSEE

Right-of-use assets

The Group recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised,
initial direct costs incurred and lease payments made at or
before the commencement date less any lease incentives
received. Unless the Group is reasonably certain to obtain
ownership of the leased asset at the end of the lease term,
the recognised right-of-use assets are depreciated on
a straight-line basis over the shorter of its estimated useful
life and the lease term. The Group’s right-of-use assets
comprise leased land and buildings with depreciation
periods mostly ranging from 5 to 45 years.

Right-of-use assets obtained as part of acquisition of
business are recognised at an amount equal to the lease
liabilities and lease payments made at or before the
acquisition date and adjusted to reflect the favourable
terms of the lease relative to market terms.

160

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

(expressed in millions of Russian Roubles,
unless otherwise stated)

Summary of significant

accounting policies

2.8 Leases

(continued)

Where an indication of impairment exists, the recoverable
amount of any right-of-use assets is assessed and, when
impaired, the asset is written down to its recoverable
amount (Note 3).

Lease liabilities

At the commencement date of the lease, the Group
recognises lease liabilities measured at the present value
of lease payments to be made over the lease term. The
lease payments include fixed payments (including in-
substance fixed payments) less any lease incentives
receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under
residual value guarantees. The lease payments also include
the exercise price of a purchase option reasonably certain
to be exercised by the Group and payments of penalties
for terminating a lease, if the lease term reflects the Group
exercising the option to terminate. The variable lease
payments that do not depend on an index or a rate are
recognised as expense in the period on which the event or
condition that triggers the payment occurs.

Lease liabilities obtained as part of acquisition of business
are recognised at the present value of the remaining lease
payments at the date of acquisition.

In calculating the present value of lease payments, the
Group uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease
is not readily determinable. After the commencement date,
the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease payments
made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease
term, a change in the in-substance fixed lease payments
or a change in the assessment to purchase the underlying
asset.

In the consolidated financial statement of cash flows
payments of principal portion of lease liabilities are
recognised as cash outflows related to financing activities,
payments of interest portion of the lease liabilities are
recognised within operating cash flows.

Sale and leaseback

When the Group sells an asset and immediately reacquires
the use of the asset by entering into a lease with the
buyer, such an operation is treated as sale and leaseback
transaction. a sale occurs when control of the underlying
asset passes to the buyer. a lease liability is recognised, the
associated non-current asset is derecognised, and a right-
of-use asset is recognised at the proportion of the carrying
value relating to the rights retained. Any gain or loss arising
relates to the rights transferred to the buyer.

Short-term leases

The Group applies the short-term lease recognition
exemption to its short-term leases of assets other than
land and buildings (i.e., those leases that have a lease term
of 12 months or less from the commencement date and do
not contain a purchase option). Lease payments on short-
term leases are recognised as expense on a straight-line
basis over the lease term.

GROUP AS A LESSOR

Leases in which the Group does not transfer substantially
all the risks and rewards incidental to ownership of an asset
are classified as operating leases. Rental income arising is
accounted for on a straight-line basis over the lease terms
and is included in Lease/sublease and other income in the
consolidated statement of profit or loss. Initial direct costs
incurred in negotiating and arranging an operating lease
are added to the carrying amount of the leased asset and
recognised over the lease term on the same basis as rental
income. Contingent rent is recognised as income in the
period in which it is earned.

2.9

Inventories

Inventories at distribution centres and retail outlets
are stated at the lower of cost and net realisable value.
Cost comprises direct costs of goods, transportation
and handling costs. Cost is determined by the weighted
average method. Net realisable value is the estimated
selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs
necessary to make the sale.

The Group provides for estimated inventory losses
(shrinkage) between physical inventory counts on the basis
of a percentage of cost of sales. The provision is adjusted
to actual shrinkage based on regular inventory counts. The
provision is recorded as a component of cost of sales. The
Group also provides for aged stock provision where the net
realisable value is below cost.

2.10

Financial instruments

A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.

(a)

Financial assets

Initial recognition and measurement

The Group classifies its financial assets as those to be
measured subsequently at amortised cost, fair value
through other comprehensive income or fair value through
profit and loss. The classification depends on the financial
asset’s contractual cash flow characteristics and the
business model for managing the financial assets.

161

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

(expressed in millions of Russian Roubles,
unless otherwise stated)

Summary of significant

accounting policies

2.10 Financial instruments (continued)

With the exception of trade receivables that do not contain
a significant financing component or for which the Group
has applied the practical expedient, the Group initially
measures a financial asset at its fair value plus, in the case
of a financial asset not at fair value through profit or loss,
transaction costs. Trade receivables that do not contain
a significant financing component or for which the Group
has applied the practical expedient are measured at the
transaction price determined under IFRS 15. Refer to the
accounting policies in section 2.24 (a) Revenue from
contracts with customers.

Management determines the classification of its financial
assets at initial recognition and re-evaluates this
designation at every reporting date, if required under IFRS.
In order for a financial asset to be classified and measured
at amortised cost or fair value through OCI, it needs to give
rise to cash flows that are ‘solely payments of principal and
interest (SPPI)’ on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed
at an instrument level.

The Group’s business model for managing financial assets
refers to how it manages its financial assets in order to
generate cash flows. The business model determines
whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both. Purchases
or sales of financial assets that require delivery of assets
within a time frame established by regulation or convention
in the market place (regular way trades) are recognised
on the trade date, i.e., the date that the Group commits to
purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets
are classified in four categories:

•

Financial assets at amortised cost (debt instruments);

•

Financial assets at fair value through OCI with recycling
of cumulative gains and losses (debt instruments);

•

Financial assets designated at fair value through
OCI with no recycling of cumulative gains and losses
upon derecognition (equity instruments);

•

Financial assets at fair value through profit or loss.

Financial assets at amortised cost (debt instruments) is the
most relevant to the Group. The Group measures financial
assets at amortised cost if both of the following conditions
are met:

•

The financial asset is held within a business model with
the objective to hold financial assets in order to collect
contractual cash flows; and

•

The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments
of principal and interest on the principal amount
outstanding.

Financial assets at amortised cost are subsequently
measured using the effective interest (EIR) method and are
subject to impairment. Gains and losses are recognised in
profit or loss when the asset is derecognised, modified or
impaired.

Derec

ognition

A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
primarily derecognised (i.e., removed from the Group’s
consolidated statement of financial position) when:

•

The rights to receive cash flows from the asset have
expired; or

•

The Group has transferred its rights to receive cash
flows from the asset or has assumed an obligation to

pay the received cash flows in full without material delay
to a third party under a ‘pass-through’ arrangement;
and either (a) the Group has transferred substantially all
the risks and rewards of the asset, or (b) the Group has
neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of
the asset.

When the Group has transferred its rights to receive cash
flows from an asset or has entered into a pass-through
arrangement, it evaluates if, and to what extent, it has
retained the risks and rewards of ownership. When it has
neither transferred nor retained substantially all of the risks
and rewards of the asset, nor transferred control of the
asset, the Group continues to recognise the transferred
asset to the extent of its continuing involvement. In that
case, the Group also recognises an associated liability. The
transferred asset and the associated liability are measured
on a basis that reflects the rights and obligations that the
Group has retained.

Continuing involvement that takes the form of a guarantee
over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum
amount of consideration that the Group could be required
to repay.

Impairment of financial

assets

The Group recognises an allowance for expected credit
losses (ECLs) for all debt instruments not held at fair value
through profit or loss. ECLs are based on the difference
between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects
to receive, discounted at an approximation of the original
effective interest rate. The expected cash flows will include
cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.

X5 Retail Group. Годовой отчет за 2022 год (на английском) - часть 10