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Consolidated financial statements at 31 December 2011 Ferrovial S.A. and Subsidiaries Amortisation and depreciation methods: Toll road concessions: IFRIC 12 - Intangible asset model All initial investments relating to the infrastructure that is subsequently returned to the grantor, including expropriation costs and borrowing costs capitalised during construction, are amortised on the basis of the expected pattern of consumption applicable in each case (e.g., forecast vehicle numbers in the case of toll roads) over the term of the concession. The investments contractually agreed on at the start of the concession on a final and irrevocable basis to be made at a later date during the term of the concession, and provided they are not investments made to upgrade infrastructure, are considered to be initial investments. For investments of this nature, an asset and an initial provision are recognised for the present value of the future investment, applying a discount rate to calculate the present value that is equal to the cost of the borrowings associated with the project. The asset is amortised based on the pattern of consumption over the entire term of the concession and the provision is increased by the related interest cost during the period until the investment is made. Where a payment is made to the grantor to obtain the right to operate the concession, this amount is also amortised based on the pattern of consumption over the concession term. A provision is recognised for replacement investments, which must have been set up in full by the time the investment becomes operational. The provision is recognised on the basis of the pattern of consumption over the period in which the obligation arises, on a time proportion basis. Infrastructure upgrade investments are those that increase the infrastructure's capacity to generate revenue or reduce its costs. In the case of investments that will be recovered over the concession term, since the upgrade investments increase the capacity of the infrastructure, they are treated as an extension of the right granted and, therefore, they are recognised in the consolidated statement of financial position when they come into service. They are amortised as from the date on which they come into service based on the difference in the pattern of consumption arising from the increase in capacity. However, if, on the basis of the terms and conditions of the concession, these investments will not be offset by the possibility of obtaining increased revenue from the date on which they are made, a provision will be recognised for the best estimate of the present value of the cash outflow required to settle the obligations related to the investment that will not be offset by the possibility of obtaining increased revenue from the date on which the investments are made. The balancing item is a higher acquisition cost of the intangible asset. In the case of the proportional part of the upgrade or increase in capacity that is expected to be recovered through the generation of increased future revenue, the general accounting treatment used for investments that will be recovered in the concession term will be applied. Set forth below are details of the main toll road concessions in force, showing their duration and the accounting method applied: Concession operator Country Concession term First year of concession Consolidation method Skyway Concession Co. US 99 2005 Full SH 130 Concession Co. (1) US 50 2007 Full North Tarrant Express (2) US 52 2009 Full LBJ Express (2) US 52 2009 Full Autopista del Sol Spain 55 1996 Full M-203 Alcalá O'Donnell Spain 30 2005 Full Autopista Madrid Sur Spain 65 2000 Full Autopista Madrid-Levante (3) Spain 36 2004 Full EuroScut Algarve Portugal 30 2000 Full Euroscut Azores Portugal 30 2006 Full Eurolink Motorway Operations Ireland 30 2003 Full 407 ETR Internacional Inc. Canada 99 1999 Equity method Indiana Toll Roads US 75 2006 Equity method Nea Odos and Central Greece Greece 30 2007-2008 Equity method (1) Concession term of 50 years as from completion of the construction work, estimated at five years. (2) Concession term of the shorter of 50 years of operation and 52 years as from the contract execution date. (3) The concession term may be extended by four years if certain service quality parameters are achieved. 3.3.3 Property, plant and equipment The assets included in “Plant, Property and Equipment” in the accompanying consolidated statement of financial position are carried at acquisition or production cost, less the related accumulated depreciation and any accumulated impairment losses. In-house work on property, plant and equipment is valued, for each investment, by adding the direct or indirect costs allocable to the investment to the cost of the materials used. Borrowing costs incurred during the construction or production period, before the assets are ready to come into operation, are capitalised, whether they derive from borrowings arranged specifically to acquire the assets or from funds borrowed generally used to obtain a qualifying asset as defined in IAS 23. The Group companies calculate the depreciation on property, plant and equipment using the method that best approximates the effective technical decline in value and the estimated years of useful life of each asset. The straight-line method is generally employed, with the exception of certain Construction business machinery, which is depreciated using the diminishing balance method. The useful lives and residual values of these assets are reviewed annually. The consolidated companies depreciate their property, plant and equipment basically over the following years of useful life: Ferrovial, S.A. Consolidated financial statements at 31 December 2011 12
Consolidated financial statements at 31 December 2011 Ferrovial S.A. and Subsidiaries Years of useful life Buildings and other structures 10-50 Machinery, fixtures and tools 2-25 Furniture 2-15 Transport equipment 3-20 Other items of property, plant and equipment 2-20 3.3.4 Investment in infrastructure projects “Investment in infrastructure projects” includes the net values of land, buildings and other structures that fulfil the requirements of IAS 40. Investment property is carried at acquisition cost less accumulated depreciation and any impairment losses. The Group does not apply the fair value model permitted by IAS 40. The Group companies depreciate investment property on a straight-line basis over the estimated useful life of the property (between 5 and 50 years). 3.3.5 Impairment losses The Group tests goodwill and intangible assets with indefinite useful lives and intangible assets not yet available for use for impairment annually. At each reporting date the Group tests depreciable assets for permanent impairment that might make it necessary to write-down the assets. Should evidence of impairment be detected, the asset’s recoverable amount is calculated in order to identify the extent of the impairment loss if the recoverable amount is lower than the carrying amount of the asset, and the difference is recognised in the income statement. Impairment losses must be assessed for each individual asset. If this is not possible, the impairment loss is determined for the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets (cash-generating units). lease payments. The interest rate implicit in the lease is used to calculate the present value of the lease payments. The cost of the assets held under finance leases is presented in the consolidated statement of financial position on the basis of the nature of the leased asset. When the Group acts as the lessee in an operating lease, lease costs are taken to profit or loss on a straight-line basis over the lease term, irrespective of the payment periods stipulated in the lease. If that the lessor has established incentives in the lease consisting of payments corresponding to the lessee but made by the lessor, the income deriving from these incentives is recognised in the income statement as a reduction of the costs of the lease on the same straight-line basis as that used to recognise the costs in the income statement. 3.3.7 Financial assets a. Financial assets at fair value through profit or loss: these are assets acquired mainly to generate a profit as a result of fluctuations in their value. They are stated at their fair value on acquisition and at subsequent measurement dates, and any changes are recognised directly in the consolidated income statement. The assets in this category are classified as current assets if they are expected to be realised within twelve months from the reporting date. There are no assets at fair value through profit or loss other than the derivative financial instruments described in Note 3.3.8. b. Available-for-sale financial assets: this category includes securities acquired that are not held for immediate trading and have no fixed maturity and relate mainly to investments in companies not included in the Group’s scope of consolidation. They are carried at their underlying carrying amount, unless there is better evidence to the contrary, in which case they are carried at their fair value. Recoverable amount is the higher of fair value less costs to sell and value in use. Value in use is calculated on the basis of estimated future cash flows discounted at a rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased up to the limit of the original amount at which the asset had been carried before the impairment loss was recognised. An impairment loss recognised for goodwill must not be reversed in a subsequent period. 3.3.6 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the Group, which generally has the option of acquiring the asset at the end of the lease term under the terms agreed on when the lease was arranged. All other leases are classified as operating leases. The Group recognises finance leases as assets and liabilities in the consolidated statement of financial position at the commencement of the lease term, at the lower of the market value of the leased asset and the present value of the minimum Ferrovial, S.A. Consolidated financial statements at 31 December 2011 13
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