Annual Report 2010 - CMVM

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Notes to the Consolidated Financial Statements as at 31 December <strong>2010</strong>After the initial recognition the book value of the minority interests is determined as the value recognised initially plus the proportion of alterations of equity of the subsidiary.The full income of a subsidiary is attributed to the non-controlling interests even if they are negative.Percentage changes of control of subsidiaries that do not result in a loss in control are recorded as equity transactions. The value of the Group's interests and the non-controlledinterests is adjusted to reflect the percentage changes. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of thetransaction price is recognised directly under equity and attributed to the shareholders of the parent Company.When the Group loses control over a subsidiary, the gain or loss in the sale is calculated as the difference between (i) the aggregate amount of the fair value of the priceand the fair value of the retained interests and (ii) the book value of the assets (including goodwill) and the liabilities of the subsidiary and of the non-controlling interests.Amounts recognised previously as other full income are transferred to the profit or loss for the year or transferred to retained earnings in the same way as would be the caseif the related assets or liabilities were sold. The fair value of the retained interests corresponds to the fair value in the initial recognition for the effect of subsequent recordingunder IAS 39 – Financial instruments or, as and when applicable, the cost for the effect of the initial recognition of an investment in an associate or joint venture.d) Investments in associated companiesAn associate is a company in which the Group exercises significant influence, but not control or joint control, through participation in decisions relative to its financial andoperating policies.Financial investments in most of the associated companies (Note 22) are recorded through the equity method, except when they are classified as held for sale, with the sharesinitially stated at acquisition cost, which is increased or decreased according to the difference between this cost and the proportional value of the holding in the equity of thesecompanies reported on the date of acquisition or first application of the said method.In accordance with the equity method, financial holdings are adjusted periodically by the amount corresponding to the participation in the net income of the associatedcompanies against ‘‘Earnings from associate companies’’, and by other changes in their equity against ‘‘Adjustments of holdings in associated companies’’, as well as by therecognition of impairment losses. Furthermore, the dividends received from these companies are recorded as a reduction in the value of the financial investments.Losses in associates which exceed the investment made in these entities are not recognised unless the Group has undertaken commitments in relation to them.Any excess of the acquisition cost over the fair value of the identifiable net assets is recorded as ‘‘Investments in associate companies - goodwill”. In cases where the acquisitioncost is lower than the fair value of the identified net assets, the difference is recorded as a gain in the profit or loss for the period in which the acquisition occurs.Unrealised gains on transactions with associates are eliminated in proportion to the Group's interest in the associate, against the investment made in that associate. Unrealisedlosses are eliminated in a similar manner, but only to the extent that the loss does not show that the transferred asset is impaired.e) GoodwillThe differences between the acquisition cost of the investments in subsidiaries, jointly controlled and associated companies, plus, in the case of the subsidiaries, the valueof the non-controlled interests and fair value of the identifiable assets and liabilities of these companies on their acquisition date, if positive, are recorded as goodwill (in thecase of subsidiaries and jointly controlled companies) or maintained under the heading of investments in associated companies.Goodwill is recognised as an asset and is not subject to depreciation, being presented separately in the consolidation of the financial position or under the heading "Investmentsin associates" (Notes 18 and 22). Regarding the goodwil of subsidiaries and jointly controlled companies, annually, or whenever there are indications of a possible lossin value, the goodwill values are subject to impairment tests. Any impairment loss is immediately recorded as a cost in the consolidated full income statement for the periodand is cannot be subject to subsequent reversal.On the disposal of a subsidiary, associate or jointly controlled company, the corresponding goodwill is included in the determination of the capital gain or loss.Where the acquisition cost is less than the fair value of the identified net assets, the difference is recognised as a gain for the period in which the acquisition occurs.154
Notes to the Consolidated Financial Statements as at 31 December <strong>2010</strong>2.4 – Intangible assetsIntangible assets essentially comprise contractual rights and costs incurred in specific projects with future economic value, and are stated at cost, minus accumulated depreciationand impairment losses. Intangible assets are recognised only if it is probable that they will produce future economic benefits for the Group, are controllable by theGroup and their value can be measured reliably.Internally generated intangible assets, including expenditure on current research and development, are recognised as a cost for the period when they are incurred.Internal costs associated to software maintenance and development are recorded as costs in the income statement when incurred, except in cases where these costs aredirectly related to projects which are likely to generate future economic benefits for the Group. In such cases, these costs are capitalised as intangible assets.Depreciation is calculated, after the beginning of use of the assets, through the straight-line method, in accordance with the year of utility that the Group expects of theassets concerned.2.5 – Tangible fixed assetsTangible assets used in production, services rendered or for administrative use are recorded at acquisition or construction cost, including the expenses incurred with theiracquisition, minus accumulated depreciation and impairment losses, when applicable.Tangible assets are depreciated through the straight-line method, according to their estimated useful life, from the date on which they are available to be used for the intendedpurpose and cease when the assets become classified as non-current assets held for sale. Depreciation is calculated in accordance with the following estimated useful lives:Years ofuseful lifeBuildings 5 - 20Basic equipment 4 - 8Transport equipment 3 - 7Tools and utensils 3 - 7Administrative equipment 2 - 10Other tangible fixed assets 1 - 4Improvements and ameliorations are only recognised as assets when they correspond to the replacement of goods, which are written-off, or lead to an increase in futureeconomic benefits.Tangible fixed assets in progress correspond to tangible assets under construction and are recorded at acquisition cost minus any impairment losses. These tangible fixedassets are depreciated as from the time when the underlying assets are able to be used for the intended purposes.Capital gains or losses arising from the sale or write-off of tangible fixed assets are determined by the difference between the sales price and the net book value on the dateof sale/write-off and stated at their net worth in the income statement under "Other operating income” or "Other operating costs", as applicable.2.6 - LeasesLease contracts are classified as: (i) finance leases, if all the risks and benefits of their ownership are transferred substantially; or (ii) operating leases, if all the risks and benefitsof ownership are not transferred substantially.Leases are classified as finance or operating leases according to the nature of the contract and not its form.Assets acquired under finance lease contracts, as well as the corresponding liabilities, are recorded through the financial method, recognising the asset, the corresponding accumulateddepreciation and the outstanding debts payable pursuant to the contractual financial plan. Furthermore, the interest included in the lease instalments and depreciation /amortisation of the assets are recognised as costs in the income statement of the period to which they refer.155
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Annual Report 2010 - CMVM

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