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2013
Annual Report
15
3.16.
Related party transactions
Transactions between Group companies are initially recognised at fair value. Transactions are subsequently
measured in accordance with applicable accounting standards.
3.17.
Environment
Expenses derived from protecting and improving the environment are recognised as an expense in the period in
which they are incurred. Property, plant and equipment modified or acquired by the Company to minimise the
environmental impact of its activity and protect and improve the environment are recognised as an increase in
property, plant and equipment.
NOTE 4
.- Financial Risk Management
4.1.
Financial risk factors
The Company uses financial risk evaluation and mitigation methods suited to its activity and scope of
operations, which are sufficient for the adequate management of risks.
A summary of the main financial risks affecting the Company, as well as the measures in place to mitigate
these risks, is as follows:
a)
Credit risk
The Company considers customer credit risk to be mitigated by the application of different policies and
specific practices to this effect, and the high level of dispersion of receivables.
Among the different policies and specific practices implemented is the customer acceptance scoring policy, the
long-term monitoring of customer credit, which reduces the possibility of default of significant receivables,
and debt collection management.
Customers that occasionally owe substantial amounts are adequately covered by guarantees, whereas an
automatic offsetting clause is included in contracts with debtors that simultaneously have balances receivable
from the Company.
b)
Liquidity risk
The Company adjusts the maturities of its debts to its capacity to generate cash for settlement.
To do this, the Company implements three-year financing plans, which are reviewed annually, and analyses of
financial position every 15 days, which include long-term projections, together with a daily monitoring of bank
balances and transactions.
Therefore, although the Company's working capital, defined as the difference between current assets and
current liabilities (maturing in less than 12 months in both cases), is negative, it is mainly because of the
difference between the average collection period (37 days) and the average payment period (75 days), which is
normal for the Company's activity.
