1        ORGANISATION AND NATURE OF OPERATIONS

Description of the business

Trader Media East Ltd. (the "Company" or "TME") and its subsidiaries (together, the "Group") are involved in classified advertising mainly for real estate, automotive and recruitment businesses through internet services, daily and weekly newspapers, periodicals and magazines in Russia and the Commonwealth of Independent States ("CIS").

The address of the registered office of TME is 13 Castle Street, St. Helier, Jersey JE4 5UT, Channel Islands.

The Group had the following subsidiaries as at 31 December 201 7   and 201 6 :

	Country of	Geographic	% ownership
Subsidiaries	incorporation	segment	2017	2016
Investment and holding entities
TCM Adria d.o.o. 2	Croatia	Corporate	100%	100%
ASPM Holding B.V. 3	Holland	Corporate	-	51%
Publishing House Pennsylvania Inc. 7	USA	Corporate	100%	100%
Mirabridge International B.V. 7	Holland	Corporate	100%	100%
Publishing International Holding BV 7	Holland	Corporate	100%	100%
LLC Rektcentr 7	Russia	Russia	100%	100%
Operating entities
LLC Pronto Media Holding ("LLC PMH") 1	Russia	Russia	100%	100%
TOO Pronto Akmola 2	Kazakhstan	Kazakhstan	100%	100%
TOO Pronto Akzhol 2	Kazakhstan	Kazakhstan	80%	80%
LLC Utro Peterburga 3	Russia	Russia	-	55%
TOO Pronto Aktau 3	Kazakhstan	Kazakhstan	-	80%
LLC Pronto Baikal 4	Russia	Russia	-	100%
LLC Pronto Kazan 4	Russia	Russia	-	100%
TOO Pronto Ust Kamenogorsk 4	Kazakhstan	Kazakhstan	-	80%
TOO Pronto Aktobe 5	Kazakhstan	Kazakhstan	-	64%
TOO Pronto Atyrau 5	Kazakhstan	Kazakhstan	-	80%
SP Belpronto 6	Belarus	Belarus	60%	60%
LLC ID Impress Media 6	Russia	Russia	91%	91%
LLC Pronto Samara 7	Russia	Russia	100%	100%
LLC Rukom 7	Russia	Russia	100%	100%

1           As announced in the press release dated 22 November 2017, the Board of Directors of LLC PMH, the biggest subsidiary of TME, has decided to cease LLC PMH's digital operations (mainly irr.ru and job.ru) in Russia. There will be limited amount of transactions in 2018 and a legal liquidation process is expected to be started based on the liquidation plan prepared by management.

2           The liquidation processes of these entities were in progress as of 31 December 2017. Related losses were recorded in the consolidated statement of comprehensive income in 2017 (Note 19).

3           These entities have already been liquidated during 2017. Related losses were recorded in the consolidated statement of comprehensive income in 2017 (Note 19).

4           The liquidation processes for these entities were finalised during 2017. Related losses were recorded in the consolidated statement of comprehensive income in 2015.

5           These entities were sold during 2017.

6           As disclosed in Note 4.1. the key remaining operating entities as at 31 December 2017 are LLC ID Impress Media and SP Belpronto.

7           These entities did not have any material operations during 2017 and 2016.

1        ORGANISATION AND NATURE OF OPERATIONS (continued)

Formation of the Group

TME was incorporated in November 2005 in Jersey and then re-registered on 6 February 2006. TME is listed on the London Stock Exchange ("LSE") through Global Depository Receipt shares ("GDRs"). The controlling party of TME is Hürriyet Invest B.V. ("HIBV") which holds 97.29% of its shares as at 31 December 201 7 (31   December 201 6 : 97.29%).

The parent company of HIBV is Hürriyet Gazetecilik ve Matbaacilik A.?. ("Hürriyet"), a company listed on the Borsa ?stanbul A.?. ("BIAS") in Turkey. As at 31 December 2017 the majority shareholder of Hürriyet was Do?an Holding ?irketler Grubu A.?. ("Do?an Holding") which is listed on BIAS and controlled by Ayd?n Do?an, the Do?an Family and companies owned by the Do?an Family ("Ultimate Controlling Party"). As disclosed in Note 26, in April 2018 Do?an Holding announced that it has concluded an agreement with Demirören Medya Yat?r?mlar? Ticaret A.? ("Demiroren") for the sale and transfer of its direct and indirect subsidiaries operating in the publishing and broadcasting segments. The transaction will also include Hürriyet, HIBV and TME. The transaction is subject to various conditions, including, amongst others, approval by the General Assembly of Do?an Holding and regulatory consents. The transaction is expected to be completed during May 2018.

Business and economic environment

The subsidiaries of TME representing its continuing operations operate in Russia and the CIS (the Republic of Belarus and Kazakhstan). Russia and the CIS have been experiencing political and economic change, which has affected and will continue to affect the activities of enterprises operating in this environment. Adverse changes arising from systemic risks in global finance and the economy could slow or disrupt the Russian economy, adversely affect the Group's access to capital and cost of capital and, more generally, its business, results of operations, financial condition and prospects. Consequently, operations in Russia and the CIS involve risks which do not typically exist in other markets.

Operating environment of the Group

Russian Federation. The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations (Note 23). The Russian economy was growing in 2017, after overcoming the economic recession of 2015 and 2016. The economy has been negatively impacted by low oil prices, ongoing political tension in the region and international sanctions against certain Russian companies and individuals. The financial markets continue to be volatile. This operating environment has a significant impact on the Group's operations and financial position. Management is taking necessary measures to ensure sustainability of the Group's operations. However, the future effects of the current economic situation are difficult to predict and management's current expectations and estimates could differ from actual results.

Republic of Belarus .   The Republic of Belarus displays certain characteristics of an emerging market. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations. The financial markets continue to be volatile in particular in Europe and Russia, which is the main export market for Belarus, and other risks could have significant negative effects on the Belorussian financial and corporate sectors. The future economic development of the Republic of Belarus is dependent upon external factors and internal measures undertaken by the government to sustain growth, and to change the tax, legal and regulatory environment. Management believes it is taking all necessary measures to support the sustainability and development of its operations in the current business and economic environment. However, the future effects of the current economic situation are difficult to predict and management's current expectations and estimates could differ from actual results.

Kazakhstan. Kazakhstan displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil, gas prices and other minerals. Low prices on oil and other minerals and exchange rate volatility could have a negative impact on the economy of Kazakhstan, including a decrease in liquidity. During 2015, the National Bank and the Government of Kazakhstan decided to stop supporting the exchange rate of the tenge and implementing a new monetary policy based on the inflation targeting mode, abolishing the currency corridor and moving to a freely floating exchange rate. Thus, there is uncertainty about the exchange rate of the tenge and future actions of National Bank and Government, as well as the impact of these factors on the economy of Kazakhstan. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations.

2        APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

The following new and revised standards and interpretations have been adopted by the Group in the current year and have affected the amounts reported and disclosures in the consolidated financial statements.

2.1.    Adoption of New or Revised Standards and Interpretations

The following amended standard became effective for the Group from 1 January 2017:

·           Disclosure Initiative - Amendments to IAS 7 (issued on 29 January 2016 and effective for annual periods beginning on or after 1 January 2017). The disclosures were provided in Note 17 and Note 20.

·           Recognition of Deferred Tax Assets for Unrealised Losses - Amendment to IAS 12 (issued on 19 January 2016 and effective for annual periods beginning on or after 1 January 2017). The amendment did not have a material impact on the Group.

·           Amendments to IFRS 12 included in Annual Improvements to IFRSs 2014-2016 Cycle (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2017). The amendments did not have a material impact on the Group.

2.2.      New Accounting Pronouncements

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 201 8 or later, and which the Group has not early adopted.

IFRS 9 "Financial Instruments: Classification and Measurement" (amended in July 2014 and effective for annual periods beginning on or after 1 January 2018). Key features of the new standard are:

·           Financial assets are required to be classified into three measurement categories: those to be measured subsequently at amortised cost, those to be measured subsequently at fair value through other comprehensive income (FVOCI) and those to be measured subsequently at fair value through profit or loss (FVPL).

·           Classification for debt instruments is driven by the entity's business model for managing the financial assets and whether the contractual cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried at amortised cost if it also meets the SPPI requirement. Debt instruments that meet the SPPI requirement that are held in a portfolio where an entity both holds to collect assets' cash flows and sells assets may be classified as FVOCI. Financial assets that do not contain cash flows that are SPPI must be measured at FVPL (for example, derivatives). Embedded derivatives are no longer separated from financial assets but will be included in assessing the SPPI condition.

·           Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to present changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity instrument is held for trading, changes in fair value are presented in profit or loss.

·           Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The key change is that an entity will be required to present the effects of changes in own credit risk of financial liabilities designated at fair value through profit or loss in other comprehensive income.

·           IFRS 9 introduces a new model for the recognition of impairment losses - the expected credit losses (ECL) model. There is a 'three stage' approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that entities will have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables.

·           Hedge accounting requirements were amended to align accounting more closely with risk management. The standard provides entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all hedges because the standard currently does not address accounting for macro hedging.

2        APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued)

Management has made an analysis of the Group's financial assets and financial liabilities as at 31 December 2017 and on the basis of the facts and circumstances existing at that date, as well as the forecasting information, concluded that the adoption of the new standard from 1 January 2018 will impact the classification of financial instruments but will not have a significant impact on the classification of assets and liabilities in the Group's consolidated financial statements, and that the amount of expected credit losses as at 1 January 2018 insignificantly differs from the amount of provisions recognised in the consolidated financial statements as at 31 December 2017.

IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective for the periods beginning on or after 1 January 2018). The new standard introduces the core principle that revenue must be recognised when the goods or services are transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognised if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalised and amortised over the period when the benefits of the contract are consumed.  The Group has assessed the impact of IFRS 15, Revenue from Contracts with Customers, and expects that the standard will have no significant effect, when applied, on its consolidated financial statements.

Amendments to IFRS 15, Revenue from Contracts with Customers (issued on 12 April 2016 and effective for annual periods beginning on or after 1 January 2018). The amendments do not change the underlying principles of the Standard but clarify how those principles should be applied. The amendments clarify how to identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract; how to determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and how to determine whether the revenue from granting a licence should be recognised at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard. The Group has assessed the impact of Amendments to IFRS 15, Revenue from Contracts with Customers, and expects that they will have no significant effect, when applied, on its consolidated financial statements.

IFRS 16, Leases (issued on 13 January 2016 and effective for annual periods beginning on or after 1 January 2019). The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The Group is currently assessing the impact of the new standard on its consolidated financial statements.

IFRS 17 "Insurance Contracts" (issued on 18 May 2017, not yet been endorsed by the EU). IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence, it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single principle-based standard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts at: (i) a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a group of contracts is or becomes loss-making, an entity will be recognising the loss immediately. The Group is currently assessing the impact of the new standard on its consolidated financial statements.

2        APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued)

IFRIC 22 "Foreign currency transactions and advance consideration" (issued on 8 December 2016, not yet been endorsed by the EU).  This interpretation considers how to determine the date of the transaction when applying the standard on foreign currency transactions, IAS 21. The interpretation applies where an entity either pays or received consideration in advance for foreign currency-denominated contracts. The interpretation specifies that the date of transaction is the date on which the entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the Interpretation requires an entity to determine the date of transaction for each payment or receipt of advance consideration. The Group is currently assessing the impact of the interpretation on its consolidated financial statements.

IFRIC 23 "Uncertainty over Income Tax Treatments" (issued on 7 June 2017, not yet endorsed by the EU). IAS 12 specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. The interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. An entity should determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments based on which approach better predicts the resolution of the uncertainty. An entity should assume that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations. If an entity concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the effect of uncertainty will be reflected in determining the related taxable profit or loss, tax bases, unused tax losses, unused tax credits or tax rates, by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty. An entity will reflect the effect of a change in facts and circumstances or of new information that affects the judgments or estimates required by the interpretation as a change in accounting estimate. Examples of changes in facts and circumstances or new information that can result in the reassessment of a judgment or estimate include, but are not limited to, examinations or actions by a taxation authority, changes in rules established by a taxation authority or the expiry of a taxation authority's right to examine or re-examine a tax treatment. The absence of agreement or disagreement by a taxation authority with a tax treatment, in isolation, is unlikely to constitute a change in facts and circumstances or new information that affects the judgments and estimates required by the Interpretation. The Group is currently assessing the impact of the interpretation on its consolidated financial statements.

The following other new pronouncements are not expected to have any material impact on the Group when adopted:

·           Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB), not yet endorsed by the EU.

·           Amendments to IFRS 2, Share-based Payment (issued on 20 June 2016, not yet endorsed by the EU).

·           Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4 (issued on 12 September 2016 and effective, depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that choose to apply temporary exemption option, or when the entity first applies IFRS 9 for entities that choose to apply the overlay approach).

·           Transfers of Investment Property - Amendments to IAS 40 (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018), not yet endorsed by the EU.

·           Annual Improvements to IFRSs 2014-2016 cycle ? Amendments to IFRS 1 an IAS 28 (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018).

·           Prepayment Features with Negative Compensation - Amendments to IFRS 9 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019), not yet endorsed by the EU.

·           Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019, not yet endorsed by the EU.

·           Annual Improvements to IFRSs 2015-2017 cycle - Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued on 12 December 2017 and effective for annual periods beginning on or after 1 January 2019), not yet endorsed by the EU.

2        APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued)

·           Plan Amendment, Curtailment or Settlement - Amendments to IAS 19 (issued on 7 February 2018, not yet endorsed by the EU).

Unless otherwise described above, the new standards and interpretations are not expected to affect significantly the Group's consolidated financial statements.

3        SIGNIFICANT ACCOUNTING POLICIES

3.1.    Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU") and interpretations issued by the IFRS Interpretations Committee ("IFRIC") applicable to companies reporting under IFRS.

The accounting policies set out in Note 3 have been consistently applied to all reporting periods.

3.2.    Basis of preparation

3.2.1.    General

The consolidated financial statements have been prepared under the historical cost convention.

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates, and also requires management to exercise judgment in the process of applying the Group's accounting policies. Those areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are discussed in Note 4.

Management prepared these consolidated financial statements on a going concern basis. Refer to Note 4 for uncertainties relating to events and conditions that may cast a significant doubt upon the Group's ability to continue as a going concern.

3.2.2.    Restatement of prior period information

Comparative information in the consolidated statement of comprehensive income and related disclosures for 2016 were amended to present only continued operations.  

3.2.3. Change of unit of measure

Starting from 2017 all amounts in the consolidated financial statements including comparative information are presented in thousands of USD.  Previously all amounts were presented in millions of USD.

3.3.       Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Group and its subsidiaries. Control is achieved when the Group:

 

·           Has power over the investee;

·           Is exposed, or has rights, to variable returns from its involvement with the investee; and

·           Has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of comprehensive income and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests which are not owned, directly or indirectly, by the Company. Non-controlling interest forms a separate component of the Group's equity.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated; unrealised losses are also eliminated unless the cost cannot be recovered. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

3.3.1.    Changes in the Group's ownership interests in existing subsidiaries

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control over a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

3.3.2.    Company Only Financial Statements

Under Article 105(11) of the Companies (Jersey) Law 1991 the directors of a holding company need not prepare separate financial statements (i.e. Company only financial statements) if consolidated accounts for the Company are prepared, unless required to do so by the members of the Company by ordinary resolution. The members of the Company had not passed a resolution requiring separate financial statements and, in the Directors' opinion, the Company meets the definition of a holding company. As permitted by law, the Directors have elected not to prepare separate financial statements.

 

 

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.4.    Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the consolidated statement of comprehensive income as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

·           Deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; and

·           Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations ("IFRS 5") are measured in accordance with that standard.  

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss in the consolidated statement of comprehensive income as a bargain purchase gain.

When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss in the consolidated statement of comprehensive income. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to the profit or loss in the consolidated statement of comprehensive income where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

The non-controlling shareholders' share in the net assets and results for the period of subsidiaries are separately classified in the consolidated statement of financial position and statements of comprehensive income as non-controlling interest.

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.5.      Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see Note 3.4 above) less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination, and represents the lowest level within the Group at which the goodwill is monitored for internal management purposes.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill   allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income in profit and loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the resulting gain or loss on disposal in the consolidated statement of comprehensive income.

3.6.      Assets held for sale and discontinued operations

In accordance with guidance contained in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use.

This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

Discontinued operations represent parts of the Group which either are classified as held-for-sale or have been disposed of, and whose activities and cash flows represent a geographical segment or major line of business and can be treated as separable from the Group's activities and cash flows.

3.7.      Segment reporting

Management has determined the Group's reportable operating segments based on the reports reviewed and used to make strategic decisions by the Executive Committee, which is the Group's chief operating decision-maker. The Executive Committee monitors the business from a geographic perspective as the risks and returns in geographical areas reflecting the primary source of risks and returns. The Group's reportable operating segments have been disclosed in Note 6.

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.8.      Related party transactions

For the purposes of these consolidated financial statements, 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 as defined by IAS 24 Related Party Disclosures. In considering related party relationships, attention is directed to the substance of the relationship, and not merely the legal form.

Transactions with related parties for the years ended 31 December 201 7 and 201 6 and outstanding amounts as at those dates are disclosed in Note 20.

3.9.      Revenue recognition

The Group's primary source of revenues is online revenue. Online revenue is primarily earned through the sale of advertising space on the Group's websites, derived principally from classified ads and display ads, including professional ads, consumer ads and banners. The related revenues are recognised at the time when the advertisement is published online, with an appropriate portion deferred where the advertisement has been scheduled to run over multiple periods.

Other types of online revenue include (1) subscription or one-off access fees to content and information provided through the Group's websites which are recognised over the period of usage and (2) revenues generated from paid line usage for connecting buyers and sellers or other related services, which are recognised upon provision of the service.

Offline revenue consists mainly of print revenue, licensing fees (royalties) and circulation revenue. Print revenue is earned from the sale of advertising space in the Group's publications. Private and professional classified advertisements and display advertisements are published on a daily, weekly and monthly basis. The related revenues are recognised at the time the advertisement is published. Revenues related to advertisements appearing on multiple occasions are deferred and recognised as the relevant advertisements are run.

Licensing fees represent a percentage of advertising and circulation revenues collected by the franchisees and are recognised in the period when earned.

Circulation revenues, whereby publications are sold via third party vendor, are recognised at the time when the publications are sold to the third party vendor. Circulation revenues are earned mainly through kiosks, newsstands and other points of sales, with such vendors having one month to return any unsold publications. Revenue recognised initially is offset by an estimate of expected returns, based on the historical track record of such returns.

3.10.     Employee benefits

Wages, salaries, contributions to the state pension and social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits (such as health services) are accrued in the year in which the associated services are rendered by the employees of the Group. The Group has no legal or constructive obligation to make pension or similar benefit payments beyond the unified social tax.

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.11.     Foreign currencies

The functional currency of the Company is the USD. The Group uses the USD as its presentational currency as management considers this to be the most meaningful currency for the users of the consolidated financial statements given the number of different local currencies in use across the Group. All Group entities use their local currency as their functional currency. In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in the consolidated statement of comprehensive income in the period in which they arise. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated statement of comprehensive income within 'financial expenses, net'.

Exchange rates are taken from the official daily closing rate per the Central Bank of Russian Federation, National Bank of the Republic of Belarus and National Bank of Kazakhstan. Russian Rouble ("RUB"), Belorussian Rouble ("BYR") and Kazakhstan Tenge ("KZT") are not readily convertible outside of their countries. Accordingly, the translation of amounts recorded in these currencies into the USD should not be construed as a representation that such currency amounts have been, could be or will in the future be converted into the USD at the exchange rate shown or at any other exchange rate.

For the purposes of presenting these consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into the USD using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Components of equity are translated at the historic rates.  

Income and expenses items for 2017 and 2016 of Russian, Belarussian and Kazakhstan subsidiaries were translated at average annual exchange rates as there were no significant fluctuations.

The exchange rates at which the assets, liabilities and operations of the Group were translated into the presentation currency are presented below:

Reporting date spot rates	31 December 201 7	31 December 201 6
RUB/USD	57.60	60.66
BYR/USD	1.9727	1.9585
KZT/USD	332.33	333.95
EURO/USD	0.84	0.95

 

Average rates	2017	2016
RUB/USD	58.30	67.03
BYR/USD	1.9324	1.9882
KZT/USD	326.00	342.05
EURO/USD	0.89	0.90

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss in the consolidated statement of comprehensive income.

In addition, in relation to a partial disposal of a subsidiary that includes a foreign operation that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in the consolidated statement of comprehensive income. For all other partial disposals (i.e. partial disposals of associates or joint arrangements that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income.

3.12.     Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the consolidated statement of comprehensive income in the period in which they are incurred.

3.13.     Leasing

Assets acquired under finance lease agreements are capitalised at the inception of the lease at fair value of the leased asset or at present value of the minimum lease payments, whichever is the lower, less accumulated depreciation. Minimum lease payments are treated as comprising capital and interest elements.

Lease payments are apportioned between the finance charges and capital redemption so as to achieve a   constant rate of interest on the remaining balance of the liability.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

3.14.     Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation and provision for impairment, where required. Depreciation is provided using the straight-line method based on the estimated useful lives of the assets. Assets lives and residual values are reviewed annually at each balance date. The depreciation periods for property, plant and equipment, which approximate the economic useful lives of assets concerned, are as follows:

Buildings	10-50 years
Furniture and fixtures	3-10 years
Leasehold improvements	2-20 years

Assets held under finance leases and leasehold improvements are depreciated over the shorter of the term of the related lease or the useful life of the asset. Gains or losses on the sale of property, plant and equipment are recognised in the period of disposal of the asset within non-operating income/ (expenses), net.   Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Costs of minor repairs and day-to-day maintenance are expensed when incurred. Cost of replacing major parts or components of property, plant and equipment items are capitalised and the replaced part is retired.

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

At the end of each reporting period management assesses whether there is any indication of impairment of property, plant and equipment. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset's fair value less costs of disposal and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in the consolidated statement of comprehensive income to the extent it exceeds the previous revaluation surplus in equity. An impairment loss recognised for an asset in prior years is reversed where appropriate if there has been a change in the estimates used to determine the asset's value in use or fair value less costs of disposal.

3.15      Investment property

Investment property is property held by the Group to earn rental income or for capital appreciation, or both and which is not occupied by the Group. Earned rental income is recorded in the consolidated statement of  comprehensive income for the year within other operating income/(expenses), net.

Investment properties are stated at cost less accumulated depreciation and provision for impairment, where required. Depreciation is provided using the straight-line method based on the estimated useful lives of the assets. The depreciation period for the investment properties, which approximates to the economic useful lives, is 40 years.

If any indication exists that investment properties may be impaired, the Group estimates the recoverable amount as the higher of value in use and fair value less costs to sell. The carrying amount of an investment property is written down to its recoverable amount through a charge to profit or loss for the year. An impairment loss recognised in prior years is reversed if there has been a subsequent change in the estimates used to determine the asset's recoverable amount. Subsequent expenditure is capitalised only when it is probable that future economic benefits associated with the item will flow to the Group, and the cost can be measured reliably. All other repairs and maintenance costs are expensed when incurred. If an investment property becomes owner-occupied, it is reclassified to property, plant and equipment.

3.16.     Intangible assets

3.16.1. Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if any.

The useful lives of the Group's intangible assets acquired separately, substantially all of which resulted from business combinations except for computer software, have been assessed as follows:

Trade names	20 years
Software	3-5 years
Other intangible assets	2-5 years

Certain trade names have indefinite useful lives as it is not practical to determine their useful lives. As disclosed in Note 13 all tradenames, software and other intangible assets were impaired as of 31 December 2017 due to decision of ceasing operations of LLC PMH.

 

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.16.2. Internally-generated intangible assets - research and development expenditure

The Group's internally-generated intangible assets relate to website development costs. Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

·           the technical feasibility of completing the intangible asset so that it will be available for use or sale;

·           the intention to complete the intangible asset and use or sell it;

·           the ability to use or sell the intangible asset;

·           how the intangible asset will generate probable future economic benefits;

·           the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

·           the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in the consolidated statement of comprehensive income in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation based on their useful lives of 2-5  years, and accumulated impairment losses, if any, on the same basis as intangible assets that are acquired separately.

3.16.3. Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, if any, on the same basis as intangible assets that are acquired separately.

3.16.4. Derecognition of intangible assets

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the consolidated statement of comprehensive income when the asset is derecognised.

3.17.     Impairment of intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

 

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which th e estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the consolidated statement of comprehensive income. As described in Note 13 goodwill, tradenames, software and other intangible assets were fully impaired as of 31 December 2017 due to ceased operations of LLC PMH.

3.18. Inventories

Inventories are recorded at the lower of cost and net realisable value. Inventories are mainly composed of paper raw materials and finished goods. The cost of finished goods comprises raw material, direct labour, other direct costs and related production overheads. The cost of inventories is determined on the weighted average basis.

3.19. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of certain resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

3.20. Cash and cash equivalents

Cash and cash equivalents are defined as cash available in bank accounts or in hand and highly liquid investments, including bank deposits, with a maturity term of less than three months. Cash and cash equivalents are carried out at amortised cost using effective interest rate method.

3.21. Short-term financial investments

Short-term financial investments are represented by bank deposits, with a maturity term of more than three months but less than one year.

3.22. Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instruments. Depending on their classification financial instruments are carried at fair value or amortised cost as described below.

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 the 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.

Valuation techniques such as discounted cash flow models or models based on recent arm's length transactions or consideration of financial data of the investees are used to measure fair value of certain financial instruments for which external market pricing information is not available.

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the consolidated statement of comprehensive income.

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Amortised cost is the amount at which the financial instrument was recognised at initial recognition less any principal repayments, plus accrued interest, and for financial assets less any write-down for incurred impairment losses. Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to the maturity amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amortised discount or premium (including fees deferred at origination, if any), are not presented separately and are included in the carrying values of the related items in the consolidated statement of financial position.

The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the net carrying amount of the financial instrument.

3.23.     Financial assets

The Group's financial assets are classified into loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

3.23.1. Trade receivables

Trade receivables are recognised initially at fair value and are subsequently carried at amortised cost using the effective interest method.

3.23.2. Impairment of financial assets

Impairment losses are recognised in the consolidated statement of comprehensive income when incurred as a result of one or more events ("loss events") that occurred after the initial recognition of the financial asset and which have an impact on the amount or timing of the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If the Group determines that no objective evidence exists that impairment was incurred for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics, and collectively assesses them for impairment. The primary factors that the Group considers in determining whether a financial asset is impaired are its overdue status and realisability of related collateral, if any. The following other principal criteria are also used to determine whether there is objective evidence that an impairment loss has occurred:

·           the counterparty experiences a significant financial difficulty as evidenced by its financial information that the Group obtains;

·           the counterparty considers bankruptcy or a financial reorganisation; or

·           there is adverse change in the payment status of the counterparty as a result of changes in the national or local economic conditions that impact the counterparty.

Impairment losses are always recognised through an allowance account to write down the asset's carrying amount to the present value of expected cash flows (which exclude future credit losses that have not been incurred) discounted at the original effective interest rate of the asset.

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 recognised (such as an improvement in the debtor's credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account through profit or loss for the year.

Uncollectible assets are written off against the related impairment loss provision after all the necessary procedures to recover the asset have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off are credited to the impairment loss account within the profit or loss for the year.

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.23.3. Derecognition of financial assets

The Group derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expire or (b) the Group has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement whilst (i) also transferring substantially all the risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all the risks and rewards of ownership but not retaining control.

Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose additional restrictions on the sale.

3.24. Financial liabilities

3.24.1. Borrowings and other payables

Borrowings and other payables, including trade payables, are initially recognised at fair value and subsequently are measured at amortised cost using the effective interest method.

3.24.2. Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the consolidated statement of comprehensive income.

3.25. Dividends

Dividends on ordinary shares are recognised in equity in the period in which the dividends are approved by the Group's shareholders. Dividend income is recognised when the right to receive payment is established.

3.26. Income taxes

Income taxes have been computed in accordance with the laws of the country of incorporation of the respective companies of the Group.

Deferred tax assets and liabilities are recognised for the expected future tax consequences of existing differences between the financial and tax reporting bases of assets and liabilities, as well as loss carry forwards, using enacted tax rates expected to be in effect at the time these differences are realised.

The effect on deferred tax assets and liabilities of a change in tax rates is recognised in the consolidated statement of operations and comprehensive income in the period in which the change is substantively enacted. Deferred tax assets are written-down at such time as, based on available evidence, it is more likely than not   that the deferred tax assets will not be realised. In making such determination, the Group considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.

Deferred tax is charged or credited in the consolidated statement of comprehensive income, except when it relates to items charged or credited in other comprehensive income or equity, in which case the deferred tax is also recorded within other comprehensive income or equity.

Deferred tax assets and deferred tax liabilities related to income taxes levied by the same taxation authority are offset to the extent there is a legally enforceable right to set off current tax assets against current tax liabilities, and the Group intends to settle its current tax assets and liabilities on a net basis.

3        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.27. Earnings per share

Earnings per share are determined by dividing the net loss attributable to the equity holders of the Company by the weighted average number of participating shares outstanding during the reporting year.

3.28. Share capital

Ordinary shares with discretionary dividends are both classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Any excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in equity.

4        CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

In the application of the Group's accounting policies, which are described in Note 3, the management of the Group is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

4.1.    Going concern

The consolidated financial statements have been prepared on the going concern basis, which means they were prepared on the assumption that the Group will continue operations, realisation of assets, and settlement of liabilities and commitments in the normal course of business.

The Group incurred a net loss of USD 65,675 for the year ended 31 December 201 7 as well as negative operating and net cash flows, and as at the year-end had a working capital deficit of USD 7,479 (31 December 201 6 : USD 6,8 46 ) and negative net assets of USD 14,828.

As described in Note 19 to the consolidated financial statements, on 22 November 2017 the Group announced its decision to cease digital operations of its major subsidiary, LLC PMH. Furthermore, operations of the Group subsidiaries in Kazakhstan have also been ceased during 2017.

Despite business restructuring described above, the Group intends to maintain operating activities of LLC SP Belpronto (Belarus), which is involved in classified advertising, and LLC ID Impress (Russia), which is  mainly involved in event organisation in commercial real estate business.

In order to improve financial performance of the operating subsidiaries and working capital situation, management intends to continue focusing on cost reduction activities, including reduction of personnel costs and general administrative expenses. The Group finances its operations though bank borrowings guaranteed by Hürriyet and other financial support from Hürriyet and Dogan Holding as and when required.

Management recognises that access to external funds is critical to support the ongoing operations. The parent of the Group, Hürriyet, has confirmed its ongoing support to the Group via a letter of support for the foreseeable future.

Based on the measures described above and the commitment of Hürriyet to support the Group, management has a reasonable expectation that the Group has adequate resources to continue its remaining activity for the foreseeable future.

 

4        CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES (CONTINUED)

4.2     Identification of reportable operating segments

Note 6 discloses the Group's reportable operating segments. The identification of reportable operating segments in accordance with the provisions of IFRS 8 Operating Segments requires judgement. In making their judgement, management considered the independence of Group entities in terms of cash inflows and outflows and the aggregation level at which results are reviewed by the Group's chief operating decision maker.

4.3     Useful lives of intangible assets

The management estimates the useful lives of certain trade names as indefinite.

As described in Note 13 all tradenames, software and other intangible assets were impaired as of 31 December 2017 due to ceased operations of LLC PMH.

Had these intangible assets' useful lives been considered finite, with a useful life of 20 years, the Group's amortisation charge and loss before tax for the year ended 31 December 201 6 would have increased by USD 1,253, with net assets decreasing by the same amount.

4.4     Impairment testing of goodwill and intangible assets with indefinite useful lives

Determining whether goodwill and intangible assets with indefinite useful lives are impaired requires an estimation of the value in use of the cash-generating units to which goodwill and intangible assets with indefinite useful lives have been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

The carrying amount of goodwill and intangible assets with indefinite useful lives as at 31 December 201 7 were completely impaired (carrying value as at 31 December 201 6 : USD 32,353 and USD 25,064, respectively). Details of the goodwill and intangible assets with indefinite useful lives impairment testing performed by the Group are set out in Note 13.

4.5.    Deferred tax asset recoverability

Determining whether recognised deferred tax assets, specifically those arising on losses carried forward, are recoverable, requires an estimation of the future cash flows and taxable profits expected to arise from the subsidiary in which the associated deferred tax asset has been recognised. Where the actual future cash flows and taxable profits are less than expected, a material write-off of deferred tax assets may arise. As at 31 December 201 7 the management of the Group did not recognise a deferred tax asset on tax losses carried forward and other deductible temporary differences in the amount of USD 18,106 (31 December 201 6 : deferred tax assets on tax losses carried forward in the amount of USD 15,029). As described in Note 8, the tax losses carry forward were mainly incurred by LLC PMH. Since LLC PMH ceased its business, there is no expectation of using tax losses carry forward and other deductible temporary difference in the future. Therefore management has not recognised deferred tax assets relating to the tax losses carry forward and other temporary differences as at 31 December 2017. Deferred tax assets on tax losses carried forward as at 31 December 2016 was not recognised as there was an operating loss for the year ended 31 December 2016 and management considered that it would be more appropriate to follow the more conservative approach consistent with prior years and not to recognise deferred tax assets.

5        CAPITAL AND FINANCIAL RISK MANAGEMENT

5.1.      Capital risk management

The Group's objectives when managing capital are to safeguard the ability of the Group in respect of continued operations to continue as a going concern while maximising the return to shareholders.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity of the Group.

The Directors monitor the capital structure of the Group on the basis of the gearing ratio, calculated as net debt divided by total capital (defined as total equity plus net debt).The gearing ratio at the end of each reporting period was as follows:

	31 December	31 December
	201 7	201 6
Total bank borrowings (Note 17 )	10,165	4,369
Total loans due to shareholders (Note 2 0 )	3,643	1,069
Less: Cash and cash equivalents (Note 15)	(653)	(1,060)
Net debt	13,155	4,378
Total equity	(14,828)	48,991
Total capital	(1,673)	53,369
Gearing ratio	(786.3%)	8.2%

The change in the gearing ratio from 2016 to 2017 as depicted above has resulted from recognition of impairment loss on goodwill, intangible and tangible assets due to the fact that LLC PMH's operations were ceased.

5.2.       Financial risk management

The Group is exposed to variety of financial risks. These risks include interest rate risk, credit risk, liquidity risk and foreign currency risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance.

Financial risk management is carried out by management under policies approved by the Board of Directors.

5.2.1. Interest rate risk

The Group funds its working capital requirements through short-term credit facilities and additional financing received from the parent company, and places surplus cash, if any, on short-term floating rate interest bearing deposits. Management actively manages the Group's short-term deposits to ensure the most favourable interest rates are obtained.

The Group has some floating rate borrowings as disclosed in Note 17 , therefore is exposed to the effects of the fluctuations in the prevailing level of market interest rates on its financial position and cash flows. However, management does not consider the Group to be materially exposed to the fluctuations in the interest rates.

5.2.2. Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Group uses a combination of information supplied by independent rating agencies, other publicly available financial information, and its own trading records to rate the creditworthiness of its major customers.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Group does not have significant credit risk exposure to any single counterparty.

Further information about trade receivables is presented in Note 1 4 .

5        CAPITAL AND FINANCIAL RISK MANAGEMENT (CONTINUED)

5.2.3. Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group's short-, medium- and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate cash reserves and borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The ability to meet the contractual repayments of financial liabilities is managed by monitoring working capital levels and maintaining the availability of adequate committed funding lines from high quality lenders. Further steps taken by management to address liquidity deficit is disclosed in Note 4 of the consolidated financial statements.

The following tables detail the Group's remaining contractual maturity for financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows. The contractual maturity is based on the earliest date on which the Group may be required to pay.

At 31 December 201 7	Up to 3 months	3 to 6 months	6 to 12 Months	1-3 years	Total
Borrowings	701	1, 374	586	10,080	12,741
Trade payables	1,421	-	-		1,421
Borrowings due to shareholders	-	-	3,862		3,862
	2,122	1,374	4,448	10,080	18,024
At 31 December 2016	Up to 3 months	3 to 6 months	6 to 12 Months	1-3 years	Total
Borrowings	691	1,033	2,970	-	4,694
Trade payables	1,899	-	-	-	1,899
Borrowings due to shareholders	-	-	1,133	-	1,133
	2,590	1,033	4,103	-	7,726

Further information regarding the borrowings is described in Note 17.

5.2.4. Foreign currency risk

The Group's subsidiaries undertake transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. In respect of foreign currency risk, management sets limits on the level of exposure by currency and in total. The positions are monitored regularly. The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

	Assets		Liabilities
	31 December	31 December	31 December	31 December
	201 7	201 6	201 7	201 6
USD	188	110	(1,486)	(104)
Euro	31	9	(693)	-

5        CAPITAL AND FINANCIAL RISK MANAGEMENT (CONTINUED)

The following table details the Group's sensitivity to a 20% increase and decrease in the USD and Euro against the relevant foreign currencies. 20% is the sensitivity rate used when reporting foreign currency risk internally to the Executive Committee and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 20% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates a decrease in loss or increase in equity where the USD or Euro weakens 20% against the relevant currency. For a 20% strengthening of the USD or Euro against the relevant currency, there would be a comparable impact on the loss or equity, and the balances below would be negative.

USD impact	201 7	201 6
Loss before tax/ equity	260	-
Euro impact	201 7	201 6
Loss before tax/ equity	132	-

6        SEGMENT INFORMATION

Information reported to the chief operating decision maker ("key management") for the purposes of resource allocation and assessment of segment performance focuses on the geographical location in which the Group's revenues are derived, with revenues being further analysed as derived from offline or online sources. All revenues reported are external.

Segment performance is primarily analysed by the key management at the Adjusted EBITDA level. Adjusted EBITDA is defined by the Group as net profit/(loss) before financial income, financial expense, income tax, depreciation and amortisation, provision for doubtful receivables and other receivables, impairment charges, gain on sale of property, plant and equipment, loss on disposal of subsidiaries and certain other non-recurring gains and losses.

As at 31 December 201 7 and 201 6 the Group has three reportable segments under IFRS 8 Operating Segments (Russia, Belarus and Kazakhstan).

The following is an analysis of the Group's revenue, results, assets and liabilities by reportable segment as at and for the year ended 31 December 201 7 :

	Russia			Belarus		Kazakhstan	Sub-total	Corporate and unallocated	Total
	continued	discontinued		continued		discontinued
Online revenues	177	4,147		573		40	4,937	-	4,937
Offline revenues	1,527	32		471		171	2,201	-	2,201
Total revenues	1,704	4,179		1,044		211	7,138	-	7,138
Adjusted EBITDA	(63)	(4,052)		(4)		(153)	(4,272)	(1,144)	(5,416)
	Russia		Belarus		Kazakhstan		Sub-total	Corporate and unallocated	Total
Non-current assets	302		43		10		355	-	355
Current assets	849		193		10		1,052	320	1,372
Total assets	1,151		236		20		1,407	320	1,727
Total liabilities	13,354		110		87		13,551	3,004	16,555

6        SEGMENT INFORMATION (CONTINued)

As announced in the press release dated 22 November 2017, Board of Directors of LLC PMH, the biggest subsidiary of the Group, has decided to cease its digital operations (mainly irr.ru and job.ru) in Russia. The operations in Kazakhstan have been ceased during 2017. The Kazakh subsidiaries were in the process of liquidation as of 31 December 2017. The consolidated statement of comprehensive income of these subsidiaries was presented based on the discontinued operations basis.

Although, the Group is intending to sell the assets of these subsidiaries, their sale is not probable within twelve months from 31 December 2017, as a result no assets and liabilities of these subsidiaries are classified as held for sale.

The following is an analysis of the Group's revenue, results, assets and liabilities by reportable segment as at and for the year ended 31 December 2016:

	Russia		Belarus	Kazakhstan	Sub-total	Corporate and unallocated	Total
	continued	discontinued	continued	discontinued
Online revenues	185	5,320	678	204	6,387	-	6,387
Offline revenues	1,487	126	899	870	3,382	-	3,382
Total revenues	1,672	5,446	1,577	1,074	9,769	-	9,769
Adjusted EBITDA	(206)	(2,814)	74	20	(2,926)	(865)	(3,791)

 

	Russia		Belarus	Kazakhstan			Sub-total		Corporate and unallocated		Total
Intangible assets	27,411		-	-			27,411		-		27,411
Goodwill	32,283		-	70			32,353		-		32,353
Other assets	1,803		334	245			2,382		903		3,285
Total assets	61,497		334	315			62,146		903		63,049
Total liabilities	12,258		216	147			12,621		1,437		14,058

Royalty fee received by the Group included in offline revenues equals to USD 30 (2016: USD 131).

A reconciliation of adjusted EBITDA to loss before tax for each reporting period is as follows.

	2017			2016
	continued	discontinued	Total	continued	discontinued	Total
Adjusted EBITDA for reportable segments	(67)	(4,205)	(4,272)	(132)	(2,794)	(2,926)
Corporate and unallocated adjusted EBITDA	(1,144)	-	(1,144)	(865)	-	(865)
Depreciation and amortisation	(38)	(1,170)	(1,208)	(44)	(759)	(803)
Provision for doubtful receivables	38	(272)	(234)	(110)	(416)	(526)
Interest expenses	(17)	(1,015)	(1,032)	(2,003)	(255)	(2,258)
Foreign exchange gain/ (loss), net	231	89	320	(99)	(1,379)	(1,478)
Impairment loss on goodwill	-	(33,712)	(33,712)	(824)	(4,954)	(5,778)
Impairment loss on intangible and tangible assets	-	(29,164)	(29,164)	-	-	-
Loss on disposal of subsidiaries	-	(7)	(7)	(238)	(100)	(338)
Other income/ (loss), net	(16)	49	33	40	(16)	24
Loss before income tax	(1,013)	(69,407)	(70,420)	(4,275)	(10,673)	(14,948)

6        SEGMENT INFORMATION (CONTINued)

Reportable segments' assets are reconciled to total assets in each reporting period as follows.

	31 December 201 7	31 December 201 6
Segment assets for reportable segments	1,407	62,146
Corporate and unallocated:
Cash and cash equivalents	179	690
Prepayments and other assets	141	213
Total assets	1,727	63,049

The Group does not have any single customer, which represents 10% or more of the total revenues.

Reportable segments' liabilities are reconciled to total liabilities in each reporting period as follows.

	31 December 201 7	31 December 201 6
Segment liabilities for reportable segments	13,551	12,621
Corporate and unallocated:
Amounts due to shareholders	2,850	1,069
Other payables	154	368
Total liabilities	16,555	14,058

7        EXPENSES

Expenses from continuing operations, by nature, for the years ended 31 December 201 7 and 201 6 are as follows:

	201 7	201 6
Personnel costs	1,170	1,375
Consultancy	606	713
Event organisation	459	472
Management fees (Note 20)	415	276
Raw material costs:
- Printing and ink	274	374
- Paper	36	67
Social taxes	294	215
Commissions	272	300
Rent	151	242
Electricity, water and office expenses	98	96
Advertising	49	51
Depreciation and amortisation charges (Notes 9, 10 and 1 2 )	38	44
Transportation, storage and travel	24	38
Communication	20	27
Provision for doubtful receivables and accounts receivable write-off	(5)	110
Other	94	-
Total expenses	3,995	4,400

 

 

8        INCOME TAXES

8.1.      Income tax recognised in the consolidated statement of comprehensive income

	201 7	201 6
Current tax expense	5	14
Deferred tax (credit)/ expense	(4,750)	354
Total income tax (credit)/ expense	(4,745)	368

 

Income tax (credit)/ expense is attributed to	201 7	201 6
Income tax credit attributable to discontinued operations (Note 19)	(4,860)	249
Income tax expenses attributable to continuing operations	115	119
Total income tax (credit)/ expense	(4,745)	368

The Group primarily pays corporate income tax in the Russian Federation, the Republic of Belarus and Kazakhstan, where the rates of corporate income tax throughout 201 7 and 201 6 were 20%, 18% and 20%, respectively. The Russian Federation is considered by management to be the main jurisdiction in which income tax is paid. The income tax expense for the year can be reconciled to the accounting loss as follows:

	201 7	201 6
Loss before tax from continuing operations	(1,015)	(4,275)
Loss before tax from discontinued operations	(69,405)	(10,673)
	(70,420)	(14,948)
Income tax benefit calculated at statutory rate of Russian Federation of
20% (201 6 : 20%)	(14,084)	(2,990)
Effect of different tax rates of subsidiaries operating in other jurisdictions	(8)	-
Tax effect of expenses not deductible for tax purposes
Impairment of goodwill	6,742	1,156
Other non-deductible expenses	73	53
Unrecognised deferred tax assets on tax loss for the year	1,521	1,899
Unrecognised other potential deferred tax assets arising on intangible assets	406	-
Deferred tax assets write-off	368	-
Other	237	250
Income tax (credit)/ expense	(4,745)	368

8.2.      Deferred tax balances

Differences between IFRS and statutory taxation regulations in the respective countries where the Group's entities operate give rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. The movements in deferred tax balances during the reporting periods were as follows:

2017	Opening balance	Recognised in profit or loss	Currency translation differences	Closing balance
Deferred tax (liabilities)/ assets relating to:
Property, plant & equipment,
intangible assets and investment property	(5,143)	5,351	(273)	(65)
Doubtful debts	302	(318)	16	-
Other	147	(155)	8	-
	(4,694)	4,878	(249)	(65)
Tax losses	125	(128)	4	1
	(4,569)	4,750	(245)	(64)

 

2016	Opening balance	Recognised in profit or loss	Currency translation differences	Closing balance
Deferred tax (liabilities)/ assets relating to:
Property, plant & equipment,
intangible assets and investment property	(4,349)	83	(877)	(5,143)
Doubtful debts	178	88	36	302
Other	439	(380)	88	147
	(3,732)	(209)	(753)	(4,694)
Tax losses	166	(145)	104	125
	(3,566)	(354)	(649)	(4,569)

8        INCOME TAXES (CONTINUED)

Deferred tax assets and liabilities are presented net within the individual subsidiaries of the Group where the legal right of offset exists. The following is the analysis of deferred tax assets/ (liabilities) presented in the consolidated statement of financial position:

	31 December 201 7	31 December 201 6
Deferred tax assets	1	125
Deferred tax liabilities	(65)	(4,694)
	(64)	(4,569)

The Group has unrecognised potential deferred tax assets in respect of unused tax loss carry forwards and other temporary differences (arising on provisions, accruals and intangible assets) of USD 90,531 (31 December 201 6 : USD 75,147). The losses were incurred by LLC PMH. Since LLC PMH ceased its business, there is no expectation of using tax losses carry forward in the future, management has not recognised deferred tax assets relating to the tax losses carry forward.

9        PROPERTY, PLANT AND EQUIPMENT

The movements of property, plant and equipment and related accumulated depreciation for the reporting periods were as follows.

	Buildings	Furniture and fixtures	Leasehold improvements	Assets under construction	Total
Cost
Balance at 1 January 201 6	588	2,557	53	16	3,214
Additions	-	63	-	11	74
Disposals	(96)	(587)	-	(18)	(701)
Transfers to investment property	(366)	-	-	-	(366)
Disposal of subsidiaries	-	(65)	-	-	(65)
Currency translation impact	108	291	10	1	410
Balance at 31 December 201 6	234	2,259	63	10	2,566
Additions	-	10	-	-	10
Disposals	(26)	(924)	-	(8)	(958)
Disposal of subsidiaries	-	(40)	-	-	(40)
Impairment loss	(217)	(923)	(66)	(2)	(1,208)
Currency translation impact	9	64	3	-	76
Balance at 31 December 201 7	-	446	-	-	446

                                                                                                                                 

Accumulated depreciation
Balance at 1 January 201 6	231		2,169	38	-	2,438
Charge	20		163	16	-	199
Disposals	(28)		(552)	-	-	(580)
Transfers to investment property	(93)		-	-	-	(93)
Disposal of subsidiaries	-		(45)	-	-	(45)
Currency translation impact	45-		265	9	-	319
Balance at 31 December 201 6	175		2,000	63	-	2,238
Charge	2		100	-	-	102
Disposals	(13)		(862)	-	-	(875)
Disposal of subsidiaries	-		(28)	-	-	(28)
Impairment loss on tangible assets	(171)		(899)	(66)	-	(1,136)
Currency translation impact	7		59	3	-	69
Balance at 31 December 201 7	-		370	-	-	370
Net carrying value
As at 31 December 201 6	59	259		-	10	328
As at 31 December 201 7	-	76		-	-	76

 

9        PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Depreciation charge amounting to USD 102 for the year ended 31 December 201 7 has been included in general administrative expenses (year ended 31 December 201 6 : USD 199). Depreciation charge for the year ended 31 December 201 7 relates to continued operations in the amount of USD 28 and discontinued operations in the amount of USD 74 (year ended 31 December 2016: continued operations - USD 41, discontinued operations - USD 158).

Net impairment loss amounting to USD 72 for the year ended 31 December 2017 is due to ceased operations of LLC PMH.

10      INVESTMENT PROPERTY

The Group has started to use the office building in Samara to earn rental income in 2016. The movements of investment property and related accumulated depreciation for the reporting periods were as follows.

	Buildings
Cost
Balance at 1 January 201 6	-
Transfers	366
Balance at 31 December 2016	366
Currency translation impact	25
Balance at 31 December 2017	391
Accumulated depreciation
Balance at 1 January 201 6	-
Transfers	93
Balance at 31 December 2016	93
Charge	10
Currency translation impact	10
Balance at 31 December 201 7	113
Net carrying value
As at 31 December 201 6	273
As at 31 December 201 7	278

The fair value of the investment property as at 31 December 2017 was assessed as USD 557 using the best available market rate for the similar office buildings in Samara.

Depreciation charge amounting to USD 10 for the year ended 31 December 201 7 has been included in general administrative expenses and relates to continuing operations.

11      GOODWILL

The movements in goodwill during the years ended 31 December 2017 and 2016 are as follows:

	2017	2016
Balance as at 1 January	32,353	31,935
Goodwill impairment (Note 13 and 19)	(33,712)	(5,778)
Currency translation impact	1,359	6,196
Balance as at 31 December	-	32,353

Goodwill impairment for the year ended 31 December 201 7 relates fully to discontinued operations in the amount of USD 33,712 (year ended 31 December 2016: discontinued operations - USD 4,954, continued operations - USD 824).

Further information on the Group's annual impairment testing for goodwill can be found in Note 13.

12      OTHER INTANGIBLE ASSETS

The movement of other intangible assets and related accumulated amortisation for the reporting periods is as follows.

	Trade names	Software	Other intangibles	Total
Cost
Balance at 1 January 2016	24,051	13,911	2,479	40,441
Additions	-	111	1,168	1,279
Disposals	(2)	(100)	(409)	(511)
Transfers	-	237	(177)	60
Disposal of subsidiaries	-	(54)	(62)	(116)
Currency translation impact	4,855	425	490	5,770
Balance at 31 December 2016	28,904	14,530	3,489	46,923
Additions	-	2	1,293	1,295
Disposals	-	(320)	(75)	(395)
Disposal of subsidiaries	-	(1)	-	(1)
Impairment loss	(30,395)	(2,205)	(4,815)	(37,415)
Currency translation impact	1,534	125	185	1,844
Balance at 31 December 2017	43	12,131	77	12,251
Accumulated amortisation
Balance at 1 January 2016	2,479	13,788	1,988	18,255
Charge	71	277	256	604
Disposals	(1)	(100)	(393)	(494)
Transfers	-	(41)	64	23
Disposal of subsidiaries	-	(54)	(59)	(113)
Currency translation impact	508	351	378	1,237
Balance at 31 December 2016	3,057	14,221	2,234	19,512
Charge	84	200	812	1,096
Disposals	-	(320)	(75)	(395)
Disposal of subsidiaries	-	(1)	-	(1)
Impairment loss	(3,263)	(2,048)	(3,012)	(8,323)
Currency translation impact	165	79	118	362
Balance at 31 December 2017	43	12,131	77	12,251
Net carrying value
As at 31 December 2016	25,847	309	1,255	27,411
As at 31 December 2017	-	-	-	-

The carrying value of intangible assets with indefinite useful lives (i.e. trade names) included above were written-off as of 31 December 2017 due to ceased operations of LLC PMH (31 December 2016: USD 25,064). Further information on the Group's annual impairment testing for intangible assets with indefinite useful lives can be found in Note 1 3 .

The amortisation charge of USD 1,096 for the year ended 31 December 2017 has been included in general administrative expenses (2016: USD 604).The amortisation charge for the year ended 31 December 201 7 relates fully to discontinued operations in the amount of USD 1,096 and included within Note 19 in the consolidated financial statements (year ended 31 December 2016: continued operations - USD 3, discontinued operations - USD 601).

Net impairment loss amounting to USD 29,092 for the year ended 31 December 2017 is due to ceased operations of LLC PMH and accounted under discontinued operations (Note 19).

The additions to other intangibles amounting to USD 1,293 in 2017 (2016: USD 1,168) are mainly related to the website development costs which were fully impaired during 2017 due to ceased operations of LLC PMH .

 

 

13      IMPAIRMENT TESTING OF GOODWILL AND OTHER INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES

As at 31 December 2017 goodwill and other intangible assets were fully impaired due to the decision to cease digital operations of LLC PMH. The amount of the impairment booked for 2017 amounted to USD 62,876 relates to impairment of goodwill amounted to USD 33,712, impairment of other intangible assets amounted to USD 29,092 and impairment of tangible assets amounted to USD 72 (as at 31 December 2016: impairment of goodwill amounted to USD 5,778).

As at 31 December 2016, goodwill and other intangible assets with indefinite useful lives were allocated for impairment testing purposes to the following cash-generating units:

·           Russia

·           Kazakhstan.

As at 31 December 2016, the carrying amounts of goodwill and other intangible assets with indefinite useful lives were allocated to the cash-generating units as follows:

	Goodwill	Other intangibles
Russia	32,283	25,064
Kazakhstan	70	-
	32,353	25,064

The recoverable amounts of the Russia and Kazakhstan cash-generating units are determined based on value in use calculations which use cash flow projections based on the forecasts approved by the directors covering a five-year period with a WACC discount rate of 18.0% per annum for Russia and 18.9% per annum for Kazakhstan.

For impairment testing as at 31 December 2016 cash flow projections during the projected period 2017-2021 are based on an expected EBITDA margin of -59.9% improving to 53.1% for Russia and -6.8% improving to 9.3% for Kazakhstan.

The cash flows beyond that five-year period have been extrapolated using steady 4.7% and 5.4% per annum growth rates for Russia and Kazakhstan, respectively and an EBITDA margin of 47.1% for Russia and 8.2% for Kazakhstan, which management considers to be reasonable and achievable long-term average growth rates for the online advertising markets in Russia and Kazakhstan.

As a result of the cash flow projections based on the above assumptions, an impairment loss of USD 5,778 was recorded in the consolidated financial statements as at 31 December 2016.

In performing the annual impairment testing, management considered certain scenarios which would have an adverse impact on the recoverable amounts of the cash-generating units and which, in management's view, are reasonably possible. The impact of each of these sensitivities has been assessed as follows (with all other assumptions held constant):

	31 December 2016
An increase in the WACC to 19%	6.2
An increase in the WACC to 20%	11.6
Not meeting revenue forecast by 20% in each year	14.9
Terminal growth rate decrease to 3.7%	3.9

14      TRADE RECEIVABLES

The details of trade receivables as at 31 December 2017 and 2016 are as follows:

	31 December 2017	31 December 2016
Trade receivables	1,783	2,020
Less: allowance for doubtful debts	(1,527)	(1,510)
Net trade receivables	256	510

The fair values of trade receivables approximate their carrying values.

As at 31 December 2017 trade receivables that are neither past due nor impaired amounted to USD 142 (31 December 2016: USD 399). These trade receivables relate to a number of independent customers for whom there is no recent history of default.

As at 31 December 2017, trade receivables of USD 114 (31 December 2016: USD 111) included in the above amounts were past due but not impaired. These past due but not impaired relate to a number of independent customers for whom there is no recent history of default. The aged analysis of these trade receivables is as follows:

	31 December 2017	31 December 2016
Up to 3 months past due	114	111
	114	111

As at 31 December 2017, trade receivables of USD 1,527 (31 December 2016: USD 1,510) were impaired. The individually impaired receivables relate to the customers experiencing economic difficulties. The aged analysis of these receivables is as follows:

	31 December 2017	31 December 2016
Up to 3 months	51	37
3 to 6 months	102	207
Over 6 months	1,374	1,266
	1,527	1,510

The movement in the allowance for doubtful debts is as follows:

	2017	2016
Balance as at 1 January	1,510	890
Impairment losses recognised on receivables	284	526
Reversal of prior year provision due to collection	(50)	-
Amounts written off during the year as uncollectable	(296)	(49)
Amounts relating to impaired receivables disposed of with a subsidiary	-	(36)
Foreign exchange translation difference	79	179
Balance as at 31 December	1,527	1,510

Trade receivables and related allowances were written off when there is no expectation of recovery. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable detailed above.

During 2017, net impairment losses recognised on receivables amounting to USD 234 (2016: USD 526), including the reversal of prior year provision due to collection in 2017 in the amount of USD 50 and impairment losses recognised on receivables in the amount of USD 284.  The net impairment losses recognised on receivables amounting to USD 234  (2016 : 526) comprise USD 272 (USD: 416) thousand related to discontinued operations and included within general administrative expenses in Note 19 and reversal of prior year provision in the amount of USD 38 (2016: impairment loss in the amount of USD 110) related to continued operations.

15      CASH AND CASH EQUIVALENTS

Cash and cash equivalents as at 31 December 2017 and 2016 are as follows:

	31 December 2017	31 December 2016
Cash at bank and in hand	553	951
Short-term time deposits	1 00	109
	6 53	1,060

Short-term time deposits are comprised of USD denominated deposits with a 0.71% p.a. interest rate (31 December 2016: 0.54% p.a.) and a maturity of less than 3 months.

The credit quality of bank balances payable on demand may be summarised based on Fitch ratings as follows:

	31 December 2017	31 December 2016
Neither past due nor impaired
BB-	181	695
BBB-	330	210
B-	80	77
BB+	62	60
BB	-	14
B	-	4
	653	1,060

16      SHARE CAPITAL

The Company's shareholding structure is as follows:

	31 December 2017			31 December 2016
	Share	Number of		Share	Number of
	capital	shares	Share, %	capital	shares	Share, %
HIBV	74,719	466,979,413	97.29	74,719	466,979,413	97.29
Other	108	671,574	0.14	108	671,574	0.14
Other GDR	1,973	12,349,013	2.57	1,973	12,349,013	2.57
Share capital	76,800	480,000,000	100.00	76,800	480,000,000	100.00

In 2017 no capital transactions were performed by the Group.

On 19 July 2016, the Directors of the Group authorised the Capital Reduction by means of a special resolution under Article 61(1A) of the Companies (Jersey) Law 1991, that the share premium account maintained in respect of the ordinary shares in the Group (referred to in the Group's consolidated financial statements as "Additional paid-in capital") be cancelled by transferring the sum of USD 696,822 standing to the credit of the said share premium account to the credit of the accumulated losses with the opening balance of USD 746,693.

In August 2016 the Group announced an offering to the holders of the Group's GDR of the right to subscribe for new ordinary shares in the capital of the Group and an offering to the holders of ordinary shares on the register of members of the Group of the right to subscribe for new shares at the rate of 21 US cents per share. The total number of shares issued was 420 million with the nominal value of 16 US cents per share, increasing the share capital by USD 67,200 and additional paid-in capital by USD 21,000. The debt to HIBV amounting to USD 87,292 was transferred to the equity as a result of the share capital increase. Remaining amount of USD 908 was received in cash and used for meeting the working capital needs and for general corporate purposes.

All issued ordinary shares are fully paid.

17      BORROWINGS

	Currency	Annual interest rate (actual rate as at 31 December 2017)	Maturity	31 December 2017	31 December 2016
Yapi Credi Bank	RUB	12.25%	21 November 2018 - 31 December 2018	356	-
Deniz Bank CJSC	RUB	11.13% (Mosprime + 2.75%)	1 February 2018 - 24 January 2019	1,302	-
Deniz Bank CJSC	RUB	12.25%	14 June 2018 - 30 September 2020	8,507	-
Deniz Bank CJSC	RUB	12.63% (Mosprime + 2.0%)	5 May 2017	-	1,236
Deniz Bank CJSC	RUB	13.38% (Mosprime + 2.75%)	16 November 2017	-	2,061
Deniz Bank CJSC	RUB	13.41% (Mosprime + 2.95%)	22 December 2017	-	1,072
				10,165	4,369

All bank loans are guaranteed by Hürriyet. The fair value of borrowings approximate their carrying amount.

Borrowings in the amount of USD 7,639 thousand, which were classified as long-term liabilities in the consolidated statement of financial position relate to LLC PMH. These borrowings are due to be settled in 2019-2020 and management intends to settle them based on the contractual maturity , notwithstanding the operations of LLC PMH were ceased  and are classified as discontinued operations.

During 2017, the Group opened new credit lines totalling for the total amount of RUB 520 million (equivalent of USD 9,028) in Yapi Kredi Bank. The Group obtained tranches during 2017 totalling RUB 350 million (equivalent of USD 6,016) in Yapi Kredi Bank with maturity of less than one year and RUB 565 million (equivalent of USD 9,691) in Deniz Bank CJSC. During 2017, the Group settled its debts in the amount of USD 5,664 to Yapi Kredi Bank and USD 4,546 to Deniz Bank CJSC.

In January 2016, the Group repaid its external debts including interests to CEB in the amount of USD 35,215 and to Deniz Bank CJSC in the amount of USD 2,469 using the additional loan of USD 37,658 obtained from HIBV. During 2016 the Group received additional loans in the amount of USD 1,571.

During 2016, the Group opened new credit lines for the total amount of RUB 300 million (equivalent of USD 4,946) in Deniz Bank CJSC and obtained tranches totalling RUB 265 million (equivalent of USD 4,369) with maturity of less than one year.

As at 31 December 2016 the Group's loans to CJSC Deniz Bank are fully secured by the guarantee of   HIBV.

As at 31 December 2017 the Group has committed but not accessed borrowing facilities in the amount of USD 3,012 (31 December 2016: USD 577).

The movement of borrowing principal for the reporting periods were as follows:

	Borrowings
Borrowings at 1 January 2016	37,692
Cash inflow	4,369
Interests accrued	499
Cash outflow	(37,470)
Interests paid	(499)
Currency translation difference	(222)
Borrowings at 31 December 2016	4,369
Cash inflow	15,707
Interests accrued	1,008
Cash outflow	(10,210)
Interests paid	(1,008)
Currency translation difference	299
Borrowings at 31 December 2017	10,165

18      TRADE PAYABLES

Trade payables as at 31 December 2017 and 2016 are as follows:

	31 December 2017	31 December 2016
Trade payables	1,421	1,899
	1,421	1,899

The average maturity of trade payables is 3 months. The Group has financial policies in place to ensure all payables are settled within the contractual credit terms.

The fair values of trade payables approximate their carrying values.

19      DISCONTINUED OPERATIONS

As announced in the press release dated 22 November 2017, Board of Directors of LLC PMH, the biggest subsidiary of the Group, has decided to cease LLC PMH's digital operations (mainly irr.ru and job.ru) in Russia. The operations in Kazakhstan have been ceased during 2017 as well and Kazakh subsidiaries were in the process of liquidation as of 31 December 2017.

Although the legal liquidation process has not yet been initiated; however, management has classified LLC PMH's operations as discontinued based on their conclusion that the operation meets the criteria set out in IFRS 5, in particular:

·      Operations of LLC PMH represent a separate major line of the Group's business in Russia;

·      Major part of LLC PMH's employees were laid-off and received severance payments as at
31 December 2017;

·      The Group derecognised major part of non-current assets related to LLC PMH, including goodwill and other intangible assets amounting to USD 33,712 and USD 29,092, respectively (Note 13). As at 31 December 2017 the Group does not have any material non-current assets related to LLC PMH.

The results of discontinued operations are as follows:

	For the years ended
	31 December	31 December
	2017	2016
Discontinued operations
Revenue	4,390	6,520
Cost of sales	(3,141)	(4,301)
Gross profit	1,249	2,219
Marketing, selling and distribution expenses	(2,640)	(2,495)
General administrative expenses	(4,051)	(3,277)
Other operating expenses	(309)	(416)
Other operating income	106	-
Operating loss	(5,645)	(3,969)
Interest expenses	(1,015)	(255)
Foreign exchange gain/ (loss), net	89	(1,379)
Impairment loss on goodwill (Note 11 and 13)	(33,712)	(4,954)
Impairment loss on intangible and tangible assets (Note 9,12 and 13)	(29,164)	-
Loss on disposal of subsidiaries	(7)	(100)
Gain/ (loss) on sale of property, plant and equipment	49	(16)
Loss before income tax	(69,405)	(10,673)
Income tax credit/(expense)	4,860	(249)
Net loss for the year from discontinued operations	(64,545)	(10,922)

An analysis of the cash flows of discontinued operations is as follows:

Net cash used in operating activities	(6,429)	(5,510)
Net cash used in investing activities	(1,164)	(1,243)
Net cash generated by/(used in) financing activities	6,867	(33,101)
Net decrease in cash and cash equivalents	(726)	(39,854)

20      RELATED PARTY BALANCES AND TRANSACTIONS

Details of transactions between the Group and other related parties are disclosed below.

Related parties may enter into transactions in which unrelated parties would not enter. Transactions between related parties may be on different terms, conditions and amounts than transactions between unrelated parties.

Management has assessed the Group's related parties as being Do?an Holding, Hürriyet, and the Group's shareholders, key management personnel and Board members, along with their families and any entities under their control.

Interest expense for the year:

 

	2017	2016
HIBV	19	1,977
Hürriyet	8	-
	27	1,977

 

Purchase of services for the year:

 

	2017	2016
Hürriyet	415	276
	415	276

 

The following payables were outstanding at the end of the reporting period:

 

	31 December 2017	31 December 2016
Hürriyet	693	276
	693	276

This balance was included in trade payables line in the consolidated statement of financial position.

The following borrowings from shareholders were outstanding at the end of the reporting period:

	31 December 2017	31 December 2016
HIBV	2,265	1,069
Hürriyet	1,378	-
	3,643	1,069

The movement of borrowings for the reporting periods were as follows:

Borrowings at 31 December 2016		1,069
Cash inflow		2,422
Interests accrued		27
Currency translation impact		125
Borrowings at 31 December 2017				3,643

 

As disclosed in Note 17 in the consolidated financial statements during 2016 the Group obtained loan in the amount of USD 37,658 from HIBV which was used to repay external debts to CEB and Deniz Bank CJSC. Later during 2016 additional loan from HIBV in the amount of USD 1,571 was received.

 

Further in August 2016 the Group received USD 908 from HIBV as a result of GDR issue, details of this transaction are disclosed in Note 16 in the consolidated financial statement.

 

 

 

20      RELATED PARTY BALANCES AND TRANSACTIONS (Continued)

The following receivables balances were outstanding at the end of the reporting period:

 

	31 December 2017	31 December 2016
HIBV	155	151
	155	151

 

The remuneration of directors and other key management personnel during the year was as follows:

 

	2017	2016
Short-term benefits (salaries)	388	295
	388	295

The short-term benefits for the year-ended 31 December 2017 amounted to USD 388 and comprised of salaries and severance payments paid to the General Director of LLC PMH together with the remuneration to the Board of Directors of the Group. 

There were no other benefits or payments made to directors or other key management personnel during the reporting periods.

21      OTHE R CURRENT ASSETS

Other current assets as at 31 December 2017 and 2016 are as follows:

	31 December 2017	31 December 2016
Receivables from social funds	148	68
Prepaid rent and other expenses	73	309
Value Added Tax ("VAT") receivable	-	301
Less: allowance for other doubtful debts	(10)	(49)
	211	629

22      OTHER CURRENT LIABILITIES

Other current liabilities as at 31 December 2017 and 2016 are as follows:

	31 December 2017	31 December 2016
Advances received	769	1,236
Provision for severance payments	133	-
VAT payable	114	217
Accrual for unused vacations	51	214
Social security and other taxes payable	34	170
Amounts due to employees	23	77
Other liabilities	50	24
	1,174	1,938

As a result of the resolution to cease operations of LLC PMH, the Group created the provision for severance payments as at 31 December 2017 amounted to USD 133, which will be paid to the employees when they will be laid-off. This amount was included in General administrative expenses within discontinued operations (Note 19).

 

 

23      COMMITMENTS AND CONTINGENCIES

23.1.     Operating lease arrangements

Minimum non-cancellable operating lease payments under existing operating leases for office space, automobiles and office equipment as at 31 December 2017 and 2016 are as follows:

	31 December 2017	31 December 2016
Within one year	122	191
	122	191

Operating lease expenses during the year ended 31 December 2017 from continued operation amounted to USD 151 and discontinued operations amounted to USD 427 (year ended 31 December 2016: continued operations - USD 242 and discontinued operations - USD 468).

23.2.     Litigation

From time to time, the Group is involved in certain litigations arising in the normal course of business.

In 2015, a legal claim for a total amount of RUB 39 million (approximately USD 535) was raised against one of the Group's subsidiaries and other third parties. The resolutions of the first and second instance courts, which took place prior to 31 December 2015, were in favour of the defendants. However, in June 2016 the cassation court ruled that previous court resolutions should be cancelled and this case should be considered again in the first instance court. The final resolutions of the courts, which took place in 2017, were again in favour of the defendants and the legal claim was closed.

23.3.     Tax and regulatory environment

During 2017 the major part of the Group's operations are performed in the Russian Federation. Russian tax legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be challenged tax authorities. Russian tax administration is gradually strengthening, including the fact that there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years (5 years for Belarus and Kazakhstan) preceding the year when decisions about the review was made. Under certain circumstances reviews may cover longer periods.

The Russian transfer pricing legislation is generally aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development (OECD), although it has specific features. This legislation provides for the possibility of additional tax assessments for controlled transactions (transactions between related parties and certain transactions between unrelated parties) if such transactions are not on an arm's-length basis. The Management has implemented internal controls to be in compliance with this transfer pricing legislation.

Tax liabilities arising from controlled transactions are determined based on their actual transaction prices. It is possible, with the evolution of the interpretation of the transfer pricing rules, that such transfer prices could be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group.

The Group includes companies incorporated outside of the Russian Federation. The tax liabilities of the Group are determined on the assumption that these companies are not subject to Russian profits tax, because they do not have a permanent establishment in the Russian Federation. This interpretation of relevant legislation may be challenged but the impact of any such challenge cannot be reliably estimated currently; however, it may be significant to the financial position and/or the overall operations of the Group.

 

 

23        COMMITMENTS AND CONTINGENCIES (CONTINUED)

As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that an outflow of resources will be required should such tax positions and interpretations be challenged by the tax authorities. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group.

Management will vigorously defend the Group's positions and interpretations that were applied in determining taxes recognised in these consolidated financial statements if these are challenged by the authorities.

24      LOSS PER SHARE

Basic and diluted loss per share

The losses attributable to the equity holders of the Company and the weighted average number of ordinary shares used in the calculation of basic and diluted loss per share are as follows:

		31 December 2017	31 December 2016
Loss per share from attributable to the ordinary equity holders of the company:
Weighted average number of
ordinary shares in issue (thousands)		480,000	200,000
Loss from continuing operations		(1,008)	(4,322)
Basic and diluted loss per share from continuing operations
(USD per share)		(0.0021)	(0.0216)
Loss from discontinued operations		(64,545)	(10,922)
Basic and diluted loss per share from discontinued operations
(USD per share)		(0.1345)	(0.0546)
Total Basic and diluted loss per share		(0.1366)	(0.0762)

25      DISPOSAL OF SUBSIDIARIES

In February 2016, the Group sold a 6% share in its subsidiary LLC Impress Media Marketing to its non-controlling interest shareholder for a nominal amount, decreasing the Group's share to 85%. In March 2016, the Group transferred its shares in LLC Impress Media Marketing to the minority shareholder. A new entity, LLC ID Impress Media, was established in December 2015, to which the net assets of LLC Impress Media Marketing were transferred in March 2016.

	2017	2016
Net assets disposed of	-	(238)
Loss on disposal of subsidiaries	-	(238)

26      EVENTS AFTER THE REPORTING PERIOD

The closing of the sale of JOB.ru's digital assets to the company HeadHunter took place on 25 January 2018 with total proceeds amounting to RUB 40 million (approximately USD 700 thousand).

In April 2018, Do ? an Holding announced that it has concluded an agreement with Demirören for the sale and transfer of its direct and indirect subsidiaries operating in the publishing and broadcasting segments. The transaction will also include Hürriyet, HIBV and TME. The transaction is subject to various conditions, including, amongst others, approval by the General Assembly of Do ? an Holding and regulatory consents. The transaction is expected to be completed during May 2018.

27      APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

These consolidated financial statements were approved by the Board of Directors and authorised for issuance on 27 April 2018.