Consolidated Financial Statements and Consolidated Management ...

4.4. Intangible assets
Intangible assets are considered to be any specifically identifiable non-monetary assets which have been acquired from third parties or developed by the
Group. Only those whose cost can be estimated in an objective way and from which future economic profits are expected are recognised.
Any assets deemed to contribute indefinitely to the generation of profits are considered to have an indefinite useful life. The remaining intangible assets
are considered have a “specific useful life”.
Intangible assets with an indefinite useful life are not depreciated and are hence subjected to the “impairment test” at least once a year (see Note 4.3).
Intangible assets with a definite useful life are depreciated according to the straight-line method on the basis of the estimated years of useful life of the
asset in question.
The following are the main items recorded under the “Intangible assets” heading:
i) Rights of use: This item reflects the right of operating Hotel NH Plaza de Armas in Seville acquired in 1994, whose depreciation has been caused by
consolidated comprehensive profit/loss over the thirty years of the term of the agreement at a growing rate of 4% per year.
ii) “Rental agreement premiums” reflect the amounts paid as a condition to obtain certain hotel lease agreements. They are depreciated on a straight-line
basis depending on the term of the lease.
iii) “Concessions, patents and trademarks” basically reflect the disbursements made by Gran Círculo de Madrid, S.A. for the refurbishment and remodelling
works of the building where the Casino de Madrid is located. The depreciation of such works is calculated on a straight-line basis by taking into account
the term of the concession for operating and managing the services provided in the building where the Casino de Madrid is located, which finalises on
1 January 2037.
iv) “Software applications” include different computer programs acquired by different consolidated companies. These programs are valued at their original
cost price and depreciated at 25% per year on a straight-line basis.
4.5. Impairment in the value of tangible and intangible assets excluding goodwill
The Group assesses the possible existence of a loss of value each year that would oblige it to reduce the book values of its tangible and intangible assets.
A loss is deemed to exist when the recoverable value is less than the book value.
The recoverable amount is either the net sale value or the value in use, whichever is higher. The value in use is calculated on the basis of estimated future
cash flows discounted at an after tax discount rate that reflects the current market valuation with respect to the cost of money and the specific risks
associated with the asset.
The discount rates used by NH Hoteles Group for these purposes range between 8.2% and 12%, depending on the different risks associated with each
specific asset.
If the recoverable amount of an asset is estimated to be lower than its book value, the latter is reduced to the recoverable amount by recognising the
corresponding write-off using the consolidated comprehensive profit and loss statement.
If an impairment loss is subsequently reversed, the book value of the asset is increased to the limit of the original value at which such asset was booked
before the loss of value was recognised.
Information on impairment losses detected in the financial year appears in Note 8 of this consolidated annual report.
4.6. Leases
The Group generally classifies all leases as operating leases. Only those leases which substantially transfer to the lessee the liabilities and advantages
arising from the property and under the terms of which the lessee holds an acquisition option on the asset at the end of the agreement under conditions
that could be clearly deemed as more advantageous than market conditions are classified as financial leases.
4.6.1. Operating leases
In operating lease transactions, ownership of the leased asset and substantially all the risks and advantages arising from the ownership of the asset
remain with the lessor.
When the Group acts as the lessor, it recognises the income from operating leases according to the straight-line method in keeping with the terms
of the agreements entered into. These assets are depreciated in accordance with the policies adopted for similar own use tangible assets. When the
Group acts as the lessee, lease expenses are charged to the consolidated comprehensive profit and loss statement on a straight-line basis.
4.6.2. Financial leases
The Group recognises financial leases as assets and liabilities in the consolidated balance sheet at the start of lease term at the market value of the
leased asset or at the actual value of the minimum lease instalments, should the latter be lower. The interest rate established in the agreement is used
to calculate the actual value of the lease instalments.
The cost of assets acquired through financial leasing agreements is booked in the consolidated balance sheet according to the nature of the asset
described in the agreement.
The financial expenses are distributed over the period of the lease in accordance with a financial criterion.
4.7. Financial instruments
4.7.1 Financial assets
Financial assets are recognised in the consolidated balance sheet when they are acquired and initially booked at their fair value. The financial assets
held by Group companies are classified as follows:
- Marketable financial assets: These include any assets acquired by the companies with the aim of taking short-term advantage of any changes their
prices may undergo or any existing differences between their purchase and sale price. This item also includes any financial derivatives that are not
considered accounting hedges.
- Financial assets at maturity: These are assets subject to a fixed or determinable redemption amount which mature over time. The Group declares its
intention and its capacity to keep these in its power from the date of acquisition to their maturity date.
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REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS