IBERSOL Annual Report 2018

ANNUAL REPORT 2018 Other changes made by the IASB expected to come into effect on or after 1 January 2019: • Long-term interests in Joint Ventures and Joint Ventures (Amendment to IAS 28 issued on October 12, 2017) clarifying the interaction with the application of the impairment model under IFRS 9; • Amendments, cuts or settlements of the Plan (amendments to IAS 19, issued on February 7, 2018) where it is clarified that in accounting for changes, cuts or settle- ments of a defined benefit plan the company shall use updated actuarial assump- tions to determine the past service costs and the net interest rate for the period. The effect of the asset ceiling is not taken into account for the calculation of the gain and loss on the settlement of the plan and is dealt with separately in the other comprehensive income (OCI); • Changes to the definition of Business (amendment to IFRS 3, issued on October 22, 2018); • Changes to the definition of Materiality (Amendments to IAS 1 and IAS 8, issued on October 31, 2018). 3. FINANCIAL RISK MANAGEMENT 3.1 FINANCIAL RISK FACTORS The group’s activities are exposed to a number of financial risk factors: market risk (including currency exchange risk, fair value risk associated to the interest rate and price risk), credit risk, liquidity risk and cash flow risks associated to the interest rate. The group maintains a risk management program that focuses its analysis on finan- cial markets to minimise the potential adverse effects of those risks on the group’s financial performance. Financial risk management is headed by the Financial Department based on the policies approved by the Board of Directors. The treasury identifies, evaluates and employs financial risk hedging measures in close cooperation with the group’s op- erating units. The Board provides principles for managing the risk as a whole and policies that cover specific areas, such as the currency exchange risk, the interest rate risk, the credit risk and the investment of surplus liquidity. a) Market risk i) Currency exchange risk With regard to exchange rate risk, the Group follows a natural hedge policy using financing in local currency. Since the Group is mainly present in the Iberian market, bank loans are mainly denominated in euros and the volume of purchases outside the Euro zone are of irrelevant proportions. 233