IBERSOL Annual Report and Consolidated Accounts 2017

Consolidated Financial Statements c) Statement of income and other comprehensive income i) Statement of other comprehensive income: restatement of Other comprehensive income items by applying the change in the general price index from the dates on which the items of income and expenses were initially recorded in the financial statements. ii) Income statement: restatement of the items of income for the year, by applying the change in the general price index from the dates on which the items of income and expenses were initially recorded in the financial statements. (iii) Other items of income or expenditure, such as income and interest expense and ex- change rate differences relating to funds invested or borrowed, are also restated, al- though they partially “offset” the effect of inflation. iv) The determination of the inflation index to be applied taking into account the registra- tion date of each transaction may require a very significant level of information disag- gregation, allowing the use of monthly averages as an approximation of the inflation rate to be applied for each transaction. d) Reconciliation of gains / losses on restatement by hyperinflation Deferred taxes are recognized on the adjustments resulting from the restatement of non-mon- etary items. 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 financial 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 ap- proved by the Board of Directors. The treasury identifies, evaluates and employs financial risk hedging measures in close cooperation with the group’s operating 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. 224