IBERSOL Annual Report 2018

Consolidated Financial Statements recoverable amount is the highest amount between an asset’s fair value minus the costs necessary for its sale and its utilisation value. To perform impairment tests, assets are grouped at the lowest level at which it may be able to separately identify cash flows (units generating cash flows). A cash-generating unit (CGU) is the smallest group of assets which includes the asset and that generates cash flows from continued use and which is generally in- dependent from the cash input from other assets or asset groups. In the case of tangible fixed assets, each shop was identified as a cash-generating unit. Impairment tests are carried out for restaurants that, having at least 2 years of activity, present operating results less amortization, depreciation and impairment losses on tangible fixed assets, intangible assets and goodwill. Consolidation differences are distributed among the group’s cash-flow generating units (CGUs), identified according to the country of operation and the business seg- ment. The recoverable value of a CGU is determined based on calculating the utilisation value. Those calculations apply cash flow forecasts based on financial budgets ap- proved by the managers and cover a 5-year period. The Board of Directors determines the budgeted gross margin based on past per- formance and on its market growth expectations. The average weighted growth rate used is consistent with provisions included in the sector’s reports. The discount rates used after taxes and reflect specific risks related with the assets from a CGU. 2.9 FINANCIAL ASSETS 2.9.1 Classification IFRS 9 introduced a financial asset classification model based on the business model used in its management and on the characteristics of the contractual cash flows, replacing the previously existing requirements that determined the classification in the categories of financial assets of IAS 39 After January 1, 2018, the Group classi- fies its other financial assets at the time of initial recognition in accordance with the requirements introduced by IFRS 9 in the following asset categories. a) Assets measured at amortized cost A financial asset is measured at amortized cost if the objective inherent to the busi- ness model is achieved by collecting the respective contractual cash flows and if the underlying contractual cash flows represent only the payment of principal and interest. Assets classified in this category are initially recognized at fair value and subsequently measured at amortized cost. Loans and accounts receivable from customers are generally held for the purpose of collecting contractual cash flows and it is expected that the underlying contractual 222