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3.- DISTRIBUTION OF PROFITS
The Directors of the parent company will propose to the Annual General Meeting to apply the losses to the account “Negative results from previous
years”, for offset in future years. In accordance with Article 273.4 of the Consolidated Text of the Corporate Enterprises Act, the Directors will
propose to allocate 418 thousand euros as an unavailable reserve, as provided by such article, at the Ordinary General Shareholders’ Meeting and
charge it to freely available reserves, because the Parent Company has not generated any profits this year.
4.- VALUATION STANDARDS
The main principles, accounting policies and valuation standards applied by the Group to draw up these consolidated financial statements, which
comply with IFRS in force on the date of the relevant financial statements, have been the following:
4.1 Tangible fixed assets
Tangible fixed assets are valued at their original cost. They are subsequently valued at their reduced cost resulting from cumulative depreciation and,
as appropriate, from any impairment losses they may have suffered.
Due to the transition to IFRS, the Group reappraised the value of some land to its market value on the basis of appraisals made by an independent
expert for a total amount of 217 million euros. The reappraised cost of such land was considered as a cost attributed to the transition to the IFRS.
The Group followed the criterion of not re-valuing any of its tangible fixed assets at subsequent year-ends.
Enlargement, modernisation and improvement costs entailing an increase in productivity, capacity or efficiency or a lengthening of the assets’ useful
life are recognised as increases in the cost of such assets. Conservation and maintenance costs are charged against the consolidated comprehensive
profit and loss statement for the year in which they are incurred.
The Group depreciates its property, plant and equipment following the straight line method, distributing the cost of the assets over their estimated
useful lives, in accordance with the following table:
Estimated years of useful
life
Buildings
33-50
Plant and machinery
10-30
Other plant, fixtures and furniture
5-10
Other fixed assets
4-5
These elements amortize according to their estimated useful life, or according to the remaining term of the lease agreement if this is lower than
their estimated useful life.
4.2 Consolidation goodwill
The goodwill generated on consolidation represents the excess of the cost of acquisition over the Group’s share in the market value of the identifiable
assets and liabilities of a subsidiary.
Any positive differences between the cost of interests in the capital of consolidated and associated entities and the corresponding theoretical
carrying amounts acquired, adjusted on the date of the first consolidation, are recognised as follows:
1. If they are assignable to specific equity elements of the companies acquired, by increasing the value of any assets the market value of which
is above their carrying amount appearing in the balance statements.
2. If they are assignable to specific intangible assets, by explicitly recognising them in the consolidated balance sheet, provided their market
value on the date of acquisition can be reliably determined.
3. Any remaining differences are recognised as goodwill, which is assigned to one or more specific cash-generating units (in general hotels)
which are expected to make a profit.
Goodwill is recognised only when it has been acquired for valuable consideration.
Any goodwill generated through acquisitions prior to the IFRS transition date, 1 January 2004, is kept at its net value recognised at 31 December
2003 in accordance with Spanish accounting standards.
Goodwill is not amortised. In this regard, at the end of every year, or whenever there are indications of a loss of value, the Group estimates, using the
so-called “Impairment Test”, the possible existence of permanent losses of value that would reduce the recoverable amount of goodwill to less than
the net cost recognised. Should this be the case, it is written down in the consolidated comprehensive profit and loss statement. Any write-downs
recognised cannot subsequently be reversed.
All goodwill is assigned to one or more cash-generating units in order to conduct the impairment test. The recoverable amount of each cash-
generating unit is determined either as the value in use or the net sale price that would be obtained for the assets assigned to the cash-generating
unit, whichever is higher. The value in use is calculated on the basis of estimated future cash flows discounted at an after-tax rate that reflects the
current market valuation with respect to the cost of money and the specific risks associated with the asset.
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
