Regular information (XML) of PJSC "IMCC"

Notes to the financial statements prepared in accordance with international financial reporting standards

1. GENERAL INFORMATION These financial statements are the financial statements of PUBLIC JOINT STOCK COMPANY "ICHNIANSKY MILK AND CONSERVED CERTAINS PLANT" (the "Company"). The Company's core business is the production of canned milk and dairy products, as well as milk processing. "Ichnia Dairy and Canned Food Processing Plant was built on the basis of the Ichnia Food Processing Plant, which was founded in 1958. In 2006, Ichnia Food Processing Plant entered a new stage of development when the company started large-scale work on the re-profiling of Ichnia Food Processing Plant and began its multi-stage reconstruction and complete re-equipment. In 2011, upon completion of the third stage of reconstruction of production facilities, the company changed its legal form to a Public Joint Stock Company (Minutes No. 1 dated February 09, 2011). As at 31 December 2017, the Company's major shareholder is "PROVIDANT" LIMITED LIABILITY COMPANY (Ukraine), which owns 371,935 shares of the Company (84,64%). The rest of the shares, namely 67,469 shares (15,36%), are held by legal entities and individuals with insignificant shares in the Company's share capital (less than 10%). The ultimate beneficial owner is a citizen of Ukraine, Mr. Valentyn Anatoliyovych Zaporoshchuk. The Company's shares are currently distributed as follows: Shareholder Country Number of shares % in total PROVIDANT LLC Ukraine 371,935 84.645337 Business Capital International, LLC USA 2 220 0.505229 OBMICHIVSKI ZORY LLC Ukraine 50 0.011379 "PROVIDENT FINANCE" LLC Ukraine 1 0.000227 Individuals (29 persons) Ukraine 65,198 14.837828 Together: 439 404 100% The Company was registered by the Ichnia District State Administration of Chernihiv Region on 13.12.2000. Registered address: 4, Vyshneva St., Ichnia, Chernihiv region, 16703, Ichnia, Ukraine. The number of employees as of 31.12.2017 was 364 persons as of 31.12.2016 was 365 persons. 2. BASICS OF INFORMATION PRESENTATION Statement of compliance with International Financial Reporting Standards The Company's financial statements have been prepared in accordance with International Financial Reporting Standards. The term International Financial Reporting Standards is used hereinafter in a broad sense to refer to standards and interpretations issued by the International Accounting Standards Board (IASB): - International Financial Reporting Standards (IFRS); - International Accounting Standards (IAS); - Interpretations issued by the International Financial Reporting Standards Committee (IFRIC) or the Standing Interpretations Committee (SIC). The Company prepares its financial statements in accordance with IFRS from the date of their first adoption as a conceptual basis for preparing these financial statements - January 1, 2012. These financial statements have been prepared under the historical cost convention, except for the following: property, plant and equipment and intangible assets, which have been measured at fair value as at January 1, 2016. These financial statements are presented in thousands of Ukrainian hryvnias. The Company maintains its primary accounting records in accordance with Ukrainian Accounting Principles (Standards). The accounting principles and procedures prescribed by national legislation differ from IFRS. The financial statements prepared in accordance with IFRS differ from those prepared in accordance with statutory regulations because they include certain adjustments, that are not reflected in the Company's books and records, which (adjustments) are necessary to present the financial position and financial performance in accordance with the accounting policies in accordance with the requirements and rules of IFRS. Going concern As of December 31, 2017, the Company has liabilities in respect of unpaid liabilities in foreign currency received from PJSC SBERBANK under the credit line agreement No. CD No. 107-В/15/35/ЮЛ/КЛ dated 26.11.2015. Taking into account that according to the agreements on amendments to the additional terms and conditions to the credit line agreement, the Company has to pay the obligations under the agreement by April 24, 2018, as of the reporting date, the agreement on prolongation has not yet been concluded. However, the Company's management has a plan to restructure these obligations and believes that it has all the prerequisites to ensure the continuity of its operations in the future. The amount of liabilities under the credit line at the end of the reporting year was UAH 219,606 thousand. This obligation has an extremely negative impact on the Company's overall financial performance. As of December 31, 2017, current liabilities exceeded current assets by UAH 184,871 thousand, which indicates the burden of borrowed funds. Without prejudice to, and subject to, the foregoing matters, the financial statements for the year ended 31 December 2017 have been prepared on the assumption that the Company will continue in operation in the foreseeable future. Accordingly, these financial statements do not contain any adjustments in the event that the Company will not be able to continue as a going concern. Adoption of standards and interpretations in the reporting period During the current year, the Company has adopted all new and revised standards and interpretations issued by the International Financial Reporting Standards Board and the International Financial Reporting Interpretations Committee that are mandatory for use in the preparation of its consolidated financial statements for periods beginning on or after January 1, 2018. Standards, interpretations and amendments to standards were in issue, but not yet effective, up to the date of authorization of these financial statements: - IFRS 1, First-time Adoption of International Financial Reporting Standards: amended by the Annual Improvements to IFRSs (2014-2016), namely: removing short-term exemptions for first-time adopters; removing the transitional provisions in paragraphs E3-E7 of IFRS 1 as they have already served their intended purpose. Effective for annual periods beginning on or after January 1, 2018; - IFRS 2 "Share-based Payment": changes to the classification and measurement of share-based payment transactions (amendments to IFRS 2); - IFRS 3 Business Combinations and IFRS 11 Joint Arrangements. The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures its previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not change the measurement of its previously held interests in that business. Effective for annual periods beginning on or after January 1, 2019; - IFRS 4 Insurance Contracts: IFRS 17 will replace IFRS 4 on January 1, 2021; - IFRS 9 Financial Instruments: Negative offset prepayment features (Amendments to IFRS 9) to address issues related to how IFRS 9 classifies certain prepaid financial assets. The amendments are to be applied retrospectively for fiscal years beginning on or after January 1, 2019, with earlier application permitted; - IFRS 11 Joint Arrangements: Amended by Annual Improvements to IFRSs 2015-2017. Effective for annual periods beginning on or after January 1, 2019; - IFRS 15 Revenue from Contracts with Customers (new standard) - effective from January 1, 2018; - IFRS 16 Leases (replaces the following standards and interpretations: IAS 17 Leases; IFRIC 4 Definition of a Lease; SIC 15 Operating Leases; SIC 27 Evaluating the Content of Transactions Involving the Legal Form of a Lease. IAS 16 sets out the principles for the recognition, measurement, reporting and disclosure of leases to ensure that lessors and lessees receive relevant information that presents a true and fair view of those transactions. The standard was issued in January 2016 and is effective for annual periods beginning on or after January 1, 2019; - IFRS 17 Insurance Contracts was issued. IFRS 17 sets out the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the Standard. The objective of IFRS 17 is to ensure that an entity provides appropriate information that fairly presents these contracts. That information provides a basis for users of financial statements to evaluate the effects of insurance contracts on an entity's financial position, financial performance and cash flows. The amendment is effective for annual periods beginning on or after January 1, 2021; - IAS 11 Construction Contracts: IAS 11 will be replaced by IFRS 15 Revenue from Contracts with Customers, effective from January 1, 2018; - IAS 12 "Income Taxes". The amendments provide clarification on income taxes on dividends and when they should be recognized as profit or loss. The amendments are effective for annual periods beginning on or after January 1, 2019; - IAS 17 Leases: IAS 17 will be replaced by IFRS 16 Leases, effective from January 1, 2019; - IAS 18 Revenue: IAS 18 will be replaced by IFRS 15 Revenue from Contracts with Customers, effective from January 1, 2018; - IAS 28 Consolidated and Separate Financial Statements: amended by Annual Improvements to IFRSs 2015-2017 (measurement of an associate or joint venture at fair value). Interpretation on the fair value through profit or loss method for an investment in an associate or joint venture that is controlled by an entity and is a venture capital company or other qualifying entity. Effective for annual periods beginning on or after January 1, 2018; - IAS 28 Consolidated and Separate Financial Statements: Amendments to Long-Term Interests in Associates and Joint Ventures (Amendments to IAS 28). Effective for annual periods beginning on or after January 1, 2019; - IAS 39 "Financial Instruments: Recognition and Measurement" (replacement of IFRS 9 "Financial Instruments"); - IAS 40 Investment Property: Changes in the Reclassification of Investment Property (Amendments to IAS 40). Effective for annual periods beginning on or after July 1, 2018; - IFRIC 22 "Foreign Currency Transactions and Measurement". IFRIC 22 clarifies the accounting for transactions involving the receipt of a payment or advance in a foreign currency. The amendment is effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted. Management of the Company does not expect the adoption of these standards and interpretations to have a material impact on its financial statements. The Company does not currently plan to early adopt these standards and interpretations. Key accounting estimates and assumptions The preparation of the financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period and the disclosure of contingent assets and liabilities at the date of the financial statements based on IFRS, IAS and interpretations issued by the International Financial Reporting Interpretations Committee. All recognized assets and liabilities are measured using the valuation policies (with exceptions) prescribed by IFRSs that are current at the balance sheet date. The Company has applied the exemption permitted by IFRS 1 "First-time Adoption of International Financial Reporting Standards", which allows to measure property, plant and equipment at the date of transition to IFRS at fair value and use that fair value as the cost of property, plant and equipment. Management anticipates that the carrying amounts of all of the Company's property, plant and equipment approximate their fair values, and the carrying amounts may be subject to adjustment in the future based on the valuations performed by independent appraisers. In this regard, the Company reviewed the estimates of the previous carrying amounts of property, plant and equipment, land plots and intangible assets and retrospectively applied fair value measurement to these items from 01.01.2016. The Company's management believes that this revision was necessary for an objective assessment of its non-current assets. All changes that had an impact on the financial statements of previous periods were disclosed in Note 5 of these financial statements. Critical accounting judgments made by management The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Due to the inherent uncertainty in these estimates, actual results reported in future periods may differ from those estimates. 3. SIGNIFICANT ACCOUNTING PRINCIPLES AND ACCOUNTING POLICIES Recognition and measurement of financial instruments The Company recognizes a financial asset or liability in the statement of financial position when it becomes a party to the contractual provisions of the instrument. The Company recognizes the following categories of financial instruments: - financial assets; - financial liabilities; - equity instruments; Financial assets comprise: - cash; - receivables for products, goods and services sold; - bill of exchange; - investments in equity instruments - (shares, options); Financial liabilities include: - accounts payable; - bills, bonds and other debt securities payable; - accounts payable for advances received; - liabilities for taxes and other payments. Financial assets and liabilities are initially measured and recognized at fair value. Transactions on the recognition or sale of financial instruments are recognized using settlement date accounting, which is the date on which the asset is transferred to or by the Company. The accounting policies for subsequent measurement of financial instruments are disclosed below. Financial assets Cash and cash equivalents Cash consists of cash on hand and balances with banks. Accounts receivable Receivables are recognized as financial assets (except for receivables that do not collect cash or financial instruments, operating leases and budgetary settlements) and are measured at fair value. If there is an indication that an impairment loss has been incurred, the carrying amount of the asset is reduced by the amount of the loss through the use of an allowance account. The allowance for loan losses is defined as the difference between the carrying amount and the present value of estimated future cash flows. The amount of doubtful debts is determined based on the solvency of individual debtors. Factors that the Company considers when determining whether it has objective evidence that an impairment loss has been incurred include information about trends in debt overdue status and the debtor's ability to pay. For the group of debtors, such factors include negative changes in the payment status of borrowers in the group, such as an increase in the number of overdue payments, negative economic conditions in the industry. The amount of the loss is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognized in profit or loss. When a receivable is uncollectible, it is written off against the allowance for impairment losses. Financial assets available for sale The Company classifies equity investments as available-for-sale financial assets if the percentage of ownership is less than 20%. Subsequent to initial recognition, the Company measures them at fair value. The resultant change in the fair value of an available-for-sale financial asset is recognized directly in equity and recognized in the statement of changes in equity, except for impairment losses and foreign currency losses, until the financial asset is derecognized, at which time the cumulative gain or loss previously recognized in equity is recognized in profit or loss. If there is objective evidence that an available-for-sale financial asset is impaired, the cumulative loss is removed from equity and recognized in profit or loss. Non-marketable shares for which no fair value can be determined are carried at cost, less impairment losses, if any. Financial assets held to maturity The Company's financial assets held to maturity include bonds and promissory notes that it has the positive intention and ability to hold to maturity. After initial recognition, the Company measures them at amortized cost using the effective interest method, less impairment losses, if any. Financial liabilities Bank loans Borrowings from banks are initially recognized at fair value, which is the amount of proceeds received less transaction costs. Subsequently, financial liabilities are stated at amortized cost using the effective interest rate method and any difference between net proceeds and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest rate. Offsetting financial assets and liabilities Financial assets and liabilities are offset when the Company has a legal right to set off the recognized amounts and the Company intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Property, plant and equipment The Company recognizes a tangible asset as a fixed asset if it is held for the purpose of using it in the course of its operations, rendering services, or for administrative, social and cultural functions, with an expected useful life of more than one year and a cost of more than UAH 6,000.00. The Company initially measures property, plant and equipment at cost. After considering the appropriateness of applying any of the retrospective application exemptions provided by IFRS 1 "First-time Adoption of International Financial Reporting Standards", management decided to apply fair value as the appropriate cost of property, plant and equipment. Once recognized as an asset, an item of property and equipment is carried at cost less any accumulated depreciation and any accumulated impairment losses. Any accumulated depreciation or amortization at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset. A revaluation surplus included in equity is transferred to retained earnings when the related asset is derecognized. The Company has decided to apply the following classes of property, plant and equipment for accounting purposes: - land; - buildings and structures; - machinery and equipment; - devices, tools; - office equipment; - other fixed assets. Further expenses The Company does not recognize in the carrying amount of an item of property, plant and equipment the costs of the day-to-day servicing, repairs and maintenance of the item. These expenses are recognized in profit or loss when incurred. Subsequent costs are recognized in the carrying amount of an item of property, plant and equipment when they meet the criteria for recognition as an asset. Depreciation and amortization of property, plant and equipment The Company applies the straight-line method of depreciation. Useful life - the period during which an asset is expected to be available for use is determined by the Company separately for each class: - Buildings and structures are up to 50 years old; - Machinery and equipment - up to 20 years; - Cars - up to 15 years old; - Tools, appliances - up to 10 years; - Office equipment - up to 5 years; - Other fixed assets - up to 10 years. Depreciation of an asset ceases on the earlier of the date on which the asset is classified as held for sale or the date on which the asset is derecognized. Land Land plots owned by the Company are carried at cost. The Company pays land tax on its owned land plots, which is accrued annually to the state authorities based on the total area and purpose of the land plots in accordance with their zoning. Intangible assets Intangible assets are measured at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets are amortized using the straight-line method over their estimated useful lives. Intangible assets that arise from contractual or other legal rights are amortized over the period of validity of those rights. Impairment of property, plant and equipment and intangible assets The Company assesses at each reporting date whether there is any indication that an asset may be impaired. The Company reduces the carrying amount of an asset to its recoverable amount if, and only if, the recoverable amount is less than its carrying amount. Such a decrease is recognized in profit or loss. A loss recognized for an asset in prior periods is reversed if there has been a change in the estimates used to determine the asset's recoverable amount. Once an impairment loss has been recognized for an asset, depreciation and amortization is adjusted in future periods to allocate the revised carrying amount of the property, plant and equipment to its estimated useful life on a systematic basis. Investment property The Company classifies investment property as buildings, premises or parts of buildings held to earn rentals rather than for use in supplying services or for administrative purposes or for sale in the ordinary course of business. If a building comprises part held to earn rentals and part held for use in the Company's operations or for administrative purposes, the parts are accounted for separately if they are available for sale in the ordinary course of business. Investment property is initially measured at cost, including transaction costs. Subsequent to recognition, the property is measured using the fair value model. Gains and losses arising from changes in the fair value of investment property are recognized in profit or loss.

Inventory. Inventories are stated at the lower of cost or net realizable value. Costs incurred in acquiring the inventories and bringing them to their existing location and condition are recognized as follows: Inventories are valued on disposal using the FIFO (First In, First Out) method, i.e. inventories are used in the order in which they are received in the warehouse, and inventories that are first to be released into production (sale, other disposal) are valued at the cost of the first inventory received. Non-current non-current assets held for sale The Company classifies a non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Non-current assets held for sale are measured and reported at the lower of their carrying amount and fair value, less costs to sell. No depreciation is charged on such assets. An impairment loss on the initial or subsequent write-down of an asset to fair value less costs to sell is recognized in the statement of operations. Rent Leases of assets under which the risks and rewards incidental to ownership are effectively retained with the lessor are classified as operating leases. Lease payments under an operating lease are recognized as expenses on a straight-line basis over the lease term. The Company recognizes rental income from operating leases on a straight-line basis over the lease term. Costs, including depreciation, incurred in earning rental income are recognized as expenses. The Company classifies a lease as a finance lease if the terms of the lease transfer substantially all the risks and rewards incidental to ownership to the lessee. All other leases are classified as operating leases. Income taxes Income tax expense represents the amount of current tax expense. Current tax is the amount of income taxes payable (recoverable) on the taxable profit (loss) for the reporting period. The Company's current tax expense is calculated using tax rates enacted or substantively enacted at the balance sheet date. Deferred income tax Deferred income tax is provided using the balance sheet liability method in respect of temporary differences at the end of the period between the carrying amounts of the Company's assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are recognized for all taxable differences, except where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the profit for financial reporting purposes nor the profit (loss) for taxation purposes. The Company recognizes deferred tax assets for all deductible temporary differences and tax loss carry forwards to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and tax loss carry forwards can be utilized, Except where the deferred tax asset arising from deductible temporary differences arises from the initial recognition of an asset or liability in a transaction other than a business combination and, at the time of the transaction, affects neither the profit for financial reporting nor the profit (loss) for tax purposes. The carrying amount of deferred income tax assets is reviewed at each reporting period and reduced to the extent that the Company expects more taxable profits to be available against which all or part of the deferred tax asset can be utilized. Unrecognized deferred income tax assets are reassessed at the end of each reporting period and are recognized to the extent that it is probable that future taxable income will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the year when the liability is realized or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax assets and liabilities are offset if a right of offset exists against current tax assets and a current portion of current income tax liabilities and the deferred income tax amount is attributable to the same taxable entity and is payable to the same taxation authority. Provision. Provisions are recognized when the Company has a present obligation as a result of a past event, 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. A provision is recognized at the amount that the Company can pay to settle the obligation, taking into account risks and uncertainties. Provisions are reviewed at each balance sheet date. Provisions are used for the expenses for which they were recognized. The Company recognizes collateral: - for unused vacation time; - other collateral Employee benefits The Company recognizes short-term employee benefits as an expense and as a liability after deducting any amounts already paid. Employee benefits include: - short-term employee benefits such as wages, salaries, social security contributions, paid annual leave and temporary disability, profit-sharing and bonuses (if they are payable within twelve months after the end of the period); - post-employment benefits, such as pensions, other retirement benefits, life insurance and post-employment medical care; - other long-term employee benefits, including additional long service leave or paid sabbaticals, jubilee payments or other service-related benefits, Long-term disability benefits, profit-sharing, bonuses and deferred compensation if they become payable on or after twelve months after the end of the period; - severance payments. Pension obligations In accordance with Ukrainian legislation, the Company withholds contributions from employees' salaries to the State pension fund. Current contributions are calculated as a percentage of current gross salary payments and are charged in the period in which the associated service is rendered and the related salaries are earned. The Company calculates the contributions required by Ukrainian legislation from the employer as a percentage of current gross salaries and recognizes them in the period in which the related salaries are earned. In addition, the Company does not have a non-state defined contribution pension plan. Income and expenses Revenues and expenses are recognized on an accrual basis. Revenue from services rendered is recognized when earned, regardless of the date of receipt of funds, and is determined based on the stage of completion of the service transaction at the balance sheet date. Dividends are recognized as income when the right to receive payment is established. Expenses incurred in earning income are recognized in the same period as the related income. Borrowing costs Borrowing costs that are not part of the financial instrument and are not capitalized as part of the cost of assets are recognized as an expense. The Company capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Foreign currency transactions Transactions in foreign currencies are accounted for in Ukrainian hryvnia at the official exchange rate of the National Bank of Ukraine at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into UAH at the respective NBU exchange rates at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign exchange differences arising on the translation of monetary items are recognized in profit or loss in the period in which they arise. Exchange differences arising on translation of monetary items are recognized in profit or loss in the period in which they arise. Contingent liabilities and assets The Company does not recognize contingent assets and liabilities. 4. CHANGES IN ACCOUNTING POLICIES In the Company's financial statements for the year ended 31 December 2017, the following paragraphs of the Summary of Significant Accounting Policies have been revised: 1). The approach to applying the fair value of property, plant and equipment as appropriate to the opening balances of the Company's IFRS financial statements prepared in accordance with IFRS 1 "First-time Adoption of International Financial Reporting Standards" was revised in the subsection "Property, Plant and Equipment". The sentence "The Company has not measured property, plant and equipment at fair value at the date of transition to IFRS (01.01.2012) and uses historical cost as the appropriate cost of property, plant and equipment at that date." was deleted. The Company changed the deadline for certain groups of property, plant and equipment, namely: - Buildings and structures - up to 50 years (10-year extension); - Cars - up to 15 years (increase by 5 years); 2). A subsection "Land" was added with the following text: The cost of land plots owned by the Company is recognized at cost. The Company pays land tax on the owned land plots, which is accrued annually to the state authorities based on the total area and purpose of the land plots in accordance with their zoning. 3). A subsection "Inventories" was added with the following text: Inventories are stated at the lower of cost or net realizable value. Costs incurred in acquiring the inventories and bringing them to their existing location and condition are recognized as follows: Inventories are valued on disposal using the FIFO (First In, First Out) method, i.e. inventories are used in the order in which they are received in the warehouse, and inventories that are first to be released for production (sale, other disposal) are valued at the cost of the first inventory received. 4). The following text was added to the subsection "Leases": The Company classifies a lease as a finance lease if the terms of the lease transfer substantially all the risks and rewards incidental to ownership to the lessee. All other leases are classified as operating leases. 5). Added a subsection "Deferred income tax" 5. RESTATEMENT OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 During the reporting year, the Company was forced to make adjustments that affected the year ended December 31, 2016. The adjustments are related to the following events: 1). The Company has applied fair value to intangible assets, land and property, plant and equipment as appropriate for its first IFRS financial statements prepared in accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards. The Company first adopted IFRS for its financial statements for the year ended December 31, 2011, but did not apply this approach. In order to retrospectively restate the opening balances of the financial statements for the year ended 31 December 2017, the Company has performed a valuation of non-current assets as at 01 January 2016 and reflected it in these financial statements. The effect of the restatement on non-current assets amounted to UAH 100,028 thousand, the impact on the Company's retained earnings as a result of the revaluation amounted to UAH 4,641 thousand; 2). The Company corrected the increase in additional paid-in capital due to previous revaluations of intangible assets and real estate, which resulted in a decrease in non-current assets by UAH 43,844 thousand; 3). Capital investments and uninstalled items of property, plant and equipment were recognized as property, plant and equipment in accordance with IAS 16 "Property, Plant and Equipment" in the total amount of UAH 2,257 thousand. 4). As a result of the changes in property, plant and equipment and intangible assets, depreciation adjustments were made in the total amount of UAH 6,309 thousand. These changes affected total expenses in the Statement of Financial Performance, retained earnings and accumulated depreciation and amortization of non-current assets. 5). The allowance for doubtful debts was revised due to the conclusion of a debt transfer agreement with a particular counterparty. The impact on trade receivables and retained earnings of the Company amounted to UAH 29,836 thousand. 6). Adjustments were made to certain source documents received from counterparties with delays, which required them to be made in the respective period. As a result of such adjustments, total expenses, retained earnings, advances paid and trade payables were adjusted. 7). As at 31 December 2016, deferred tax liabilities in the amount of UAH 15,911 thousand were calculated, which also affected income tax income, retained earnings and additional paid-in capital. 8). Liabilities under the credit line were reclassified from non-current to current in accordance with the credit line agreement. 9). As at 31 December 2016, a provision for vacations in the amount of UAH 1,533 thousand was accrued, which also affected the total expenses of the period and retained earnings. These and other less significant adjustments were reflected in the comparative financial statements for the year ended 31 December 2016. The adjustments by financial statement line items are presented in more detail in the following tables: 5.1 Adjustments to the Statement of Financial Position as at 31 December 2016 Line code 31.12.2016 31.12.2016 (Restated) Adjustment Adjustment of assets Intangible assets 1000 32,854,248 (32,606) Capital investments in progress 1005 2,257 - (2,257) Property, plant and equipment 1010 182 728 281 210 98 482 Inventories 1101 16,926 16,646 (280) Accounts receivable for products, goods, works, services 1125 88,949 118,785 29,836 Receivables from settlements: on advances issued 1130 69 121 68 474 (647) with a budget of 1135 8,517 8,399 (118) Other current receivables 1155 33,923 33,849 (74) Prepaid expenses 1170 199 - (199) Other current assets 1190 2,032 1,960 (72) Other items that were not adjusted - 27,236 27,236 - Total adjustments to assets 464,742 556,807 92,065 Adjustments to equity and liabilities Equity in revaluation 1405 11,092 78,851 67,759 Additional paid-in capital 1410 32,781 29 (32,752) Retained earnings (uncovered loss) 1420 (57,890) (20,256) 37,634 Deferred tax liabilities 1500 - 15,911 15,911 Long-term loans from banks 1510 210,705 - (210,705) Short-term loans from banks 1600 - 210,705 210,705 Current accounts payable for: goods, works, services 1615 70 227 72 207 1 980 Current provisions 1660 - 1,533 1,533 Other items that were not adjusted - 197,827 197,827 - Total adjustments to equity and liabilities 464,742 556,807 92,065 5.2 Adjustments to the Statement of Comprehensive Income as at 31 December 2016 Line code Year ended 31.12.16 Year ended 31.12.16 (Restated) Adjustments Revenue adjustments Other operating income 2120 20,625 11,461 (9,164) Other income 2240 8,536 - (8,536) Income tax expense (income) 2300 - 2,266 2,266 Other items not adjusted - 551,341 551,341 Total revenue adjustments 580,502 565,068 (15,434) Adjustment of expenses Cost of sales (goods, works, services) 2050 (440,180) (447,361) (7,181) Administrative expenses 2130 (17,509) (18,244) (735) Selling expenses 2150 (70,309) (72,560) (2,251) Other operating expenses 2180 (47,113) (11,541) 35,572 Other expenses 2250 (23,582) (15,046) 8,536 Other unadjusted items - (14,681) (14,681) Total cost adjustments (613,374) (579,433) 33,941 Net financial result: profit 2350 - - - loss 2355 (32,872) (14,365) 18,507 6. 6. Structure of revenues from the Company's production and commercial activities: 6.1 Revenues from sales Year in which Year ended 12/31/2017, that ended 12/31/2016 Revenue from sales of finished goods 649,382 523,223 Revenue from sales of services 116,168 Revenue from sale of goods 3 27,947 Total 649,501 551,338 6.2 Revenues from sales by business area Year Year ended 12/31/2017, that ended 12/31/2016 Export sales 303,766 179,545 Other sales 345,619 371,625 Rental income 116,168 Total 649,501 551,338 6.3 Other operating, other financial and other income Year in which Year ended 12/31/2017, that ended 12/31/2016 Gain on write-off of liabilities 5,796,407 Operating foreign exchange gain 2,253 2,346 Interest on deposits 40 3 Gain on sale of other current assets - 6,056 Other income 2 018 2 652 Total 10 107 11 464 7. 7. The structure of expenses from the Company's production and commercial activities: 7.1 Cost of sales Year in which Year ended 12/31/2017, that ended 12/31/2016 Materials (437,318) (390,237) Services (27,466) (24,823) Depreciation and amortization (23,106) (16,086) Salaries and wages (17,140) (13,426) Social insurance (3,501) (2,789) Total: (508,531) (447,361) 7.2 Administrative expenses The year under review Year ended 12/31/2017, that ended 12/31/2016 Services (7,537) (7,868) Salaries and wages (6,232) (6,825) Social insurance (1,270) (1,325) Depreciation and amortization (1,217) (329) Materials (374) (1,494) Taxes (635) (403) Total (17,265) (18,244)

7.3 Selling and distribution expenses Year in which Year ended 12/31/2017, that ended 12/31/2016 Transportation services (45,719) (36,888) Advertising services and discounts (42,067) (25,344) Salaries and wages (3,554) (3,182) Materials (1,826) (1,420) Social insurance (716) (668) Depreciation and amortization (551) (402) Other services (4,494) (4,656) Total (98,927) (72,560) 7.4 Other operating and other expenses The year that Year ended 12/31/2017, that ended 12/31/2016 Non-operating foreign exchange losses (7,015) (15,036) Cost of inventories sold (2,385) Doubtful and uncollectible debts (2,047) (3,381) Losses and damage to valuables (251) (1,251) Expenses on purchase and sale of foreign currencies (207) (423) Losses from operating foreign exchange - - Losses on impairment of inventories - (12) Other expenses (1,181) (6,484) Total (13,086) (26,587) 7.5 Financial expenses The year that Year ended 12/31/2017, that ended 12/31/2016 Interest on bank loans (28,705) (14,681) Total (28,705) (14,681) 8. TAXES Current tax payables include: 8.1 Taxes receivable Year in which Year ended 12/31/2017, that ended 12/31/2016 Value added tax 11,031 8,399 Total 11 031 8 399 8.2 Current taxes payable Year in which Year ended 12/31/2017, that ended 12/31/2016 Income tax 444,338 Settlements for other taxes 36 26 Total 480,364 8.3 Income (expense) payable Year that Year ended 12/31/2017, that ended 12/31/2016 Current income tax expense - - Deferred tax expense on temporary differences 1,844 2,266 Total 1,844 2,266 8.4 Reconciliation of income tax deductions The year that Year ended 12/31/2017, that ended 12/31/2016 Profit (loss) before tax (6,906) (16,631) Theoretical tax at the statutory rate 18% - - Tax effect: Deferred tax expense on temporary differences 1,844 2,266 Total 1,844 2,266 The current tax payable is justified by the Company's business activities. Income tax has not been calculated due to repeated losses incurred. In Ukraine, the statutory income tax rate for 2016 is 18% and for 2017 is 18%. These rates were used to calculate the temporary differences at which deferred tax liabilities were accrued. Value added tax has been calculated and paid in accordance with the tax legislation. The statutory value added tax rate in Ukraine for 2016 and 2017 is 20%. 9. DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES Deferred taxes were calculated on temporary income tax differences using the tax rate of 18%. 9.1 Deferred tax liabilities in the Statement of financial position as at 31.12.2016 31.12.2015 Recognized in equity Recognized in profit or loss 31.12.2016 Tax effect of temporary differences, which reduces the amount of taxation: Property, plant and equipment 3,001 - 1,665 4,666 Accounts receivable - - 42 42 Provision for future expenses - - 559,559 Tax effect of temporary differences, which increases the amount of taxation: Revaluation of property and equipment (9,315) (11,863) - (21,178) Total deferred tax assets 3,001 - 2,266 5,267 Total deferred tax liabilities (9,315) (11,863) - (21,178) Deferred tax liabilities recognized (6,314) (11,863) 2,266 (15,911) 9.2 Deferred tax liabilities in the Statement of financial position as at 31.12.2017 31.12.2016 Recognized in equity Recognized in profit or loss 31.12.2017 The tax effect of temporary differences, which changes the amount of taxation: Property, plant and equipment 4,666 - 1,654 6,320 Accounts receivable 559 - (152) 407 Provision for future expenses 42 - 342,384 The tax effect of temporary differences, which increases the amount of taxation: Revaluation of property, plant and equipment (21,178) 19 - (21,159) Total deferred tax assets 5,267 - 1,844 7,111 Total deferred tax liabilities (21,178) 19 - (21,159) Deferred tax liabilities recognized (15,911) 19,1,844 (14,048) 10. INTANGIBLE ASSETS The Group recognizes acquired intangible assets at cost. Intangible assets are subsequently measured in accordance with IAS 38 "Intangible Assets" and are measured at cost less any amortization or impairment losses on the intangible asset. As at 31.12.2017, the Company accounts for software licenses for the total amount of UAH 218 thousand (31 December 2016: UAH 248 thousand) as intangible assets. Intangible assets are amortized on a straight-line basis over the estimated useful lives of intangible assets. The minimum useful life is 2 years. 11. 11. BASIC FACILITIES 11.1 Property, plant and equipment 31.12.2017 31.12.2016 Cost 314,572 314,535 Accumulated depreciation and amortization 58,052 33,325 Net carrying amount 256 520 281 210 Land plots 4,518 4,518 Uncommissioned facilities 1 556 2 232 Buildings and structures 54,465 55,687 Machinery and equipment 183 163 203 634 Vehicles 11,431 13,193 Office equipment and inventory 1,387 1,946 Net carrying amount 256 520 281 210 As at 31.12.2017, property and equipment are carried at the fair value deemed appropriate at the date of the revision of such valuation, namely January 1, 2016, less accumulated depreciation and subsequent accumulated impairment losses, if any. Cost includes the cost of replacing parts of property, plant and equipment and finance costs that are included in the cost of qualifying assets. Depreciation of property, plant and equipment was calculated using the straight-line method. During the reporting period, there were changes in the estimates of the cost of items and useful lives of the Company's property, plant and equipment, which are disclosed in Note 4. Movement of property, plant and equipment by groups is presented in Table 11.2. As at 31 December 2017, property, plant and equipment used as collateral for the credit line amounted to UAH 248,411 thousand at net carrying amount (31 December 2016: UAH 271,053 thousand). 11.2 Movements in property, plant and equipment by Group of operations Plots of land Not commissioned objects under construction and equipment of the machine and Equipment Transport facilities Office equipment and other basic means Total As of January 01, 2016 Cost 4,518 1,720 59,147 24,557 7,952 3,364 101,258 Accumulated depreciation and amortization - - (2,308) (4,699) (2,113) (867) (9,987) Net carrying amount 4,518 1,720 56,839 19,858 5,839 2,497 91,271 Receipts - 653 69 203 236 9 273 199 213 430 Depreciation and amortization expense - - (1) (6,253) (269) - (6,523) Disposals - (141) - - - (12) (153) Depreciation and amortization expense - - - - 2 2 Depreciation and amortization - - (1,220) (13,207) (1,650) (740) (16,817) As of December 31, 2016 Cost 4,518 2,232 59,216 227,793 17,225 3,551 314,535 Accumulated depreciation and amortization - - (3,529) (24,159) (4,032) (1,605) (33,325) Net carrying amount 4,518 2,232 55,687 203,634 13,193 1,946 281,210 Receipts - 316 - 772 159 98 1 345 Disposals - (992) - - (316) - (1,308) Depreciation and amortization expense - - - - 147 - 147 Depreciation and amortization expense - - (1,222) (21,243) (1,752) (657) (24,874) As of December 31, 2017 Cost 4 518 1 556 59 216 228 565 17 068 3 649 314 572 Accumulated depreciation and amortization - - (4,751) (45,402) (5,637) (2,262) (58,052) Net carrying amount 4,518 1,556 54,465 183 163 11,431 1,387 256 520 12. INVESTMENTS 12.1 Inventories 31.12.2017 31.12.2016 Finished goods 22 451 18 316 Raw materials and supplies 20,204 16,646 Semi-finished products 4,218 4,925 Work in progress 3,800 Goods - 698 Total 50 673 40 585 Inventories are carried at cost, which consists of actual costs incurred in acquiring them. For the year ended 31.12.2017, inventories totaling UAH 442,154 thousand were expensed (31 December 2016: UAH 394,402 thousand). There are no restricted inventories. 13. CASH AND CASH EQUIVALENTS 13.1 Cash and cash equivalents 31.12.2017 31.12.2016 Short-term deposits - 2,750 Cash on hand 1 2 Cash at bank in UAH 429,545 Total 430 3,297 As at 31.12.2017 and 31.12.2016, there were no cash assets that would make it impossible or difficult for the Company to use. As at 31.12.2017 and 31.12.2016, cash is not pledged as collateral for the bank credit line. 14. TRADE AND OTHER RECEIVABLES 14.1 Trade receivables 31.12.2017 31.12.2016 Trade receivables 110 674 119 020 Allowance for doubtful accounts (304) (235) Total 110 370 118 785 14.2 Trade receivables past due but not impaired by periods 31.12.2017 31.12.2016 Neither past due nor impaired 86,441 56,446 60-180 days 3 794 11 228 180-365 days 1 088 31 037 more than 365 days 19 047 20 074 Together: 110 370 118 785 Average debt duration, days 318,231 14.3 Allowance for doubtful accounts for trade receivables Year ended 31.12.17 Year ended 31.12.16 At the beginning of the year (235) Write-off of debt 93 Charge to provision (162) (235) At the end of the year (304) (235) 14.4 Other payables 31.12.2017 31.12.2016 Other current receivables 44,586 33,849 Expenses paid in advance 70 192 68 474 Tax credit 2 932 1 960 Allowance for doubtful accounts (1,827) - Total: 115 883 104 283 14.5 Allowance for doubtful debts on other receivables Year ended 31.12.17 Year ended 31.12.16 At the beginning of the year - - Write-off of debt - - Charge to provision (1,827) - At the end of the year (1,827) Accounts receivable are carried in the Company's financial statements at cost as they are short-term and their fair value is not significantly affected by changes in the value of money over time. During the reporting period, the Company did not receive any collateral for receivables. 15. ISSUED CAPITAL AND RESERVES As at 31 December 2017, the Company's share capital was represented by the registered share capital in the amount of UAH 109,851.00 divided into 439,404 ordinary registered shares, which were issued and fully paid in cash at a nominal value of UAH 0.25 per share. As at 31 December 2017, the Company's major shareholder is "PROVIDANT" LIMITED LIABILITY COMPANY (Ukraine), which owns 371,935 shares of the Company (84,64%). The rest of the shares, namely 67,469 shares (15,36%), are held by legal entities and individuals with insignificant shares in the Company's share capital (less than 10%). 15.1 Shareholders Country Number of % shares in total PROVIDANT LLC Ukraine 371,935 84.645337 Business Capital International, LLC USA 2 220 0.505229 OBMICHIVSKI ZORY LLC Ukraine 50 0.011379 "PROVIDENT FINANCE" LLC Ukraine 1 0.000227 Individuals (29 persons) Ukraine 65,198 14.837828 Together: 439 404 100% As at 31 December 2017, 415,875 shares are pledged as collateral for the bank's credit line. The structure of equity is shown in the following table: 15.2 Equity in the Statement of Changes in Equity 31.12.2017 31.12.2016 Issued capital 110 110 Reserves and additional paid-in capital 70,333 78,880 Retained earnings (loss) (16,858) (20,256) Total: 53 585 58 734 16. LOANS AND BORROWINGS 16.1 Loans Currency Maturity date % Rate 31.12.2017 31.12.2016 Short-term loans and borrowings Bank credit line USD 24/04/2018 11%+ 11%+ LIBOR USD 6M 219 606 210 705 Total 219 606 210 705 The bank credit line is secured by property, plant and equipment with a net book value of UAH 248,411 thousand as at 31 December 2017 (31 December 2016: UAH 271,053 thousand). The rights to own the Company's shares in the amount of 415,875 shares are represented by the following. Guarantee of the ultimate beneficiary and related parties. 16.2 Borrowing costs 31.12.2017 31.12.2016 Interest expense on borrowings 28,705 14,681 Loans in foreign currency, USD 28,705 14,681 Loan repayment costs 8,006 16,783 Loans in foreign currency, USD 8,006 16,784 Total: 36 711 31 465

17. 17. In the reporting year, the Company's provisions were classified as non-current - provisions for bonus programs related to trading contracts, and current - provisions for staff leave. Movements in provisions are presented in the table below: 17.1 Provisions in the Statement of Financial Position Provision for unused vacation leave Provision for share-based payment contracts Total As of 12/31/15 (328) - (328) Accruals for the year (1,205) (19,068) (20,273) Utilized during the year - 15,959 15,959 As of 12/31/16 (1,533) (3,109) (4,642) Accruals for the year (184) (22,355) (22,539) Utilized during the year - 23,206 23,206 As of 12/31/17 (1,717) (2,258) (3,975) 18. TRADE PAYABLES AND OTHER LIABILITIES 18.1 Trade payables and other liabilities in the Statement of Financial Position 31.12.2017 31.12.2016 Trade accounts payable 62,598 72,207 Settlements on advances received 14,612 11,433 Payments to staff for labor remuneration 2 020 1 514 Social security payments 481,311 Other liabilities, including 173,719 180,985 Loans and other receivables 152 275 164 301 Tax credit 12 448 12 312 Bank interest payable 8,996 4,365 Other liabilities - 7 Total: 253 430 266 450 19. TRANSACTIONS WITH RELATED PARTIES In accordance with IAS 24 Related Party Disclosures, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. The Company's information on transactions and balances is disclosed in the following categories: Persons (including legal entities) holding shares in the Company; Persons who exercise joint control over the Company or have significant influence over it; Senior management personnel of the Company or its parent company; Other related parties. Transactions with related parties are disclosed in the table below. These transactions represent sales and purchases of goods and services between the Company and related parties, as well as settlements in the form of loans. All transactions are based on bilateral agreements and are settled in cash. In the period from 01.01.2017 to 31.12.2017, there were no collateralized transactions with related parties. 19.1 Income and expenses related to related parties Income from sales to related parties Services and inventories purchased from related parties The year that Year ended 12/31/2017, that Year ended 12/31/2016 that Year ended 12/31/2017, that ended 12/31/2016 Sales of inventories 132 137 154 197 - - Rent 134 134 1 035 2 525 Purchase of property, plant and equipment - - - 170,386 Purchase of inventories - - 17,955 55,929 Payments under share bonuses - - 21,125 5,711 Royalties - - 818 554 Other services - - 14 31 Total 132 271 154 331 40 947 235 136 19.2 Trade and other receivables from related parties 31.12.2017 31.12.2016 Trade receivables 17,495 16,635 Advances paid 65,717 65,764 Other receivables 38,780 28,886 Total 121 992 111 285 19.3 Trade payables and other liabilities to related parties 31.12.2017 31.12.2016 Trade payables (1,019) (5,814) Advances received (10,195) (7,108) Other liabilities (159,203) (144,212) Total (170,417) (157,134) 19.4 Remuneration to key personnel 31.12.2017 31.12.2016 Salaries and wages to management personnel 2,183 1,899 Social expenses related to management personnel 906,788 Total 3,089 2,687 20. RISK MANAGEMENT The Company is exposed to country risk, taxation risk, credit risk, liquidity risk, market risk (including foreign currency risk and interest rate risk) and capital management risk arising from the Company's holdings of financial instruments. These notes provide information about the Company's exposure to each of the above risks, the Company's objectives, policies and procedures for measuring and managing these risks. The Company does not have a formalized risk management system. Nevertheless, the Company's management actively monitors financial and market risks and takes appropriate measures, if necessary. a. Geopolitical environment risk Ukraine has been experiencing political and economic change that has affected, and may continue to affect, the Company's business activities. Ukraine is currently going through a period of great challenges, but if they are successfully overcome, the country could be in a much more favorable position than before. The great combination of natural, intellectual, human and production resources opens up many new opportunities for the country's development in the ever-changing geopolitical arena. Consequently, the future economic stability of Ukraine is substantially dependent upon the effectiveness of economic measures and reforms undertaken together with legal, regulatory, and political developments, all of which are beyond the Company's control. These financial statements reflect management's current assessment of the Ukrainian business environment and the impact on the operations and the financial position of the Company, although the future business environment may differ from management's assessment. b. Risks of the Ukrainian tax system In Ukraine, the Tax Code of Ukraine is the main document regulating various taxes imposed by both central and local authorities. These taxes include value added tax, income tax, personal income tax and other taxes. The Ukrainian tax legislation is often unclear or uncertain. In addition, Ukrainian tax legislation is subject to frequent amendments and changes, which may result in both a favorable environment and unusual challenges for the Company and its operations. Within governmental ministries and organizations, including the tax authorities, differing interpretations of the legislation may exist, creating uncertainty and conflict. Tax declarations/refunds are subject to review and investigation by a number of authorities that are enacted by law to impose significant fines, penalties and interest charges. These circumstances generally create more tax risks in Ukraine as compared to countries with more developed tax systems. In general, the Ukrainian tax authorities may only review tax liabilities of taxpayers within three years after the submission of the relevant tax refund. However, this time limit may be waived or extended under certain circumstances. c. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its obligations under a contract. In the reporting period, the Company's financial assets that are subject to credit risk are represented by: bank balances and trade and other receivables (excluding receivables that are not represented by financial assets). d. Exposure to credit risk The carrying amount of financial assets is the maximum amount that is subject to credit risk. The maximum exposure to credit risk as at 31.12.2017 and 31.12.2016 is as follows: 20.1 Assets in the Statement of Financial Position 31.12.2017 31.12.2016 Trade receivables, net 110,370 118,785 Other receivables 115,883 104,283 Cash and cash equivalents 430 3,297 Total 226,683 226,365 The Company's credit risk is primarily related to trade receivables from customers. The Company's exposure to credit risk is largely dependent on the characteristics of each customer. The Group's credit risk is monitored and analyzed on a case-by-case basis and management believes that credit risk is appropriately reflected by impairment, which directly reduces the carrying amount of receivables. e. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to liquidity management is to ensure, to the extent possible, that the Company will always have sufficient liquidity to meet its liabilities in a timely manner (both under normal and abnormal conditions), avoiding unacceptable losses or risk of damage to the Company's reputation. Liquidity risk management is the responsibility of the Company's management, which has developed an appropriate framework for managing the Company's long-term, medium-term and short-term funding requirements and for monitoring liquidity. The Company manages liquidity risk by maintaining adequate reserves, using bank facilities and borrowings, and by continuously monitoring, forecasting and matching the Company's cash flows to actual cash flows and the maturity profile of its assets and liabilities. Liquidity analysis is a comparison of assets grouped according to their degree of liquidity and arranged in descending order of liquidity with liabilities grouped according to their maturity and arranged in ascending order of maturity. 20.2 Assets in descending order of liquidity 31.12.2017 31.12.2016 Most liquid assets (A1) 430 3,297 Quickly realized assets (A 2) 237,284 231,467 Slowly realized assets (A3) 50 673 40 585 Difficult to sell assets (A4) 256,738 281,458 Total 545,125 557,807 20.3 Liabilities in ascending order of maturity 31.12.2017 31.12.2016 The most urgent liabilities (P1) 80 191 85 829 Short-term liabilities (P2) 395,043 393,224 Long-term liabilities (P3) 16,306 19,020 Equity (P4) 53,585 58,734 Total 545,125 556,807 The table below sets forth the absolute amounts of payment surpluses or deficits as at 31.12.2017 and 31.12.2016: 20.4 Groups of assets and liabilities Surplus (deficit) 31.12.2017 31.12.2016 1 (79 761) (82 532) 2 (157 759) (161 757) 3 34 367 21 565 4 203 153 222 724 The statement of financial position is considered to be absolutely liquid if the following conditions are met: A1 > P1, A2 > P2, A3 > P3, A4 < P4. As at 31.12.2017, the Company's statement of financial position is not liquid as only one of the four liquidity conditions is met. The following table provides an analysis of the Company's liquidity as at 31.12.2017 and 31.12.2016 based on the calculation of liquidity ratios. 20.5 Liquidity ratios 31.12.2017 31.12.2016 Absolute liquidity ratio 0.001 0.007 Quick ratio 0.577 0.561 Current ratio 0.607 0.575 The absolute liquidity ratio shows how much of the company's accounts payable can be repaid immediately. The value of this indicator should not be lower than 0.2. As at 31.12.2017, the Company can immediately repay 0.1% of accounts payable (as at 31.12.2016 - 0.7%). The quick ratio shows the extent to which a company's liquid assets cover its short-term debt. The liquid assets of the company include all current assets of the company, except for inventories. The recommended value of this indicator is from 0.7-0.8 to 1.5. As at 31.12.2017, the Company's liquid assets cover its short-term debt by 57.7% (as at 31.12.2016 - 56.1%). The current ratio shows whether the company has sufficient funds that can be used to repay its short-term liabilities within a year. The recommended value of this indicator is from 1 to 2. As at 31.12.2017 and 31.12.2016, the Company did not have sufficient funds to repay its short-term liabilities. The table below shows an analysis of monetary liabilities grouped on the basis of the remaining contractual maturity as at 31 December 2017 and 31 December 2016: 20.6 Liabilities in the Statement of Financial Position Less than 1 year From 1 to 5 years More than 5 years Total As of 12/31/16 Short-term loans 210,705 - - 210,705 Trade and other payables 266,450 - - 266,450 Total: 477 155 - - 477 155 As of 12/31/17 Short-term loans 219,606 - - 219,606 Trade and other payables 253,430 - - 253,430 Total: 473 036 - - 473 036 The amounts of trade and other receivables disclosed above do not include payroll and tax receivables. In accordance with the Company's plans, its working capital requirements are met both from cash flows from operations and from borrowings, when cash flows from operations are insufficient to meet its obligations in a timely manner. f. Interest rate risk The Group is exposed to fluctuations in interest rates, which may adversely affect the Company's financial results. g. Foreign exchange risk In respect of currency risk, management sets limits on the level of exposure by currency and in total. The positions are monitored. In accordance with IFRS 7 "Financial Instruments: Disclosures", foreign currency risk arises from financial instruments denominated in a currency other than the functional currency and that are monetary in nature; foreign currency translation risks are not taken into account. Currency risk arises primarily from non-functional currencies in which the Company has financial instruments. The Company primarily operates in the following currencies: Ukrainian hryvnia, US dollar, and euro. The following table demonstrates the sensitivity to a reasonably possible change in the exchange rate, with all other variables held constant, of the Company's profit before tax: The table below shows the Company's monetary assets and liabilities at carrying amounts as at 31.12.2016 and 31.12.2017: 20.7 Assets and liabilities at carrying amount UAH (UAH) US dollar (USD) Euro (EUR) Total As of December 31, 2017 Cash and cash equivalents 430 - - 430 Trade receivables 60,197 50,173 - 110,370 Advances paid 70,192 - - 70,192 Total assets 130,819 50,173 - 180,992 Short-term loans - (219,606) - (219,606) Trade payables (61,927) (266) (405) (62,598) Advances received (10,208) (4,404) - (14,612) Other liabilities (164,725) (8,994) - (173,719) Total liabilities (236,860) (233,270) (405) (470,535) Total carrying amount (106,041) (183,097) (405) (289,543) As of 12/31/16 Cash and cash equivalents 3,297 - - 3,297 Trade receivables 85,059 33,726 - 118,785 Advances paid 67,833,641 - 68,474 Total assets 156 189 34 367 - 190 556 Short-term loans - (210,705) - (210,705) Trade payables (71,835) (372) - (72,207) Advances received (11,273) (160) - (11,433) Other liabilities (180,824) (161) - (180,985) Total liabilities (263,932) (211,398) - (475,330) Total carrying amount (107,743) (177,031) - (284,774) Increase/ Decrease Impact on profit before income tax For the year ended 31.12.2017 US dollar 5% (9,155) US dollar -5% 9,155 Euro 5% (20) Euro -5% 20 For the year ended 31.12.2016 US dollar 5% (8,852) US dollar -5% 8,852 Euro 5% Euro -5% - h. Capital management risk The Company's capital management is aimed at ensuring the continuity of the company's operations with a simultaneous increase in profit growth through optimization of the ratio of own and borrowed funds. Management takes measures to ensure that the Company maintains a sufficient capital base to meet its operational and strategic needs and to maintain confidence of other market participants. This is achieved through effective cash management, continuous control of the Company's revenue and profit, as well as planning of long-term investments financed by the Company's operating activities. By implementing these measures, the Company seeks to ensure stable profit growth. 20.8 Calculation of financial indicators Notes 31.12.2017 31.12.2016 Issued capital 15 110 110 Provision (revaluation of assets) 15 70 304 78 851 Additional capital 15 29 29 Retained earnings (loss) 15 (16,858) (20,256) Total equity 53,585 58,734 Collateral 17 3,975 4,642 Short-term loans 16 219 606 210 705 Trade payables 18 62 598 72 207 Other liabilities 18,190,832 194,243 Total amount of borrowed funds 477,011 481,797 Cash and cash equivalents 13,430 3,297 Net debt 476,581 478,500 Total equity and net debt 530,166 537,234 Net debt/Total equity and net debt 0.90 0.89 The Company's accumulated loss in 2017 is characterized by a decrease compared to 2016. Thus, from 31.12.2016 to 31.12.2017, the indicator decreased by UAH 3,398 thousand. The total amount of the Company's equity as at 31.12.2017 decreased by UAH 5 149 thousand compared to 31.12.2016. The total amount of borrowed funds as at 31.12.2017 did not decrease significantly compared to 31.12.2016. As at 31.12.2017, total borrowed funds amounted to UAH 477,011 thousand. 20.9 Calculation of financial indicators Notes Year ended 31.12.17 Year ended 31.12.16 Profit (loss) before tax (6,906) (16,631) Interest paid on borrowings 7 28,705 14,681 EBIT (earnings (loss) before interest and taxes) 21,190 (1,950) Amortization of O3 and intangible assets 11 24,874 16,817 EBITDA (earnings (loss) before interest, taxes, depreciation and amortization) 46,673 14,867 Net debt at the end of the year 476,581 478,500 Net debt at the end of the year / EBITDA 10.21 32.19 EBITDA is an analytical measure equal to earnings before interest, taxes, depreciation and amortization. There were no changes in the approaches to capital management during the reporting periods. In 2017, EBITDA increased by UAH 31,806 thousand compared to 2016. i. Operational risk In 2017, the Company's financial results are characterized as unsatisfactory. In 2017, the loss amounted to UAH 7,515 thousand, which, compared to a loss of UAH 16,303 thousand in 2016, indicates an improvement in the dynamics. EBITDA increased significantly to UAH 46,064 thousand in 2017 compared to 2016. Thus, it can be said that the operational management of the Company's commercial and production activities is more or less efficient. 21. EVENTS AFTER THE REPORTING DATE In accordance with the requirements of IFRS 10 "Events after the Balance Sheet Date", the management reports that there have been no adjusting events after the balance sheet date that could have a significant impact on the Company's assets and liabilities as at 31.12.2017.