ZaraAnnual-English2012

3. Significant Accounting Judgment, Estimates and
Assumptions
The preparation of the consolidated financial statements requires management to make estimates and assumptions that
affect the reported amounts of financial assets and liabilities and disclosure of contingent liabilities. These estimates and
assumptions also affect the revenues and expenses and the provisions as well as fair value changes reported in equity. In
particular, considerable judgment by management is required in the estimation of the amount and timing of future cash
flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about several
factors involving varying degrees of judgment and uncertainty and actual results may differ resulting in future changes in such
provisions.
Judgments, estimates and assumptions in the consolidated financial statements are detailed below:
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A provision is established for accounts receivable based on basis and assumptions approved by the Group’s management
to estimate the required provision in accordance with IFRS.
Income tax expense is calculated and charged for the year in accordance with laws and regulation and IASs. Deferred
tax assets and liabilities and income tax provision is calculated accordingly.
The management periodically reviews the useful lives of property and equipment in order to calculate the annual
deprecation expense on the general conditions of the property and equipment and estimate the future useful
lives accordingly. Any impairment losses of property and equipment are recognized in the consolidated income
statement.
A provision will be established against court cases where the Group is the defendant based on a legal study provided
by the Group’s legal advisor which will determine the risk that may occur. These studies are reviewed periodically and
the provision is adjusted accordingly.
The management of the Group periodically reviews the financial assets stated at cost to assess any impairment loss that
may occur. Impairment loss is recognized in the consolidated income statement.
Annual Report 2012
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