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

Notes to the Consolidated Financial Statements at 31 st December 2008
Whenever the results of a construction contract can be reasonably estimated, the corresponding revenue and costs are recognized in
accordance with the finishing percentage, as established in the IAS 11 - Construction contracts. According to this method, the profits
directly related to the works in progress are recognized in the results statement, in accordance with its finishing percentage, which
is determined by the ratio between the cost incurred and the total estimated costs of the works (incurred costs added to the costs
to be incurred). The differences between the profits ascertained through the application of this method and the invoicing issued
are accounted in the items “Other current assets” (Note 30) or “Other current liabilities” (Note 40), according to the nature of
the differences.
Variances in the contracted works, claims and premiums are considered as they are being agreed and whenever it is possible its quantification
with enough reliability.
So that the results of a contract can be reasonably estimated it is necessary that the following conditions are fulfilled:
- To be likely that the group obtains the economic benefits foreseen in the contract;
- The contract costs are identifiable and can be reasonably quantified;
- At the date of the balance sheet it must be possible that the costs required to complete construction, as well as the finishing degree
of the same, can be sufficiently and reasonably quantified, so that the actual costs incurred can be compared to the initial
estimates.
When it becomes likely that the costs exceed the contract profits, the expected loss is recognized as an immediate cost.
Accrual Basis
Profits and costs are registered according to the specialization principle of the financial years; therefore they are recognized as they are
generated, independently of the moment in which they are received or paid.
The differences between the amounts received and paid and the corresponding profits and costs are registered in the items “Other assets
(current and non-current)” and “Other liabilities (current and non-current)”.
2.21 - Financial assets impairment and adjustments
At each balance sheet date the Group analyzes if there is objective evidence that a financial asset or a group of financial assets are at
impairment.
Financial Assets available for sale
In the case of financial assets classified as available for sale, a long or significant decline in the fair value of the instrument below its
cost is considered as an indicator that the instruments are at impairment. Should similar evidence exist for the financial assets classified
as available for sale, the accumulated loss – measured as the difference between the acquisition cost and the current fair market
value, less any loss of impairment of the financial asset that has been already recognized in the results – is removed from equity
and recognized in the results statement. Loss of impairment in the capital instruments recognized in results is not reversed through the
results statement.
Customers, debtors and other financial assets
Adjustments for value losses are registered whenever there are objective indicators that the Group is not going to receive all the amounts to
which it is entitled to, in accordance with the original terms of the contracts established. Several indicators are used in their identification,
such as:
- credit maturity;
- financial difficulties of the debtor;
- debtor’s probable bankruptcy.
The adjustments are determined by the difference between the recoverable value and the balance value of the financial asset and are
registered by counterpart of the year’s results. The balance value of these assets is reduced to a recoverable value through the use of an
adjustments account. Whenever an amount to receive from customers or debtors is considered as irrecoverable, it is written off by using the
respective adjustments account. Subsequent recovery of amounts that were written off are registered under results.
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