IBERSOL Annual Report and Consolidated Accounts 2017

ANNUAL REPORT 2017 2.21 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% cumula- tive 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 in 2014. Accordingly, IAS 29 was applied according to which the financial state- ments of a subsidiary reporting in the currency of a hyperinflationary economy need to be restated by applying a general price index of the country 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 comparatives. Thus, the begin- ning 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 Earnings. The restatement of the financial statements of subsidiaries whose functional currency is a currency of a hyperinflationary economy requires the application of certain 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. iii) Restatement of equity items: At the beginning of the first period of application of IAS 29, equity items, except retained earnings and any revaluation surplus, are restated by the application of a general index since the dates on which the components were constituted or arose. Any revaluation surplus arising from prior periods is eliminated. Retained retained earnings are determined from all other amounts in the restated statement of financial position. At the end of the first period and in subsequent peri- ods, all components of equity are restated by the application of a general price index from the beginning of the period or the date of its establishment if later. 223