Download Complete PDF - Informe Anual 2012
Download Complete PDF - Informe Anual 2012
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Intangible assets with an indefinite useful life are not depreciated and are hence subjected to the “impairment test” at least once a year (see<br />
Note 4.3).<br />
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<br />
of the asset in question.<br />
The following are the main items recorded under the “Intangible assets” heading:<br />
i) Rights of use: This item reflects the right to operate Hotel NH Plaza de Armas in Seville, acquired in 1994, whose depreciation is attributed to<br />
the consolidated comprehensive profit/loss over the 30-year term of the agreement at a growing rate of 4% per year.<br />
ii) “Rental agreement premiums” reflect the amounts paid as a condition to obtain certain hotel lease agreements. They are depreciated on a<br />
straight-line basis depending on the term of the lease.<br />
iii) “Concessions, patents and trademarks” basically reflect the disbursements made by Gran Círculo de Madrid, S.A. for the refurbishment and<br />
remodelling works of the building where the Casino de Madrid is located. The depreciation of such works is calculated on a straight-line<br />
basis by taking into account the term of the concession for operating and managing the services provided in the building where the Casino<br />
de Madrid is located, which finalises on 1 January 2037.<br />
iv) “Software applications” include various computer programs acquired by different consolidated companies. These programs are valued at<br />
their original cost price and depreciated at 25% per year on a straight-line basis.<br />
4.5 Impairment in the value of tangible and intangible assets excluding goodwill<br />
The Group evaluates the possible existence of a loss of value each year that would oblige it to reduce the book values of its tangible and<br />
intangible assets. A loss is deemed to exist when the recoverable value is less than the book value.<br />
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<br />
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<br />
specific risks associated with the asset.<br />
Future estimates have been drawn up over a period of five financial years, except in cases in which the remaining term of a lease agreement is<br />
less, plus a residual value.<br />
The discount rates used by the Group for these purposes range from 7.42% to 12%, depending on the different risks associated with each specific<br />
asset.<br />
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<br />
the corresponding reduction using the consolidated comprehensive profit and loss statement.<br />
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<br />
booked before the loss of value was recognised.<br />
Information on impairment losses detected in the financial year appears in Notes 7 and 8 of this Consolidated Annual Report.<br />
4.6 Leases<br />
The Group generally classifies all leases as operating leases. Only those leases which substantially transfer to the lessee the liabilities and<br />
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<br />
under conditions that could be clearly deemed as more advantageous than market conditions are classified as financial leases.<br />
4.6.1 Operating leases<br />
In operating lease transactions, ownership of the leased asset and substantially all the risks and advantages arising from the ownership of the<br />
asset remain with the lessor.<br />
When the Group acts as the lessor, it recognises the income from operating leases using the straight-line method according to the terms of the<br />
agreements signed. These assets are depreciated in accordance with the policies adopted for similar own use tangible assets. When the Group<br />
acts as the lessee, lease expenses are charged to the consolidated comprehensive profit and loss statement on a straight-line basis.<br />
4.6.2 Financial leases<br />
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<br />
leased asset or at the present value of the minimum lease instalments, should the latter be lower. The interest rate established in the agreement<br />
is used to calculate the present value of the lease instalments.<br />
The cost of assets acquired through financial leasing agreements is booked in the consolidated balance sheet according to the nature of the asset<br />
described in the agreement.<br />
The financial expenses are distributed over the period of the lease in accordance with a financial criterion.<br />
4.7 Financial instruments<br />
4.7.1 Financial assets<br />
Financial assets are recognised in the consolidated balance sheet when they are acquired and initially booked at their fair value. The financial<br />
assets held by Group companies are classified as follows:<br />
- Negotiable financial assets: these include any assets acquired by the companies with the aim of taking short-term advantage of any changes<br />
their prices may undergo or any existing differences between their purchase and sale price. This item also includes any financial derivatives<br />
that are not considered accounting hedges.<br />
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 73