IBERSOL Annual Report 2018

Consolidated Financial Statements 4. IMPORTANT ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgements are continuously evaluated and are based on past experi- ence and on other factors, including expectations regarding future events that are believed to be reasonably probable within the respective circumstances. The group makes estimates and outlines premises about the future. Generally, ac- counting based on estimates rarely corresponds to the real reported results. Esti- mates and premises that present a significant risk of leading to a material adjust- ment in the accounting value of the assets and liabilities in the following year are described below: a) Estimated impairment of goodwill The group performs annual tests to determine whether the goodwill is subject to impairment, according to the accounting policy indicated in Note 2.7. Recoverable amounts from the units generating cash flows are determined based on the calcula- tion of utilisation values. Those calculations require the use of estimates (Note 9). If the real gross margin is less, or the discount rate - after taxes - is greater than the estimates by the managers, the impairment losses of the goodwill may be greater than those recorded. b) Income Tax The group is subject to Income Tax in Portugal, Spain and Angola. A significant judgement must be made to determine the estimated income tax. The large number of transactions and calculations make it difficult to determine the income tax during normal business procedures. The group recognises liabilities for additional payment of taxes that may originate from reviews by the tax authorities. When tax audits in- dicate a final result different from the initially recorded amounts, the differences will have an impact on the income tax and on deferred taxes in the period in which those differences are identified. c) Provisions The group on a periodic basis examines possible obligations arising from past events that should be recognized or disclosed. The subjectivity inherent in determining the probability and amount of internal re- sources required to settle these obligations may result in significant adjustments due to changes in the assumptions used or the future recognition of provisions previ- ously disclosed as contingent liabilities. 240