IBERSOL Annual Report 2018

Consolidated Financial Statements Sales of catering and goods In sales of catering and merchandise sales there is only a performance obligation, so revenue is recognized immediately, with the delivery of the goods to the customer. In sales situations in restaurants where customers are promised discounts on future sales through the customer loyalty program. In accordance with current regulations, the fair value of the benefits attributed to customers was estimated, and the recog- nition of the revenue is deferred up to the time the obligation is satisfied or expires. Franchise Agreements In contracts with franchised customers, the Group has the obligation to grant the customer the right to use the trademark and its operating know-how, in a certain place and for an agreed period of time, and the customer has the obligation to pay a counterpart , usually translated into: - initial entry value, corresponding to the right of opening; - monthly operating royalties, the method of calculation of which is previously de- fined in the contract (fixed amount previously established or amount determined periodically by applying a percentage to the value of sales made by the customer); - monthly quota for advertising purposes. If there is an initial value of the entry, it is accounted for as deferred income, so that the recognition of the respective revenue is effected throughout the life of the con- tract. The recognition of the revenue corresponding to the monthly operating royalties and the monthly advertising quotas is carried out immediately, coinciding with the fulfillment of the performance obligations. The Group adopted this new standard as of January 1, 2018, using the modified ret- rospective method, which establishes that the cumulative effect of the adoption of the standard is recognized in the results carried over to that date. In adopting IFRS 15, the Group did not identify significant differences between the previous and the new accounting standards. 2.2.2 IFRS 9 - Financial instruments The International Accounting Standards Board (IASB) issued, on July 24, 2014, IFRS 9 - ‘Financial Instruments’, with effective application date as of January 1, 2018. This standard brought fundamental changes in accounting for instruments and replaced IAS 39 - Financial instruments: recognition and measurement. The Group adopted IFRS 9 on its mandatory application date, that is, on January 1, 2018, with the cumulative effect of applying the standard recognized in Sharehold- ers’ Equity on the date of the initial application, not having restated comparative information, as provided in the standard. 214