IBERSOL | 2019 Annual Report

2019 ANNUAL REPORT the preparation of the financial statements as at 31 December 2018. The preparation of the financial statements requires estimates and management judgments, as disclosed in Note 4. 2.2. NEW RULES, CHANGES AND INTERPRETATION ADOPTED The group first adopted, on January 1, 2019, the new standards IFRS 16 - Leases, IFRIC 23 - Uncertainty about tax treatment of income tax. a) IFRS 16 – Leases On January 13, 2016, the IASB issued IFRS 16 - Leases, mandatory for periods begin- ning on or after January 1, 2019. The standard was endorsed in the European Union by European Commission Regulation no. 1986/2017, of October 31. Early adoption is permitted as long as IFRS 15 is also adopted. This standard revokes IAS 17 - Leases. The new IFRS 16 standard eliminated the classification of leases between operating or financial leases for lessee entities, as provided for in IAS 17. Instead, it introduced a single accounting model, very similar to the treatment that was given to financial leases in the accounts of tenants. The Group adopted this new standard as from 1 January 2019, having applied the modified retrospective method, with assets equal to liabilities, in the consolidated accounts, so it did not restate the comparative accounts for the year 2018, and the- re was no impact in the Group’s equity at the time of the transition. The Group’s leases relate mainly to lease agreements for stores and warehouses. With regard to previous commitments with operating leases, on the transition, the Group recognized on 1 January 2019, in its Consolidated Balance Sheet, rights of use in the amount of 291.085.260 euros, liabilities for leasing of 293.970.178 euros and an adjustment in accruals and deferrals of 4.987.328 euros. With regard to previous commitments with leases, in the transition, the book values of assets and liabilities per lease as at 31 December 2018 (4.282.410 and 2.180.000 euros, respectively) were assumed as use rights and liabilities for lease. in accor- dance with IFRS 16 to 1 January 2019 and the respective reclassified amounts of property, plant and equipment and loans. When measuring lease liabilities, the Group discounted lease payments using its incremental financing rate on January 1, 2019. The weighted average rate applied is in the range of 3.5% - 6%, taking into account the characteristics contracts (un- derlying asset, term and economic environment). When applying IFRS 16 for the first time, the Group adopted a practical expedient that allows it not to reassess whether a contract is, or contains, a lease at the date of initial application. Thus, the Group applied this standard, on the initial application date, to contracts that were previously identified as leases under IAS 17 Leases and IFRIC 4 Determine whether an Agreement contains a Lease. The Group also adopted the following practical exemptions and expedients: 209