Consolidated Annual Accounts 2017

Atresmedia Corporación de Medios de Comunicación, S.A. 2017 FINANCIAL STATEMENTS 15 4.5.2 Financial liabilities Financial liabilities include debts and payables by the Company arising on the purchase of goods and services in the course of trade operations and non-trade liabilities that are not derivatives. Debts and payables are initially measured at the fair value of the consideration received, adjusted for directly attributable transaction costs, and subsequently at amortised cost. The Company derecognises a financial liability, or part of a financial liability, when it discharges the obligation or is legally released from primary responsibility for the obligation through a judicial proceeding or by the creditor. An exchange between the Company and the counterparty of debt instruments with substantially different terms and substantial modifications of the terms of initially recognised liabilities are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The Company considers that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. If the exchange is accounted for as an extinguishment of the original financial liability, any costs or fees incurred are recognised in the statement of profit or loss as part of the gain or loss on the extinguishment. Otherwise, any costs or fees adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. In the latter case, the new effective interest rate is determined at the modification date, which is the discount rate that equates the carrying amount of the financial liability at that date to the present value of the cash flows payable under the new terms. The Company has arranged reverse factoring facilities with several banks to manage payments to suppliers. Trade payables whose settlement is managed by banks are recorded under “Trade and other payables” in the balance sheet until they are paid, settled or mature. 4.5.3 Equity instruments An equity instrument represents a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recognised in equity for the amount of proceeds received, net of issue costs. Treasury shares acquired by the Company in the year are recognised at the value of the consideration paid and are deducted directly from equity. Any gain or loss on the acquisition, sale, issue or cancellation of own equity instruments is recognised directly in equity and not in profit or loss. 4.5.4 Hedges The Company used derivative financial instruments to hedge the risks to which its businesses, operations and future cash flows are exposed. Basically, these risks relate to changes in exchange rates. Under the scope of these transactions, the Company enters into hedging instruments. For these financial instruments to qualify for hedge accounting, on inception the Company formally designates and documents the hedging relationship. In addition, the Company verifies, both at inception and regularly over the term of the hedge (at least at the end of each reporting period) that the hedge is effective; i.e. it can expect, prospectively, changes in the fair value or cash flows of the hedged item (attributable to the hedged risk) to be almost entirely offset by changes in the fair value or cash flows of the hedging instruments,