The financial statements of NJSC Naftogaz of Ukraine (the Company) comply with the legislation of Ukraine and International Financial Reporting Standards (IFRS). This statement was published by the Audit and Risks Committee of Naftogaz's Supervisory Board on the findings of the State Audit Service of Ukraine (SASU) based on the results of the audit of the Company's financial and business operations for the period from 1 October 2018 to 31 December 2019.
During its meeting on 12-15 October 2020, the Audit and Risks Committee considered and discussed the findings set forth in the audit report of the SASU and further actions of the Company. In the statement, the Committee also clarified certain points on the Company's financial statements mentioned by the media.
Full text of the statement below.
«Recently, findings from the State Audit Service of Ukraine regarding Naftogaz were leaked to the media.
It is common practice that when such an audit is conducted, companies provide a response to the findings within a short period of time. Naftogaz welcomed and facilitated the audit, and has responded in detail to the findings on time.
The Audit and Risks Committee of the Supervisory Board has dedicated its sessions on 12-15 October 2020 to review and discuss the findings of the audit and the appropriate follow up. It has highlighted that Naftogaz operates under the laws of Ukraine and reports according to International Financial Reporting Standards. The Audit and Risks Committee of the Supervisory Board wants to clarify three points mentioned by the media:
1. Recording of provision for bad debts. The Group’s provision for expected credit losses (provision for bad debts) is in compliance with IFRS 9 “Financial Instruments”, adopted by the Group on 1 January 2018. Deloitte’s audit opinion and report on the review of interim financial statements have been issued and are available. It has been argued that these provisions can only be made if financial plans are approved by the Cabinet of Ministers of Ukraine (CMU). Unfortunately, no decision was taken by the CMU regarding the Naftogaz financial plan for 2018. The real issue is of course that some users do not pay for the gas that we have supplied. If those users would have paid for the gas, Naftogaz would make higher contributions to the State.
2. Recording of fines and penalties. Fines and penalties received are accrued when cash is received by the Company. Fines and penalties receivable do not meet the definition of “asset” and “income” as defined in The Conceptual Framework for Financial Reporting. Deloitte’s audit opinion and report on the review of interim financial statements have been issued and are available on the Company website.
3. Timely dividend payment. According to the Ukrainian legislation, the Company made a 30% dividend payment to the State Budget of Ukraine before 30 June 2019. The late publication of the CMU Resolution on 90% dividend distribution rate led to another dividend payment after the date set by the law.
Naftogaz is a transparent company and is striving to follow the best international practices in the reporting of its activities».
Integrated Communications Department
NJSC Naftogaz of Ukraine