Annual Report 2010 - AdP

payment is contingent on the fact that the operator (or concessionaire) ensures that the infrastructure meets the quality and efficiency
requirements. The operator (or concessionaire) must recognize an intangible asset in so far as it receives a right (licence) to charge
users for public service. The right to charge users for a public service is not a an unconditional collection right because the amounts
are conditioned to the fact that the users use the service.
2.6.2 Infrastructure classification
Contractually speaking, the group companies are based on formats that tend to classify infrastructure as a financial asset because
they do not pose a risk, are entitled to contractually guaranteed annual (minimum) remuneration that can be received as a deferral
over time, but which is guaranteed.
However, the definition of the financial asset, established under IAS 32 is not associated with risk, but rather with the present and
unconditional right to receive money or another financial asset. Among the various mechanisms for re-balancing the concession
contracts of the AdP Group companies, namely increase in tariffs, direct compensation of the Awarding Body and/or extension of
the term of the concession, extension of the term does not fulfil the requirements stipulated in that standard (IAS 32), seeing as it
constitutes a future right to be collected from the users, making the option unfeasible due to recognition of the financial asset. As
such, the AdP Group companies that are SMM concessionaires or managers of partnerships classify the infrastructures of the systems
that they operate as intangible assets - Right to use the infrastructures.
Intangible assets are recorded at acquisition or production cost, including direct cost and income (net) and indirectly related to
investment projects that are capitalized under fixed assets under construction. Costs that can be capitalized are related to realization
of the investment. Operational costs are allocated to fixed assets under construction on the basis of a percentage calculated in
accordance with the allocation of staff to the respective projects. Financial charges related to loans obtained for financing the
investment in progress are fully capitalized until operation of the system begins.
Expenses that materialize in expansion or modernization of initial infrastructures, via economic regulation of concessions, are specifically
remunerated to the extent that they contribute to forming the tariff (i.e. they are implicitly recovered upon acceptance of the
amortization by the Regulator) and are thus calculated as part of the intangible asset. Current conservation and maintenance costs
are recognized as costs during the respective financial years in which they occur.
2.6.3 Amortization
Intangible assets, right to use infrastructures, are amortized on a systematic basis in accordance with the standard for obtaining
economic benefits associated with them. In the case of the AdP Group concessions, the economic benefits obtained from the rights
of the concession are determined by economic regulation, i.e. by accepting amortization costs when the Regulator annually forms
the tariffs.
2.6.4 Residual value
Additional expansion or modernization investments whose useful life is extended beyond the concession time period may have a
residual value that will result in a compensation equivalent to the not yet amortized value at that date and as such these amounts
are classified as financial assets (discounted amount receivable).
2.6.5 Yield - construction services
Under IFRIC 12 - Concession contracts, yield on construction services should be recognized in accordance with IAS 11 – Construction
contracts. The regulatory model and the calculation rules for the tariffs do not permit AdP Group companies to eliminate the
construction service or the operation service from the tariff or that the fair value of the respective yield be determined reliably.
It should be pointed out that AdP Group, during the infrastructure construction phase, acts as an “agent”/intermediary, transferring
risks and returns to a third party (who constructs), without appropriating any margin doing the course of its operating activity.
As such, and taking into account the regulated activity of the AdP Group companies, the recognized yield is that which results strictly
from application of the tariffs approved by the Awarding Body and monitored by the Regulator, plus or minus the underlying tariff
deficit, as stipulated in the concession contracts and as such yield on construction services is not yet known..