Property, plant and equipment

The net book value of property, plant and equipment as at 31 December 2012, 2011 and 2010 was as follows:


  Buildings and site services Cable and transmission devices Other Construction in progress Total
Cost/Deemed cost          
At 1 January 2010 201,323 292,049 71,068 13,252 577,692
Additions 267 747 426 54,440 55,880
Acquisition through business combination 1,707 6,517 836 1,900 10,960
Transfer 15,370 26,121 8,676 (50,167) -
Disposals (2,283) (11,270) (3,203) (717) (17,473)
Reclassification 446 (1,688) 1,194 2 (46)
At 31 December 2010 216,830 312,476 78,997 18,710 627,013
At 1 January 2011 216,830 312,476 78,997 18,710 627,013
Additions 201 1,242 3,327 65,067 69,837
Reclassification from investment  property and assets held for sale 262 121 - - 383
Acquisition through business combination 1,270 8,079 525 902 10,776
Transfer 16,909 37,651 6,509 (61,069) -
Disposals (3,826) (7,772) (4,789) (794) (17,181)
Reclassification (12,117) 20,044 (8,639) 712 -
At 31 December 2011 219,529 371,841 75,930 23,528 690,828
At 1 January 2012 219,529 371,841 75,930 23,528 690,828
Additions 78 5,926 2,446 100,555 109,005
Reclassification from investment  property and assets held for sale 1,465 (7) 45 58 1,561
Acquisition through business combination 8 454 29 10 501
Transfer 13,231 38,527 8,488 (60,246) -
Disposals (4,093) (6,157) (1,292) (951) (12,493)
Foreign exchange - (43) (2) (4) (49)
Reclassification (62,305) 55,707 6,574 24 -
At 31 December 2012 167,913 466,248 92,218 62,974 789,353

  Buildings and site services Cable and transmission devices Other Construction in progress Total
Accumulated amortization and impairment losses          
At 1 January 2010 (82,131) (152,405) (49,287) (372) (284,195)
Depreciation expense (11,360) (26,424) (9,637) - (47,421)
Impairment losses (233) (22) 3 38 (214)
Disposals 1,825 10,006 3,009 - 14,840
Reclassification (186) (145) 179 152 -
At 31 December 2010 (92,085) (168,990) (55,733) (182) (316,990)
At 1 January 2011 (92,085) (168,990) (55,733) (182) (316,990)
Depreciation expense (9,675) (32,902) (9,993) - (52,570)
Reclassification from investment property and assets held for sale (119) (61) - - (180)
Impairment losses (1) (111) (1) (153) (266)
Disposals 2,882 6,723 4,778 - 14,383
Reclassification (9,324) 3,351 5,970 3 -
At 31 December 2011 (108,322) (191,990) (54,979) (332) (355,623)
At 1 January 2012 (108,322) (191,990) (54,979) (332) (355,623)
Depreciation expense (8,842) (36,016) (9,838) - (54,696)
Reclassification from investment property and assets held for sale (1,086) 20 (38) - (1,104)
Impairment losses (57) 96 (40) (1,391) (1,392)
Disposals 3,211 5,186 1,028 30 9,455
Foreign exchange - 1 - - 1
Reclassification 33,298 (29,987) (3,316) 5 -
At 31 December 2012 (81,798) (252,690) (67,183) (1,688) (403,359)
Net book value          
At 31 December 2010 124,745 143,486 23,264 18,528 310,023
At 31 December 2011 111,207 179,851 20,951 23,196 335,205
At 31 December 2012 86,115 213,558 25,035 61,286 385,994

For the purposes of consistent classification of similar item of property, plant and equipment the Group made reclassification as at 31 December 2012, 2011 and 2010.

At 31 December 2012, 2011 and 2010 cost of fully depreciated property, plant and equipment was 155,128, 134,392 and 120,414 respectively.

Interest capitalization

Interest amounting to 1,462, 948 and 563 was capitalized in property, plant and equipment for the years ended 31 December 2012, 2011 and 2010 respectively. The capitalization rate used to determine the amount of borrowing costs eligible for capitalization is 7.88%, 7.50% and 9.48% for the years ended 31 December 2012, 2011 and 2010 respectively.

Pledged property, plant and equipment

Property, plant and equipment with a carrying value of 1,286, 2,827 and 10,605 was pledged in relation to loan agreements entered into by the Group as at 31 December 2012, 2011 and 2010 respectively.

Leased property, plant and equipment

As at 31 December 2012, 2011 and 2010 net book value of leased property, plant and equipment comprised:


  31 December 2012 31 December 2011 31 December 2010
Buildings and constructions 518 1,107 1,629
Switches and transmission devices 2,265 3,533 7,239
Vehicles and other property, plant and equipment 888 657 1,348
Construction in progress 87 13 17
Total net book value of leased property, plant and equipment 3,758 5,310 10,233

Impairment of property, plant and equipment

As at 31 December 2012, 2011 and 2010 the Group conducted impairment testing of its property, plant, equipment, to identify possible irrecoverability of the assets. The Group assessed the recoverable amount of the assets for which estimation on individual basis is impossible within respective CGU. The Group defines CGUs as regional branches (in case of Rostelecom), legal entities or group of legal entities (in case of subsidiaries).

The recoverable amount of each CGU is determined by estimating its value in use. Value in use calculation uses cash-flow projections based on actual and budgeted financial information approved by management and a discount rate which reflects time value of money and risks associated with each individual CGU. Key assumptions management used in the calculation of value in use are as follows:

  • discount rates are estimated in nominal terms as the weighted average cost of capital on pre tax basis and varies from 15.01% to 22.39% per CGU;
  • OIBDA margin are based on historical actual results and varies from 13.99% to 54.23% per CGU;
  • for all CGUs cash flow projections cover the period of five years, cash flows beyond five-year period are extrapolated using growth rate of 2% for each CGU.

For individual items of construction in progress for which the Group has no intention to complete and use or sell them impairment loss recognised in the amount of their carrying value.

2012 impairment testing

As a result of impairment testing loss of 715 was recognised in respect of corporate assets included in construction in progress. Impairment loss are included in the line Depreciation, amortisation and impairment losses in the statement of comprehensive income.

2011 impairment testing

Impairment loss of property, plant and equipment in the amount of 113 (CGU regional branch Ural) and construction in progress of 150 were recognised as a result of impairment testing. Impairment losses are included in the line Depreciation, amortisation and impairment losses in the statement of comprehensive income.

2010 impairment testing

As a result of the impairment testing performed as at 31 December 2010, for certain CGUs the Group recognized an impairment loss of property, plant and equipment: Sibirtelecom (64), Uralsvyazinform (293), and reversal of impairment loss of property, plant and equipment: Rostelecom (93) and Southern Telecommunications Company (50).

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