Consolidated Financial Statements and Consolidated Management ...

2.5.2. Associate companies (See Annex II)
Associated companies are considered as any companies in which the Parent Company holds the capacity to exercise significant influence, though it
does not exercise either control or joint control. In general terms, it is assumed that significant influence exists when the percentage stake (direct or
indirect) held by the Group exceeds 20% of the voting rights, as long as it does not exceed 50%.
Capredo Investments GmbH is a vehicle lacking any inherent activity used for making final investments in a series of companies domiciled in the
Dominican Republic in which the Group holds an effective stake of 25%. Hence, this vehicle has been considered an associated company.
Associated companies are valued in the consolidated financial statements by the equity method; in other words, through the fraction of their net equity
value the Group’s stake in their capital represents once any dividends received and other equity write-offs have been considered.
2.5.3. Joint ventures (See Annex III)
Joint ventures are considered to be any ventures in which the management of the investee companies is jointly held by the Parent Company and third
parties not related to the Group, without any of them holding a greater degree of control than the others. The financial statements of joint ventures are
consolidated by the proportional consolidation method, so that aggregation of balances and subsequent eliminations are carried out in proportion to
the stake held by Group in relation to the capital of said entities.
If necessary, any adjustments required are made to the financial statements of said companies to standardise their accounting policies with those used
by the Group.
2.5.4. Foreign currency conversion
The following criteria have been different applied for converting into euros the different items of the consolidated balance sheet and the consolidated
comprehensive profit and loss statement of foreign companies included within the scope of consolidation:
• Assets and liabilities have been converted by applying the effective exchange rate prevailing at year-end.
• Equity has been converted by applying the historical exchange rate. The historical exchange rate existing at 31 December 2003 of any companies
included within the scope of consolidation prior to the transitional date has been considered as the historical exchange rate.
• The consolidated comprehensive profit and loss statement has been converted by applying the average exchange rate of the financial year.
Any difference resulting from the application these criteria have been included in the “Translation differences” item under the “Equity” heading.
Any adjustments arising from the application of IFRS at the time of acquisition of a foreign company with regard to market value and goodwill are
considered as assets and liabilities of such company and are therefore converted using the exchange rate prevailing at year-end.
2.5.5. Changes in the consolidation boundary
The most significant changes in the scope of consolidation during 2011 and 2010 that affect the comparison between financial years were the following:
a.1. Changes in the scope of consolidation in 2011
a.1.1. Incorporations
On 30 April 2011, the General Shareholders’ Meeting of Donnafugata Resort S.r.l. resolved to reduce capital by 6,784,000 euros and charge it to prior
years’ losses, and to subsequently increase capital by approximately 6,294,000 euros. Both transactions were recorded in public instruments on 3 May
2011. Given that the remaining members did not participate in this increase of capital, the Parent Company subscribed all of it, thereby increasing its
percentage interest from 58.82% to 78.00%.
a.1.2. Exits
The company Jolly Hotels France, S.A., the owner of a hotel in Paris, was sold in 2011 for 89 million euros. The capital gain booked for this transaction
amounted to 19.94 million euros.
The resulting effect of the exit of the above mentioned company on the consolidated balance sheet at 31 December 2011 was as follows:
Thousands Euros
Tangible fixed assets 84,550
Tax (4,725)
Other long term debts (14,941)
Working capital (1,103)
Net assets disposed of 63,781
Consideration (89,687)
Profit before minority interests (25,906)
Minority interests 5,966
Consolidated profit (19,940)
a.1.3. Others corporate transactions
The Group performed several corporate restructuring operations in 2011, such as:
• The contributions of 64.21% of NH Las Palmas, S.A.; 98.74% of Gran Círculo de Madrid, S.A.; and 50% of NH Domo of NH Hoteles, S.A. to NH
Hoteles España, S.L.
• The takeover of Explotaciones Hoteleras Condor, S.L. by NH Hoteles España, S.L.
• NH Rallye, S.A sold 17.33% of its interest in LGH to NH Hoteles, S.A.
• The sale of interests in NH Hoteles España, S.L. by NH Rallye, S.A. (1.82%) and NH Central Reservation Office, S.L. (1.76) to NH Hoteles, S.A; and
• The merger of Lenguados Vivos, S.A. and Fast Good Peninsula Ibérica, S.A.
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 69