Ferrovial, S.A. and Subsidiaries consolidated financial statements. Board of Directors 23 February 2012

Transcription

1 Consolidated financial statements for 2011 and consolidated financial statements Ferrovial, S.A. and Subsidiaries Board of Directors 23 February 2012 Ferrovial, S.A. Consolidated financial statements at 31 December

2 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION FOR 2011 AND CONSOLIDATED INCOME STATEMENTS FOR 2011 AND CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR 2011 AND CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR 2011 AND CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 2011 AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR COMPANY ACTIVITIES AND SCOPE OF CONSOLIDATION IMPACT ON THE CONSOLIDATED FINANCIAL STATEMENTS OF THE SALE OF 5.88% OF BAA SUMMARY OF THE MAIN ACCOUNTING POLICIES MANAGEMENT OF FINANCIAL RISKS AND CAPITAL SEGMENT REPORTING GOODWILL AND ACQUISITIONS INTANGIBLE ASSETS INVESTMENTS IN INFRASTRUCTURE PROJECTS PROPERTY, PLANT AND EQUIPMENT INVESTMENTS IN COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD NON-CURRENT FINANCIAL ASSETS DERIVATIVE FINANCIAL INSTRUMENTS AT FAIR VALUE NON-CURRENT ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE INVENTORIES TRADE AND OTHER RECEIVABLES EQUITY DEFERRED INCOME PROVISIONS AND PENSION SURPLUS OTHER PROVISIONS NET CASH POSITION OTHER NON-CURRENT LIABILITIES TRADE AND OTHER PAYABLES TAX MATTERS CONTINGENT LIABILITIES, CONTINGENT ASSETS AND OBLIGATIONS FAIR VALUE ADJUSTMENTS IMPAIRMENT AND DISPOSALS OF NON-CURRENT ASSETS AND OTHER NON-RECURRING EFFECTS OPERATING REVENUE STAFF COSTS FINANCIAL RESULT NET PROFIT OR LOSS FROM DISCONTINUED OPERATIONS EARNINGS PER SHARE CASH FLOW REMUNERATION OF THE BOARD OF DIRECTORS SHARE BASED PAYMENT INFORMATION ON TRANSACTIONS WITH RELATED PARTIES DIRECTORS OWNERSHIP INTERESTS IN AND POSITIONS OR FUNCTIONS AT COMPANIES ENGAGING IN AN ACTIVITY THAT IS IDENTICAL, SIMILAR OR COMPLEMENTARY TO THE COMPANY OBJECT OF FERROVIAL AUDITOR S FEES EVENTS AFTER THE REPORTING PERIOD COMMENTARIES ON APPENDICES EXPLANATION ADDED FOR TRANSLATION TO ENGLISH Ferrovial, S.A. Consolidated financial statements at 31 December

3 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 3 and 40). In the event of a discrepancy, the Spanish-language version prevails. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION FOR 2011 AND 2010 Assets (Millions of euros) Notes Non-current assets 17,517 35,465 Goodwill 6 1,493 5,032 Intangible assets Investments in infrastructure projects 8 5,960 21,512 Investment Properties Property, plant and equipment Investment in companies accounted for using the equity method 10 5,219 3,110 Non-current financial assets 11 1,893 2,184 Infrastructure project receivables 1,279 1,344 Available-for-sale financial assets 0 34 Restricted cash and other non-current financial assets Other receivables Deferred tax assets 23 2,022 2,068 Derivative financial instruments at fair value Assets classified as held for sale ,515 Current assets 5,453 6,306 Inventories Trade and other receivables 15 2,677 3,161 Trade receivables for sales and services 2,254 2,526 Other receivables Current tax assets Provisions Cash and cash equivalents 20 2,349 2,701 Infrastructure project companies Restricted cash Other cash and cash equivalents Other companies 2,161 2,007 TOTAL ASSETS 22,972 43,287 Equity and liabilities (Millions of euros) Notes Equity 16 6,288 6,628 Equity attributable to the equity holders 6,138 5,194 Equity attributable to non-controlling interests 150 1,434 Deferred income Non-current liabilities 10,815 28,596 Provisions for pensions Other long-term provisions 19 1, Bank borrowings 20 6,695 21,511 Debt securities and borrowings of infrastructure projects 5,503 19,566 Bank borrowings of other companies 1,192 1,944 Other payables Deferred tax liabilities 23 1,299 3,951 Derivative financial instruments at fair value 12 1,521 1,968 Liabilities classified as held for sale Current liabilities 5,577 6,975 Bank borrowings 20 1,214 1,530 Debt securities and borrowings of infrastructure projects 1,145 1,415 Bank borrowings of other companies Trade and other payables 22 3,882 4,889 Trade payables 3,128 3,906 Current tax liabilities Other non-trade payables Operating Provisions TOTAL EQUITY AND LIABILITIES 22,972 43,287 The intangible assets, property, plant and equipment and investment property used in infrastructure projects are included under Investments in Infrastructure Projects. The accompanying Notes 1 to 40 and Appendix 1 are an integral part of the consolidated statement of financial position at 31 December Ferrovial, S.A. Consolidated financial statements at 31 December

4 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 3 and 40). In the event of a discrepancy, the Spanish-language version prevails. CONSOLIDATED INCOME STATEMENTS FOR 2011 AND 2010 Millions of euros Notes Before fair Fair value value adjustments adjustments (*) Total 2011 Before Fair fair value value adjustments adjustments (*) Revenue 7, ,446 9, ,384 Other operating income Total 2010 Total operating revenue 27 7, ,461 9, ,401 Materials consumed 2, ,366 3, ,028 Staff costs 28 2, ,018 2, ,815 Other operating expenses 2, ,258 2, ,311 Total operating expenses 6, ,642 8, ,155 Gross profit from operations , ,246 Depreciation and amortisation charge Profit from operations before impairment and non-current asset disposals Impairment and disposals of non-current assets ,888 2,572 Profit from operations ,647 1,887 3,533 Finance income of infrastructure projects Finance costs of infrastructure projects Gains and losses on derivative financial instruments and other fair value adjustments Financial result of infrastructure projects Finance income of other companies Finance expense of other companies Gains and losses on derivative financial instruments and other fair value adjustments Financial result of other companies Financial Result Share of profits of companies accounted for using the equity method Consolidated profit before tax ,014 1,854 2,869 Income tax Consolidated profit or loss from continuing operations ,891 2,649 Net profit or loss from discontinued operations (Exclusion from consolidation of BAA) 2 and Profit or loss of BAA Disposal Gain Consolidated profit or loss for the year , ,501 2,182 Profit or loss for the year attributable to non-controlling interest Profit for the year attributable to the Parent , ,506 2,163 Net earnings per share attributable to the Parent 31 Basic Diluted (*) Relating to gains and losses arising from changes in the fair value of derivatives, other financial assets and liabilities and assets and liability impairment (see Note 25). The accompanying Notes 1 to 40 and Appendix 1 are an integral part of the consolidated income statement for Ferrovial, S.A. Consolidated financial statements at 31 December

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 3 and 40). In the event of a discrepancy, the Spanish-language version prevails. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR 2011 AND 2010 Millions of euros Attributable to the Parent 1,269 2,163 Attributable to non-controlling interests Consolidated profit or loss for the year 1,268 2,182 Income and expense recognised directly in equity before tax: Hedges Defined benefit plans Translation differences Income and expense recognised directly in equity of fully consolidated companies Income and expense recognised directly in equity of companies accounted for using the equity method Income and expense recognised directly in equity relating to discontinued operations Taxes Amounts transferred to profit or loss of fully consolidated companies Amounts transferred to profit or loss relating to discontinued operations Attributable to the Parent Attributable to non-controlling interests Income and expense recognised directly in equity Attributable to the Parent 1,314 2,403 Attributable to non-controlling interests Total comprehensive income for the year 1,160 2,432 The accompanying Notes 1 to 40 and Appendix 1 are an integral part of the consolidated statement of comprehensive income for 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 3 and 40). In the event of a discrepancy, the Spanish-language version prevails. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR 2011 AND 2010 Millions of euros Share capital Share premium Treasury shares Other reserves 2011 Retained earnings Attributable to equity holders Attributable to noncontrolling interests Total equity Balance at 31/12/ , ,705 5,194 1,434 6,628 Consolidated profit or loss for the year 1,269 1, ,268 Comprehensive income for the year ,269 1, ,160 Dividends paid Capital increases/reductions Transactions with owners Exclusion from consolidation of BAA -1,127-1,127 Changes in the scope of consolidation Other changes Balance at 31/12/ , ,607 6, ,288 Millions of euros Share capital Share premium Treasury shares Other reserves 2010 Retained earnings Attributable to equity holders Attributable to noncontrolling interests Total equity Balance at 01/01/ ,022-1, ,986 1,570 4,556 Changes in accounting policies Restated balance at 01/01/ ,022-1, ,102 1,617 4,719 Consolidated profit or loss for the year 2,163 2, ,181 Income and expense recognised in equity Comprehensive income for the year 240 2,163 2, ,432 Dividends paid Capital increases/reductions Transactions with owners Changes in the scope of consolidation and other changes Balance at 31/12/ , ,705 5,194 1,434 6,628 The accompanying Notes 1 to 40 and Appendix 1 are an integral part of the consolidated statement of changes in equity for Ferrovial, S.A. Consolidated financial statements at 31 December

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 3 and 40). In the event of a discrepancy, the Spanish-language version prevails. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 2011 AND 2010 Millions of euros Notes December 2011 December 2010 Net profit attributable to the Parent 1,269 2,163 Adjustments for Non-controlling interests Depreciation and amortisation charge and provisions Result of companies accounted for using the equity method Results on financing Tax Other operating income Fair value adjustment less costs to sell ,572 Other losses and gains Income taxes paid Changes in receivables, payables and other Dividends from infrastructure project companies received Cash flows from operating activities ,245 Investments in property, plant and equipment and intangible assets Investments in infrastructure projects Investments in non-current financial assets Divestment of infrastructure projects 0 0 Divestment of non-current financial assets 1,264 1,124 Cash flows from investing activities Cash flows before financing activities 1,004 1,175 Proceeds from capital and non-controlling interests Payment of dividends to equity holders of the Parent Payment of dividends to non-controlling interests of investees Other changes in shareholders equity 0 0 Cash flows from shareholders and non-controlling interests Interest paid Interest received Increase in bank borrowings 918 1,185 Decrease in bank borrowings -1, Change in borrowings held for sale Cash flows from financing activities Change in cash and cash equivalents Cash and cash equivalents at beginning of year 2,701 2,480 Cash and cash equivalents at end of year 2,349 2,701 Effect of foreign exchange rate changes on cash and cash equivalents Change in cash and cash equivalents held for sale Change in cash and cash equivalents relating to discontinued operations Discontinued operations Cash flows from operating activities 1,160 1,253 Cash flows from investing activities Cash flows from financing activities Net cash flows from discontinued operations The accompanying Notes 1 to 40 and Appendix 1 are an integral part of the consolidated statement of cash flows for Ferrovial, S.A. Consolidated financial statements at 31 December

7 Consolidated financial statements for 2011 and 2010 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 3 and 40). In the event of a discrepancy, the Spanish-language version prevails. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR Company activities and scope of consolidation. 1.1 Company activities: The consolidated Ferrovial Group ( Ferrovial ) comprises the Parent Ferrovial, S.A. and its subsidiaries, which are detailed in Appendix I. Its registered office is at calle Príncipe de Vergara 135, Madrid. Through these companies, Ferrovial engages in the following lines of business, which are its primary reporting segments pursuant to IFRS 8. a. Construction and execution of all types of public and private works in Spain and abroad, operating basically through Ferrovial Agromán, S.A., the company that heads this business Division. Notable are the international business carried on in Poland through Budimex, S.A. and its investees, the leading construction group in that market, which is listed on the Warsaw stock market and in which the Group holds a 59.06% ownership interest, and the business carried on in the United States (Texas) through the Webber Group, which is wholly owned by Ferrovial. b. Toll roads. This activity consists of the development, financing, construction and operation of toll road projects through Cintra Infraestructuras, S.A., in which Ferrovial, S.A. holds a 100% ownership interest. c. Airports. This activity consists of the development, financing and operation of airports, basically through BAA, a UK company that operates six airports in the United Kingdom and other airport assets through its investees; Ferrovial, S.A. has an ownership interest of 49.99% in BAA. d. Services. This division is headed by Ferrovial Servicios, S.A. and includes the following activities: a) upkeep and maintenance of infrastructure, buildings and facilities (through Amey in the UK and Ferroser Infraestructuras, S.A. and Ferrovial Servicios, S.A. in Spain); b) urban services and waste treatment (basically through Cespa, S.A.). In addition to the description of Ferrovial s activities and for the purposes of understanding these financial statements, it should be noted that a significant part of the business carried on by the Toll roads, Airports and Services Divisions consists of the performance of infrastructure projects. Unlike the above, in most cases involving airports, licenses are of an indefinite nature which is why, although IFRIC 12 is not applicable, the arrangements are very similar to concession arrangements. Accordingly, and in order to aid understanding of the Group s financial performance, these financial statements present separately the impact of projects of this nature on both nonfinancial non-current assets ( Investments in Infrastructure Projects includes the property, plant and equipment, intangible assets and investment property assigned to these projects) and non-current financial assets, borrowings and cash flows. It is also important to highlight that two of the Group's main assets are its investments of 49.99% in BAA and 43.23% in ETR 407, which have been accounted for using the equity method since 2011 and 2010, respectively. In order to provide detailed information on the two companies Note 10 on "Investments in Companies Accounted for Using the Equity Method" includes information relating to the changes in the two companies' balance sheets and income statements, and this information is completed in other Notes with data considered to be of interest. 1.2 Changes in the scope of consolidation The main changes in the scope of consolidation in 2011 were as follows: - Airports Division: on 26 October 2011, 5.88% of the share capital of FGP Topco, the head of the BAA Group, was sold. As a result of this transaction and of the changes that it brought about in the composition of that company's Board of Directors and in the shareholders' agreement, Ferrovial lost control of this Group of companies. Specifically, with the new wording of the shareholders' agreement, Ferrovial now has five votes on the Board of Directors of FGP Topco and of its main subsidiaries, whereas the other three shareholders together have six votes (CDPQ 3 votes, GIC 2 votes and Alinda 1 vote). The impact of this transaction on the consolidated financial statements is described in Note 2. - Services Division; on 17 February the investment of Ferrovial Servicios in Swissport, which had been classified as an asset held for sale in the 2010 consolidated financial statements, as indicated in Note 13 to these consolidated financial statements, was sold. - Toll Roads Division; on 10 January the 50.00% ownership interest of Cintra Infraestructuras in its subsidiary Autopista Trados 45, which had been accounted for using the equity method and classified as an asset held for sale in the 2010 consolidated financial statements, as indicated in Note 13 to these consolidated financial statements, was formally completed. These projects are conducted mainly in the Toll Roads and Services areas under long-term arrangements in which the concession operator, in which the Group generally has interest together with other partners, finances the construction or upgrade of public infrastructure and which fall within the scope of application of IFRIC 12, Service Concession Arrangements. Ferrovial, S.A. Consolidated financial statements at 31 December

8 Also, in this Business Division, on 16 November Cintra, a subsidiary of Ferrovial, agreed on the sale of its 40% ownership interest in Cintra Chile pursuant to the agreement signed on 15 September Construction Division: Ferrovial, through the Polish subsidiary of Ferrovial Agromán, Budimex, entered into an agreement on 17 November 2011 with the Polish railway transport infrastructure operator PKP for the acquisition of Przedsiebiorstwo Napraw Infrastruktury (PNI), a construction company specialising in civil engineering work and in the design, construction and maintenance of railway infrastructure. 2. Impact on the consolidated financial statements of the sale of 5.88% of BAA. 2.1 Disposal gain on the divestment As provided for in IAS 27.34, the sale of a percentage of ownership of an investee that leads to the loss of control entails, from the accounting standpoint, the derecognition of all the assets and liabilities of the subsidiary and the recognition, on the one hand, of the consideration received for the percentage sold and, on the other, of the fair value of the investment retained, and any resulting difference is a gain or loss attributable to the parent. Based on the foregoing, the Company recognised a gain net of taxes of EUR 847 million, consisting of the gain on the sale of the 5.88% holding in BAA, amounting to EUR 141 million, and the remeasurement of the investment retained (49.99%) at fair value, amounting to EUR 706 million. In turn, this gain consisted of the amount of the gain itself, i.e. EUR 1,344 million, and the transfer from reserves to profit or loss in relation to translation differences and valuation adjustments arising on derivatives that the investment had given rise to at the date of sale, amounting to EUR -497 million (see Note 30). 2.2 Equity Method Since the date of the sale, the 49.99% ownership interest in BAA has been accounted for using the equity method, which led to a very significant change in the structure of the consolidated statement of financial position and in the main aggregates in the consolidated income statement. 2.3 Treatment as a discontinued operation As indicated in IFRS 5.36A, an entity that sells an investment in a subsidiary involving loss of control must treat the operation as a discontinued operation, provided that the subsidiary constitutes a major line of business. Based on IFRS 5, the operation was treated as a discontinued operation, despite the fact that, following the transaction, the asset continued to be a strategic asset for the Group and the Group maintains a significant degree of continuing involvement in its management. Presentation in the consolidated income statement on the divestment and the profit or loss generated by the operations of the subsidiary until control was lost, which involves the exclusion from consolidation in both years the income statement of the operation reported, including the net profit or loss generated in a single line item. In this regard, as required by IFRS 5, the heading Net Profit or Loss from Discontinued Operations (Exclusion from Consolidation of BAA)" includes: -Under Disposal Gain, the gain mentioned in Note generated in Under Profit or Loss of BAA, the net profit or loss of BAA for the whole of 2010 and for the period elapsed in 2011 up to the date of sale of the 5.88% ownership interest (October 2011). The profit or loss from that date started to be accounted for using the equity method. -Presentation in the consolidated statement of financial position Unlike the case of the consolidated income statement, for comparison purposes IFRS 5 does not permit the exclusion from consolidation of the investment in the consolidated statement of financial position for 2010 and, therefore, all the line items are fully consolidated in that consolidated statement of financial position. However, in order to provide a better understanding of the impact of the exclusion from consolidation of BAA for the purposes of the consolidated statement of financial position, in the various Notes that analyse the changes between 2010 and 2011 in the line items in the consolidated statement of financial position, a line item called "Exclusion from Consolidation of BAA" has been included in order to separate this impact. - Consolidated statement of cash flows In line with the stance followed in relation to the consolidated income statement and as required by IFRS 5, the changes relating to BAA are excluded from the consolidated statements of cash flows for both 2010 and At the end of the financial statement reported, a detail of the cash flows generated by BAA is presented as cash flows from discontinued operations. - Consolidated statement of comprehensive income and consolidated statement of changes in equity In line with the stance followed in relation to the consolidated income statement and as required by IFRS 5, a separate line item called "Discontinued Operations" is presented showing the effects generated by BAA in the ten-month period in 2011 up to the date of the divestment and concomitant change of method of accounting for the investment retained. The impacts relating to the last two months of the year are presented in the line relating to companies accounted for using the equity method. The main effect on the consolidated financial statements of treating the operation as a discontinued operation is the obligation to recognise in a single line item in the consolidated income statements for both 2011 and 2010 the net gain or loss Ferrovial, S.A. Consolidated financial statements at 31 December

9 2.4 Disclosures concerning BAA In order to cover all the disclosures required and avoid duplication of information between the disclosures required by accounting legislation for discontinued operations and investments accounted for using the equity method, Note 10 on "Investments in Companies Accounted for Using the Equity Method" contains an analysis of the balance sheet and income statement of BAA and of the main changes therein in Summary of the main accounting policies 3.1 Basis of preparation New interpretations Approved for use by the EU Amendment to IFRIC 14 IFRIC 19 Prepayments of a Minimum Funding Requirement Extinguishing Financial Liabilities with Equity Instruments Mandatory application in annual reporting periods beginning on or after : 1 January July 2010 The accompanying financial statements were obtained from the Company s accounting records and are presented in compliance with the regulatory financial reporting framework applicable to the Company and, accordingly, present fairly the Company s equity, financial position and results of operations. The regulatory framework is provided for in International Financial Reporting Standards (IFRSs) approved by Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of 19 July Set out below is a brief reference of the content of these new standards and interpretations. None of these new rules had a significant impact on the preparation of these consolidated financial statements: - IAS 32 (Amended), Financial Instruments: Presentation: amends the accounting treatment of rights, options and warrants denominated in a currency other than the functional currency. 3.1.a) New standards, amendments and interpretations adopted by the European Union mandatorily applicable in 2011 The new accounting rules approved by the European Union that were mandatorily applicable for the first time in 2011 are as follows: New standards and amendments Mandatory application in annual reporting periods beginning on or after: Approved for use by the EU Amendments to IAS 32 Financial Instruments: 1 February 2010 Presentation - Classification of Rights Issues Revision of IAS 24 Related Party Disclosures 1 January 2011 Improvements to IFRS (issued in May 2010) Amendments to various standards Mostly 1 January 2011, some 1 July IAS 24 (Revised), Related Party Disclosures: extends the definition of related party and removes the requirements for government related entities to disclose details of all transactions with the government and other governmentrelated parties. - IFRIC 14 (Amended), IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction: the prepayment of minimum funding requirement contributions may give rise to an asset. - IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments: treatment of the extinguishment of financial liabilities through the issue of equity instruments. 3.1.b) New standards, amendments and interpretations mandatorily applicable in annual reporting periods subsequent to 2011: The new accounting rules approved in 2011 and which are not yet mandatorily applicable are as follows: Ferrovial, S.A. Consolidated financial statements at 31 December

10 New Standards, amendments and interpretations Approved for use in the EU Amendment to IFRS 7 Financial Instruments: Disclosures- Transfers of Financial Assets Not yet approved for use in the EU IFRS 9 Financial Instruments: Classification and Measurement Amendments to IAS 12 Income tax - Deferred Taxes Arising from Investment Property Mandatory application in annual reporting periods beginning on or after: 1 July January January 2012 IFRS 10 Consolidated Financial 1 January 2013 Statements IFRS 11 Joint Arrangements 1 January 2013 IFRS 12 Disclosure of Interests in Other Entities 1 January 2013 IFRS 13 Fair Value Measurement 1 January 2013 IAS 27 (Revised) Separate Financial Statements 1 January 2013 IAS 28 (Revised) Investments in Associates and 1 January 2013 Joint Ventures Amendments to IAS 1 Presentation of Items of Other 1 January 2012 Comprehensive Income Amendments to IAS 19 Employee Benefits 1 January 2013 Amendments to IFRS 9 and IFRS 7 Amendment to IAS 32 Amendments to IFRS 7 IFRIC 20 Mandatory Effective Date and Transition Disclosures Offsetting Financial Assets and Financial Liabilities Offsetting Financial Assets and Financial Liabilities Stripping Costs in the Production Phase of a Surface Mine N/A 1 January January January IFRS 7 (Amended), Financial Instruments: Disclosures: extends and reinforces the disclosures on transfers of financial assets. - IFRS 9, Classification and Measurement: replaces the IAS 39 classification, measurement and derecognition requirements for financial assets and liabilities - IAS 12 (Amended), Income Taxes: on the measurement of deferred taxes arising from investment property using the fair value model in IAS IFRS 10, Consolidated Financial Statements: supersedes the requirements relating to consolidated financial statements in IAS IFRS 11, Joint Arrangements: supersedes IAS 31 on joint ventures, limiting the application of proportionate consolidation to entities in which the liability of the shareholders is not limited to the capital and in which there are rights and obligations relating to the entities' assets and liabilities (joint operations). In all other situations (joint ventures) the equity method must be used. - IFRS 12, Disclosure of Interests in Other Entities: single IFRS presenting the disclosure requirements for interests in subsidiaries, associates, joint arrangements and unconsolidated entities. - IFRS 13, Fair Value Measurement: sets out the framework for fair value measurement. - IAS 27 (Revised), Separate Financial Statements: 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. - IAS 28 (Revised), Investments in Associates and Joint Ventures: revision in conjunction with the issue of IFRS 11, Joint Arrangements. - IAS 1 (Amended), Presentation of Financial Statements: minor amendments in relation to the presentation of items in other comprehensive income, with the requirement to present separately the items that will be reclassified (recycled) to income statement in subsequent periods from those that will not be reclassified. - IAS 19 (Amended), Employee Benefits: the amendments affect basically the presentation of cost components in the income statement; specifically, must be recognised in the income statement the net interest arising from applying to the deficit or surplus the interest rate used to discount the obligations. - Amendments to IFRS 9 and IFRS 7, Mandatory Effective Date and Transition Disclosures: deferral of the effective date of IFRS 9 and amendments to transition requirements and disclosures. - IAS 32 (Amended), Financial Instruments: Presentation and IFRS 7 (Amended), Financial Instruments: Disclosures: additional clarifications on the rules in IAS 32 for offsetting financial assets and financial liabilities and introduction of new associated disclosures in IFRS 7.2. At the date of presentation of these consolidated financial statements Group management is evaluating the impact that the application of these standards might have on the Group's consolidated financial statements. 3.2 Basis of consolidation In 2011 and 2010 all the separate financial statements of all the companies included in the scope of consolidation either referred to the same reporting date or were temporarily brought into line with those of the Parent. Moreover, in order to present uniformly the items included in these consolidated financial statements, uniformity adjustments were made on the basis of the Parent s accounting policies. The consolidated financial statements were prepared using the following methods: a. Full consolidation: all the subsidiaries are fully consolidated. Subsidiaries are companies over whose Ferrovial, S.A. Consolidated financial statements at 31 December

11 management Ferrovial, S.A. holds effective control because it holds more than 50% of the voting power, directly or indirectly through agreements with other shareholders. When assessing whether Ferrovial controls a company, the existence and effects of potential voting rights which may be currently exercised or converted are taken into account. A subsidiary is included in the scope of consolidation when the Group formally obtains effective control. b. Equity method: the equity method is used to account for all the companies over which Ferrovial S.A. has a significant influence. Also accounted for using this method, pursuant to the alternative provided for in IAS 31, are the other companies over which Ferrovial, S.A. holds joint control. In the latter case, the Company considers that the equity method is the method that best ensures fair presentation, since in these cases of joint control the Company does not control the assets or have any present obligation with respect to the liabilities of the investee, but rather only effectively controls the ownership interest in the entity. The new IFRS 11, Joint Arrangements, which will come into force on 1 January 2013, also takes this stance in relation to joint arrangements. c. Proportionate consolidation: the contracts that are undertaken through unincorporated temporary joint ventures (UTEs) or similar entities are proportionately consolidated. Unlike the previous case, it is considered that in these cases of joint control, the parties have a direct involvement in the assets, liabilities, income, expenses and joint and several liabilities in these entities. Operations of this nature contributed to the consolidated Group assets, profits and sales of EUR 1,119 million, EUR 88 million and EUR 1,255 million, respectively, in 2011 (2010: EUR 917 million; EUR 60 million and EUR 1,280 million, respectively). d. Balances and transactions with Group companies: balances and transactions between Group companies are eliminated on consolidation. However, the transactions recognised in the income statement in relation to construction contracts performed by the Construction Division for infrastructure project concession operators are not eliminated on consolidation, since contracts of this kind are treated as construction contracts under which the Group performs work for the concession grantor or regulator in exchange for the right to operate the infrastructure under the terms pre-established by the grantor or regulator. The grantor or regulator thus controls the asset from inception and grants the above-mentioned right in exchange for the work performed, and, therefore, the conclusion may be reached that at Group level the work is performed for third parties. This is in line with IFRIC 12. The detail of the transactions not eliminated on the basis of the foregoing is shown in Note 35 on "Information on Transactions with Related Parties". rates prevailing when they joined the Group. Income and expenses are translated at the cumulative average exchange rates for the year. Differences arising during the aforementioned translation process are recognised in equity under "Translation Differences". Appendix I contains a list of subsidiaries, associates and joint ventures. 3.3 Accounting policies applied to each item in the consolidated statement of financial position and consolidated income statement Intangible assets Intangible assets in the accompanying consolidated statement of financial position are initially carried at acquisition or production cost, including capitalisable borrowing costs, and are subsequently measured at cost less accumulated amortisation and any impairment losses. Intangible assets with a finite useful life are amortised on a straight-line basis, or based on estimated traffic in the case of administrative concessions over the concession term. Intangible assets with an indefinite useful life are not amortised and are tested annually for impairment Investments in infrastructure projects This line item includes the investments made by infrastructure concession operators under the scope of IFRIC 12 (mainly toll roads). It also includes intangible assets and investment property used in projects of this nature. The assets acquired by the concession operator to provide the concession services but which do not form part of the infrastructure (vehicles, furniture, computer hardware, etc.) are not included in this line item. Assets of this nature are classified on the basis of their nature and are depreciated over their useful life, using a method that reflects their economic use. e. Translation of financial statements in currencies other than the euro: the financial statements of consolidated subsidiaries and joint ventures whose accounting records are denominated in a currency other than the euro are translated to euros by applying the yearend exchange rates to all items in their statements of financial position, except for equity and investments in Group companies, which are translated at the exchange Ferrovial, S.A. Consolidated financial statements at 31 December

12 Amortisation and depreciation methods: Toll road concessions: IFRIC 12 - Intangible asset model All initial investments relating to the infrastructure that is subsequently returned to the grantor, including expropriation costs and borrowing costs capitalised during construction, are amortised on the basis of the expected pattern of consumption applicable in each case (e.g., forecast vehicle numbers in the case of toll roads) over the term of the concession. The investments contractually agreed on at the start of the concession on a final and irrevocable basis to be made at a later date during the term of the concession, and provided they are not investments made to upgrade infrastructure, are considered to be initial investments. For investments of this nature, an asset and an initial provision are recognised for the present value of the future investment, applying a discount rate to calculate the present value that is equal to the cost of the borrowings associated with the project. The asset is amortised based on the pattern of consumption over the entire term of the concession and the provision is increased by the related interest cost during the period until the investment is made. Where a payment is made to the grantor to obtain the right to operate the concession, this amount is also amortised based on the pattern of consumption over the concession term. A provision is recognised for replacement investments, which must have been set up in full by the time the investment becomes operational. The provision is recognised on the basis of the pattern of consumption over the period in which the obligation arises, on a time proportion basis. Infrastructure upgrade investments are those that increase the infrastructure's capacity to generate revenue or reduce its costs. In the case of investments that will be recovered over the concession term, since the upgrade investments increase the capacity of the infrastructure, they are treated as an extension of the right granted and, therefore, they are recognised in the consolidated statement of financial position when they come into service. They are amortised as from the date on which they come into service based on the difference in the pattern of consumption arising from the increase in capacity. However, if, on the basis of the terms and conditions of the concession, these investments will not be offset by the possibility of obtaining increased revenue from the date on which they are made, a provision will be recognised for the best estimate of the present value of the cash outflow required to settle the obligations related to the investment that will not be offset by the possibility of obtaining increased revenue from the date on which the investments are made. The balancing item is a higher acquisition cost of the intangible asset. In the case of the proportional part of the upgrade or increase in capacity that is expected to be recovered through the generation of increased future revenue, the general accounting treatment used for investments that will be recovered in the concession term will be applied. Set forth below are details of the main toll road concessions in force, showing their duration and the accounting method applied: Concession operator Country Concession term First year of concession Consolidation method Skyway Concession Co. US Full SH 130 Concession Co. (1) US Full North Tarrant Express (2) US Full LBJ Express (2) US Full Autopista del Sol Spain Full M-203 Alcalá O'Donnell Spain Full Autopista Madrid Sur Spain Full Autopista Madrid-Levante (3) Spain Full EuroScut Algarve Portugal Full Euroscut Azores Portugal Full Eurolink Motorway Operations Ireland Full 407 ETR Internacional Inc. Canada Equity method Indiana Toll Roads US Equity method Nea Odos and Central Greece Greece Equity method (1) Concession term of 50 years as from completion of the construction work, estimated at five years. (2) Concession term of the shorter of 50 years of operation and 52 years as from the contract execution date. (3) The concession term may be extended by four years if certain service quality parameters are achieved Property, plant and equipment The assets included in Plant, Property and Equipment in the accompanying consolidated statement of financial position are carried at acquisition or production cost, less the related accumulated depreciation and any accumulated impairment losses. In-house work on property, plant and equipment is valued, for each investment, by adding the direct or indirect costs allocable to the investment to the cost of the materials used. Borrowing costs incurred during the construction or production period, before the assets are ready to come into operation, are capitalised, whether they derive from borrowings arranged specifically to acquire the assets or from funds borrowed generally used to obtain a qualifying asset as defined in IAS 23. The Group companies calculate the depreciation on property, plant and equipment using the method that best approximates the effective technical decline in value and the estimated years of useful life of each asset. The straight-line method is generally employed, with the exception of certain Construction business machinery, which is depreciated using the diminishing balance method. The useful lives and residual values of these assets are reviewed annually. The consolidated companies depreciate their property, plant and equipment basically over the following years of useful life: Ferrovial, S.A. Consolidated financial statements at 31 December

13 Years of useful life Buildings and other structures Machinery, fixtures and tools 2-25 Furniture 2-15 Transport equipment 3-20 Other items of property, plant and equipment Investment in infrastructure projects Investment in infrastructure projects includes the net values of land, buildings and other structures that fulfil the requirements of IAS 40. Investment property is carried at acquisition cost less accumulated depreciation and any impairment losses. The Group does not apply the fair value model permitted by IAS 40. The Group companies depreciate investment property on a straight-line basis over the estimated useful life of the property (between 5 and 50 years) Impairment losses The Group tests goodwill and intangible assets with indefinite useful lives and intangible assets not yet available for use for impairment annually. At each reporting date the Group tests depreciable assets for permanent impairment that might make it necessary to write-down the assets. Should evidence of impairment be detected, the asset s recoverable amount is calculated in order to identify the extent of the impairment loss if the recoverable amount is lower than the carrying amount of the asset, and the difference is recognised in the income statement. Impairment losses must be assessed for each individual asset. If this is not possible, the impairment loss is determined for the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets (cash-generating units). lease payments. The interest rate implicit in the lease is used to calculate the present value of the lease payments. The cost of the assets held under finance leases is presented in the consolidated statement of financial position on the basis of the nature of the leased asset. When the Group acts as the lessee in an operating lease, lease costs are taken to profit or loss on a straight-line basis over the lease term, irrespective of the payment periods stipulated in the lease. If that the lessor has established incentives in the lease consisting of payments corresponding to the lessee but made by the lessor, the income deriving from these incentives is recognised in the income statement as a reduction of the costs of the lease on the same straight-line basis as that used to recognise the costs in the income statement Financial assets a. Financial assets at fair value through profit or loss: these are assets acquired mainly to generate a profit as a result of fluctuations in their value. They are stated at their fair value on acquisition and at subsequent measurement dates, and any changes are recognised directly in the consolidated income statement. The assets in this category are classified as current assets if they are expected to be realised within twelve months from the reporting date. There are no assets at fair value through profit or loss other than the derivative financial instruments described in Note b. Available-for-sale financial assets: this category includes securities acquired that are not held for immediate trading and have no fixed maturity and relate mainly to investments in companies not included in the Group s scope of consolidation. They are carried at their underlying carrying amount, unless there is better evidence to the contrary, in which case they are carried at their fair value. Recoverable amount is the higher of fair value less costs to sell and value in use. Value in use is calculated on the basis of estimated future cash flows discounted at a rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased up to the limit of the original amount at which the asset had been carried before the impairment loss was recognised. An impairment loss recognised for goodwill must not be reversed in a subsequent period Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the Group, which generally has the option of acquiring the asset at the end of the lease term under the terms agreed on when the lease was arranged. All other leases are classified as operating leases. The Group recognises finance leases as assets and liabilities in the consolidated statement of financial position at the commencement of the lease term, at the lower of the market value of the leased asset and the present value of the minimum Ferrovial, S.A. Consolidated financial statements at 31 December

14 c. Held-to-maturity investments and accounts receivable: Financial asset model provided for in IFRIC 12 This line item includes the service concession arrangements related to infrastructure in which the consideration consists of an unconditional contractual right to receive cash or another financial asset, either because the grantor guarantees to pay the operators specified or determinable amounts or because it guarantees to pay the operator the shortfall between amounts received from users of the public service and specified or determinable amounts. Therefore, these are concession arrangements in which demand risk is borne in full by the grantor. In these cases, the amount payable by the grantor is recognised in assets in the consolidated statements of financial position as a loan or a receivable. To calculate the amount payable by the grantor, the value of the construction, operation and/or maintenance services provided and the interest implicit in arrangements of this nature are taken into consideration. Revenue from the services provided in each period increases the amount of the related receivables with a credit to sales. The interest on the consideration for the services provided increases the amount of the receivables with a credit to other operating income. Amounts received from the grantor reduce the total receivable with a charge to cash. Set forth below are details of the main toll road concessions in force to which the financial asset model is applied, showing their duration and the consolidation method applied: Concession Country Concession First year of Consolidation operator term concession method ii. Terrasa Manresa Spain Full Toll Road Norte Litoral Toll Spain Full Road Eurolink M3 Ireland Full Financial assets are derecognised when the risks and rewards of ownership of the financial asset are substantially transferred. In the specific case of receivables, this is deemed to occur when the default and delinquency risks have been transferred Derivative financial instruments Derivative financial instruments are initially recognised at fair value on the date they are arranged. Subsequent changes in fair value are also recognised at each reporting date. The method used to recognise gains or losses on derivatives depends on whether the instrument has been designated as a hedging instrument and, as the case may be, on the type of hedge involved. The Group uses the following types of hedge: i. Cash flow hedge: a cash flow hedge hedges exposure to highly probable future transactions and changes in cash flows. When there is overhedging (effectiveness of between 80% and 100%), the gain or loss on the ineffective portion of the hedging instrument is taken to the consolidated income statement and the gain or loss on the effective portion is recognised directly in other comprehensive income. When there is underhedging (effectiveness of between 100% and 125%) the gain or loss on the effective portion is recognised in other comprehensive income, while those on the ineffective portion will not have any effect either on other comprehensive income or income statement. The amount deferred in other comprehensive income is not recognised in the income statement until the gains or losses on the hedged transactions are recognised in income statement or until the transactions mature. That amount is recognised in the same line item as the gain or loss on the hedged item. Lastly, should the hedge become ineffective, the amount recognised in other comprehensive income until then is taken to income statement proportionately over the term of the derivative arranged. Fair value hedge: a fair value hedge hedges exposure to changes in the value of a recognised asset or liability or a firm commitment relating to a future transaction. The loss or gain on the hedging instrument and the loss or gain on the hedged asset or liability is recognised in income statement. Other receivables Held-to-maturity investments, loans granted and receivables are initially recognised at fair value and are subsequently measured at amortised cost, and any accrued interest is recognised on the basis of the effective interest rate. The effective interest rate is the discount rate that exactly matches the carrying amount of a financial instrument to all its estimated cash flows of all kinds through its residual life. If at year-end there is objective evidence that not all amounts receivable will be collected, the necessary impairment losses are recognised. The amount of the impairment loss is the difference between the carrying amount of the asset and the present value of the estimated future cash flows, discounted at the effective interest rate. iii. Hedge of net investments in foreign operations: Hedges of this nature hedge exposure to changes in the value of net investments in foreign operations attributable to foreign exchange fluctuations. Gains or losses are recognised in other comprehensive income and taken to income statement when the investment is sold or matures. Gains or losses arising from changes in fair value of derivatives not qualifying for hedge accounting are recognised in the consolidated income statement. Ferrovial, S.A. Consolidated financial statements at 31 December