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The recoverable amount is either the net sale value or the value in use, whichever is higher. The value in use is calculated on the basis of estimated
future cash flows discounted at an after tax discount rate that reflects the current market valuation with respect to the cost of money and the specific
risks associated with the asset.
The Group has defined each of the hotels it operates as cash-generating units, according to the real management of their operations.
In general, future estimates have been drawn up for a five-year period, except in cases in which the remaining term of a lease agreement is less, plus
a residual value.
The discount rates used by the Group for these purposes range from 6.35% to 14%, depending on the different risks associated with each specific
asset.
If the recoverable amount of an asset is estimated to be lower than its carrying amount, the latter is reduced to the recoverable amount by
recognising the corresponding reduction through the consolidated comprehensive profit and loss statement.
If an impairment loss is subsequently reversed, the carrying amount of the asset is increased to the limit of the original value at which such asset was
recognised before the loss of value was recognised.
Information on impairment losses detected in the financial year appears in Notes 7 and 8 of this Consolidated Annual Report.
4.5 Lease Rentals
The Group generally classifies all leases as operating leases. Only those leases which substantially transfer to the lessee the risks and rewards
deriving from ownership and under the terms of which the lessee holds an acquisition option on the asset at the end of the agreement under
conditions that could be clearly deemed as more advantageous than market conditions are classified as finance leases.
4.5.1 Operating leases
In operating lease transactions, ownership of the leased asset and substantially all the risks and rewards deriving from ownership of the asset remain
with the lessor.
When the Group acts as the lessor, it recognises the income from operating leases using the straight-line method according to the terms of the
agreements signed. These assets are depreciated in accordance with the policies adopted for similar own-use tangible assets. When the Group
acts as the lessee, the leasing costs are charged on a straight-line basis to its comprehensive consolidated income statement, the resulting asset or
liability being recognised under “other non-current liabilities” and “other non-current assets” or “other current liabilities” and “other current assets”.
4.5.2 Finance leases
The Group recognises finance leases as assets and liabilities in the consolidated balance sheet at the start of lease term at the market value of the
leased asset or at the present value of the minimum lease instalments, should the latter be lower. The interest rate established in the agreement is
used to calculate the present value of the lease instalments.
The cost of assets acquired through finance leasing agreements is recognised in the consolidated balance sheet according to the nature of the asset
described in the agreement.
The financial expenses are distributed over the period of the lease in accordance with a financial criterion.
4.6 Financial Instruments
4.6.1 Financial assets
Financial assets are recognised in the consolidated balance sheet when they are acquired and initially recognised at their fair value. The financial
assets held by Group companies are classified as follows:
- Negotiable financial assets: these include any assets acquired by the companies with the aim of taking short-term advantage of any changes
their prices may undergo or any existing differences between their purchase and sale price. This item also includes any financial derivatives
that are not considered accounting hedges.
- Held to maturity financial assets: these are assets subject to a fixed or determinable redemption amount with a fixed maturity date. The Group
declares its intention and its capacity to keep these in its power from the date of acquisition to their maturity date.
- Outstanding loans and accounts receivable generated by the Company: these are financial assets generated by the companies in exchange for
deliveries of cash or the supply of goods or services.
Negotiable financial assets are valued after their acquisition at fair value, any changes in which are recognised through profit or loss for the year.
Fair value of a financial instrument on a given date is construed as the amount for which it could be bought or sold on that same date by two
knowledgeable parties acting freely and prudently under conditions of mutual independence.
Held to maturity financial assets and loans and accounts receivable originated by the Group are valued at their amortised cost and accrued interest
is recognised in the consolidated comprehensive profit and loss statement on the basis of their effective interest rate. Amortised cost is construed as
the initial cost minus any collections or amortisation of the principal, taking into account any potential reductions arising from impairment or default.
As regards valuation corrections made to trade and other accounts receivable in particular, the criterion used by the Group to calculate the
corresponding valuation corrections, if any, generally consists of provisioning for any balances more than 180 days overdue.
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
