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

162

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)

ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses
that result from default events that are possible within
the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase
in credit risk since initial recognition, a loss allowance is
required for credit losses expected over the remaining life
of the exposure, irrespective of the timing of the default
(a lifetime ECL).

For trade and other receivables the Group applies
a simplified approach in calculating ECLs. Therefore, the
Group does not track changes in credit risk, but instead
recognises a loss allowance based on lifetime ECLs at
each reporting date. The Group has established a provision
matrix that is based on its historical credit loss experience,
adjusted for forward-looking factors specific to the debtors
and the economic environment.

(b)

Financial liabilities

Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net
of directly attributable transaction costs.

The Group’s financial liabilities include trade and other
payables, loans and borrowings. For more information refer
to Note 2.11 and Note 2.12.

Derecognition

A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified,
such an exchange or modification is treated as the
derecognition of the original liability and the recognition
of a new liability. The difference in the respective carrying
amounts is recognised in the statement of profit or loss.

2.11

Borrowings

Borrowings are initially recognised at their fair value, net
of transaction costs, and are subsequently stated at
amortised cost; any difference between the proceeds
(net of transaction costs) and the redemption value is
recognised in the consolidated statement of profit or
loss over the period of the borrowings using the effective
interest method. Borrowings are classified as current
liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after
the reporting date. Borrowing costs directly attributable to
the acquisition, construction or production of assets that
necessarily take a substantial period of time to get ready
for intended use or sale (qualifying assets) are capitalised
as part of the costs of those assets.

The commencement date for capitalisation is when (a) the
Group incurs expenditures for the qualifying asset; (b) it
incurs borrowing costs; and (c) it undertakes activities that
are necessary to prepare the asset for its intended use or
sale.

Capitalisation of borrowing costs continues up to the date
when the assets are substantially ready for their use or sale.

The Group capitalises borrowing costs that could have
been avoided if it had not made capital expenditure

on qualifying assets. Borrowing costs capitalised
are calculated at the Group’s average funding cost
(the weighted average interest cost is applied to the
expenditures on the qualifying assets), except to the extent
that funds are borrowed specifically for the purpose of
obtaining a qualifying asset. Where this occurs, actual
borrowing costs incurred less any investment income
on the temporary investment of those borrowings are
capitalised.

After initial recognition, interest-bearing borrowings
are subsequently measured at amortised cost using
the effective interest (“EIR”) method. Gains and losses
are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation
process.

Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is
included as finance costs in the consolidated statement of
profit or loss.

2.12

Trade and other payables

Trade and other payables are accrued when the
counterparty performs its obligation under the contract
and are carried at amortised cost using the effective
interest method. Trade payables are recognised initially at
fair value and measured subsequently at amortised cost.

2.13

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits
held at call with banks, and other short-term highly
liquid investments used for meeting short term cash
commitments.

163

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

2.14

Provisions

Provisions are recognised when the Group has a present
legal or constructive obligation as a result of past events,
it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation,
and a reliable estimate of the amount of the obligation can
be made. Provisions are measured as the best estimate of
the expenditure required to settle the present obligation at
the reporting date.

2.15

Value added tax

Output VAT related to sales is payable to tax authorities
on the earliest of (a) collection of the receivables from
customers or (b) delivery of the goods or services to
customers. Input VAT is generally recoverable against
output VAT upon receipt of the VAT invoice and fulfilment
of other conditions in compliance with Russian tax
legislation.

The tax authorities permit the settlement of VAT on a net
basis. VAT related to sales and purchases is recognised in
the consolidated statement of financial position on a gross
basis and disclosed separately as an asset and liability,
except for VAT, presented within other non-current assets.
Where a provision has been made for the impairment of
receivables, the impairment loss is recorded for the gross
amount of the debtor, including VAT.

2.16

Employee benefits

Wages, salaries, bonuses, paid annual leave and sick leave
are accrued in the period in which the associated services
are rendered by the employees of the Group. The Group’s
entities contribute to the Russian Federation’s state

pension and social insurance funds in respect of their
employees. These contributions are accrued when incurred.
The Group’s commitment ends with the payment of these
contributions.

2.17

Share-based payments

Stock unit plan

The Group receives services from Supervisory Board
members as consideration for conditional rights to receive
the value of the GDRs in cash after vesting period of 3
years and fulfilment of service conditions. Share-based
payment transactions under the stock unit plan are
accounted for as cash-settled transactions.

The fair value of the services received in exchange for the
grant of the conditional rights is recognised as an expense
over the vesting period with the corresponding increase
in short term liabilities (Provisions and other liabilities)
and in long term liabilities (Other non-current liabilities)
and measured by reference to the market price of the
GDRs which is determined at grant date. The liabilities are
remeasured at each reporting date and at settlement date
so that the ultimate liabilities equal to the cash payment on
settlement date.

Service conditions are not taken into account when
determining the grant date fair value of awards, but the
likelihood of the conditions being met is assessed as
part of the Group’s best estimate of the number of equity
instruments that will ultimately vest. Market performance
conditions are reflected within the grant date fair value.
Any other conditions attached to an award, but without an
associated service requirement, are considered to be non-
vesting conditions. Non-vesting conditions are reflected

in the fair value of an award and lead to an immediate
expensing of an award. No expense is recognised for
awards that do not ultimately vest because service
conditions have not been met.

The cumulative expense recognised for cash-settled
transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired
and the Group’s best estimate of the number of equity
instruments that will ultimately vest. The expense or credit
in the statement of profit or loss for a period represents
the movement in cumulative expense recognised as at the
beginning and end of that period.

2.18

Share capital

Ordinary shares are classified as equity. External costs
directly attributable to the issue of new shares are shown
as a deduction in equity from the proceeds. Any excess of
the fair value of consideration received over the par value
of shares issued is recognised as share premium.

2.19

Dividends

Dividends are recognised as a liability and deducted from
equity at the reporting date only if they are declared on or
before the reporting date. Dividends are disclosed when
they are proposed before the reporting date or proposed
or declared after the reporting date but before the
consolidated financial statements are authorised for issue.

164

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

2.20

Treasury shares

Where any group company purchases the Company’s
equity share capital, the paid consideration, including any
directly attributable incremental costs (net of income taxes)
is deducted from equity attributable to the Company’s
equity holders until the shares are cancelled, reissued or
disposed of. Where such shares are subsequently sold or
reissued, any received consideration, net of any directly
attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the
Company’s equity holders.

2.21

Earnings per share

Earnings per share are determined by dividing the profit
or loss attributable to equity holders of the Company by
the weighted average number of participating shares
outstanding during the reporting period. Diluted earnings
per share are calculated by adjusting the earnings and the
number of shares for the effects of dilutive options.

2.22

Taxes

Current tax is the amount expected to be paid to, or
recovered from, the state budget in respect of taxable
profits or losses for the current and prior periods. Taxable
profits or losses are based on estimates if consolidated
financial statements are authorised prior to filing relevant
tax returns. Taxes other than on income are recorded within
operating expenses.

Current income tax liabilities (assets) are measured in
accordance with IAS 12 Income Taxes and IFRIC 23
Uncertainty over Income Tax Treatments, based on
legislation that is enacted or substantively enacted at the
reporting date, taking into consideration applicable tax
rates and tax exemptions.

Deferred income tax is provided using the reporting
liability method for temporary differences arising between
the tax bases of assets and liabilities and their carrying
values for financial reporting purposes. A deferred tax
asset is recorded only to the extent that it is probable that
taxable profit will be available against which the deductible
temporary differences can be utilised. In accordance with
the initial recognition exception, deferred tax liabilities
are not recorded for temporary differences on initial
recognition of goodwill and subsequently for goodwill
which is not deductible for tax purposes. Deferred tax
assets and liabilities are measured at tax rates that are
expected to apply to the period in which the asset is
realised or the liability is settled, based on tax rates which
are enacted or substantially enacted at the reporting date.

Deferred income tax assets and liabilities are offset when
there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred
income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is
an intention to settle the balances on a net basis. Deferred
tax assets and liabilities are netted within the consolidated
group of taxpayers (CGT) and within individual companies
of the Group for the entities that are not members of the
CGT.

The Group considers whether it is probable that a taxation
authority will accept an uncertain tax treatment. If the
Group concludes it is probable that the taxation authority
will accept an uncertain tax treatment, the Group
determines the taxable profit (tax loss), tax bases, unused
tax losses, unused tax credits or tax rates consistently with
the tax treatment used or planned to be used in its income
tax filings.

If the Group concludes it is not probable that the taxation
authority will accept an uncertain tax treatment, the Group
reflects the effect of uncertainty in determining the related
taxable profit (tax loss), tax bases, unused tax losses,
unused tax credits or tax rates. The Group reflects the
effect of uncertainty for each uncertain tax treatment by
using either of the following methods, depending on which
method the entity expects to better predict the resolution
of the uncertainty: the most likely amount or the expected
value.

If an uncertain tax treatment affects current tax and
deferred tax (for example, if it affects both taxable profit
used to determine current tax and tax bases used to
determine deferred tax), the Group makes consistent
judgements and estimates for both current tax and
deferred tax.

The Group’s uncertain tax positions are reassessed by
management at the end of each reporting period. The
assessment is based on the interpretation of tax laws that
have been enacted or substantively enacted by the end of
the reporting period, any known court or other rulings on
such issues, and relevance and effect of a change in facts
and circumstances or of new information in the context
of applicable tax laws. Liabilities for penalties, interest and
taxes other than on income are recognised based on
management’s best estimate of the expenditure required
to settle the obligations at the end of the reporting
period. Adjustments for uncertain income tax positions
are recorded within the income tax charge and included
in current income tax payable line of the consolidated
statement of financial position. Interest incurred in relation
to taxation is included in finance costs in the consolidated
statement of profit or loss. Provisions are maintained,
and updated if necessary, for the period over which the
respective tax positions remain subject to review by the
tax and customs authorities, being 3 years from the year of
filing.

165

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)

2.23

Fair value measurement

Fair values of financial instruments measured at amortised
cost are disclosed in Note 34.

Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability
takes place either:

•

In the principal market for the asset or liability; or

•

In the absence of a principal market, in the most
advantageous market for the asset or liability.

The principal or the most advantageous market must be
accessible by the Group.

The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into
account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the
asset in its highest and best use.

The Group uses valuation techniques that are appropriate
in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of
unobservable inputs.

All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based

on the lowest level input that is significant to the fair value
measurement as a whole:

•

Level 1 − quoted (unadjusted) market prices in active
markets for identical assets or liabilities;

•

Level 2 − valuation techniques for which the lowest level
input that is significant to the fair value measurement is
directly or indirectly observable;

•

Level 3 − valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.

For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines
whether transfers have occurred between Levels in
the hierarchy by re-assessing categorisation (based on
the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting
period.

2.24

Income and expense recognition

Income and expenses are recognised on an accrual basis
as earned or incurred. Recognition of the principal types of
income and expenses is as follows:

(a)

Revenue from contracts with customers

The Group is in the retail business and sells its goods
both through stores operated by the Group and through
franchisees (agents) acting as a principal. The revenue
recognised by the Group meets the definition of revenue
from contracts with customers as per IFRS 15. The Group
recognises revenue when control of goods and services
is transferred to the customer, generally for the retail
customers it is occurred in the stores at the point of sale.
Payment of the transaction price is due immediately when
the customer purchases goods.

The Group has loyalty points programmes, which allow
customers to accumulate points that can be redeemed
for free products. The loyalty points give rise to a separate
performance obligation as they provide a material right
to the customer. a portion of the transaction price is
allocated to the loyalty points awarded to customers based
on relative stand-alone selling price and recognised as
a contract liability until the points are redeemed. Revenue is
recognised upon redemption of products by the customer.

When estimating the stand-alone selling price of the
loyalty points, the Group considers the likelihood that the
customer will redeem the points. The Group updates its
estimates of the points that will be redeemed on a monthly
basis and any adjustments to the contract liability balance
are charged against revenue.

(b)

Cost of sales

Cost of sales includes the purchase price of the products
sold and other costs incurred in bringing the inventories
to the location and condition ready for sale, i.e. retail
outlets. These costs include costs of purchasing, storing,
rent, salaries and transporting the products to the extent
it relates to bringing the inventories to the location and
condition ready for sale.

The Group receives various types of allowances from
suppliers in the form of volume discounts and other forms
of payment. In accounting for supplier bonuses received by
the Group, the Group determined that these bonuses are
a reduction in prices paid for the product and are reported
as part of the cost of sales as the related inventory is sold.
Bonuses receivable from suppliers in cash are presented as
trade receivables.

Summary of significant

accounting policies

166

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)

2.24 Income and expense recognition
(continued)

(c)

Interest income and expense

Interest income and expense are recognised on an
effective yield basis.

(d)

Selling, general and administrative expenses

Selling expenses consist of salaries and wages of stores
employees, store expenses, variable lease expenses,
depreciation of stores, utilities, advertising costs and other
selling expenses. General and administrative expenses
include costs of salaries and wages of support office
employees, depreciation of support offices, impairment
and amortisation charges of non-current assets and other
general and administrative expenses. Selling, general and
administrative expenses are recognised on an accrual basis
as incurred.

2.25

Contract liability

A contract liability is the obligation to transfer goods or
services to a customer for which the Group has received
consideration (or an amount of consideration is due) from
the customer. If a customer pays consideration before
the Group transfers goods or services to the customer,
a contract liability is recognised when the payment is
made or the payment is due (whichever is earlier). Contract
liabilities are recognised as revenue when the Group
performs under the contract.

2.26

Impairment of non-current assets

other than goodwill

The Group periodically assesses whether there is any
indication that non-current assets may be impaired. If any
such indicators exist, the Group estimates the recoverable
amount of the asset. Where it is not possible to estimate
the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash generating
unit to which it belongs. Individual stores are considered
separate cash-generating units for impairment testing
purposes. Impairment loss is recognised whenever the
carrying amount of an asset or the related cash-generating
unit exceeds its recoverable amount. Impairment losses
are recognised in the consolidated statement of profit or
loss. Non-financial assets other than goodwill that suffered
an impairment are reviewed for possible reversal of the
impairment at each reporting date.

2.27

Fair value of assets and liabilities

at the acquisition date

A primary valuation of assets and liabilities of acquired
companies was performed on a provisional basis. Once
the valuation is finalised, any adjustments arising are
recognised retrospectively.

2.28

Indemnification asset

The indemnification asset equivalent to the fair value of
the indemnified liabilities is included in net assets acquired
in the business combination if the selling shareholders
of the acquiree agreed to compensate possible claims
or contingencies. Subsequent measurement of the
indemnification asset and contingent liability does not have
any impact on future earnings, unless the indemnification
asset becomes impaired.

2.29

Offsetting of financial assets

and financial liabilities

Accounts receivable and accounts payable are offset
and the net amount is presented in the consolidated
statement of financial position when, and only when, the
Group currently has a legally enforceable right to set off the
recognised amounts and intends to settle on a net basis.

2.30

Long-term employee benefits

The Group recognises the liability and respective expenses
in relation to long-term employee benefits when there is
a present obligation as a result of past events and a reliable
estimate of the obligation can be made. The Group
recognises the net total of the following amounts in profit
or loss:

•

Service cost;

•

Net interest on the net defined benefit liability;

•

Remeasurements of the net defined benefit liability.

Summary of significant

accounting policies

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

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

167

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Critical accounting

estimates and

judgements in applying

accounting policies

The Group makes estimates and assumptions that affect
the reported amounts of assets and liabilities within
the next financial year. Estimates and judgements are
continually evaluated and are based on management’s
experience and other factors including expectations of
future events that are believed to be reasonable under
the circumstances. Management also makes certain
judgements, apart from those involving estimations, in
the process of applying accounting policies. Judgements
that have the most significant effect on the amounts
recognised in the consolidated financial statements and
estimates that can cause a significant adjustment to the
carrying amount of assets and liabilities include:

Impairment of goodwill

The Group tests goodwill for impairment at least annually.
The recoverable amount of a cash-generating unit has
been determined based on the higher of fair value less
costs to sell or value-in-use calculations. These calculations
require the use of estimates as further detailed in Note 13.

Identifying a business combination

The Group enters into transactions to acquire integrated
set of assets and operations of retail stores. The Group
determines whether such transactions represent
a business combination or assets acquisitions. The Group
determines that it has acquired a business when the
acquired set of activities and assets include an input and
a substantive process that together significantly contribute
to the ability to create outputs. The acquired process
is considered substantive if it is critical to the ability to
continue producing outputs, and the inputs acquired
include an organised workforce with the necessary skills,
knowledge, or experience to perform that process or it
significantly contributes to the ability to continue producing
outputs and is considered unique or scarce or cannot be

replaced without significant cost, effort, or delay in the
ability to continue producing outputs. All acquisitions of
assets and operations of retail stores occurred in 2022 and
2021 were treated by the Group as business combinations.

Litigations

The Group exercises considerable judgment in measuring
and recognising provisions and the exposure to contingent
liabilities related to pending litigations or other outstanding
claims subject to negotiated settlement, mediation,
arbitration or government regulation, as well as other
contingent liabilities. Judgement is necessary in assessing
the likelihood that a pending claim will succeed, or a liability
will arise, and to quantify the possible range of the final
settlement. Because of the inherent uncertainties in this
evaluation process, actual losses may be different from the
originally estimated provision. These estimates are subject
to change as new information becomes available, primarily
with the support of internal specialists, if available, or with
the support of outside consultants, such as actuaries or
legal counsel. Revisions to the estimates may significantly
affect future operating results.

Tax legislation

Russian tax, currency and customs legislation is subject to
varying interpretations (Note 35).

Deferred tax assets and liabilities

Group’s management judgment is required for the
calculation of current and deferred income taxes. Deferred
tax assets are recognised to the extent that their utilisation
is probable. The utilisation of deferred tax assets will
depend on whether it is possible to generate sufficient
taxable income in respective tax type and jurisdiction.

Various factors are used to assess the probability of the
future utilisation of deferred tax assets, including past
operating results, the operational plan, expiration of tax
losses carried forward, and tax planning strategies. In the
event that an assessment of future utilisation indicates
that the carrying amount of deferred tax assets must be
reduced, this reduction is recognised in profit or loss.

IAS 12 requires a deferred tax liability to be recognised
for all taxable temporary differences associated with
investments in subsidiaries unless: (a) the parent, investor,
joint venturer or joint operator is able to control the
timing of the reversal of the temporary difference; and
(b) it is probable that the temporary difference will not
reverse in the foreseeable future. The Group exercises
significant judgment in assessing the amount of taxable
temporary differences associated with investments in
subsidiaries (unremitted earnings) that will not reverse in
the foreseeable future.

If actual results differ from these estimates or if these
estimates must be adjusted in future periods, the financial
position, results of operations and cash flows may be
negatively affected.

Property, plant and equipment

The Group’s management determines the estimated useful
lives and related depreciation charges for its plant and
equipment (Note 10). The estimation of the useful life of the
asset is a matter of judgement based on the experience
of the entity with similar assets. Management increases
the depreciation charge where useful lives are less than
previously estimated lives or it writes-off or writes-down
technically obsolete or non-strategic assets that have been
abandoned or reclassified as held for sale.

168

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)

Critical accounting

estimates and

judgements in applying

accounting policies

Property, plant and equipment (continued)

The Group periodically assesses whether there is any
indication that property, plant and equipment may be
impaired. The Group performs assets impairment testing
(Note 10). The Group estimates the recoverable amount
of the asset or cash generating unit and if it is less than
the carrying amount of an asset or cash generating unit
an impairment loss is recognised in the consolidated
statement of profit or loss. For the year ended 31 December
2022 the Group recognised an impairment loss in the
amount of RUB 4,905 (year ended 31 December 2021: a net
impairment loss in the amount of RUB 3,105).

Investment property

The Group’s management determines the estimated
useful lives and related depreciation charges for its
investment properties (Note 12). Management increases
the depreciation charge where useful lives are less than
previously estimated lives or it writes-off or writes-down
technically obsolete or non-strategic assets that have been
abandoned or reclassified as held for sale.

The Group periodically assesses whether there is any
indication that investment property may be impaired.
The Group performs assets impairment testing (Note 12).
The Group estimates the recoverable amount of the asset
or cash generating unit and if it is less than the carrying
amount of an asset or cash generating unit an impairment
loss is recognised in the consolidated statement of profit
or loss. For the year ended 31 December 2022 the Group
recognised a net impairment loss in the amount of RUB
232 (year ended 31 December 2021: a net impairment gain
in the amount of RUB 343).

Right-of-use assets

The Group periodically assesses whether there is any
indication that right-of-use assets may be impaired. The
Group performs assets impairment testing (Note 11).
The Group estimates the recoverable amount of the asset
or cash generating unit and if it is less than the carrying
amount of an asset or cash generating unit an impairment
loss is recognised in the consolidated statement of profit
or loss. For the year ended 31 December 2022 the Group
recognised a net impairment loss in the amount of RUB
1,451 (year ended 31 December 2021: a net impairment loss
in the amount of RUB 630).

Inventories provisions

The Group provides for estimated inventory shrinkage
on the basis of historical shrinkage as a percentage of
cost of sales. This provision is adjusted at the end of each
reporting period to reflect the historical trend of the actual
physical inventory count results. The Group also provides
for aged stock where the net realisable value is below cost
(Note 15).

Revenue recognition – Loyalty programmes

The Group estimates the amount of obligations related to
customer loyalty programmes by allocating transaction
price to loyalty points based on the standalone selling price
of the points. The standalone selling price of the points is
reduced for the expected amount of the points that will
expire unredeemed.

The Group estimates the stand-alone selling price of the
loyalty points awarded under loyalty programmes. The
stand-alone selling price of the loyalty points issued is
calculated by multiplying to the estimated redemption rate
and to the monetary value assigned to the loyalty points.
In estimating the redemption rate, the Group considers
breakage which represents the portion of the points
issued that will never be redeemed. The Group applies
statistical projection methods in its estimation using
customers’ historical redemption patterns as the main
input. The redemption rate is updated monthly and the
liability for the unredeemed points is adjusted accordingly.
The Group ensures that the value assigned to the loyalty
points is commensurate to the stand-alone selling price
of the products eligible for redemption (i.e., the value of
each point is equivalent to the stand-alone selling price of
any product eligible for redemption divided by number of
points required).

Points issued under the loyalty programmes normally
expires in six months from their recognition. However due
to periodic changes in customer redemption patterns
estimates of the stand-alone selling price are subject to
significant uncertainty.

Any significant changes in customers’ redemption
patterns will impact the estimated redemption rate. As at
31 December 2022, the estimated liability for unredeemed
points was RUB 3,487 (31 December 2021: RUB 2,146).

169

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)

Provision for expected credit losses of trade
and other receivables

The Group uses a provision matrix to calculate ECLs for
trade and other receivables. The provision rates are based
on days past due for groupings of various customer
segments that have similar loss patterns (by customer
type). The calculation reflects the probability-weighted
outcome, the time value of money and reasonable and
supportable information that is available at the reporting
date about past events, current conditions and forecasts
of future economic conditions. Generally, trade and other
receivables are written-off if past due for more than 3 years
and are no subject to enforcement activity. The maximum
exposure to credit risk at the reporting date is the carrying
value of each class of financial assets.

The provision matrix is initially based on the Group’s
historical observed default rates. The Group calibrates
the matrix to adjust the historical credit loss experience
with forward-looking information. For instance, if forecast
economic conditions (i.e., gross domestic product) are
expected to deteriorate over the next year which can lead
to an increased number of defaults, the historical default
rates are adjusted. At every reporting date, the historical
observed default rates are updated and changes in the
forward-looking estimates are analysed.

The assessment of the correlation between historical
observed default rates, forecast economic conditions
and ECLs is a significant estimate. The amount of ECLs
is sensitive to changes in circumstances and of forecast
economic conditions. The Group’s historical credit loss
experience and forecast of economic conditions may also
not be representative of customer’s actual default in the
future. The information about the ECLs on the Group’s
trade and other receivables is disclosed in Note 17.

Critical accounting

estimates and

judgements in applying

accounting policies

Brand and private labels

The Group periodically assesses whether there is any
indication that brand and private labels may be impaired.
The Group performs assets impairment testing of brands
with indefinite useful lives at least annually (Note 14). The
Group estimates the recoverable amount of the asset and
if it is less than the carrying amount an impairment loss is
recognised in the consolidated statement of profit or loss.
For the year ended 31 December 2022 the Group did not
recognise any impairment of brand and private labels (year
ended 31 December 2021: Nil).

Lease term of contracts with extension options
and termination options

In determining the lease term, the Group considers
all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise
a termination option. For leases of retail stores the most
relevant factors are profitability and revenue of particular
stores, the value to the business in a particular region and
investment strategy. For leases of distribution centres
and offices the most relevant factors are the value to
the business, significance of termination penalties and
significance of leasehold improvements’ remaining value.
At commencement of the lease such considerations
generally result in determining the lease term equal to the
non-cancellable lease period including the period covered
by an option to terminate. The assessment of reasonable
certainty is only revised if a significant event or a significant
change in circumstances occurs, which affects this
assessment, and that is within the control of the lessee.

Incremental borrowing rates for calculation
of lease liability

Incremental borrowing rate is the rate of interest that
a lessee would have to pay to borrow over a similar term,
and with a similar security, the funds necessary to obtain an
asset of a similar value to the right-of-use asset in a similar
economic environment. Because there are normally no
absolutely similar to lease agreements borrowings, which
interest rates are observable in open market, the Group
derives incremental borrowing rates from both internal
and external data sources applying significant judgement
in such calculations. The Group estimates incremental
borrowing rates by adjusting Russian government risk-free
bonds in a relevant currency by the risk-premium inherent
to the Group which in turn is determined by comparing
Group’s rate of borrowing with Russian government
risk-free bonds of the same duration. Incremental
borrowing rates are calculated on a monthly basis.

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

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

170

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Adoption of new and

revised standards

and interpretations

and new accounting

pronouncements

In the preparation of these consolidated financial
statements, the Group followed the same accounting
policies and methods of computation as compared with
those applied in the previous year, except for the adoption
of new standards and interpretations and revision of
the existing standards as of 1 January 2022. Standards,
Interpretations and amendments effective 1 January 2022
did not have a material impact on the financial position or
performance of the Group.

The following amendments to IFRSs effective for the
financial year beginning on or after 1 January 2022 do not
have a material impact on the Group and do not result
in change of the Group’s accounting policy:

•

Amendments to IFRS 3 Business Combinations; IAS 16
Property, Plant and Equipment; IAS 37 Provisions,
Contingent Liabilities and Contingent Assets as well as
Annual Improvements 2018–2020.

The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is
not yet effective:

1 Subject to EU endorsement.

The Group expects that the adoption of other
pronouncements listed above will not have a significant
impact on the Group’s results of operations and financial
positions in the period of initial application except for
amendments to IAS 12 Income Taxes.

The amendments to IAS 12 Income Taxes may require
to recognise deferred tax on transactions that, on initial
recognition, give rise to equal amounts of taxable and
deductible temporary differences. The impact for the Group
would be the recognition of additional deferred tax assets
and liabilities attributable to right-of-use assets and lease
liabilities. The Group does not expect significant effect of
the amendments to IAS 12 on its consolidated financial
statements.

Standards issued but
not yet effective
in the European Union

Effective for annual

periods beginning on

or after

Amendments to IAS 1 Presentation of
Financial Statements: Classification of
Liabilities as Current or Non-current,
Classification of Liabilities as Current
or Non-current – Deferral of Effective
Date and Non-current Liabilities with
Covenants

1 January 2024

Amendments to IFRS 17 Insurance
Contracts: Initial Application of IFRS 17
and IFRS 9 – Comparative Information

1 January 2023

Amendments to IAS 1 Presentation of
Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting
Policies

1 January 2023

Amendments to IAS 8 Accounting
policies, Changes in Accounting
Estimates and Errors: Definition of
Accounting Estimates

1 January 2023

Amendments to IAS 12 Income Taxes:
Deferred Tax related to Assets and
Liabilities arising from a Single Transaction

1 January 2023

IFRS 17 Insurance Contracts including
Amendments to IFRS 17

1 January 2023

Amendments to IFRS 16 Leases: Lease
Liability in a Sale and Leaseback

1 January 2024

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

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

171

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Segment reporting

The Group identifies retail chains of each format and (see
Note 1) as separate operating segments in accordance with
the criteria set forth in IFRS 8.

The following significant operating functions are
decentralised by formats:

•

Category management, including purchasing, pricing,
assortment management, promotion management;

•

Distribution centres logistics;

•

Development function.

The formats’ general managers are determined as segment
managers in accordance with IFRS 8. The chief operating
decision-maker has been determined as the Management
Board. The Management Board reviews each format’s
internal reporting in order to assess performance and
allocate resources.

Upon adoption of IFRS 16 the Management Board started
to assess the performance of the operating segments
based on a measure of sales and adjusted earnings before
interest, tax, depreciation, amortisation and impairment
pre-IFRS 16 (EBITDA pre-IFRS 16). EBITDA pre-IFRS 16
is calculated by adjusting EBITDA to include fixed lease
expenses, fixed non-lease components of lease contracts,
exclude gain on derecognition of right-of-use assets
and lease liabilities and exclude adjustment of gain/loss
from sale of asset under sale and leaseback operations
for the proportion of the rights retained. Adjusted capital
expenditures include additions of property, plant and
equipment, investment properties and intangible assets
adjusted to replace capitalised depreciation of right-of-
use assets with capitalisation of fixed lease expenses,
acquisitions of property, plant and equipment, investment
properties and intangible assets through business
combinations as well as goodwill acquired through such
business combinations.

The accounting policies used for segments are the same
as accounting policies applied for these consolidated
financial statements. In 2022 a new methodology of
overhead expenses allocation was used for more accurate
measurements of segments’ performance. The comparative
figures for earlier periods have been adjusted in order to
provide meaningful comparative information.

The segment information for the year ended 31 December
2022, comparative figures for earlier periods and
reconciliation of EBITDA pre-IFRS 16 to profit for the year is
provided as follows:

172

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)

Segment reporting

YEAR ENDED 31 DECEMBER 2022

Pyaterochka

Perekrestok

Other

segments

Corporate

centre

Total

Revenue (Note 24)

2,124,617

386,199

94,416

−

2,605,232

EBITDA pre-IFRS 16

170,538

28,251

(5,963)

(6,038)

186,788

Fixed lease expenses and fixed non-lease
components of lease contracts

113,742

Gain on derecognition of right-of-use assets
and lease liabilities

2,551

Reversal of adjustment for the proportion
of the rights retained under sale
and leaseback operations (Note 11)

(232)

Depreciation, amortisation and impairment

(164,731)

Operating profit

138,118

Finance cost, net

(68,417)

Net foreign exchange result

(2,032)

Profit before income tax

67,669

Income tax expense

(22,481)

Profit for the year

45,188

Adjusted capital expenditure

46,077

10,024

25,909

−

82,010

31 December 2022

Inventories

169,190

28,136

11,335

−

208,661

YEAR ENDED 31 DECEMBER 2021

Pyaterochka

Perekrestok

Other

segments

Corporate

centre

Total

Revenue (Note 24)

1,795,018

351,100

58,701

−

2,204,819

EBITDA pre-IFRS 16

145,495

24,241

(4,369)

(4,343)

161,024

Fixed lease expenses and fixed non-lease
components of lease contracts

104,141

Gain on derecognition of right-of-use assets
and lease liabilities

2,940

Reversal of adjustment for the proportion
of the rights retained under sale
and leaseback operations (Note 11)

(255)

Depreciation, amortisation and impairment

(150,278)

Operating profit

117,572

Finance cost, net

(57,229)

Net foreign exchange result

399

Profit before income tax

60,742

Income tax expense

(18,004)

Profit for the year

42,738

Adjusted capital expenditure

72,079

18,656

7,189

−

97,924

31 December 2021

Inventories

137,489

25,638

3,713

−

166,840

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

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

173

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Subsidiaries

Details of the Company’s significant subsidiaries at 31 December 2022 and 31 December 2021 were as follows:

Company

Country

Nature of operations

Ownership (%)

31 December 2022

Ownership (%)

31 December 2021

Agrotorg LLC

Russia

Retailing

100

Trade House PEREKRIOSTOK JSC

Russia

Retailing

100

Agroaspect LLC

Russia

Retailing

100

X5 Nedvizhimost CJSC

Russia

Assets holding company

100

KOPEYKA-MOSCOW Ltd

Russia

Retailing

100

Krasnoborskoe LLC

Russia

Assets holding company

100

PEREKRIOSTOK-2000 LLC

Russia

Assets holding company

100

Beta Estate LLC

Russia

Assets holding company

100

X5 FINANSE LLC

Russia

Bond issuer

100

Agro-Avto LLC

Russia

Assets holding company

100

X5 Corporate Center LLC

Russia

Assets holding company

100

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

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

174

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Acquisition

of businesses

Acquisitions in 2022

Acquisition of Krasny Yar and Slata

In 4th quarter 2022 the Group acquired 70% of shares of
Smart LLC (Krasny Yar) and Mayak LLC (Slata) operating
retail chains in Eastern Siberia and provided put options for
the remaining 30% non-controlling interests. At acquisition
date the retail chains operated 594 stores under brands
“Krasny Yar”, “Baton”, “Slata”, “KhlebSol”.

Since the put options do not give present ownership
interest in the shares subject to put and in the absence
of particular guidance of accounting for put options over
NCI in current IFRSs the Group made an accounting policy
choice (Note 2.2) to account for the initial recognition and
further changes in fair value of put option liability along
with NCI in Other reserves within equity. As at 31 December
2022 purchase commitments for non-controlling interests’
shares under put option liability in amount of RUB 2,204
were included in other non-current liabilities in the
consolidated statement of financial position.

In the year ended 31 December 2022 the acquired
business contributed revenue of RUB 14,482 from the
date of acquisition. Net loss from the date of acquisition
comprised RUB 37. If the acquisitions had taken place at
the beginning of the year, revenue of the Group would have
been RUB 2,663,257.The Group considers impracticable to
disclose the impact of the acquisition on the Group’s net
profit, since before the acquisition the acquired businesses
did not prepare financial statements in accordance with the
Group’s accounting policy.

Provisional fair values

at the acquisition date

Property, plant and equipment (Note 10)

2,342

Other intangible assets (Note 14)

1,863

Right-of-use assets (Note 11)

19,061

Indemnification asset

5,986

Inventories

4,761

Trade, other accounts receivable and
prepayments

753

VAT and other taxes receivable

148

Cash and cash equivalents

531

Lease liabilities (Note 11)

(18,960)

Deferred tax liabilities (Note 30)

(424)

Trade accounts payable

(5,361)

Short-term borrowings (Note 21)

(1,819)

Interest accrued

(5)

Short-term contract liabilities (Note 20)

(26)

Current income tax payable

(2,115)

Provisions and other liabilities

(5,714)

Net assets acquired

1,021

Provisional fair values

at the acquisition date

Goodwill (Note 13)

7,674

Non-controlling interests measured
at fair value

(2,609)

Purchase consideration

6,086

Net cash outflow arising from
the acquisition

4,482

Details of assets and liabilities of acquired business and the related goodwill were as follows:

The Group assigned provisional fair values to net assets
acquired. The Group will finalise the purchase price
allocation within 12 months from the acquisition date
which is not yet finished at the date of approval of these
consolidated financial statements.

The Group recognises non-controlling interests in an
acquired entity either at fair value or at the non-controlling
interest’s proportionate share of the acquired entity’s net
identifiable assets. This decision is made on an acquisition-
by-acquisition basis. For the non-controlling interests in
Krasny Yar and Slata the Group elected to recognise the
non-controlling interests at fair value.

The fair value of the non-controlling interest in Smart LLC
and Mayak LLC, non-listed companies, was estimated
by applying a proportionate share to the valuation
of the companies which in its turn was made on the
basis of revenue and EBITDA multiples. The fair value
measurements were based on significant inputs that are
not observable in the market.

The purchase consideration for the reporting period
comprised RUB 5,013 and RUB 1,073 as cash consideration
and deferred consideration respectively.

The goodwill recognised is attributable to: i) the business
concentration in the Russian regions; ii) expected cost
synergies from the business combination and iii) acquired
traffic from existing customers. The goodwill related to this
acquisition was allocated to other segments in amount of
RUB 7,674.

175

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)

Acquisition

of businesses

Provisional fair values

at the acquisition date

Property, plant and equipment (Note 10)

339

Right-of-use assets (Note 11)

3,574

Deferred tax assets (Note 30)

128

Trade, other accounts receivable
and prepayments

VAT and other taxes receivable

Cash and cash equivalents

Lease liabilities (Note 11)

(3,507)

Current income tax payable

(106)

Provisions and other liabilities

(343)

Net assets acquired

146

Goodwill (Note 13)

502

Purchase consideration

648

Net cash outflow arising from
the acquisition

644

Other acquisitions

In 2022 the Group acquired 100% of several businesses of
other retail chains in Russian regions. The acquisitions were
individually immaterial.

In the year ended 31 December 2022 the acquired
businesses contributed revenue of RUB 3,391 from the
date of acquisition. If the acquisitions had taken place at
the beginning of the year, revenue of the Group would have
been RUB 2,607,521. The Group considers impracticable to
disclose the impact of this factor on the Group’s net profit,
since before the acquisition the acquired businesses did
not prepare financial statements in accordance with the
Group’s accounting policy.

The Group assigned provisional fair values to net assets
acquired. The Group will finalise the purchase price
allocation within a 12-month period from the acquisition
date which is not yet finished at the date of approval of
these consolidated financial statements.

The purchase consideration for the reporting period
comprised consideration paid in cash of RUB 648.

The goodwill recognised was attributable to: i) the business
concentration in the Russian regions; ii) expected cost
synergies from the business combination and iii) acquired
traffic from existing customers. The goodwill related to
these acquisitions was allocated to Pyaterochka segment
in amount of RUB 502.

During the 12 months ended 31 December 2022 the Group
transferred RUB 369 as deferred payments for the prior
periods acquisitions.

Details of assets and liabilities of acquired businesses and
the related goodwill were as follows:

176

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)

Acquisition

of businesses

Acquisitions in 2021

During 2021 the Group acquired 100% of several
businesses of other retail chains in Russian regions.
The acquisitions were individually immaterial.

In the year ended 31 December 2021 the acquired
businesses contributed revenue of RUB 5,996 from the
date of acquisition. As the businesses were not acquired
as separate legal entities, it is impracticable to disclose
net profit from the date of acquisition. These businesses
did not prepare relevant financial information immediately
before the acquisition, therefore, it is impracticable to
disclose revenue and net profit of the Group for the year
ended 31 December 2021 as though the acquisition date
had been the beginning of that period.

The purchase consideration for the reporting period
comprised consideration paid in cash of RUB 1,021 and
RUB 265 as deferred consideration measured at fair value.

During the 12 months ended 31 December 2021 the Group
transferred RUB 750 as deferred payments for the prior
periods’ acquisitions.

Finalised fair values

at the acquisition date

Other intangible assets (Note 14)

Right-of-use assets (Note 11)

3,928

Deferred tax assets (Note 30)

244

Indemnification asset

Trade, other accounts receivable and
prepayments

Lease liabilities (Note 11)

(3,928)

Current income tax payable

(34)

Provisions and other liabilities

(80)

Net assets acquired

168

Goodwill (Note 13)

1,118

Purchase consideration

1,286

Net cash outflow arising from
the acquisition

1,021

At 31 December 2021 the Group assigned provisional fair
values to net assets acquired, in estimating provisional fair
values of acquired assets. In 2022 the Group completed
the purchase price allocation, which resulted in no changes
in fair values at the acquisition date:

Notes to the сonsolidated

financial statements

for the year ended 31 December 2022

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

177

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Related party

transactions

In considering each possible related party relationship,
attention is directed to the substance of the relationship,
not merely the legal form. Related parties may enter
into transactions which unrelated parties might not, and
transactions between related parties may not be effected
on the same terms, conditions and amounts as transactions
between unrelated parties.

The nature of the relationships for those related parties
with which the Group entered into significant transactions
or had significant balances outstanding at 31 December
2022 and at 31 December 2021 are provided below. The
ownership structure is disclosed in Note 1.

The following transactions were carried out with related
parties:

Relationship

2022

2021

CTF Holdings S.A.

Entity with
significant influence
over the Company

Management services
received

113

Other

Under control by
the entity with
significant influence
over the Company

Purchases from
related parties

4,924

4,122

Other operating
expenses

Bonuses from
related parties

206

201

Other

Other operating
expenses

–

Interest expenses

107

–

Variable rent

–

Relationship

31 Dec

2022

31 Dec

2021

CTF Holdings S.A.

Entity with
significant influence
over the Company

Other accounts payable

–

Other

Under control by
the entity with
significant influence
over the Company

Other receivables from
related parties

Trade accounts payable

872

759

Trade accounts
receivable

–

Other accounts payable

–

Other

Advances

–

Other accounts payable

–

The consolidated financial statements include the following
balances with the related parties:

X5 Retail Group. Годовой отчет за 2022 год (на английском) - часть 11