OJSC Oil Company Rosneft Consolidated Financial Statements

OJSC Oil Company Rosneft
Notes to Consolidated Financial Statements (continued)
2. Significant Accounting Policies (continued)
Comprehensive Income
The Company applies SFAS 130, Reporting Comprehensive Income, which establishes standards for
the calculation and reporting of the Company's comprehensive income (net income plus all other
changes in net assets from non-owner sources) and its components in consolidated financial
statements.
As of December 31, 2008 the Company recorded other accumulated comprehensive loss in the amount
of US$ 40 million (net of tax) which represents an unrealized loss resulting from the revaluation of
available-for-sale investments. As of December 31, 2007 and 2006, there are no material
comprehensive income items and, therefore, comprehensive income for 2007 and 2006 equals net
income.
Accounting for Buy/Sell Contracts
The Company applies the Financial Accounting Standards Board’s ("FASB") Emerging Issues Task
Force ("EITF") Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same
Counterparty, which requires that two or more legally separate exchange transactions with the same
counterparty, including buy/sell transactions, be combined and considered as a single arrangement for
the purposes of applying the provisions of APB 29, Accounting for Non-monetary Transactions, when
the transactions are entered into "in contemplation" of one another.
Accounting for Contingencies
Certain conditions may exist as of the date of these consolidated financial statements which may
further result in a loss to the Company, but which will only be resolved when one or more future
events occur or fail to occur. The Company’s management makes an assessment of such contingent
liabilities which is based on assumptions and is a matter of opinion. In assessing loss contingencies
relating to legal or tax proceedings that involve the Company or unasserted claims that may result in
such proceedings, the Company, after consultation with legal or tax advisors, evaluates the perceived
merits of any legal or tax proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a loss will be incurred and the
amount of the liability can be estimated, then the estimated liability is accrued in the Company’s
consolidated financial statements. If the assessment indicates that a potentially material loss
contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then
the nature of the contingent liability, together with an estimate of the range of possible loss if
determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in
which case the nature of the guarantee would be disclosed. However, in some instances in which
disclosure is not otherwise required, the Company may disclose contingent liabilities or other
uncertainties of an unusual nature which, in the judgment of management after consultation with its
legal or tax counsel, may be of interest to shareholders or others.
Taxes Collected from Customers and Remitted to Governmental Authorities
Excise taxes are reported gross within sales and other operating revenues and taxes other than income
taxes, while value-added tax is recorded net in taxes other than income tax liabilities in the
consolidated balance sheets.
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