Annual Report 2010 - CMVM

Notes to the Consolidated Financial Statements as at 31 December 20102.3 - Principles of consolidationa) SubsidiariesThe subsidiaries have been consolidated in each financial year through the full consolidation method. Control exists when the Group directly or indirectly holds a majority ofthe voting rights in the General Meeting, or has the power to determine the financial and operating policies.Third party participation in the equity and net profit of these companies is presented separately in the consolidated statement of the financial position and consolidatedincome statement, under the respective headings of "Non-controlling interests"When the losses attributable to the non-controlling interests exceed the non-controlling interest in the equity of the subsidiary, the Group will absorb this excess and anyadditional losses, except when the non-controlling interests are obliged and able to cover these losses. If the subsidiary subsequently reports a profit, the Group appropriatesthe profit up to the amount of the losses which have been absorbed by the Group.The subsidiaries at 31 December 2010 are presented in Note 4. The significant transactions and balances between these companies were eliminated during the consolidationprocess. Capital gains arising from the sale of subsidiaries, within the Group, were also eliminated.Whenever necessary, adjustments are made to the financial statements of the subsidiaries with a view to achieving the uniformity of their accounting policies with thoseapplied by the Group.b) Jointly controlled companiesInvestments in jointly controlled companies (Note 23) were consolidated through the proportional consolidation method, from the date on which joint control is acquired.According to this method, the assets, liabilities, income and expenditure of these companies were integrated into the consolidated financial statements on a line-by-linebasis, in proportion to the Group’s control over them.Transactions, balances and dividends distributed between companies are eliminated in the proportion of the Group's control over them.The classification of financial investments in jointly controlled companies is determined based on agreements that regulate the joint control.c) Business combinationsBusiness combinations, namely the the acquisition of subsidiaries, are recorded through the acquisition method.The acquisition cost corresponds to the sum of the fair values of the assets acquired, liabilities incurred or assumed and the equity instruments issued by the Group in exchangefor the control acquired. Costs related to the acquisition are recognised as a cost when incurred. When applicable, the acquisition cost also includes the fair value of contingentpayments measured on the acquisition date. Subsequent alterations in the value of contingent payments are recorded in accordance with the accounting rules which regulatethe recording of the assets or liabilities in question, unless they qualify as an adjustment in the provisional measurement period (with a maximum of 12 months).The identifiable assets, liabilities and contingent liabilities of a subsidiary that meet the criteria to be recognised in accordance with IFRS 3 - Business Combinations (‘‘IFRS3’’), are measured by their fair value on the acquisition date, except for non-current assets (or groups of assets) which are classified as held for sale, in accordance with IFRS5 - Non-current assets held for sale and discontinued operations (“IFRS 5”), which are recognised and measured at the respective fair value minus the costs to be incurredin the future sale.Any excess of the acquisition cost increased by the value of the non-controlled interests relative to the fair value of the acquired assets and liabilities is recognised as Goodwill.If the cost of acquisition is less than the fair value of the identified net assets, the difference is recorded as net income gain for the period when the acquisition occurs, afterre-confirmation of the attributed fair value.If the process of recording of the business combinations is incomplete by the end of the year when the combination occurs, the Group discloses this same situation, and theprovisioned values may be adjusted during the measurement period (the period between the acquisition date and the date when the Group obtains the complete informationon the facts and circumstances that existed on the acquisition date and within the maximum of 12 months), or new assets and liabilities may be recognised so as to reflectfacts and circumstances that existed on the balance sheet date and which, in known cases, would have affected the amounts recognised on the acquisition date.Non-controlling interests are identified separately in equity by the equity attributable to the shareholders of the parent Company. Non-controlling interests may be measuredinitially either at their fair value or by the proportion of the fair value of the assets and liabilities of the acquired subsidiary. This option is made separately for each transaction.153