OJSC Oil Company Rosneft Consolidated Financial Statements

OJSC Oil Company Rosneft
Notes to Consolidated Financial Statements (continued)
2. Significant Accounting Policies (continued)
Derivative Instruments
All derivative instruments are recorded on the consolidated balance sheets at fair value in either other
current assets, other non-current assets, other current liabilities or other non-current liabilities.
Recognition and classification of a gain or loss that results from recognition of a derivative instrument
at fair value depends on the purpose for issuing or holding the derivative instrument. Gains and losses
from derivatives that are not accounted for as hedges under SFAS 133, Accounting for Derivative
Instruments and Hedging Activities, are recognized immediately in the consolidated statement of
income and comprehensive income.
Recognition of Revenues
Revenues are recognized when title passes from the seller to the customer, the contract price is fixed
or determinable and collectability of the receivable is reasonably assured. Specifically, domestic sales
of crude oil and gas, as well as petroleum products and materials are recognized when title passes. For
export sales, title generally passes at the border of the Russian Federation and the Company covers
transportation expenses (except freight), duties and taxes on those sales. Revenues include excise taxes
and custom duties (see Note 19).
Sales of support services are recognized as services are performed provided that the service price can
be determined and no significant uncertainties regarding the receipt of revenues exist.
Transportation Expenses
Transportation expenses recognized in the consolidated statements of income and comprehensive
income represent all expenses incurred in the transportation of crude oil and petroleum products via
the Transneft pipeline network, as well as by railway and other transport means. Transportation
expenses also include all other shipping and handling costs.
Refinery Maintenance Costs
The Company recognizes the costs of overhauls and preventive maintenance performed with respect to
oil refining assets as expenses when incurred.
Environmental Liabilities
Environmental expenditures are expensed or capitalized, depending upon their future economic
benefit. Expenditures that relate to an existing condition caused by past operations, and do not have a
future economic benefit, are expensed. Liabilities for these expenditures are recorded on an
undiscounted basis when environmental assessments or clean-ups are probable and the costs can be
reasonably estimated.
Guarantees
The fair value of a guarantee is determined and recorded as a liability at the time when the guarantee is
issued. The initial guarantee amount is subsequently remeasured to reflect the changes in the
underlying liability. The expense is included in the related line items of the consolidated statements of
income and comprehensive income, based on the nature of the guarantee. When the likelihood of
performing on a guarantee becomes probable, a liability is accrued, provided it is reasonably
determinable on the basis of the facts and circumstances at that time.
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