Telekom Srpske Banja Luka : Revizorski izvještaj i konsolidovani revizorski izvještaj za 2021. godinu dostupni na engleskom jeziku

"MTEL" a.d. BANJA LUKA

Consolidated Financial Statements for the Year Ended

31 December 2021 and

Independent Auditor's Report

MTEL A.D. BANJA LUKA

CONTENTS
	Page
INDEPENDENT AUDITOR'S REPORT	1 - 5
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Profit and Loss and Other Comprehensive Income	6
Consolidated Statement of Financial Position	7
Consolidated Statement of Changes in Equity	8
Consolidated Statement of Cash Flows	9
Notes to the Consolidated Financial Statements	10 - 62

This is an English translation of Independent Auditor's Report originally issued in the Serbian language

INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS AND MANAGEMENT BOARD OF "MTEL" a.d. BANJA LUKA

Opinion

We have audited the consolidated financial statements of "Mtel" a.d. Banja Luka and its subsidiaries (hereinafter collectively referred to as the "Group"), which comprise the consolidated statement of financial position as of 31 December 2021, and the consolidated statement of profit and loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as 31 December 2021, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

(Continued)

INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS AND MANAGEMENT BOARD OF "MTEL" a.d. BANJA LUKA (Continued)

Key Audit Matters (Continued)

Key Audit Matter

Audit Procedures Applied

1. Revenue recognition (accuracy of recording revenues due to the complexity of the information systems for generating income from services rendered), Note 5 to the consolidated financial statements

There are inherent risks associated with the accuracy of recognized revenues arising from the complexity of information systems (IT) of the Group, through which the realised traffic, billing, approved free traffic and other discounts in the revenue generation process are measured.

Based on the procedures performed, we have not identified significant findings in relation to the accuracy of the revenue recorded for the year ended 31 December 2021.

We assessed the Group's most important IT systems for recording the realised traffic, billing and invoicing services to customers and conducted tests of relevant controls over these systems, tested the relevant control over the transfer of data from the respective information systems to the general ledger, as well as controls over the process of payments of bills by the customers and the process of customer complaints resolution.

We tested the compliance of prices and discount terms on customers' invoices with the current pricelist and discount terms on a sample basis.

Key Audit Matter	Audit Procedures Applied

2. Accrual of income and expenses due to the assessment of contracted and realised roaming discounts in the international traffic, Notes 23 and 33 to the consolidated financial statements

Accrued income of the Group from the roaming discounts contracted with other operators in the international traffic, as well as accrued expenses for roaming discounts granted to other operators by the Group were selected as key audit matters due to the fact that they include a significant scope of management estimates relating to meeting the requirements from individual contracts with specific operators.

Based on the procedures performed, we have not identified significant findings in relation to the accrued discounts based on the roaming traffic realised in the year ended 31 December 2021.

We reviewed contracts with major operators per income generated/expenses incurred from the roaming discount, tested sales/purchase invoices to/from operators on a sample basis and checked their accuracy, as well as their compliance with the terms defined in the agreements on roaming discounts.

We have verified the billing of the amount of roaming with clearings and settlements received from clearing houses for the year ended 31 December 2021.

In addition, we have checked the consistency in the application of the group's accounting policies when recording the roaming discount.

(Continued)

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INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS AND MANAGEMENT BOARD OF "MTEL" a.d. BANJA LUKA (Continued)

Key Audit Matters (Continued)

Key Audit Matter	Audit procedures applied

3. Capitalization of costs of investments in intangible assets and property, plant and equipment, as well as their valuation after initial recognition, Notes 12 and 14 to the consolidated financial statements

This key audit matter was selected due to the fact that it involves significant estimates by the Group's management in the capitalization of investment costs in software and property, plant and equipment, as well as in determining the depreciation period and subsequent measurement of the recoverable amount of these assets due to relatively rapid technological changes inherent to the telecommunications industry.

Based on the procedures performed, we have not identified significant findings in relation to the adequacy of capitalization of costs of investments in intangible assets and property, plant and equipment, as well as their subsequent valuation after initial recognition in the year ended 31 December 2021.

We tested on a sample basis the Group's expenses recorded in current period expenses, as well as the increase recorded by the Group during the year on intangible assets and property, plant and equipment, from the point of view of meeting the criteria for capitalization of expenses, i.e. their recognition as expenses in current period. We analysed the assessments of the Group's management regarding the existence of indicators of impairment of intangible assets, property, plant and equipment, such as changes in use, reduction of market value, detection of physical damage, etc. We have considered the applied depreciation rates in relation to the useful lives of assets, plans to replace assets, previous experience in spending, as well as the realized income and expenses from the disposal of individual assets. We tested the internal controls implemented by the Group's management in this process. Based on the sample, we checked the arithmetic accuracy of the depreciation calculation and compared the rates with the previous accounting period. In addition, we tested construction in progress according to the age structure of the investment, physical condition, additionally capitalized costs during the period, the moment of putting into use and the inception of depreciation.

(Continued)

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