Summary of the main accounting policies   

Basis of presentation

The consolidated financial information presented in these financial statements has been prepared under the International Financial Reporting Standards adopted by the European Union (IFRS EU), at the year end. In general, the historical cost method has been applied, with the exception of items in respect of which IFRS EU specifically impose a different measurement method. As regards the alternative methods provided by IFRS EU, Ferrovial has opted to measure property, plant and equipment and intangible assets at historical cost, capitalising financial expenses during the construction period, while jointly controlled entities and temporary joint ventures (UTEs) have been consolidated using the proportionate method. These are the same methods applied in 2006.

Ferrovial has applied the new IFRS 7 as from 1 January 2007, having applied the relevant breakdown requirements to financial year 2006.

In November 2006, the IASB approved the IFRIC 12 interpretation of the accounting treatment of concession contracts. This interpretation has not yet been approved by the European Union and will be mandatory for financial years commencing as from 1 January 2008. Grupo Ferrovial has not applied IFRIC 12 at year-end 2007. The accounting treatment of concession contracts is presented in points 2.3.21.2 and 2.3.21.4.

New accounting standards (IFRS/IAS) and interpretations (IFRIC) have been approved and published and are expected to enter into force in the financial years commencing 1 January 2008 or after that date. Ferrovial Group management is evaluating the potential impact of these standards and interpretations, which is not expected to be relevant.

Standards, amendments to standards and mandatory interpretations for all financial years commencing on or after 1 January 2007.

  • IFRS 7 - "Financial Instruments: Disclosures" (mandatory for financial years commencing as from 1 January 2007) and the provision supplementing IAS 1, Presentation of Financial Statements - Equity-related Disclosures. This IFRS brings in new requirements to improve the disclosure of financial instruments in financial statements, replacing IAS 30, Disclosures in the Financial Statements of Banks and similar Financial Institutions, and certain requirements of IAS 32, Financial Instruments: Disclosure and Presentation. The amendment to IAS 1 brings in disclosure requirements concerning equity. The Group has adapted its financial information to these new requirements.

    IFRIC 8 - "Scope of IFRS 2" (mandatory in financial years commencing as from 1 May 2006).

    IFRIC 9 - "Reassessment of Embedded Derivatives" (mandatory in financial years commencing as from 1 June 2006).

Standards, amendments and interpretations that came into effect in 2007 but have no effect on the Group's accounts:

  • IFRIC 7 - "Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies" (mandatory in financial years commencing as from 1 March 2006).

  • IFRIC 10 - "Interim Financial Reporting and Impairment" (mandatory in financial years commencing as from 1 November 2006).

Standards, amendments to standards and interpretations issued by the IASB that came into force after 1 January 2007 and have not been adopted early by the Group:

  • IFRIC 11 - "IFRS 2 - Group and Treasury Share Transactions" (mandatory in financial years commencing as from 1 March 2007). IFRIC 11 develops the application of IFRS 2 to share-based payments when the shares are acquired from third parties or furnished by the company's shareholders, or payments based on the shares of a different company of the same group.

  • IFRS 8 - "Operating Segments" (mandatory in financial years commencing as from 1 January 2009). This standard will supersede IAS 14 - "Segment reporting" and relates to the convergence with US standards in this area, contained in FAS 131 - "Disclosures about Segments of an Enterprise and Related Information", based on the breakdown of segment information in the information used to take decisions. The Company is assessing the possible impact of this standard.

Standards, amendments to standards and interpretations issued by the IASB and yet to be adopted by the European Union that came into force after 1 January 2007 according to the IASB and have not therefore been adopted early by the Group:

  • IAS 1 (amended September 2007) – “Presentation of Financial Statements” (mandatory in financial years commencing as from 1 January 2009).

  • IAS 23 (amended 29 March 2007) - “Borrowing costs” (mandatory in financial years commencing as from 1 January 2009). This revised IAS supersedes the IAS 23 revised in 1993.

  • IAS 27 (amended 10 January 2008) – “Consolidated and Separate Financial Statements” (mandatory in financial years commencing as from 1 July 2009). The changes relate mainly to the recognition of shareholdings that are not controlled and the loss of control of a subsidiary. Should this standard be adopted early, the revised IFRS 3 must also be adopted early.

  • IFRS 2 (amended 17 January 2008) – “Vesting Conditions and Cancellations”.

  • IFRS 3 – “Business combinations” (mandatory in financial years commencing as from 1 July 2009). Should this standard be adopted early, the revised IAS 27 must also be adopted early.

  • IAS 32 and IAS 1 (amended February 2008): Financial instruments that include a fair value surrender option for the holder and obligations that arise on liquidation (mandatory in financial years commencing as from 1 January 2009). 

  • IFRIC 12 – “Service concession arrangements” (mandatory in financial years commencing as from 1 January 2008). IFRIC 12 is applicable to contracts in which a private operator takes part in the development, financing, operation and maintenance of a public service infrastructure.

  • IFRIC 13 – “Customer loyalty programmes” (mandatory in financial years commencing as from 1 July 2008).

  • IFRIC 14 – “IAS 19 – The Limit on a Defined Benefit Asset, Minimum funding requirements and their interaction” (mandatory in financial years commencing as from 1 January 2008).

The 2007 consolidated financial statements were prepared on 25 February 2008 and are pending to be approved by the General Shareholders' Meeting. Nevertheless, the parent company's directors expect the consolidated financial statements to be approved without changes.

With effect as from 1 January 2007, the Company has reviewed the method used to estimate the consumption of the economic benefits of assets used under toll road concession contracts, for depreciation purposes, having shifted from the straight-line method to a method based on estimates of traffic during the concession period. This change of method has been applied prospectively to 2007 and does not affect prior-year information.

The above-mentioned change of method in 2007 has resulted in a reduction of 81 million euro in depreciation charged and an increase of 23 million euro in net income attributed to the majority shareholders.

Moreover, in accordance with IFRS 3, paragraph 62, the comparative information for 2006 has been restated in connection with the business combination arising from the acquisition of the BAA Group. As permitted by IFRS 3, the initial accounting treatment of the business combination was reviewed in 2007, within 12 months as from the acquisition date, giving rise to the changes explained in Note 5 on goodwill and acquisitions (point 5.2 on the review of the acquisition of the BAA Group).

Finally, interest received has been included in cash flows from investing activities in the cash flow statement (previously included in cash flows from financing activities) and the 2006 figures have been restated for comparative purposes.

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