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Any financial instruments valued after their initial recognition at fair value are classified as level 1 to 3 based on the extent to which fair value can
be observed:
• Level 1: Includes any instruments indexed to listed prices (without adjustment) of identical assets or liabilities in active markets.
• Level 2: Includes any instruments indexed to other observable inputs (which are not the listed prices included under Level 1) for assets or
liabilities, be it directly (i.e., prices) or indirectly (i.e., derived from prices).
• Level 3: Includes any instruments indexed to valuation techniques, which include inputs for assets or liabilities that are not based on observable
market data (unobservable inputs).
4.6.4 Equity instruments
An equity instrument represents a residual interest in the equity of the Parent Company once all its liabilities are subtracted.
Equity instruments issued by the Parent Company are recognised in equity for the amount received, net of the issue expenses.
4.7 Non-Current Assets and Associated Liabilities Held for Sale and Discontinued Operations
Assets and liabilities, the carrying amount of which is recovered through a sale and not from continued use, are classified as non-current assets held
for sale and liabilities associated with non-current assets held for sale. This condition is considered to be met only when the sale is highly probable
and the asset is available for immediate sale in its current state, and it is estimated that the sale will be completed within one year from the date of
classification.
Non-current assets and associated liabilities classified as held for sale are measured at the lower of carrying amount and fair value less selling
expenses.
Discontinued operations represent components of the Group which will be disposed of. These components are activities and cash flows that can be
clearly distinguished from the rest of the Group, both operationally and for the purposes of financial reporting, and represent lines of business or
geographical areas which can be considered as separate from the rest.
4.8 Investments in Associates
Investments in companies over which the Parent Company exercises significant influence or are jointly controlled are accounted for using the equity
method. The carrying amount of the investment in the associate includes the goodwill and the consolidated statement of comprehensive income
includes the share in the results of the associate’s operations. If the associate recognises gains or losses directly in equity, the Group also recognises
its share in such items directly in equity.
At each year-end, the existence of indicators of a potential impairment of the investment in the associate is assessed in order to recognise the related
impairment loss, where appropriate. In order to determine the recoverable amount of the investments in companies whose sole asset consists of
property inventories, appraisals were obtained from the same independent valuer that appraised the Group’s inventories (Note 12). In the case of the
other companies, discounted cash flow valuations were performed internally, similar to those described in Note 4.5.
4.9 Inventories
The criteria followed to value the different elements forming inventories are as follows:
Hotel operations
Catering edible products are valued at original cost or at realisation value, whichever is lower.
Real estate operations (through Sotogrande, S.A.)
After the sale of Sotogrande, S.A. in 2014, the Company no longer holds any inventory evaluated as follows in 2013:
All costs incurred are identified by area and product in order to determine the cost of each element at the moment it is sold. This method assigns to
the cost of the sale a proportional part of the total value of the land and of the development costs based on the percentage the square metres sold
represents of the total square metres available for sale in each area.
All land and plots held for sale are classified under current assets though their construction and sale period may exceed one year.
i) Undeveloped land: Undeveloped land is valued at original cost, which includes any legal expenses for deeds of sale, registration and any taxes
not directly recoverable from the tax authorities.
ii) Developed land: Developed land is valued at cost or market value, whichever is lower. The cost mentioned above includes the cost of land,
development costs and the cost of technical projects. Taking into consideration the peculiar characteristics of this activity (development and
sale of a property measuring approximately 16 million square metres over a period of approximately 50 years), the value of developed land
includes the personnel expenses and overheads incurred by the technical department in connection with the development and design of the
different projects. In 2013, costs attributable directly to said projects amounted to €38,000 (no amount was attributed in 2012).
iii) Buildings under construction and completed: These are valued at cost price, which includes the proportional part of the cost of land and
infrastructure and any costs directly incurred in connection with the different construction projects (projects, building licences, certifications
of works, declaration of new works, registration at registry, etc.). The Group takes into account the market value and the term for realising
the sales of its finished products, making the necessary value adjustments whenever needed.
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
