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3.22 Related party transactions
Related parties are individuals or enterprises that control or are controlled, directly or indirectly by Provincial
Electricity Authority, or are under common control with Provincial Electricity Authority. Moreover, related parties
also include associates and individuals who have direct or indirect voting rights that result in signifcant infuence
on Provincial Electricity Authority, executives, directors or employees and close member of that person’s family
is related to Provincial Electricity Authority’s executives who have control over Provincial Electricity Authority.

3.23 Use of judgments and signifcant accounting estimates
To prepare of fnancial statements in conformity with generally accepted accounting principles,
management has to make estimates and several assumptions that affect amount of revenues, expenses, assets
and liabilities and disclosure of contingent assets and liabilities. Actual results may differ from the estimates
such as allowance for doubtful accounts, allowance for obsolete materials and supplies and allowance for loss
or misstated or lost materials.

3.24 Operating Segments

Provincial Electricity Authority presents operating segments by geographical areas in which Provincial Electricity
uthority s management, administration and fnancial reporting structure are criteria for determination segmentation.
Provincial Electricity Authority has 5 geographical segments which include northern, northeastern, central,
southern areas and headquarter. Each area is responsible for distributing electricity in its own area. The headquarter
is responsible for setting policies and plans as well as providing all necessary materials to the regional areas.
According to PEA accounting policies for operating segments, each of the operating segments recognize
revenues based on the amount of electricity sold in its own areas. Provincial Electricity Authority also allocates
its cost of sales from headquarter to each of the operating segments based on actual cost occurred.
Operating income of each segment derives from total revenues deducted cost and operating expenses.
Assets of each regional area are those assets used in operating activities by each of the operating segment
or related activities.
Liabilities of each regional area are those liabilities incurred from operating activities by each of the operating
segment and related activities, except accounts payable-electricity, long-term loans, accrued remittance to the
inistry of inance and liabilities under fnancial leases which the headquarter does not allocate those items to
each of the operating segments.

106 SMART PEA
Annual Report 2016 Provincial Electricity Authority