Joint Stock Company “Sukhoi Civil...

Joint Stock Company “Sukhoi Civil Aircraft”

Consolidated financial statements

for the year ended 31 December 2015 with independent auditors’ report


Consolidated financial statements

for the year ended 31 December 2015

Contents Independent auditors’ report ............................................................................................................ 1 Consolidated statement of financial position .................................................................................... 3 Consolidated statement of profit or loss and other comprehensive income...................................... 4 Consolidated statement of cash flows ............................................................................................. 5 Consolidated statement of changes in equity .................................................................................. 6 Notes to the consolidated financial statements ................................................................................ 7

A member firm of Ernst & Young Global Limited

Ernst & Young LLC Sadovnicheskaya Nab., 77, bld. 1 Moscow, 115035, Russia Tel: +7 (495) 705 9700 +7 (495) 755 9700 Fax: +7 (495) 755 9701 www.ey.com/ru

ООО «Эрнст энд Янг» Россия, 115035, Москва Садовническая наб., 77, стр. 1 Тел.: +7 (495) 705 9700 +7 (495) 755 9700 Факс: +7 (495) 755 9701 ОКПО: 59002827

Independent auditors’ report

To the Shareholders and Board Directors of Joint-Stock Company “Sukhoi Civil Aircraft” We have audited the accompanying consolidated financial statements of Joint-Stock Company “Sukhoi Civil Aircraft” and its subsidiary (“the Group”), which comprise the consolidated statement of financial position as at 31 December 2015, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s responsibility for the financial statements Management of Joint-Stock Company “Sukhoi Civil Aircraft” is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

http://www.ey.com/russia

A member firm of Ernst & Young Global Limited

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Group as at 31 December 2015, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting standards.

11 April 2016 Moscow, Russia


The accompanying notes are an integral part of these consolidated financial statements. 4

Consolidated statement of profit or loss and other comprehensive income

(In thousands of US dollars)

For the year ended 31 December

Notes 2015 2014

Revenues 17 565,669 567,808

Cost of sales

(613,239) (640,264) Gross loss

(47,570) (72,456)

Government grant related to income 18 3,640 3,895 Selling expenses

(4,194) (3,759)

Administrative expenses 19 (42,948) (46,896) Change in provision for onerous contract 16 10,289 15,867 Write-down of work-in-progress to net realisable value 9 (37,454) (58,174) Impairment of Intangible assets 5 (473,006) – Other operating income and expenses, net

(38,798) (14,090)

Operating loss

(630,041) (175,613) Interest income

2,300 2,913

Interest expense and other finance expenses 20 (199,663) (187,372) Foreign exchange gains

404,493 168,795

Loss before tax

(422,911) (191,277)

Income tax benefit/(expense) 21 39,669 (40,005) Net loss being total comprehensive loss for the period (383,242) (231,282)



Consolidated statement of cash flows


For the year ended 31 December

Note 2015 2014

Operating activities

Loss before tax

(422,911) (191,277)

Depreciation and amortisation recognised in income

40,125 44,825 Interest income

(2,300) (2,913)

Foreign exchange gain

(432,467) (200,617) Loss on assets disposal

489 296

Write-off value added tax receivable

3,473 1,728 Write-down of work in progress to net realisable value 9 37,454 58,174 Onerous contract provision 16 (10,289) (15,867) Impairment of Intangible assets 5 473,006 – Interest expense and other finance charges 20 199,663 187,372 Other

14,547 3,013

Cash flows used in operating activities before changes in working capital and income tax (99,210) (115,266)

Increase in inventories

(64,634) (270,237)

Decrease in accounts receivable and advances issued

8,221 3,315 Decrease in non-income tax receivable

25,641 15,489

Increase/(decrease) in advances from customers

407,648 (68,243) Increase/(decrease) in trade and other accounts payable

(205,253) 154,802

Increase/(decrease) in non-income tax payable

17,901 (1,401) Interest paid

(263,807) (110,619)

Cash flows used in operating activities

(173,493) (392,160)

Investing activities Acquisition of property, plant and equipment

(17,864) (17,349) Acquisition of intangible assets

(41,047) (59,047)

Interest received

10,139 1,027 Government grant related to assets 5, 18 5,886 12,345 Cash flows used in investing activities

(42,886) (63,024)

Financing activities Proceeds from share issues

32,429 694,000 Proceeds from borrowings

854,327 1,315,291

Proceeds from interest-free loan from the Parent Company in the amount of RUB 100,000 million 2, 14 1,600,827 –

Repayment of borrowings

(2,085,378) (1,554,246) Finance lease payments

(126) (3,982)

Cash flows from financing activities

402,079 451,063 Effect of exchange rate changes

(31,020) (3,757)

Increase/(decrease) in cash and cash equivalents

154,680 (7,878) Cash and cash equivalents at the beginning of period

23,525 31,403

Cash and cash equivalents at the end of period

178,205 23,525



Consolidated statement of changes in equity


Note Share capital

Share premium

Additional paid-in-capital

Reserve for the issue of

shares under registration

process Accumulated

losses Total

Balance as at 1 January 2014 101,929 250,072 55,362 – (839,569) (432,206) Loss being total comprehensive loss for the period – – – – (231,282) (231,282)

Transactions with owners, recorded directly in equity

Shares under registration process – – – 694,000 – 694,000

Balance as at 31 December 2014 101,929 250,072 55,362 694,000 (1,070,851) 30,512 Loss being total comprehensive loss for the period – – – – (383,242) (383,242)

Transactions with owners, recorded directly in equity

Shares under registration process – – – 32,429 – 32,429 Shares issued 13 199,851 526,578 – (726,429) – – Effect of recognition of loans received from PJSC “Company “Sukhoi”, net of related tax effect of USD 90,469 thousand 13, 14 – – 361,875 – – 361,875

Balance as at 31 December 2015 301,780 776,650 417,237 – (1,454,093) 41,574


Notes to the consolidated financial statements

for the year ended 31 December 2015

(In thousands of US dollars, unless otherwise stated)

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1. The Group Joint Stock Company “Sukhoi Civil Aircraft” (hereafter “the Company”) was established on 25 May 2000 with the purpose of development, testing, production and operation of new types of civil aircraft. On 28 January 2011 the Company received ARMAK Type Certificate for “Sukhoi Super Jet – 100” aircraft (formerly “Russian Regional Jet” or “RRJ”, thereafter “SSJ-100”) – a civil aircraft with a capacity of 95 seats in basic configuration. In February 2012, the Company received EASA Type Certificate for “Sukhoi Super Jet – 100” aircraft. The Company’s registered address is at: Building 2, 23B, Polykarpova Str., 125284 Moscow, Russian Federation. The Company has the following branches:

► Komsomolsk-on-Amur branch located at address: 1, Sovetskaya Str., 681018 Komsomolsk-on-Amur, Khabarobvsk Region, Russian Federation.

► Ulyanovsk branch located at address: 1, Antonova avenue, 432072 Ulyanovsk, Russian Federation.

► Novosibirsk branch located at address: 15, Polzunova Str., 630051 Novosibirsk, Russian Federation.

► Voronezh branch located at address: 27, Tsiolkovskogo Str., 394029 Voronezh, Russian Federation.

The Company owns a 100% subsidiary – Air Finance Limited, an entity registered in Hong Kong. The Company’s shareholders are:

► Public Joint-Stock Company “Aviation Holding Company “Sukhoi” (the “Parent Company” or PJSC “Company “Sukhoi”), which owns 94.47% of shares;

► World Wings S.A. (96% subsidiary of Alenia Aermacchi, ultimately controlled by Finmeccanica), which owns 5.53% of shares.

Russian business environment The Company’s and its subsidiary’s (collectively, “the Group”) operations are mainly located in the Russian Federation. Consequently, the Group is exposed to the economic and financial markets of the Russian Federation which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in the Russian Federation. These financial statements reflect management’s assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment.


Notes to the consolidated financial statements (continued)

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2. Basis of presentation Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”). Basis of measurement The financial statements are prepared on the historical cost basis except that the carrying amounts of assets, liabilities and equity items in existence at 31 December 2002 include adjustments for the effects of hyperinflation, which were calculated using conversion factors derived from the Russian Federation Consumer Price Index published by the Russian Statistics Agency, GosKomStat. Russia ceased to be hyperinflationary for IFRSs purposes as at 1 January 2003. Functional and presentation currency The Group’s consolidated financial statements are presented in the United States dollar (“USD”), which is also the Company’s functional currency because it reflects the economic substance of the underlying events and circumstances of the Company, notably USD is the currency with the largest impact on the selling prices of aircraft and related services and on the cost base – giving regard to an international cooperation status of the SSJ-100 program. Going concern These consolidated financial statements were prepared on a going concern basis, which assumes that the Group will continue operations in the foreseeable future and will be able to realise its assets and discharge its liabilities in the normal course of operations.

1. As at 31 December 2015 the Group’s current assets exceeded its current liabilities by USD 505,153 thousand and as at 31 December 2014 the Group’s current liabilities exceeded its current assets by USD 795,103 thousand and its net assets were positive as at 31 December 2015 and 2014 (USD 41,574 and USD 30,512 thousand, respectively). Improvement of financial position relates to debt restructuring (refer to p. 3 of this section below).

Under Russian Corporate legislation the Company is required to maintain certain levels of net assets determined with reference to the statutory financial statements. As at 31 December 2015, at 31 December 2014 and at 31 December 2013 the Company’s net assets were below the Company’s share capital which formally required the Company’s shareholders to either approve a reduction of the Company’s share capital to a level below its net assets (provided that the share capital exceeds minimum requirements), or to liquidate the Company. Management expects that additional issue of shares in favour of the Parent Company in 2016-2017, shall align net assets of the Company with the Russian legislative requirements described above.

2. Net losses of the Group for the year ended 31 December 2015 and for the year ended 31 December 2014 were USD 383,242 thousand and USD 231,282 thousand, respectively. As at 31 December 2015 and at 31 December 2014 accumulated losses were USD 1,454,093 thousand and USD 1,070,851 thousand, respectively. Negative financial results of the Group were primarily driven by impairment of intangible assets recognition (refer to Note 5), flat sales dynamics of aircraft on the Russian and international markets and executing onerous contract.



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2. Basis of presentation (continued) Going concern (continued) 3. On 26 March 2015 the President of the Russian Federation ordered to increase share capital

of PJSC “UAC” in the amount of RUB 100,000 million to restructure Group’s liabilities in 2015. As the result of President’s decision, on 4 August 2015 the Group received the interest-free loan from the Parent Company in the amount of RUB 100,000 million (USD 1,600,827 thousand) to repay the Group’s outstanding loans and borrowings and to cover working capital deficit (hereinafter referred to as interest-free Parent loan).

4. Additionally, in 2015 certain measures have been undertaken under the order of the President of the Russian Federation to boost sales of SSJ-100 aircraft on the domestic market and to improve Group financial performance:

► implementation of cost reduction program;

► improvement of after-sales services (refer to Note 18 below);

► access to additional financing. Debt restructuring and the Government support measures on aircraft sales stimulation shall allow the Group to continue as a going concern in the foreseeable future. Use of estimates and judgements The preparation of these consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies are described in the following notes:

► Note 2 – Functional and presentation currency;

► Note 2 – Going concern;

► Note 5 – Intangible assets;

► Note 8 – Deferred tax assets and liabilities;

► Note 9 – Inventories;

► Note 25 – Put options over the sold aircraft / residual value guarantees.



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3. Summary of significant accounting principles The accounting policies described below were applied consistently to all reporting periods presented in these consolidated financial statements. (a) Basis of consolidation Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. The Group controls an investee if and only if the investor has all the following: (a) power over the investee; (b) exposure, or rights, to variable returns from its involvement with the investee; and (c) the ability to use its power over the investee to affect the amount of the investor's returns. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income or loss 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. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments. Transactions eliminated on consolidation Intragroup balances and transactions, and any unrealised gains arising from intragroup transactions, are eliminated in the consolidated financial statements. Unrealised losses are eliminated in the same way. (b) Intangible assets Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. It must also be probable that the intangible asset will generate future economic benefits and that it is clearly identifiable and allocable to a specific product. Further to meeting these criteria, only such costs that relate solely to the development phase of a self-initiated project are capitalised. Any costs that are classified as part of the research phase of a self-initiated project are expensed as incurred. If the research phase cannot be clearly distinguished from the development phase, the respective project related costs are treated as if they were incurred in the research phase only.



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3. Summary of significant accounting principles (continued) (b) Intangible assets (continued) The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Furthermore, borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are included in the cost. Amount of government grants provided is deducted from the cost of qualifying assets. Other development expenditure is recognised in the consolidated statement of comprehensive income as an expense as incurred. Upon completion of the development phase capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Other intangible assets Other intangible assets, which are acquired by the Group, are stated at cost less accumulated amortisation and impairment losses and less any related government grants. Expenditure on internally generated goodwill and brands is recognised in profit or loss as incurred. Amortisation Intangible assets with a definite lifetime are amortised on a straight-line basis over their estimated useful lives from the date the asset is available for use. (c) Impairment Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of the asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised, and is recognised in profit or loss in the period when the event occurred. Non-financial assets The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For intangible assets that are not yet available for use, recoverable amount is estimated at each reporting date.



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3. Summary of significant accounting principles (continued) (c) Impairment (continued) The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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 the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). For the assets that cannot be directly allocated to the cash generating unit on a reasonable and consistent basis are testing by allocation to the group of cash-generating and compare the carrying amount of that group of cash-generating units, including the portion of the carrying amount of the corporate asset allocated to that group of units, with the recoverable amount of the group of units. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (d) Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation and impairment loss. Initial costs The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of overheads. Furthermore, borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are included in the cost. Amount of government grants received for acquisition or construction of qualifying assets is deducted from the cost. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment. Subsequent expenditure Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, is capitalised with the carrying amount of the component being written off. Other subsequent expenditure is capitalised if future economic benefits will arise from the expenditure. All other expenditure, including repairs and maintenance expenditure, is recognised in profit or loss as incurred.



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3. Summary of significant accounting principles (continued) (d) Property, plant and equipment (continued) Depreciation Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of the individual assets. Depreciation commences on the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and ready for use. Land is not depreciated. The estimated useful lives are as follows:

Buildings and constructions 10-20 years Machinery and equipment 3-10 years Vehicles 5-10 years Aircraft in operating lease 5-25 years Other 3-10 years

Depreciation methods, estimated useful lives and residual values are re-assessed annually. (e) Inventories Inventories are stated at the lower of cost and net realisable value. The cost of inventories is determined on the weighted average basis and includes all costs in bringing the inventory to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. In the case of manufactured inventories and work-in-progress cost includes all directly related costs such as labour, material and direct overheads, and an allocation of fixed and variable production overheads. Labour costs include taxes and employee benefit costs associated with labour that is involved directly in the production process. (f) Provisions and contingences A provision is recognised in the consolidated statement of financial position when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Onerous contract provision A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of fulfilling the contract. The estimate of net cost of fulfilling the contract includes expected late delivery penalties, if applicable. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract. Contingencies Contingencies attributable to specific events are disclosed unless the possibility of an outflow or resources embodying economic benefit is remote. Contingent assets are disclosed in these consolidated financial statements when an inflow of economic benefits is probable.



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3. Summary of significant accounting principles (continued) (g) Employee benefits The Group makes contributions for the benefit of employees to Russia’s State pension fund. The contributions are expensed as incurred. The Group has a defined contribution plan obligations for the benefit of the employees. The contributions are expenses as incurred. (h) Income tax Income tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss except for items recognised directly in equity or in other comprehensive income. Current tax Current tax expense is the tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Income tax currently payable is based on taxable profit for the year, which differs from profit as reported in the statement of profit and loss and comprehensive income as it excludes items of income or expense that are taxable or deductible in other years or excludes items that are not taxable or deductible. The Group’s liability for current tax is calculated using enacted tax rates by the end of the reporting period. Deferred tax Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. (i) Government grants Government grants (including non-monetary grants at fair value) are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received.



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3. Summary of significant accounting principles (continued) (i) Government grants (continued) The Group receives Government grants for partial compensation of development costs capitalised within intangible assets, acquisition of property, plant and equipment. The Group recognises the amounts of government grants received as a deduction from the full amount of development costs incurred and costs incurred for acquisition and development of property, pland and equipment. Government grants received for compensation of expenses are recognised in profit or loss on a systematic basis over the periods necessary to match them with the related costs which they are intended to compensate. A government grant received to compensate expenses or losses already incurred is recognised as income of the period in which it becomes receivable. (j) Revenues Sale of aircraft Revenue from the sale of goods is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity, and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Any cash outflows related to customer penalties for late delivery of aircraft are deducted from gross amount of revenue. Sales of the aircraft with written put option over the sold aircraft / residual value guarantee Revenue from sales of aircraft that include underlying asset value guarantee commitments are accounted for as lease agreements in accordance with IAS 17 Lease. Classification of lease agreements is based on expectation of future market value of the aircraft at the date when option to prolong (acquire) aircraft for the next period becomes exercisable in order to determine whether at the inception of the contract it is reasonably certain that the customer will not exercise its put option and therefore lease term will cover substantially all economic life of the aircraft. In such case the revenue is recognised in full contract amount upon delivery of the aircraft providing that at the moment of delivery the aircraft future market value exceeds the guaranteed residual value. For the sales deliveries accounted for as finance lease revenue recognised at fair value of the consideration receivable and finance income recognised based on a pattern reflecting a constant periodic rate of return on the lessor's net investment in the finance lease. For sales deliveries accounted for as an operating lease upon the initial sale of these aircraft to the customer, the total cost of the aircraft previously recognised in inventory is transferred to “Property, plant and equipment” and depreciated over the estimated useful economic life of the aircraft, with the proceeds received from the customer being recorded as deferred income and recognised in profit or loss evenly over the period till the expected date of guarantee exercise date.



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3. Summary of significant accounting principles (continued) (j) Revenues (continued) Sales of aircraft under construction contracts The Group accounts for certain contracts with customers as construction contracts under IAS 11 Construction Contracts. Under these contracts ordered aircraft are heavily customised at development and production stage to meet customer requirements under contracts. As soon as outcome of a contract can be estimated reliably, contract revenue is recognized in profit and loss in proportion to the stage of completion of the contract, measured by the ratio of total costs incurred to the date relative to the total estimated costs on the contracts. When outcome of a contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract cost incurred that are likely to be recoverable and contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the total expected loss is recognised as an expense immediately. Operating lease Rental and sub-rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging lease are added to the carrying amount of the leased asset and recognised in profit or loss on a straight-line basis over the lease term. Services Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the date of the consolidated statement of financial position. The stage of completion is assessed by reference to surveys of work performed. (k) Finance income and costs Finance income comprises interest income on funds invested. Interest income is recognised when it is highly probable that the Group receive the economic benefits and the amount of income can be measured reliably. Interest income is recognised in profit or loss, using the effective interest method, except for the interest income on the invested funds, which were borrowed specifically for the purposes of obtaining a qualifying asset which reduces the amount of capitalised borrowing costs. Finance costs comprise interest expense on borrowings and impairment losses recognised on financial assets. All borrowing costs are recognised in profit or loss using the effective interest method, except for costs directly attributable to the acquisition, construction or production of qualifying assets which are included in the cost of qualifying assets. (l) Leases A lease is classified as an operating lease if it does not transfer substantially all risks and rewards incidental to ownership. Operating lease – the Group as lessee Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease payments made. Contingent rentals arising under operating leases are recognised in profit or loss in the period in which they are incurred.



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3. Summary of significant accounting principles (continued) (l) Leases (continued) Finance lease – the Group as lessee Assets held under finance leases are recognised as assets of the Group at their fair value at the inception date of the lease or, if lower, at present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance costs and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance costs are charged directly to profit or loss. (m) Determination and presentation of operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, and for which discrete financial information is available. All operating segment’s operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segment and assess its performance. As disclosed in Note 1, the Group’s current principal activity is the development of SSJ-100 program that earned the first revenues in 2011. Nearly all of the Group’s assets are associated with this program and are located in one geographical region – Russian Federation. The Group expects to receive the majority of its revenues from sales of SSJ-100. Giving regard to these factors, management believes that as of 31 December 2015 and 31 December 2014 all assets and liabilities related to operating activities of the Group are associated with a single operating segment, SSJ-100 program. The reconciliation of segment revenue and segment measure of profit or loss with reported amounts required by IFRS 8 Operating Segments is disclosed in Note 4. (n) New and amended standards and interpretations Several new standards and amendments are effective as at 1 January 2015. However, they do not impact the consolidated financial statements of the Group. The nature of each new standard and amendment is described below: Amendments to IAS 19 Defined Benefit Plans: Employee Contributions IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment is effective for annual periods beginning on or after 1 July 2014. This amendment is not relevant to the Group.



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3. Summary of significant accounting principles (continued) (n) New and amended standards and interpretations (continued) Annual improvements 2010-2012 cycle With the exception of the improvement relating to IFRS 2 Share-based Payment applied to share-based payment transactions with a grant date on or after 1 July 2014, all other improvements are effective for accounting periods beginning on or after 1 July 2014. The Group has applied these improvements for the first time in these consolidated financial statements. They include: IFRS 2 Share-based Payment This improvement is applied prospectively and clarifies various issues relating to the definitions of performance and service conditions which are vesting conditions. The clarifications are consistent with how the Group has identified any performance and service conditions which are vesting conditions in previous periods. In addition, the Group had not granted any awards during the second half of 2014. Thus, these amendments did not impact the Group’s financial statements or accounting policies. IFRS 3 Business Combinations The amendment is applied prospectively and clarifies that all contingent consideration arrangements classified as liabilities (or assets) arising from a business combination should be subsequently measured at fair value through profit or loss whether or not they fall within the scope of IAS 39. This is consistent with the Group’s current accounting policy and, thus, this amendment did not impact the Group’s accounting policy. IFRS 8 Operating Segments The amendments are applied retrospectively and clarify that:

► an entity must disclose the judgements made by management in applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are ‘similar’;

► the reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities.

IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that the asset may be revalued by reference to observable data by either adjusting the gross carrying amount of the asset to market value or by determining the market value of the carrying value and adjusting the gross carrying amount proportionately so that the resulting carrying amount equals the market value. In addition, the accumulated depreciation or amortisation is the difference between the gross and carrying amounts of the asset. This amendment did not have any impact to the Group’s consolidated financial statements. IAS 24 Related Party Disclosures The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. This amendment is not relevant for the Group as it does not receive any management services from other entities.



19

3. Summary of significant accounting principles (continued) (n) New and amended standards and interpretations (continued) Annual improvements 2011-2013 cycle These improvements are effective from 1 July 2014 and the Group has applied these amendments for the first time in these consolidated financial statements. They include: IFRS 3 Business Combinations The amendment is applied prospectively and clarifies for the scope exceptions within IFRS 3 that:

► Joint arrangements, not just joint ventures, are outside the scope of IFRS 3

► This scope exception applies only to the accounting in the financial statements of the joint arrangement itself

The Group is not a joint arrangement, and thus this amendment is not relevant for the Group and its subsidiary. IFRS 13 Fair Value Measurement The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of IAS 39. The Group does not apply the portfolio exception in IFRS 13. IAS 40 Investment Property The description of ancillary services in IAS 40 differentiates between investment property and owner-occupied property (i.e., property, plant and equipment). The amendment is applied prospectively and clarifies that IFRS 3, and not the description of ancillary services in IAS 40, is used to determine if the transaction is the purchase of an asset or a business combination. The Group has no Investment property, thus the amendment did not impact the accounting policy. (o) Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective. IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The adoption of IFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but no impact on the classification and measurement of the Group’s financial liabilities.



20

3. Summary of significant accounting principles (continued) (o) Standards issued but not yet effective (continued) IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date. Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group given that the Group has not used a revenue-based method to depreciate its non-current assets. Annual improvements 2012-2014 cycle These improvements are effective for annual periods beginning on or after 1 January 2016. They include: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Assets (or disposal groups) are generally disposed of either through sale or distribution to owners. The amendment clarifies that changing from one of these disposal methods to the other would not be considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in IFRS 5. This amendment must be applied prospectively. IFRS 7 Financial Instruments: Disclosures (i) Servicing contracts The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendments.



21

3. Summary of significant accounting principles (continued) (o) Standards issued but not yet effective (continued) (ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report. This amendment must be applied retrospectively. IAS 19 Employee Benefits The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment must be applied prospectively. IAS 34 Interim Financial Reporting The amendment clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report (e.g., in the management commentary or risk report). The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. This amendment must be applied retrospectively. This amendment is not expected to have any impact on the Group. IFRS 16 Leases IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17 (effective for annual reporting periods beginning on or after 1 January 2019). IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture. This amendment has no impact to the Group as the Group did not make any sales or contribution of assets to its associates or joint ventures during the period (effective for annual periods beginning on or after 1 January 2016). IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures Amendments regarding the application of the consolidation exception by investment entities. This amendment has no impact to the Group as it is not an investment entity (effective for annual periods beginning on or after 1 January 2016).



22

3. Summary of significant accounting principles (continued) (o) Standards issued but not yet effective (continued) IFRS 11 Joint Arrangements Amendments regarding the accounting for acquisitions of an interest in a joint operation. Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) amends IFRS 11 such that the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in IFRS 3, is required to apply all of the principles on business combinations accounting in IFRS 3 and other IFRSs with the exception of those principles that conflict with the guidance in IFRS 11(effective for annual periods beginning on or after 1 January 2016). IAS 7 Statement of Cash Flows Amendments resulting from the disclosure initiative. The amendments aim at clarifying IAS 7 to improve information provided to users of financial statements about an entity’s financing activities. Management has not yet considered any changes or amendments to be made to the financial reports (effective for annual periods beginning on or after 1 January 2017). Amendments to IAS 1 Disclosure Initiative The amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify:

► the materiality requirements in IAS 1;

► that specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated;

► that entities have flexibility as to the order in which they present the notes to financial statements;

► that the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI. These amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Group. (p) Other matters Certain items in consolidated statement of financial position of these consolidated financial statements do not correspond with the respective items in the statement in the previously issued Group’s consolidated financial statements for the year ended 31 December 2014 because the Group made reclassifications within this statement to ensure consistent presentation of items between periods.



23

4. Operating segments The Group has one reportable segment “Sukhoi Super Jet – 100” that includes development and production of civil aircraft. The reportable segment is managed and operates manufacturing facilities in the Russian Federation. The Board of Directors reviews internal management reports prepared on a quarterly basis based on the statutory accounting records prepared in accordance with the legislation of the Russian Federation. The major reconciling differences between the information provided to the consolidated financial statements at each reporting date. Board of Directors and the related IFRS-based amounts relate to:

► Timing differences related when revenue and costs are recognised

► Adjustments of net realisable value of inventories and change in provision for onerous contract

► Foreign currency exchange differences

► Impairment of intangible assets

► Effect of discounting on loans received

► Administrative and selling expenses Information regarding the results of reportable segment is included below. Segment performance is measured based on segment profit before income tax. Segment profit/loss before income tax is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. 2015 2014 Reportable segment loss before income tax (179,288) (145,471) Difference in timing and principles of revenue and related costs recognition 92,693 (7,016) Difference in timing of administrative and selling expenses recognition (7,619) (7,594) Difference in inventory recognition to net realisable value (11,547) (76,889) Impairment of Intangible assets (473,006) – Foreign currency exchange differences 217,490 83,455 Difference in recognition income and expenses related to onerous contract

provision (2,377) 13,681 Finance lease interest expense and discounting effect on loans received (78,247) (35,892) Difference in timing of other operating income and expenses recognition 18,990 (15,551) Loss before income tax (422,911) (191,277) Geographic location In presenting the following information, segment revenue has been based on the geographic location of customers:

2015 2014

Russian Federation 454,766 385,888 Americas 62,241 180,324 Other CIS countries 26,775 – Other locations 21,887 1,596

565,669 567,808

In 2015 revenue from six (in 2014 – four) individually significant customers represented 97% (in 2014 – 94%) of the Group’s revenues.



24

5. Intangible assets

Software

Development of SSJ-100 program

Advances given for

development costs Total

Cost At 1 January 2014 19,598 1,049,431 16,268 1,085,297

Additions 5,297 71,469 4,914 81,680 Disposal (378) – – (378) Transfers – 5,876 (5,876) – Government grant related to

development cost – (7,938) – (7,938) At 31 December 2014 24,517 1,118,838 15,306 1,158,661 Additions 2,245 57,370 4,779 64,394 Disposal (2,518) – – (2,518) Transfers – 4,671 (4,671) – Government grant related to

development cost – (5,886) – (5,886) At 31 December 2015 24,244 1,174,993 15,414 1,214,651

Accumulated amortisation and impairment losses

At 1 January 2014 2,991 107,364 – 110,355 Charge for the period 3,244 25,727 – 28,971 Disposal (378) – – (378) At 31 December 2014 5,857 133,091 – 138,948 Charge for the period 2,696 28,310 – 31,006 Impairment losses – 473,006 – 473,006 Disposal (2,518) – – (2,518) At 31 December 2015 6,035 634,407 – 640,442

Net book value At 1 January 2014 16,607 942,067 16,268 974,942

At 31 December 2014 18,660 985,747 15,306 1,019,713

At 31 December 2015 18,209 540,586 15,414 574,209 Capitalisation of development costs On 28 January 2011 the Group obtained the Type Certificate for serial aircraft production (ARMAK) and subsequently commenced deliveries to the first customers. Management concluded that development costs capitalised up to the date of the Type Certificate met the requirement of IAS 38 Intangible Assets as ‘available for use’ which triggered commencement of amortisation of these costs based on straight-line method over the estimated useful life of the asset. Management expects that certain development activities are still required to complete the development of the aircraft to ensure its operating capabilities and required aviation standards in the target markets. Management monitors whether future development activities result in meeting capitalisation requirements of IAS 38 and, if met, related costs adjust the carrying amount of related intangible asset. In 2015 additions to development costs in amount of USD 57,370 thousand were attributed to expansion of the Type Certificate.



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5. Intangible assets (continued) Impairment of intangible assets Management of the Group constantly monitors the SSJ-100 program for signs of impairment. There were significant downturn of passenger air traffic and related airlines’ demand for civil aircraft in 2015. Management of the Group decreased projected volume of aircraft to be sold in the bounds of the whole SSJ-100 program by 28% and performed an impairment test taking into account the decrease as an indication of potential impairment. Management reviewed the cash-flow projections for the full period of SSJ-100 program till 2051 and prepared updated forecast which assumes decrease of sales volume forecasts, as compared to the model used in prior periods. As of 31 December 2015 the recoverable amount of the Intangible assets and property, plant and equipment related to SSJ-100 program was USD 750,776 thousand.The recoverable amount has been determined based on value in use calculations using the updated cash-flow projection. The pre-tax discount rate applied to cash-flow projections is 15%. Based on the updated cash-flow, impairment losses were recognised in the amount of USD 473,006 thousand against Intangible assets with a carrying amount of USD 1,047,215 thousand as of 31 December 2015.

• Sale volumes. In 2016, 2017 and 2018 the Group forecasted sales amounted to 27, 34 and 38 aircraft respectively. A decrease of annual aircraft sale volumes by 10% would result an additional impairment loss of USD 166,672 thousand.

• EBITDA (calculated as operating income or loss less depreciation and amortisation). Average EBITDA margin from aircraft sales assumed in the test equals to 17%. A decrease of forecasted EBITDA by 1% would result in additional impairment loss of USD 15,725 thousand.

• Discount rate. An increase of discount rate by 1% would result in additional impairment loss of USD 73,408 thousand.



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6. Property, plant and equipment

Buildings and

construc-tions

Machinery and

equipment

Aircraft in operating

leases Vehicles Other

Advances paid for

acquisition of equipment, buildings and construction Total

Cost At 1 January 2014 87,422 236,187 243,101 3,485 13,689 4,156 588,040

Additions and transfers 5,160 141,576 (118,605) 138 1,037 (2,604) 26,702 Government grant related to

machinery and equipment – (4,407) – – – – (4,407) Transfer to Inventories – (6,463) (8,113) – – – (14,576) Disposal (9) (1,953) – (62) (602) – (2,626) At 31 December 2014 92,573 364,940 116,383 3,561 14,124 1,552 593,133 Additions and transfers 1,950 (37,300) 52,881 (5) 796 (461) 17,861 Transfer from inventories – 13,806 – – – – 13,806 Transfer to inventories – (11,769) – – – – (11,769) Disposal (95) (1,182) (116,442) – (418) – (118,137) At 31 December 2015 94,428 328,495 52,822 3,556 14,502 1,091 494,894

Accumulated depreciation and impairment losses

At 1 January 2014 33,347 174,055 61,366 3,254 12,448 – 284,470 Depreciation for the period 6,545 27,248 11,773 123 644 – 46,333 Transfer – 39,487 (39,487) – – – – Disposal (9) (1,664) – (62) (595) – (2,330) Transfer to inventories – (1,441) (1,363) – – – (2,804) Impairment losses disposal – (1,778) (925) – – – (2,703) At 31 December 2014 39,883 235,907 31,364 3,315 12,497 – 322,966 Depreciation for the period 6,663 25,432 7,053 86 555 – 39,789 Transfer – (6,615) 6,615 – – – – Disposal (22) (854) (24,974) – (389) – (26,239) Transfer to inventories – (2,341) – – – – (2,341) Impairment losses disposal

and transfer – (14,592) (1,085) – – – (15,677) At 31 December 2015 46,524 236,937 18,973 3,401 12,663 – 318,498

Net book value At 1 January 2014 54,075 62,132 181,735 231 1,241 4,156 303,570

At 31 December 2014 52,690 129,033 85,019 246 1,627 1,552 270,167

At 31 December 2015 47,904 91,558 33,849 155 1,839 1,091 176,396 Aircraft in operating leases Aircraft in operating leases as at 31 December 2015 include 2 aircraft provided to customers under operating lease agreements (31 December 2014: 5 aircraft). During 2015 the Group sold five aircraft classified as at 31 December 2014 as operating leases. Finance lease The Group leases equipment and vehicles under a number of finance lease agreements. At the end of each of the leases the Group has the option to purchase the equipment at a beneficial price. As of 31 December 2015 the net book value of leased assets was USD 411 thousand (2014: USD 2,503 thousand). The leased equipment secures lease obligations (refer to Note 14). Collateral As at 31 December 2015 the Group pledged two aircraft of USD 33,849 thousand net book value as collateral for bank guarantee (31 December 2014: nil).



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7. Net investment in finance leases

31 December 2015

31 December 2014

Current portion 2,640 1,908 Non-current portion 32,609 34,051

35,249 35,959

As at 31 December 2015 and 2014 the carrying amount of net investment in finance lease was represented by training simulators transferred under finance lease arrangements during 2012-2014 to Superjet International S.A., a joint venture of the Parent Company and Alenia Aermacchi S.p.A. As at 31 December 2015 and 2014 the Group did not pledge the assets related to the net investment in finance lease as collateral for credit line facilities.

Future minimum

lease payments

2015 Interest

2015

Present value of minimum

lease payments

2015

Future minimum

lease payments

2014 Interest

2014

Present value of minimum

lease payments

2014 Less than one year 6,223 3,583 2,640 7,665 5,757 1,908 Between one and five years 17,574 7,048 10,526 16,665 7,564 9,101 More than five years 27,011 4,928 22,083 31,404 6,454 24,950 Total 50,808 15,559 35,249 55,734 19,775 35,959 8. Deferred tax assets and liabilities Deferred tax assets and liabilities are attributed to the following items:

31 December

2015 Recognised

in profit or loss Recognised

in equity

Tax losses written down

to profit or loss 1 January

2015

Intangible assets 12,973 65,856 – – (52,883) Property, plant and

equipment (44,562) 23,282 – – (67,844) Inventories 10,095 (11,450) – – 21,545 Trade accounts and other

receivables (25,466) 86 – – (25,552) Trade accounts and other

payables 23,257 6,280 – – 16,977 Loans and borrowings (64,144) 17,952 (90,469) – 8,373 Onerous contract provision – 728 – – (728) Tax losses carried forward 162,579 (59,962) – (3,103) 225,644

Net deferred tax assets 74,732 42,772 (90,469) (3,103) 125,532



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8. Deferred tax assets and liabilities (continued)

31 December 2014

Recognised in profit or

loss

Tax losses written down

to profit or loss 1 January

2014

Intangible assets (52,883) (35,766) – (17,117) Property, plant and equipment (67,844) (360) – (67,484) Inventories 21,545 25,535 – (3,990) Trade accounts and other receivables (25,552) (28,931) – 3,379 Trade accounts and other paybles 16,977 (8,148) – 25,124 Loans and borrowings 8,373 5,448 – 2,925 Onerous contract provision (728) (654) – (74) Tax losses carried forward 225,644 5,339 (2,469) 222,774

Net deferred tax assets 125,532 (37,536) (2,469) 165,537 Management estimates that the Group will have sufficient future taxable profits to utilise the deferred tax asset after completion of “Sukhoi Super Jet – 100” development program and achievement of production and sales targets under the SSJ-100 business plan. The substantial part of tax losses expires in 2018-2023. Management expects that the Group will generate sufficient profits to utilise deferred tax assets recognised for tax losses carried forward prior to their expiry. Tax losses carried forward expire as follows: Years 2015

2018-2020 27,964 2021 11,207 2022 3,775 2023 111,614 2024 8,019

Total 162,579 9. Inventories

31 December 2015

31 December 2014

Components for aircraft serial production 293,557 227,639 Advances given for aircraft serial production 94,577 125,176 Work-in-progress 333,522 338,468 Finished goods 866 391 Other inventories 17,874 10,782

Total 740,396 702,456 Work-in-progress and finished goods are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs of necessary to make the sale. During 2015 the Group recognised inventories as an expense to the net realisable value in amount of USD 37,454 thousand (2014: USD 58,174 thousand).



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9. Inventories (continued) During 2015 the Group wrote down components for aircraft production in the amount of USD 384,630 thousand (2014: USD 536,986 thousand). At 31 December 2015 and 2014 the Group did not pledge inventories as collateral for secured loans. 10. Trade accounts and other receivables

31 December 2015

31 December 2014

Trade accounts receivable 176,531 213,021 Other receivables 3,815 10,696

Total 180,346 223,717 11. Advances issued

31 December 2015

31 December 2014

Advances to suppliers 25,746 22,179 Prepaid expenses 15,979 17,368 Other non-monetary receivables 20,435 18,457

Total 62,160 58,004 12. Cash and cash equivalents

31 December 2015

31 December 2014

Bank accounts 23,592 18,744 Bank deposits 154,592 4,757 Other cash and cash equivalents 21 24

Total 178,205 23,525 13. Equity Share capital and Share premium As at 1 January 2014, the share capital comprise 3,100,000 authorised and fully paid ordinary shares with par value of RUB 1,000 each. The structure of shareholding as per the Company’s Charter is as follows: PJSC “Company “Sukhoi”: 75% less one share and World Wings S.A.: 25% plus one share. As at 31 December 2015 the structure of actual shareholding was as follows: PJSC “Company “Sukhoi” 94.47%, World Wings S.A. – 5.53%.



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13. Equity (continued) Share capital and Share premium (continued) Additional share issue On 30 June 2014 the Group decided to increase its share capital by issuing 14,607,200 additional shares with a par value of RUB 1,000 each. The offering price per share is RUB 2,500. On 28 August 2014 the Group entered into agreement with the Parent Company and sold 10,032,381 shares for the total amount RUB 25,080,953 thousand (USD 694,000 thousand). On 19 January 2015 the Parent Company additionally aquired 880,000 shares for the total amount of RUB 2,200,000 (USD 32,429 thousand) based on the addendum to the agreement dated 28 August 2014. The registration process of the additional issue and changes in the Company’s charter was completed on 26 June 2015. Additional paid-in capital Additional paid-in capital in the amount of USD 55,362 thousand represents a fair value adjustment relating to loans received from PJSC “United Aircraft Corporation” (in 2010 in amount by USD 3,568 thousand) and “Sukhoi OKB” the Parent Company branch (in 2011 in amount by USD 51,794 thousand). The increase of additional paid-in capital in the amount of USD 361,875 thousand represents a fair value adjustment relating to a interest-free loans received from the Parent Company (for more details refer to Note 14 “Loans and borrowings”). Distributable profit In accordance with Russian legislation the Company’s distributable reserves are limited to the balance of accumulated retained earnings as recorded in the Company’s statutory financial statements prepared in accordance with Russian Accounting Principles. As at 31 December 2015 the Group had cumulative losses and, therefore, no profits available for distribution (2014: nil). Dividends As at 31 December 2015 and 2014 the Group has not declared and not paid dividends.



31

14. Loans and borrowings This note provides information about the contractual terms of the Group’s loans and borrowings, which are measured at amortised cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity risk, refer to Note 22. Terms repayment schedules at 31 December Current loans and borrowings:

Creditor Currency Interest rate,

% 31 December

2015 Interest rate,

% 31 December

2014

Secured bank loans PJSC “Sberbank” US dollars – – 7.5 241,619

Vnesheconombank US dollars – – 8.9 125,950 EABD US dollars – – Libor+5.3 58,458 VTB (Austria) US dollars – – Libor+5.5 50,226 JSC “Sberbank Leasing” US dollars – – 6.8 44,388 PJSC “Sberbank” EUR – – Euribor+6.5 52,516 PJSC “Sberbank” RUB – – 9.9 35,655 PJSC “Sberbank” US dollars – – 5.4 80,354 JSC “VTB Bank” RUB – – 16.0 35,520 JSC “Sberbank Leasing” US dollars 7.34 3,389 7.34 3,167 Vnesheconombank GBP 8.28-8.96 1,738 8.3 1,751 Vnesheconombank EUR 8.01-4.83 1,314 8.0 1,425 JSC “Alfa-Bank” US dollars – – 5.0 709 Vnesheconombank GBP 11.27 979 11.3 1,027 Vnesheconombank EUR – – 7.6 903 JSC “Alfa-Bank” US dollars – – 5.1 372 Vnesheconombank GBP Libor+4.64 206 Libor+4.64 214 JSC “VTB Bank” US dollars – – 6.2 69,664 JSC “Alfa-Bank” US dollars – – 4.6 50,032 JSC “Alfa-Bank” RUB – – 10.5 1 JSC “Alfa-Bank” RUB – – 10.5 1

Unsecured bank loans EBRD EUR Euribor+0.9 23,246 Euribor+0.9 66,593

PJSC “MDM Bank” US dollars – – 6.7 50,086 JSC “VTB Bank” US dollars – – 6.9 33,472 VTB (France) US dollars – – Libor+6.5 22,871 VTB (France) EUR – – Euribor+7 1,967

Secured bond issues Note A RUB – – 14.3 86,546

Unsecured bond issues Note B RUB 26.6-0.1 228 26.6 18,321

Finance lease liabilities

EUR 16.8-12.6 1,319 16.8 2,254

US dollars – – 17.1 67

Unsecured loans from related parties

PJSC “Company “Sukhoi” RUB – – 16.0 96,908 PJSC “Company “Sukhoi” RUB – – 10.8 53,647 PJSC “UAC” RUB – – 8.9 50,314 PJSC “UAC” RUB – – 9.2 10,635 PJSC “UAC” RUB – – 8.5 6,840 PJSC “Company “Sukhoi” (Note C) RUB 15.8 93,284 – – Total

125,703

1,354,473



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14. Loans and borrowings (continued) Terms and debt repayment schedule (continued) Non-current loans and borrowings:

Creditor Maturity Currency Interest rate,

% 31 December

2015 Interest rate,

% 31 December

2014

Secured bank loans Vnesheconombank 2015 US dollars – – 8.92 304,717

JSC “Alfa-Bank” 2015 US dollars – – 5.01 84,534 JSC “Alfa-Bank” 2015 US dollars – – 5.06 80,728 JSC “Sberbank Leasing” 2016-2027 US dollars 7.3 51,369 7.3 54,757 JSC “Alfa-Bank” 2017 RUB – – 10.46 10,681 Vnesheconombank 2016-2020 GBP 8.28-8.96 6,870 8.28 9,028 JSC “Alfa-Bank” 2018 RUB – – 10.47 8,901 Vnesheconombank 2019 GBP 11.3 2,950 11.3 4,121 Vnesheconombank 2016-2018 EUR 8.01-4.83 2,038 8.01 3,723 Vnesheconombank 2016-2020 GBP Libor+4.64 723 Libor+4.64 977

Secured bond issues Note A 2017 RUB 14.29-0.1 4,863 – –

Unsecured bond issues Note B 2017 RUB 17.1 41,786 – –

Finance lease liabilities

2016-2019 EUR 16.8-12.6 1,727 16.80 2,246

Unsecured loans from related parties

PJSC “UAC” 2020 RUB 7.9 23,250 7.90 27,891 PJSC “Company “Sukhoi” 2020 RUB 7.9 14,093 7.90 16,921 PJSC “UAC" 2020 RUB 7.7 2,432 7.7 2,923 PJSC “Company “Sukhoi”

(Note C) 2017 RUB 14.3 1,052,527 – –

Unsecured bank loans EBRD 2017 EUR Euribor+0.9 12,442 – –

Total

1,217,070

612,148 Refinancing of loans and borrowings denominated in foreign currencies During May-June 2015 the Group obtained from the state-controlled banks the ruble-denominated loans and used them for early repayment of the credit loan facilities denominated in foreign currencies with carrying amount of USD 1,035,102 thousand with the following banks: Eurasian Development Bank, JSC “Alfa-Bank”, VTB (Austria), VTB (France), PJSC “VTB Bank”, Vnesheconombank and PJSC “Sberbank”. In August 2015, under the terms of the interest-free Parent loan the Group used proceeds from this loan to repay liabilities under the loans and borrowing with JSC “Alfa-Bank”, Khabarovsk branch of PJSC “VTB Bank”, Vnesheconombank, PJSC “MDM-Bank”, JSC “Novikombank”, PJSC “Sberbank”, PJSC “UAC” and PJSC “Company “Sukhoi” with respect to borrowings obtained before 4 August 2015 in the total amount of RUB 96,671,160 thousand (USD 1,547,538 thousand). In September 2015 the Group redeemed bonds of series GSS-01 in the amount of RUB 3,328,840 thousand (USD 50,326 thousand). The total amount of repayment of liabilities under execution of the orders of the President of the Russian Federation made as at 26 March 2015 totalled to RUB 100,000,000 thousand (USD 1,597,864 thousand).



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14. Loans and borrowings (continued) Security All secured bank loans and bonds issues are guaranteed by PJSC “Company “Sukhoi” and PJSC “UAC”. The finance lease liabilities are secured by the leased assets. Secured Bonds (Note A) In March 2015 the Group redeemed 1,062,212 bonds in the total amount of USD 17,869 thousand. In April-September 2015 the Group performed secondary offer of 1,082,911 bonds in the total amount of USD 22,219 thousand and redeemed 4,620,251 bonds in the total amount of USD 69,850 thousand. On 4 September 2015 the President of the Company approved the new coupon rate of 0.1% for the eighteenth-twentieth coupon periods of the bonds of series GSS-01. In March 2017 the bonds of series GSS-01 will be paid off. Unsecured Bonds (Note B) In May 2015 the Group issued 3,000,000 bonds of series BO-05 with the nominal value of RUB 1,000 and maturity in May 2020. The coupon rate for the first four coupon periods was set at 16.4% p.a. The first offer on redemption of the bonds of series BO-05 shall be made in May 2017. In June 2015 the Board of Directors approved the new coupon rate of 0.1% for the second and third coupon periods of the bonds of series BO-04. In July 2015 the Group redeemed 1,013,397 bonds of series BO-04 in the total amount of USD 18,208 thousand. The next offer shall be made in June 2016. Loans from Parent Company (Note C) As at 4 August and 16 September 2015 the Group has received interest-free Parent loans in the total amount of RUB 100,000,000 and RUB 7,300,000 thousand (USD 1,600,827 and 108,700 thousand). The loans mature on 31 December 2017 and 31 July 2016, respectively. The fair values were determined using present value technique by reference to the current market interest rate for the similar financial instruments. The difference between loans nominal amounts and fair values in the amount of USD 361,875 thousand net of related income tax of USD 90,469 thousand was recognised directly in equity. Finance leases repayment schedule

At 31 December 2015

Future minimum lease

payments Interest

Present value of minimum lease

payments

During the first year 1,547 228 1,319 During the second year 516 161 355 During the third year 515 118 397 During the fourth year 1,031 56 975

Total 3,609 563 3,046



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14. Loans and borrowings (continued) Finance leases repayment schedule (continued)

At 31 December 2014

Future minimum lease

payments Interest

Present value of minimum lease

payments

During the first year 2,646 326 2,320 During the second year 573 230 343 During the third year 573 186 387 During the fourth year 573 137 436 During the fifth year 1,146 66 1,080

Total 5,511 945 4,566 The finance lease liabilities are secured by the leased assets (refer to Note 6). 15. Trade accounts and other payables

31 December 2015

31 December 2014

Trade creditors 156,392 392,233 Wages and salaries payable 2,869 3,607 Other accounts payable 86,810 63,154

Total 246,071 458,994 16. Onerous contract As at 31 December 2015 onerous contract provision balance decreased by USD 10,289 thousand as compared to 31 December 2014 which was attributable to utilisation of provision. As at 31 December 2015 the Company has no provision for the onerous contract. 17. Revenues

2015 2014

Sales of civil aircraft 544,097 551,141 Other 21,572 16,667

Total 565,669 567,808 In 2015 the Group delivered 25 aircraft SSJ-100 under sales contracts with customers (in 2014: 27 aircraft). Revenue recognised in accordance with IAS 11 Construction Contracts during 2015 amounted to USD 16,694 thousand (2014: USD 35,417 thousand). Other sales included operating leases of airctraft and various technical services related to supporting of aircraft sales.



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18. Government grants The Group’s activity on development of the “Sukhoi Super Jet – 100” aircraft is included in the Federal Target Program “Development of the civil aircraft for 2013-2025” approved by the Decision of the Federal Government of the Russian Federation No. 303 dated 15 April 2014. In accordance with this program, the Group receives financing from the Federal Government. Funds were received under the contract with Ministry of Industry and Trade (Minpromtorg) and PJSC “United Aircraft Corporation” (PJSC “UAC”) which is structured as a contract for the development services, and as a contract to cover certain types of expenses. The summary of government grants received by the Group is presented below.

2015 2014

Grants related to Machinery and equipment – 4,407 Grants related to development costs 5,886 7,938 Total government grants related to assets 5,886 12,345

Grants related to income 3,640 3,895 Total grants related to income received during the period 3,640 3,895

Total 9,526 16,240 Also in 2015 the Group received funds in the amount of USD 8,453 thousand from Minpromtorg to reimburse of expenses incurred for creation of spare parts stock sold to the customer of aicraft and trainings of customer’s crews in accordance with above mentioned program. 19. Administrative expenses

2015 2014

Wages and social contributions 18,037 25,543 Rent 1,911 5,193 Other expenses 23,000 16,160

Total 42,948 46,896 20. Interest and other finance expenses

2015 2014

Interest expenses on loans and borrowings 199,342 190,268 Interest expenses on obligations under finance lease 321 771 Total interest and other finance expenses 199,663 191,039 Less: amounts included in the cost of qualifying assets – (3,667)

Total interest and other finance expenses 199,663 187,372 The interest rate used to determine the amount of borrowing costs eligible for capitalisation in 2014 was 7.6%, which was effective interest rate of the borrowings.



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21. Income tax expense The Group’s applicable tax rate is the Russian Federation corporate income tax rate of 20%.

2015 2014

Deferred tax – origination and reversal of temporary differences 39,669 (40,005)

Deferred income tax benefit/(expense) 39,669 (40,005) Reconciliation of effective tax rate:

2015 2014

000'USD % 000'USD %

Loss before tax (422,911) 100.0 (191,277) 100.0 Theoretical income tax benefit at

the statutory tax rate 84,582 20.0 38,255 20.0 Tax effect of non-deductible expenses (15,239) (3.6) (10,842) (5.7) Effect of foreign currencies exchange

rates (26,571) (6.3) (64,950) (34.0) Write-down of tax losses carried

forward (3,103) (0.7) (2,468) (1.3)

Total income tax benefit/(expense) 39,669 9.4 (40,005) (20.9) 22. Financial instruments Exposure to credit, interest rate and currency risk arises in the normal course of the Group’s business. The Group does not hedge its exposure to such risk. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from related parties receivables from customers and investment securities. The maximum exposure to credit risk is represented by the carrying amount of financial assets. Maximum exposure to credit risk at the reporting date was as follows:

Note

31 December 2015

31 December 2014

Trade accounts receivable 10 176,531 213,021 Other receivables 10 3,815 29,153 Net investment in finance lease 7 35,249 35,959 Cash and cash equivalents 12 178,205 23,525

Total 393,800 301,658 As at 31 December 2015 share of the three (as at 31 December 2014 – two) main significant customers of the Group amounted to 94% and 100% of the total amount of receivable and investments in finance lease as at 31 December 2015 and 2014, respectively. As at 31 December 2015 contractual amounts of financial assets of USD 18,417 thousand (2014: USD 7,284 thousand) were impaired and fully provided for. During 2015 the Group charged impairment loss for financial assets of USD 11,133 thousand (2014: USD 7,284 thousand).



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22. Financial instruments (continued) Credit risk (continued) As at 31 December 2015 there are trade accounts and other receivables that are past due with the age less 6 months but not impaired in the amount of USD 2,212 thousand (2014: nil). Liquidity risk The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The table below analyses the Group’s financial liabilities into relevant maturity Group’s based on the remaining period from the reporting date to the contractual maturity date, based on the contractual undiscounted cash flows including estimated interest payments.

2015 Carrying amount

Contractual cash flows

6 months or less 6-12 months 1-2 years 2-5 years

More than 5 years

Bank and other loans 1,292,850 1,708,858 21,451 121,264 1,400,884 95,937 69,322 Secured bond issues 4,863 5,216 – – 5,216 – – Unsecured bond issues 42,014 51,544 3,594 3,366 44,584 – – Finance lease liabilities 3,046 3,609 1,547 – 516 1,546 – Trade accounts and other

payables 246,071 246,455 121,769 122,267 2,419 – – Total 1,588,844 2,015,682 148,361 246,897 1,453,619 97,483 69,322

2014 Carrying amount

Contractual cash flows

6 months or less

6-12 months

1-2 years

2-5 years

More than 5 years

Bank and other loans 1,857,188 2,153,921 948,246 406,012 241,241 208,627 349,795 Secured bond issues 86,546 87,987 87,987 – – – – Unsecured bond issue 18,321 20,591 20,591 – – – – Finance lease liabilities 4,566 5,511 2,646 – 573 2,292 – Trade accounts and other

payables 453,688 453,688 453,688 – – – – Total 2,420,309 2,721,698 1,513,158 406,012 241,814 210,919 349,795 Market risk Foreign currency risk The Group incurs foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Group. The currencies giving rise to this risk are primarily RUB, EUR and GBP. Management does not hedge the Group’s exposure to foreign currency risk. The Group has the following assets and liabilities denominated in foreign currency:

2015 2015 2015 2014 2014 2014 000'USD RUB EUR GBP RUB EUR GBP Cash and cash equivalents 172,345 4 – 7,052 129 – Loans and borrowings (1,232,463) (39,040) (13,466) (461,705) (127,128) (17,118) Finance lease liabilities – (3,046) – – (4,500) – Trade accounts and other

payables (35,813) (10,591) (300) (68,916) (12,096) (668) Trade accounts and other

receivables 33,874 444 – 17,212 520 –

(1,062,057) (52,229) (13,766) (506,357) (143,075) (17,786)



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22. Financial instruments (continued) Market risk (continued) The following exchange rates were applied at the respective reporting dates: 2015 2014 USD USD

RUB 1 equals 0.0137 0.0178 EUR 1 equals 1.09 1.21 GBP 1 equals 1.48 1.55 The following tables demonstrate the sensitivity to a reasonably possible change in RUB, EUR and GBP exchange rates, with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities. Assuming all other variables held constant fluctuations in the foreign currencies has the following impact on the profit before tax of the Group:

Changes in foreign

currencies rates Effect on profit

before tax 2015

RUB +/- 29.0% +/- 307,997 EUR +/- 12.5% +/- 6,529 GBP +/- 4.5% +/- 619

2014 RUB +/- 28.74% +/- 213,086

EUR +/- 6.23% +/- 13,052 GBP +/- 5.73% +/- 1,492 Interest rate risk At the reporting date the amount of the Group’s variable interest bearing financial instruments was:

2015 2014

Variable rate instruments Bank loans 36,617 253,822

Total 36,617 253,822 Changes in interest rates impact primarily loans and borrowings by changing either their fair value (fixed rate debt) or their future cash flows (variable rate debt). Management does not have a formal policy of determining how much of the Group’s exposure should be to fixed or variable rates. However, at the time of raising new loans or borrowings management uses its judgment to decide whether it believes that a fixed or variable rate would be more favourable to the Group over the expected period until maturity.



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22. Financial instruments (continued) Market risk (continued) Cash flow sensitivity analysis for variable rate instruments The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows:

Change in interest rates

Effect on profit before tax

2015 Libor +/- 0.50% +/- 5

Euribor +/- 0.25% +/- 89

2014 Libor +/- 0.02% +/- 39

Euribor +/- 0.07% +/- 124 Fair values All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities

• Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

• Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

At 31 December 2015 and at 31 December 2014 the Group estimates the carrying value of its financial assets and short-term receivables and payables not to be materially different from their fair value. As at 31 December 2015 the fair value of the loans and borrowings exceeded their carrying value by USD 16,487 thousand (31 December 2014: was not materially different from the fair value). Fair value of financial instruments measured at amortised cost is determined based on future principal and interest cash flows discounted using rates with similar market risk exposure are disclosed in Note 14. Interest rates used for evaluation of the fair value at 31 December 2015 was 13.0-13.8%%. All assets and liabilities in the reporting period were estimated on the basis of the resources listed in Level 3. During the period the Group did not transfer assets and liabilities between the Levels. Capital risk management The Group’s long-term objectives in managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide return for shareholders and benefits for other stakeholders. In the medium term, the Group’s objectives are to maintain an optimal capital structure to reduce the cost of capital and provide sufficient recourses necessary for successful commencement of a serial production of aircraft under the SSJ-100 program.



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22. Financial instruments (continued) Capital risk management (continued) Management’s target is to achieve a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. As discussed in Note 2, the overall success in achieving Group’s long-term objectives is dependent on certain important external factors, and taking those into account, the Group’s capital structure in the short-term may differ from targeted medium and long-term structure, although management believes that commencement of the production phase of the SSJ-100 program will enable the Group to closer align the short-term capital structure with the desired long-term objectives. As part of its capital management, it is one of the Group’s objectives to maintain a strong credit rating by institutional rating agencies. Apart from certain non-financial parameters, the credit rating is based on the factors such as capital and liquidity ratios. Most recently updated Company’s long-term rating from Fitch Ratings is “BB-”. 23. Operating leases The Group leases property based on short-term lease agreements with its shareholders. The lease agreements are subject to regular renewal. During the current year USD 3,500 thousand (2014: USD 5,406 thousand) was incurred in respect of operating leases, which approximates the annual minimum lease payments. The Group has no non-cancellable operating lease agreements. 24. Commitments The Group has commitments to provide sales financing to customers. These sales financing transactions will generally be collateralised by the underlying aircraft. The Group believes that the estimated fair value of the aircraft securing such commitments will substantially offset any potential losses from the commitments. As of 31 December 2015 the Group has no contractual commitments for the acquisition of property, plant and equipment. 25. Contingencies Russia continues economic reforms and development of its legal, tax and regulatory frameworks as required by a market economy. The future stability of the Russian economy is largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary measures undertaken by the Government. In 2015 the Russian economy continued to be negatively impacted by a significant drop in crude oil prices and a significant devaluation of the Russian ruble, as well as sanctions imposed on Russia by several countries in 2014. The ruble interest rates remained high after the Central Bank of Russia raised its key rate in December 2014, with subsequent gradual decrease in 2015. The combination of the above resulted in reduced access to capital, a higher cost of capital, increased inflation and uncertainty regarding economic growth, which could negatively affect the Group’s future financial position, results of operations and business prospects. The management believes it is taking appropriate measures to support the sustainability of the Group’s business in the current circumstances.



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25. Contingencies (continued) Insurance The Group does not have full coverage for its facilities, business interruption, or third party liability in respect of property or environmental damage arising from accidents on Group property or relating to Group operations. Until the Group obtains adequate insurance coverage, there is a risk that the loss or destruction of certain assets could have a material adverse effect on the Group’s operations and financial position. Tax contingencies Major part of the Group’s business activity is carried out in the Russian Federation. Russian tax legislation as currently in effect is vaguely drafted and is subject to varying interpretations, selective and inconsistent application and changes, which can occur frequently, at short notice and may apply retrospectively. Fiscal periods remain open and subject to review for a period of three calendar years immediately preceding the year in which the decision to conduct a tax review is taken. Under certain circumstances, the tax authorities may review earlier accounting periods. Effective from 1 January 2012, a number of changes were made to the Tax Code of the Russian Federation: new tax control principles for controlled transactions were implemented for income tax purposes: they extend qualification criteria (basis) for related parties; amend the list of controlled transactions; establish a list of price control methods; change requirements to justify selected pricing methods; introduce rules to notify the Federal Tax Service of the Russian Federation (RF FTS) on controlled transactions and obligation to submit to the RF FTS special documents on controlled transactions. In 2015 the Group measured its tax liabilities under controlled transactions based on actual transaction prices. The Group takes regular measures to comply with the Russian tax legislation on controlled transactions. The Group’s management believes that its interpretation of the relevant legislation is appropriate and is in accordance with the current industry practice and that the Group’s tax, currency and customs positions will be sustained. However, the interpretations of the relevant authorities could differ. As of 31 December 2015, the Group’s management estimated the possible effect of operating taxes, including fines and interest, on these consolidated financial statements, if the authorities were successful in enforcing different interpretations, to be de minimus. Litigation The Group has a number of claims and litigations relating to sale and purchases of goods and services. Management believes that none of these claims, individually or in aggregate, will have a material adverse impact on the Group. Put options over the sold aircraft / residual value guarantees Certain contracts for aircraft delivery include the put option over the sold aircraft and residual value guarantee. According to these contracts the Group while selling the aircraft assumes an obligation in a 10-12 years after the sale of the aircraft (period usually equal a half of the economic useful life of the aircraft) either to pay the difference between certain guaranteed amount (usually 40-45% of the sales price) and its market price at that date in case if customer sells aircraft at the market or repurchase used aircraft at that certain guaranteed amount. Management of the Group when selling the aircraft and at the end of each reporting period makes an assessment whether such obligations became onerous, in which case the Group recognises provision for the difference between the future market price of the sold aircraft subject to put option and the guaranteed amount. As at 31 December 2015 the management of the Group believes that none of the put options over the sold aircraft/residual value guarantees are onerous.



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26. Related parties Control relationship The Group’s related parties comprise the ultimate controlling party of the Group, the Russian Federation, all entities controlled, jointly controlled or significantly influenced by the Russian Federation, and the shareholder with significant influence, over the Group, World Wings S.A., and all its subsidiaries and other entities under common control of Finmeccanica S.p.A., ultimate parent of World Wings S.A., and key management personnel of the Group. The Group is indirectly owned and ultimately controlled by the Government of the Russian Federation. The Group operates in the industry dominated by entities directly or indirectly controlled by the Government of the Russian Federation through its government authorities, agencies, affiliation and other organisations (collectively referred to as “government-related entities”). The Group has transactions with other government-related entities including but not limited to sales and purchases of goods and ancillary materials, rendering and receiving services, lease of assets, depositing and borrowing money, and use of public utilities. These transactions are conducted in the ordinary course of the Group’s business on terms comparable to those with other entities that are not government-related. The Group has established procurement policies, pricing strategy and approval process for purchases and sales of products and services, which are independent of whether the counterparties are government-related entities or not. For the year ended 31 December 2015, management estimates that the aggregate amount of the Group’s collectively significant transactions with government related entities comprises 78% (2014: up to 65%) of its revenues, at least 24% (2014: at least 38%) of its purchases of materials, equipment and services, and up to 94% of its borrowings (2014: up to 69%). Proceeds and repayments of significant loans and borrowings from government-related entities are disclosed in Note 14. Government grants received are disclosed in Note 18. Transactions with shareholder with significant influence Transactions and balances with World Wings S.A., a shareholder with significant influence over the Company, its ultimate parent Finmeccanica S.p.A. and entities under its control are listed below:

2015 2014

Income 88,029 191,069 Acquisition of development cost, other assets and services (8,830) (13,437) Trade and other payables (5,148) (11,248) Trade and other receivables 93,295 187,463 Net investment in finance lease 35,249 35,959 Advances received (11,923) (18,792) Transactions with management Remuneration to key managerial staff for the year ended 31 December 2015 amounted to USD 3,728 thousand (2014: USD 4,355 thousand).



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27. Subsequent events Subsequent to 31 December 2015 the Group borrowed ruble-denominated loans in the amount of USD 21,579 thousand and repaid USD 7,475 thousand under the existing credit facilities at the reporting date.

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