Annual Report - EDP

notes to the EDP consolidated - Energias de Portugal, and company S.A. financial statementsNotes to for the the Consolidated years and ended Company 31 december Financial Statements 2012 and 2011for the years ended 31 December 2012 and 2011y) CO 2 licenses and greenhouse effect gas emissionThe Group holds CO 2 licenses in order to deal with gas emissions resulting from its operational activity and licenses acquired for trading. The CO 2 and gas emissionslicenses held for own use and attributed free of charge are booked as intangible assets against Deferred Income - Subsidies and are valued at the quoted price in themarket on the grant date, usually at the beginning of each year. The use of the licenses is based on actual gas emissions in the period, valued at the quoted price onthe date of attribution.Amortisation of Deferred Income - Subsidies is made in the year in which the subsidy is granted. When the emissions of the year exceed the CO 2 licenses attributed forfree, a provision is booked to cover for the costs of acquiring the necessary additional licenses at the balance sheet date.The licenses held by the Group for trading purposes are booked under inventories at acquisition cost, subsequently adjusted to the respective fair value, calculated onthe basis of the market quote in the last working day of each month. Gains and losses resulting from these adjustments are recognised in the income statement of theperiod.z) Cash Flow StatementThe Cash Flow Statement is presented under the direct method, by which gross cash flows from operating, financing and investing activities are disclosed.The Group classifies cash flows related to interest and dividends paid as financing activities and interest and dividends received as investing activities.aa) Group concession activitiesThe International Financial Reporting Commitee (IFRIC) issued in July 2007, IFRIC 12 - Service Concession Arrangements. This interpretation was approved by theEuropean Commission on 25 March 2009 and is applicable for the annual periods beginning after that date.In the case of the EDP Group, the first annual period after the approval date is 2010 and, therefore, the EDP Group adopted IFRIC 12 for comparative purposes as of 1January 2009. Under the terms of IFRIC 12, this interpretation was applied prospectively considering that the retrospective application was impraticable. The effect ofthe retrospective application would have a similar effect as a prospective application.IFRIC 12 is applicable to public-private concession contracts in which the public entity controls or regulates the services rendered through the utilisation of certaininfrastructure as well as the price for such services and also controls any significant residual interest in the infrastructure.According to IFRIC 12, the infrastructures allocated to concessions are not recognised by the operator as tangible fixed assets or as financial leases, as the operatordoes not control the assets. These infrastructures are recognised according to one of the following accounting models, depending on the type of remunerationcommitment of the operator assumed by the grantor within the terms of the contract:Financial Asset ModelThis model is applicable when the operator has an unconditional right to receive certain monetary amounts regardless of the level of use of the infrastructure withinthe concession and results in the recognition of a financial asset, booked at amortised cost.Intangible Asset ModelThis model is applicable when the operator, within the concession, is remunerated on the basis of the level of use of the infrastructure (demand risk) and results in therecognition of an intangible asset.Mixed ModelThis model is applicable when the concession includes simultaneously guaranteed remuneration and remuneration based on the level of use of the infrastructurewithin the concession.Under the terms of concession contracts of EDP Group to which IFRIC 12 is applicable, the construction activities are outsourced to specialised entities. Therefore, EDPGroup has no margin in the construction of assets assigned to concessions. The revenue and the expenditure with the acquisition of these assets have equal amounts(see note 7).Intangible assets within concessions are amortised over their respective useful lives during the concession period.The Group carries out impairment tests to the intangible assets within concessions whenever events or circumstances may indicate that the book value of an assetexceeds its recoverable amount, being any impairment, if any, recognised in the income statement.Grants received from customers related to assets within concessions are delivered to the Group on a definitive basis, and, therefore, are not reimbursable. Thesegrants are deducted from the value of the assets allocated to each concession.EDP - Annual Report 2012187