The management of RAO UES of Russia believes that one of the main tasks involved in improving a system of financial management is the creation of a unified approach to the sequence plan — budget — result.
Accounting is based on the principles of an accounting policy which has been formulated by RAO UES of Russia. In accordance with Law No. 129-FZ of 21.11.96 On financial accounting and the Decree on book-keeping and accounting in the Russian Federation, as confirmed by Decree No. 34 n of the Ministry of Finance of the Russian Federation (29.07.98), operations must be structured in a way that takes account of the specific conditions of a company’s financial and business activities. All of the Company’s subsidiaries and affilietes which are not included in the schedule of RAO UES of Russia’s costs operate a complete system of book-keeping, draw up a balance sheet and other financial reports, pay taxes and are responsible for the full and timely payment of sums to the budget under all articles of company taxation. The principles of this book-keeping policy are also applied to RAO UES of Russia as a company, all of its affilietes, representative offices and other divisions. Subsidiary joint stock companies in which the Company holds a controlling block of shares are also subject to the main principles of RAO UES of Russia’s accounting policy.
The report kept the assumptions and the requirements stipulated in the business accounting rule (PBU) of 1/98, provided the comparability of the balance statements for the beginning of the reporting period with the statements of the previous reporting period with changes connected with application of the business accounting rule of 1/98.
The existence of a significant number of foreign shareholders, the launch of securities on the international market and the improved transparency of the various companies have required financial auditing to be carried out in accordance with international standards (MSFO). Since 1998 the Company’s external auditor has been the closed joint stock company PricewaterhouseCoopers Audit, which has carried out an audit of RAO UES of Russia’s accounts for 1998 in accordance with international auditing standards. The Company prepared a full set of financial documentation: balance sheet, profit and loss statement, cash flow statement and capital movement statement.
The management accounting system introduced during the period 1998—2000 focuses on flows of money and other company resources and the efficiency with which they are used within the budgeting system which is being intensively introduced in the companies of RAO UES of Russia. In 1999, a system of quarterly budgeting with month-by-month breakdowns was introduced for the operating activities of the Company and its structural divisions. Beginning from the second quarter of 2000, the Company is introducing systems of quarterly budgeting with a month-by-month breakdown for the activities of AO energos, AO power stations and the Holding Company as a whole.
During the year 2000, RAO UES Russia intends to implement yet another block of management accounting, cost accounting. The introduction of this accounting mechanism was begun with the adoption of a set of measures for reducing the conventionally fixed costs in the production of energy for each AO energo and AO power station. RAO UES of Russia has embarked on development and implementation of a programme for controlling the growth of production costs, involving setting appropriate control figures for each power company in the Holding Company. These indicators are designed to cut back losses in the power grids, reduce conventionally fixed costs and increase the efficiency of power generation.
Work has begun in RAO UES of Russia on the creation of a financial and managerial system for credit policy. A Treasury Department has been established, one of the functions of which is to develop and implement the Company’s credit policy under the management of the First Deputy Chairman for Finance and Economics. The goals of the Company’s credit policy include defining and operating an optimal policy on borrowing, monitoring and controlling credit, expanding the circle of creditors, issuing marketable financial instruments, employing various forms of security to attract funds and refinancing loans.
A Department of Project and Trade Financing has been established, with responsibility for the acquisition of loans to finance highly profitable projects.
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