Financial Statements - Entel

EMPRESA NACIONAL DE TELECOMUNICACIONES S.A. & SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For Translation Purposes Onlyd) Use of Estimates and Accounting JudgmentsEstimates determined based on the best information available at the close of each financial yearhave been used in the preparation of the consolidated financial statements. These estimates affectthe valuation of certain assets, liabilities, income, and cash flows and hence may be significantlyaffected by new events that change the assumptions made and other sources of uncertaintyassumed on the date.The main estimates are:actuarial assumptions used when calculating employee separation obligations;the valuation of assets and goodwill originating from the acquisition of companies that with thepotential to affect the calculation of losses due to impairment in their value;the useful life of property, plant and equipment, and intangible assets;assumptions made when determining the fair value of financial instruments;assumptions on the generation of future taxable revenue where tax is deductible from assets asdeferred tax;in establishing the cost of decommissioning installations.e) Changes to Accounting PoliciesAccounting principles have been consistently applied during the years covered by theseconsolidated financial statements.3. SUMMARY OF ACCOUNTING POLICIESa) Consolidation BasisThe financial statements of subsidiaries are included in the consolidated financial statements fromthe date of controlling starts until the date it is relinquished.Control exists when Entel S.A., has a direct or indirect majority of voting rights or has the power todetermine (also through agreements) the financial and operating policies of a company to generateprofit from its activities.In the preparation of these consolidated financial statements, the assets, liabilities, revenues, andcosts for the consolidated companies are consolidated line by line. All direct and indirectsubsidiaries of Entel S.A. are 100% controlled and as such there are no non-controlling shares in theconsolidated financial statements for the Entel Group.For the purposes of consolidation, significant transactions and balances between consolidatedcompanies have been removed in addition to any balances owed.The book value of the investment in each subsidiary is offset against its equity after adjustment,where applicable, to its fair value on the date control was acquired. Goodwill is recorded on thisdate under intangible assets, as described further on, while any earnings from the purchase of abusiness or negative goodwill are recorded on the income statement.The assets and liabilities of consolidated foreign subsidiaries expressed in currencies other thanChilean Pesos are converted using the exchange rate on the date of the statement; revenue andexpenditure are converted at the average exchange rate for the period covered by the financial–3–