OJSC Oil Company Rosneft Consolidated Financial Statements

OJSC Oil Company Rosneft
Notes to Consolidated Financial Statements (continued)
2. Significant Accounting Policies (continued)
Foreign Currency Translation (continued)
As of December 31, 2008 and 2007, the Central Bank of the Russian Federation ("CBR") official rates
of exchange were 29.38 rubles and 24.55 rubles per US dollar, respectively. As of March 2, 2009, the
official rate of exchange was 35.72 rubles (‘RUB’) per US dollar.
The translation of local currency denominated assets and liabilities into US dollars for the purposes of
these financial statements does not indicate that the Company could realize or settle, in US dollars, the
reported values of these assets and liabilities. Likewise, it does not indicate that the Company could
return or distribute the reported US dollar (“USD”) value of equity to its shareholders.
Principles of Consolidation
The consolidated financial statements include the accounts of majority-owned, controlled subsidiaries
and variable interest entities where the Company is a primary beneficiary. All significant
intercompany transactions and balances have been eliminated. The equity method is used to account
for investments in affiliates in which the Company has the ability to exert significant influence over
the affiliates’ operating and financial policies. The investments in entities where the Company holds
the majority of shares, but the minority shareholders have significant influence, are also accounted for
using the equity method. The Company’s share in net profit or loss of equity investees also includes
any other-than-temporary declines in fair value recognized during the period. Investments in other
companies are accounted for at cost and adjusted for impairment, if any.
Minority Interest
Minority interests in the net assets and net results of consolidated subsidiaries are shown under
"Minority interest" in the accompanying consolidated balance sheets and statements of income and
comprehensive income. For majority-owned subsidiaries that incur losses, the Company recognizes
100% of the losses, after first reducing the related minority interests’ balances to zero, unless minority
shareholders committed to fund the losses. Further, when a majority-owned subsidiary becomes
profitable, the Company recognizes 100% of profits until such time as the excess losses previously
recorded have been recovered. Thereafter, the Company recognizes profits in accordance with the
underlying ownership percentage. The actual ruble-denominated balances attributable to minority
interests may differ from these amounts presented in these consolidated financial statements.
Cash and Cash Equivalents
Cash represents cash on hand and in the Company’s bank accounts and interest bearing deposits which
can be effectively withdrawn at any time without prior notice or penalties reducing the principal
amount of the deposit. Cash equivalents are highly liquid, short-term investments that are readily
convertible to known amounts of cash and have original maturities of three months or less from their
date of purchase. They are carried at cost plus accrued interest, which approximates fair value.
Loans and Accounts Receivable
Loans and accounts receivable are stated at their principal amounts outstanding net of loan losses and
allowances for doubtful debts. Specific allowances are recorded against trade receivables whose
recovery or collection has been identified as doubtful. Estimates of allowances require the exercise of
judgment and the use of assumptions.
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