Financial Statements - Entel

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EMPRESA NACIONAL DE TELECOMUNICACIONES S.A. & SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For Translation Purposes OnlyValues accrued for or against Group companies are recorded based on the agreements andmeasurements for traffic exchanged with other operators, both nationally and internationally.4. FINANCIAL ASSETS AND LIABILITIESa) Calculation of Fair ValuesCertain accounting criteria and disclosures require the fair value of assets and liabilities, bothfinancial and non-financial, to be calculated. Fair values are calculated for measurement anddisclosure using the following methods.Derivative Financial InstrumentsThe fair value of derivative contracts not quoted on an active market is calculated based on thedifference between the cash flows of rights and obligations arising from the contracts and adjustedaccording to the current market interest rates on the date of measurement.Risk-free and zero-coupon rates are used to discount both local and dollar currencies.For currency forward contracts, this corresponds to the difference between the value of the foreigncurrency to be purchased according to the contract, discounted at the dollar rate for the remainingperiod and expressed in pesos according to the exchange rate at the close of the accounting period,less the debt in pesos agreed in the contract discounted at the current peso rate for the remainingperiod of the contract.For contracts to hedge against exchange and interest rates (CCS), the value is determined by thedifference in flows, including notional capital, discounted from each component of the contract.Non-Derivative Financial InstrumentsThe fair value used for the purposes of disclosures is calculated based on the present value of futurecapital and cash flows from interest, discounted at the market interest rate at the close of theaccounting period.For financial leasing, both as leasing party and lease holder, the interest rate is determined byreference to current market rates for leasing agreements of a similar nature.The fair value of current trading assets and liabilities is deemed to be the same as their currentvalue as they are short-term flows.Non-Derivative Financial LiabilitiesThe fair value calculated for the purposes of disclosure is based on the present value of futurecapital and cash flows from interest, discounted at the market interest rate on the date of reporting.For financial leasing, the market interest rate is calculated by referring to similar leasingagreements.b) Fair Value Hierarchies–14–
EMPRESA NACIONAL DE TELECOMUNICACIONES S.A. & SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For Translation Purposes OnlyIn line with the methods and techniques used to calculate fair values, the following hierarchy ofvalues is used.Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2: Inputs that differ to the quoted prices included in Level 1 and are observable for assetsor liabilities, either directly (as a price) or indirectly (derived from a price).Level 3: Inputs for assets or liabilities not based on observable market information (nonobservableinputs).The following table shows the total values of assets and liabilities for financial instruments,measured and reported at fair value.12/31/2012 12/31/2011Level 2 Level 2Th. CLP$ Th. CLP$AssetsNon-hedge derivatives 910,277 4,509,615LiabilitiesNon-hedge derivatives 23,124,193 15,799,808Hedge derivatives 20,669,703 33,994,498c) Categories of Financial Assets and LiabilitiesThe following table shows the different categories of financial assets and liabilities, comparing thevalues recorded in the accounts at the close of each accounting period to their respective fair values.with change Loans and Liabilities at Currency or Total Total12/31/2011 in CLP$ 000 Note in results Hedge accountsamortizedcurrency at accounting at fair- negotiable derivatives receivablecostindex value valueAssetsCash and cash equivalents 5 - - 53,876,890 - CLP/USD/PEN 53,876,890 53,876,890Other financial assets 6At fair valueDebtors for financial leasing - - 4,373,129 - UF 4,373,129 4,889,324Derivatives 910,277 - - - USD 910,277 910,277Other - - 1,971,655 - CLP 1,971,655 1,971,655Commercial debtors and others 8 - - 276,768,958 - CLP/USD/PEN 276,768,958 276,768,958Accounts receivable from related entities 9 - - 379,554 - CLP 379,554 379,554Total assets 910,277 337,370,186 338,280,463 338,796,658LiabilitiesOther financial liabilities 15Interest accruing loans - - - 383,549,242 383,549,242 385,207,897Creditors for financial leasing - - - 8,441,289 8,441,289 8,956,196Derivatives 23,124,193 20,669,703 - - 43,793,896 43,793,896Commercial accounts payable and other 16 - - - 373,510,494 373,510,494 373,510,494Total liabilities 23,124,193 20,669,703 765,501,025 809,294,921 811,468,483–15–
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