Basic HTML Version
25
FINANCIAL STATEMENTS, MANAGEMENT AND CORPORATE GOVERNANCE REPORT.
2011
C) Impairment of financial assets
At year-end, the Company evaluates if its financial assets or group of financial assets are impaired.
Financial assets recognised at amortised cost (receivables and investments held to maturity)
Valuation adjustments are made, provided that there is objective evidence that the value of a financial asset, or group of
financial assets, recognised at amor tised cost has suffered an impairment loss as a result of one or more events that have
occurred after their initial recognition causing a reduction or delay in estimated future cash flows.
The impairment loss on these financial assets is the difference between their carrying value and the present value of
the future cash flows expected to be generated, minus the effective interest rate calculated at the time of their initial
recognition. For financial assets with floating interest rates, the effective interest rate corresponding to the balance sheet
date is used, in accordance with the contractual conditions. To calculate the impairment losses of a group of financial
assets, models based on statistical methods or formulas are used. For investments held to maturity as a substitute for the
present value of future cash flows, the market value of the instrument may be used, provided that it is sufficiently reliable
to be considered representative of the value that the Company might recover.
Impairment losses, as well as the reversion thereof when the amount of the loss diminishes for reasons related to a
subsequent event, are recognised as revenue or expenses, respectively, in the income statement. The reversal of an
impairment is limited to the carrying value of the credit that would have been recognised on the reversal dates had no
impairment loss been recognised.
Investments in Group companies, joint ventures and associates
When there is objective evidence that the carrying amount of an investment will not be recoverable, the required
valuation adjustments must be made.
The valuation adjustment is the difference between the carrying amount of the investment and the recoverable amount,
which is the greater of the investment’s fair value, less costs to sell, and the present value of future cash flows derived
from the investment. Unless better evidence of the recoverable amount of the investments is available, impairment of
this type of asset has been estimated taking into account the equity of the subsidiary, adjusted by any unrealised capital
gain existing on the measurement date.
Unless financial suppor t has been promised to the investee, no provisions are set aside in excess of the value of the
investment.
Impairment loss and its reversion are recognised as expenses or as revenue, respectively, in the income statement.
The reversal of an impairment is limited to the carrying value of the estimate that would have been recognised on the
reversal dates had no impairment loss been recognised.
Available-for-sale financial assets
When there is objective evidence of a decline in the fair value of this category of financial assets due to impairment, the
underlying capital losses recognised as “Unrealised gains (losses) reserve” in equity are taken to the income statement.
The reversal of an impairment loss is recognised in the income statement. Such reversal is limited to the carrying amount
of the financial asset that would have been recognised on the reversal date had no impairment loss been recognised.
D) Derecognition of financial assets
The Company derecognises all or par t of a financial asset when the contractual rights to related cash flows expire or are
transferred. In such cases, substantially all of the risks and rewards of ownership must be assigned, under circumstances
that are evaluated by comparing the Company’s exposure before and after the transfer with the variability in the
amounts and the timing of the net cash flows of the transferred asset.