IBERSOL | Integrated Management Report 2022

Consolidated Financial Statements To calculate the present value of lease payments, in cases where it is not possible to obtain the implicit interest rate, the Group uses the incremental financing rate, which represents the interest rate that the Group would have to pay to borrow for a similar period, and with a similar guarantee, the funds necessary to obtain an asset of equivalent value to the asset under right of use in a similar economic context. The Group determines the lease term as the non-cancellable period of the lease, taking into account the periods covered by an option to extend the contract, if it is reasonable for the Group to exercise it, or any periods covered by an option to terminate. the contract, if it is reasonably certain that the Group will not exercise it. The lease term is thus comprised between the minimum corresponding to the non- cancellable period of the contracts and the maximum corresponding to the period during which the contract is enforceable (period after which lessor and lessee have the right to end the lease with no more than a negligible penalty considering the broader economic circumstances). There are no residual value guarantees in the contracts. The main value judgments relating to the future and other sources of uncertainty essentially concern the future profitability prospects of the stores which, as stated above, influence the lease term in cases where there are renewal and/or termination options. Payments related to variable contract components are not considered as lease payments, being recognized as an expense in the year in which they occur. These rents are determined by a percentage of the sales of each space and are incremental compared to the contracted minimum rents. For the year ended December 31, 2022, exposure to variable lease payments is re- duced. For a variation of more than 5% in sales in all the Group’s restaurants, an in- crease in total rentals of 0.8% is estimated. After the start date of the contracts, the Group reassesses the term of the leases if there is a significant event or change in circumstances that are within its control and that affect its ability to exercise or not to exercise the option to renew or terminate (for example, local changes in the consumer market and/or carrying out significant improvements or customization in the lease asset). Interest on leases is shown in the consolidated statement of cash flows, in payments relating to cash flows arising from financing activities. The amendment to IFRS 16 in the context of Covid-19, allowed the use of a practical expedient for lessees, which exempts from the assessment of bonuses attributed by lessors if modifications to leases qualify. The Group opted for the application of this exemption, accounting for the change in rent payments, as variable lease rents in the periods in which the event or condition that led to the payment reduction occurs. The practical expedient is only applicable when the following conditions are cumula- tively verified: a) the change in lease payments results in a revised fee for the lease that is substan- tially equal to, or less than, the fee immediately preceding the change; 456