Consolidated Annual Accounts 2017

4 Recognition of deferred tax assets See notes 2 a), 3 m) and 22 to the consolidated annual accounts Key Audit Matter How the Matter was Addressed in Our Audit The Group has recognised deferred tax assets amounting to Euros 267,525 thousand. The recognition of deferred tax assets entails a high level of judgement by Group management in assessing the probability and sufficiency of future taxable profits and reversals of taxable temporary differences. Due to the significance of the balance of deferred tax assets, the high level of judgement regarding the estimates used and the uncertainty associated with the recovery of the aforementioned assets, this has been considered a key audit matter. Our audit procedures included the following: – We assessed the design and implementation of the most relevant controls established by the Group in respect of the recognition and valuation of deferred tax assets. – We assessed the key assumptions used to estimate future taxable profits and reversals of taxable temporary differences, using the Group's historical information to verify these assumptions and estimates. – We assessed the sufficiency of future taxable profits to offset deferred tax assets within the time limit established in the financial reporting framework applicable to the Group. – We assessed whether the disclosures included in the annual accounts comply with the requirements of the financial reporting framework applicable to the Group. Other Information: Consolidated Directors’ Report__________________________ Other information solely comprises the 2017 consolidated directors' report, the preparation of which is the responsibility of the Parent's Directors and which does not form an integral part of the consolidated annual accounts. Our audit opinion on the consolidated annual accounts does not encompass the consolidated directors’ report. Our responsibility regarding the content of the consolidated directors' report is defined in the legislation regulating the audit of accounts, which establishes two different levels: a) A specific level applicable to the consolidated statement of non-financial information, as well as certain information included in the Annual Corporate Governance Report (ACGR), as defined in article 35.2. b) of Audit Law 22/2015, which consists solely of verifying that this information has been provided in the consolidated directors' report, or where applicable, that the consolidated directors' report makes reference to the separate report on non-financial information, as provided for in legislation, and if not, to report on this matter.