H1 2013 INTERIM REPORT with lines for website

2. Significant Accounting Policies

Basis of Preparation (continued)

Restatement of Financial Statements (continued)

2.Changes in Accounting Policies

Basis of Preparation (continued)

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Restatement of Financial Statements (continued)

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2. Significant Accounting Policies

Changes in Accounting Policies

In the preparation of the interim condensed consolidated financial statements, the Group followed the same accounting policies and methods of computation as compared with those applied in the complete consolidated financial statements for year ended 31 December 2012, except for the adoption of new standards and interpretations and revision of the existing IAS as of 1 January 2013.

New/Revised Standards and Interpretations Adopted in 2013:

 Amendments to IAS 19 “Employee Benefits”

IAS 19 (revised) includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognised in other comprehensive income and permanently excluded from profit and loss; expected returns on plan assets that are no longer recognised in profit or loss, instead, there is a requirement to recognise interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation, and; unvested past service costs are now recognised in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognised. Other amendments include new disclosures, such as, quantitative sensitivity disclosures. The amended standard is required to be applied retrospectively. The effects of the application of the revised IAS 19 are disclosed in the Basis of Preparation above.

 Amendments to IFRS 7 “Financial Instruments: Disclosures” – Offsetting Financial Assets and Financial Liabilities

The amendment requires an entity to disclose information about rights to set-off financial instruments and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether the financial instruments are set off in accordance with IAS 32.

 IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7 “Financial Instruments: Disclosures”. Some of these disclosures are specifically required for financial instruments by IAS 34.16A(j), thereby affecting the interim condensed consolidated financial statements period.

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2. Significant Accounting Policies (continued)

Changes in Accounting Policies (continued)

Amendments to IAS 1 “Presentation of Financial Statements” – Changes to the Presentation of Other Comprehensive Income

The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or recycled) to profit or loss at a future point in time (e.g., net gain on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) now have to be presented separately from items that will never be reclassified (e.g., actuarial gains and losses on defined benefit plans and revaluation of land and buildings).

The amendment to IAS 1 clarifies the difference between voluntary additional comparative information and the minimum required comparative information. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional voluntarily comparative information does not need to be presented in a complete set of financial statements.

An opening statement of financial position (known as the ‘third balance sheet’) must be presented when an entity applies an accounting policy retrospectively, makes retrospective restatements, or reclassifies items in its financial statements, provided any of those changes has a material effect on the statement of financial position at the beginning of the preceding period. The amendment clarifies that a third balance sheet does not have to be accompanied by comparative information in the related notes. Under IAS 34, the minimum items required for interim condensed financial statements do not include a third balance sheet.

 IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”

This Interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine.

If the benefit from the stripping activity will be realised in the current period, an entity is required to account for the stripping activity costs as part of the cost of inventory. When the benefit is the improved access to ore, the entity recognises these costs as a non-current asset, only if certain criteria are met. This is referred to as the ‘stripping activity asset’. The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset.

If the costs of the stripping activity asset and the inventory produced are not separately identifiable, the entity allocates the cost between the two assets using an allocation method based on a relevant production measure.

After initial recognition, the stripping activity asset is carried at its cost or revalued amount less depreciation or amortisation and less impairment losses, in the same way as the existing asset of which it is a part.

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2. Significant Accounting Policies (continued)

Changes in Accounting Policies (continued)

 Amendments to standards following the May 2012 “Improvements to IFRS” project

Except for IAS 19 (revised), the amendments described above did not have a significant impact on the financial position or performance of the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

3.Segment Information

The following tables present measures of segment profit or loss based on management accounts.

Six-month period ended 30 June 2013

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3.Segment Information (continued)

The following table shows a reconciliation of revenue and EBITDA used by the management for decision making and revenue and profit or loss before tax per the consolidated financial statements prepared under IFRS.

Six-month period ended 30 June 2013

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3.Segment Information (continued)

Six-month period ended 30 June 2012 (restated)

In the six-month period ended 30 June 2013, the Group made a reversal of the allowance for net realisable value in the amount of $16 million.

The material changes in property, plant and equipment during the six-month period ended 30 June 2013 other than those disclosed above are presented below:

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4.Purchases/Sales of Ownership Interests in Subsidiaries

Acquisition of Controlling Interest in Corber

In October 2012, EVRAZ plc concluded a preliminary agreement with Adroliv Investments Limited for an acquisition of a 50% ownership interest in Corber subject to the receipt of regulatory approvals and fulfillment of certain other conditions. On 16 January 2013, all the conditions were met and the Group obtained control over the entity. As a result, Corber became a wholly owned subsidiary of the Group on 16 January 2013.

Management believes that this acquisition will increase the Group’s coking coal self-coverage and generate substantial operational synergies to the Group, including the optimal use of various coal grades.

The purchase consideration includes 132,653,006 shares of EVRAZ plc issued on 16 January 2013, warrants to subscribe for an additional 33,944,928 EVRAZ plc shares exercisable at zero price in the period from 17 January to 17 April 2014 and a cash consideration of $202 million to be paid in equal quarterly installments to 15 January 2014. Fair value of the consideration transferred totalled to $964 million, including $611 million relating to the shares issued, $156 million representing the fair value of the warrants and $197 million of present value of the cash component of the purchase consideration. The fair value of shares and warrants was determined by reference to the market value of EVRAZ plc shares at the date of acquisition.

In accordance with IFRS 3 “Business Combinations” in a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss in the income statement. The fair value of the equity interest previously held by an acquirer is further added to the purchase consideration in the purchase price calculation. The fair value of the equity interest previously held by the Group was $658 million. The fair value of the investment in Corber was determined using the market price of shares of Raspadskaya at the date of acquisition of an additional 50% share in Corber.

The Group recorded a $94 million gain on derecognition of the equity interest in Corber held before the business combination. This gain was determined as follows:

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4.Purchases/Sales of Ownership Interests in Subsidiaries (continued)

Acquisition of a Controlling Interest in Corber (continued)

The acquisition of a controlling interest in Corber was accounted for based on provisional values as the Group, as of the date of authorisation of issue of these financial statements, has not completed a purchase price allocation in accordance with IFRS 3 “Business Combinations”.

The table below sets forth the provisional fair values of Corber’s consolidated identifiable assets, liabilities and contingent liabilities at the date of acquisition:

Cash flow on acquisition for the six-month period ended 30 June 2013 was as follows:

As of 30 June 2013, the unpaid purchase consideration was $151 million.

For the period from 16 January 2013 to 30 June 2013, Corber reported a net loss amounting to $82 million.

Acquisition of a Controlling Interest in MediaHolding Provincia

In the six-month period ended 30 June 2013, the Group acquired an additional 45.5% ownership interest in MediaHolding Provincia for a cash consideration of $11 million. The fair value of the equity interest previously held by the Group (30%) was $4 million. The Group recorded a $5 million loss on derecognition of the equity interest in MediaHolding Provincia held before the business combination. The Group recognised $3 million of goodwill on the transaction. Subsequently, the Group acquired all non-controlling interests settled by the transfer of property and recognised the excess of the carrying value of the acquired non-controlling interests over the amount of consideration amounting to $1 million in additional paid-in capital.

Disclosure of Other Information in Respect of Business Combinations

If this business combination had occurred as of the beginning of 2013, the revenue and net profit/(loss) of the combined entity would have been $7,388 million and $(129) million, respectively.

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