ACCIONA, S.A. AND. SUBSIDIARIES (Consolidated Group)

Transcription

1 ACCIONA, S.A. AND SUBSIDIARIES (Consolidated Group) CONSOLIDATED FINANCIAL STATEMENTS AND DIRECTORS' REPORT Page 1 -

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3 CONTENTS CONSOLIDATED BALANCE SHEETS FOR 2011 AND 2010 CONSOLIDATED INCOME STATEMENTS FOR 2011 AND 2010 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR 2011 AND 2010 CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR 2011 AND 2010 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 2011 AND GROUP ACTIVITIES 2. BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AND BASIS OF CONSOLIDATION 2.1. Basis of presentation 2.2. Basis of consolidation 3. PRINCIPAL ACCOUNTING POLICIES 3.1. Adoption of new standards and interpretations issued 3.2. Accounting policies 3.3. Accounting estimates and judgments 3.4. Changes in accounting estimates and policies and correction of fundamental errors 4. PROPERTY, PLANT AND EQUIPMENT 5. INVESTMENT PROPERTY 6. GOODWILL 7. OTHER INTANGIBLE ASSETS 8. INVESTMENTS IN ASSOCIATES 9. INTERESTS IN JOINT VENTURES 10. NON-CURRENT AND CURRENT FINANCIAL ASSETS 11. BIOLOGICAL ASSETS 12. NON-CURRENT RECEIVABLES AND OTHER NON-CURRENT ASSETS 13. INVENTORIES 14. TRADE AND OTHER RECEIVABLES 15. CASH AND CASH EQUIVALENTS 16. EQUITY - Page 2 -

4 17. PROVISIONS 18. BANK BORROWINGS 19. RISK MANAGEMENT POLICY 20. DERIVATIVE FINANCIAL INSTRUMENTS 21. PREFERENCE SHARES, DEBT INSTRUMENTS AND OTHER MARKETABLE SECURITIES 22. OTHER NON-CURRENT AND CURRENT LIABILITIES 23. TAX MATTERS 24. DISCONTINUED OPERATIONS AND NON-CURRENT ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE 25. GUARANTEE COMMITMENTS TO THIRD PARTIES 26. INCOME 27. EXPENSES 28. SEGMENT REPORTING 29. FINANCE INCOME AND COSTS AND OTHER INCOME AND EXPENSES FOR THE YEAR 30. PROPOSED DISTRIBUTION OF PROFIT 31. ENVIRONMENTAL MATTERS 32. EARNINGS PER SHARE 33. EVENTS AFTER THE REPORTING PERIOD 34. RELATED PARTY TRANSACTIONS 35. REMUNERATION AND OTHER BENEFITS 36. OTHER DISCLOSURES CONCERNING THE BOARD OF DIRECTORS 37. PAYMENT PERIODS 38. EXPLANATION ADDED FOR TRANSLATION TO ENGLISH APPENDICES I.- II.- III.- IV.- V.- GROUP COMPANIES JOINTLY CONTROLLED ENTITIES COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD CHANGES IN THE SCOPE OF CONSOLIDATION DETAIL OF CONSOLIDATED RESERVES AND TRANSLATION DIFFERENCES DIRECTORS' REPORT - Page 3 -

5 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 38). In the event of a discrepancy, the Spanish-language version prevails. ACCIONA, S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS FOR 2011 AND 2010 (Thousands of euros) ASSETS Note 31/12/11 31/12/10 Property, plant and equipment 4 10,419,561 10,168,146 Investment property 5 341, ,475 Goodwill 6 1,048,760 1,049,396 Other intangible assets 7 743, ,680 Non-current financial assets , ,024 Investments accounted for using the equity method 8 82,229 75,984 Biological assets 11 6,814 6,800 Deferred tax assets , ,337 Non-current receivables and other non-current assets , ,377 NON-CURRENT ASSETS 14,020,318 13,615,219 Biological assets Inventories 13 1,211,058 1,616,401 Trade and other receivables 14 2,473,530 2,368,962 Other current financial assets , ,904 Current income tax assets 15,742 59,109 Other current assets 251, ,053 Cash and cash equivalents 15 1,541,778 1,368,618 Non-current assets classified as held for sale and discontinued operations , ,925 CURRENT ASSETS 6,306,522 6,886,972 TOTAL ASSETS 20,326,840 20,502,191 EQUITY AND LIABILITIES Note 31/12/11 31/12/10 Share capital 63,550 63,550 Retained earnings 5,667,965 5,887,482 Treasury shares (411,129) (263,672) Translation differences 23,629 44,120 Interim dividend Equity attributable to equity holders of the Parent 5,344,015 5,731,480 Non-controlling interests 300, ,917 EQUITY 16 5,644,677 6,063,397 Preference shares, debt instruments and other marketable securities 21 56,495 57,537 Bank borrowings 18 6,680,740 4,938,782 Deferred tax liabilities , ,847 Provisions , ,174 Other non-current liabilities , ,481 NON-CURRENT LIABILITIES 8,784,898 7,038,821 Preference shares, debt instruments and other marketable securities Bank borrowings 18 2,216,967 3,215,195 Trade and other payables 2,492,614 2,636,351 Provisions 180, ,160 Current income tax liabilities 88,288 18,129 Other current liabilities , ,295 Liabilities associated with non-current assets classified as held for sale and , ,843 discontinued operations CURRENT LIABILITIES 5,897,265 7,399,973 TOTAL EQUITY AND LIABILITIES 20,326,840 20,502,191 The accompanying Notes 1 to 38 are an integral part of the consolidated balance sheet for Page 4 -

6 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 38). In the event of a discrepancy, the Spanish-language version prevails. ACCIONA, S.A. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS FOR 2011 AND 2010 (Thousands of euros) NOTE Revenue 26 6,645,995 6,263,027 Other income 752, ,779 Changes in inventories of finished goods and work in progress (32,607) (82,011) Procurements 27 (1,677,258) (1,580,568) Staff costs 27 (1,274,100) (1,258,474) Other operating expenses 27 (3,102,403) (2,858,577) Depreciation and amortisation charge and change in provisions and allowances 5, 6,7 & 27 (717,346) (683,223) Impairment and gains or losses on disposals of non-current assets 26 33,713 4,836 Other gains or losses 3,402 (6,232) PROFIT FROM OPERATIONS 631, ,557 Finance income 29 57,206 82,650 Finance costs 29 (466,876) (415,766) Exchange differences 1,589 49,313 Net losses arising from changes in value of financial instruments at fair value 20 (4,559) (4,410) Net gain arising from changes in value of non-financial assets at fair value Result of companies accounted for using the equity method 8 4,822 1,845 PROFIT BEFORE TAX FROM CONTINUING OPERATIONS 223, ,189 Income tax expense 23 (53,451) (55,979) PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 170, ,210 Profit/Loss after tax from discontinued operations PROFIT FOR THE YEAR 170, ,210 Non-controlling interests 16 31,640 (16,991) PROFIT ATTRIBUTABLE TO THE PARENT 202, ,219 BASIC EARNINGS PER SHARE FROM CONTINUING OPERATIONS (euros) DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS (euros) BASIC EARNINGS PER SHARE (euros) DILUTED EARNINGS PER SHARE (euros) The accompanying Notes 1 to 38 are an integral part of the consolidated income statement for Page 5 -

7 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 38). In the event of a discrepancy, the Spanish-language version prevails. ACCIONA, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR 2011 (Thousands of euros) Note Amount Tax effect Total A) CONSOLIDATED PROFIT FOR THE YEAR 170, Profit attributable to the Parent 202, Non-controlling interests (31,640) B) INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY: (516,203) 154,924 (361,279) 1. Revaluation/(Reversal of the revaluation) of property, plant and equipment and intangible assets Revaluation of financial instruments: 2,170 (651) 1,519 a) Available-for-sale financial assets 10 2,170 (651) 1,519 b) Other income / (expenses) Cash flow hedges 20 (484,851) 145,455 (339,396) 4. Translation differences (33,985) 10,197 (23,789) 5. Actuarial gains and losses and other adjustments (77) Companies accounted for using the equity method Other income and expenses recognised directly in equity C) TRANSFERS TO PROFIT OR LOSS: 100,406 (30,122) 70, Revaluation of financial instruments: a) Available-for-sale financial assets b) Other income / (expenses) 2. Cash flow hedges ,406 (30,122) 70, Translation differences 4. Companies accounted for using the equity method 5. Other income and expenses recognised directly in equity TOTAL RECOGNISED INCOME/(EXPENSE) (A+B+C) (415,798) 124,802 (120,573) a) Attributable to the Parent (403,724) 121,180 (80,482) b) Attributable to non-controlling interests (12,074) 3,622 (40,092) The accompanying Notes 1 to 38 are an integral part of the consolidated statement of comprehensive income for Page 6 -

8 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 38). In the event of a discrepancy, the Spanish-language version prevails. ACCIONA, S.A. AND SUBSIDIARIES STATEMENT OF COMPREHENSIVE INCOME FOR 2010 (Thousands of euros) Note Amount Tax effect Total A) CONSOLIDATED PROFIT FOR THE YEAR , Profit attributable to the Parent , Non-controlling interests ,991 B) INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY: (74,727) 22,423 (52,304) 1. Revaluation/(Reversal of the revaluation) of property, plant and equipment and intangible assets Revaluation of financial instruments: (3,786) 1,136 (2,650) a) Available-for-sale financial assets 10 (3,786) 1,136 (2,650) b) Other income / (expenses) Cash flow hedges 20 (191,530) 57,459 (134,071) 4. Translation differences 120,404 (36,121) 84, Actuarial gains and losses and other adjustments (51) Companies accounted for using the equity method Other income and expenses recognised directly in equity C) TRANSFERS TO PROFIT OR LOSS: 113,732 (34,120) 79, Revaluation of financial instruments: a) Available-for-sale financial assets b) Other income / (expenses) Cash flow hedges ,732 (34,120) 79, Translation differences Companies accounted for using the equity method Other income and expenses recognised directly in equity TOTAL RECOGNISED INCOME/(EXPENSE) (A+B+C) 39,005 (11,697) 211,519 a) Attributable to the Parent 20,834 (6,246) 181,808 b) Attributable to no-controlling interests 18,171 (5,451) 29,711 The accompanying Notes 1 to 38 are an integral part of the consolidated statement of comprehensive income for Page 7 -

9 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 38). In the event of a discrepancy, the Spanish-language version prevails. CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY FOR 2011 Equity attributable to the Parent (thousands of euros) Shareholders' equity Share capital Share premium, reserves and interim dividend Treasury shares Profit for the year attributable to the Parent Other equity instruments Valuation adjustments Noncontrolling interests Total equity Beginning balance at 01/01/11 63,550 5,910,902 (263,672) 167, (146,519) 331,917 6,063,397 Adjustments due to changes in accounting policies Adjustments due to errors Adjusted beginning balance 63,550 5,910,902 (263,672) 167, (146,519) 331,917 6,063,397 Total recognised income/(expense) Transactions with shareholders 202,062 (282,544) (40,092) (120,574) -- (168,748) (147,457) ,754 (4,891) (316,342) Capital increases/(reductions) -- Conversion of financial liabilities into equity Dividends paid (191,110) (3,039) (194,149) Treasury share transactions (net) Increases/(Decreases) due to business combinations Other transactions with shareholders (970) (147,457) (148,427) 23,332 4,754 (1,852) 26,234 Other changes in equity , (167,219) ,728 18,197 Share-based payment -- Transfers between equity items 167,219 (167,219) -- Other changes 4,469 13,728 18,197 Ending balance at 31/12/11 63,550 5,913,842 (411,129) 202, (424,309) 300,662 5,644, The accompanying Notes 1 to 38 are an integral part of the consolidated statement of changes in total equity for Page 8 -

10 CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY FOR 2010 Equity attributable to the Parent (thousands of euros) Shareholders' equity Share capital Share premium, reserves and interim dividend Treasury shares Profit for the year attributable to the Parent Other equity instruments Valuation adjustments Noncontrolling interests Total equity Beginning balance at 01/01/10 Adjustments due to changes in accounting policies Adjustments due to errors 63,550 4,765,862 (155,333) 1,268, (161,108) 306,146 6,087, Adjusted beginning balance 63,550 4,765,862 (155,333) 1,268, (161,108) 306,146 6,087,510 Total recognised income/(expense) Transactions with shareholders 167,219 14,589 29, , (121,587) (108,339) (6,279) (236,205) Capital increases/(reductions) -- Conversion of financial liabilities into equity Dividends paid (120,554) (5,855) (126,409) Treasury share transactions (net) Increases/(Decreases) due to business combinations Other transactions with shareholders (1,033) (108,339) (109,372) (424) (424) Other changes in equity -- 1,266, (1,268,393) , Share-based payment -- Transfers between equity items 1,268,393 (1,268,393) -- Other changes (1,766) 2, Ending balance at 31/12/10 63,550 5,910,902 (263,672) 167, (146,519) 331,917 6,063, The accompanying Notes 1 to 38 are an integral part of the consolidated statement of changes in total equity for Page 9 -

11 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 38). In the event of a discrepancy, the Spanish-language version prevails. ACCIONA, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 2011 AND 2010 (Thousands of euros) CASH FLOWS FROM OPERATING ACTIVITIES 887,373 1,240,101 Profit before tax from continuing operations 223, ,189 Adjustments for: 1,017, ,351 Depreciation and amortisation charge 974, ,679 Other adjustments to profit (net) 42, ,672 Changes in working capital (119,590) 99,861 Other cash flows from operating activities: (234,032) (11,300) Interest paid (446,704) (420,104) Interest received 52, ,356 Income tax recovered/(paid) 11, ,892 Other amounts received/(paid) relating to operating activities 148,031 68,556 CASH FLOWS FROM INVESTING ACTIVITIES (486,663) (962,742) Payments due to investment: (1,042,940) (1,156,741) Group companies, associates and business units (60,822) (5,431) Property, plant and equipment, intangible assets and investment property (982,118) (1,151,310) Proceeds from disposal: 478, ,192 Group companies, associates and business units 426,452 4,886 Property, plant and equipment, intangible assets and investment property 52, ,306 Other cash flows from investing activities: 77,485 22,807 Dividends received 6,409 4,437 Other amounts received/(paid) relating to investing activities 71,076 18,370 CASH FLOWS FROM FINANCING ACTIVITIES (211,929) (277,644) Proceeds and (payments) relating to equity instruments: (154,565) (113,749) Purchases (154,565) (113,749) Disposals Proceeds and (payments) relating to financial liability instruments: 331, ,501 Proceeds from issues 2,871,241 1,831,488 Repayments and redemptions (2,540,128) (1,651,987) Dividends and returns on other equity instruments paid (194,149) (126,409) Other cash flows from financing activities (194,327) (216,987) Other amounts received/(paid) relating to financing activities (194,327) (216,987) EFFECT OF FOREIGN EXCHANGE RATE CHANGES (15,623) 33,256 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 173,159 32,971 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,368,619 1,335,648 CASH AND CASH EQUIVALENTS AT END OF YEAR 1,541,778 1,368,619 COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF YEAR Cash on hand and at banks 884, ,244 Other financial assets 657, ,375 TOTAL CASH AND CASH EQUIVALENTS AT END OF YEAR 1,541,778 1,368,619 The accompanying Notes 1 to 38 are an integral part of the consolidated statement of cash flows for Page 10 -

12 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 2 and 38). In the event of a discrepancy, the Spanish-language version prevails. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 OF ACCIONA, S.A. AND SUBSIDIARIES (Consolidated Group) 1.- Group activities Acciona, S.A. ( the Parent or the Company ) and its subsidiaries compose the Acciona Group ( Acciona or the Group ). Acciona, S.A.'s registered office and headquarters are in Alcobendas (Madrid), at Av. Europa, 18. The Acciona Group companies operate in several industries, including most notably: - Acciona Infrastructure: including mainly construction and engineering activities and transport and hospital concessions. - Acciona Real Estate: real estate portfolio, property development and car park operation. - Acciona Energy: including the various industrial and commercial activities of the electricity business, ranging from the construction of wind farms to the generation, distribution and retailing of various energy sources. - Acciona Logistics and Transport Services: this division is an integral provider of passenger and cargo transportation services (land, sea and air). - Acciona Urban and Environmental Services: carries on activities relating to urban services and environmental protection, and also performs all kinds of activities, work and services, specific or related to the water cycle. - Other businesses: businesses relating to fund management and stock market brokerage, wine production and other investments. Note 28 to the accompanying consolidated financial statements Segment Reporting includes detailed information relating to the assets, liabilities and transactions carried out in each of the above business divisions that compose the Acciona Group. On 24 March 2011, the managing bodies of Acciona, S.A., Grupo Entrecanales, S.A., Servicios Urbanos Integrales, S.A., Tivafen, S.A. (Sole-Shareholder Company) and Ósmosis Internacional, S.A. (Sole-Shareholder Company) approved the common plan for the merger by absorption of Grupo Entrecanales, S.A., Servicios Urbanos Integrales, S.A., Tivafen, S.A. (Sole-Shareholder Company) and Osmosis Internacional, S.A. (Sole-Shareholder Company) (all known together as the absorbed companies) by Acciona, S.A. (absorbing company), with the dissolution without - Page 11 -

13 liquidation of the absorbed companies and the transfer en bloc of all their assets and liabilities to the absorbing company, which would acquire, by universal succession, the rights and obligations of the absorbed companies. This merger plan was registered at the Mercantile Registry on 29 March Since in aggregate net terms the only assets of the absorbed companies are shares of the absorbing company, there was no capital increase at Acciona, S.A. in order to cover the exchange of shares. Also, the shareholders at the Annual General Meeting held on 9 June 2011 approved the aforementioned merger by absorption. On 10 June the related notice for opposition by creditors was published, pursuant to Article 44 of Law 3/2009, of 3 April, on structural changes to companies ("LME"). The merger by absorption became effective, pursuant to Article 46 of the LME, on the filing thereof at the Mercantile Registry on 14 June Basis of presentation of the consolidated financial statements and basis of consolidation 2.1 Basis of presentation The consolidated financial statements for 2011 of the Acciona Group were prepared by the directors of Acciona, S.A. at the Board of Directors Meeting held on 23 February 2012, and present fairly the Group's consolidated equity and financial position at 31 December 2011, and the results of its operations, the changes in the consolidated statement of comprehensive income, the changes in the consolidated equity and the consolidated cash flows in the year then ended. These consolidated financial statements were prepared in accordance with the regulatory financial reporting framework applicable to the Group and, in particular, with International Financial Reporting Standards (IFRSs) as adopted by the European Union, in conformity with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council. The main mandatory accounting principles and measurement bases applied, the alternative treatments permitted by the relevant legislation in this connection and the standards and interpretations issued but not yet in force at the date of formal preparation of these consolidated financial statements are summarised in Note 3. These consolidated financial statements were prepared on the basis of the accounting records kept by the Parent and by the other Group companies. These records include the figures relating to the joint ventures, groupings and consortia in which the Group companies have interests, which are proportionately consolidated through the inclusion of the proportion of the assets, liabilities and transactions of these entities relating to the Group's ownership interest therein, after the appropriate eliminations of asset and liability balances and intra-group transactions in the year. - Page 12 -

14 The Acciona Group's consolidated financial statements for 2011 were approved by the shareholders at the Annual General Meeting on 9 June The consolidated financial statements for 2011 of the Acciona Group and the separate financial statements for 2011 of the companies composing the Group have not yet been approved by the shareholders at the respective Annual General Meetings. However, the Parent's Board of Directors considers that the aforementioned financial statements will be approved without any material changes. These consolidated financial statements are presented in thousands of euros (unless otherwise indicated) because the euro is the functional currency of the principal economic area in which the Acciona Group operates. Foreign operations are accounted for in accordance with the policies established in Notes 2.2-g and 3.2-q. 2.2 Basis of consolidation a. Consolidation methods The Group's subsidiaries, considered to be the companies over which effective control is exercised by virtue of ownership of a majority of the voting rights in their representation and decision-making bodies, were fully consolidated (see Appendix I). Joint ventures -entities managed jointly with third parties on the basis of contractual arrangements- were proportionately consolidated (see Appendix II). Associates, i.e. companies not classified as subsidiaries or joint ventures over whose management the Group is in a position to exercise significant influence, were accounted for using the equity method (see Appendix III). As a general rule, associates are deemed to be companies in which the Group holds more than 20% of the share capital or of the voting power in their governing bodies. In addition, certain companies were considered to be associates, even though the aforementioned percentage was not reached, because significant influence is deemed to exist (basically through membership of the Board of Directors and/or significant transactions with the associate). b. Eliminations on consolidation All material balances and effects of the transactions performed by the subsidiaries with associates and joint ventures were eliminated on consolidation. The corresponding gains on transactions with associates and jointly controlled entities are eliminated to the extent of the Group's ownership interest in the share capital thereof. Exceptionally, the profits and losses on internal transactions with Group companies, jointly controlled entities or associates in connection with certain concession-related activities were not eliminated. - Page 13 -

15 c. Uniformity The Spanish resident companies included in the scope of consolidation were consolidated on the basis of their separate financial statements prepared in accordance with the Spanish National Chart of Accounts and foreign companies were consolidated in accordance with local standards. All material adjustments required to adapt these financial statements to International Financial Reporting Standards and/or make them compliant with the Group's accounting policies were considered in the consolidation process. d. Subsidiaries Subsidiaries are defined as companies over which the Parent has the capacity to exercise effective control; control is, in general but not exclusively, presumed to exist when the Parent owns directly or indirectly more than half of the voting power of the investee. In accordance with IAS 27, control is the power to govern the financial and operating policies of a company so as to obtain benefits from its activities. The financial statements of the subsidiaries are fully consolidated with those of the Parent. Accordingly, all material balances and effects of the transactions between consolidated companies are eliminated on consolidation. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition on which control is obtained, as indicated in IFRS 3, Business Combinations. Any excess of the cost of acquisition over the fair values of the identifiable net assets is recognised as goodwill. If the cost of acquisition is lower than the fair value of the identifiable net assets, the difference is recognised in profit or loss on the acquisition date. The results of subsidiaries acquired during the year are included in the consolidated income statement from the date of acquisition to year-end. Similarly, the results of subsidiaries disposed of during the year are included in the consolidated income statement from the beginning of the year to the date of disposal. The interest of non-controlling shareholders is stated at their proportion of the fair values of the assets and liabilities recognised. The share of third parties of the equity of their investees is presented within the Group's equity under Non-Controlling Interests in the consolidated balance sheet. Similarly, their share of the profit or loss for the year is presented under Non-Controlling Interests in the consolidated income statement. e. Joint ventures Joint ventures are deemed to be ventures in which the investee (jointly controlled entity) is jointly managed by a Group company and one or several unrelated third parties. All parties share control over strategic decisions, which require the unanimous consent thereof. - Page 14 -

16 The financial statements of jointly controlled entities are proportionately consolidated with those of the Parent and, therefore, the aggregation of balances and subsequent eliminations are only made in proportion to the Group's ownership interest in the capital of these entities. The assets and liabilities relating to jointly controlled operations and the Group's share of the jointly controlled assets are recognised in the consolidated balance sheet classified according to their specific nature. Similarly, the Group's share of the income and expenses of joint ventures is recognised in the consolidated income statement on the basis of the nature of the related items. f. Equity method In the consolidated financial statements, investments in associates are accounted for using the equity method, i.e. at the Group's share of net assets of the investee, after taking into account the dividends received therefrom and other equity eliminations. The value of these investments in the consolidated balance sheet includes, where applicable, the goodwill arising on the acquisition thereof. When the Group's investments in associates are reduced to zero, any additional implicit obligations at the subsidiaries that are accounted for using the equity method are recognised under "Long-Term Provisions" in the consolidated balance sheet. In order to present results uniformly the Group's share of the profit or loss before and after tax of associates is disclosed in the consolidated income statement. g. Translation differences On consolidation, the assets and liabilities of the Group's foreign operations with a functional currency other than the euro are translated to euros at the exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly. Capital and reserves are translated at the historical exchange rates. Any translation differences arising are classified as equity. Such translation differences are recognised as income or as expenses in the year in which the operation is disposed of. h. Changes in the scope of consolidation In 2011 the main exclusions from, and reductions in, the scope of consolidation relate to the sale of the toll road concession operators in Chile, the car park concession operators and a shopping centre in Cornellá, which were all classified as assets held for sale at 31 December 2010 (see Note 24). Also, in 2011 the Group sold 15% of Acciona Termosolar, S.L., although control over this subsidiary was retained after the sale. In 2010 there were no significant changes in the scope of consolidation. Appendix IV includes the changes in the scope of consolidation in 2011 and Page 15 -

17 3.- Principal accounting policies 3.1 Adoption of new standards and interpretations issued Standards and interpretations applicable in 2011 In 2011 new accounting standards came into force, which, accordingly, were taken into account in the preparation of the accompanying consolidated financial statements. The following standards and interpretations were applied in these consolidated financial statements but did not have a significant impact on the figures presented or the presentation and disclosures in these consolidated financial statements, either because they entailed no significant changes or because they referred to economic events that do not affect the Acciona Group. - Revision of IAS 24, Related Party Disclosures - IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments - Amendments to IAS 32 - Classification of Rights Issues - Amendments to IFRSs (issued in May 2010) - Amendments to IFRIC 14, IAS 19, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Standards and interpretations issued but not yet in force At the date of preparation of these consolidated financial statements, the most significant standards and interpretations published by the IASB but not yet in force, either because their effective date is subsequent to the date of the consolidated financial statements or because they have not yet been adopted by the European Union, are as follows: Standards, amendments and interpretations: Approved for use by the EU Amendments to IFRS 7, Financial Instruments: Disclosures- Transfers of Financial Assets (issued in October 2010) Not yet approved for use in the European Union IFRS 9, Financial Instruments: Classification and Measurement (issued in November 2009 and October 2010) Amendments to IAS 12, Income Taxes Deferred Taxes Arising From Investment Property (issued in December 2010) IFRS 10, Consolidated Financial Statements (issued in May 2011) Obligatory application in years beginning on or after: Extends and reinforces the disclosures on transfers of financial assets 1 July 2011 Replaces the IAS 39 classification, measurement and derecognition requirements for financial assets and liabilities On the measurement of deferred taxes arising from investment property using the fair value model in IAS 40 Supersedes the requirements relating to consolidated financial statements in IAS January January January Page 16 -

18 Standards, amendments and interpretations: IFRS 11, Joint Arrangements (issued in May 2011). IFRS 12, Disclosure of Interests in Other Entities (issued in May 2011). IAS 27 (Revised), Separate Financial Statements (issued in May 2011). IAS 28 (Revised), Investments in Associates and Joint Ventures (issued in May 2011). IFRS 13, Fair Value Measurement (issued in May 2011). Amendments to IAS 1, Presentation of Items of Other Comprehensive Income (issued in June 2011). Amendments to IAS 19, Employee Benefits (issued in June 2011). Amendments to IFRS 9 and IFRS 7, Effective Date and Transition Disclosures (issued in December 2011). Amendments to IAS 32, Offsetting Financial Assets and Financial Liabilities (issued in December 2011). Amendments to IFRS 7, Offsetting Financial Assets and Financial Liabilities (issued in December 2011). IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine (issued in October 2011). Supersedes IAS 31 on joint ventures. Single IFRS presenting the disclosure requirements for interests in subsidiaries, associates, joint arrangements and unconsolidated entities The IAS is revised, since as a result of the issue of IFRS 10 it applies only to the separate financial statements of an entity. Obligatory application in years beginning on or after: 1 January January January 2013 Revision in conjunction with the issue of IFRS 11, Joint Arrangements. 1 January 2013 Sets out a framework for measuring fair value. 1 January 2013 Minor amendments relating to the presentation of items of other comprehensive income. 1 July 2012 The amendments affect mainly defined benefit plans since one of the major changes is the elimination of the corridor. Deferral of the effective date of IFRS 9 and amendments to transition requirements and disclosures. Additional clarifications to the rules for offsetting financial assets and financial liabilities under IAS January January January 2014 Introduction of new disclosures associated with IFRS 7. 1 January 2013 Addresses the accounting treatment of the waste material removal costs incurred in surface mining operations. 1 January IFRS 9 - Financial Instruments: Classification and Measurement: IFRS 9 will in the future replace the current part of IAS 39 relating to classification and measurement. There are very significant differences with respect to the current standard relating to financial assets, including, inter alia, the approval of a new classification model based on only two categories, namely instruments measured at amortised cost and those measured at fair value, the disappearance of the current held-to-maturity investments and available-for-sale financial assets categories, impairment analyses only for assets measured at amortised cost and the non-separation of embedded derivatives in financial asset contracts. In relation to financial liabilities, the classification categories proposed by IFRS 9 are similar to those currently contained in IAS 39 and, therefore, there should not be any very significant differences except for the requirement to recognise changes in fair value relating to own credit risk as a component of equity, in the case of the fair value option for financial liabilities. At the reporting date, the future impact of the adoption of this standard had not yet been analysed. - Page 17 -

19 - Amendments to IFRS 7, Financial Instruments: Disclosures - Transfers of Financial Assets. Reinforces the disclosure requirements applicable to transfers of financial assets, including both those in which the assets are not derecognised and, principally, those in which the assets qualify for derecognition but the Group has a continuing involvement in them. At the reporting date, the future impact of the adoption of this standard had not yet been analysed. - IFRS 10, Consolidated Financial Statements, IFRS 11, Joint Arrangements, IFRS 12, Disclosure of Interests in Other Entities, IAS 27 (Revised) Separate Financial Statements and IAS 28 (Revised), Investments in Associates and Joint Ventures. This package of five standards or amendments was issued jointly and is aimed at superseding the current standards in relation to consolidation and the accounting for investments in subsidiaries, associates and joint ventures and the related disclosures. IFRS 10 modifies the current definition of control. The new definition of control sets out the following three elements of control: power over the investee; exposure, or rights, to variable returns from involvement with the investee; and the ability to use power over the investee to affect the amount of the investor s returns. IFRS 11, Joint Arrangements supersedes IAS 31. The fundamental change introduced by IFRS 11 with respect to the current standard is the elimination of the option of proportionate consolidation for jointly controlled entities, which will begin to be accounted for using the equity method. IAS 27 and IAS 28 are revised in conjunction with the issue of the aforementioned new IFRSs. Lastly, IFRS 12 represents a single IFRS presenting the disclosure requirements for interests in other entities (whether they be subsidiaries, associates, joint arrangements or other interests) which are extended. From this "package" of standards IFRS 11 will foreseeably have a material effect on the Acciona Group s consolidated financial statements as the option that has been applied for the consolidation of joint ventures has been the proportionate consolidation of their financial statements (see Note 2.2-e). The Group s directors are currently assessing the impact that the application of this interpretation will have on the consolidated financial statements. With the exception of the matters indicated in the preceding paragraphs, the Group s directors do not expect any significant changes to arise as a result of the introduction of the other standards, amendments and interpretations published but not yet in force, since they are to be applied prospectively, the amendments relate to presentation and disclosure issues and/or the matters concerned are not applicable to the Group s operations. - Page 18 -

20 3.2 Accounting policies The principal accounting policies used in preparing the Group's consolidated financial statements, in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, were as follows: A) Property, plant and equipment Property, plant and equipment acquired for use in the production or supply of goods or services or for administrative purposes are stated in the consolidated balance sheet at the lower of acquisition or production cost (less any accumulated depreciation) and their recoverable amounts. The costs of expansion, modernisation or improvements leading to increased productivity, capacity or efficiency or to a lengthening of the useful lives of the assets are capitalised. Acquisition cost includes professional fees and borrowing costs incurred during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use. The interest rate used is that corresponding to specific-purpose financing or, in the absence thereof, the average financing rate of the company making the investment. The acquisition cost of assets acquired before 31 December 2003 includes any asset revaluations permitted in the various countries to adjust the value of the property, plant and equipment due to the effect of inflation until that date. The balances of assets retired as a result of modernisation or for any other reason are derecognised from the related cost and accumulated depreciation accounts. In-house work on non-current assets is recognised at accumulated cost (external costs, internal costs calculated on the basis of in-house consumption of warehouse materials, and manufacturing costs incurred). Upkeep and maintenance costs are charged to the consolidated income statement for the year in which they are incurred. Generally, depreciation is calculated using the straight-line method, on the basis of the acquisition cost of the assets less their residual value. The land on which the buildings and other structures stand has an indefinite useful life and, therefore, is not depreciated. The Group companies depreciate their property, plant and equipment over the years of estimated useful life. The annual depreciation rates applicable in 2011 were as follows: - Page 19 -

21 Annual depreciation rates Buildings 2 10% Plant in service: Wind farms 5 7% Hydroelectric power plants 1 2% Biomass plants 4% Solar thermal plants 3% Vessels 5 20% Remaining plant 3 30% Machinery 5 33 % Furniture 5 33% Computer hardware 13 33% Transport equipment 7 25% Other items of property, plant and equipment 2 33% Finance leases Assets held under finance leases are recorded in the corresponding asset category and are depreciated over their expected useful lives on the same basis as owned assets. B) Investment property Investment Property in the accompanying consolidated balance sheet reflects the net values (i.e. less any accumulated depreciation) of the land, buildings and other structures held either to earn rentals or for capital appreciation. Investment property is stated at acquisition cost and for all purposes the Group applies the same policies as those used for property, plant and equipment of the same kind. Each year the Group determines the fair value of its investment property based on appraisals undertaken by independent valuers (see Note 5). Investment property is depreciated on a straight-line basis over the years of estimated useful life of the assets, which constitutes the period over which the Group companies expect to use them. The average depreciation rate is as follows: C) Goodwill Annual depreciation rate Buildings held for rental 2 5% Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's ownership interests in the fair value of the identifiable assets and liabilities, including contingent assets and liabilities, of a subsidiary or jointly controlled entity at the date of acquisition or at the date on which control is obtained. - Page 20 -

22 The assets and liabilities acquired are measured provisionally at the date on which control is acquired, and the resulting value is reviewed in a maximum period of one year from the date of acquisition. Until the fair value of the assets and liabilities has been definitively determined, the difference between the cost of acquisition and the carrying amount of the company acquired is recognised provisionally as goodwill. Any excess of the cost of the investments in the consolidated companies over the corresponding underlying carrying amounts acquired, adjusted at the date of first-time consolidation, is allocated as follows: - If it is attributable to specific assets and liabilities of the companies acquired, increasing the value of the assets (or reducing the value of the liabilities) whose market values were higher (lower) than the carrying amounts at which they had been recognised in their balance sheets and whose accounting treatment was similar to that of the same assets (liabilities) of the Group: amortisation, accrual, etc. - If it is attributable to specific intangible assets, recognising it explicitly in the consolidated balance sheet provided that the fair value at the date of acquisition can be measured reliably. - The remaining amount is recognised as goodwill, which is allocated to one or more specific cash-generating units. Goodwill is only recognised when it has been acquired for consideration and represents, therefore, a payment made by the acquirer in anticipation of future economic benefits from assets of the acquired company that are not capable of being individually identified and separately recognised. Goodwill acquired on or after 1 January 2004 is measured at acquisition cost and that acquired earlier is recognised at the carrying amount at 31 December On disposal of a subsidiary or jointly controlled entity, the attributable amount of goodwill is included in the determination of the gain or loss on disposal. Goodwill arising on the acquisition of companies with a functional currency other than the euro is translated to euros at the exchange rates prevailing at the date of the consolidated balance sheet. D) Other intangible assets Intangible assets are recognised initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortisation and any reductions required to reflect accumulated impairment losses. Intangible assets with indefinite useful lives are not amortised. Intangible assets with finite useful lives are amortised over those useful lives using methods similar to those used to depreciate property, plant and equipment. The amortisation rates, which were determined on the basis of the average years of estimated useful life of the assets, are basically as follows: - Page 21 -

23 Annual amortisation rate Development expenditure 10 20% Administrative concessions 2 25% Leasehold assignment rights 10 20% Computer software 7 33% The consolidated companies recognise any impairment loss on the carrying amount of these assets with a charge to Impairment and Gains or Losses on Disposals of Non-Current Assets in the consolidated income statement. The criteria used to recognise the impairment losses on these assets and, where applicable, any subsequent recovery thereof are detailed in Note 3.2-E). Research and development expenditure As a general rule, expenditure on research activities is recognised as an expense in the year in which it is incurred, except in development projects in which an identifiable asset is created, it is probable that the asset will generate future economic benefits, and the development cost of the asset can be measured reliably. The Group's development expenditure, which relates basically to the wind power business, is only recognised as an asset if it is probable that it will generate future economic benefits and the development cost of the asset can be measured reliably. Development expenditure is amortised on a straight-line basis over its useful life. Unless the aforementioned conditions for recognition as an asset are met, development expenditure is recognised as an expense in the year in which it is incurred. Administrative concessions Administrative Concessions includes the concessions that have been acquired by the Group for consideration (in the case of concessions that can be transferred) or for the amount of the expenses incurred to directly obtain the concession from the Government or from the related public agency. Administrative concessions are amortised on a straight-line basis over the term of the concession. Intangible assets in infrastructure projects Since its adoption of IFRIC 12, the Acciona Group has included intangible assets associated with concessions in which the investment recovery risk is borne by the operator under Intangible Assets in Infrastructure Projects. This type of concession-related activity is carried out through investments mainly in transport, car park and water supply infrastructure that is operated by subsidiaries, jointly controlled entities or associates (concession operators), the detail being as follows: - The concessions infrastructure is owned by the grantor in most cases. - The grantor (which may be a public-or-private sector entity) controls or regulates what services the operator must provide and the conditions under which it must provide them. - Page 22 -

24 - The infrastructure is operated by the concession operator as established in the concession tender specifications for an established concession term. At the end of this period, the assets are returned to the concession grantor, and the concession operator has no right whatsoever over these assets. - The concession operator receives revenue for the services provided either directly from the users or through the concession grantor. The most significant accounting methods used by the Acciona Group in relation to these concession arrangements are as follows: - Capitalisation of the borrowing costs incurred during the construction period and noncapitalisation of the borrowing costs after the entry into service of the related assets. - Depreciation of the concession infrastructure on a straight-line basis over the concession term. - Concession operators depreciate these assets so that the carrying amount of the investment made plus the costs considered necessary to return the assets in working order is zero at the end of the concession. - In virtually all of the concessions of the Acciona Group, the construction work was carried out by Group companies. In this regard, the income and expenses corresponding to infrastructure construction or upgrade services are recognised at the gross amount thereof (recognition of the sales and the cost of sales in the consolidated financial statements of the Acciona Group), recognising the construction margin in the consolidated financial statements. If construction were not carried out by the Group itself, this fact would be taken into account for the purpose of recognising sales and the cost of sales in the consolidated financial statements. Computer software The acquisition and development costs incurred in relation to the basic computer systems used in the Group's management are recognised at acquisition cost with a charge to Other Intangible Assets in the consolidated balance sheet. Computer system maintenance costs are recognised with a charge to the consolidated income statement for the year in which they are incurred. E) Impairments of non-current assets At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment, investment property, goodwill and intangible assets to determine whether there is any indication that those assets might have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset itself does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the smallest identifiable cash-generating unit to which the asset belongs. - Page 23 -