BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA

2.2.22. CONSOLIDATED STATEMENTS OF CASH FLOWS
The indirect method has been used for the preparation of the consolidated statement of cash flows. This
method starts from the entity’s consolidated net income and adjusts its amount for the effects of transactions
of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and
items of income or expense associated cash flows classified as investment or finance.
For these purposes, in addition to cash on hand, cash equivalents include very short term, highly liquid
investments subject to very low risk of impairment.
The composition of component of cash and equivalents with respect to the headings of the consolidated
balance sheets is shown in the accompanying consolidated cash flow statements.
To prepare the consolidated cash flow statements, the following items are taken into consideration:
• Cash flows: Inflows and outflows of cash and cash equivalents, the latter being short-term, highly
liquid investments subject to a low risk of changes in value, such as balances with central banks,
short-term Treasury bills and notes, and demand deposits with other credit institutions.
• Operating activities: The typical activities of credit institutions and other activities that cannot be
classified as investing or financing activities.
• Investing activities: The acquisition, sale or other disposal of long-term assets and other investments
not included in cash and cash equivalents.
• Financing activities: Activities that result in changes in the size and composition of equity and of
liabilities that do not form part of operating activities.
2.2.23. ENTITIES AND BRANCHES LOCATED IN COUNTRIES WITH HYPERINFLATIONARY
ECONOMIES
In accordance with the IFRS-EU criteria, to determine whether an economy has a high inflation rate the
country's economic situation is examined, analyzing whether certain circumstances are fulfilled, such as
whether the population prefers to keep its wealth or save in non-monetary assets or in a relatively stable
foreign currency, whether prices can be set in that currency, whether interest rates, wages and prices are
pegged to a price index or whether the accumulated inflation rate over three years reaches or exceeds
100%. The fact that any of these circumstances is fulfilled will not be a decisive factor in considering an
economy hyperinflationary, but it does provide some reasons to consider it as such.
Since the end of 2009, the Venezuelan economy is considered to be hyperinflationary as defined by the
aforementioned criteria. Accordingly, as of June 30, 2010 and December 31, 2009, it was necessary to
adjust the financial statements of the Group's subsidiaries based in Venezuela to correct for the effect of
inflation. Pursuant to the requirements of IAS 29, the monetary headings (mainly loans and credits) have not
been re-expressed, while the non-monetary headings (mainly tangible fixed assets) have been re-expressed
in accordance with the change in the country's Consumer Price Index.
The historical differences as of January 1, 2009 between the re-expressed costs and the previous costs in
the non-monetary headings were credited to "Reserves” on the consolidated balance sheet for 2009, while
the differences for 2009, and the re-expression of the income statement as of December 31, 2009 were
recognized in the consolidated income statement for 2009.
The effects of inflation accounting in Venezuela in the consolidated income statement corresponding to the
six months ended June 30, 2010 were not significant.
In January 2010, the Venezuelan authorities announced the devaluation of the Venezuelan bolivar with
regard to the main foreign currencies and that other economic measures will be adopted. The effects of this
devaluation in the consolidated income statement corresponding to the six months ended June 30, 2010 and
on consolidated equity were not significant.
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