Annual Report 2010 - AdP

4.1 Provisions and adjustments
AdP periodically analyzes all obligations that result from past events and which should be recognized or disclosed. AdP is a party to
various court cases currently underway, and on the basis of its lawyers’ opinions conducts a judgement regarding whether a provision
should be established for these contingencies (note 18). Adjustments to accounts receivable are calculated essentially on the basis
of the age of the accounts receivable, the risk profile of the customers and their financial situation. Estimates related to adjustments
to accounts receivable differ from business to business.
The subjectivity involved in determining the probability and amount of outflow of internal resources necessary to fulfil obligations
may lead to significant adjustments, whether by changes in these criteria or by future recognition of provisions previously disclosed
as contingent liabilities.
4.2 Tangible and intangible assets
Determination of useful lives of the assets and the depreciation method are essential to ascertain the amount of depreciation and
amortization to be recognized in the income statement.
These two parameters were defined in accordance with the Administration’s best estimate for the assets and businesses in question;
however, they may be changed if international practice in the sector for identical situations points to a different benchmark.
4.3 Impairment
Determination of a possible loss due to impairment can be sparked by the occurrence of various events, many of which are outside
AdP’s sphere of influence, such as the future availability of financing, the cost of capital or maintaining the current regulatory structure
of the market, as well as other changes inside and outside AdP. Identification of impairment indicators, estimated future cash flow
and the determination of the fair value of assets (or group of assets) imply a high level of judgement by the Administration as regards
identifying and assessing various impairment indicators, expected cash flow, applicable discount rates, useful lives and residual values.
In the specific case of AdP, the impairment indicators change with the growth in the infrastructure network, expected tariff changes
or current strategies of AdP stakeholders, which together with the other factors may lead to changes in the standard or amount of
future cash flows.
At the balance sheet date, it is our opinion that there is no likely occurrence of any situation of impairment in the reported assets.
If subsequent to the assessment currently underway there should be evidence of any impairment, the respective balance sheet value
of the asset shall be adjusted under results of the year. In addition to the aforementioned uncertainties, there are also some judgement
areas whose impact is reflected in the financial statements. Although we do not expect that they will cause a material change in the
following year, they may still change the criteria or the assessment undertaken by AdP's Administration.
4.4 Fair value of derivatives
The fair value of financial instruments that not have an active market is determined on the basis of valuations that reflect the markto-market
valuation of these instruments. AdP uses its own judgement to select the valuation techniques and criteria to use for
valuation of the contracted derivatives at the date of financial reporting.
5 First time adoption of the IFRS
Under its articles of association, AdP, SGPS prepared its financial statements in accordance with the Official Plan of Accounts (OPA),
which was eliminated in 31 December 2009. As of 1 January 2010, AdP, SGPS has adopted the IFRS as the standards for preparing
and reporting its financial information. Below, reconciliations between total equity and income for the comparative period, prepared
in accordance with the OPA, along with an explanation of the more significant changes.
AdP Group_Annual Report 2010_138|139