7. Property, plant and equipment

The net book value of property, plant and equipment as at 31 December 2013, 2012 and 2011 was as follows:


Buildings and site services Cable and transmission devices Other Construction in progress Total
Cost/deemed cost
At 1 January 2011 225,125 322,397 81,949 19,542 649,013
Additions 622 2,176 3,349 68,320 74,467
Reclassification from investment  property and other non–current assets 262 121 383
Acquisition through business combination 1,270 8,079 525 902 10,776
Reclassification to assets held for sale (944) (1) (33) (58) (1,036)
Transfer 17,786 38,925 7,228 (63,939)
Disposals (3,803) (7,989) (5,153) (801) (17,746)
Reclassification (12,117) 20,044 (8,639) 712
At 31 December 2011 228,201 383,752 79,226 24,678 715,857
At 1 January 2012 228,201 383,752 79,226 24,678 715,857
Additions 78 5,925 2,447 102,995 111,445
Reclassification from investment  property and other non–current assets 1,465 (7) 45 58 1,561
Acquisition through business combination 8 465 49 10 532
Reclassification to assets held for sale (2,223) (111) (100) (2,434)
Transfer 13,389 40,553 8,943 (62,885)
Disposals (2,237) (6,302) (1,330) (974) (10,843)
Foreign exchange (43) (2) (4) (49)
Reclassification (62,416) 55,713 6,669 29 (5)
At 31 December 2012 176,265 479,945 95,947 63,907 816,064
At 1 January 2013 176,265 479,945 95,947 63,907 816,064
Additions 87 2,980 1,650 54,471 59,188
Reclassification from investment  property and assets held for sale 473 13 486
Reclassification to assets held for sale (11,077) (71,536) (6,696) (15,216) (104,525)
Transfer 5,566 53,867 8,499 (67,932)
Disposals (972) (9,498) (4,773) (586) (15,829)
Foreign exchange 39 3 10 52
Reclassification (24,102) 17,113 6,473 91 (425)
At 31 December 2013 146,240 472,910 101,116 34,745 755,011

Buildings and site services Cable and transmission devices Other Construction in progress Total
Accumulated amortization and impairment losses
At 1 January 2011 (95,795) (173,844) (57,829) (182) (327,650)
Depreciation expense (10,052) (33,716) (10,451) (54,219)
Reclassification from investment property and assets held for sale (119) (61) (180)
Reclassification to assets held for sale 579 1 25 605
Impairment losses (1) (111) (1) (153) (266)
Disposals 2,423 6,886 5,037 14,346
Reclassification (9,324) 3,351 5,970 3
At 31 December 2011 (112,289) (197,494) (57,249) (332) (367,364)
At 1 January 2012 (112,289) (197,494) (57,249) (332) (367,364)
Depreciation expense (9,142) (37,024) (10,211) (56,377)
Reclassification from investment property and assets held for sale (1,086) 20 (38) (1,104)
Reclassification to assets held for sale 1,730 86 94 1,910
Impairment losses (57) 96 (40) (1,391) (1,392)
Disposals 1,763 5,314 1,068 30 8,175
Foreign exchange 1 1
Reclassification 32,937 (29,017) (3,915) (1) 4
At 31 December 2012 (86,144) (258,018) (70,291) (1,694) (416,147)
At 1 January 2013 (86,144) (258,018) (70,291) (1,694) (416,147)
Depreciation expense (4,900) (44,268) (9,811) (58,979)
Reclassification from investment property and assets held for sale (262) (13) (275)
Reclassification to assets held for sale 2,933 34,920 3,622 189 41,664
Reversal of impairment losses (21) (70) (48) 262 123
Disposals 677 7,762 4,638 165 13,242
Foreign exchange (5) (5)
Reclassification 11,878 (7,433) (4,020) 425
At 31 December 2013 (75,839) (267,112) (75,923) (1,078) (419,952)
Net book value
At 31 December 2011 115,912 186,258 21,977 24,346 348,493
At 31 December 2012 90,121 221,927 25,656 62,213 399,917
At 31 December 2013 70,401 205,798 25,193 33,667 335,059

For the purposes of consistent classification of similar item of property, plant and equipment the Group made reclassification of certain items from investment property to property, plant and equipment as at 31 December 2012 and 2011. Furthermore assets related to mobile business were classified as assets held for sale as at 31 December 2013.

Assets of mobile business with a carrying value of 62,609 are included into reclassification to assets held for sale for the year ended 31 December 2013.

At 31 December 2013, 2012 and 2011 cost of fully depreciated property, plant and equipment was 181,117, 155,986 and 135,287 respectively.

Interest capitalization

Interest amounting to 2,780, 1,462 and 948 was capitalized in property, plant and equipment for the years ended 31 December 2013, 2012 and 2011 respectively. The capitalization rate used to determine the amount of borrowing costs eligible for capitalization is 8.37%, 7.88% and 7.50% for the years ended 31 December 2013, 2012 and 2011 respectively.

Pledged property, plant and equipment

Property, plant and equipment with a carrying value of 2,072, 1,872 and 3,414 was pledged in relation to loan agreements entered into by the Group as at 31 December 2013, 2012 and 2011 respectively.

Leased property, plant and equipment

As at 31 December 2013, 2012 and 2011 net book value of leased property, plant and equipment comprised:


  31 December 2013 31 December 2012 31 December 2011
Buildings and constructions 1 518 1,107
Switches and transmission devices 415 2,265 3,533
Vehicles and other property, plant and equipment 539 888 657
Construction in progress 87 87 13
Total net book value of leased property, plant and equipment 1,042 3,758 5,310

Impairment of property, plant and equipment

As at 31 December 2013, 2012 and 2011 the Group conducted impairment testing of its property, plant, equipment, to identify possible irrecoverability of the assets. The Group assessed the recoverable amount of the assets for which estimation on individual basis is impossible within respective CGU. The Group defines CGUs as regional branches (in case of Rostelecom), legal entities or group of legal entities (in case of subsidiaries).

In 2013 as a result of reorganization (refer to Note 8) a number of legal entities were merged with the Company which caused the change in composition CGU. Assets including goodwill previously allocated to legal entities were reallocated to regional branches to which former entities have been merged.In addition, due to planned disposal of mobile assets in 2014 (refer to Note 35), all assets including goodwill of subsidiaries providing mobile services were classified as assets held for sale as at 31 December 2013. Since, the following CGU ceased to exist for the purpose of impairment testing:

  • Akos
  • Baikalvestcom
  • BIT
  • Nizhegorodskaya sotovaya sviaz
  • Skylink
  • Volgograd GSM
  • Yenisey telecom

The recoverable amount of each CGU is determined by estimating its value in use. Value in use calculation uses cash–flow projections based on actual and budgeted financial information approved by management and a discount rate which reflects time value of money and risks associated with each individual CGU. Key assumptions used by management for three reporting dates in the calculation of value in use are as follows:

  • discount rates are estimated in nominal terms as the weighted average cost of capital on pre tax basis and varys from 15.56% to 22.38% per CGU;
  • OIBDA margin are based on historical actual results and varies from 7.66% to 53.00% per CGU;
  • for all CGUs cash flow projections cover the period of five years, cash flows beyond five–year period are extrapolated using growth rate of 2% for each CGU.

For individual items of construction in progress for which the Group has no intention to complete and use or sell them impairment loss was recognised in the amount of their carrying value.

2013 impairment testing

As a result of impairment testing no loss in respect of property, plant and equipment was recognised.

2012 impairment testing

As a result of impairment testing a loss of 715 was recognised in respect of corporate assets included in construction in progress. The impairment loss are included in the line Depreciation, amortisation and impairment losses in the statement of comprehensive income.

2011 impairment testing

Impairment loss of property, plant and equipment in the amount of 113 (CGU regional branch Ural) and construction in progress of 153 were recognised as a result of impairment testing. Impairment losses are included in the line Depreciation, amortisation and impairment losses in the statement of comprehensive income.