Page 64 - Consolidated Financial Statements and Management Report

2.4
Responsibility for the information, estimates made and sources of uncertainty
The Directors of the Parent Company are responsible for the information contained in these consolidated financial statements.
Estimates made by the management of the Group and of the consolidated entities (subsequently ratified by their Directors) have been used in the Group’s consolidated
financial statements to quantify some of the assets, liabilities, revenue, expenses and undertakings recorded. These estimates essentially refer to:
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Losses arising from asset impairment.
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The hypotheses used in the actuarial calculation of liabilities for pensions and other undertakings made to the workforce.
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The useful life of the tangible and intangible assets.
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The valuation of consolidation goodwill.
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The market value of specific assets.
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The estimation of onerous agreements.
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Calculation of provisions and evaluation of contingencies.
These estimates were made on the basis of the best available information on the facts analysed. Nonetheless, it is possible that future events may take place that make it
necessary to modify them, which would be done in accordance with IAS 8.
2.5
Consolidation principles applied
2.5.1.
Subsidiaries (see Appendix I)
Subsidiaries are considered as any company included within the scope of consolidation in which the Parent Company directly or indirectly controls their management
due to holding the majority of voting rights in the governance and decision-making body, with the capacity to exercise control. This capacity is shown when the Parent
Company holds the power to manage an investee entity’s financial and operating policy in order to obtain profits from its activities.
The financial statements of subsidiaries are consolidated with those of the Parent Company by applying the full consolidation method. Consequently, all significant
balances and effects of any transactions taking place between them have been eliminated in the consolidation process.
Stakes held by minority members in the Group’s equity and results are respectively presented in the “Minority interests” item of the consolidated balance sheet and of
the consolidated comprehensive profit and loss statement.
The profit or loss of any subsidiaries acquired or disposed of during the financial year are included in the consolidated comprehensive profit and loss statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate.
2.5.2
Associate companies (see Appendix II)
Associated companies are considered as any companies in which the Parent Company holds the capacity to exercise significant influence, though it does not exercise
either control or joint control. In general terms, it is assumed that significant influence exists when the percentage stake (direct or indirect) held by the Group exceeds
20%
of the voting rights, as long as it does not exceed 50%.
Associated companies are valued in the consolidated financial statements by the equity method; in other words, through the fraction of their net equity value the Group’s
stake in their capital represents once any dividends received and other equity retirements have been considered.
2.5.3
Joint ventures (see Appendix II)
Joint ventures are considered to be any ventures in which the management of the investee companies is jointly held by the Parent Company and third parties not related
to the Group, without any of them holding a greater degree of control than the others. The financial statements of the joint ventures are consolidated using the equity
method, i.e. at the Group’s share of net assets of the investee, after taking into account the dividends received therefrom and other equity eliminations.
2.5.4
Foreign currency conversion
The following criteria have been different applied for converting into euros the different items of the consolidated balance sheet and the consolidated comprehensive
profit and loss statement of foreign companies included within the scope of consolidation:
Assets and liabilities have been converted by applying the effective exchange rate prevailing at year-end.
Equity has been converted by applying the historical exchange rate. The historical exchange rate existing at 31 December 2003 of any companies included within
the scope of consolidation prior to the transitional date has been considered as the historical exchange rate.
The consolidated profit and loss statement has been coverted by applying the average exchange rate of the year.
Any difference resulting from the application these criteria have been included in the “Translation differences” item under the “Equity” heading.
Any adjustments arising from the application of IFRS at the time of acquisition of a foreign company with regard to market value and goodwill are considered as assets
and liabilities of such company and are therefore converted using the exchange rate prevailing at year-end.
REPORT ONTHE CONSOLIDATED FINANCIAL STATEMENTS
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