Annual Accounts 2012 Abertis


Published on

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Annual Accounts 2012 Abertis

  1. 1. ABERTIS INFRAESTRUCTURAS, S.A.AND SUBSIDIARY COMPANIESConsolidated Annual Accounts and Consolidated Directors’ ReportYear Ended 31 December 2011(prepared under International Financial Reporting Standards) 1
  2. 2. INDEXConsolidated Balance Sheets at 31 December ....................................................... 3Consolidated Income Statements at 31 December ................................................. 5Consolidated Statements of Comprehensive Income at 31 December ....................... 6Statement of Changes in Consolidated Net Equity ................................................. 7Consolidated Cash Flow Statements .................................................................... 8NOTES TO THE 2011 CONSOLIDATED ANNUAL ACCOUNTS ................................... 101. General information .............................................................................. 102. Basis of presentation............................................................................. 113. Accounting policies ............................................................................... 234. Management of financial risk and capital .................................................. 435. Property, plant and equipment ............................................................... 495. Property, plant and equipment ............................................................... 496. Goodwill and other intangible assets........................................................ 527. Investment property ............................................................................. 618. Investments in associates ...................................................................... 629. Available-for-sale financial assets ........................................................... 6810. Derivative financial instruments .............................................................. 6911. Trade and other receivables ................................................................... 7312. Cash and cash equivalents ..................................................................... 7813. Net equity ........................................................................................... 7914. Borrowings .......................................................................................... 9415. Deferred income ................................................................................... 9816. Trade and other payables ...................................................................... 9917. Corporate income tax .......................................................................... 10018. Obligations for employee benefits ......................................................... 10519. Provisions and other liabilities .............................................................. 11020. Income and expenses ......................................................................... 11221. Contingencies and commitments........................................................... 11522. Business combinations ........................................................................ 11623. Shareholdings in multigroup companies ................................................. 11724. Environment ...................................................................................... 11825. Segment reporting .............................................................................. 11926. Discontinued operations and assets and liabilities held for sale .................. 12327. Related parties ................................................................................... 12828. Share-based payments ........................................................................ 14029. Other information ............................................................................... 14430. Subsequent events ............................................................................. 149APPENDIX I. Subsidiaries in the consolidation scope......................................... 150APPENDIX II. Multi-group companies in the consolidation scope .......................... 159APPENDIX III. Associates in the consolidation scope ........................................... 161CONSOLIDATED MANAGEMENT REPORT FOR 2011 ............................................ 1641. Information required under the provisions of article 262 of the corporate enterprises act ................................................................................... 1642. Annual corporate governance report ...................................................... 173 2
  3. 3. ABERTIS INFRAESTRUCTURAS, S.A.Y SOCIEDADES DEPENDIENTESConsolidated Balance Sheets at 31 December(thousand Euros) Notes 2011 2010 ASSETS Non-current assets Property, plant and equipment (PPE) 5 1,741,827 1,880,755 Goodwill 6 4,263,123 4,397,724 Other intangible assets 6 11,217,068 12,549,808 Investment property 7 - 444,150 Investments in associates 8 1,899,059 1,461,077 Deferred tax assets 17.c 676,181 798,485 Available-for-sale financial assets 9 13,577 474,997 Derivative financial instruments 10 235,186 235,218 Trade and other receivables 11 1,357,140 971,733 Non-current assets 21,403,161 23,213,947 Current assets Inventories - 21,123 33,581 Trade and other receivables 11 933,389 949,136 Derivative financial instruments 10 512 862 Cash and cash equivalents 12 391,010 482,328 Current assets 1,346,034 1,465,907 Disposable group assets held for sale 26 - 612,325 Assets 22,749,195 25,292,179 These consolidated balance sheets should be read together with the Notes to the accounts on pages 8 to 171. 3
  4. 4. ABERTIS INFRAESTRUCTURAS, S.A.Y SOCIEDADES DEPENDIENTESConsolidated Balance Sheets at 31 December(thousand Euros) Notes 2011 2010 NET EQUITY Capital and reserves attributable to the equity holders of the company Share capital 13.a 2,327,969 2,217,113 Share premium 13.a 11,262 417,733 Treasury shares 13.a (411,354) (258,996) Reserves 13.b (66,678) (55,314) Retained earnings and other reserves 13.c 1,203,156 1,699,946 3,064,355 4,020,482 Non-controlling interests 13.d 1,351,358 1,433,000 Net equity 4,415,713 5,453,482 LIABILITIES Non-current liabilities Borrowings 14 13,462,360 14,247,781 Derivative financial instruments 10 280,116 402,311 Deferred income 15 28,741 47,226 Deferred tax liabilities 17.c 1,654,197 1,773,729 Employee benefit obligations 18 70,576 70,529 Provisions and other liabilities 19 832,280 1,003,757 Non-current liabilities 16,328,270 17,545,333 Current liabilities Borrowings 14 1,083,309 1,128,173 Derivative financial instruments 10 4,466 7,535 Trade and other payables 16 541,479 633,842 Current tax liabilities - 184,647 217,949 Provisions and other liabilities 19 191,311 305,865 Current liabilities 2,005,212 2,293,364 Liabilities 18,333,482 19,838,697 Net equity and liabilities 22,749,195 25,292,179 These consolidated balance sheets should be read together with the Notes to the accounts on pages 8 to 171. 4
  5. 5. ABERTIS INFRAESTRUCTURAS, S.A.Y SOCIEDADES DEPENDIENTESConsolidated Income Statements at 31 December(thousand Euros) (*) Notes 2011 2010 Rendering of services 20.a 3,810,683 3,802,345 Other operating income 20.b 85,467 89,836 Own work capitalised - 14,112 16,864 Other income 20.b 4,527 7,521 Operating income 3,914,789 3,916,566 Income for upgrades to infrastruture - 265,239 337,200 Other operating income 4,180,028 4,253,766 Personnel expenses 20.c (615,334) (572,332) Other operating expenses - (832,523) (926,017) Variation in trade provisions - (12,184) (8,343) Variation in provisions for impairment of assets 9 (1,678) (187) Amortisation and depreciation 5/6/7/26 (934,710) (922,789) Other expenses - (1,002) (2,848) Operating expenses (2,397,431) (2,432,516) Expenses for upgrades to infrastructures - (265,239) (337,200) Other operating expenses (2,662,670) (2,769,716) Operating profit 1,517,358 1,484,050 Variation in valuation of hedging instruments 20.d (4,213) (1,076) Financial income 20.d 226,415 169,847 Financial expenses 20.d (839,063) (836,929) Net financial result (616,861) (668,158) 8/13.c.iii/ Results of companies accounted for by equity accounting 26 124,542 116,919 Profit before tax 1,025,039 932,811 Corporate Income tax 17.b (249,628) (223,201) Profit from continuing operations 775,411 709,610 Profit (loss) from discontinued operations 26 19,100 33,739 Profit for the year 794,511 743,349 Attributable to non-controlling holdings 13.c.iii 74,417 81,734 Attributable to the equity holders of the Company 720,094 661,615 Profit per share for continuing and discontinued operations (€ per share) - basic of continuing operations 13.f 0.93 0.83 - basic of discontinued operations - 0.02 0.04 - diluted of continuing operations 13.f 0.93 0.83 - diluted of disconiued operations - 0.02 0.04 These consolidated balance sheets should be read together with the Notes to the accounts on pages 8 to 170. (*) 2010 income statement includes the impact of the classification of discontinued operations in application of IFRS 5 as indicated in Note 1 and 26 and expressing income and expenses for improvements in infrastructure as shown in detail in Note 1. 5
  6. 6. ABERTIS INFRAESTRUCTURAS, S.A.Y SOCIEDADES DEPENDIENTESConsolidated Statements of Comprehensive Income at 31 December(thousand Euros) Notes 2011 2010Profit for the year 794,511 743,349Net income and expenses charged directly to net equity:Net fair value gains/(losses) of available-for-sale financial assets 9/13 (234,359) (171,870) (gross of tax)Net fair value gains/(losses) of held-for-sale assets (gross of tax) 13,233 (84,648) 26.aCash flow hedges in parent, fully and proportionally consolidated 10 21,229 (96,527) companiesNet foreign investment hedges in parent, fully and proportionally 10 22,868 (148,969) consolidated companiesCash flow hedges / net foreign investment companies accounted for 13 (13,970) 26,240 by equity accountingCurrency translation differences 13 (74,656) 223,558Others 13.c 9,936 (30,290)Actuarial gain and loss 18 (1,078) (89)Tax on items taken directly to or transferred from net equity 4,385 69,816 17.c (252,412) (212,779)Releases to the income statement:Cash flow hedges in fully and proportionally consolidated 20.d/10 61,070 90,848 companiesCash flow hedges / net foreign investment in fully and 20.d/10 18,929 6,710 proportionally consolidated companiesGain on sale of Atlantia, S.p.A 26.a (150,706) -Tax effect 17.c (25,794) (30,636) (96,501) 66,922Other comprehensive income (348,913) (145,857)Total comprehensive income 445,598 597,492Attributible to: The Company’s equity holders: for continuing operations 519,664 420,681 for discontinued operations (118,033) 30,881 401,631 451,562 Non-controlling interests 43,967 145,930 445,598 597,492 These consolidated balance sheets should be read together with the Notes to the accounts on pages 8 to 171. 6
  7. 7. Statement of Changes in Consolidated Net Equity (thousand Euros) Capital, share premium Retained earnings and and treasury shares Non-controlling Other reserves Net Equity Reserves interestsNotes 13.a 13 13.c 13.dAt 1 January 2,375,850 (55,314) 1,699,946 1,433,000 5,453,4822011Comprehensive income for the - (370,450) 772,081 43,967 445,598 yearSupplementary dividend 2010 - - (221,711) (85,806) (307,517)Extraordinary 2011 interim - - (495,155) - (495,155) dividend2011 interim dividend - - (232,797) (1,769) (234,566)Return of contributions to (295,615) - - - (295,615) shareholdersTreasury (152,358) - - - (152,358)sharesVariation in - 359,086 (319,208) (38,034) 1,844 scopeAt 31December 1,927,877 (66,678) 1,203,156 1,351,358 4,415,7132011 Capital, share premium Retained earnings and and treasury shares Non-controlling Other reserves Net Equity Reserves interestsNotes 13.a 13 13.c 13.dAt 1 January 2,373,733 149,213 1,476,722 1,334,421 5,334,0892010Comprehensive income for the - (204,527) 656,089 145,930 597,492 yearFinal dividend 2009 and interim dividend 2010 - - (432,865) (68,418) (501,283)Treasury 2,117 - - - 2,117sharesVariation in - - - (1,719) (1,719) scopeIncrease / (decrease) in - - - 22,786 22,786 capitalAt 31December 2,375,850 (55,314) 1,699,946 1,433,000 5,453,4822010 These consolidated balance sheets should be read together with the Notes to the accounts on pages 8 to 171. 7
  8. 8. Consolidated Cash Flow Statements(thousand Euros) (*) Notes 2011 2010Net cash flow from operating activities:Profit for the year from continuing operations 775,411 709,610Adjustments to:Taxes 17.b 249,628 223,201Depreciation and amortisation for the year 5/6/7 934,710 922,789Variation in asset impairment provision 9 1,678 187(Profit)/loss, net, on sale of property, plant and equipment and intangible assets and other assets - (3,525) (4,673)(Profit)/loss on hedging instruments 20.d 4,213 1,076Variation in post-employment provisions 18 16,353 15,298Variation in provisions for IFRIC 12 and other provisions 19 68,681 72,369Dividend income 20.d (27,170) (27,170)Interest income 20.d (199,245) (142,677)Interest expense 20.d 839,063 836,929Release of deferred income to profit and loss 15 (2,716) (5,462)Income from upgrade to infrastructure (265,239) (337,200)Other adjustments to net income 11 (125,279) (98,333)Share in results of associates accounted for by equity accounting 13.c.iii (124,542) (116,919) 2,142,021 2,049,025Variation in current assets/liabilities:Inventories - (5,439) 5,235Trade and other receivables - (50,448) (71,694)Derivative financial instruments - (2,608) (3,751)Trade and other payables - (52,473) 26,487Other current liabilities - (73,900) 60,267 (184,868) 16,544Cash flow generated from operations 1,957,153 2,065,569Corporate income tax paid - (249,284) (254,421)Interest and settlement of hedges paid - (730,585) (776,637)Interest and settlement of hedges received - 96,077 101,241Utilisation of provisions for post-employment benefits 18 (15,686) (12,531)Utilisation of provisions for IFRIC 12 and other provisions 19 (120,478) (70,266)Other payables 19 17,051 31Receipt / refund of grants and other deferred income 15 2,415 811Non-current debtors and other receivables - 24,367 (54,127)Discontinued operations 26 9,873 43,388(A) Total Net Cash Flow from Operations 990,903 1,043,058 These consolidated balance sheets should be read together with the Notes to the accounts on pages 8 to 171. (*) 2010 cash flow statement considering the impact of the classification of discontinued operations in application of IFRS 5 as indicated in Notes 1 and 26 and detailing the income and expenses for upgrades to infrastructure as indicated in Note 1. 8
  9. 9. Consolidated Cash Flow Statements(thousand Euros) (*) Notes 2011 2010Net cash flow from investing activities:Business combinations and changes in consolidation scope - - 3,577Acquisition of shareholdings in associates 8 (152,106) (24,851)Proceeds from sale property, plant and equipment - 7,824 7,589Purchases of property, plant and equipment and intangible assets and investment property 5/6/7 (263,241) (333,998)Purchases of available-for-sale financial assets - - (275)Dividends received from associates and shareholdings 8/20.d/ 27.c 118,293 96,224Others - 31,076 45,618Discontinued operations 26 908,728 (30,391)(B) Total Net Cash Flow from Investing Activities 650,574 (236,507)Net cash flow from financing activities:Receipt borrowings during the year 14 1,385,603 979,498Repayment of borrowings 14 (1,935,613) (1,126,883)Dividends paid to equity holders of the Parent Company 13 (862,102) (432,865)Return of premium to equity holders of the Parent Company 13 (295,615) -Treasury shares 13 (158,617) 2,117Repayment of share premium to non-controlling interests 13 (87,575) (68,326)Discontinued operations 26 250,606 (5,162)(C) Total Net Cash Flow from Financing Activities (1,703,313) (651,621)(D) Effect of variation in exchange rates (29,482) (14,371)Net (decrease) / increase in cash and cash equivalents (A)+(B)+(C) + (D) (91,318) 140,559Opening balance of cash and cash equivalents 482,328 341,769Closing balance of cash and cash equivalents 391,010 482,328 These consolidated balance sheets should be read together with the Notes to the accounts on pages 8 to 170. (*) 2010 cash flow statement considering the impact of the classification of discontinued operations in application of IFRS 5 as indicated in Notes 1 and 26 and detailing the income and expenses for upgrades to infrastructure as indicated in Note 1. 9
  10. 10. NOTES TO THE 2011 CONSOLIDATED ANNUAL ACCOUNTS1. GENERAL INFORMATIONAbertis Infraestructuras, S.A. (hereinafter abertis or the Parent Company)was incorporated in Barcelona on 24 February 1967. The Company’sregistered office is in Avenida del Parc Logistic nº 12-20, Barcelona. On 30May 2003 the Company’s name was changed from Acesa Infraestructuras,S.A. to its current name.abertis is the parent company of a group of companies mainly engaged inthe management of mobility and communications infrastructures operatingin three sectors: motorway concessions, telecommunications and airports.As shown in Note 26, the Group sold the car parks and logistics facilitiessectors over the year. Therefore, their resources are classified asdiscontinued operations in accordance with IFRS 5 "Non-current assets heldfor sale and discontinued operations".Its business purposes include the construction, maintenance and operationof motorways under concession; the management of motorway concessionsin Spain and internationally; the construction of roads; ancillaryconstruction activities, maintenance and operation of motorways, includingservice stations, integrated logistics and/or transport centres and/or carparks, as well as any other activity related to transport infrastructures andcommunications and/or telecommunications for the mobility and transportof people, goods and information, under the necessary authorisation, as thecase may be.The Company can undertake its business purposes, especially itsconcessionary activity, directly or indirectly through its shareholding inother companies, subject, in this respect, to the legal provisions in force atany time.Note 29.c includes information on the Group’s concession contracts.The lists of the subsidiary and multi-group companies of abertis, whichtogether with the parent Company make up the consolidated group(hereinafter, the Group) at 31 December 2011 are set out in Appendix Iand Appendix II, respectively. 10
  11. 11. The aggregates contained in all the financial statements that form part ofthe consolidated annual accounts (consolidated balance sheet, consolidatedincome statement, consolidated statement of comprehensive income,consolidated statement of changes in net equity, consolidated cash flowstatement) and the notes to the consolidated annual accounts areexpressed in thousand Euros, unless explicitly stated in million Euros.2. BASIS OF PRESENTATIONa) Basis of presentationThese consolidated annual accounts have been prepared in accordance withthe International Financial Reporting Standards adopted by the EuropeanUnion under Regulation (EC) No. 1606/2002 of the European Parliamentand the Council on 19 July 2002 and others in force at 31 December 2011(hereinafter, IFRS). In addition, the obligation to present consolidatedannual accounts under EU approved IFRS is governed by the final eleventhprovision of the Tax, Administrative and Corporate Measures Act, Law62/2003/30 December (Official State Gazette (BOE) of 31 December 2004).These consolidated annual accounts prepared under IFRS have beenformulated by the Directors of abertis in order to provide a true and fairview of its consolidated equity, financial situation for the year ended 31December 2011, consolidated results from its operations, the changes inconsolidated net equity and consolidated cash flows in accordance with theabove-mentioned legislation in force.The first consolidated annual accounts to be presented under IFRS werethose for the year ended 31 December 2005. Consequently, IFRS-1, “First-time Adoption of the International Financial Reporting Standards” wasapplied at the transition date of 1 January 2004. 11
  12. 12. As required by IFRS, these 2011 consolidated annual accounts include thefigures corresponding for the previous year for comparative purposes.These figures have been duly restated as result of the following concepts: In accordance with IFRS 5 "Non-Assets held for sale and discontinued operations" and, mainly as a result of the disposal of the car parks and logistics facilities businesses in October 2011 (see details in Note 26), the 2010 income and expenses corresponding to these businesses have been classified as discontinued operations in line with the figures for 2011. In accordance with the criteria indicated in Note 3.0, construction activities and upgrades in infrastructure carried out by the Group in 2010 (Euros 337 million) have been recorded as income and expenses. These figures were mentioned in Note 30 of the 2010 consolidated annual accounts, although they were not broken down in the income statement.As stated in Note 3.q, at the date of preparation of these consolidatedannual accounts, there are standards and interpretations which during 2011were revised and being studied by the corresponding internationalregulatory bodies. In any case, the application of these will be consideredby the Group once they are approved by the European Union, as the casemay be.The preparation of the consolidated annual accounts under IFRS requiresManagement to make certain accounting estimates and certain judgements.These are continuously evaluated and are based on the historical experienceand other factors, including the expectations of future events, which areconsidered reasonable under the circumstances. Whilst the estimations havebeen made based on the best information available at the time of preparingthese consolidated annual accounts, in accordance with IAS-8, anymodification in the future of these estimations would be applied from thatpoint on, recognising the impact of the change in the estimates made in theconsolidated income statement for the year in question. 12
  13. 13. The main estimates and judgements considered in preparing the consolidatedannual accounts are the following:  Assumptions used in the impairment test to determine the recoverability of goodwill and other non-financial (see Notes 3.c, 6 and 7) and financial assets (see Notes 3.d and 11) assets.  Fair value of derivatives and other financial instruments (see Notes 3.e and 10).  Estimates of the intervention cycles in determining the provisions under IFRIC 12 (see Notes 3.n and 19).  Fair value of assets and liabilities in business combinations (see Note 22).  Financial investments available sale (see Notes 3.d.i, 3.h and 9).  Changes in the consolidation scope (see Notes 8 and 9).  Actuarial hypotheses used in determining the liabilities for post- employment obligations and other commitments with employees (see Notes 3.l and 18).  Corporate income tax (see Notes 3.k and 17).The consolidated annual accounts have been prepared on the basis ofhistorical cost, except in the cases specifically mentioned in these Notes, suchas those items measured at fair value, which are mentioned in Note 4.b.The consolidated annual accounts have been prepared on the basis ofuniformity in recognition and measurement. If new standards modifying theexisting valuation principles become applicable, they will be applied inaccordance with the transition criteria set down in said standards.Certain amounts in the consolidated income statement and the consolidatedbalance sheet have been grouped together for clarity, with their breakdownbeing shown in the Notes to the consolidated annual accounts.The distinction presented in the consolidated balance sheet between currentand non-current entries has been made on the basis of whether the assetsand liabilities fall due within one year or more.Additionally, the consolidated annual accounts include all the information thatis considered necessary for their correct presentation under company law inforce in Spain. 13
  14. 14. The consolidated annual accounts of abertis together with the parentCompany’s annual accounts and the accounts of subsidiary companies willbe presented at their respective Shareholders’ General Meetings in duetime. The Directors of abertis expect these accounts to be approvedwithout significant changes.b) Consolidation principlesi) Consolidation methodsSubsidiary CompaniesSubsidiary Companies are all those entities in which abertis directly orindirectly controls the financial and operating policies. This normally occurswhen more than half of the voting rights are held. Additionally, in order toevaluate whether abertis controls another entity, the existence and effectof potential voting rights that are can be exercised or convertible at thistime are also considered. Subsidiary companies are consolidated as fromthe date on which control passes to abertis, and they are de-consolidatedon the date that control ceases to exist.Subsidiary companies are fully consolidated.Appendix I to these Notes provides a breakdown of critical information onall the subsidiary companies included in the consolidation scope at 31December 2011.Multigroup Companies (Joint Ventures)These are companies that have a contractual arrangement with a third partyto share control of their activity and where the strategic financial andoperating decisions related thereto require the unanimous arrangement of allthe parties that share control.The interests of the Group in joint ventures are accounted for under theproportional consolidation method.Appendix II to these Notes gives information on the multigroup companiesincluded in consolidation scope at 31 December 2011. 14
  15. 15. AssociatesAssociates are companies in which abertis has significant influence and along-term relationship that fosters and influences its business in spite of asmall representation in the management and control bodies. This isgenerally accompanied by a shareholding of between 20% and 50% of thevoting rights unless it can be clearly demonstrated that no such influenceexists or when abertis holds less than 20% and it can be clearlydemonstrated that said influence does exist.Investments in associates are accounted for by equity accounting andinitially stated at acquisition cost. The shareholding of abertis in associatesincludes, as per IAS 28, goodwill (net of any loss or accumulatedimpairment) identified in the acquisition and recorded under “Investmentsin associates” in the consolidated balance sheet.In the case of associates acquired in stages, IAS 28 does not specificallydefine how to determine the cost of the acquisitions. Therefore, the Groupinterprets that the cost of a shareholding in an associate acquired in stagesis the sum of the amounts paid in each acquisition plus the share of theprofits and other changes in shareholders equity less any impairment whichmay have occurred.Thereafter, the share of abertis in the earnings and reserves of associates isrecognised in the consolidated income statement and as consolidationreserves (other comprehensive income), respectively, with the value of theshareholding as the balancing entry in both cases. Dividend receipts and/oraccrual after acquisition are adjusted against the value of the shareholding.In the event that the Group’s share in the losses of an associate is equal to orgreater than the financial value of its shareholding, including any otherunsecured outstanding accounts receivable, additional losses will not berecognised unless obligations have been incurred or payments made in thename of the associate.Appendix III to these Notes provides the particulars of the associatesincluded in the consolidation scope under equity accounting at 31 December2011. 15
  16. 16. ii) Standardisation of timing and valuationExcept for Eutelsat Communications, S.A. which year end is 30 June, all thecompanies included in the consolidation scope close their financial year on31 December and for the purposes of the consolidation process therespective financial statements prepared under IFRS principles have beenused. In accordance with current legislation, these companies presentindividual annual accounts in accordance with the standards applicable intheir country of origin.In the specific case of Eutelsat Communications, S.A. the respective timingstandardisation has been undertaken and for the purposes of theconsolidation process the respective financial statements prepared underIFRS principles for the year ended 31 December have been used.The standards of valuation applied by the Group companies largely coincide.However, whenever necessary the corresponding adjustments are made tostandardise valuation to ensure uniformity of the accounting policies of thecompanies included in the consolidation scope with the policies adopted bythe Group.iii) Differences on first consolidationThe Group uses the acquisition method to account for the acquisition ofsubsidiary companies in accordance with the revised IFRS 3. The acquisitioncost is the fair value of the assets, the equity and the liabilities onacquisition date, plus any asset or liability resulting from the contingentconsideration. The costs directly attributed to the acquisition are recogniseddirectly in the consolidated income statement for the year in which it takesplace.The identifiable assets acquired, the liabilities and contingencies assumed ina business combination are initially valued at their fair value on acquisitiondate, including the non-controlling interests. For each business combination,the Group can elect to recognise any non-controlling interest in the acquiredcompany at fair value or for the proportional part of the non-controllinginterest of the net identifiable assets of the acquired entity.The excess of the acquisition cost over the fair value of the net assetsidentified in the transaction is accounted for as consolidation goodwill, whichis assigned to the respective cash generating unit. 16
  17. 17. On the contrary, if the acquisition cost is less than the fair value of the netassets of the company acquired, if the purchase is made underadvantageous conditions, the difference is recognised directly in thestatement of comprehensive income.Consolidation goodwill is not written off on a straight-line basis and issubject to an annual impairment test, as indicated in Note 3.c.In the case of step-acquisitions, when control is obtained, the fair value ofthe assets and liabilities of the business acquired must be determined byincluding the part already owned. The differences that arise between theassets and liabilities already recognised must be recognised in the incomestatement.In case of step-acquisitions of associates, goodwill is calculated in eachacquisition based on the cost and the share of the fair value of the acquirednet assets on each acquisition date.As indicated in Note 2.b.i, the goodwill related to acquisitions of associatesis included as part of the respective shareholding, and is valuated inaccordance with the procedures set out in Note 3.b.iv.iv) Elimination of internal operationsThe balances and intercompany transactions between companies of theGroup are eliminated, as are the unrealised profits from third partiesgenerated by transactions between Group companies. Unrealised losses arealso eliminated, unless the transaction provides evidence of a loss due tothe impairment of the transferred asset.In transactions with joint ventures (multigroup companies) the share in theprofit or loss from operations with Group companies is only recorded in thepart corresponding to other participants.The profit and loss from transactions between the Group and its associatesis recorded in the Groups financial statements only to the extent that theycorrespond to the shareholdings of other investors in the associates whichare not linked to the investor. 17
  18. 18. v) Translation of financial statements in foreign currenciesThe financial statements of foreign companies, none of which operate inhyperinflationary economies, prepared in a functional currency (that of themain economic area in which the entity operates) distinct from thepresentation currency of the consolidated annual accounts (Euros) aretranslated into Euros using the year end exchange rate, whereby: Net equity is translated at historical exchange rates. Entries in the income statement are translated using the average exchange rate for the period as an approximation of the exchange rate at the transaction date. The other balance sheet entries are translated at the year end exchange rate.As a result of using this method, the currency translation differencesgenerated are included under “Reserves – Cumulative translationadjustments” in net equity on the consolidated balance OthersThe currency translation differences that arise from the translation of netinvestment in foreign companies, and from loans and other instruments innon-Euro currencies designated as hedges on these investments, arerecorded against net equity. When they are sold, said cumulative translationadjustments are recognised in the income statement as part of theconsolidated gain or loss on the sale.The adjustments to goodwill and the fair value that arise from theacquisition of a foreign entity are considered as assets and liabilities of theforeign entity and are translated using the year end exchange rate.vii) Variations in the consolidation scopeThe most significant changes in the consolidation scope and in thecompanies falling under said scope in 2011 have been as follows: On 11 April 2011 incorporation of the company Saba Infraestructuras, S.A. fully owned by Abertis Infraestructuras, S.A. This company has been fully consolidated. 18
  19. 19. Within the framework of the reorganisation of the structure of abertis businesses as detailed in Note 26, on 18 May 2011 the car parks and logistics facilities businesses have been provided to this company through contribution of all the shares held by Abertis Infraestructuras, S.A. in Saba Aparcamientos, S.A. and Abertis Logística, S.A. through a non-monetary capital increase. In June 2011, the General Meeting of Shareholders of abertis approved the payment of an extraordinary interim dividend for the profits of the year of Euros 0.67 per share which may be optionally exchanged for shares in Saba Infraestructuras, S.A. (see Note 13.c and 26). Following this payment, abertis then held 78.06% of the aforementioned company. Finally, on 26 October 2011, Abertis Infraestructuras, S.A. sold its entire shareholding which on the aforementioned date it held in Saba Infraestructuras, S.A. This sale was carried out in accordance with the share purchase contract which abertis held with Criteria CaixaHolding, S.A.U. (and other third parties), see Note 26. With effect on 31 December 2011, the classification of the 14.61% holding in the capital of Brisa has changed from an available-for-sale financial asset to a shareholding in an associate and now recorded using equity accounting (See Note 8 and 9).Other changes having a minor impact have been as follows: On 18 May 2011 incorporation of the company Gestora del Espectro, S.L., fully owned by Retevisión I, S.A. This company has been fully consolidated. Incorporation of the company Autopistas Metropolitanas de Puerto Rico, LLC (metropistas), 45% owned by abertis are recorded using equity accounting. In September 2011 this company was awarded the concession for managing the PR-22 and PR-5 motorways in Puerto Rico (see Note 8). Increase, with effect on 1 April 2011, of sanef’s shareholding in Sanef Tolling, Ltd from 70% to 100%. Increase, with effect on 1 January 2011, of sanef’s shareholding in Bet Eire Flow from 80% to 100%. On 30 December 2011 sale of the company Túnel del Cadí, S.A.C., recorded at that time using equity accounting, in which abertis had an indirect shareholding of 37.21% (see Note 8). 19
  20. 20. On 20 December 2011 sale of the company Pt Operational Services Limited (PTY), recorded at that time using equity accounting, in which abertis had a shareholding of 33.30%. Exit from the consolidation scope in May 2011 of the company Acesa Italia, S.r.L., in which abertis had an indirect shareholding of 100% as a result of its liquidation, following the sale of the 6.68% shareholding in Atlantia. Exit from the consolidation scope in June 2011 of the companies Aldergrove International Airport Limited, Aldergrove Airport Limited and Aldergrove Car Parks, in which abertis had an indirect shareholding of 90%, as a result of their liquidation. Exit from the consolidation scope in August 2011 of the company MB121 Limited, in which abertis had an indirect shareholding of 90%, as a result of its liquidation. Exit from the consolidation scope in November 2011 of the company TBI Global Limited, in which abertis had an indirect shareholding of 90%, as a result of its liquidation. Takeover merger of companies of ACDL Group TBI Cargo Inc and TBI (US) Holdings Limited, the latter 90% owned abertis (through acdl).In addition, with effect on 21 December 2011 Abertis Infraestructuras, S.A.sold to Abertis Autopistas España, S.A. (with no impact on theseconsolidated annual accounts as both companies belong to the consolidationscope) the shareholdings of the companies Autopistas ConcesionariaEspañola, S.A. (acesa), Infraestructures Viàries de Catalunya, S.A.(invicat), Autopistas Aumar Concesionaria Española, S.A. (aumar) andIberpistas, Concesionaria Española, S.A. (iberpistas), with the aim ofgrouping together all the operator companies of Spanish motorways underone single company responsible for joint management of all of thosecompanies.Additionally, in 2010 there were no changes with a significant impact on theconsolidation scope or on the companies making up the scope although thefollowing changes with a lesser impact on the corresponding consolidatedaccounts were recorded: On 3 June 2010, the associate Centro Intermodal de Logística, S.A. (cilsa) sold its entire stake in the Group subsidiary Consorcio de Plataformas Logísticas, S.A. (cpl), and reduced the indirect shareholding of abertis as at that date from 66,68% to 51%. 20
  21. 21. On 30 December 2010 the shareholding of abertis (through thesubsidiary Abertis Logística, S.A.) in Consorcio de PlataformasLogísticas, S.A. (cpl), a fully consolidated company, rose from theaforementioned 51% to 64.5%, through the capital increase that thelatter performed, which was subscribed by Abertis Logística, S.A.through a non-cash contribution of the 32% stake it held in CentroIntermodal de Logística, S.A. (cilsa).As a result of the non-cash contribution made by the othershareholder of Consorcio de Plataformas Logísticas, S.A. (cpl) inorder to subscribe the aforementioned capital increase, cpl has cometo own 44% of Centro Intermodal de Logística, S.A. (cilsa), and,accordingly, this company, in light of the new shareholderarrangements as from that date, has gone from being accounted forby equity accounting to proportional consolidation effective 30December 2010. Consequently, the indirect shareholding of abertisof cilsa was 28.38%.The shareholding operations at 30 December 2010 did not have asignificant impact on equity.Increase in the shareholding of abertis in Saba Aparcamientos, S.A.(saba), from 99.46% a un 99.48%.Increase in the shareholding of Saba Aparcamientos, S.A. inParcheggi Pisa, S.r.L. from 70% to 80%, and, accordingly, theindirect shareholding of abertis amounted to 79.58%.Increase in the shareholding of Saba Aparcamientos, S.A. in SabaAparcament de Santa Caterina, S.L. from 92% to 100%, and,accordingly, the indirect shareholding of abertis amounted to99.48%.Increase in the shareholding of abertis in Autopistas de Puerto Ricoand Compañía, S.E. (APR) from 75% to 100%.Sale in September 2010 of Rabat Parking, S.A. in which abertis hadan indirect shareholding of 50.72%.Teledifusión de Madrid, S.A., in which abertis had an indirectshareholding of 80%, left the consolidation scope in June 2010.Takeover merger of the Group companies Saba Campo San GiacomoS.r.L. and Saba Italia S.p.A., that latter of which is 99.48% owned byabertis (through Saba Aparcamientos, S.A.). 21
  22. 22. Incorporation of the company Overon US, Inc., fully owned by Servicios Audiovisuales Overon, S.L. (overon), proportionally consolidated by the Group by virtue of current shareholders’ arrangements (abertis holds an indirect 51% stake). Incorporation of the company Impulso Aeroportuario del Pacífico, S.A. de C.V., 99.9% owned by the associate Aeropuertos Mexicanos del Pacífico, S.A. de C.V. (AMP), consolidated by equity accounting (abertis holds an indirect stake of 33.33%). Incorporation of the company Parcheggio Largo Bellini S.r.L 80% owned by Saba Italia S.p.A and fully consolidated. Through Saba Aparcamientos, S.A. abertis holds an indirect stake of 79.58%. Incorporation of the company Constructura de Infraestructura Vial SAS, 40% owned by abertis. This company has been consolidated by equity accounting. Incorporation of the company Consorci de Parcs Logístics del Penedés, S.L., fully owned by Abertis Logística, S.A. This company has been fully consolidated. Incorporation of the company Consorci de Parcs Logístics Toulouse, fully owned by Consorcio de Plataformas Logísticas, S.A. (cpl). This company has been fully consolidated.viii) Transactions with non-controlling interestsUnder IAS 27 revised, transactions with non-controlling interests arerecorded as transactions with the owners of Group equity. Accordingly, inthe purchases of non-controlling interests, the difference between theconsideration paid and the respective proportion of the book value of thenet assets of the subsidiary impacts net equity. Likewise, the gains or lossfrom the sale of non-controlling interests are also recognized in the netequity of the Group. 22
  23. 23. In the event that significant influence or control is lost, the remaininginterest is stated once again at fair value, and the difference in relation tothe investment previously recorded is recognized in the consolidated incomestatement for the year. Additionally, any amount previously recognized inother comprehensive income in relation to this entity is recorded as if theGroup had directly sold all the related assets and liabilities, which wouldmean, as the case may be, that the amounts previously recognized in othercomprehensive income would be reclassified to the consolidated incomestatement for the year. If the decrease in the shareholding in an associatedoes not imply a loss of significant influence, the proportional part formerlyrecognized under Other comprehensive income would be reclassified to theincome statement.3. ACCOUNTING POLICIESThe most significant accounting policies applied in the preparation of theseconsolidated annual accounts are as follows:a) Property, plant and equipment (PPE)Property, plant and equipment are accounted for at cost of acquisition lessdepreciation and the accumulated amount of any loss in value. Property,plant and equipment includes the legal revaluations applied in years prior to1 January 2004 allowed under local accounting standards, which value hasbeen taken as cost of acquisition as permitted under IFRS-1 “First-timeAdoption of International Financial Reporting Standards”.Capital grants received reduce the cost of acquisition of property, plant andequipment and are recorded when the requirements are met in order todemand payment of the grant. Grants are released to profit and loss on astraight-line basis depending on the useful life of the asset financedreducing the depreciation charge for the year.Personnel costs and other expenses, as well as net financing costs directlyrelated to property, plant and equipment, are capitalised as part of theinvestment until brought into use.Costs of refurbishment, extension or improvement of property, plant andequipment are capitalised only when they increase the capacity,productivity or extend the useful life of the asset, provided that it is possibleto know or estimate the net carrying value of the assets which are writtenoff when replaced. 23
  24. 24. The costs of repairs and maintenance are charged to the consolidatedincome statement in the year in which they are incurred.The investment in infrastructure recorded by the operator companies underPPE includes the assets over which the Grantor holds no control (not ownedby Grantor given that it does not control the residual value of the assets atthe end of the concession), although they are necessary for the operationand management of the infrastructure. These assets mainly comprise thebuildings used in operations, the toll facilities and material, video-surveillance, etc.The depreciation of property, plant and equipment is calculated on astraight line basis using the estimated useful life of the assets, taking intoconsideration wear and tear derived from normal use.The depreciation rates used to calculate the impairment of property, plantand equipment are as follows: Asset Rate Buildings and other constructions 2-14 % Machinery 6-30 % Tooling 7-30 % Other installations 7-20 % Furniture 10-20 % Computer equipment 20-33 % Other property, plant and equipment 8-25 % Other assets for infrastructure management (*) (*) The depreciation rates for the most significant assets related to infrastructure management are as follows: Asset Rate Toll installations 8-12 % Toll machinery 10-12 % Others 10-20 %When the net carrying value of an asset exceeds its estimated recoverablevalue, said value is immediately reduced to its recoverable value, and theeffect is taken to the consolidated income statement for the year. 24
  25. 25. b) Goodwill and other intangible assetsThe intangible assets indicated below are recorded at acquisition cost lessthe accumulated amortisation and any loss due to impairment, useful lifebeing evaluated on the basis of a prudent estimate. Capital grants receivedreduce the cost of acquisition of the intangible asset and are recorded whenthe requirements are met in order to demand payment of the grant. Grantsare released to profit and loss on a straight-line basis depending on theuseful life of the asset financed reducing the amortisation charge for theyear.The net carrying value of intangible assets is reviewed for possibleimpairment when certain events or changes indicate that their net carryingvalue may not be recoverable.i) Research and development expensesResearch costs are expensed as they are incurred, whilst the expenses ondevelopment incurred in a project are capitalised if the project is feasiblefrom a technical and commercial perspective, if there are sufficient technicaland financial resources to complete the project, if the costs incurred can bedetermined in a reliable manner as established by the internationalstandard, and the generation of future profits is probable. These arerecorded at their cost of acquisition.The amortisation is made on the basis of the estimated useful life for eachproject (between 3 and 5 years).ii) Computer applicationsRefers principally to the amounts paid for access to ownership or for the rightto use computer programs, only when usage is expected to cover severalyears.The computer applications are stated at their acquisition cost and amortisedon the basis of their useful life (between 3 and 5 years). Maintenanceexpenses on these computer applications are charged to the incomestatement in the year in which they are incurred. 25
  26. 26. iii) Administrative concessionsAdministrative concessions are listed as assets valued at the total amount ofthe payments made to obtain them.IFRIC 12 regulates the treatment of public-to-private service concessionarrangements when: The Grantor controls or regulates which services the operator must provide with the infrastructure, to whom these services must be rendered, and, at what price, and The Grantor controls the entire significant residual interest in the infrastructure at the end of the arrangement.Under these concession arrangements, the operator acts as a serviceprovider, specifically, on the one hand, construction services orinfrastructure enhancement, and, on the other hand, operational andmaintenance service during the term of the arrangement. The considerationreceived for these services is recorded bearing in mind the type ofcontractual right received: In cases in which the right is granted to charge a price to users for the user of the public service, and the latter is not unconditional but depends on the fact that the users actually use the service, the consideration for the construction or enhancement service is recorded as an intangible asset under “Other intangible assets – administrative concessions” in application of the intangible asset model, in which the risk of demand is borne by the operator. This model is applicable to most concessionary companies. If an unconditional right is granted by the Grantor (or on its account) to receive cash or other financial assets, and the Grantor has little or no capacity to avoid the payment, the consideration for the construction or enhancement service is recorded as a financial asset under “Debtors and other receivables – public administration debtors” (see section d.ii of this Note) in application of the financial model, in which the operator bears no risk of demand (payment is made even if the infrastructure is not used since the Grantor guarantees payment to the Operator of a fixed or specifiable amount or of the deficit, if any). This model is residually applicable for the Group to the odd airport. 26
  27. 27. The amounts which appear under the heading "Administrative concessions"mostly result from the transition to the application of IFRIC 12 with effectfrom 1 January 2009, which are the result of their reclassification from theheading of "property, plant and equipment" and for the same carryingamount which appear on said date, in line with the provisions in paragraph30 of the transition of IFRIC 12.The administrative concessions have a finite useful life and their cost ifrecorded as an intangible asset, is expensed, through their amortisation, overthe term of the concession on a straight-line basis.In the case of administrative concessions acquired through businesscombinations after 1 January 2004 (IFRS transition date), these, as per IFRS-3, are stated at fair value (on the basis of valuations based on discountedcash flow analyses at their current value at the acquisition date) andamortised on a straight-line basis over the concession period.iv) GoodwillGoodwill generated in different business combinations, represents the surplusof the acquisition cost over the fair or market value of the identifiable netassets of all the company acquired at acquisition date.The possible impairment of goodwills recognised separately (those ofsubsidiary and jointly-controlled companies) is tested annually forimpairment to determine whether its value has declined to a level below thecarrying value at the aforementioned transition date, and, as the case maybe, the necessary charge is made against the consolidated income statementfor the year (see Notes 3.c and 6). The losses for impairment of goodwill arenot subsequently reversed.The impairment of the goodwills included in the carrying value of the equityinvestment in associates is not tested separately. However, under IAS 36,the total carrying value of the investment is tested for impairment bycomparing the recoverable amount (the greater of value in use and fairvalue, minus cost of sale) to carrying value, provided that there areindications that the value of the investment may have been impaired.The loss or gain obtained from the sale of an entity includes the carryingvalue of the goodwill of the entity sold. 27
  28. 28. In view of the fact that the goodwill is considered an asset of the acquiredcompany (except the goodwills generated prior to 1 January 2004, whichunder IFRS-1 were considered assets of the acquiring company), a subsidiaryusing a functional currency other than the Euro valuated in the functionalcurrency of the subsidiary, and the translation into Euros, is made at theexchange rate on the balance sheet date, as indicated in Note Other intangible assetsPrimarily includes licences for the management of airport infrastructures,which are carried as assets in the consolidated balance sheet at fair value atacquisition moment, obtained on the basis of valuations based on theanalysis of discounted cash flows at their current value at the acquisition dateas per IFRS-3. These are expensed using the straight line amortisationmethod.c) Impairment losses on non-financial assetsThe Group evaluates, at each balance sheet date, whether there is anyindication of impairment in the value of any asset. Should such an indicationexist, or when an annual impairment test is required (in the case ofgoodwill), the Group estimates the recoverable value of the assets, which isthe greater of the fair value of an asset minus cost of sale and its value inuse. In order to determine the value in use of an asset, the future cashinflow that the asset is expected to generate is discounted from its netpresent value using an interest rate that reflects, amongst other, thecurrent value of money at long-term rates and the specific risks of theassets (risk premium). See Note 6.In the event that the asset analysed does not generate cash flowindependently of other assets (as is the case for goodwill), the fair value orvalue in use of the cash generating unit that includes the asset (smallestidentifiable group of assets separated from other assets or groups of assets)is estimated. If there are impairment losses in a cash generating unit, thebook value of the goodwill assigned, if any, will be reduced, followed by aproportional reduction of the book value of the other assets in relation tothe unit. 28
  29. 29. Losses for impairment (surplus of the asset’s book value over therecoverable value) are recognised in the consolidated income statement forthe year.With the exception of goodwill, where impairment losses are irreversible, ifthe Group has recognised losses for impairment of assets at the end of eachfinancial year, an evaluation will be made to determine whether theindications of impairment have disappeared or lessened, and therecoverable value of the impaired asset, if applicable, will be estimated.A loss due to impairment recognised in prior years will only be reversed ifthere is a change in the estimates used to determine the recoverable valueof the asset as from the time the last loss due to impairment wasrecognised. If this is the case, the book value of the asset would increase toits recoverable value, which cannot exceed the book value that would havebeen recorded, net of amortisation, had the impairment loss on the asset inprior years not been recorded. This reversal would be recorded in theconsolidated income statement for the year.d) Investments and other financial assets (excluding derivative financial instruments)The Group determines the classification of its financial assets when they areinitially recognised. At the close of 31 December 2011 the financial assetshave been classified under the following categories:i) Available-for-sale financial assetsThis entry in the consolidated balance sheet includes those investments inwhich the Group does not exert any significant influence or control (seeNote 9). These are classified as non current assets unless there is anintention to dispose of the investment in the twelve months as from theconsolidated balance sheet date, in which case they are classified as currentassets.These investments are stated at fair value, and gains or losses arising fromchanges in value are part of the other comprehensive result until theinvestment is sold or suffers losses due to impairment.The Group evaluates, at each balance sheet date, whether there is anyeffective indication of impairment, among others, taking into accountwhether there has been a significant or prolonged decrease in the fair valueof the securities below cost price. If there are any indications of this type,the accumulated loss previously recorded in net equity under “Reserves – 29
  30. 30. investments available-for-sale” would be transferred to profit and loss asgains or losses on the respective financial assets.For the purposes of identifying indications of impairment, the Group firstuses Spanish accounting standards (Spanish General Chart of Accounts)which indicate that an available-for-sale financial asset will be assumed tohave suffered impairment after a fall of one and a half years and fortypercent of its price without their being a recovery in its value. At any event,and where necessary, a specific analysis is conducted on those figures ofthe instrument which are deemed essential for confirming or rejecting theneed, or not, to record deterioration of the capital instrument.The fair value of the investments that are actively traded on official stockexchanges is taken as the trading price at the close of the market at thebalance sheet date. In the case of investments where there is not an activemarket, the fair value is determined using valuation methods, such asprojections of discounted cash flows. If their market value cannot bedetermined in a reliable manner, they will be valued at cost or at a loweramount if there is evidence of impairment.Dividend income arising from available-for-sale financial assets are recordedunder “Financial income” (see Note 20.d) in the consolidated incomestatement when the right of the Group to receive them is established.ii) Trade and other receivablesThis entry corresponds primarily to: Loans granted to associates or related entities which are valued at amortised cost using the effective interest method. This value is decreased, as the case may be, by the respective provision for impairment of the asset. Deposits and guarantee deposits recorded at their nominal value. Trade accounts receivable, which are stated at their nominal value, which is similar to initial fair value. Said value is reduced, if necessary, by the corresponding provision for bad debts (loss for impairment of asset) whenever there is objective evidence that the amount owed will not be partially or fully collected, charged against the consolidated income statement for the year. 30
  31. 31. Accounts receivable resulting from the application of the financial model in recording certain concession arrangements subject to IFRIC 12 (see section b.iii of this Note). This right is stated initially at fair value and subsequently at amortised cost, and at the balance sheet date financial income is booked that has been calculated using an effective interest rate, during the term of the concession arrangement.e) Derivative financial instrumentsThe Group uses derivative financial instruments to manage its financial riskarising principally from fluctuations in interest rates and exchange rates(see Note 4). These derivative financial instruments, whether or not theyhave been classified as hedges, have been recorded at fair value, which isthe year end market value of listed instruments, or valuations based on theanalysis of discounted cash flows using assumptions that are mainly basedon the market conditions at the balance sheet date for unlisted derivativeinstruments.At the beginning of the transaction the Group documents the relationshipbetween the hedging instruments and the assets they cover, as well as therisk management objectives and the strategy for its hedging transactions.The Group also documents their evaluation, both at the beginning andcontinuously, as to whether the derivatives that are used in the hedgingtransactions are highly effective for offsetting the changes in fair value orcash flows of the items hedged.The fair value of derivative financial instruments used for hedging purposesis set out in Note 10, and the variation in the hedging reserve recordedunder consolidated net equity is set out in Note 13.Classification on the balance sheet as current or non-current will depend onwhether the maturity of the hedge at the year end is less or more than oneyear. Non-hedge derivatives will be classified in any case as current. 31
  32. 32. The criteria used to account for these instruments are as follows:i) Fair value hedgesThe changes in the fair value of the designated derivatives that meet theconditions to be classified as hedging operations of the fair value of assetsor liabilities are recorded in the income statement for the year under“Variation in valuation of hedging instruments”, together with any change inthe fair value of the asset or liability covered by the hedge attributable tothe risk hedged. This corresponds mainly to those derivative financialinstruments contracted by the Group companies to convert fixed interestdebt into floating rate debt.ii) Cash flow hedgesThe positive or negative changes in the valuation of the derivativesclassified as cash flow hedges are charged, in the effective portion, net ofany tax impact, to consolidated equity under the entry “Reserves – Hedgereserve”, until the hedged item impacts the result for the year (or when thehedged item matures or is sold or if it is no longer probable that thetransaction will take place), at which point the retained earnings or losses innet equity are transferred to the consolidated income statement for theyear.The positive or negative differences in the valuation of the derivativescorresponding to the ineffective portion, if they exist, are recorded directlyin the consolidated income statement for the year under “Variation invaluation of hedging instruments”.This type of hedge corresponds primarily to those derivatives contracted bythe Group companies that convert floating rate debt to fixed rate debt.iii) Hedging net foreign investment in non-euro currencyIn certain cases abertis finances its activities in the same functionalcurrency in which the foreign investments are held so as to reduce theexchange rate risk. This is done by raising finance in the correspondingcurrency or by contracting cross currency interest rate swaps. 32
  33. 33. The hedging of net foreign investments is accounted for in a way that issimilar to the cash flow hedge. The gains or losses on the hedginginstrument for the effective portion are recorded under net equity and thegains or losses related to the ineffective portion are recognised immediatelyin the consolidated income statement for the year.Accumulated gains or losses in net equity are carried in the incomestatement when the foreign transaction is concluded.iv) Derivatives not qualified as accounting hedgesIn case there are derivatives that do not meet the criteria established to bequalified as hedges, the positive or negative variation arising fromrecalculating the fair value of these derivatives is taken directly toconsolidated profit and loss for the year.f) InventoriesInventories consist primarily of spare parts for property, plant and equipmentand are valued at cost, calculated using the weighted average price method,making the necessary valuation adjustments and raising the correspondingimpairment.g) Cash and cash equivalentsCash and cash equivalents include cash on hand, demand deposits in banksand short-term investments in highly liquid instruments maturing in threemonths or less.h) Non current assets held for saleNon current assets are classified as held for sale when their value will berecovered mainly through sale, provided that said sale is highly likely. Theseassets are stated at the lesser of their book value or fair value, less the costsof sale. 33
  34. 34. i) Treasury sharesIn the event that any Group entity or the Parent Company acquires shares ofabertis, these are recorded under “Treasury shares” in the consolidatedbalance sheet and consolidated net equity is reduced. The shares are statedat acquisition cost, without recording any provisions.When these shares are sold, any amount received, net of any additionaldirectly attributable transaction costs and the corresponding effect of the taxon the profit generated, and are included in the net equity attributable toequity holders of the parent Company.j) BorrowingsBorrowings are initially recorded at fair value, including the costs incurred inraising the debt. In subsequent periods they are valued at amortised cost andthe difference between the funds obtained (net of the costs involved inraising the funds) and the repayment value, as the case may be, and if it issignificant, is recorded in the income statement over the life of the debt usingthe effective interest method.Borrowings at a fixed interest rate hedged using derivatives that modify thisinterest rate from fixed to floating are stated at fair value for the hedgedcomponent, and these variations are taken to profit and loss, thus offsettingthe impact on results of the variation in the fair value of the derivativeinstrument.k) Income taxThe tax expense (or, where appropriate, income) on profits is the totalamount accrued for this purpose during the year, representing both currentand deferred tax.Both the current tax expense (or, where appropriate, income) and deferredtax expense are recorded in the consolidated income statement for the year.However, the tax effect relating to items recorded directly in othercomprehensive income or net equity is recorded under other comprehensiveincome or net equity. 34
  35. 35. The deferred tax is calculated using the liabilities method based on thebalance sheet, on the temporary differences that arise between taxableincome of the assets and liabilities and their accounting amounts in theconsolidated annual accounts, under the regulations and using tax rates inforce, or pending approval, on the balance sheet date and which areexpected to be used when the corresponding deferred tax asset is realised orthe deferred tax liability is settled.Deferred tax liabilities that arise from temporary differences with subsidiary,multi-group companies and/or associates are always recorded, except inthose cases in which the Group can control the date on which the temporarydifferences will reverse and it is probable that they will not reverse in theforeseeable future.The deferred income tax assets are recognised if it is probable that future taxprofit will arise with which to offset the deductible temporary differences orthe losses or unused fiscal credits. In the case of deferred tax assets thatcould arise due to temporary differences with subsidiary and multigroupcompanies and/or associates, these are recognised if additionally it ispossible that they will reverse in the foreseeable future.The recoverability of deferred tax assets is evaluated when they aregenerated, and at each year end, depending on the evolution of resultsexpected from the companies according to their respective business plans.l) Employee benefitsUnder the respective collective bargaining arrangements, various companiesin the Group have the following commitments with their employees:i) Post-employment obligations:  Defined contributions to employee welfare instruments (employee pension plans and collective insurance policies).  Defined benefits, in the form of bonuses or payments for retirement from the company and temporary and /or life-time annuities. 35
  36. 36. In defined contribution employee welfare, the Company makes predefinedcontributions to an external entity and does not have a legal or realobligation to make additional contributions in the event that this entity doesnot have sufficient assets to cover the employee payments that related to theservices provided in the current year and previous years. The annual expenserecorded is the corresponding contribution made in the year.In the defined benefit commitments, where the Company assumes certainactuarial and investment risks, the liability recorded on the balance sheet isthe present value of the obligations at the balance sheet date less the fairvalue of the possible assets for this commitment on said date, plus or minusany unrealised actuarial gain or loss, less any amount arising from the cost ofpast services not yet recognised.The actuarial valuation of the defined benefit commitments is made annuallyby independent actuaries using the projected credit unit method to determineboth the current value of the obligations and the cost of the services providedin the current and previous years. The actuarial gains and losses arising fromchanges in the actuarial assumptions are recognised in the year in which theyoccur. They are not included in the consolidated income statement, butpresented in the statement of comprehensive income.Costs for past services are recognised as an expense, and are allocated on astraight-line basis over the average period remaining until the right to receivethe benefits has finally vested. Nevertheless, when the benefits areimmediately irrevocable after the introduction of a defined benefits plan, orfollowing any change in the plan, the costs for past services are recognisedimmediately.The hedging of commitments by making contributions to an insurance policy,where the legal or implied obligation to meet the agreed benefits remains, isalways treated as a defined benefit.ii) Other long-term benefits, related to the length-of-service of the employee in the company.In respect of long-term commitments for the length of service of employeesin the company, the liability recognised on the balance sheet coincides withthe current value of the obligations at the balance sheet date, if there are noother assets related to them. 36
  37. 37. The projected credit unit method is used to determine both the current valueof the obligations at the balance sheet date and the cost of the servicesrendered during the current year and previous years. The actuarial gains andlosses that arise from changes in the actuarial assumptions are recognized,unlike the post-employment obligations, in the year in which they aregenerated, in the consolidated income statement for the year.iii) Share-based payments.As indicated in Note 28, the group has a Management compensation planconsisting in the distribution of options in abertis stock that can only besettled in shares.This plan is valuated at its fair value, at the date it is initially distributed,using a generally accepted financial calculation method, which, amongstothers, takes into account the option exercise price, volatility, exercise term,expected dividends and the risk-free interest rate.The cost of the plan is charged to the consolidated income statement as apersonnel expense as it accrues during the period of time required for theemployee to remain in the company in order to exercise the option, while acounter-entry is made in consolidated net equity, without a re-estimate of itsinitial valuation, as per IFRS-2. However, at the year end the Group reviewsits original estimates of the number of options expected to be exercisable(affected, inter alia, by the impact of any bonus share issue) and recognizes,as the case may be, the impact of its review on the income statements bymaking the respective adjustment to consolidated net equity as it accruesduring the period of time remaining until the end of the period of timerequired for the employee to remain in the company in order to exercise theoption.m) Transactions in foreign currenciesTransactions in foreign currencies are translated into the presentationcurrency of the Group (Euro) using the exchange rates in force on thetransaction date. The gains and losses on foreign currencies that arise fromthe settlement of these transactions and from the translation of monetaryassets and liabilities held in foreign currency at the year end exchange ratesare recorded in the consolidated income statement, unless they are 37
  38. 38. deferred in net equity as in the case of cash flow hedges and hedges on netinvestments, as noted in section e) of this Note.n) ProvisionsProvisions are recorded when the Group has a present legal or impliedobligation, as the result of past events where it is probable that adisbursement must be made to settle the obligation and when the amountcan be reliably estimated.In cases in which the effect of the time value of money is significant, theamount of the provision is calculated as the present value of the future cashflows that are estimated to be required to settle the existing obligation.For infrastructure concessions that are subject to compliance by the Operatorwith the contractual obligations such as maintenance of a certain level ofoperations of the infrastructure or the restoration under certain conditions ofthe infrastructure when returned to the Grantor at the end of the servicearrangement, provisions are posted, as per IAS 37, using the best estimatefor the outflow of funds to cancel the present obligation on the balance sheetdate.o) Revenue recognitionIncome for the rendering of services is recognised when it is probable thatthe benefits from the transaction will be received by the Group and can bereliably quantified (time of use of the infrastructure by the users).Most income of the Group is generated by the motorway segment and relatesmainly to toll income, which is recorded when the service is provided.Income from the telecommunications segment is also recorded when theservice is rendered and relates mainly to the provision of audio-visualservices, radio communications for closed groups of users, television andradio broadcasting, infrastructure rental, satellite capacity, transport of datato operators and other non-recurrent income.Income from the airports segment, mainly from the ACDL Group, relatesbasically to the provision for movements of aircraft and people, tradingrevenues and others, which are also recorded when the service is rendered.Interest income is recognised using the effective interest method whiledividend income is recognised when the right to receive payment isestablished. 38
  39. 39. Finally, it is important to point out that, the abertis group does notgenerally carry out the construction activities of concession assets as itincorporates the infrastructures which it operates by means ofadministrative concession through their acquisition from third-partycompanies which perform the construction on the account of abertis. Inaccordance with paragraph 14 of IFRIC 12, the headings "Income fromupgrades of infrastructures" and "Expenses from upgrades ofinfrastructures" of the consolidated income statement for the year includesthe income and expenses corresponding to the construction activities orupgrades of infrastructures carried out over the year, with no marginrecorded for said activity as the Group does not carry out any constructionand acquires the infrastructure at its fair value.p) EnvironmentCosts arising from legal environment requirements are recorded annuallyeither as an expense or are capitalised, depending on their nature. Theamounts capitalised are depreciated over their useful life.No allowance has been made to the provision for liabilities and charges inrelation to the environment, given that there are no contingencies related tothis matter.q) New IAS/IFRS standards and IFRIC interpretationsAs indicated below, in 2011 new accounting standards (IAS/IFRS) andinterpretations (IFRIC) have come into force or those which came into forcein 2010 but for years beginning after 1 January 2010 (applied for abertispurposes as from 1 January 2011) have been applied. Furthermore, at thedate of formulation of these consolidated annual accounts, new internationalaccounting standards (IAS/IFRS) and interpretations (IFRIC) have beenenacted that are to enter into force for the accounting years commencing 1January 2012 or subsequent to this date.i) Standards, modifications and interpretations coming into effect on 1 January 2011, or which abertis has applied on that date, having come into force in 2010 but only for the years beginning after 1 January 2010. IAS 24 (revised in November 2009) – “Related party disclosures” (in force for years beginning 1 January 2011). IAS 32 (modification October 2009) – “Financial Instruments: 39
  40. 40. presentation of emissions rights” (in force for the years beginning 1 February 2010). IFRS 1 (modified January 2010) – “First-time Adoption of IFRS, limited exemption from comparative IFRS 7 disclosures for first- time adopters” (in force for years beginning 1 July 2010). IFRIC 14 (modified July 2010) – “Prepayments of a minimum funding requirement” (in force for financial years beginning 1 January 2011). IFRIC 19 - “Extinguishing financial liabilities with equity instruments” (in force for years beginning 1 July 2010). In addition, as part of the IASB’s annual improvements project of May 2010, a series of minor changes in certain standards and interpretations have been adopted, which entered into force on 1 January 2011.All those standards, amendments and interpretations applicable to theGroups annual accounts have been taken into account with effect from 1January 2011, without significant impact on these consolidated annualaccounts.ii) Standards, modifications and interpretations issued by the IASB and adopted by the European Union, coming into force in 2011 but for years beginning after 1 January 2011, for which the Group has not contemplated early adoption (applicable for abertis purposes as from 1 January 2012). IFRS 7 (modification in October 2010) – “Financial instruments: disclosures – transfers of financial assets” (in force for the years beginning 1 January 2011).It is not expected that the application of these standards, modifications andinterpretations will have a significant impact on the consolidated annualaccounts of abertis. 40
  41. 41. iii) Standards, modifications and interpretations issued by the IASB pending adoption by the European Union, generally coming into force after 1 January 2012, for which the Group has not contemplated their early adoption. IAS 1 (amendment of June 2011) – “Presentation of financial statements" (in force for years beginning 1 July 2012, and so for abertis purposes it will be applied as from 1 January 2013). Amends the presentation of Other Comprehensive Income, grouping it into two categories, based on whether the headings included therein will be reclassified to the income statement or not. IAS 12 (modification December 2010) – “Income Taxes – deferred tax: recovery of underlying assets” (in force for years beginning 1 January 2012). IAS 19 (amendment of June 2011) – “Employee Benefits” (in force for years beginning 1 January 2013). It amends, inter alia, the recognition and measurement of defined benefit pension costs and termination benefits, as well as the breakdowns of all employee benefits. IAS 27 (amendment of May 2011 as a consequence of the new IFRS 10) - "Separate financial statements" (in force for years beginning 1 January 2013). IAS 28 (amendment of May 2011 as a consequence of the new IFRS 11) - "Investments in associates and joint ventures" (in force for years beginning 1 January 2013). IAS 32 (modification of December 2011) – “Financial Instruments: offsetting financial assets and financial liabilities" (in force for years beginning 1 February 2014). IFRS 1 (modified December 2010) – “First-time Adoption of IFRS, severe hyperinflation and removal of fixed dates for first-time adopters” (in force for the years beginning 1 July 2011). IAS 7 (modification of December 2011) – “Financial Instruments: offsetting financial assets and financial liabilities" (in force for years beginning 1 January 2013). IFRS 9 – “Financial instruments” replacing IAS 39 (in force for years beginning 1 January 2015 in accordance with the amendment published in July 2011). 41