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Resolution Of 18 September 2013, Of The Institute Of Accountancy And Audit Of Accounts, By Which Dictate Standards Of Registration And Valuation And Information To Be Included In The Notes On The Accounts On The Deterioration Of The Value Of The Act...

Original Language Title: Resolución de 18 de septiembre de 2013, del Instituto de Contabilidad y Auditoría de Cuentas, por la que se dictan normas de registro y valoración e información a incluir en la memoria de las cuentas anuales sobre el deterioro del valor de los act...

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TEXT

I

The General Accounting Plan (PGC) approved by Royal Decree 1514/2007 of 16 November, sets out in the second part the rules of registration and valuation that develop accounting principles and other provisions contained in the first part relating to the Conceptual Framework of Accounting. This Resolution constitutes the regulatory development of the registration and valuation criteria on asset value impairment.

To this effect, the final provision of Royal Decree 1514/2007, dated 16 November, enables the Accounting and Audit Institute (ICAC) to adopt, by means of a resolution, binding rules that develop the abovementioned Plan and its complementary rules, in particular with regard to the rules for registration and valuation and the rules for drawing up annual accounts.

Similarly, the final provision of Royal Decree 1515/2007 of 16 November approving the General Plan for the Accounting of Small and Medium-sized Enterprises (PGC-SMBs) and the specific accounting criteria for microenterprises, sets the following:

" The normative developments of the General Plan of Accounting that are approved by virtue of the ratings set out in the final provisions of Royal Decree 1514/2007 of 16 November, approving the General Plan Accounting, they will be of compulsory application for companies that implement the General Plan of Accounting of SMEs.

In case of any distinct aspect for Small and Medium-sized Enterprises, in such regulatory developments, mention is made of this circumstance. "

Finally, the final third provision of Royal Decree 1159/2010 of 17 September 2010 approving the rules for the formulation of consolidated annual accounts (NFCAC), expresses:

" The Institute of Accounts and Audit of Accounts may approve, by resolution, binding rules to develop this text and, where appropriate, the adaptations to be adopted under the provisions of the paragraphs above. "

Following the entry into force of the new PGC, ICAC has issued some interpretations on asset value impairment.

With this Resolution, the task of systematizing the aforementioned administrative doctrine is assumed and the development of the rules of registration and valuation of the PGC, the PGC-SMBs and the NFCAC that regulate the corrections of value is assumed. deterioration, without prejudice to future actions that may be necessary in line with the new international accounting statements deemed appropriate to be incorporated in our domestic law.

II

Impairment is the accounting expression of the estimated loss of value of an asset, distinct, for the case of depreciable elements, to its systematic depreciation by operation, use, obsolescence or enjoyment. The accounting record shows the difficulty of recovering, through the use, sale or other form of disposal, the entire accounting value of an asset. Therefore, the recoverable amount of an asset, as an expression of the future profits or economic returns to be obtained from it, is the primary benchmark for determining the existence and the amount of the impairment.

On a general basis, the criteria for the subsequent valuation of all assets, except those measured at fair value with changes in profit and loss, require that at the end of the financial year the existence of evidence of impairment and that the company accounts for a loss in its profit or loss account if the recoverable amount of the assets does not exceed its value in books.

This criterion is particularly important in the context of economic crisis to ensure that asset impairment losses, which are inferred from the difficulty faced by companies in maintaining their assets, are income, is recognised as incurred, in accordance with the accrual principle, and is thus met with the objective of true image of the equity, financial situation and results of the company at that time of the cycle economic.

III

The Resolution is divided into six rules:

First. Objective and scope of application.

Second. Impairment of asset value.

Third. Deterioration in the value of tangible fixed assets, real estate investments and intangible fixed assets.

Fourth. Deterioration of the value of financial instruments.

Fifth. Impairment of stock value.

Sixth. Entry into force.

With the Resolution on asset value impairment, the ICAC assumes the task of completing the regulation of the PGC and its complementary rules in the matter while providing the recipients of the standard accounting for the criteria necessary to report on the recoverable amount of the assets of a company, in line with international accounting standards adopted by the European Union.

In the first rule it is clarified that the Resolution is a development of the PGC, the PGC-SMBs and the NFCAC that must be applied by all companies, whatever their legal form, in the formulation of the accounts individual annual accounts as, where appropriate, in the drawing up of consolidated accounts. The Resolution is only subsidiary to financial institutions which, in application of their own legal regime, are governed by a sectoral accounting standard.

Also, considering the special regulation approved in these years on the deterioration of value for certain entities, the Resolution will only be applicable to carry out the verification of the deterioration of the generating assets. of cash flows of companies falling within the scope of the rules on accounting aspects of public undertakings approved by Order EHA/733/2010 of 25 March 2010 and of non-profit-making entities to be governed by the rules of adaptation approved by Royal Decree 1491/2011 of 24 October 2011.

When assets are traded on an active market, the best estimate of their recoverable amount is their quoted price. However, since only a few assets are traded on organised markets, the determination of the recoverable amount of an asset or group of assets will result in the need for a high level of judgment on the best estimate of the asset. quoted amount.

Without knowing that premise, that is, that the use of estimates does not detract from the reliability of the annual accounts because it is part of the accounting technique, at the same time the Resolution warns that the company should be prudent in the estimates and assessments to be made under conditions of uncertainty, in order to preserve the reliability of the financial information.

Therefore, it is recalled in the second standard that estimates must be performed with impartiality and objectivity, maximizing the use of observable market data and other factors that participants would consider to be the same. fix the recoverable amount of an asset, limiting as much as possible the use of subjective and non-observable or verifiable data, and in any case reporting in the memory of the facts and circumstances supporting the valuations of the company, thus allowing a third party to be able to form an appropriate judgment on the rationality of the estimates that have been used to formulate the annual accounts.

The specific criteria for accounting for the deterioration in the value of tangible fixed assets, real estate investments and intangible fixed assets are developed in the third standard, and it is undoubtedly the highest level of development. incorporates.

According to the provisions of the PGC, when a company identifies a sign of loss of value in one of these assets, it must quantify its value in use, considering the time value of money and risks. specific to the asset and, alternatively, to calculate its fair value minus the selling costs. Only when the largest of these two quantities is less than the value in books of the asset is when it can be stated, from a rational economic perspective, that the asset has deteriorated. This general regulation assumes a fundamental premise. The assets of the accounting subject generate cash flows individually, or it is possible to group them into a set of assets that do generate them.

The third standard develops these concepts, and points to the general lines of the methodology to be used to estimate the recoverable amount of assets, in line with IAS 36 "Asset Value Impairment" adopted by the European Union. In this context, a regulation goes beyond what has been the subject of accounting standards, introducing concepts and references to valuation techniques generally accepted by the professionals involved in the field of accounting. asset valuation. However, regulation has necessarily had to be addressed from a general principles approach, which administrators will have to follow to meet the objective of the faithful image imposed by the trade rule. The contrary would have been to interfere in a practice where the exercise of estimates and judgments of value, subject to the reality of the market and the specificities of the entity, is inherent in the discipline of the professionals who perform that work.

In spite of this, in the preparatory work of the Resolution within the ICAC, a series of ideas were presented that it is considered appropriate to reproduce. For example, on the concept of 'no risk' market interest rate which is defined in the Resolution as the interest rate of lower relative risk of the economic environment where the company develops its business, and therefore for the companies that develop their activity in Spain, and with cash flows to discount in euros it seems reasonable to consider that in a scenario of "normality" such interest rate is the profitability offered by the Spanish public debt, on the date in the valuation is to be carried out at a time equivalent to the cash flow to be the subject of discount; considering a good estimator of this interest, when there is no bias in the distribution of cash flows, the profitability offered by the Public Treasury within ten years.

Similarly, for companies that do not have securities admitted to trading, it was also considered that, with the exception of better evidence, companies could use their incremental interest rate as a discount rate to calculate the value in use, in application of the so-called "traditional approach"; that is, the interest rate at which the entity could be refinanced within a time limit equal to the cash flow to be counted.

The accounting treatment of grants for the purposes of the "deterioration test" has been a matter that also raised a broad debate. In particular, on whether the subsidy to be charged to the profit and loss account should be considered as a higher amount of the value in use of the asset or the corresponding cash generating unit (UGE).

The value in use of an asset or of a UGE is defined in paragraph 6. º "Valuation Criteria" of the Accounting Concept Framework, included in the first part of the PGC, as follows:

" (...) is the current value of expected future cash flows, through its use in the normal course of the business and, where applicable, its disposal or other form of disposal, taking into account its current status and updated (...) "

In view of this definition, in principle, the answer to the question that has been asked should be negative because the subsidy received to finance the asset is not a cash flow that is obtained from its use, but a cash flow that is received, at the initial time, for financing. Therefore, those who defend this view consider that the deterioration check should be carried out in accordance with the general rules, and consequently in the 'deterioration test' the effect of the subsidy should be unaware of the effect of the subsidy. they affect other sources of funding or resources that the company may obtain other than those that they bring from the direct exploitation of the asset.

Another set of vowels, however, took the view that the subsidy should be part of the value in use, on the basis of a broad interpretation of this concept, which would in turn lead to extensive interpretation of the the concept of asset, where it has been subsidised, and whose reflection on the balance sheet would not only be justified by the achievement of direct economic returns or profits, in the form of cash flows through their use, but also by indirect form of service potential through the promotion of an activity of public utility or interest social or promotion of a public purpose, which the company would not normally have undertaken in the absence of a grant.

In addition to this criterion, a similar criterion would be applied to non-profit entities when their assets do not generate cash flows. Following a similar reasoning to the employee in the PGC adjustment rules to these entities, if the assets are subsidised, the absence of cash flows for their direct use would not result in the recognition of a deterioration as long as there is a demand for the asset. Otherwise, the corresponding impairment of value and transfer to the profit and loss account should be recognised by applying the same proportion as the impairment loss represents the book value of the asset, before the deterioration is recognized.

Furthermore, with this interpretation, the accounting treatment of grants would not vary outside the scope of the decision of the entity to implement the aid, i.e. regardless of whether the transfer of funds is agreed at the initial time, or for a periodic payment to be agreed over a certain period of time, in which case the company itself should be financed by the company.

" Without prejudice to recognizing the economic rationality of the two solutions discussed, the criterion that has been included in the resolution has finally been the second one, considering that the vocation of the transparency which is deducted from the accounting treatment of the grants followed in the PGC (where they look at the net worth of the company, and do not detract from the value of the assets), which in turn brings about its own legal regime, where the transparency is a nuclear place (in order to be able to identify at all times the subsidies received by a company).

Another aspect analyzed in detail has been the criterion to be followed to check the impairment of a UGE, and to perform the distribution of the goodwill and the so-called "common assets" among several generating units. cash.

IAS 36 Asset Value Impairment, adopted by the European Union, notes that at the time of the deterioration of the value of a UGE to which a goodwill has been distributed, there may be indications of deterioration value of an asset within the unit that contains the goodwill. In these circumstances, the entity shall check the impairment of the asset value, first, and recognise any impairment loss for that asset, before checking the impairment of the value of the unit containing the goodwill.

Similarly, the aforementioned international standard of reference points out that when the lowest level to which the goodwill has been distributed is a group of units, as a step prior to the verification of the deterioration of the value of the group, each of these units shall be subject to a check, where there are indications that its value could have deteriorated, by comparing the amount in books of the unit, excluding the goodwill, with its recoverable amount.

Unlike the previous case, in this case, the criterion could result in a deterioration in the assets of the UGE (for reasons other than that of a low physical performance, obsolescence or breakdown) before accounting for a loss for deterioration in the goodwill attributed to several units.

The issue discussed has been whether this criterion could be in collision with the registration and valuation standard (NRV) 2. Inmobilised material, paragraph 2.2, of the PGC: ' In case the company is required to recognise a impairment loss of a cash-generating unit to which all or part of a goodwill has been allocated, shall first reduce the book value of the goodwill corresponding to that unit. '

Before reaching a conclusion on this point, it is appropriate to make the following considerations. The goodwill is the excess, at the date of acquisition, of the cost of the business combination on the value of the identifiable assets acquired less that of the liabilities assumed. It is therefore an asset that represents future economic benefits from other assets acquired in a business combination, which have not been able to be individually identified and recognized separately.

According to the PGC's NRV 5, an intangible asset will be identifiable when it meets any of the following requirements: a) Be separable, this is, liable to be separated from the company and sold, ceded, delivered to you. operating, leased or exchanged; (b) Surges from legal or contractual rights, irrespective of whether such rights are transferable or separable from the undertaking or other rights or obligations.

The amount of the goodwill should be allocated among each of the UGE, s of the company on which the benefits of the synergies of the business combination are expected to fall. However, in order to determine this amount, as a previous step, the company is required to identify all acquired intangible assets (e.g., trademarks, patents, utility models, internet domain names, property rights). intellectual, agreements not to compete, list of clients, orders or production pending, contracts with clients and corresponding commercial relations, non-contractual relations with the client, licenses, franchise agreements, concessions administrative and other operating rights, asset management contracts financial, etc.) thereby minimizing the possible goodwill for the benefit of the relevance of financial information.

If after this work a goodwill arises, this amount will be distributed, from the date of acquisition, between each of the cash generating units expected to benefit from the synergies of the business combination, regardless of whether other assets or liabilities of the acquired company are assigned to those cash-generating units. In addition, it is necessary that each unit between which the goodwill is distributed represents the lowest level within the enterprise in which the goodwill is controlled for internal management purposes.

In view of this background, the issue discussed was whether the approach that should prevail to check the value deterioration of the goodwill is an "bottom up" approach to the calculation of the deterioration, and is left for a Second stage the analysis of the loss in the goodwill, or if, on the contrary, what is appropriate is to analyse the verification of the deterioration of the goodwill in a single stage.

Well, in the Resolution it is clarified that for the purposes of identifying the deterioration of value in a UGE, in any case, what will proceed is to analyze the recoverable amount of the set and, if necessary, to account for the decrease of the trade prior to the recognition of a deterioration loss in another UGE assets, unless there are indications of deterioration of an identifiable element that is maintained for the purpose of being alienated, or where such an item generates cash flows from individual form, but for practical reasons it would have been included in the unit.

Similarly, with the aim of making the criterion fixed by IAS 36 itself effective in the sense that the distribution of the goodwill has to be carried out at the lowest level within the company in which the fund of Trade is controlled for internal management purposes, it has also been considered appropriate not to follow in its entirety the scheme included in the international standard to distribute the goodwill and the common assets to a group of generating units cash, when it is not possible to identify which amount corresponds to each.

Instead, the Resolution provides that where it is not possible to distribute a percentage of the goodwill between different cash generating units, the undistributed excess is allocated to the exclusive effects of checking their deterioration, each of them in proportion to their value in books, including in their case the part of the goodwill that could be distributed.

The levels of breakdown in memory required in the Resolution have been drawn up taking as a benchmark those required by IAS 36. In the case of listed companies, these breakdowns are justified by the high degree of transparency imposed on entities seeking financing on the capital markets. However, in view of the judgments that need to be made to carry out the verification of the impairment of assets, in particular when assessing the deterioration of the goodwill, it also seems reasonable to require this information. to the other companies, in order to be able to clearly identify the different assumptions that the administrators have managed in the analysis of their possible deterioration.

The fourth standard has been drawn up, in line with IAS 39 Financial Instruments: Recognition and Valuation, adopted by the European Union, presenting the criteria for accounting for the impairment of assets in function of the criterion followed for the subsequent valuation of the instrument (amortised cost, cost or fair value). This makes it compatible in the same way to develop the criteria for the deterioration of value contained in the PGC and in the PGC-SMBs.

Without prejudice to the above, in order to facilitate their practical implementation, the financial instruments which should normally be assessed in accordance with the respective criteria have been listed in each section, except in the case of provisions contained in the PGC or in the PGC-SMBs would have to be measured at fair value with changes in profit and loss.

For the financial assets valued at amortised cost, the solutions that are collected in many cases are based on regulatory developments referred to in Circular 4/2004, dated December 22, of the Banco de España, a credit institutions, on rules on public and private financial reporting and models of financial statements. However, in this Resolution some aspects have not been developed which are dealt with in the Circular, such as the criteria to be followed for a collective analysis of the impairment losses of a group of financial assets, by consider that the resolution should be drawn up from a more general perspective and without prejudice to the fact that the criteria included in the Circular may constitute a reference for carrying out the above analysis; for example, in the Circular clarifies that when the company has no experience of its own to estimate the historical losses of a group or This is insufficient, it will use the available data from the experience of other companies operating in the same market for comparable groups of debt instruments.

In any case, the methodology for estimating impairment losses should take into account that the deterioration is inherent in any portfolio of financial assets, being clearly influenced by the evolution of the economic cycles. Therefore, models based on statistical formulas or methods may be used in the calculation of impairment losses, provided that they are consistent with the requirements set out in the Resolution, such as the so-called calendars. the market reality and the specificities of the entity.

Alternatively, this is, when the company has not developed statistical methods to perform the collective or global assessment of the deterioration, the Resolution introduces a presumption of impairment loss of the whole of the commercial credit portfolio, which must be provided at the end of the financial year.

Another issue discussed was the accounting treatment of the assumptions for the approval of an agreement of creditors or restructuring of a debt, from the perspective of the creditor. In this case, it is clarified in the Resolution that in order to calculate the recoverable amount of the amortised cost credit, the effective interest rate will be used before the modification of the contract.

However, the debtor, in application of the financial liability registration and valuation rule, will make a two-stage registration: first it will analyse whether there has been a substantial modification of the debt conditions for which the cash flows of the former and the new one shall be deducted by using the initial interest rate, and subsequently, where appropriate (if the change is substantial), record the original debt reduction and recognise the new liability for its fair value (implying that interest expense on the new debt is accounted for from that time on applying the market interest rate on that date).

This accounting treatment was discussed in an express manner as an alternative to homogenize it with that applied by the debtor (since it could be interpreted that the renegotiation would result in the extinction of the previous debt), This would require, in the event that the change was described as 'substantial', to recognise a loss of impairment by difference between the book value of the debt instrument and its fair value, and to account for the new interest applying the market interest rate at that time.

However, it was finally ruled out that in these cases the renegotiation is the result of the debtor's financial difficulties, to which it is still exposed, and therefore the new cash flows must be assessed in the the context of the contractual materialisation of a default of the debtor and should be measured under the indicator summarising the initial contractual terms, i.e. the initial effective interest rate.

In relation to the insolvency proceedings, in the preparatory work of the resolution, the debate was also subject to debate if the debtor's default and the subsequent declaration of competition should give rise to what we might call the "suspension" of the the accounting record of the interest agreed upon in writing the loan (or legally enforceable) from the date on which its maturity was declared, that is, the cessation of its accounting recognition in accordance with the effective interest rate method.

Well, the declaration of competition does not interrupt the application of the principles of business in operation and accrual. The suspension of the accrual of the interest referred to in Article 59 of the Insolvency Law has a strictly procedural/insolvency scope, which does not have full economic effects until the agreement is approved and, where appropriate, the agreement concludes with a removal from the principal or, in the case of a waiting period, the debtor and his creditors agree that the post-concourse interest shall not be charged. In any event, the aforementioned precept excepted from the suspension of accrual to the credits with real guarantee, which will be required as far as the respective guarantee is reached.

Consequently, the interest must be recognized as a collection right because it is collected in the corresponding writing in which the contract has been formalized (or by legal provision), on the margin that simultaneously and In the light of the situation described above, the company should assess whether that amount will be recovered and, where appropriate, account for the corresponding impairment loss.

This interpretation, consisting in recognizing the income and, where applicable, the corresponding impairment loss, is in line with the principle of non-compensation set out in paragraph 3 of the Accounting Framework, for which: 'unless otherwise expressly provided for in a rule, the items of assets and liabilities or of expenditure and revenue shall not be compensated and the members of the annual accounts shall be assessed separately'.

The text of the Resolution also includes several clarifications on the impairment of the value of the financial assets classified in the category of available for sale. First, in accordance with the ICAC's administrative doctrine on the subject, the specific rule that for equity instruments will be presumed to exist objective evidence of deterioration when a prolonged decline occurs during a year and a half in the price of the price, or in a significant way if the share price in an active market falls by forty per cent. It should be recalled at this point that while the presumption admits the proof to the contrary, it is also clarified that a quoted price on an active market provides the most reliable evidence on fair value and must be used without adjustment to assess the fair value as long as it is available.

Similarly, if the book value of an asset is adjusted to recognize a decline in the price of the quotation, in the event that the asset has deteriorated, the entire accumulated loss in equity must be Reclassify to the profit and loss account, without therefore being able to perform a "on demand" reclassification of the loss.

Finally, in the resolution it is expressed that in the case of equity instruments the impairment losses will result in a new purchase price of the financial asset that will be the one that will have to be taken as a reference in the future to account for, where appropriate, a further deterioration loss by applying the criteria set out in the standard, without therefore continuing to account for decreases in value in the profit and loss account unless a loss is made. new scenario of deterioration.

The verification of the impairment of the investment in a company of the group will follow the criteria set out in the fourth standard of the Resolution, as an asset that generates cash flows on an individual basis, without prejudice to the consolidated annual accounts are formulated in the fund of trade implicit in the investment in the companies of the group it emerges as an independent asset, and at that time the rules contained in the RICAC to check its possible deterioration.

However, the distribution of the goodwill in the consolidated annual accounts must be consistent with the economic fund of the transaction. Therefore, if the dominant company acquires an implicit trading fund in its investment in a subsidiary, which must be distributed to that company and two other dependent companies, the latter should, from a rational economic point of view, be to compensate the acquired company for the added value generated by the combination in those dependent companies.

In the fifth standard, the criteria for the impairment of stocks are developed. A widely debated issue was the desirability of introducing a percentage of cover on the purchase price or cost of production of assets which, with the exception of better evidence of the recoverable amount of stocks, would be have to be applied according to their age in the balance sheet. This rule has not been included in the Resolution because it is difficult to understand that the same timetable for all sectors of activity could reflect the true image of the deterioration of the different stocks.

To the greatest abundance, for the case of stocks consisting of soil, constructions or real estate promotions in progress or finished, considering the high concentration that of this type of assets has occurred in the credit institutions, it was also discussed to take as a reference the percentages of coverage approved by the recent financial regulation in the field, and that they have served to quantify the minimum loss that, in any case, must be accounted for entities on the assumption that the assets awarded remain on their balance sheets more than one a given period since its acquisition.

At this point the views expressed were as follows. On the one hand, some vowels said that the Real Decree-Law 2/2012's own explanatory memorandum of 3 February, on the consolidation of the financial sector, clarifies that the new requirements respond to the current situation of the real estate assets of credit institutions, designed in a realistic manner to obtain a reasonable estimate of the deterioration for all portfolios of these assets, which should be recognised in accordance with the accounting framework applicable in Spain. As a result, once a certain percentage of mandatory coverage for credit institutions has been identified, companies with a portfolio of similar real estate assets should also use the recoverable amount that is inferred from the quoted percentages.

Others, on the other hand, were of the opinion that these percentages were estimated for a particular sector and that their calculation could have been influenced by the search for a solution aimed at "incentivising" these entities to carry out those assets with the aim of freeing up resources that can be allocated to the genuine business of credit institutions.

No reference has been included in the Resolution because it is considered that the above rules and, in particular, the coverage rates in the Regulation are addressed only to credit institutions, without prejudice to the fact that managers of other companies may take them as a reference when, in their view, and in the light of the economic circumstances of each particular undertaking, the necessary identity of reason is present in order to be able to apply by analogy that criteria.

The Resolution develops the criteria for the deterioration of the value of the approved assets for the exercises initiated from 1 January 2008, so in principle, as has happened with the Resolutions recently approved, in relation to these criteria, it is not necessary to establish a final standard with the date of entry into force.

However, as far as the estimate of the recoverable amount is concerned, considering the high number of clarifications contained in the standard, the impact of which, if any, should be accounted for in a forward-looking manner in the loss account and gains, in the interests of desirable legal certainty, it has been considered appropriate to establish as the date of entry into force on 1 January 2014, being of compulsory application for the exercises starting from that date and without prejudice that the criteria contained in it may be taken before that time as an appropriate guidance for estimating impairment losses.

For all of the above, as a result of the need to develop the PGC's registration and valuation rules, the PGC-SMBs and NFCAC referred to the impairment of asset value,

This Institute of Accounts and Audit of Accounts, according to the final disposition of Royal Decree 1514/2007 of 16 November, and the final provision of Royal Decree 1159/2010 of 17 September, gives the Next Resolution:

INDEX

First. Objective and scope of application.

Second. Impairment of asset value.

Third. Deterioration in the value of tangible fixed assets, real estate investments and intangible fixed assets.

1. Identification of impaired assets.

2. Recoverable amount.

2.1. General provisions.

2.2. Fair value less selling costs.

2.3. Value in use.

2.3.1. General provisions.

2.3.2. Criteria for the estimation of future cash flows.

2.3.3. Composition of the estimates of future cash flows.

2.3.4. Discount rate.

2.3.5. Current value techniques for calculating the value in use.

3. Recognition and assessment of impairment losses on the value of an asset.

4. Recognition and valuation of impairment losses on the value of cash and goodwill generating units.

4.1. Identification of the cash generating unit to which a particular asset belongs.

4.2. Recoverable amount and amount in books from a cash-generating unit.

4.3. Goodwill.

4.3.1. Distribution of goodwill to cash-generating units.

4.3.2. Checking the impairment of the value for cash-generating units with goodwill.

4.3.3. Cash-generating units in which external partners participate.

4.3.4. Periodicity of the value impairment check.

4.4. Common assets.

4.5. Impairment loss of the value of a cash generating unit.

5. Reversal of impairment losses.

5.1. General provisions.

5.2. Reversal of losses that affect individual assets.

5.3. Reversal of losses affecting cash-generating units.

5.4. Reversal of losses affecting the goodwill.

6. Information to include in memory.

6.1. Information to be included in the memory of the individual annual accounts.

6.2. Information to be included in the memory of the consolidated annual accounts.

Fourth. Deterioration of the value of financial instruments.

1. Identification of impaired financial assets.

2. Impairment of value in financial assets valued at amortised cost.

3. Impairment of value on financial assets valued at cost.

3.1. Investments in the assets of group, multigroup and associated companies.

3.2. Other financial assets valued at cost.

4. Impairment of value in financial assets measured at fair value with changes in net worth.

5. Information to include in memory.

Fifth. Impairment of stock value.

Sixth. Entry into force.

REGISTRATION AND VALUATION RULES AND INFORMATION TO INCLUDE IN MEMORY ON ASSET VALUE IMPAIRMENT

First. Objective and scope of application.

1. This Resolution develops the criteria for the deterioration of the value of tangible fixed assets, intangible fixed assets, real estate investments, financial assets and stocks, regulated in the General Accounting Plan, the General Plan of Accounting for Small and Medium Enterprises and the Rules for the Form of Consolidated Annual Accounts.

2. As a result, without prejudice to the following paragraph, this Resolution is mandatory for all undertakings, irrespective of their legal form, which should apply those rules, both in the formulation of the individual annual accounts as, where appropriate, in the drawing up of consolidated accounts.

3. For credit institutions, insurance institutions and investment firms the criteria set out in this Resolution shall have a subsidiary character.

4. Companies falling within the scope of the rules on accounting aspects of public undertakings approved by Order EHA/733/2010 of 25 March 2010 will apply this Resolution to account for the deterioration of the value of assets. cash flow generators. For non-cash flow generating assets, the special criteria approved by those rules shall follow.

5. Non-profit entities subject to the adjustment rules approved by Royal Decree 1491/2011 of 24 October 2011 will apply this Resolution to account for the deterioration in the value of cash flow generating assets. In this case, the references that are made to the "company" in this Resolution must be understood as being made to the "entity". For non-cash flow generating assets, the special criteria approved by those rules shall follow.

Second. Impairment of asset value.

1. Impairment is the estimated loss in the value of the asset that represents the difficulty of recovering, through its use, its sale or other form of disposal, the totality of its book value.

2. The recoverable amount of an asset, as an expression of the future profits or economic returns to be obtained from it, is the primary benchmark for determining the existence and the amount of the impairment.

3. An asset has deteriorated when its book value is higher than its recoverable amount, a circumstance that requires the recognition of a impairment loss in the profit and loss account and the corresponding valuation correction. For financial assets with valuation adjustments accounted for directly in equity, the impairment loss shall be accounted for by reclassifying the entire negative adjustment to the profit and loss account.

4. The use of estimates does not detract from the reliability of annual accounts. However, the company should be prudent in the estimates and valuations to be made under conditions of uncertainty. To this end, the estimates will be carried out with impartiality and objectivity, maximizing the use of observable market data and other factors that market participants would consider when fixing the recoverable amount of an asset, limiting in any possible use of subjective and non-observable or verifiable data.

5. In general, the check or test for deterioration is mandatory only where there are indications or objective evidence of the deterioration, with the exception of the regulated assumptions expressly where a periodic check is required.

6. The deterioration should be calculated as an element, unless a collective analysis is carried out in accordance with the provisions of this Resolution.

7. Without prejudice to the particular rules contained in the regulatory rules on each asset class, in general, the reversion of the impairment should be recognised as an income in the profit and loss account when the loss does not exist or decreased.

Third. Deterioration in the value of tangible fixed assets, real estate investments and intangible fixed assets.

1. Identification of impaired assets.

1. For the purposes of this third rule, the term 'active' refers to any element of tangible fixed assets, real estate investments or intangible fixed assets, but also, where appropriate, to be extended to that of a unit cash generator.

The cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the inputs produced by other assets or groups of assets.

2. At least at the end of the financial year, the undertaking shall assess whether there are indications, both internal and external, that any asset may be impaired, in which case it shall estimate its recoverable amount by making the valuation corrections that proceed.

3. The following facts and circumstances shall be considered at least when assessing whether there is any indication that the value of an asset has deteriorated:

(a) Significant changes in the technological, regulatory, legal, competitive or economic environment in general, in which the company operates during the financial year or on the market to which the asset in question is intended; which are expected to occur in the short term and have a long-term negative impact on the company.

b) Significant decrease in the fair value of the asset and higher than expected by the passage of time or normal use.

(c) During the financial year, market interest rates or other types of investment performance market have suffered increases that are likely to affect the discount rate used to calculate the value of use of the asset, so that its recoverable amount has decreased significantly.

d) The amount in books of the entity's net assets is greater than its stock market capitalization.

e) Evidence of obsolescence or physical impairment of the asset, not expected through the asset amortization system.

(f) Significant changes in the form or extent to which the asset is used or expected to be used during the financial year or expected to occur in the short term and which has a negative impact on the company.

g) There are reasonable doubts that the technical and economic performance of the asset can be maintained in the future in accordance with the forecasts that were taken into account at the date of incorporation into the company's assets.

h) Interruption of the construction of the asset prior to its operation.

i) Cese or significant reduction in the demand or need for the services provided with the asset. However, a mere downward fluctuation in demand should not necessarily constitute an indication that there has been a deterioration in the value of such an asset, as the demand or need for such services may fluctuate over time.

(j) For the case of subsidised assets or activities, the repayment of the grant.

4. This relationship of evidence is not exhaustive. The undertaking shall provide for any other indicative evidence of impairment of its assets and, where appropriate, determine the recoverable amount of the asset. In either case, events or circumstances that could have a significant impact on the recoverable value of the asset should be identified.

5. If there is any indication that the asset may be impaired, even if it is not finally to be recognised as a loss of impairment, this may indicate that the remaining useful life, the depreciation method (amortisation) or the residual value of the asset, needs to be revised and adjusted in accordance with the registration and valuation rule applicable to that asset.

6. Irrespective of any indication of deterioration of the value, the undertaking shall at least annually verify the deterioration of the goodwill, unless otherwise provided by another provision, as well as by any other intangible asset with life. For the purposes of Article 2 (1) of the basic Regulation, the amount of the amount of the sum of the amount of the sum of the assets shall be calculated. This verification shall be carried out independently of the evidence that the analysis of the signs at the end of the financial year could lead to.

The annual check referred to in the preceding paragraph may be carried out at any time during the financial year, provided that it is carried out on the same date of each financial year, without prejudice to the fact that the asset value verification may be carried out on different dates. If changes are made in the circumstances between the date of the last deterioration analysis and the date of the accounting closure, which may lead to indications of deterioration, further deterioration analysis shall be required per year.

2. Recoverable amount.

2.1 General provisions.

1. The recoverable amount of an asset is understood to be the largest of the following values:

a) The fair value of the asset deducted from its selling costs.

b) The value in use of the asset.

2. The fair value differs from the value in use. Fair value reflects the assumptions that market participants would use when setting the price of the asset. Conversely, the value in use reflects the effects of factors that may be specific to the entity and not applicable, in general, to other entities.

3. It is not always necessary to calculate at the same time the fair value of the asset minus the selling costs and their value in use. For example, it will not be required:

a) If any of those amounts exceed the book value of the asset, then it will not have deteriorated.

(b) If there is no reason to believe that the value in use of an asset significantly exceeds its fair value at least the selling costs, the value of the asset shall be treated as its recoverable amount. This will often be the case for an asset that is maintained to be alienated or to have it on the other way.

4. The recoverable amount will be calculated for an individual asset, unless it cannot be estimated. If this is the case, the recoverable amount will be determined for the cash generating unit to which the asset belongs.

5. The recoverable amount of an individual asset cannot be estimated when:

(a) The asset does not generate cash flows in favour of the company arising from its continued operation that are, to a large extent, independent of those produced by other assets; and

b) its value in use is not near to its fair value less the necessary selling costs.

6. The most recent detailed calculations, carried out in a previous financial year, of the recoverable amount of a cash-generating unit in which an intangible fixed-life fixed asset has been integrated, could be used for the purposes of the checking the deterioration of the value of that unit in the current exercise, provided that the following requirements are met:

a) The assets that make up that unit have not changed significantly since the calculation of the most recent recoverable amount;

b) the calculation of the most recent recoverable amount, resulted in an amount exceeding the amount in books of the unit by a significant margin; and

c) based on an analysis of the events that have occurred, and of the circumstances that have changed since the most recent calculation of the recoverable amount was made, the probability that the determination of the recoverable amount stream is less than the current book amount of the drive, be remote.

2.2 Reasonable value less selling costs.

1. The fair value of an asset is the amount by which the asset can be exchanged, between interested parties and duly informed parties, that perform a transaction under conditions of mutual independence.

To calculate this amount, the criteria in the Accounting General Plan Accounting Framework will apply.

2. The selling costs are the incremental costs directly attributable to the sale of an asset in which the company would not have incurred not having taken the decision to sell, excluding financial expenses and profit tax.

3. Selling costs, different from those that have already been recognised as liabilities, will be deducted when calculating the fair value minus the selling costs, such as the legal costs necessary to transfer ownership of the asset and the sales commissions, timbres and other taxes on the transaction, the costs of dismantling or moving the asset, as well as all other incremental costs to leave the asset in conditions for sale. However, severance payments and other costs associated with the reorganisation or restructuring of the business, involving the disposal of an asset, will not have the consideration of directly related incremental costs and attributable to the disposal.

4. On occasion, the disposal or disposal of an asset by another asset may imply that the buyer assumes a liability already recognised in the company's balance sheet, and the fair value of the asset, reflects this circumstance. In such cases, in order to determine the value in books of the asset in a uniform manner, the amount of the value in books of such liability shall be reduced.

2.3 Value in use.

2.3.1 General provisions.

1. The value in use of an asset is the current value of expected future cash flows, through its use in the normal course of the business and, where applicable, its disposal or other form of disposal, taking into account its current state and updated to a 'no risk' market interest rate adjusted where appropriate for the specific risks of the asset that have not adjusted the estimates of future cash flows.

2. Therefore, in determining the value in use the following elements should be considered:

a) The estimate of future cash flows that the company expects to obtain as a result of the use of the asset;

(b) expectations of possible changes in the amount or temporary distribution of such future cash flows;

(c) the time value of money, represented by the "no risk" market interest rate;

d) the price related to the inherent uncertainty in the asset; and

e) other factors, such as illiquidity, that market participants would reflect in the valuation of future cash flows that the company expects to be derived from the use of the asset.

3. Estimating the value in use for an asset involves the following steps:

(a) Estimate future cash outflows and outflows from both their continued use and their disposal or disposal by another route upon the end of the use of the asset; and

b) apply the appropriate discount rate to these future cash flows.

4. The items identified in point 2 (b), (d) and (e) may be reflected as adjustments in future cash flows, or as adjustments in the discount rate.

5. For the purposes of this rule, the 'no risk' market rate means the interest rate of lower relative risk of the economic environment where the business develops its business.

2.3.2 Criteria for estimating future cash flows.

1. To estimate cash flows, the following items should be considered:

(a) The projections of the cash flows shall be based on reasonable and substantiated assumptions, representing the best estimates of the management of the overall economic conditions to be reported over the course of the year. of the remaining shelf life of the asset. Greater weight will be given to the evidence external to the company.

(b) Cash flow projections shall be calculated in accordance with the information contained in the most recent financial type budgets or forecasts, which have been approved by management, excluding any estimation of cash inflows or outflows expected to arise from future restructurings or improvements in return on assets. Projections based on these budgets or forecasts shall cover a maximum of five years, unless the use of a longer period can be justified.

(c) The projections of cash flows after the period covered by the most recent financial type budgets or forecasts shall be calculated by extrapolating from previous projections based on such budgets or forecasts, using scenarios with a constant or decreasing rate of growth, unless the use of a growing rate in time could be justified. This type of growth shall not exceed the average long-term growth rate for industrial products or sectors, as well as for the country or countries in which the company operates and for the market in which the asset is used, unless can justify a higher rate of growth.

2. The management shall assess the reasonableness of the assumptions on which its current projections of cash flows are based, examining the causes of the differences between the projections of past and current cash flows. The management shall ensure that the assumptions on which its projections of current cash flows are based are uniform with the actual results achieved in the past, provided that the effects of subsequent events or circumstances that are not existed when such actual cash flows were generated, allow it.

2.3.3 Composition of estimates of future cash flows.

1. Estimates of future cash flows will include:

a) The projections of cash inflows from the continued use of the asset;

(b) the projections of cash outflows in which it is necessary to generate cash inflows arising from the continued use of the asset (including, where applicable, the payments that are necessary to prepare the asset for use), and may be directly attributed, or distributed on a reasonable and uniform basis, to that asset; and

(c) net cash flows which, if any, would be received (or payable) for the disposal of the asset at the end of its useful life.

2. In order to avoid duplication, estimates of future cash flows will not include:

(a) Cash inflows from assets that already generate cash inflows that are largely independent of the entries from the asset under review (e.g. financial assets such as items to be charged); and

(b) payments related to obligations that have already been recognised as liabilities (e.g. accounts payable, pensions or provisions).

Without prejudice to the foregoing, the way to estimate the net cash flows must be consistent with the criteria to be followed to identify the assets of the cash-generating unit. Therefore, when for practical reasons the book value of the cash generating unit is calculated by considering the working capital associated with it, in the estimation of cash flows, it will also be necessary to consider those that cause of their variation.

3. Estimates of future cash flows will include future cash outflows needed to maintain the level of economic benefits expected to arise from the asset in its current state. When a cash generating unit consists of assets with different estimated useful lives, all of which are essential for the operational functioning of the unit, the replacement of assets with shorter useful lives shall be considered as as part of the daily maintenance of the unit, when estimating future cash flows associated with it.

Similarly, when an individually considered asset is composed of components with different estimated useful lives, the replacement of components with shorter useful lives is considered as part of the maintenance. the asset's journal, when the future cash flows that it generates are estimated.

4. Future cash flows shall be estimated, for the asset, taking into account its current status, not being acceptable for the inclusion of future cash flows motivated by:

a) Future restructurings that the company has not committed to;

b) extending and enhancing the asset.

Future cash flows will not include cash inflows or outflows from financing activities.

In any case, estimated future cash flows will reflect assumptions that are uniform with how to determine the discount rate. Therefore, if the latter is determined before tax, the cash flows shall not include those arising from the tax on profits.

5. The estimate of net cash flows to receive (or to pay), by disposal or disposal by another means of an asset at the end of its useful life, will be the amount that the company expects to obtain for the sale of the item, in a transaction in conditions of mutual independence between interested parties and duly informed parties, after deducting the estimated costs of disposal or disposal by another means, except that, taking into account the business plan of the undertaking, it is reasonable conclude that the operating asset will be maintained until the end of its economic life.

6. Future cash flows will be estimated in the currency in which they will be generated, and will be updated using the appropriate discount rate for that currency. The company will convert the current value by applying the spot exchange rate at the date of the calculation of the value in use.

7. For the case of subsidised assets, the subsidy to be charged to the profit and loss account shall be qualified as a component plus the value in use of the asset to determine whether there is a impairment loss.

2.3.4 Discount rate.

1. The discount rate or rates to be used will be those that reflect the current market evaluations:

a) To the time value of money; and

b) to the specific risks of the asset for which the estimates of future cash flows have not been adjusted. Otherwise, the effect of some hypotheses would be taken into account twice.

2. A rate that reflects current assessments of the time value of money and the specific risks of the asset is the return that investors would demand if they chose an investment that would generate cash flows for amounts, distribution temporary and risk profile, equivalent to those that the company expects to obtain from the asset. This discount rate will be estimated from the implicit rate in current market transactions for similar assets, or as the weighted average cost of capital of a listed company that has a single asset (or a portfolio of assets). similar to the one that is being considered, in terms of service potential and supported risk. This would be an appropriate procedure for determining the discount rate for the traditional method described in paragraph 2.3.5.

3. Where the rate corresponding to a specific asset is not directly available from the market, the company will use substitutes to estimate the value in use for the purpose of performing, as best as possible, a market assessment of:

a) The time value of money, for periods that elapse to the end of the life of the asset; and

b) the factors (b), (d) and (e) described in paragraph 2.3.1. of this standard, in so far as they have not already been the cause of adjustments for the collection of estimated cash flows.

4. As a starting point for making such an estimate, the company might consider the following types:

(a) The weighted average cost of capital, determined using techniques such as the Financial Assets Price Model;

b) the incremental interest rate of loans taken by the company; and

c) other market types for loans.

However, these rates should be adjusted:

a) To reflect how the market evaluates the specific risks associated with the estimated cash flows of the assets; and

(b) to exclude risks that are not relevant to the estimated cash flows of assets, or for which estimated cash flows have already been adjusted, as is the case with the cash flow method expected from paragraph 2.3.5.

Risks such as country-risk, exchange rate risk, and price risk should be considered.

5. A company will normally use a single discount rate for the estimate of the value in use for an asset. However, the company will employ different interest rates for different future periods, provided that the value in use is sensitive to differences in risks for different periods, or to the structure of interest rate deadlines.

2.3.5 Current value techniques for calculating the value in use.

1. The techniques used to estimate future cash flows and the discount rate will vary from one situation to another, depending on the circumstances surrounding the asset in question. However, the following general principles guide any application of the current value techniques in asset measurement.

(a) Interest rates, used to discount cash flows, shall reflect assumptions that are uniform with those inherent in estimated cash flows.

b) Estimated cash flows and discount rate should be free of bias and other factors unrelated to the asset in question.

c) Estimated cash flows or discount rate should reflect the range of possible outcomes, but not the most likely outcome, nor the maximum or minimum amount possible.

2. Under the "expected cash flow approach" (b), (d) and (e) described in paragraph 2.3.1. of this standard, they are reflected as adjustments in cash flows to achieve risk-adjusted cash flows.

3. The application of the "expected cash flow approach" requires the use of probabilities to take into account all expectations of the expected cash flows, rather than a single more likely cash flow, as well. as the uncertainty that may exist in relation to the temporary distribution of cash flows.

4. The application of this approach is subject to the cost-benefit restriction. Therefore, where it is not possible to have information to allow for the development of different cash flow scenarios without incurring substantial costs, the company should apply the so-called 'traditional approach' where a single one is used. set of expected cash flows and a single discount rate, assuming that this discount rate can incorporate all expectations on future cash flows.

3. Recognition and assessment of impairment losses on the value of an asset.

1. The impairment loss of an asset, individually considered, shall be recognised in the profit and loss account, reducing the value of the asset's books to its recoverable amount.

2. Where the estimated amount of a impairment loss is greater than the carrying amount of the asset to which it relates, the company shall recognise a liability if, and only if, it is obliged to do so by another standard.

3. After the recognition of a impairment loss, the depreciation charges for the asset shall be adjusted in future years, in order to distribute the revised amount of the asset, minus its eventual residual value, from a systematic form over its remaining useful life.

4. If a impairment loss is recognised, the deferred tax assets and liabilities related to it shall also be determined by comparing the revised book amount of the asset with its tax base.

5. Compensation received from third parties, by assets which have experienced a loss due to impairment, have been lost or abandoned, shall be included in the profit and loss account of the financial year when such compensation is paid. are practically true or safe.

4. Recognition and valuation of impairment losses on the value of cash and goodwill generating units.

4.1 Identification of the cash generating unit to which a particular asset belongs.

1. The cash-generating unit of an asset is the smallest group of goods and rights that, including the quoted asset, generates cash inflows that are largely independent of the inputs produced by other assets or groups of assets. assets. If the recoverable amount of an individual asset cannot be determined, the company must identify the unit that, including it, generates cash inflows that are largely independent of those originated by other assets. The identification of the cash generating unit involves the making of judgments.

2. To identify whether cash inflows from an asset (or group of assets) are largely independent of cash inflows from other assets (or groups of assets), the company will consider different factors, including how management controls company operations (e.g., product lines, businesses, individual locations, districts or regional areas), or how management takes decisions to continue or dispose of or dispose of by another route of the company's assets and operations.

3. The existence of a market for products made by an asset or group of assets shall determine its consideration as a cash-generating unit, even if one or all of the products manufactured are used internally or transferred to a company in the group.

4. Cash-generating units shall be identified in a uniform manner from one financial year to another, and shall be made up of the same asset or types of assets, unless the reasons for the modification of the pools are justified. previously identified.

5. Where cash-generating units cannot be identified at a lower level, from the perspective of the individual annual accounts, the company as a whole shall qualify as a cash-generating unit.

4.2 recoverable amount and book amount from a cash-generating unit.

1. The recoverable amount of a cash-generating unit is the largest between the fair value minus the unit's selling costs, and its value in use.

2. The book value of a cash generating unit shall be determined in a uniform manner with the manner in which the recoverable amount of the cash-generating unit is calculated.

3. The book value of a cash-generating unit shall include the carrying amount of those assets which may be directly attributed, or distributed according to a reasonable and uniform criterion, to the same and which shall generate the future entries of cash used in the determination of its value in use. However, the book value of the recognised liabilities shall not be included for these purposes unless the recoverable amount of the cash-generating unit cannot be determined without taking into account such liabilities.

4. For practical reasons, the recoverable amount of a cash generating unit may be determined on occasion after consideration of assets that are not part of the unit itself (e.g. receivables or other assets). financial) or liabilities that have been accounted for (e.g. accounts payable). In such cases, the carrying amount of the cash-generating unit shall be increased by the carrying amount of these assets and shall be reduced by the carrying amount of the liabilities.

5. The inclusion of an asset in a cash-generating unit implies that its impairment shall be determined in accordance with the provisions of Standard 4.5, irrespective of whether its performance or contribution to the generation of cash flows is undermined. significantly. However, the individual deterioration shall occur when:

(a) Stop contributing to the cash flows of the unit to which it belongs and its recoverable amount is treated as fair value minus the selling costs or, where applicable, the asset's discharge should be recognised.

(b) In accordance with the above paragraph, the carrying amount of the cash-generating unit would have been increased by the value of assets that generate independent cash flows, provided that they exist indications that the latter may be impaired.

4.3 Trade Fund.

4.3.1 Distribution of goodwill to cash-generating units.

1. The goodwill is an asset that represents future economic benefits from other assets acquired in a business combination, which have not been individually identified and recognised separately; it is the excess, in the the acquisition date, the cost of the business combination on the value of the identifiable assets acquired minus that of the liabilities assumed.

2. For the purpose of checking the deterioration of the value, the goodwill shall be distributed, from the date of acquisition, between each of the cash-generating units of the acquiring undertaking, which is expected to benefit from the synergies of the business combination, regardless of whether other assets or liabilities of the acquired company are assigned to those units. Each unit among which the goodwill is distributed shall represent the lowest level within the enterprise to which the goodwill is controlled for internal management purposes.

The application of these requirements will lead to the verification of the impairment of the value of the goodwill to a level that reflects the way in which the entity manages its activities and with which the goodwill would be Naturally associated. Consequently, additional information systems are not required to be developed.

3. For the purposes of drawing up the consolidated annual accounts, where the goodwill is distributed to a cash-generating unit of the acquiring company itself, the determination of the possible deterioration shall be consistent with that distribution, but for the purposes of calculating the corresponding conversion difference, the goodwill shall in any event be considered as an asset of the acquired company.

4. In exceptional cases where a percentage of the goodwill cannot be distributed among the individual cash-generating units, that amount shall be allocated to the exclusive effects of the deterioration check to each individual cash-generating unit. one of them in proportion to their value in books, including in their case the part of the goodwill that has been able to be distributed.

5. If the initial distribution of the goodwill cannot be completed before the end of the year in which the purchase of the business took place, that distribution shall be carried out before the end of the first annual financial year beginning thereafter. of the date of acquisition.

6. In the event that the undertaking enjene or otherwise has an activity included in a cash-generating unit to which it has been allocated a goodwill, the goodwill associated with that activity shall:

a) It shall be included in the amount in books of the same when the result is determined from the disposal or disposal by another route; and

(b) shall be valued on the basis of the relative values of the part of the part of the part of the part of the part of the cash-generating unit which continues to be maintained, unless the undertaking can demonstrate that any other method better reflects that association.

4.3.2 Value impairment check for cash-generating units with goodwill.

1. A cash-generating unit, to which goodwill has been distributed, shall be subject to the checking of the impairment of the value on an annual basis, unless otherwise specified by another provision, and also where there are indications that the unit could have deteriorated by comparing the amount in books of the unit, including the goodwill, to the amount recoverable from the unit. If the recoverable amount of the unit exceeds its carrying amount, the unit and goodwill attributed to that unit shall be considered as non-impaired. If the book amount of the unit exceeds its recoverable amount, the company shall recognise the impairment loss.

2. At the time of checking the deterioration of the value of a cash-generating unit to which a goodwill has been distributed, there may be indications of the deterioration of the value of an asset within the unit containing the goodwill, in the cases described in paragraph 4.2.5 of this standard. In these circumstances, the entity shall check the impairment of the asset value, first, and recognise any impairment loss for that asset, before checking the impairment of the value of the cash generating unit containing the asset. goodwill.

4.3.3 Cash-generating units involving external partners.

1. For the purpose of checking the deterioration of the cash-generating units in which external partners are involved, the carrying amount of that unit shall be in theory adjusted, before being compared to its recoverable amount. This adjustment shall be made, by adding to the book amount of the trade fund allocated to the unit, the goodwill attributable to the external partners at the time of the takeover.

2. The amount in theoretically adjusted books of the cash generating unit shall be compared to its recoverable amount to determine whether that unit has deteriorated. If this is the case, the entity shall distribute the impairment loss in accordance with the provisions of paragraph 4.5 of this standard, by reducing the amount in books of the trade fund allocated to the unit in the first place.

3. However, because the goodwill is recognised only up to the limit of the share of the parent at the date of acquisition, any impairment loss related to the goodwill will be divided between the the dominant and the one assigned to the external partners, but only the first one will be recognised as a loss of goodwill impairment.

4. If the impairment loss of the cash generating unit exceeds the amount of the goodwill, including the theoretically adjusted amount, the difference shall be allocated to the other assets of the same as provided for in paragraph 4.5.

5. The resulting impairment loss shall be attributed to the companies of the group and, where appropriate, to the external partners, in accordance with point (d) of paragraph 1 of Article 29 of the Rules for the Forms of Annual Accounts Consolidated.

4.3.4 Periods of the value impairment check.

1. The annual verification of the impairment of the value for a cash generating unit to which a goodwill has been distributed shall be made at any time during an annual period, provided that each financial year is carried out on the same date. and there are no indications, prior to that date, that the unit may have deteriorated.

2. The deterioration check for each of the different cash generating units may be performed on different dates.

However, if all or any of the trade funds attributed to a cash-generating unit had been acquired in a business combination during the current annual financial year, the deterioration of the business will be verified. value of this unit before the end of the current annual financial year, except that the distribution of the goodwill between the different cash generating units would not have been completed at the end of the financial year. In such a case, at the end of the financial year, the deterioration check or test shall be carried out with a provisional allocation of the goodwill, provided that there are indications of deterioration, which will subsequently be reviewed retroactively before end the deadline to complete the distribution.

3. The most recent detailed calculations, carried out in a previous year, of the recoverable amount of a cash-generating unit to which goodwill has been distributed, could be used for the verification of the deterioration of the value of the that unit in the current year, provided that the requirements listed in paragraph 6 of paragraph 2.1 of this standard are met.

4.4 Common Assets.

1. The distinguishing features of the common assets, such as the buildings of the headquarters and the data processing center, are that they do not generate independent cash inflows from other assets or groups of assets, and that their value in books cannot be entirely attributed to the cash generating unit whose deterioration is being analysed.

2. In these circumstances, the recoverable value of an individual common asset cannot be calculated unless the management has decided on its disposal, so if there is any indication that the common asset may require the carrying out of valuation corrections shall be analysed in the context of the cash-generating unit to which it can be assigned in a reliable manner. Any impairment loss of the value shall be recognised in accordance with the content of this Resolution.

3. As part of the process of analyzing the loss of the value of the cash generating units, the company will identify all the common assets that relate to that unit. In cases where a part of the book value of a common asset:

a) Pueda be attributed to a cash generating unit, the company will compare the value in books of the unit, including the part of the book value of the common assets, with its recoverable value. Any impairment loss will be recognized in accordance with the content of this Resolution.

(b) Cannot be attributed, the company shall allocate that amount, to the exclusive effects of the impairment check, to each of the company's cash-generating units in proportion to its value in books, including the case of the part of the goodwill and of the common assets which it has been able to distribute. Any impairment loss will be recognized in accordance with the content of this Resolution.

4.5 Loss of impairment of the value of a cash-generating unit.

1. A impairment loss of the value of a cash generating unit shall be recognised if, and only if, its recoverable amount is less than the amount in books of the unit. The impairment loss of the value will be distributed, to reduce the amount in books of the assets that make up the unit, in the following order:

a) First, the carrying amount of any trade fund distributed to the cash-generating unit shall be reduced; and

b) then the other assets in the unit, prorating based on the in-book amount of each of the assets in the unit.

These book amount reductions will be treated as impairment losses on the value of individual assets.

2. When distributing a impairment loss as set out in the preceding paragraph, the company will not reduce the carrying amount of an asset below the highest value of the following:

a) Its fair value minus the selling costs (if it could be determined);

b) its value in use (if it could be determined); and

c) zero.

The amount of impairment loss that cannot be distributed to the asset in question will be apportioned among the other assets that make up the unit.

3. After the application of the requirements of paragraphs 1 and 2 of this paragraph, a liability shall be recognised for any remaining amount of a impairment loss on the value of a cash-generating unit if, and only if, it was required by another. rule.

5. Reversal of impairment losses.

5.1 General provisions.

1. At least at the end of the financial year, it shall be assessed whether there is any indication that the impairment loss of the recognised value, in previous years, for an asset other than the goodwill, no longer exists or may have decreased. If such an indication exists, the company will again estimate the recoverable amount of the asset.

2. When assessing whether there are indications that the impairment loss, recognised in previous years for an asset other than the goodwill, no longer exists or could have decreased in value, the company shall consider at least the loss of following facts and circumstances:

a) During the exercise, they have had, or are to take place in the short term, significant changes with a favorable effect for the company in the long term, concerning the technological, regulatory, legal, competitive or economic environment in general in which the activity is carried out, or on the market to which the asset in question is intended.

b) During the exercise, the fair value of the asset has increased significantly.

(c) During the financial year, market interest rates or other types of investment performance market have experienced decreases likely to affect the discount rate used to calculate the value in use of the active, so that its recoverable amount has increased significantly.

d) Significant changes with a favorable effect for the company, occurring during the exercise or expected to occur in the short term, in the form or extent in which the asset is used or expected to be used. These changes include the costs incurred during the exercise to improve or develop the performance of the asset or restructure the activity to which the asset belongs.

e) Evidence is available from internal reports indicating that the technical or economic performance of the asset is, or is going to be, better than expected.

f) Significant increase in demand or need for services provided with the asset. However, a mere upward fluctuation in demand should not necessarily constitute an indication that there has been a reversal of the deterioration in the value of such an asset, since the demand or need for such services may fluctuate over time. time.

3. Impairment corrections recognised in previous periods for an asset, other than goodwill, may be reversed if, and only if, a change in the estimates used has occurred to determine the value of the asset. recoverable amount of the same, since the last impairment loss was recognised. If this is the case, the carrying amount of the asset will be increased until it reaches its recoverable amount, once the limitations referred to below are addressed.

5.2 Reversal of losses affecting individual assets.

1. The book value of an asset, other than the goodwill, increased after the reversal of a impairment loss, shall not exceed the value in books that may have been obtained (net of amortisation) if the asset was not recognised. loss due to deterioration in previous periods. The reversions will be recognized as an income in the profit and loss account.

2. Asset amortization charges will be adjusted in future accounting periods, in order to distribute the revised book amount of the asset minus its eventual residual value, in a systematic manner over its remaining useful life.

5.3 Reversal of losses affecting cash-generating units.

1. The amount of the reversal of a impairment loss on a cash-generating unit shall be distributed among the assets of that unit, with the exception of the goodwill, in proportion to the book value of the assets that are part of the unit. Member of the Commission. The reversal of these valuation corrections shall be made by applying the same criteria as mentioned in the case of individual assets.

2. The in-book value of each asset in the cash-generating unit must not be increased above the lower of the following:

a) Your recoverable amount (if it could be determined); and

(b) the amount in books (net of depreciation or depreciation) that would have been determined if the impairment loss of the asset value was not recognised in earlier periods.

The amount of the reversion of the impairment loss that cannot be distributed to the assets in accordance with the above criterion, will be prorated among the other assets that make up the unit, except for the trade.

5.4 Reversal of losses affecting the goodwill.

Impairment losses recognized in the goodwill shall not be reversed in subsequent periods.

6. Information to include in memory.

6.1 Information to include in the memory of individual annual accounts.

1. The company will disclose, for each asset class, the following information:

(a) The amount of impairment losses recognised in the result of the financial year, as well as the item (s) of the profit and loss account in which such losses due to impairment of the value are included.

(b) The amount of the reversions of the impairment losses recognised in the result of the financial year, as well as the item or items in the profit and loss account in which such reversions are included.

2. An asset class is a group of assets that have similar nature and use in the company's activities.

3. The company shall disclose the following information, for each impairment loss or its reversal, of a significant amount, which have been recognised during the financial year for an individual asset, including goodwill, or for an individual asset. cash-generating unit:

a) The events and circumstances that have led to the recognition or reversal of impairment loss;

b) the amount of impairment loss of the recognized or reversed value;

c) for each individual asset, the nature of the asset; and

d) for each cash generating unit:

d.1) A description of the cash-generating unit (for example, whether it is a product line, a factory, a business operation, or a geographic area);

d.2) the amount of impairment loss of the value recognized or reversed in the financial year, for each asset class; and

d.3) if asset aggregation, to identify the cash generating unit, has changed since the previous estimate of the recoverable amount of the cash generating unit (if any), a description of the and the current to perform the grouping, as well as the reasons to modify the way to identify the unit in question.

e) The recoverable amount of the impaired asset (or, where applicable, the cash-generating unit), indicating whether the recoverable amount of the asset (or, where applicable, the cash-generating unit) is the fair value less selling costs or their value in use.

f) In the event that the recoverable amount is the fair value minus the selling costs, the company must include the following information:

f.1) For those calculations of fair value that have not been obtained from quoted prices on an active market, the description of the valuation techniques used for the calculation of the fair value minus the costs For sale. If any changes have been made to the valuation techniques, the company must report on these changes and the reasons why they have been made;

f.2) for those calculations of fair value that have not been obtained from quoted prices on an active market, each key scenario on which the management has based the calculation of the fair value less shall be reported. the selling costs. The key assumptions are those to which the recoverable amount of the asset (or the cash-generating unit) is more sensitive, and include the discount rate or rates used in the present valuation and the previous valuations, if any calculated the fair value minus the selling costs using the current value method.

g) In the event that the recoverable amount is the value in use, the discount rate or rates used in the current estimates and in those previously (if any) of the value in use, a description of the key assumptions on which the cash flow projections have been based and how their values have been determined, the period covered by the projection of cash flows and the growth rate of cash flows from the fifth year onwards.

4. The company shall disclose the following information for all losses due to impairment of the value and reversions thereof, recognised during the financial year for which no information has been disclosed in accordance with the paragraph previous third party:

(a) Major classes of assets affected by impairment losses, and major asset classes affected by reversions of impairment losses.

b) The main events and circumstances that have led to the recognition of these impairment losses and the reversions of the impairment losses.

5. If, at the end of the financial year, some part of the goodwill acquired in a business combination during the financial year has not been distributed to any cash-generating unit, the amount of the goodwill shall be disclosed. distributed as the reasons why that excess amount was not distributed.

6. The company shall disclose the information required in the following letters for each cash-generating unit for which the amount in books of the goodwill or intangible immobilised with indefinite useful life, which has been distributed to that unit, be significant in comparison to the total book amount of goodwill or intangible assets with undefined useful life of the company:

a) The amount in books from the distributed goodwill to the unit.

b) The amount in books of intangible assets with indefinite or ongoing useful lives distributed to the unit.

c) The basis on which the recoverable amount of the unit has been determined (i.e. value in use or fair value minus selling costs).

d) If the recoverable amount of the drive was based on the value in use:

d.1) A description of each key hypothesis on which the management has based its cash flow projections for the period covered by the most recent budgets or forecasts. Key assumptions are those that the recoverable amount of the units is most sensitive to.

d.2) A description of the approach used by the management to determine the value or values assigned to each key hypothesis; as well as whether these values reflect past experience or, if applicable, whether they are uniform with the sources external information and, if they were not, as and because they differ from past experience or external sources of information.

d.3) The period over which the management has projected cash flows based on guidance approved by the management and, where a period of more than five years is used for a generating unit of cash, an explanation of the causes that justify that longer period.

d.4) The growth rate used to extrapolate cash flow projections beyond the period covered by the most recent budgets or forecasts, as well as the relevant justification if used a growth rate that exceeds the average long-term growth rate for products, industries, or for the country or countries in which the company operates, or for the market to which the unit is engaged.

d.5) The discount rate or rates applied to cash flow projections.

e) If the recoverable amount of the unit was based on the fair value minus the selling costs, the methodology used to determine the fair value minus the selling costs. If the fair value minus the selling costs had not been determined using an observable market price for the unit, the following information shall also be disclosed:

e.1) A description of each key scenario on which the management would have based its determination of fair value minus selling costs. Key assumptions are those that the recoverable amount of the units is most sensitive to.

e.2) A description of the approach used by management to determine the value (or values) assigned to each key scenario, whether those values reflect past experience or, if applicable, whether they are consistent with the external information and, if they are not, as and because they differ from past experience or external sources of information.

If the fair value minus the selling costs is determined using discounted cash flow projections, the following information shall also be disclosed:

e.3) The period in which the address has projected the cash flows.

e.4) The growth rate used to extrapolate cash flow projections.

e.5) The discount rate or rates applied to cash flow projections.

f) If a reasonably possible change in a key scenario, on which the management has based the determination of the recoverable amount of the unit, suppose that the amount in books of the unit exceeded its amount recoverable:

f.1) The amount by which the recoverable amount of the unit exceeds its amount in books.

f.2) The value assigned to the or key hypotheses.

f.3) The amount by which the value or values assigned to the key hypothesis must be changed so that, after incorporating the recoverable value, all effects resulting from that change on other variables used to measure the recoverable amount, that recoverable amount of the unit is matched to its in-book amount.

Otherwise, it should be expressly stated that there is no reasonably possible change to the record of a deterioration in value.

7. If all or part of the amount in books of the goodwill, or intangible assets with induseable useful lives, has been distributed among multiple cash-generating units, and the amount thus attributed to each unit is not significant compared to the total book amount of the goodwill or intangible assets with indefinite useful life of the company, that fact shall be disclosed together with the sum of the amount in books of the goodwill or assets intangibles with undefined useful lives attributed to such units.

In addition, if the recoverable amount of any of those units is based on the same key assumptions and the sum of the amounts in goodwill books or intangible assets with undefined useful lives distributed between those units would be significant compared to the amount in total books of the goodwill or intangible assets with indefinite lives of the company, this will reveal this fact, along with:

a) The sum of the in-book amount of the distributed goodwill between those units.

b) The sum of the in-book amount of intangible assets with undefined useful lives distributed among those units.

c) A description of the key hypotheses.

d) A description of the approach used by the management to determine the value or values assigned to each key scenario; as well as whether these values reflect past experience or, where appropriate, whether they are uniform with the external information and, if not, how and because they differ from past experience or external sources of information.

e) If a reasonably possible change in a key hypothesis, upon which the address has based its determination of the recoverable amount of the unit, suppose that the amount in books of the unit exceeded its amount recoverable:

e.1) The amount by which the recoverable amount of the unit exceeds its amount in books.

e.2) The value assigned to the or key hypotheses.

e.3) The amount by which the value or values assigned to the key hypothesis must be changed so that, after incorporating all the effects resulting from that change into the recoverable value on other variables used to measure the recoverable amount, the recoverable amount of the unit is matched to its amount in books.

6.2 Information to be included in the memory of consolidated annual accounts.

In the consolidated annual accounts, in addition to reporting in the terms required in paragraph 6.1 above, the following requirements must be met if the company provides segmented information for each segment:

(a) The amount of impairment losses recognised during the financial year.

(b) The amount corresponding to the reversions of impairment losses, recognised during the financial year.

(c) In respect of the one requested in point 3.c) of paragraph 6.1), the main segment to which the individual asset belongs shall also be indicated.

(d) Respect to the one requested in point 3.d) of paragraph 6.1), it shall be reported if the cash-generating unit constitutes an information segment of the undertaking as well as the amount of impairment loss of the recognised value or reverted in the exercise for each main segment of information.

Fourth. Impairment of the value of financial assets.

1. Identification of impaired financial assets.

1. For the purposes of this fourth standard, the term financial asset refers to any element qualified as such in accordance with the definitions included in the General Accounting Plan and in the General Plan of Small Accounting and Medias Enterprises, but should also be understood as extensive to a group of financial assets with the same risk characteristics as collectively assessed.

2. A financial asset has deteriorated when its book value is higher than its recoverable amount, which requires the recognition of a impairment loss and the corresponding valuation correction.

3. At least at the close of the financial year, the company will assess whether there is objective evidence that a financial asset has deteriorated.

4. In particular, a financial asset will be impaired as a result of one or more events that have occurred after the initial recognition of the asset and that event or events causing the loss have a negative impact on the estimated future cash from the financial asset that can be measured reliably.

5. It might not be possible to identify a single event that individually is the cause of the deterioration. Thus, the deterioration could have been caused by the combined effect of various events. In any event, the methodology used in the estimation of impairment losses should take into account that the deterioration is inherent in any portfolio of financial assets, being clearly influenced by the evolution of the cycles. economic.

6. The objective evidence that an asset or group of assets are impaired includes, among others, observable data, which claim the attention of the holder of the asset on the following events causing the loss:

a) Significant financial difficulties of the issuer or the obligor;

(b) breaches of contractual clauses, such as defaults or delays in the payment of interest or principal;

(c) the creditor, for economic or legal reasons relating to financial difficulties of the debtor, grants him advantages which he otherwise would not have granted;

(d) it is increasingly likely that the debtor will enter into a bankruptcy situation or any other financial reorganization situation;

e) the disappearance of an active market for the asset in question, due to financial difficulties; or

f) observable data indicate that there is a decrease in future estimated cash flows in a group of financial assets from initial recognition of those, although the decrease may not yet be identified with individual financial assets of the group, including among such data:

f.1) Adverse changes in the payment terms of the group's debtors (for example, an increasing number of payment delays or a growing number of credit card customers who have reached their credit limit) and are paying the minimum monthly amount); or

f.2) local or national economic conditions that correlate with defaults on group assets (e.g. an increase in the rate of unemployment in the geographic area of debtors, a decrease in the price of properties mortgaged in the relevant area, a decrease in the prices of a given product for the credits granted to its producers, or adverse changes in the conditions of the sector affecting the group's debtors.)

7. For the case of financial assets valued at amortised cost, objective evidence of impairment shall be determined:

a) Individual for all debt instruments that are significant.

b) Individual or collectively for groups of debt instruments that are not individually significant. The collective estimate of losses is considered appropriate, among other assumptions, when the instruments have amounts due in similar seniority.

8. In particular, the company should analyse the possible deterioration of the investment in the assets of the group, multi-group and associated companies, and equity instruments that are valued at cost, when it recognises a dividend from the asset financial and there is evidence that:

(a) The amount in books of the investment exceeds the book value of the company's net assets, including, where applicable, the associated goodwill, in the consolidated annual accounts; or

b) the dividend exceeds the total result of the dependent, multi-group company or associated in the year in which it has been agreed.

9. The following assumptions do not constitute objective evidence of deterioration on their own, although indications are:

a) The disappearance of an active market, because the financial instruments of a company are not going to be listed anymore.

b) The downgrade in the company's credit rating, when considered in conjunction with other available information.

(c) A decrease in the fair value of the financial asset below its cost or amortised cost (e.g. a decrease in the fair value of a debt instrument as a result of an increase in the interest rate) risk-free).

10. In addition to the classes of events referred to in paragraph 6 of this paragraph, in the analysis of the deterioration for an investment in an equity instrument, information on significant changes which, with an effect, will be considered among other indications. adverse events have taken place in the technological, market, economic or legal environment in which the issuer operates, and shall indicate that the cost of the investment in the equity instrument may not be recoverable. A prolonged or significant decline in the fair value of an investment in an equity instrument below its cost is also an objective evidence of impairment of value.

11. In particular, for the case of investment in financial assets measured at fair value with changes in equity, there is a presumption that there is objective evidence of deterioration when the decline occurs in a prolonged period of one year and (a) whether the share price in an active market falls by 40%, without prejudice to the fact that it may be necessary to recognise a deterioration loss before the expiry of that period or the reduction of the quotation in the above mentioned percentage.

However, in those cases where the fair value of the stock occurs with a subsequent recovery of the share above the reference price, the year and a half will start to compute from the date on which, after such recovery, the quoted price starts to decrease again in a prolonged manner, unless the recovery of fair value would have been an isolated and insignificant event, in which case the year and a half will be computed from the first decrease. This same criterion will be applicable in order to assess whether there has been a decrease in the quoted price of forty per cent. For these purposes, the initial valuation of the asset, or the weighted average value of homogeneous groups, is understood by reference price, in the event that several acquisitions have occurred.

12. At times, the observable data required to estimate the amount of impairment loss of a financial asset may be very limited or no longer relevant. This may be the case, for example, where a customer is in financial difficulty and there is limited historical data available for similar debtors. In such cases, the company shall use its expert and prudent judgment to estimate the amount of impairment losses incurred in an asset or group of financial assets.

13. Where the estimated losses of a financial asset are within a range of amounts, the best estimate may be chosen within the range, taking into account all relevant information available in the formulation of the annual accounts on the existing conditions on the closing date.

2. Impairment of value in financial assets valued at amortised cost.

1. As a general rule, the amortised cost of credit for commercial transactions (customers and miscellaneous debtors) arising from the sale of goods and the provision of services by the company's traffic operations is valued at amortised cost. Also follow this criterion of valuation after the financial assets which, not being equity instruments or derivatives, generate cash flows of determined or determinable amount. That is to say, it includes credits other than commercial traffic, company notes, bonds, bonds and other debt securities (as long as they are non-coticen), deposits with credit institutions and forward impositions, advances and credit to staff, securities and deposits constituted, credit for the disposal of fixed assets, dividends to be paid and disbursements required on equity instruments.

The investments included in the category of investments held to maturity, i.e. the debt securities, with a fixed maturity date and the amount of the amount, are also valued at amortised cost. determined (such as a fixed interest coupon) or determinable (such as an indexed coupon at a variable interest rate), that are traded on an active market and that the company has the capacity and the effective intention to keep them up to maturity. As a result, the provisions of this paragraph would also apply to bonds, obligations and company notes, or issued by other entities, admitted to trading on active markets.

If the Company applies the General Small and Medium Business Accounting Plan, bonds, bonds, and other debt securities admitted to trading shall also be included in this category, provided that they do not classify as financial assets held to negotiate.

2. If there is objective evidence of a impairment loss on assets valued at amortised cost, the amount of the valuation correction shall be the difference between the carrying amount of the asset and the current value of the cash flows. future estimates.

3. The estimated future cash flows of a debt instrument are all amounts, principal and interest, which the company estimates it will obtain during the life of the instrument. All relevant information that is available on the date of the formulation of the annual accounts shall be considered in its estimation, providing data on the possibility of future collection of contractual cash flows.

When the instruments have real guarantees, they will include the flows that would be obtained from their realization, minus the amount of the costs necessary for their obtaining and subsequent sale, regardless of the probability of the execution of the guarantee.

4. In the calculation of the current value of the estimated future cash flows, the original effective interest rate of the financial asset (i.e. the effective interest rate calculated at the time of the financial asset) shall be used as the discount rate. initial recognition), if the contractual rate is fixed.

In financial assets at the variable interest rate, the effective interest rate corresponding to the closing date of the annual accounts shall be taken in accordance with the contractual terms.

5. Where the terms of the debt instruments are renegotiated or modified due to financial difficulties of the debtor, the effective interest rate shall be used before the contract is modified.

6. In the event that the debtor is declared as a creditor, the company will continue to recognize the relevant interests, and, if necessary, account for the appropriate deterioration until a settlement is reached or declared the opening of the settlement phase.

7. The discount of cash flows does not need to be made when its quantitative impact is not material. In particular, where the time limit for the collection of cash flows is 12 months or less.

8. For listed instruments, as a substitute for the current value of future cash flows, the market value of the instrument may be used, provided that the instrument is sufficiently reliable to be representative of the value of the instrument. could retrieve the company.

9. Where the undertaking considers the deterioration of the value of commercial operations collectively or globally, it shall be presumed, unless otherwise proved, that it shall have to close the financial year with a percentage of coverage of 3% of the total amount of the balances with customers, who are, where appropriate, minorated in the recoverable amount of guarantees which would have been in favour of the undertaking. Balances with public administrations and those for which an individual analysis of the impairment of value would have been carried out shall not be included in the calculation basis of that coverage.

10. The resulting impairment loss shall be recognised in the profit and loss account.

11. If, in subsequent periods, the amount of the impairment loss decreases, the previously recognised impairment loss shall be reversed. The reversal shall not result in a carrying amount of the financial asset that exceeds the amortised cost that would have been recognised on the date of reversal if the impairment loss was not accounted for. The amount of the reversal shall be recognised in the profit and loss account.

3. Impairment of value on financial assets valued at cost.

3.1 Investment in the assets of group, multigroup and associated companies.

1. If there is objective evidence that a loss of value impairment has been incurred in the equity investments of the group, multi-group and associated companies, the amount of the valuation correction shall be the difference between its value in books and the recoverable amount, understood as the highest amount between their fair value minus the selling costs and the current value of the future cash flows arising from the investment, obtained from any of the following procedures:

(a) By estimating those expected to be received as a result of the dividend distribution by the investee and the disposal or reduction in investment accounts in the investee, or;

b) by estimating its share in the cash flows that are expected to be generated by the investee company, from both its ordinary activities and its disposal or discharge into accounts.

2. To calculate the impairment of the value of these investments, the criteria set out in the third standard of this Resolution shall apply, and the rules set out in the following paragraphs of this paragraph 3.1.

3. Except for better evidence of the recoverable amount of investments, in the estimation of the impairment of this asset class, the net worth of the investee will be taken into consideration, as corrected by the existing tacit capital gains. of the valuation. In determining that value, and provided that the participating undertaking participates in another, the net worth resulting from the consolidated annual accounts drawn up in accordance with the criteria included in the Code shall be taken into account. Trade and its implementing rules. In the event that the above accounts are not formulated, under any of the reasons for waiver provided for in the consolidation rules, the individual accounts shall be taken.

4. The indirect method of estimating from net worth is useful in cases where it can be used to demonstrate a minimum recoverable value without the need for a more complex analysis when it follows that there is no deterioration.

The capital gains to be considered, to the extent that the objective is to estimate the recoverable amount of the investment, also include the goodwill (which could be negative), and any other unspoken capital gains at the time in which the valuation is performed, net of the tax effect.

When the functional currency of the investee is different from the euro, to obtain the amount recoverable by the indirect method, to the equity of the investee, calculated in accordance with the criteria of the plan General Accounting and its implementing rules, and the tacit gains existing at the valuation date, shall be applied to the closing exchange rate.

However, if it were foreign companies that are affected by high inflation rates, the values to be considered will be those resulting from the adjusted financial statements, prior to their conversion, from agreement with the criteria included on "Adjustments for high inflation rates" in the Standards for the Formulation of the Consolidated Annual Accounts, which are developed by the Commercial Code.

5. In the event that an investment in the company had occurred, prior to its qualification as a group, multi-group or associated company, and prior to that qualification, value adjustments were made directly to the company. Net worth arising from such investment, such adjustments shall be maintained after the rating of the investment, at which time the profit and loss account is recorded, or until the following changes are made. circumstances:

(a) In the case of prior value adjustments for value increases, the impairment valuation corrections shall be recorded against the item of net worth to collect the value adjustments previously made up to the the amount of the same and the excess, where applicable, shall be recorded in the profit and loss account. The impairment valuation correction directly attributed to the net worth shall not revert.

(b) In the case of prior value adjustments for value reductions, where the recoverable amount is later higher than the accounting value of the investments, the latter shall be increased, up to the limit of the indicated value. value reduction, against the item that has collected the previous valuation adjustments and from that point on the new amount raised shall be considered as the cost of the investment. However, where there is objective evidence of impairment in the value of the investment, losses accumulated directly in equity shall be recognised in the profit and loss account.

6. If the participating undertaking agrees to a reduction in capital to compensate for losses and a simultaneous increase in capital, the investor shall not discharge the valuation correction which, if appropriate, would have accounted for, without thereby undermining the the purchase price of the investment, unless the situation of the participating company raises substantial doubts as to the application of the operating company principle, or where a difference arises between the percentage previously held and after the corporate operation.

7. The impairment valuation corrections and, where applicable, their reversal, shall be recorded as an expense or income, respectively, in the profit and loss account. The reversion of the impairment shall be limited to the value in books of the investment that would be recognized on the date of reversal if the impairment of the value had not been recorded.

3.2 Other financial assets valued at cost.

1. In the case of equity instruments which are valued at the cost, because their fair value cannot be reliably determined, the impairment valuation correction shall be calculated in accordance with the provisions of the previous paragraph relating to the investments in the assets of the group, multigroup and associated companies.

2. Impairment losses recognised in previous financial years shall not be reversed for accounting purposes unless the company applies the General Plan of Small and Medium Enterprises Accounting, in which case the reversal shall be recognised as an income in the profit and loss account.

3. In addition, if the company applies the General Plan of Accounting for Small and Medium-sized Enterprises, unless otherwise proved, the price quoted in an active market is the best estimate of the recoverable amount of the investments in equity instruments, other than investments in group, multi-group or associated companies. In particular, this criterion shall apply to investments in shares or units of collective investment institutions.

4. Impairment of value in financial assets measured at fair value with changes in net worth.

1. Financial assets included in the category of available for sale are valued at fair value through changes in the net worth, including, among others, other than their incorporation into another category: investments in equity instruments of other undertakings, such as shares or units in collective investment institutions, in addition to the representative debt securities such as bonds, bonds and company notes, or issued by other undertakings entities, which are listed on an active market and do not meet the requirements for inclusion in the category of investments held to maturity.

2. Where there is objective evidence of impairment, the value correction for these assets shall be calculated by difference between their cost or amortised cost less, if any, any impairment value correction previously recognised in the account losses and gains and fair value at the time the valuation is carried out.

3. A quoted price on an active market provides the most reliable evidence on fair value and must be used unadjusted to assess fair value whenever available.

4. Accumulated losses recognised in the net worth by a decrease in fair value, provided that there is objective evidence of impairment in the value of the asset, shall be recognised in the profit and loss account.

5. If the fair value is increased in subsequent years, the valuation correction recognised in previous years shall revert to the profit and loss account of the financial year, except in the case of equity instruments, the value increase shall be directly accounted for in net worth.

6. As a result, for equity instruments, impairment losses result in a new purchase price of the financial asset that will be the one to be taken as a benchmark in the future to account for a new asset. impairment loss by applying the criteria set out in this standard.

5. Information to include in memory.

1. The information to be included in the memory of the individual and consolidated annual accounts must be provided by classes of financial assets, for which the nature of the same and the categories set out in the standard of recording and valuation of the financial instruments of the General Accounting Plan, or the standard of recording and valuation of the financial assets of the General Plan of Small and Medium-sized Enterprises, respectively.

2. The company will report on the criteria applied to determine the existence of objective evidence of deterioration, as well as the record of the value correction and its reversal and the definitive decline of impaired financial assets. In particular, the criteria used to calculate the valuation corrections relating to commercial debtors and other receivables shall be highlighted. The accounting criteria applied to financial assets whose conditions have been renegotiated and which otherwise would be due or impaired shall also be indicated.

3. For each class of financial assets, it shall be reported from those whose impairment has been determined individually, including the factors that the company has considered in the calculation of the valuation correction, and a reconciliation of the changes in the value corrective account during the exercise.

4. For investments in group, multi-group and associated companies, information on the amount of impairment valuation corrections recorded in the different units shall be detailed, differentiating those recognised in the financial year. of the accumulated. It shall also be reported, where appropriate, on the amounts of impairment valuation corrections charged against the item of net worth to collect the valuation adjustments.

Fifth. Impairment of stock value.

1. Where the net realisable value of the stock is lower than its purchase price or production cost, the appropriate valuation corrections shall be made by recognizing them as an expense in the profit and loss account.

2. The net realisable value is the amount that the company expects to obtain for its disposal on the market, in the normal course of the business, by deducting the estimated costs necessary to carry it out, as well as, in the case of raw materials and products in progress, the estimated costs necessary to complete their production, construction or manufacturing. Accordingly, to estimate this amount, the fair value is the best benchmark.

The difference that may exist between the two concepts is that the former responds to specific factors of the company, fundamentally, to its ability to impose sales prices above or below the market, to assume different risks, or by incurring production or marketing costs other than those of the generality of the companies in the sector.

3. Goods and services which have been the subject of a contract for the sale or supply of services on a firm basis, the fulfilment of which must subsequently take place, shall not be the subject of a valuation correction, provided that the selling price stipulated in that contract covers at least the purchase price or the cost of production of such goods and services, plus all the costs to be incurred for the performance of the contract.

4. In accordance with the above, the company will not correct the value of the raw materials provided that it expects the finished products to be sold above the cost and the corresponding marketing costs.

Where a valuation correction is to be made, that is, in the event that the value in books is not expected to be recovered, the replacement price of the raw materials, unless otherwise proved, is the best available measure of its realizable net value.

However, when it is not going to continue with the manufacture of the product of which the raw materials are part or are not to be used in the production process, the net realisable value of the raw materials will be the the amount that can be obtained by its disposal on the market, by deducting the estimated sales costs necessary to carry it out, if the latter amount is less than the replacement price.

5. The analysis of the deterioration shall be carried out for each of the stock categories. In the case of stocks of services, the deterioration shall be analysed for each of the services with an independent benefit price.

6. The assumptions used to calculate the possible impairment loss should be reasonable, realistic and based on criteria that have a proven empirical basis. In particular, particular attention should be paid to verifying that the business plan used by the company to make its estimates is in line with the market reality and the specificities of the company.

7. If the circumstances that caused the value of the stock to be corrected have ceased to exist, the amount of the valuation correction shall be reversed by recognizing an income in the profit and loss account.

8. In the memory of the individual and consolidated annual accounts, the valuation criteria shall be specified in respect of valuation corrections for the deterioration of stocks, as well as the amount of such corrections and, where appropriate, the reversal of the which has been accounted for. In addition, the circumstances or events that have produced each impairment loss or its reversal shall be broken down.

In cases where the fair value of stocks is lower than the net realisable value, all significant information that justifies the difference between the two amounts should be included in the memory.

When the net realisable value is less than the fair value, the company shall account for a impairment loss if the net realisable value is less than the book value of the stock. In these cases, all significant information on the criterion applied and the circumstances that have motivated the value correction should also be included in the memory.

Sixth. Entry into force.

This Resolution shall enter into force on 1 January 2014 and shall apply for the exercises starting from that date.

Madrid, 18 September 2013.

The President of the Accounting and Audit Institute,

Ana M. ª Martínez-Pina García