Annual Report 2009 - Isagen

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ANNUAL REPORT 2009 / ISAGEN S.A. E.S.P.962. Basis of presentation of financial statementsThe financial statements considered of general purpose, shall bepresented to the Shareholders’ Meeting for its approval and are thebasis for the distribution of dividends and other appropriations.a) Accounting periodAccording to the Company’s bylaws, annual closing date isDecember 31.b) Monetary unitAccording to legal provisions, the monetary unit used by theCompany is the Colombian Peso.c) Classification of assets and liabilitiesAssets and liabilities are classified into current and non-current,according to their use or degree of realization or demand, in termsof time and value. Accordingly, current assets and liabilities areunderstood as such amounts that will be realizable or demandablewithin a term not longer than one year; for terms longer thanone year, they are classified as non-current.d) Relative importance and materialityRecognition and presentation of economic facts are made accordingto their relative importance or materiality.An economic fact is material when due to its nature or amount,knowing or not knowing it, considering the circumstances, couldsignificantly affect the decisions or assessments of the users ofsuch information.In the preparation and presentation of the financial statements,materiality was determined in relation to, among others, total assets,current and non-current assets, total liabilities, current andnon-current liabilities, equity and income, as the case may be.In general terms, an entry would be considered material if it exceeds5% of any of the above.3. Operating and/or administrativelimitations and deficienciesDuring 2009 and 2008, no operating or administrative limitationsand/or or deficiencies were found that would affect the normal accountingprocesses, or the consistency and reasonability of the accountingfigures.4. Main accounting policies and practicesFor its accounting entries and preparation of its financial statements,the Company observes the accounting principles generally acceptedin Colombia, defined by accounting regulations issued by theColombian General Accounting Office –CGN– and theSuperintendency of Domiciliary Public Utilities, through applicationof information systems. Chart of accounts for utilities and costs andexpenses unified system.5. Valuation rulesFollowing is a description of the main accounting policies and practicesadopted by the Company in accordance with note 4:a) Foreign currency translation and balancesTransactions in foreign currency are recorded at the applicableexchange rates in force on the date of the transaction. At the closeof each month, balances of assets accounts are adjusted to currentexchange rates on such date and the differences are carriedto income statement accounts. With regard to liability accounts,only exchange differences not ascribable to the cost of acquisitionof assets, that is, differences originated during the time such as-Contents Letter from the CEO Achievements2009Good GovernancePractices EvaluationCorporateManagementFinancial Management
ANNUAL REPORT 2009 / ISAGEN S.A. E.S.P.97sets are under construction or installation, and until they becomeoperational, are carried to the income statement.b) Cash equivalentsFor purposes of preparation of the statement of cash flows, marketableinvestments are considered to be cash equivalents, giventhat they can be easily converted into cash.The statement of cash flows is prepared using the indirect method.c) InvestmentsInvestments are recognized and recorded at their historic cost oracquisition price, and expressed at their actual value or at marketprices, depending on their classification.Investments are classified and recorded as follows:Debit or fixed-income investments are classified as tradable investments.These investments are initially recorded at cost value,and every month thereafter, are adjusted to reflect their marketvalue as a charge or credit, as the case might be, in the incomestatement. The market value of such investments is determinedby calculating the present value of their future capital and interestflows, discounted at a market interest rate calculated according toparameters determined by the Financial Superintendency.Investments in shares or equity considered of low or minimummarketability and those not quoted at stock exchanges are classifiedas non-tradable investments. Variable-income investmentsare recorded at cost value plus the value of stock dividends receivedin shares. If at year’s end, the intrinsic value of investmentsis greater or lower than the book value, a charge is recorded inthe re-appraisals account with a contra entry in re-appraisal surplusin equity, or a provision is charged to the income statement,respectively.d) Accounts receivableThey represent collection rights resulting from the execution ofthe Company’s financial, economic and social activities such asenergy and gas supplying, delivery of services, loans, and otherterm transactions.For energy accounts receivable, customers are classified accordingto risk assessment policies established by the Company.Debts not timely satisfied are reclassified as doubtful accountsand provisioned according to their age and default. Receivablesolder than 180 days are 100% provisioned.Provisions are presented in the balance sheet as a smaller valueof accounts receivable and include the amounts determined bythe Company to cover eventual losses.When payment agreements are subscribed for already provisionedreceivables, the doubtful account is reclassified as currentaccount. As payments are received, they are recorded as recoveriesand the provision is cancelled out.Once collection procedures are exhausted, receivables arewritten off and removed from the balance sheete) InventoriesInventories are recorded at cost value, adjusted to consider inflationuntil December 31, 1998.Regular consumables, including generic spare parts not correspondingto dependent technologies (exclusive supplier), materialsand other consumables are recorded as inventories.Parts, materials and other consumables are valued by the weightedaverage method; inventories in transit are valued by either thespecific value method or the net sale value, whichever the lowest.Contents Letter from the CEO Achievements2009Good GovernancePractices EvaluationCorporateManagementFinancial Management
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Annual Report 2009 - Isagen

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