Annual report (20-F) - Ono

Had the life of this debt not been changed, the deferred expenses balance would have been euro 8 million
higher as of December 31, 2004 as a result of the euro 6.2 million extraordinary expense referred to above
and the lower amortization of euro 1.8 million that would have been accrued from June 30 to
December 31, 2004.
k) Short and long term liabilities
Short and long term liabilities are stated at the amount at which they are to be repaid at maturity and any
implicit interest included either in their face value or repayment value is recorded under deferred
expenses.
Liabilities are classified in the Group’s balance sheet according to their maturity. Short term liabilities are
those with maturity within one year and long term liabilities those maturing beyond one year.
l) Cross-currency swaps
Transactions aimed to eliminate or significantly reduce exchange rate risks on asset and liability positions
are treated as hedging transactions. The gains or losses arising during the life of these transactions are
accrued and taken to the statement of profit and loss together with the related gains or losses on the
hedged assets or liabilities.
Transactions which are not assigned to hedge exchange rate risks are not treated as hedging transactions.
In transactions of this kind, the differences in market price are recorded when the transactions are finally
settled. However, if potential losses are anticipated at year-end, the related provisions are recorded with a
charge to the consolidated statement of profit and loss.
m) Share based compensation plan
The Group adopted a phantom stock option plan (the “Phantom Plan”), which provides eligible
employees, ex-employees, directors and former directors with the right, subject to vesting, to receive the
difference between the market value of certain number of shares of Cableuropa, S.A.U. (the Group’s
parent company) or shares of Grupo Corporativo ONO, S.A. (the sole shareholder of Cableuropa, S.A.U.)
as estimated by the Board of Directors and their exercise price. The maximum period to exercise the
options is 10 years from the granting. The liability, if any, under the Phantom Plan is estimated annually.
Changes in the value of the options, if any, would be recognized in the statement of profit and loss.
n) Transactions and balances denominated in foreign currencies
Receivables and payables denominated in foreign currencies are stated at year-end exchange rates.
Transactions in foreign currencies are recorded at the exchange rates on the dates when they occur.
Realized gains, together with realized and unrealized losses on exchange, are taken to the statement of
profit and loss in the year. Unrealized gains are recorded in the consolidated balance sheet as deferred
income and are taken to the statement of profit and loss only when realized or to the extent that losses on
exchange are recognized for the same or higher amounts within each homogeneous group.
Receivable and payable balances denominated in foreign currency covered by hedging derivative
financial instruments are stated at the exchange rate of the relevant instrument.
o) Corporate income tax
Corporate income tax expense (or income) is calculated based on the reported profit or loss as adjusted
for permanent differences between reported and taxable consolidated profit or loss, and the effects of any
deductions. Deferred tax assets and liabilities arising from timing differences in the recognition of income
and expense for accounting and tax purposes are recorded in the consolidated balance sheet until the
underlying timing differences reverse, if the deferred tax assets are expected to be realized within a ten
year period from the date on which they were generated.
p) Income and expenses
Income and expenses are recorded on an accrual basis, i.e. in the period in which the income or expense
deriving from the goods or services provided is earned or incurred. For reasons of prudence, however, the
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