Severstal FY2009 Financials HRG Part1Strange how Severstal wrote down the Prognoz value by 58 million on the HRG side, yet they maintain their same valuation on their books. I have clipped the accounting policy notes and extracted HRG data. Notice how Severstal claims 50% ownership, this is strange as it should be more like 26% - 74%, the 75% being the other 50% with evergreen and the minority interest. Yet Severstal has a value of $6,572 in FY2009 and $6,765 in FY2008, on the HRG side Prognoz had a balance sheet value of $86 million.
More importantly Severstal has not "impared" the value on their books other than amortized the asset based on what I believe to be a 35 year write-off. There were no mentions of any writeoff.
Question: Does this mean Severstal will write the asset back, and why do they claim 50% ownership?
3. Summary of the principal accounting policies
a. Basis of consolidation
Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control. Where a Group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognized in its financial statements and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on the accrual basis. Income from the sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognized when it is probable that the economic benefits associated with the transactions will flow to the Group and their amount can be measured reliably. Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using the equity method of accounting whereby an interest in jointly controlled entities is initially recorded at cost and adjusted thereafter for post-acquisition changes in the Group’s share of net assets of the joint venture. The income statement reflects the Group’s share of the results of operations of the joint venture. Unrealized gains on transactions between the Group and its jointly controlled entities are eliminated to the extent of the Group’s interest in the joint venture; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
OAO Severstal and subsidiaries
Notes to the consolidated financial statements
for the years ended December 31, 2009, 2008 and 2007
(Amounts expressed in thousands of US dollars, except as stated otherwise)
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20. Investments in associates and joint ventures
The Group's investments in associated and joint ventures companies are described in the tables below. The Group structure and certain additional information on investments in associated and joint ventures, including ownership percentages, is presented in Note 29.
2009 2008 2007
Associates
Joint ventures
Prognoz Serebro LLC $6,572 $6,765 -
29. Subsidiaries, associates and joint ventures
OJSC Buryatzoloto 42.6% 45.7% n/a Russia Gold mining
Berezitovy Rudnik LLC 49.6% 53.3% n/a Russia Gold mining
Societe Des Mines de Taparko 45.1% 48.4% n/a Burkina Faso Gold mining
Joint ventures:
Prognoz Serebro LLC 50.0% 50.0% n/a Russia Silver project