Annual Report 2010 - AdP

Financial assets available for sale
In the case of financial assets classified as available for sale, a prolonged or significant decline in the fair value of the instrument below
its cost value is considered to be an indicator that the instruments have been impaired. If there is similar evidence in relation to
financial assets classified as available for sale, the accumulated loss - measured as the difference between acquisition cost and current
fair value, less impairment losses for the financial asset that have already been recognized under results - it is removed from shareholder
equity and recognized in the income statement. Impairment losses on capital instruments recognized under results are not reversed
through the income statements.
Customers, debtors and other financial assets
Impairment loss adjustments are recorded when there are objective indicators that the group will not receive all amounts that it
was entitled to under the original terms of the established contracts. When identifying impairment situations, various indicators are
used, such as the following: (i) analysis of default; (ii) default for more than 3 months; (iii) financial difficulties of the debtor; (iv)
probability of debtor bankruptcy.
The adjustment for impairment losses is determined by the difference between the recoverable value and the balance sheet value
of the financial asset and is recorded under results for the period. The balance sheet value of these assets is reduced to the recoverable
value via an adjustments account. When an amount receivable from customers and debtors is considered unrecoverable, it is written
off using the adjustments account for accumulated impairment losses. Subsequent recovery of amounts that have been written off
are recorded under results. When overdue amounts receivable from customers or other debtors have their terms renegotiated,
they cease to be considered overdue and are considered new credits.
2.16.2 Impairment of non-financial assets
Group assets are analyzed at the date of each balance sheet in order to detect any impairment losses. If there is any indication of
this, the recoverable value of the asset is assessed. For goodwill and other intangible assets with undefined useful life, the recoverable
value is assessed annually at the balance sheet date. The recoverable value of group assets for which there are indications of potential
impairment losses is determined. Whenever the book value of an asset or the unit that generates cash where the asset is inserted
exceeds the recoverable amount, it is reduced up until the recoverable amount and this impairment loss is recognized under results
of the year.
The group conducts an impairment analysis for cash generating units with a business activity that has begun less than a certain time
ago (two to three years). However, when the respective businesses have not yet attained sufficient maturity, impairment losses are
recognized when there are unequivocal indicators that recoverability is considered remote.
Determination of the recoverable amount of assets
The recoverable amount of medium and long-term receivables is equal to the current value of future expected receivables, using
the effective interest rate implicit in the original operation as a discount factor. For the remaining assets, the recoverable amount is
the highest between the net sale price and its use value. In determining the use value of an asset, future estimated cash flow is
discounted using a rate of discount before taxes that reflects current market valuations of the time value of money and the specific
risks of the asset in question. The recoverable amount of the assets that do not generate independent cash flows by themselves is
determined in conjunction with the cash generating unit in which the assets are inserted.
Reversal of impairment losses
An impairment loss recognized in a medium and long-term receivable amount shall only be reversed if the justification for the
increase in the respective recoverable amount pertains to an event that has occurred after the date on which the impairment loss
was recognized.
An impairment loss recognized in relation to goodwill shall not be reversed. Impairment losses related to other assets are reversed
whenever there are changes in the estimates used to determine the respective recoverable amount. Impairment losses are reversed
up until the value, net of amortizations, that the asset would have had if the impairment loss had not been recognized.
2.17 Capital
Ordinary shares are classified as total equity. Costs directly attributable to the issue of new shares or options are stated in total
equity as a deduction, net of taxes, at the issued amount.
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