1. Financial structure, management, and IFRS Reporting Creating value for growth Presenter: John Robinson Partner

2. © 2013. For information, contact Deloitte Touche Tohmatsu Limited. Contents Financial management for large Infrastructure entities Decision making mechanisms IFRS Reporting

3. © 2013. For information, contact Deloitte Touche Tohmatsu Limited. Financial Management for large infrastructure entities 3Financial structure, management and reporting

4. 4 © 2013 ZAO Deloitte & Touche CIS or © 2013 Deloitte & Touche Regional Consulting Services Limited Financial management for large infrastructure entities Creating the perfect balance Site management/ Inventory store HR (payroll & subcontracting) Legal Financial Reporting Engineers (Certification of works done, costs to complete) Fixed Asset management (Allocation of depreciation) Treasury (interest treatment)

5. © 2013. For information, contact Deloitte Touche Tohmatsu Limited. Decision making mechanism 5Financial structure, management and reporting r

6. Financial structure, management and reporting6 © 2013 ZAO Deloitte & Touche CIS or © 2013 Deloitte & Touche Regional Consulting Services Limited Decision making mechanism Focusing on your priorities Management information systems are the basis of sound decision making in financial management

7. © 2013 ZAO Deloitte & Touche CIS or © 2013 Deloitte & Touche Regional Consulting Services Limited Decision making mechanism 7Financial structure, management and reporting Periodic internal financial reporting Development of budgets and forecasts Internal control environment Features of a sound financial management system

8. © 2013 ZAO Deloitte & Touche CIS or © 2013 Deloitte & Touche Regional Consulting Services Limited Decision making mechanism (cont’d) Benefits of effective systems for decision making 8Financial structure, management and reporting Timely identification important financial trends over a period of time Ability to correctly assess the financial position and result of the company Attractiveness to investors Improved ability to project future results and growth potential

9. © 2013. For information, contact Deloitte Touche Tohmatsu Limited. IFRS reporting 9Financial structure, management and reporting

10. 10 © 2013 ZAO Deloitte & Touche CIS or © 2013 Deloitte & Touche Regional Consulting Services Limited IFRS Reporting Bringing trust and integrity to the market In some respects implementing IFRS needs to be seen as a fundamental change in attitude as to how management looks at its Management Information Systems IFRS reporting is not simply the annual transformation process from local accounting to a set of IFRS compliant Financial Statements.

11. Financial structure, management and reporting11 © 2013 ZAO Deloitte & Touche CIS or © 2013 Deloitte & Touche Regional Consulting Services Limited IFRS Reporting (cont’d) Entities continue to operate their financial reporting from a tax perspective rather than from a business perspective. Tax should be an outcome rather than a driver of business Implementing IFRS is a process that requires change and the ongoing operations require people to change the way that they work on a day to day basis Companies in transition economies, like Azerbaijan, typically change very little in terms of their day to day operations when implementing IFRS and rely on a periodic transformation exercise of the “IFRS reporting” department to do the work. As a result they struggle to get timely, relevant information and are very reliant on 1 or 2 people in the organisation to get the information together. This has its own risk when these people are in high demand and it is easy for the company’s “history” to be lost when these people change employment.

12. © 2013 ZAO Deloitte & Touche CIS or © 2013 Deloitte & Touche Regional Consulting Services Limited Typical conversion impacts 12Financial structure, management and reporting Activities Accounting and reportingTaxes Identify local GAAP/IFRS differences (accounting, presentation, and disclosure) and identify high-level impact on the entities consolidated financial statements Analyze optional IFRS policies and first-time (IFRS 1) considerations and implications of anticipated future changes to IFRS standards Analyze peer company IFRS 1 and accounting policy elections Identify local tax accounting method issues resulting from accounting workstreams Consider IFRS as a basis for local country tax reporting Identify process and technology issues the tax department may face in connection with transition to IFRS Assess high-level global tax planning implications

13. © 2013 ZAO Deloitte & Touche CIS or © 2013 Deloitte & Touche Regional Consulting Services Limited Typical conversion impacts (cont’d) 13Financial structure, management and reporting Activities Support for local statutory conversionPeople and organization Identify statutory reporting requirements and prioritize statutory locations for IFRS conversion or reconciliations from statutory GAAP to IFRS Analyze impacts on the overall organization, including the following areas: Change management strategy and plan (including HR matters such as training and communication strategies) Legal – Identify certain arrangements with local GAAP metrics Analyze other organizational impacts Systems, processes, and controls Workplan development and communications Perform initial analysis of required financial applications and technical infrastructure Identify high-level system gaps to meet future IFRS reporting requirements Summarize assessment findings and assist management with developing a strategic workplan and roadmap for its global IFRS implementation including: Critical activities, timelines, resource estimates, budget estimates, coordination with auditors, etc.

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