IBERSOL | Integrated Management Report 2022

INTEGRATED MANAGEMENT REPORT 2022 Cash Flow Coverage For hedging relationships classified as cash flow hedging and which are determined to belong to an effective hedge, gains or losses in the fair value of the hedging instru- ment are recognized in other comprehensive income; the ineffective part will be rec- ognized directly in the results. Net Investment Coverage Currently, Ibersol does not consider carrying out exchange rate hedging on net in- vestments in foreign operating units (subsidiaries), as it is not significantly exposed to exchange gains and losses on monetary items that in substance can be considered as a net investment in foreign operations. Ibersol has well identified the nature of the risks involved, exhaustively and formally documents the hedging relationships, ensuring through its information systems that each hedging relationship is accompanied by a description of Ibersol’s risk policy, ob- jective and strategy for hedging , classification of the hedging relationship, description of the nature of the risk being hedged, identification of the hedging instrument and hedged item, description of the initial and future measurement of effectiveness and identification of the part of the hedging instrument, if any, that will be excluded of the evaluation of the effectiveness. Ibersol considers derecognition in situations where the hedging instrument expires, is sold, expires or is exercised; the hedge no longer meets the criteria for hedge account- ing; for cash flow hedging, the forecasted transaction ceases to be highly probable or ceases to be expected; for management reasons the company decides to cancel the coverage designation. As at 31 December 2022, the Group has no derivative financial instruments. 8.4. Lease liabilities Accounting policies Liabilities with leases are initially measured based on the present value of the lease liabilities at that date. Subsequently, the lease liability is adjusted for the effect of interest and lease payments, as well as possible modifications and remeasurements of the lease agreements. Lease payments include payments made to a lessor for the right to use an underlying asset during the lease term (excluding variable lease payments) and also include the exercise price of a call option, if there is an expectation reasonable for the Group to exercise it, and the amount of penalties for termination of contracts, if it is reasonably certain that the Group will trigger the possibility of termination. 455