IBERSOL Annual Report 2018

ANNUAL REPORT 2018 The Group has well identified the nature of the involved risks, guarantees through its software that each hedge instrument is followed under the Group’s risk policy, re- cording thorough and formally the hedges relationships; the hedges goal and strat- egy; classification of the hedges relationship; description of the nature of the risk that’s being cover; identification of the hedge instrument and covered item; descrip- tion of initial measure and future effectiveness of the hedge; identification of the excluded, if any, part of the hedge instrument. The Group will consider discontinued an hedge instrument when it is sold, expires or is realised; the hedge ceases to fulfil the hedge accounting criteria; for the cash flow hedge the expected transaction in unlikely or unexpected; the Group cancels the hedge instruments for managing reasons. 2.22 SUBSIDIARIES WHERE THE FUNCTIONAL CURRENCY IS A CURRENCY OF A HYPERINFLATIONARY ECONOMY As a result of the high levels of inflation in the last three years approaching 100% cumulative terms and analyzing some qualitative aspects of the Angolan economy (the use of the USD as the reference currency), it is concluded that Angola qualifies as a hyperinflationary economy. Accordingly, IAS 29 was applied according to which the financial statements of a subsidiary reporting in the currency of a hyperinflation- ary economy need to be restated by applying a general price index of the coun- try in whose currency it reports before being included in the consolidated financial statements. The restated financial statements are then translated into the closing exchange rates. However, in accordance with IAS 21, the results and financial position of an entity whose functional currency is a currency of a hyperinflationary economy must be translated into the group’s presentation currency without restatement of compara- tives. Thus, the beginning of the first period of application of IAS 29 is January 1, 2017, and adjustments to this date are recorded as a contra entry to Retained Earn- ings. The restatement of the financial statements of subsidiaries whose functional cur- rency is a currency of a hyperinflationary economy requires the application of cer- tain procedures, such as: a) Selection of the general index of prices to use b) Statement of financial position: i) Segregation of monetary and non-monetary items - Monetary items do not have to be restated - non-monetary items have to be restated, except for those that are measured at net realizable value or fair value at the reporting date. ii) Restatement of non-monetary items: use of the accumulated inflation increase from the initial registration date to the reporting date. 229