X5 Group (Пятерочка). Годовой отчет за 2021 год - часть 31

FINANCIAL STATEMENTS

242

NoteS to the CoNSolidated FiNaNCial StatemeNtS

NoteS to the CoNSolidated 

FiNaNCial StatemeNtS

for the year ended 31 December 2021 

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

31

Financial risk 

management

Financial risk management is a part of integrated risk 
management and internal control framework described 
in “Corporate Governance” section of this Annual Report. 
The primary objectives of the financial risk management 
are to establish risk limits, and then ensure that exposure 
to risks stays within these limits.

Financial risk management is carried out by the 
Group’s centralised Finance Department. The Finance 
Department monitors and measures financial risks and 
undertakes steps to limit their influence on the Group’s 
performance.

(a)  

market risk

Currency risk

Group is exposed to foreign exchange risk arising from 
foreign currency denominated assets and liabilities with 
respect to import purchases and lease liabilities mainly 
in USD and EUR. As at 31 December 2021 the Group 
had trade accounts payable denominated in USD in the 
amount of RUB 7,827 and in EUR in the amount of RUB 
2,163 (31 December 2020: denominated in USD in the 
amount of RUB 4,762 and in EUR in the amount of RUB 
1,574) and leases denominated in USD in the amount of 
RUB 7,028 and in EUR in the amount of RUB 3,506 (31 
December 2020: denominated in USD in the amount of 
RUB 9,855 and in EUR in the amount of RUB 4,794). As 
at 31 December 2021 the Group did not have any other 
significant assets and liabilities denominated in foreign 
currency and the exposure for the Group was estimated 
as not significant.

interest rates risk

As at 31 December 2021 the Group had no floating 
interest-bearing assets (31 December 2020: Nil), but 
had 16% (31 December 2020: 28%) share of borrowings 
with floating interest rates based on the Key rate of 
the Central Bank of the Russian Federation. As at 
31 December 2020, additionally to the borrowings 
with floating interest rates the Group had financial 

instruments limiting the corridor of rate fluctuations for 
share of borrowings. 

If the Key rate had been 100 b.p. higher the profit before 
tax for the year ended 31 December 2021 had been 
RUB 398 lower. If the Key rate had been 100 b.p. lower 
the profit before tax for the year ended 31 December 
2021 had been RUB  398 higher. The Group’s income 
and operating cash inflows were largely independent of 
changes in market interest rates but part of The Group’s 
interest expenses was marginally exposed to changes in 
market interest rates.

(b)  

Credit risk

Financial assets, which are potentially subject to credit 
risk, consisted principally of cash and cash equivalents 
and short-term financial investments held in banks, 
trade and other receivables (Note 9 and Note 17). Due to 
the nature of its main activities (retail sales to individual 
customers) the Group had no significant concentration 
of credit risk. Cash was placed in financial institutions 
which were considered at the time of deposit to have 
low risk of default (Note 9). 

The Group has policies in place to ensure that in case 
of credit sales of products and services to wholesale 
customers and reverse franchise schemes only those 
counteragents with an appropriate credit history are 
selected. Although collection of receivables could be 

influenced by economic factors, management believes 
that there was no significant risk of loss to the Group 
beyond the allowance already recorded. In accordance 
with the Group treasury policies and exposure 
management practices, counterparty credit exposure 
limits were continually monitored and no individual 
exposure was considered significant.

(c)  

liquidity risk

Liquidity risk is defined as the risk that an entity will 
encounter difficulty in meeting obligations associated 
with financial liabilities. Liquidity risk is managed by the 
Corporate Finance Department.

The Group finances its operations by a combination of 
cash flows from operating activities and long-term and 
short-term debt. The objective is to ensure continuity of 
funding on the best available market terms. The policy is 
to keep the Group’s credit portfolio diversified structure, 
continue to improve the debt maturity profile, to arrange 
funding ahead of requirements and to maintain sufficient 
undrawn available bank lines / limits, and a strong credit 
rating so that maturing debt may be refinanced as it falls 
due.

FINANCIAL STATEMENTS

243

NoteS to the CoNSolidated FiNaNCial StatemeNtS

NoteS to the CoNSolidated 

FiNaNCial StatemeNtS

for the year ended 31 December 2021 

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

31

Financial risk 

management

The following is an analysis of the contractual undiscounted cash flows payable under financial liabilities as at the 
reporting date at spot foreign exchange rates: 

yeaR eNded 31 deCemBeR 2021

dURiNG 1 yeaR

iN 1 to 5 yeaRS

oVeR 5 yeaRS

Lease liabilities

 111,953

 389,062

 289,176

Borrowings

 107,339

 223,397

−

Trade payables

 212,949

−

−

Other financial liabilities

 75,683

 1,442

−

TOTAL

 507,924

 613,901

 289,176

yeaR eNded 31 deCemBeR 2020

dURiNG 1 yeaR

iN 1 to 5 yeaRS

oVeR 5 yeaRS

Lease liabilities

 105,141

 369,835

 260,555

Borrowings

 90,435

 197,530

−

Trade payables

 170,909

−

−

Other financial liabilities

 64,627

 1,935

−

TOTAL

 431,112

 569,300

 260,555

(c)   liquidity risk (continued)

At 31 December 2021 the Group had net current 
liabilities of RUB  206,373 (31 December 2020: 
RUB 202,400) including short-term borrowings of 
RUB 87,767 (31 December 2020: RUB 77,026). At 
31 December 2021 the Group had available bank 
credit lines of RUB 482,263 (31 December 2020: 
RUB 457,086). At 31 December 2021 the Group 
had RUB registered bonds programme available for 
issue on MOEX of RUB 190,000 (31 December 2020: 
RUB 200,000).

Management regularly monitors the Group’s operating 
cash flows and available credit lines / limits to ensure 
that these are adequate to meet the Group’s ongoing 
obligations and its expansion programmes. Part of the 
existing lines is provided on rolling basis which is closely 
monitored by detailed cash flow forecasts and are 
managed by the Corporate Finance Department.

The Group’s capital expenditure programme is highly 
discretionary. The Group optimises its cash outflows 
by managing the speed of execution of current capex 
projects and by delaying future capital extensive 
programmes, if required.

The Group is carefully monitoring its liquidity profile 
by optimizing the cost of funding and the drawdown 
periods within revolving credit facilities as well as 
extending existing credit facilities or obtaining new 
credit lines. The Group manages liquidity requirements 
by the use of both short-term and long-term projections 
and maintaining the availability of funding. Based on 
the review of the current liquidity position of the Group 
management considers that the available credit lines 
and expected cash flows are more than sufficient to 
finance the Group’s current operations.

The Group has assessed the impact of climate related 
matters on its financial statements as not material.

FINANCIAL STATEMENTS

244

NoteS to the CoNSolidated FiNaNCial StatemeNtS

NoteS to the CoNSolidated 

FiNaNCial StatemeNtS

for the year ended 31 December 2021 

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

32

operating  

environment  

of the Group

Russia continues economic reforms and development 
of its legal, tax and regulatory frameworks as required 
by a market economy. The COVID-19 worldwide 
outbreak was also increasing uncertainties. Mobility 
restrictions, quarantines and similar lockdown measures 
implemented in Russia to cope with the pandemic 
affected the operations of the Group leading to less 
frequent customer visits to stores but larger purchases 
and shift towards digitalisation. From the beginning of 
COVID-19 pandemic the Group has taken necessary 
measures to avoid direct impact of the pandemic on 
its operations with a special focus on protection of the 
health of employees and customers and uninterrupted 
business processes. The Group introduced measures 
such as mandatory body temperature checks for all 
employees entering its premises, provided masks and 
disposable gloves to operational personnel, introduced 
additional disinfection hours daily for all stores as well as 
additional disinfection in stores and other premises. The 

Group has assessed a potential impact of the COVID-19 
outbreak on its going concern (Note 2), impairment 
of non-current assets (Notes 10, 13) and allowance 
for expected credit losses (Note 17). There have been 
no modifications to financial liability contracts and 
covenants.

The future stability of the Russian economy is largely 
dependent upon the impact and span of the COVID-19 
and the impact of the sanctions being imposed as result 
of the events subsequent to the reporting date (Note 
36). Should the economy be in a long-term recession 
after the pandemic and the sanctions, that may affect 
the Group’s financial position, cash flows and results of 
operations. 

Management believes it is taking appropriate measures 
to support the sustainability of the Group’s business in 
the current circumstances.

FINANCIAL STATEMENTS

245

NoteS to the CoNSolidated FiNaNCial StatemeNtS

NoteS to the CoNSolidated 

FiNaNCial StatemeNtS

for the year ended 31 December 2021 

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

33

Capital risk 

management

The Group’s objectives when managing capital are to 
safeguard the Group’s ability to continue as a going 
concern in order to provide returns for shareholders 
and benefits for other stakeholders and to maintain an 
optimal capital structure to reduce the cost of capital. 
The Group manages total equity attributable to equity 
holders recognised under IFRS requirements. The 
Group is in compliance with externally imposed capital 
requirements.

In accordance with a few loan facilities the Group 
maintains an optimal leverage ratio by tracking 
covenant: the maximum level of Net Debt / EBITDA pre-
IFRS 16 (4.00 / 4.25 during two quarters after acquisition). 
Net debt is calculated as the sum of short-term and 
long-term borrowings less cash and cash equivalents. 
Reconciliation of EBITDA pre-IFRS 16 to operating 
profit is performed in Note 5. This ratio is included as 
covenants into some of Group’s loan agreements (Note 
21). At 31 December 2021 the Group complied with the 
requirements under the loan facilities.

FINANCIAL STATEMENTS

246

NoteS to the CoNSolidated FiNaNCial StatemeNtS

NoteS to the CoNSolidated 

FiNaNCial StatemeNtS

for the year ended 31 December 2021 

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

34

Fair value  

of financial  

instruments

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 best evidence of fair value is 
price in an active market. An active market is one in 
which transactions for the asset or liability take place 
with sufficient frequency and volume to provide pricing 
information on an ongoing basis. 

The estimated fair values of financial instruments have 
been determined by the Group using available market 
information, where it exists, and appropriate valuation 
methodologies. However, judgement is necessarily 
required to interpret market data to determine the 
estimated fair value. 

FiNaNCial aSSetS CaRRied  
at amoRtiSed CoSt

The estimated fair value of fixed interest rate instruments 
is based on estimated future cash flows expected to 
be received discounted at current interest rates for 
new instruments with similar credit risk and remaining 
maturity. Discount rates used depend on credit risk of 
the counterparty. 

The carrying amount of cash and cash equivalents and 
trade and other financial receivables approximates their 
fair value.

liaBilitieS CaRRied at amoRtiSed CoSt

The fair value of bonds is based on quoted market 
prices. Fair values of other liabilities are determined using 
valuation techniques.

The fair value of bonds traded on the MOEX and the 
SE is determined based on active market quotations 
and amounted to RUB  77,366 at 31 December 2021 
(31 December 2020: RUB 75,221). The measurement 
is classified in level 1 of the fair value hierarchy. The 
carrying value of these bonds amounted to RUB 78,484 
at 31 December 2021 (31 December 2020: RUB 73,853) 
(Note 21). The fair value of long-term borrowings 
amounted to RUB 179,255 at 31 December 2021 
(31 December 2020: RUB 116,536). The measurement 
is classified in level 3 of the fair value hierarchy and is 
determined based on expected cash flows discounted 
using interest rate of similar instruments available on 
the market. The sensitivity analysis shows that the 
increase / decrease of the market interest rate by 10% 
leads to the decrease / increase of fair value of long-
term borrowings by RUB 2,470 at 31 December 2021 
(31 December 2020: RUB 1,273). The fair value of short-
term borrowings was not materially different from their 
carrying amounts.

FINANCIAL STATEMENTS

247

NoteS to the CoNSolidated FiNaNCial StatemeNtS

NoteS to the CoNSolidated 

FiNaNCial StatemeNtS

for the year ended 31 December 2021 

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

35

Commitments and 

contingencies

CaPital eXPeNditURe CommitmeNtS

At 31 December 2021 the Group contracted for capital 
expenditure for the acquisition of property, plant and 
equipment and intangible assets of RUB 7,659 (net of 
VAT) (31 December 2020: RUB 7,144).

leGal CoNtiNGeNCieS

The Group has been and continues to be the subject of 
legal proceedings and adjudications from time to time. 
Management believes that there are no current legal 
proceedings or other claims outstanding, which could 
have a material effect on the result of operations or 
financial position of the Group and which have not been 
accrued at 31 December 2021.

taX CoNtiNGeNCieS, CommitmeNtS aNd RiSKS 

Russian tax, customs, and currency legislation allows 
for various interpretations and is subject to frequent 
amendments. Relevant regional and federal authorities 
can challenge the Group management interpretation 
of legislation provisions in the context of the Group’s 
transactions and operations. The Group includes 
companies incorporated outside Russia. These 

companies are subject to tax at the rates prescribed by 
the legislation of the jurisdiction where the companies 
are tax residents. According to the Russian legislation, 
foreign companies of the Group are not subject to profit 
tax except for cases of withholding tax (i.e. dividends, 
interest, capital gain, etc.), since tax obligations of the 
foreign companies of the Group are determined on the 
assumption that the foreign companies of the Group are 
not Russian tax residents. 

In 2021 Russian legislative authorities performed 
further update of state taxation system and continue 
to diligently collaborate with foreign tax authorities 
in the framework of an international tax information 
exchange which makes corporate operations more 
transparent. After the speech of the Russian President 
in 2020 about the intention to increase withholding 
tax rate on dividends and interest paid from Russia 
to the so-called “offshore jurisdictions” it is generally 
known that the Russian Ministry of Finance sent letters 
to finance ministries of some foreign jurisdictions 
regarding proposed changes to the current tax rates 
provided in Double Tax Treaties (DTTs), including Cyprus, 
Luxembourg, Malta and the Netherlands.

In the second half of 2020 it was officially announced 
by the Russian Ministry of Finance, Russia signed a 
Protocol to amend the double tax treaties with Cyprus, 
Luxembourg and Malta. The parties agreed to raise the 
basic tax rate on dividends and interest to 15% with 
exceptions for public companies for which the rate stays 
5%. The changes related to DTTs with Cyprus and Malta 
come into force from 1 January 2021, with Luxemburg 
from 1 January 2022 and would not apply retrospectively. 
In May 2021 the Federal law of denunciation the DTT 

with the Netherlands was adopted, as a result respective 
DTT expires starting from 2022. These changes would 
not apply retrospectively to income paid prior to 2022. 
Besides that, the Russian Ministry of Finance plans to 
change tax agreements with Hong Kong, Singapore and 
Switzerland.

The Russian transfer pricing legislation is to the large 
extent aligned with the international transfer pricing 
principles developed by the Organisation for Economic 
Cooperation and Development. Starting from 1 January 
2019, a significant number of domestic transactions 
was excluded from the transfer pricing control in Russia. 
Only transactions between Russian companies that 
apply different tax rates on profits or special tax regimes 
are subject to the rules, and only if income from those 
transactions exceeds RUB 1 billion per year. Moreover, 
starting from 1 January 2019, a threshold of RUB 60 
million applies for cross-border transactions to be 
classified as controlled for transfer pricing purposes. 

The amendments described above as well as recent 
trends of interpretation and application of particular 
provisions of the Russian tax legislation highlight the 
fact that tax authorities can enter the more rigid position 
with regards to the interpretation of the legislation and 
tax calculations. Therefore, tax authorities can dispute 
lawfulness of transactions and accounting methods 
that were previously out of question. As a result, material 
additional taxes, penalties and fines can be charged. It 
is impossible to forecast the amount of potential claims 
and to evaluate the probability of an unfavourable 
outcome. Generally, tax audits can cover three calendar 
years preceding the year in which the decision 
on the performance of audit is adopted. In certain 
circumstances a tax audit can cover earlier tax periods.

MLI standards came into effect on 1 January 2021. The 
MLI requires the setting of minimum standards — rules 
that must be observed in order to benefit from reduced 
rates under a tax treaty. The Russian Federation adopted 
the following standards:

• 

The principal purpose test (PPT); and

• 

Simplified limitation on benefits (sLoB).

The principal purpose test means that tax treaty benefits 
may not be applied if obtaining them was the principal 
purpose of a transaction.

The simplified limitation on benefits means that 
reduced rates under a tax treaty may be enjoyed only 
by “qualified persons” (individuals, a state or political 
subdivision thereof, public companies, pension funds, 
non-profit organizations, etc.) and other persons who are 
not “qualified persons” if they carry on “active business” 
and the income received is connected to that business. 
The term “active business” does not include activities 
of holding companies, intra-group financing, making 
or managing investments (except for professional 
participants in the market), etc.

It follows from the above that where income is paid 
to a foreign company which qualifies for reduced 
rates or exemption from taxation only on the basis of 
the provisions of a tax treaty with a specific state, it 
is essential to ensure compliance both with local law 
and with the provisions of the MLI as a document that 
regulates the application of DTTs between specific 
countries.

FINANCIAL STATEMENTS

248

NoteS to the CoNSolidated FiNaNCial StatemeNtS

NoteS to the CoNSolidated 

FiNaNCial StatemeNtS

for the year ended 31 December 2021 

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

35

Commitments and 

contingencies

taX CoNtiNGeNCieS, CommitmeNtS aNd RiSKS 
(CoNtiNUed)

Management regularly reviews the Group’s taxation 
compliance with applicable legislation, laws and decrees 
and current interpretations published by the authorities 
in the jurisdictions in which the Group has operations. 
Furthermore, management regularly assesses the 
potential financial exposure relating to tax contingencies 
not only for the periods open for tax audit but also 
for which the three years’ tax inspection right has 
expired but which, under certain circumstances, may be 
challenged by the regulatory bodies. From time to time 
potential exposures and contingencies are identified 
and at any point in time a number of open matters may 
exist.

Management estimates that possible exposure in 
relation to the aforementioned risks, as well as other 
profits tax and non-profits tax risks (e.g. imposition of 
additional VAT liabilities), that are more than remote, but 
for which no liability is required to be recognised under 
IFRS, could be several times more than accrued liabilities 
and provisions reflected on the statement of financial 
position at that date. This estimation is provided for the 
IFRS requirement for disclosure of possible taxes and 
should not be considered as an estimate of the Group’s 
future tax liability.

In 2021 the Group made net accrual of provisions and 
liabilities for tax uncertainties attributable to income 
tax and non-income tax risks in amount of RUB  3,076 
including net accrual of non-income tax provision of 
RUB  1,891 , income tax provision of RUB  914 and net 
accrual of indemnification asset of RUB  271.

In 2020 the Group made net accrual of provisions and 
liabilities for tax uncertainties attributable to income 
tax and non-income tax risks in amount of RUB 5,286 
including net accrual of non-income tax provision of 
RUB 1,882, income tax provision of RUB 3,373 and net 
accrual of indemnification asset of RUB 31.

At the same time management has recorded liabilities 
for income taxes in the amount of RUB 2,443 
(31 December 2020: RUB 2,384) and provisions for taxes 
other than income taxes in the amount of RUB 6,049 
at 31 December 2021 (31 December 2020: RUB 4,202) 
in these consolidated financial statements as their 
best estimate of the Group’s liability related to tax 
uncertainties as follows: 

Balance at 1 January 2020

2,738

Release of provision

 (431) 

Accrual of provision

 5,717 

Offset of provision 

 (1,438) 

Balance at 31 December 2020

 6,586 

Release of provision

 (982) 

Accrual of provision

 4,058

Offset of provision 

 (1,170) 

Balance at 31 December 2021

 8,492 

FINANCIAL STATEMENTS

249

NoteS to the CoNSolidated FiNaNCial StatemeNtS

NoteS to the CoNSolidated 

FiNaNCial StatemeNtS

for the year ended 31 December 2021 

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

36

Subsequent events  

for the Group

Since late February 2022 a number of countries 
(including the US, UK and EU) imposed new sanctions 
against certain entities and individuals in Russia as a 
result of the official recognition of the Donetsk People 
Republic and Lugansk People Republic by the Russian 
Federation. Announcements of potential additional 
sanctions have been made following military operations 
initiated on 24 February 2022. Such sanctions can 
directly impact the sanctioned entities and individuals, 
and entities under their control. The Group is not subject 
to any sanctions or restrictions at the moment, but 
is likely to encounter challenges due to sanctions on 
financial system and certain imports into Russia. For the 
management considerations of the potential risks arisen 
from recent geopolitical changes please refer to the 
section “How we manage risk” of the Annual report.