notes to the <strong>EDP</strong> consolidated - Energias de Portugal, and company S.A. financial statementsfor the years ended 31 december 2012 and 2011Notes to the Consolidated and Company Financial Statementsfor the years ended 31 December 2012 and 2011IAS 28 (Amended) - Investments in Associates and Joint VenturesThe International Accounting Standards Board (IASB) issued in May 2011, IAS 28 (Amended) - Investments in Associates and Joint Ventures, with effective date ofmandatory application for periods beginning on or after 1 January 2014, being allowed its early adoption.This amendment to IAS 28 (2003) describes the accounting treatment to be adopted by the investor in associates and joint ventures, defining the accountingrequirements for applying the equity method for both associates and joint ventures.No significant impact in the Group is expected from the adoption of this change.IAS 32 (Amended) - Financial Instruments: Presentation - Offsetting Financial Assets and Financial LiabilitiesThe International Accounting Standards Board (IASB) issued in December 2011, IAS 32 (Amended) - Financial Statements: Presentation - Offsetting Financial Assets andFinancial Liabilities, with effective date of mandatory application for periods beginning on or after 1 January 2014, being allowed its early adoption.This amendment clarifies the required conditions to be met in order to present the net position of the financial assets and liabilities in the financial position of an entity,as follows: (i) the entity currently has a legally enforceable right to set off the recognized amounts, and (ii) the entity has the intention to settle on a net basis or to realisethe asset and settle the liability simultaneously.No significant impact in the Group is expected from the adoption of this change.Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27The International Accounting Standards Board (IASB), issued in October 2012, Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27, with effective date ofmandatory application for periods beginning on or after 1 January 2014, being allowed its early adoption. These amendments, have not yet been adopted by theEuropean Union.IASB defines the term "investment entity" as an entity whose business purpose is to invest funds solely for returns from capital appreciation, investment income or both,and must evaluate the performance of its investments on a fair value basis.The amendments provide an exception to the consolidation requirements in IFRS 10 and require investment entities to measure particular subsidiaries ar fair valuethrough profit or losses, rather than consolidate them these amendments also set out the disclosure requirements for investment entities.No significant impact in the Group is expected from the adoption of these amendments.IFRS 9 - Financial InstrumentsThe International Accounting Standards Board (IASB) issued in November 2009, IFRS 9 - Financial instruments part I: Classification and measurement, with effectivedate of mandatory application for periods beginning on or after 1 January 2015, being allowed its early adoption. This standard, changed in October 2010, has not yetbeen adopted by the European Union.This standard is included in phase I of the IASB's comprehensive project to replace IAS 39 and relates to issues of classification and measurement of financial assets.The main issues considered are as follows:- the financial assets can be classified in two categories: at amortised cost or at fair value. This decision will be made upon the initial recognition of the financial assets.Its classification depends on how the entity presents these financial assets and the contractual cash flows associated to each financial asset in the business;- debt instruments model can be measured at amortised cost when the contractual cash-flows represent only principal and interest payments, which means that itcontains only basic loan features, and for which an entity holds the asset to collect the contractual cash flows. All the other debt instruments are recognised at fairvalue;- equity instruments issued by third parties are recognised at fair value with subsequent changes recognised in the profit and loss. However an entity could irrevocablyelect equity instruments at initial recognition for which fair value changes and the realised gain or loss are recognised in fair value reserves. Gains and lossesrecognised in fair value reserves can not be recycled to profit and loss. This is a discretionary decision, and does not imply that all the equity instruments should betreated on this basis. The dividends received are recognised as income for the year;- there is no exemption that allows unquoted equity investments and related derivatives to measure at cost, under IAS 39, is not allowed in IFRS 9;- changes in fair value attributable to own credit risk of financial liabilities classified as fair value through profit or loss, shall be recognised in Other comprehensiveincome. The remaining fair value changes related to these financial liabilities shall be recognised through profit or loss. The amounts recognised in Othercomprehensive income shall not be reclassified/transferred to profit and loss.The Group is evaluating the impact of adopting this standard.<strong>EDP</strong> - <strong>Annual</strong> <strong>Report</strong> 2012251
notes to the consolidated <strong>EDP</strong> - and Energias company de Portugal, financial S.A. statementsfor the Notes years to the ended Consolidated 31 december and Company 2012 Financial and Statements 2011for the years ended 31 December 2012 and 201151. <strong>EDP</strong> BRANCH IN SPAINThe aim of "<strong>EDP</strong> - Energias de Portugal - Sociedade Anónima, Sucursal en España" is to manage and coordinate the energy interests of subsidiaries depending from<strong>EDP</strong> Group in Spain, organised through managing and monitoring structures, in order to ensure the maximum synergy and value creation in the operations andactivities in Spain, also assuming itself as an organizational platform to lead the Iberian integration of shared and support services (back and middle offices). On thisbasis, the majority interests in <strong>EDP</strong> Renováveis, S.A., <strong>EDP</strong> Servicios Financieros España, S.A. and HC Energia (Hidroeléctrica del Cantábrico S.A.), as well as the indirectmajority interest in NG Energia (Naturgás Energia Grupo S.A.), are directly allocated to the assets of <strong>EDP</strong> Sucursal.The Spanish branch of <strong>EDP</strong> has offices in Madrid and Oviedo. From a formal and legal point of view, the representation of the Spanish branch of <strong>EDP</strong> before thirdparties is ensured through the permanent representatives, which are members of the Executive Board of Directors of <strong>EDP</strong>, mandated for that purpose.The structure of direction, coordination, management and representation of the Spanish branch of <strong>EDP</strong> is composed of an Executive Committee, a ManagementCommittee and direct representation on iberian ambit <strong>EDP</strong> Management Committee.The Executive Committee of <strong>EDP</strong> is composed essentially of five permanent representatives, a Corporate General Director (Group Controller for the activities in Spain)and by first line directors of the business units in Spain, which constitute the main direction and coordination body of the Branch, being responsible for thecoordination of the activities of the permanent representatives and of the Management Committee. The Management Committee is chaired by the Corporate GeneralDirector and is composed by the natural extension of the Departments of the Corporate Centre of <strong>EDP</strong>, namely the Department of M&A ("Direcção de Análise deNegócios"), Department of Legal Affairs ("Direcção de Assessoria Jurídica"), Department of Internal Audit ("Direcção de Auditoria"), Department of Spanish Tax Matters("Direcção de Fiscalidade Espanhola"), Department of Financial Management ("Direcção de Gestão Financeira"), Department of Commercial Shared Services ("Direcçãode Serviços Partilhados Comerciais"), Department of Corporate Shared Services ("Direcção de Serviços Partilhados Corporativos") and IT Department ("Direcção deSistemas de Informação") and "Share <strong>EDP</strong> Project" ensuring in a homogeneous way the functions of these departments transversally to the Spanish territory. Lastly, theSpanish branch of <strong>EDP</strong> has direct representation on iberian ambit <strong>EDP</strong> Management Committee particularly the Energy Planning Committees, Price and Volume,Markets, Distribution Networks, Commercial and Production.The condensed statement of financial position of the Branch as at 31 December 2012 and 2011 is analysed as follows:<strong>EDP</strong> BranchThousands of Euros Dec 2012 Dec 2011Investments in subsidiaries<strong>EDP</strong> Renováveis, S.A. 2,939,889 2,939,889Hidroeléctrica del Cantábrico, S.A. 1,981,798 1,981,798<strong>EDP</strong> Servicios Financieros España, S.A. 482,695 481,695<strong>EDP</strong> Investments and Services, S.L. 281,854 -Other 60 60Deferred tax assets 54,636 65,859Other debtors and others assets 129,006 79,794Total Non-Current Assets 5,869,938 5,549,095Trade receivables 10,985 13,573Debtors and other assets 325,212 387,595Tax receivable 43,943 37,306Cash and cash equivalents 361 11,649Total Current Assets 380,501 450,123Total Assets 6,250,439 5,999,21852. ENVIRONMENTAL MATTERSEquity 2,515,135 2,269,465Trade and other payables 3,006,023 2,436,252Total Non-Current Liabilities 3,006,023 2,436,252Trade and other payables 726,998 1,293,150Tax payable 2,283 351Total Current Liabilities 729,281 1,293,501Total Liabilities 3,735,304 3,729,753Total Equity and Liabilities 6,250,439 5,999,218Expenses of an environmental nature are those identified and incurred to avoid, reduce or repair damage of an environmental nature resulting from the company'snormal activity.Expenses of an environmental nature are recorded as expenses for the year, except if they qualify for capitalization under the terms of IAS 16.252A World Full Of Energy
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