A N N U A L R E P O R T A N D A C C O U N T S - CMVM

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Notes to the Consolidated Financial Statements at 31 st December 2008 2.9 - Assets, liabilities and transactions in foreign currency Transactions in currencies other than Euro are registered at the rates in force, at the transaction date. At each balance sheet date, pecuniary assets and liabilities expressed in foreign currency are converted into Euro, using the exchange rates in force on that date. Non-pecuniary assets and liabilities registered in accordance with their fair value expressed in foreign currency, are converted in Euro, using for that purpose the exchange rate in force at the date in which the fair value was determined. The favourable and unfavourable difference in the exchange rate, derived from the differences between the exchange rates in force at the transactions’ date and the ones in force at the date of the debt collection, payments or balance sheet date of the same transactions, are registered as profits and costs in the results statement of the period, except those regarding non-pecuniary items, which fair value variation is registered directly in the equity capital in item "Exchange rate conversion adjustments". The conversion of the results statement of the subsidiary companies and associated companies expressed in foreign currency is done considering the exchange rate in force at the date of the balance sheet, for conversion of assets and liabilities, the historic exchange rate for the conversion of the balances in the equity capital and average exchange rate of the period items, for the conversion of the statements of results and cash flows. The exchange rate effects of that conversion, after the 1 st of January 2004, are registered in equity capital, in the “Exchange rate adjustments”, being transferred to financial results at the time of the corresponding alienation of investments. In accordance with IAS 21 – The effects of the alterations in exchange rates, the goodwill and the fair value corrections ascertained in the acquisition of foreign entities are considered to be denominated in the reporting currency of those entities, being converted into Euro at the exchange rate at the balance sheet date. The exchange rate differences thus generated are registered in the “Exchange rate adjustments” item. 2.10 - Financing costs Costs with loans are recognized in the results statements of the period they refer to, except when the financial charges of the loans obtained are directly related with the acquisition, construction and production of assets that take a substantial period of time to be ready for the intended use, which are capitalized being part of the asset cost. The capitalization of these charges starts after the beginning of the construction activities preparation or asset development and is interrupted after the starting of its use, or final of production or construction of the asset, or when the project in question is suspended. Any financial profits generated by loans obtained beforehand and liable to be allocated to a specific investment are deducted to eligible financial costs for capitalization. 2.11 - Subsidies Subsidies are recognized in accordance with their fair value when there is reasonable guaranty that they will be received and that the Group is going to comply with the required conditions for granting them.. Subsidies for operation, namely for employee training, are recognized in the financial statements, in accordance with the cost incurred as they become due. Subsidies for investment, related to the acquisition of tangible fixed assets, are included in the items “Other current liabilities” and “Other noncurrent liabilities” (as applicable) and are credited in the financial results in constant quotas, in a consistent and proportional way to the depreciation of the assets which are being acquired. 2.12 - Stocks Goods and raw materials are registered at cost, which is inferior to respective market value, using the average cost as costing method. The finished and semi-finished goods, sub-products and works in progress are valued at weighted average cost of production, which includes the cost of incorporated raw materials, labour and general manufacture expenditures (considering the productive equipment depreciations calculated in accordance with the normal utilization levels), which is inferior to the net realisable value. The net realisable value corresponds to the normal selling price deducted of costs to complete production and the marketing costs. Adjustments due to stocks depreciation are registered for the difference between the cost value and the respective stocks realization value, in the case the latter is inferior to the cost. 180
Notes to the Consolidated Financial Statements at 31 st December 2008 2.13 - Provisions Provisions are recognized, when and only if the Group has a present obligation (legal or implicit) resulting from a past event, and it is likely that for the resolution of that obligation there is an outlet of resources and the obligation amount can be reasonably estimated. The provisions are reviewed at the date of each balance sheet and are adjusted in order to reflect a better estimate at that date. The provisions for restructuring costs are recognized by the group whenever there is a formal and detailed restructuring plan and the same has been communicated to the parties involved. 2.14 - Report by segments A business segment is a group of assets and operations involved in the supply of products or services subject to risks and benefits which are different from other business segments. A geographic segment is a group of assets and operations involved in the supply of products or services in a particular economic environment, that is subject to risks and benefits which are different from those carried out by segments that operate in other economic environments.. The Group presents the main business segments, in a coinciding way with the one in which management conducts its business. 2.15 - Operational results Operational results include total operating costs and profits, recurrent or non-recurrent, including costs with restructurings, and costs and profits associated to operational assets (tangible fixed assets and other intangible assets). They also include capital gains or losses (increased or decreased values) ascertained in the company sale included in the consolidation by the integral or proportional consolidation method. Thus, the net financing costs, the results ascertained with associated companies (Note 22), with the other financial investments (Note 25) and the income taxes are excluded from the operational results. 2.16 - Financial instruments Financial assets and financial liabilities are recognized whenever the Group becomesa part in the respective contractual relation. Cash and cash equivalents The amounts included in the item “Cash and cash equivalents” correspond to cash values, bank deposits, time deposits and other financial investment applications, becoming due within less than three months, and which can be immediately mobilizable with insignificant risk of changing the value. Accounts receivable Accounts receivable do not have implicit interest and are submitted by respective nominal value, deducted from the estimated realization losses. Investments Investments are recognized on the date in which the inherent risks and advantages are substantially transferred. Initially they are registered by their acquisition value, which is the fair value of the price paid, including transaction expenses. The financial assets available for sale are financial investments which are available for sale and are classified as non-current assets. After initial recognition, the financial assets available for sale are measured with reference to their market value at the balance sheet date, without any deduction regarding transaction costs that may occur until they are sold. Gains or losses deriving from the alteration of the fair value are registered in the equity capital, in the item “Fair value reserve” until the investment is sold, received or in any way alienated, or in the situations where it is deemed that there are losses due to impairment and it is in that moment that the accumulated gain or loss is registered in the financial statement. The financial assets available for sale in equity capital instruments, which do not have a market price listed in an asset market and with a fair value which cannot be reliably measured, are denominated “Other investments”. Other investments are measured by their acquisition cost deducted of any losses due to accumulated impairments. 181
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A N N U A L R E P O R T A N D A C C O U N T S - CMVM

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