Telia Lietuva, AB
Notification on material event
Regarding the Decision of the Director of the Supervision Service of the Bank of Lithuania
Telia Lietuva, AB received a Decision of the Director of the Supervision Service of the Bank of Lithuania as of 14 January 2019 No. 241-14, whereof the Company is obliged to publicize the following statement:
“3. To oblige Telia Lietuva, AB, immediately publicly announce notification of material event about this Decision of the Director of the Supervision Service of the Bank of Lithuania indicating that:
3.1. following the decision of the Director of the Supervision Service of the Bank of Lithuania it was decided to announce that Telia Lietuva, AB, breached the part 5 of the Article 22 of the Law on Securities of the Republic of Lithuania and 17 and 18 paragraphs of Rules on Information Disclosure;
3.2. annual financial statements of Telia Lietuva, AB for the year ended 31 December 2017 do not comply with the requirements of IAS 16 “Property, plant and equipment” and IAS 38 “Intangible assets”;
3.3. in consolidated annual report for the year 2017 not all information that is required by the provisions of the Law on financial reporting of enterprises and the Law on consolidated financial reporting of groups of enterprises was disclosed, there is lack of information accuracy, explanation, reasoning, and not to a full extend followed requirement of the Guidelines on Alternative Performance Measures;
3.4. impact of infringement on financial reports – taking into consideration that useful life of non-current tangible and non-current intangible assets, that are fully depreciated and amortised but still in use, was set shorter than its utility to the Company and Group, the Company’ and Group expenses for previous periods were increased and value of the assets was reduced.”
The Supervision Service of the Bank of Lithuania performed the examination of Telia Lietuva, AB accounting and financial reporting compliance to International Accounting and International Financial Reporting standards, and annual report and social responsibility report compliance with the legal acts, and based on findings of examination passed the above-mentioned decision.
Commenting on the opinion of the Bank of Lithuania expressed in findings of examination that useful life of non-current assets of the Company is not set properly, Laimonas Devyžis, CFO of Telia Lietuva, AB said that the rapid development of technologies over the last 20 years had an impact on the Company’s assets accounting policy. With the fast pace of technology change, it is becoming more difficult to properly set the useful life of the assets. Therefore, due to increased uncertainty, the Company follows the prudency principle while evaluating the useful life of the assets. Decisions of the Company are based on probability of the risk to suffer potential losses and their impact on financial statements that could occur due to sudden technology shift. The majority of amortised but still used in activities assets are outdated technologies, that do not have a technical support and do not get additional investments, and are gradually substituted with new technologies, for example, copper lines are substituted with the fiber-optic ones. However, the Company is not able to substitute all lines at once. It is a lengthy and investment-heavy process, because with the change of lines it is required to change the equipment too. Every year Company’s technical team thoroughly evaluates the amortisation rate and justifies them. It is obvious, that with development of technologies, the process of write-off of the assets will accelerate and the acquisition value of fully amortised but still used in activities assets will gradually diminish.
Following the remarks provided during the Bank of Lithuania examination regarding the financial ratios’ presented in the Annual Report of the Company for the year 2017 compliance with the requirements set in the Guidelines on Alternative Performance Measures, the Company placed the description and calculation methods of alternative performance measures used by Telia Lietuva, AB, as well as performance indicators calculation for the year 2016 and 2017 on its website.
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