Notes to the Financial Statements - Efacec

1.5 Investments
Investments in group, associated and other companies shown at acquisition cost.
The Group checks at each balance sheer date whether object evidence exists of the impairment of any investment. If such evidence
exists, the accumulated loss, calculated as the difference between the balance sheet value and the current fair value, is
recognised in the profi t and loss account of the period in which the impairment occurred (Note 1.4).
The company only recognises income to the extent that it receives distributions from cumulative net profi ts of the shareholding
held, following the date of its acquisition. Distributions received in excess of these profi ts are considered as a recovery of the
investment, and as such are booked as a reduction in the cost of the investment.
1.6 Trade debtors and other debtors
Trade debtors and other debtors are initially recognised at their nominal or fair value, when different, less any impairment loss.
The provision for debtor impairment is set up when there is objective evidence that the Group will not receive the entire amount
outstanding, as per the original conditions established for the debt. The amount of the provision is the difference between the
amount presented and the estimated present value of future cash fl ows, discounted at the effective interest rate. The amount of
the provision is recognised in the profi t and loss account.
1.7 Cash and cash equivalents
The line “Cash and cash equivalents” includes cash, bank deposits, other short term high liquidity investments and with initial
maturities up to three months. Bank overdrafts are shown in the balance sheet under current liabilities in the line Borrowings.
1.8 Share capital
Ordinary shares are shown in shareholders’ funds.
The incremental costs directly attributable to the issue of new shares or options are shown in shareholders’ funds as a reduction,
net of taxes, of cash from increases in share capital. The incremental costs directly attributable to the issue of new shares or options
or the acquisition of a new business are included in the cost of acquisition as part of the purchase price.
1.9 Borrowings
Borrowings are initially recognised at their nominal value or fair value, whenever different, less any impairment loss. Later they
are shown at their amortised cost; any difference between receipts (net of transaction costs) and the amortised value is recognised
in the profi t and loss account throughout the loan period, using the effective rate method.
Borrowings are shown in current liabilities, unless the company has an unconditional right to defer payment of the liability until at
least 12 months after the balance sheet date.
1.10 Income tax and deferred taxes
EFACEC Capital, S.G.P.S. opted for taxation based on consolidated profi ts as from 1993, currently covered by the “Special Rules
for taxation of Groups of Companies”). All Group companies whose registered offi ces are located in Portugal and are subject to the
Portuguese Corporate Tax Regime (IRC), and where the direct and indirect share holding is greater than 90%, have been included
in the tax consolidation in accordance with the applicable legislation. The consolidated tax charge is determined on the basis of
the arithmetic sum of taxable profi ts and losses as derived from individual companies’ tax returns.
Deferred taxes are generally recognised using the liability method concerning temporary differences arising from the carrying
amounts of assets and liabilities for consolidated fi nancial reporting purposes and amounts used for income tax purposes. However,
if the deferred tax arises through the initial recognition of an asset or liability in a transaction that is not a business concentration
that at the date of the transaction did not affect either the accounting or fi scal result, it is not booked. Deferred taxes are determined
by fi scal rates (and laws) in force or substantially in force at the balance sheet date and which are expected to be applicable
in the period when the deferred tax asset or the payment of the deferred tax liability takes place. The tax rate that has been used
to determine deferred taxes is that of current legislation - 25%, plus the maximum local tax possible - 1.5% of taxable profi t.
Deferred tax assets are recognised to the extent that it is probable that future taxable profi ts will be available to make use of the
timing difference.
Deferred taxes on timing differences arising from investments in affi liates and associates are recognised, except when the Group
is able to control the haphazard nature of the reversal of the timing difference and when it is probable that the timing difference
does not revert in the foreseeable future.
49
2007 Consolidated and
Individual Financial Statments