The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standard Board (IASB), which have been applied consistently in the years presented.
The consolidated financial statements have been prepared on a historical basis, as modified by the subsequent valuation of financial assets and financial liabilities (including derivative instruments) at fair value.
The preparation of the Consolidated Financial Statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires that management uses its professional judgment in the process of applying the Company’s accounting policies. See Note 3 for disclosure of significant accounting estimates and judgments.
All IFRS standards, amendments and enhancements whose adoption was required by January 1, 2017, have been adopted by the Company, without significant impacts on the financial statements as of December 31, 2017.
At the date of issuance of these consolidated financial statements the following Standards, Amendments, Improvements and Interpretations to existing IFRS standards have been published to existing standards that have not taken effect and that the Company has not adopted in advance or when applied corresponds.
These standards are required to be applied by the following dates:
| New Standards, Improvements, Amendments and Interpretations | | Mandatory for years beginning in: |
| Amendments to IFRS 2 | | Classification and Measurement of Share-based Payment Transactions. | | January, 1, 2018 |
| IFRIC Interpretation 22 | | Foreign Currency Transactions and Advance Consideration. | | January, 1, 2018 |
| Amendments to IAS 40 | | Transfers of Investment Property. | | January, 1, 2018 |
| Improvement to IAS 28 | | Investment in Associates and Joint Ventures: Measuring an associate or joint venture at fair value. | | January, 1, 2018 |
| IFRS 9 | | Financial Instruments. | | January, 1, 2018 |
| IFRS 15 | | Revenue fro Contracts with Customers. | | January, 1, 2018 |
| Amendments to IFRS 15 | | Clarifications to IFRS 15 Revenue fro Contracts with Customers. | | January, 1, 2018 |
| IFRS 16 | | Leases. | | January, 1, 2019 |
| IFRC 23 | | Uncertainty over Income Tax Treatments. | | January, 1, 2019 |
| Amendments to IFRS 9 | | Financial Instruments. | | January, 1, 2019 |
| Amendments to IAS 28 | | Investment in Associates and Joint Ventures | | January, 1, 2019 |
| Amendments to IFRS 3 | | Business combination. | | January, 1, 2019 |
| Amendments to IFRS 11 | | Joint arrangements. | | January, 1, 2019 |
| Amendments to IAS 12 | | Income taxes. | | January, 1, 2019 |
| Amendments to IAS 23 | | Borrowing costs. | | January, 1, 2019 |
The Company estimates the adoption of these new Standards, Improvements, Amendments and Interpretations mentioned in the table above will not have a material impact on the Consolidated Financial Statements upon initial application, except by the application of IFRS 9, IFRS 15 and IFRS 16 which is described as follows how this affect to the Company:
| - | In relation with IFRS 9, the Company has made an evaluation of its impacts which included the determination of gaps between criteria of classification and measurement of financial instruments with respect to the criteria currently used and the determination of the impact of moving to a model of expected losses to determine the impairment of its financial assets. |
Based on the evaluation performed it has been determined there are no significant changes that affect the classification and measurement of its financial assets after applying IFRS 9. Nor have impacts on accounting policies been identified for financial liabilities, since the new requirements only affect accounting for liabilities that are designated at fair value through profit or loss, over which the Company, as of December 31, 2017 does not have, nor have there been any debt renegotiations that could be affected by the new clarifications regarding the accounting treatment regarding modification of liabilities.
In relation to the new impairment model, the standard requires the recognition of impairment losses based on expected credit losses (PCE) instead of only credit losses incurred as indicated in IAS 39. Based on the evaluations performed on Trade and other accounts receivable as of December 31, 2017, the Company has estimated that there is no significant impact on the determination of the provision for impairment losses, but the accounting policy will be modified.
The date of adoption of this new standard is mandatory as of January 1, 2018. The Company will apply this standard prospectively, using the practical resources allowed by the standard and given that the effects are not significant, the comparative balances for the year 2017 will not be restated.
| - | In relation with IFRS 15, the basic principle of IFRS 15 is an entity recognizes income from ordinary activities, in a way that represents the transfer of goods or services committed to customers, in exchange for an amount that reflects the compensation, in which the entity, expects to have entitled in change these goods or services. An entity shall recognize revenue from ordinary activities in accordance with that basic principle by applying the following 5 steps which are: |
Step 1 – Identify the contract (or contracts) with the customer.
Step 2 - Identify performance obligations in the contract.
Step 3 - Determine the price of the transaction.
Step 4 - Assign the price of the transaction between performance obligations.
Step 5 - Recognize income from ordinary activities when (or as) the entity satisfies a performance obligation.
The Company has carried out an evaluation of the 5 steps indicated above and no new performance obligations have been identified or different from those already presented in the Consolidated Financial Statements and additionally has determined there are no significant changes in the recognition of income, since these are recorded to the extent that it is likely the economic benefits flow to the Company and can be measured reliably, with determined prices that are measured at the fair value of the economic benefits received or to be received, once the performance obligation is satisfied and income is presented net of valued added tax, specific taxes, returns, discounts and rappel.
The date of adoption of this new standard is mandatory as of January 1, 2018. The Company will apply this standard prospectively, using the practical resources allowed by the standard and given that the effects are not significant, the comparative balances for the year 2017 will not be restated.
| - | IFRS 16 about leases requires that the lease contracts currently classified as operational, with maturities greater than 12 months, have an accounting treatment similar to financial leases. In general terms, this means that an asset must be recognized for the right to use the assets subject to operational lease contracts and a liability, equivalent to the present value of the payments associated with the contract. As for the effects on the result, the monthly lease payments will be replaced by the depreciation of the asset and the recognition of a financial expense. |
At the date of issuance of these Consolidated Financial Statements, the Company is evaluating the impact of the adoption of this leasing standard, including the effects it may have on covenants and other financial indicators.
