Consolidated Annual Accounts 2017

Atresmedia Corporación de Medios de Comunicación, S.A. and Subsidiaries Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 2 and 29). In the event of discrepancy, the Spanish-language version prevails. 2017 CONSOLIDATED FINANCIAL STATEMENTS 27 h) Derivative hedging instruments All the derivatives held by the Group at 31 December 2016 were OTC derivatives, whose prices are not quoted on active futures and options markets. Therefore, it is necessary to apply generally accepted valuation techniques, based on objective market data, used in the measurement of financial instruments of this nature. Foreign currency hedges The derivative financial instruments held by the Group companies are basically cash flow hedges arranged to mitigate the exposure of the cash flows associated with external production rights to fluctuations in the USD/EUR exchange rate. Foreign currency hedging contracts are measured using the spot exchange rate and the forward interest rate curves of the related currencies. The “market” foreign currency hedge is calculated at year-end and is compared with the price of the foreign currency hedge entered into. Interest rate hedges The Parent entered into interest rate swaps (IRSs) to fix the finance cost arising from the floating rates applicable to each of the tranches of the syndicated financing arranged. With IRSs, the parties agree to swap, on predetermined dates, the cash flows resulting from applying an interest rate to a nominal amount. The rate applied to the payments of a portion is fixed, whereas the other portion is a floating rate (based on a benchmark rate). Hedging instruments are recognised in the consolidated balance sheet at fair value, with the portion of any gain or loss on the hedging instrument determined to be effective recognised directly in equity, in accordance with IAS 39. For foreign currency hedges, when the term of the broadcasting rights designated as a hedged item commences, the related gains or losses on the derivative that were recognised in equity are included in the initial carrying amount of the asset. Any changes in fair value of the hedging instrument from then are recognised directly in profit or loss for the year. Group companies test the effectiveness of the outstanding hedges and the ineffective portion is recognised immediately under financial profit or loss in the consolidated statement of profit or loss. When the hedge no longer meets the criteria for hedge accounting and the forecast transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss. The Group's policy is to categorise its assets and liabilities measured at fair value within the fair value hierarchy, based on the availability of observable market inputs, and only transfers items between levels when these inputs are not available. In 2017, no transfers were made between the fair value hierarchy levels corresponding to the Group's financial instruments. i) Treasury shares All the treasury shares of the Parent held at 31 December 2017 and 2016 represented 0.351% of the share capital of the Parent of the Group at that date. The transactions involving treasury shares in 2017 and 2016 are summarised in Note 12.e. The amount relating to these treasury shares is recognised as a reduction of equity.