Consolidated Financial Statements and Consolidated Management ...

- Determination and monitoring of the scope of the Internal Financial Information Control System. Definition of its scope involves determining the
relevance of each of the Group’s Business Units, and whether they should be included within the Financial Information Control System, as well as
identifying which significant operational and support processes should be analysed within each Business Unit. Both quantitative and qualitative
criteria have been taken into account in determining this scope.
The determination and review of this scope, as previously described, are fully documented within the Financial Information Control System, and must
be overseen by the Group’s Financial Department. It is approved annually by the Audit and Control Committee.
This process covers all the basic objectives of financial information: existence and occurrence; completeness; valuation; disclosure, breakdown and
comparability; rights and obligations.
Aside from the previously-described process, the Financial Department carries out a monthly accounting consolidation process.
This process starts with the consolidated accounts being received from the various Business Units each month. These are checked and approved to
ensure they comply with the established principles of control, co-management and significant influence.
The last phase of this process includes verification of the standardisation adjustments affecting the income statement (monthly) and the balance sheet
(quarterly).
This means all the Business Units share a documentation and consolidation system that is approved by the Financial Department, which reviews it once
a year.
It is important to stress that the Company has a single Accounts Plan for the entire Group, as well as shared management IT tools in all the Business Units.
3. Main features of the Control Activities
The Internal Financial Information Control System defined within the group’s control structure involves detailed work to identify not just the group
companies to which it should apply, but also the map of the most significant processes within each of them. The most relevant processes include
reporting, accounting closure, consolidation, opinions and estimates.
In order to ensure the reliability of the Financial Information, accounting errors that may arise from the following control objectives are always borne
in mind:
• Completeness: balances or transactions that should be recorded but are not.
• Transaction cut-off: those booked in a period other than when they were accrued.
• Accuracy: transactions recorded with errors (amounts, conditions).
• Occurrence/ Existence: transactions that have taken place within the period.
• Valuation/Allocation: record of transactions involving incorrect sums due to inadequate valuation calculations.
• Presentation/ Classification: classification errors in the various entries of the financial statements.
The controls and procedures defined within the Internal Financial Information Control System support the relevant processes to ensure the proper
functioning of the information systems, such as secure access, monitoring of changes in the systems, operational continuity and separation of
functions.
Supervision of the management of activities outsourced to third parties, as well as any possibly relevant evaluation, calculation or valuation tasks
commissioned from independent experts are also covered by this control structure.
The Group’s Financial Department sends the Management Report to the Board of Directors once a month, to be reviewed. This report includes all
the most relevant financial and management information, the income statement and the main economic indicators and ratios. A balance sheet is also
submitted each quarter
The Board of Directors periodically requests an analysis of specific issues, as well as the details of particular financial transactions that, because of their
importance, need to be studied in greater depth.
The Chairman of the Audit and Control Committee periodically reviews this financial information during its meetings and, as required, requests the
attendance of either external and/ or internal auditors.
4. Information and Communication
The Company’s Organisation and Systems Department is responsible for unifying, analysing and publishing all the standards and procedures that
apply to the Company, particularly operational, administrative (including accounting), quality and regulatory rules. It is the responsibility of each of the
departments (financial, operations, purchases, commercial, etc.) to issue and oversee regulations that relate to their area and form an integral part of
the Company’s internal control.
Although the functions relating to accounting criteria are the responsibility of the Organisation and Systems Department, the Financial Department
is responsible for defining and applying the accounting criteria, with this department being in charge of ensuring these are updated and approved.
To do this, the Company currently has a common Accounts Plan, an Accounting Regulations Manual and a Consolidation Manual, which apply in all
the countries in which the Group operates and are updated at least once a year. This body of regulations contains the requirements of international
financial reporting standards (IFRS), which are the accounting regulations used within the Group.
Interpretation and application of the financial reporting regulations is the responsibility of the Group’s Financial Department, which updates and checks
any possible new regulatory developments relating to the generation of financial information twice a year.
5. Supervision of the system
The Audit and Control Committee is responsible for supervising internal control, which it does by means of the Internal Audit Department, which
attends the sessions of the Audit and Control Committee whenever the committee feels this to be necessary.
The Audit and Control Committee regularly carries out the following supervisory and control functions, as specified in Article 25 b) of the Regulation
of the Board of Directors:
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ANNUAL CORPORATE GOVERNANCE REPORT