Septiembre 2011

Group companies, jointly controlled entities and associates

Group companies, jointly controlled entities and associates

For the purpose of presenting the financial statements, a company is considered to form part of a group when the two entities are related through a relationship of direct or indirect control as defined by Article 42 of the Spanish Commercial Code for groups of companies or when the entities are controlled by any means by one or more natural or legal persons acting jointly or under single management as a result of agreements or bylaw clauses.

An entity is considered to be an associate when significant influence is exercised over it.

Significant influence over the management of another entity is presumed to exist when the following two requirements are met:

• 
  The head of the group or one or more group companies, including the controlling legal or natural persons, have an ownership interest in the entity, and
  

• 
  The parent has the power to participate in the financial and operating policy decisions of the investee, but is not in a position to exercise control.
  

Group companies, jointly controlled entities and associates

Also, the existence of significant influence by an entity may be evidenced in one or more of the following ways:

• 
  Representation on the board of directors or equivalent governing body of the investee;
  

• 
  Participation in policy-making processes;
  

• 
  Material transactions between the entity and its investee;
  

• 
  Interchange of managerial personnel; or
  

• 
  Provision of essential technical information.
  

If an entity, its group or the controlling natural persons hold, directly or indirectly, 20 per cent or more of the voting power of the investee, it is presumed that the investor has significant influence, unless it can be clearly demonstrated that this is not the case.

A jointly controlled entity is considered to be one that is managed on a joint basis.