IBERSOL Annual Report 2018

Consolidated Financial Statements accumulated impairment equal to the expectation of loss estimated to occur within the next 12 months. If credit risk has increased significantly, the Group recognizes an accumulated impairment equal to the expectation of loss that is estimated to occur until the respective maturity of the asset. Regardless of the above, a significant increase in credit risk is assumed if there is objective evidence that a financial asset is impaired, including observable data that draw the attention of the asset holder to the following loss events, among others: significant financial difficulty the issuer or the debtor; restructure of an amount owed to the Group in terms it would not otherwise consider; a breach of contract, such as irrecoverability or delay in payments of interest or capital; or it becomes probable that the debtor will go into bankruptcy or other financial reorganization. Once the event of loss under IFRS 9 (“objective proof of impairment”, in accordance with IAS 39 terminology) has been verified, the accumulated impairment is directly attributed to the instrument in question, and its accounting treatment, based on this similar to that provided for in IAS 39, including the treatment of their interest. The book value of the asset is reduced and the amount of losses recognized in the income statement. If, in a subsequent period, the impairment amount decreases, the amount of impairment losses previously recognized is also reversed in the income statement if the impairment loss is objectively related to the event occurring after the initial recognition. a) Accounts receivable from customers The Group applies the simplified method and records expected loss to maturity for all its accounts receivable, including those that include a significant financial compo- nent. Estimated expected losses were calculated based on the experience of actual losses over a period that, by business or type of customer, were considered statisti- cally significant and representative of the specific characteristics of the underlying credit risk. b) Other amounts receivable and financial assets For assets receivable valued at amortized cost and at fair value through other com- prehensive income, the Group prepares its analyzes based on the general model. In preparing this valuation, the Group makes estimates based on the risk of default and loss rates, which require judgment. The inputs used to assess the risk of losses on these financial assets include: • credit ratings (to the extent available) obtained through information provided by rating agencies such as Standard and Poor’s and Moody’s; • significant changes in expected performance and debtor behavior; and • data extracted from the market, in particular on probabilities of non-compliance. 224