VINotes to the Consolidated
Annual Accounts for 2012

1. NATURE, ACTIVITIES AND COMPOSITION OF THE GROUP

Distribuidora Internacional de Alimentación, S.A. (hereinafter the Parent or DIA) was incorporated as a public limited liability company (sociedad anónima) for an unlimited period under Spanish law on 24 July 1966, and has registered offices in Las Rozas (Madrid).

On 25 March 2011, the sole shareholder, exercising the powers of shareholders at an annual general meeting, approved an amendment to DIA´s statutory activity to the following:

  • The Company’s statutory activity comprises the following activities in Spain and abroad:
  • a) The whole or retail sale of food products and any other consumer goods in both domestic and foreign markets.
  • b) Corporate services aimed at the sale of telecommunication products and services, particularly telephony services, through collaboration agreements with suppliers of telephony products and services. These co-operative services shall include the sale of telecommunication products and services, as permitted by applicable legislation.
  • c) Activities related to internet-based marketing and sales, and sales through any other electronic medium of all types of legally tradable products and services, especially food and household products, small electrical appliances, multimedia and IT products, photography equipment and telephony products, sound and image products and all types of services through internet or any other electronic medium.
  • d) Wholesale and retail travel agency activities including the organisation and sale of package tours.
  • e) Retail distribution of petrol, operation of service stations and retail sale of fuel to the public.
  • f) The acquisition, ownership, use, management, administration and disposal of equity instruments of resident and non-resident companies in Spain through the concomitant management of human and material resources.
  • g) The management, coordination, advisory and support of investees and companies with which the Parent works under franchise and similar contracts.
  • h) The deposit and storage of goods and products of all types, both for the Company and for other companies.

Its principal activity is the retail sale of food products through owned or franchised self-service stores under the DIA brand name. The Parent opened its first establishment in Madrid in 1979.

Until 5 July 2011 the Parent and its subsidiaries formed part of the Carrefour Group, the Parent of which is Carrefour, S.A., domiciled in Paris. As described in notes 16.1 and 23, on 1 July 2011 Carrefour S.A. acquired the entire share capital of DIA from the Carrefour Group company Norfin Holder, S.L. As a result of this transaction, Carrefour, S.A. became the direct shareholder of the Parent. On 5 July 2011, DIA’s shares were distributed to the holders of Carrefour, S.A. shares at the previous day’s trading close. On that date, 100% of DIA shares began trading on the Spanish Stock Exchanges and the DIA Group ceased to form part of the Carrefour Group.

Distribuidora Internacional de Alimentación, S.A. is the parent of a group of subsidiaries (hereinafter the DIA Group or the Group) which are all fully consolidated, except for Bladis SAS, which is accounted for using the equity method. On 5 July 2012 DIA France, which changed its name from ED SAS during the year, purchased the interests held by minority shareholders in Proved SAS, increasing its stake in this company from 50% to 100%. Also in 2012, DIA World Trade, S.A., which was incorporated in 2011, began operating in the first half of the year. Details of the DIA Group´s subsidiaries, as well as their activities, registered offices and percentages of ownership are as follows:

% interest
Name Location Activity 2012 2011
DIA Portugal Supermercados, S.U, Lda. Lisbon Food distribution. 100,00 100,00
DIA Argentina, S.A. Buenos Aires Wholesale and retail distribution of food products. 100,00 100,00
Diasa DIA Sabanci Supermarketleri Ticaret, A.S. Istanbul Wholesale and retail distribution of consumer products. 60 60
DIA Brasil Sociedade Limitada Sao Paulo Wholesale and retail distribution of consumer products. 100,00 100,00
Finandia, E.F.C., S.A.U. Madrid Loan and credit transactions, including consumer loans, mortgage loans and finance for commercial transactions, and credit and debit car issuing and management. 100,00 100,00
DIA Tian Tian Management Consulting Service & Co. Ltd. Shanghai Services consultancy. 100,00 100,00
Shanghai DIA Retail Co. Ltd. Shanghai Wholesale and retail distribution of consumer products. 100,00 100,00
Beijing DIA Commercial Co. Ltd. (***) Beijing Wholesale and retail distribution of consumer products. 100,00 100,00
Twins Alimentación, S.A.U. Madrid Distribution of food and toiletries through supermarkets. 100,00 100,00
Pe-Tra Servicios a la distribución, S.L.U. Madrid Leasing of business premises. 100,00 100,00
DIA France Vitry sur Seine Wholesale and retail distribution of consumer products. 100,00 100,00
Inmobiliere Erteco SAS Vitry sur Seine Leasing of business premises. Franchise management. 100,00 100,00
ED Franchise SAS Vitry sur Seine Wholesale and retail distribution of consumer products. 100,00 100,00
Proved SAS Annecy Wholesale and retail distribution of consumer products. 100,00 50
Voiron Distribution SAS Annecy Wholesale and retail distribution of consumer products. 100,00 50,00
Erteco SAS (*) Vitry sur Seine Management and brand licencing. 100,00 100,00
Bladis, SAS Chaleaurenard Sale of fruit and vegetables. 33,33 33,33
Campus DIA SAS (**) Annecy Training. 100,00 100,00
DIA World Trade, S.A. (**) Ginebra Provision of services to suppliers of DIA Group companies. 100,00 100,00

(*) On 2 May 2011, the subsidiary DIA France acquired all the shares of Erteco, SAS and its subsidiary Bladis SAS from Carrefour S.A. for Euros 40,000 thousand. Bladis SAS is accounted for using the equity method (see notes 4 and 11).
(**) Campus DIA SAS and DIA World Trade, S.A. were incorporated in 2011.
(***) Beijing DIA Commercial Co.Ltd. is presented under discontinued operations in the consolidated income statements.


2. BASIS OF PRESENTATION

2.1. Basis of preparation of the consolidated annual accounts

The directors of the Parent have prepared these consolidated annual accounts on the basis of the accounting records of Distribuidora Internacional de Alimentación S.A. and consolidated companies and in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU), and other applicable provisions in the financial reporting framework pursuant to Regulation (EC) No. 1606/2002 of the European Parliament and of the Council, to present fairly the consolidated equity and consolidated financial position of Distribuidora Internacional de Alimentación S.A. and subsidiaries at 31 December 2012 and consolidated results of operations and consolidated cash flows and changes in consolidated equity for the year then ended.

On 28 February 2011 the DIA Group authorised for issue the consolidated financial statements for 2010, 2009 and 2008, which were the first consolidated financial statements drawn up by the DIA Group. These consolidated financial statements were prepared in accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards, taking 1 January 2008 as the date of first-time adoption. As indicated in note 1, until 5 July 2011 the DIA Group formed part of the Carrefour Group, which has issued consolidated financial statements in accordance with IFRS-EU since 2005. For the purposes of the consolidated financial statements of the Carrefour Group, DIA and its subsidiaries each prepared a consolidation reporting package under IFRS-EU.

In accordance with IFRS 1, considering the DIA Group as a subsidiary that adopted IFRS-EU for the first time after its Parent, the assets and liabilities included in DIA’s opening statement of financial position were recognised at the carrying amounts reflected in the subgroup´s contribution to the consolidated financial statements of the Parent, eliminating the consolidation adjustments of the Carrefour Group.

Consequently, the DIA Group chose the same exemptions from IFRS 1 as those applied by the Carrefour Group:

  • Business combinations: the Group has not re-estimated the business combinations carried out prior to 1 January 2004.
  • Cumulative translation differences: the Group recognised the cumulative translation differences of all foreign businesses prior to 1 January 2004 at zero, and transferred the related balances to reserves at that date.
  • Financial instruments: the Group opted to apply IAS 32 and IAS 39 from 1 January 2004.

These consolidated annual accounts have been prepared on the historical cost basis, except for the following:

  • Derivative financial instruments, financial instruments at fair value through profit or loss and available-for-sale financial assets are measured at fair value.
  • Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

The 2011 consolidated annual accounts, which were the first consolidated annual accounts prepared by the DIA Group, were filed at the Madrid Mercantile Registry in accordance with Spanish legislation.

The DIA Group’s consolidated annual accounts for 2012 were prepared by the board of directors of the Parent on 20 February 2013 and are expected to be approved in their present form by the shareholders of the Parent at their ordinary general meeting.

2.2. Comparative information

The consolidated statement of financial position, consolidated income statement, consolidated statement of changes in equity, consolidated statement of cash flows and the notes thereto for 2012 include comparative figures for 2011, which formed part of the consolidated annual accounts approved by the shareholders of the Parent at the ordinary general meeting held on 13 June 2012.

During 2012 the Group decided to dispose of its business in Beijing (China). The different accounts corresponding to this business have therefore been recognised under net loss from discontinued operations in the consolidated income statement for 2012, and 2011 figures have been restated accordingly (see note 15).

2.3. Functional and presentation currency

The figures contained in the documents comprising these consolidated annual accounts are expressed in thousands of Euros, unless stated otherwise. The functional and presentation currency of the Parent is the Euro.

2.4. Relevant accounting estimates, assumptions and judgements used when applying accounting principles

Relevant accounting estimates and judgements and other estimates and assumptions have to be made when applying the Group’s accounting principles to prepare the consolidated annual accounts in conformity with IFRS-EU. A summary of the items requiring a greater degree of judgement or which are more complex, or where the assumptions and estimates made are significant to the preparation of the consolidated annual accounts, are as follows:

a) Relevant accounting estimates and assumptions

The Group evaluates whether there are indications of possible impairment losses on non-financial assets subject to amortisation or depreciation to verify whether the carrying amount of these assets exceeds the recoverable amount (see note 3 (h)). The Group tests goodwill for impairment on an annual basis. The calculation of the recoverable amount of a country group of CGUs to which goodwill has been allocated requires the use of estimates by management. The recoverable amount is the higher of fair value less costs to sell and value in use. The Group generally uses cash flow discounting methods to calculate these values. Discounted cash flow calculations are based on five-year projections in the budgets approved by management. The cash flows take into consideration past experience and represent management’s best estimate of future market performance. From the fifth year cash flows are extrapolated using individual growth rates. The key assumptions employed when determining fair value less costs to sell and value in use include growth rates and the weighted average cost of capital. These estimates, including the methodology used, could have a significant impact on values and impairment (see note 7).

The Group evaluates the recoverability of deferred tax assets recognised by certain subsidiaries based on the business plans of the Parent or of the tax group to which the subsidiary in question belongs, and has recognised the tax effect of tax loss carryforwards, credits and deductible temporary differences whose offset against future tax gains appears probable. In order to determine the amount of the deferred tax assets to be recognised, management estimates the amounts and dates on which future taxable profits will be obtained and the reversal period of temporary differences.

The shareholders general meeting has approved non-current employee benefit plans settled in Parent own shares. Beneficiaries were informed of the plan regulations on 11 June 2012. Management of the Parent has estimated the total obligation derived from these plans and the part of this obligation accrued at 31 December 2012 based on the extent to which the conditions for receipt have been met (see note 20).

The Group is undergoing legal proceedings and tax inspections in a number of jurisdictions, some of which have been completed by the taxation authorities and additional tax assessments have been appealed by the Group companies at 31 December 2012. The Group recognises a provision if it is probable that an obligation will exist at year end which will give rise to an outflow of resources and the outflow can be reliably measured. As a result, management uses significant judgement when determining whether it is probable that the process will result in an outflow of resources and estimating the amount (see note 19).

b) Changes in accounting estimates

Although estimates are calculated by management based on the best information available at 31 December 2012, future events may require changes to these estimates in subsequent years. Any effect on the consolidated annual accounts of adjustments to be made in subsequent years would be recognised prospectively.

2.5. First-time application of accounting standards

The Group has applied all standards effective as of 1 January 2012. The application of these standards has not required any significant changes in the preparation of this year’s consolidated annual accounts.

IAS 19 Employee Benefits, which is effective for annual periods beginning on or after 1 January 2013, has been adopted early (see note 18.1). The application of this standard must be made retroactively, however, the Group has not restated figures for 2011 and earlier for not considering the impact of the application of the standard material.

2.6. Standards and interpretations issued and not applied

At the date of publication of these consolidated annual accounts, the following standards have been issued but have not entered into force. The Group expects to adopt these standards as of 1 January 2013 or thereafter:

  • IFRS 13 Fair Value Measurement. Effective for annual periods beginning on or after 1 January 2013.
  • IFRS 7 Financial Instruments: Disclosures. Changes to disclosure requirements on the offsetting of financial assets and financial liabilities. This standard applies to years starting on or after 1 January 2013.
  • IFRS 10 Consolidated Financial Statements. Effective for annual periods beginning on or after 1 January 2014.
  • IFRS 11 Joint Arrangements. Effective for annual periods beginning on or after 1 January 2014.

The Group has not early adopted any of these standards or amendments and is currently analysing the impact of applying these standards, rectifications and interpretations. Based on its analyses to date, the Group estimates that first-time application will not have a significant impact on the consolidated financial statements.

2.7. Basis of consolidation

Subsidiaries are entities over which the Parent, either directly or indirectly, exercises control. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Control is assumed to exist when the Parent holds over 50% of the subsidiary´s voting rights.

The income, expenses and cash flows of subsidiaries are included in the consolidated annual accounts from their acquisition date, which is the date on which the Group obtains effective control, until the date that control ceases. For consolidation purposes the annual accounts of subsidiaries are prepared for the same reporting period as those of the Parent, and applying the same accounting policies. All balances, revenues, expenses, gains, losses and dividends arising from transactions between Group companies are eliminated in full.

3. SIGNIFICANT ACCOUNTING POLICIES

a) Business combinations and goodwill

As permitted by IFRS 1, the Group has recognised only business combinations that occurred on or after 1 January 2004, the date of transition of the Carrefour Group to IFRS-EU, using the purchase method. Entities acquired prior to that date were recognised in accordance with the accounting principles applied by the Carrefour Group at that time, taking into account the necessary corrections and adjustments at the transition date.

The Group has applied IFRS 3 Business Combinations, revised in 2008, to all transactions detailed in these annual accounts.

The Group applies the purchase method for business combinations.

The acquisition date is the date on which the Group obtains control of the acquiree.

The consideration transferred in a business combination is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred or assumed, the equity instruments issued and any consideration contingent on future events or compliance with certain conditions in exchange for control of the business acquired.

The consideration transferred excludes any payment that does not form part of the exchange for the acquired business. Acquisition costs are recognised as an expense when incurred.

Non-controlling interests in the acquiree are recognised at the proportionate interest in the fair value of the net assets acquired. These criteria are only applicable for non-controlling interests which grant entry into economic benefits and entitlement to the proportional part of net assets of the acquiree in the event of liquidation. Otherwise, non-controlling interests are measured at fair value or value based on market conditions. Liabilities assumed include any contingent liabilities that represent present obligations arising from past events for which the fair value can be reliably measured. The Group also recognises indemnification assets transferred by the seller at the same time and following the same measurement criteria as the item that is subject to indemnification from the acquired business, taking into consideration, where applicable, the insolvency risk and any contractual limit on the indemnity amount.

The excess between the consideration transferred, plus the value assigned to non-controlling interests, and the value of net assets acquired and liabilities assumed, is recognised as goodwill. Where applicable, any shortfall, after evaluating the consideration transferred, the value assigned to non-controlling interests and the identification and measurement of net assets acquired, is recognised in profit or loss.

b) Investments in associates

The DIA Group’s investments in companies over which it exercises significant influence (whether because it holds an interest of between 20% and 50%, or is represented on the board of directors, or through shareholder agreements) but does not exercise control or manage the entity jointly with third parties are accounted for using the equity method. The carrying amount of the investment in the associate includes goodwill and the consolidated income statement reflects the Group’s share in the results from the associate’s operations. If the associate recognises profits or losses directly in its equity, the Group also recognises its share of these items directly in equity.

c) Non-controlling interests

Non-controlling interests in subsidiaries acquired prior to 1 January 2004 were recognised at the amount of the Group’s share of the subsidiary’s equity.

Profit and loss and each component of other comprehensive income are allocated to equity attributable to equity holders of the Parent and to non-controlling interests in proportion to their investment, even if this results in a balance receivable from non-controlling interests. Agreements entered into between the Group and non-controlling interests are recognised as a separate transaction.

Changes in the Group’s percentage ownership of a subsidiary that imply no loss of control are accounted for as equity transactions. When control over a subsidiary is lost, the Group adjusts any residual investment in the entity to fair value at the date on which control is lost.

d) Translation of foreign operations

The Group has applied the exemption permitted by IFRS 1 First-time Adoption of International Financial Reporting Standards, relating to cumulative translation differences. Consequently, translation differences recognised in the consolidated annual accounts that were generated prior to 1 January 2004 are recognised in retained earnings. As of that date, foreign operations whose functional currency is not the currency of a hyperinflationary economy have been translated into Euros as follows (IAS 21.39):

  • Assets and liabilities, including goodwill and net asset adjustments derived from the acquisition of the operations, including comparative amounts, are translated at the closing rate at the reporting date;
  • Capital and reserves are translated using historical exchange rates.
  • Income and expenses, including comparative amounts, are translated at the exchange rates prevailing at each transaction date; and
  • All resulting exchange differences are recognised as translation differences in other comprehensive income.

These criteria are also applicable to the translation of the financial statements of equity-accounted companies, with translation differences attributable to the Group recognised in other comprehensive income.

For presentation of the consolidated statement of cash flows, cash flows, including comparative balances, of the subsidiaries and foreign joint ventures are translated into Euros applying the exchange rates prevailing at the transaction date.

Translation differences recognised in other comprehensive income are accounted for in profit or loss as an adjustment to the gain or loss on the sale using the same criteria as for subsidiaries, associates and joint ventures.

e) Foreign currency transactions, balances and cash flows

Transactions in foreign currency are translated at the spot exchange rate between the functional currency and the foreign currency prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies have been translated into Euros at the closing rate, while non-monetary assets and liabilities measured at historical cost have been translated at the exchange rate prevailing at the transaction date. Non-monetary assets measured at fair value have been translated into Euros at the exchange rate at the date that the fair value was determined.

In the consolidated statement of cash flows, cash flows from foreign currency transactions have been translated into Euros at the exchange rates prevailing at the dates the cash flows occur. The effect of exchange rate fluctuations on cash and cash equivalents denominated in foreign currencies is recognised separately in the statement of cash flows as net exchange differences.

Exchange gains and losses arising on the settlement of foreign currency transactions and the translation into Euros of monetary assets and liabilities denominated in foreign currencies are recognised in profit and loss. However, exchange gains or losses arising on monetary items forming part of the net investment in foreign operations are recognised as translation differences in other comprehensive income.

Exchange gains or losses on monetary financial assets or financial liabilities denominated in foreign currencies are also recognised in profit and loss.

f) Recognition of income and expenses

Income and expenses are recognised in the consolidated income statement on an accruals basis, that is to say, when the actual flow of goods and services they represent, regardless of when the monetary or financial flows derived therefrom arise.

Revenue from the sale of goods or services is measured at the fair value of the consideration received or receivable derived therefrom. Volume rebates, prompt payment and any other discounts, as well as the interest added to the nominal amount of the consideration, are recognised as a reduction in the consideration.

Discounts granted to customers are recognised as a reduction in sales revenue when it is probable that the discount conditions will be met.

The Group has customer loyalty programmes which do not entail credits, as they comprise discounts which are applied when a sale is made and are recognised as a reduction in the corresponding transaction.

The Group recognises revenue from the sale of goods when:

  • The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
  • The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
  • The amount of revenue and the costs incurred or to be incurred can be measured reliably;
  • It is probable that the economic benefits associated with the transaction will flow to the Group; and
  • The costs incurred or to be incurred in respect of the transaction can be measured reliably.
g) Intangible assets

Intangible assets, except for goodwill (see note 3 (a)), are measured at cost or cost of production, less any accumulated amortisation and accumulated impairment.

The Group assesses whether the useful life of each intangible asset is finite or indefinite. Intangible assets with finite useful lives are amortised systematically over their estimated useful lives and their recoverability is analysed when events or changes occur that indicate that the carrying amount might not be recoverable. Intangible assets with indefinite useful lives, included goodwill are not amortised, but are subject to analysis to determine their recoverability on an annual basis, or more frequently if indications exist that their carrying amount may not be fully recoverable. Management reassesses the indefinite useful life of these assets on a yearly basis.

The amortisation methods and periods applied are reviewed at year end and, where applicable, adjusted prospectively.

Internally generated intangible assets

Costs associated with development activities, which mainly relate to computer software, are capitalised to the extent that:

  • The Group has technical studies that demonstrate the feasibility of the production process;
  • The Group has undertaken a commitment to complete production of the asset, to make it available for sale or internal use;
  • The asset will generate sufficient future economic benefits;
  • The Group has sufficient technical and financial resources to complete development of the asset and has devised budget control and cost accounting systems that enable monitoring of budgetary costs, modifications and the expenditure actually attributable to the different projects.

Expenditure on activities for which costs attributable to the research phase are not clearly distinguishable from costs associated with the development stage of intangible assets are recognised in profit and loss.

Expenditure on activities that contribute to increasing the value of the different businesses in which the Group as a whole operates is expensed when incurred. Replacements or subsequent costs incurred on intangible assets are generally recognised as an expense, except where they increase the future economic benefits expected to be generated by the assets.

Computer software

Computer software comprises all the programs used at points of sale, warehouses and offices, as well as micro-software. Software is recognised at cost of acquisition and amortised on a straight-line basis over its useful life, usually estimated at three years. Computer software maintenance costs are charged as expenses when incurred.

Leaseholds

Leaseholds are rights to lease premises which have been acquired through an onerous contract assumed by the Group. Leaseholds are measured at cost of acquisition and amortised on a straight-line basis over the shorter of ten years and the estimated term of the lease contract.

h) Property, Plant and Equipment

Property, plant and equipment are measured at cost or cost of production, less any accumulated depreciation and accumulated impairment. Land is not depreciated.

The cost of acquisition includes external costs plus internal costs for materials consumed, which are recognised as income in the income statement. The cost of acquisition includes, where applicable, the initial estimate of the costs required to decommission or remove the asset and to restore the site on which it is located, when these measures are required to the Group as a result of the use of the asset.

Non-current investments made in buildings leased by the Group under operating lease contracts are recognised following the same criteria as those used for other property, plant and equipment. Assets are depreciated over the shorter of their useful life and the lease term, taking renewals into account.

Enlargement, modernisation or improvement expenses that lead to an increase in productivity, capacity or efficiency or lengthen the useful life of the assets are capitalised as higher cost when recognition criteria are met.

Preservation and maintenance costs are recognised in the consolidated income statement in the year in which they are incurred.

The DIA Group assesses whether valuation adjustments are necessary to recognise each item of property, plant and equipment at its lowest recoverable amount at each year end, when circumstances or changes indicate that the carrying amount of property, plant and equipment may not be fully recoverable, i.e. that the revenues generated will not be sufficient to cover all costs and expenses. In this case, the lowest measurement is not maintained if the reasons for recognising the valuation adjustment have ceased to exist.

Recoverable amount is determined for each individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs.

The Group companies depreciate their property, plant and equipment from the date on which these assets enter into service. Property, plant and equipment are depreciated by allocating the cost of the assets over the following estimated useful lives, which are calculated in accordance with technical studies, which are reviewed regularly:

Buildings 40
Technical installations and machinery 4 – 7
Other installations, equipment and furniture 4 - 10
Other property, plant and equipment 3 - 5

Estimated residual values and depreciation methods and periods are reviewed at each year end and, where applicable, adjusted prospectively.

i) Leases

Lessee accounting records

Determining whether a contract is, or contains, a lease is based on an analysis of the substance of the arrangement and requires an assessment of whether fulfilment of the arrangement is dependent on the use of a specific asset and whether the arrangement conveys a right to use the asset to the DIA Group.

Leases under which the lessor maintains a significant part of the risks and rewards of ownership are classified as operating leases. Operating lease payments are expensed on a straight-line basis over the lease term.

Leases are classified as finance leases when substantially all the risks and rewards incidental to ownership of the assets are transferred to the Group. At the commencement of the lease term, the Group recognises the assets, classified in accordance with their nature, and the associated debt, at the lower of fair value of the leased asset and the present value of the minimum lease payments agreed. Lease payments are allocated proportionally between the reduction of the principal of the lease debt and the finance charge, so that a constant rate of interest is obtained on the outstanding balance of the liability. Finance charges are recognised in the consolidated income statement over the life of the contract.

Contingent rents are recognised as an expense when it is probable that they will be incurred.

Lessor accounting records

The Group has granted the right to use certain spaces within the DIA stores to concessionaires and the right to use leased establishments to franchisees under subleases. The risks and rewards incidental to ownership are not substantially transferred to third parties under these contracts. Operating lease income is taken to the consolidated income statement on a straight-line basis over the lease term. Assets leased to concessionaires are recognised under property, plant and equipment following the same criteria as for other assets of the same nature.

Sale and leaseback transactions

In each sales and leaseback transaction, the Group assess the classification of finance and operating lease contracts for land and buildings separately for each item, and assumes that land has an indefinite economic life. To determine whether the risks and rewards incidental to ownership of the land and buildings are substantially transferred, the Group considers the present value of minimum future lease payments and the minimum lease period compared with the economic life of the building.

If the Group cannot reliably allocate the lease rights between the two items, the contract is recognised as a finance lease, unless there is evidence that it is an operating lease.

Transactions that meet the conditions for classification as a finance lease are considered as financing operations and, therefore, the type of asset is not changed and no profit or loss is recognised.

When the leaseback is classed as an operating lease:

  • If the transaction is established at fair value, any profit or loss on the sale is recognised immediately in consolidated profit or loss for the year;
  • If the sale price is below fair value, any profit or loss is recognised immediately. However, if the loss is compensated for by future lease payments at below market price, it is deferred in proportion to the lease payments over the period for which the asset is to be used.
  • If the sale price is above fair value, the excess over fair value is deferred and amortised over the period for which the asset is to be used.
Non-current assets held for sale and discontinued operations

(i) Non-current assets held for sale

Non-current assets for which the carrying amount will be recovered principally through a sale transaction rather than through continuing use are classified as held for sale, provided that these are available for immediate sale in their present condition subject to terms that are usual and customary for sales of such assets and that the disposal is highly probable.

For the sale to be highly probable, the Group must be committed to a plan to sell the asset or disposal group, and an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset or disposal group must be actively marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification, except in cases in which the delay is caused by circumstances beyond the Group’s control and the Group remains committed to its plan to sell the asset or disposal group.

Non-current assets or disposal groups classified as held for sale are measured at the lower of the carrying amount and fair value less costs to sell and are not depreciated.

The Group classifies subsidiaries that comply with the above conditions and over which the Group will lose control, irrespective of whether it continues to exercise significant influence or joint control, as a disposal group held for sale or distribution, or as a discontinued operation.

The Group measures a non-current asset that ceases to be classified as held for sale or to form part of a disposal group at the lower of the carrying amount before the asset was classified as held for sale, adjusted for any depreciation or amortisation that would have been recognised had the asset not been classified as held for sale, and its recoverable amount at the date of reclassification. Any required adjustment to the carrying amount of a non-current asset that ceases to be classified as held-for-sale is included in profit and loss from continuing operations.

(ii) Discontinued operations

A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale, and:

  • represents a separate major line of business or geographical area of operations;
  • is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
  • is a subsidiary acquired exclusively with a view to resale.

A component of the Group comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Group.

The Group discloses the post-tax profit and loss of discontinued operations and the post-tax gain or loss recognised on the measurement at fair value less costs to sell or distribute or on the disposal of the assets or disposal group(s) constituting the discontinued operation on the face of the consolidated income statement.

If the Group ceases to classify a component as a discontinued operation, the results previously disclosed as discontinued operations are reclassified to continuing operations for all years presented.

k) Impairment of non-financial assets

(i) Impairment of goodwill

Pursuant to IAS 36, impairment testing should be performed annually on each CGU or group of CGUs with associated goodwill, to determine whether the carrying amount of these assets exceeds their recoverable amount.

The recoverable amount of the assets is the higher of their fair value less costs to sell and their value in use.

This CGU or group of CGUs should represent the lowest level at which goodwill is monitored for internal management purposes and should not be larger than an operating segment before aggregation determined in accordance with IFRS 8. The DIA Group reviews the allocation of goodwill at country level. This decision is based on both organisational and strategic criteria to the extent that the activities carried out in a specific country are supported by common resources (purchases, warehouses, etc.) and the implementation decisions are generally taken at country level.

An asset’s value in use is measured based on the future cash flows the Group expects to derive from use of the asset, expectations about possible variations in the amount or timing of those future cash flows, the time value of money, the price for bearing the uncertainty inherent in the asset and other factors that market participants would consider in pricing the future cash flows related to the asset.

(ii) Impairment of other non-current assets

At the end of each reporting period, the Group assesses whether there are any indications of possible impairment of non-current assets, including intangible assets. If such indications exist, or when by their nature assets require yearly impairment testing, the Group estimates the recoverable amount of the asset, calculated as the higher of fair value less costs to sell and value in use. Value in use is determined by discounting estimated future cash flows, applying a pre-tax discount rate which reflects the value of money over time, and considering the specific risks associated with the asset. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is considered to be impaired. In this case the carrying amount is adjusted to the recoverable amount and the impairment loss is recognised in the consolidated income statement. Amortisation and depreciation charges for future periods are adjusted to the new carrying amount during the remaining useful life of the asset. Assets are tested for impairment on an individual basis, except in the case of assets that generated cash flows that are independent of those from other assets (cash-generating units).

The Group calculates impairment on the basis of the strategic plans of the different cash-generating units to which the assets are allocated, which are generally for a period of five years. For longer periods, projections based on strategic plans are used as of the fifth year, applying a constant expected growth rate.

The discount rates used are calculated before tax and are adjusted for the corresponding country and business risks.

When new events or changes in existing circumstances arise which indicate that an impairment loss recognised in a previous period could have disappeared or been reduced, a new estimate of the recoverable amount of the asset is made. Previously recognised impairment losses are only reversed if the assumptions used in calculating the recoverable amount have changed since the most recent impairment loss was recognised. In this case, the carrying amount of the asset is increased to its new recoverable amount, to the limit of the carrying amount this asset would have had had the impairment loss not been recognised in previous periods. The reversal is recognised in the consolidated income statement and amortisation and depreciation charges for future periods are adjusted to the new carrying amount.

l) Advertising and catalogue expenses

The cost of acquiring advertising material or promotional articles and advertising production costs are recognised as expenses when incurred. However, advertising placement costs that can be identified separately from advertising production costs are accrued and expensed as the advertising is published.

m) Financial instruments – assets

Regular way purchases and sales of financial assets are recognised in the consolidated statement of financial position at trade date, when the Group undertakes the commitment to purchase or sell the asset. At the date of first recognition, the DIA Group classifies its financial instruments into the following four categories: financial assets at fair value through profit and loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The only significant financial assets are classified under loans and receivables.

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market and are not classified in any other financial asset categories. Assets of this nature are recognised initially at fair value, including incurred transaction costs, and subsequently measured at amortised cost using the effective interest method. Results are recognised in the consolidated income statement at the date of settlement or impairment loss, and through amortisation. Trade receivables are initially recognised at fair value and subsequently adjusted where objective evidence exists that the debtor may default on payment. The provision for bad debts is calculated based on the difference between the carrying amount and the recoverable amount of receivables. Current trade balances are not discounted.

Guarantees paid in relation to rental contracts are measured using the same criteria as for financial assets. The difference between the amount paid and the fair value is classified as a prepayment and recognised in consolidated profit and loss over the lease term.

All or part of a financial asset is derecognised when one of the following circumstances arises:

  • The rights to receive the cash flows associated with the asset have expired.
  • The Group has assumed a contractual obligation to pay the cash flows received from the asset to a third party.
  • The contractual rights to the cash flows from the asset have been transferred to a third party and all of the risks and rewards of ownership have been transferred.
n) Inventories

Inventories are initially measured at cost of purchase based on the weighted average cost method.

The purchase price comprises the amount invoiced by the seller, after deduction of any discounts, rebates, non-trading income or other similar items, plus any additional costs incurred to bring the goods to a saleable condition, other costs directly attributable to the acquisition and indirect taxes not recoverable from the Spanish taxation authorities.

Trade discounts granted by suppliers are recognised as a reduction in merchandise and other consumables used in the consolidated income statement when it is probable that the conditions for discounts, if this is the case, to be received will be met. Unallocated discounts are recognised as a decrease on the purchase in the consolidated income statement.

Purchase returns are recognised as a reduction in the carrying amount of inventories returned, except where it is not feasible to identify these items, in which case they are accounted for as a reduction in inventories on a weighted average cost basis.

The previously recognised write-down is reversed against profit and loss when the circumstances that previously caused inventories to be written down no longer exist or when there is clear evidence of an increase in net realisable value because of changed economic circumstances. The reversal of the valuation adjustment is limited to the lower of the cost and the revised net realisable value of the inventories.

Write-downs to net realisable value recognised or reversed on inventories are classified under merchandise and other consumables used.

o) Cash and cash equivalents

Cash and cash equivalents recognised in the consolidated statement of financial position include cash and bank accounts, demand deposits and other highly liquid investments maturing in less than three months. These items are recognised at historical cost, which does not differ significantly from their realisable value.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents reflect items defined in the paragraph above. Any bank overdrafts, if any, are recognised in the consolidated statement of financial position as financial liabilities from loans and borrowings.

p) Financial liabilities

Financial liabilities are initially recognised at the fair value of the consideration given, less any directly attributable transaction costs. In subsequent periods, these financial liabilities are carried at amortised cost using the effective interest method. Financial liabilities are classified as non-current when their maturity exceed twelve months or the DIA Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

Financial liabilities are derecognised when the corresponding obligation is settled, cancelled or has expired. When a financial liability is substituted by another with substantially different terms, the Group derecognises the original liability and recognises a new liability, taking the difference in the respective carrying amounts to the consolidated income statement.

The Group considers the terms to be 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.

The Group has contracted reverse factoring facilities with various financial institutions to manage payments to suppliers. Trade payables settled under the management of financial institutions are recognised under trade and other payables in the consolidated statement of financial position until they have been settled, repaid or have expired.

Income received from financial institutions as consideration for the acquisition of trade invoices or bills payable to the Group is recorded in other income within the consolidated income statement when accrued.

Security deposits received in sublease contracts are measured at nominal amount, since the effect of discounting is immaterial.

Derivative financial products and hedge accounting

Derivative financial instruments are recognised at fair value and classified as financial assets or financial liabilities depending on whether fair value is positive or negative. Derivative financial instruments are classified as current or non-current depending on whether their maturity is less or more than twelve months. Derivative instruments that qualify to be treated as hedging instruments for non-current assets are classified as non-current assets or liabilities, depending on whether their values are positive or negative.

The criteria from recognising gains or losses arising from changes in the fair value of derivatives depend on whether the derivative instrument complies with hedge accounting criteria and, where applicable, on the nature of the hedging relationship.

Changes in the fair value of derivatives that qualify for hedge accounting, have been allocated as cash flow hedges and are highly effective, are recognised in equity. The ineffective portion of the hedging instrument is taken directly to consolidated profit and loss. When the forecast transaction or the firm commitment results in the recognition of a non-financial asset or liability, the gains or losses accumulated in equity are taken to the consolidated income statement during the same period in which the hedging transaction has an impact on net profit and loss.

At the inception of the hedge the Group formally documents the hedging relationship between the derivative and the hedged item, as well as the objectives and risk management strategies applied on establishing the hedge. This documentation includes the identification of the hedging instrument, the hedged item or transaction and the nature of the hedged risk, as well as the measures taken to assess the effectiveness of the hedge in terms of covering the exposure to changes in the hedged item, whether with respect to its fair value or cash flows attributable to the risk hedge purpose. The effectiveness of the hedge is assessed prospectively and retrospectively, both at the inception of the hedging relationship and systematically over the period of allocation.

Hedge accounting criteria cease to be applied when the hedging instrument expires or is sold, cancelled or settled, or when the hedging relationship no longer complies with the criteria to be accounted for as such, or the instrument is no longer designated as a hedging instrument. In these cases, the accumulated gain or loss on the hedging instrument that has been recognised in equity is not taken to profit or loss until the forecast or committed transaction impacts on the Group’s results. However, if the transaction is no longer considered probable, the accumulated gains or losses recognised in equity are immediately transferred to the consolidated income statement.

The fair value of the Group’s derivatives portfolio reflects estimates based on calculations performed using observable market data and the specific tools used widely among financial institutions to value and manage derivative risk.

q) Parent own shares

The Group’s acquisition of equity instruments of the Parent is recognised separately at cost of acquisition in the consolidated statement of financial position as a reduction in equity, irrespective of the reason for the purchase. Any gains or losses on transactions with own equity instruments are not recognised in consolidated profit and loss.

The subsequent redemption of the Parent instruments entails a capital reduction equivalent to the par value of the shares. Any positive or negative difference between the purchase price and the par value of the shares is debited or credited to reserves.

Transaction costs related to own equity instruments, including issue costs related to a business combination, are accounted for as a reduction in equity, net of any tax effect.

Parent own shares are recognised as a component of consolidated equity at their total cost.

Contracts that oblige the Group to acquire own equity instruments, including non-controlling interests, in cash or through the delivery of a financial asset, are recognised as a financial liability at the fair value of the amount redeemable against reserves. Transaction costs are likewise recognised as a reduction in reserves. Subsequently, the financial liability is measured at amortised cost or at fair value through profit and loss in line with the redemption conditions. If the Group does not ultimately exercise the contract, the carrying amount of the financial liability is reclassified to reserves.

r) Distributions to shareholders

Dividends, whether in cash or in kind, are recognised as a reduction in equity when approved by the shareholders at their annual general meeting.

s) Employee benefits

Defined benefit plans

Liabilities accrued on commitments for defined benefit plans are measured using the projected unit credit method. This calculation is based on demographic and financial assumptions which are determined at country level, considering the macroeconomic environment. Discount rates are determined by reference to market interest rate curves. These calculations are performed by an independent actuary.

Termination benefits

Termination benefits paid or payable that do not relate to restructuring processes in progress are recognised when the Group is demonstrably committed to terminating the employment of current employees prior to retirement date. The Group is demonstrably committed to terminating the employment of current employees when it has a detailed formal plan and is without realistic possibility of withdrawing or changing the decisions made.

Restructuring-related termination benefits

Restructuring-related termination benefits are recognised when the Group has a constructive obligation, that is, when it has a detailed formal plan for the restructuring and there is valid expectation in those affected that the restructuring will be carried out by starting to implement that plan or announcing its main features to those affected by it.

Employee benefits

The Group recognises the expected cost of short-term employee benefits in the form of accumulating compensated absences when the employees render service that increases their entitlement to future compensated absences. In the case of non-accumulating compensated absences, the expense is recognised when the absences occur.

t) Other provisions

Provisions are recognised when the Group has a present obligation (legal or implicit) as a result of a past event, the settlement of which requires an outflow of resources which is probable and can be estimated reliably. If it is virtually certain that some or all of a provisioned amount will be reimbursed by a third party, for example through an insurance contract, an asset is recognised in the consolidated statement of financial position and the related expense is recognised in the consolidated income statement, net of the foreseen reimbursement. If the time effect of money is material, the provision is discounted, recognising the increase in the provision due to the time effect of money as a finance cost.

Provisions for onerous contracts are based on the present value of unavoidable costs, determined as the lower of the contract costs, net of any income that could be generated, and any compensation or penalties payable for non-completion.

u) Share-based payments for goods and services

The Group recognises the goods or services received or acquired in a share-based payment transaction when it obtains the goods or as the services are received. It recognises an increase in equity if the goods or services were received in an equity-settled share-based payment transaction, or a liability with a balancing entry in the consolidated income statement or assets if the goods or services were acquired in a cash-settled share-based payment transaction.

The Group recognises equity-settled share-based payment transactions, including capital increases through non-monetary contributions, and the corresponding increase in equity at the fair value of the goods or services received, unless that fair value cannot be reliably estimated, in which case the value is determined by reference to the fair value of the equity instruments granted.

Equity instruments granted as consideration for services rendered by Group employees or third parties that supply similar services are measured by reference to the fair value of the equity instruments granted.

(i) Equity-settled share-based payment transactions

Share-based payment transactions are recognised by applying the following criteria:

  • If the equity instruments granted vest immediately on the grant date, the services received are recognised in full charged to profit and loss, with a corresponding increase in equity;
  • If the equity instruments granted do not vest until the employees complete a specified period of service, those services are accounted for during the vesting period, with a corresponding increase in equity.

The Group determines the fair value of the instruments granted to employees at the grant date. In 2012 final approval was granted for benefit plans settled in own shares of the Parent. Beneficiaries were informed of the plan regulations on 11 June 2012.

If the service period is prior to the plan award date, the Group estimates the fair value of the consideration payable, to be reviewed on the plan award date itself.

Market vesting conditions and non-vesting conditions are taken into account when estimating the fair value of the instrument. Vesting conditions, other than market conditions, are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised for services received is based on the number of equity instruments that eventually vest. Consequently, the Group recognises the amount for the services received during the vesting period based on the best available estimate of the number of equity instruments expected to vest and revises that estimate according to the equity instruments expected to vest.

Once the services received and the corresponding increase in equity have been recognised, no additional adjustments are made to equity after the vesting date, though this does not affect the corresponding reclassifications in equity.

(ii) Tax effect

In accordance with prevailing tax legislation in Spain and other countries in which the Group operates, expenses paid by delivering of share-based instruments will be deductible during the taxable period when the delivery of the instruments took place, arisen in those cases a temporary difference as a result of the different moment between the accounting booking of the expense and its taxable deduction.

v) Grants, donations and bequests

Grants, donations and bequests are recorded as a liability when, where applicable, they have been officially awarded and the conditions attached to them have been met or there is reasonable assurance that they will be received.

Monetary grants, donations and bequests are measured at the fair value of the sum received, whilst non-monetary grants, donations and bequests received are accounted for at fair value of the received asset.

In subsequent years, grants, donations and bequests are recognised as income as they are applied.

Capital grants are recognised as income over the same period and in the proportions in which depreciation on those assets is charged or when the assets are disposed of, derecognised or impaired.

w) Income taxes

Income tax in the consolidated income statement comprises total debits or credits deriving from income tax paid by Spanish Group companies and those of a similar nature of foreign entities.

The income tax expense for each year comprises current tax and, where applicable, deferred tax.

Current tax assets or liabilities are measured at the amount expected to be paid to or recovered from the taxation authorities. The tax rates and tax laws used to calculate these amounts are those prevailing at the closing date in each country.

Deferred taxes are obtained from an analysis of the consolidated statement of financial position, taking into consideration temporary differences which are those generated from the difference between the carrying amount of the assets and liabilities and their tax base.

The Group calculates deferred tax assets and liabilities using the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted (or substantially enacted) by the end of the reporting period.

Deferred tax assets and liabilities are not discounted at present value and are classified as non-current irrespective of the reversal date.

At each close the Group analyses the carrying amount of the deferred tax assets recognised and makes the necessary adjustments where doubts exist regarding their future recovery. Deferred tax assets not recognised in the consolidated statement of financial position are also re-evaluated at each accounting close and are recognised when their recovery through future tax profits appears likely.

The tax effect of items recognised in equity is also recognised directly in equity. The recognition of deferred tax assets and liabilities arising from business combinations affects goodwill.

Deferred tax assets and liabilities are presented at their net amount only when they relate to income taxes levied by the same taxation authority on the same taxable entity, provided that there is a legally enforced right to set off current taxes against assets and liabilities or the intention to realise the assets and settle the liabilities simultaneously.

In accordance with French tax legislation and pursuant to the French State Budget Law for 2010, enacted on 30 December 2009, French taxable entities are subject to the “Cotisation sur la valeur ajoutée des entreprises “ (CVAE, a French business tax), calculated based on the added value reflected in their financial statements.

Under IAS 12 the CVAE has been identified as an income tax, and consequently the total amount of current and deferred costs derived from the CVAE are included within income tax.

x) Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating decision-maker in order to allocate resources to the segment and assess its performance, and for which discrete financial information is available.

y) Classification of assets and liabilities as current and non-current

The Group classifies assets and liabilities in the consolidated statement of financial position as current and non-current. Current assets and liabilities are determined as follows:

  • Assets are classified as current when they are expected to be realised or are intended for sale or consumption in the Group’s normal operating cycle, they are held primarily for the purpose of trading, they are expected to be realised within twelve months after the reporting date or are cash or a cash equivalent, unless the assets may not be exchanged or used to settle a liability for at least twelve months after the reporting date.
  • Liabilities are classified as current when they are expected to be settled in the Group’s normal operating cycle, they are held primarily for the purpose of trading, they are due to be settled within twelve months after the reporting date or the Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.
z) Environmental issues

The Group takes measures to prevent, reduce or repair the damage caused to the environment by its activities.

Expenses derived from environmental activities are recognised as other operating expenses in the period in which they are incurred. The Group recognises environmental provisions if necessary.

aa) Related party transactions

Sales to and purchases from related parties take place in the same conditions as those existing in transactions between independent parties.

ab) Interest

Interest is recognised using the effective interest method, which is the discount rate used to make the carrying amount of a financial instrument equivalent to the estimated cash flows over the expected useful life of the instrument, based on contractual conditions and without considering future losses due to credit risk.

4. BUSINESS COMBINATIONS

On 2 May 2011, the subsidiary DIA France acquired all the shares of Erteco, SAS and its subsidiary Bladis SAS from Carrefour, S.A. for Euros 40,000 thousand. Bladis SAS is accounted for using the equity method (see note 1 and 11).

Details of assets and liabilities acquired in the Erteco, S.A. business combination are as follows:

Thousands of Euros 2011
Property, plant and equipment 3
Investments accounted for using equity method 2,596
Deferred tax assets 143
Non-current financial assets 3
Non-Current Assets 2,745
Trade and other receivables 2,478
Other current financial assets 30,462
Current tax assets 608
Cash and cash equivalents 10
Current Assets 33,558
TOTAL ASSETS 36,303
Deferred tax liabilities 1
Provisions 193
Non-Current Liabilities 194
Trade and other payables 1,754
Other financial liabilities 4
Current tax liabilities 15,777
Current Liabilities 17,535
TOTAL LIABILITIES 17,729

At the date of acquisition of the interest in Erteco, S.A., both companies were part of the Carrefour Group and therefore the operation was considered a transaction under common control. In accordance with IFRS-EU rules on business combinations under common control, the Group has opted to measure the assets and liabilities of the acquired businesses at the carrying amounts at which they were recognised in the consolidated annual accounts of the Carrefour Group at the date of acquisition.

Any differences between the amounts paid and the carrying amount of the net assets acquired were adjusted in equity attributed to the Parent. Details are as follows:

Thousands of Euros
Price paid 40,000
Value of net assets acquired (18,574)
Adjustment to Equity 21,426

In an agreement signed with Schlecker International GmbH on 28 September 2012, the Parent agreed to acquire 100% of the share capital of Schlecker, S.A. Unipersonal (“Schlecker Spain”) and, indirectly, 100% of the share capital of Schlecker Portugal, Sociedade Uniperssoal Lda. Once authorisation was obtained from the Spanish and Portuguese competition authorities, the final sale and purchase contract was signed on 1 February 2013, which is, therefore, the date on which the Parent took control over the acquired businesses. The Group agreed a total price of Euros 69,287,307.46 for 100% of Schlecker Spain and Schlecker Portugal’s share capital and certain industrial property rights and other credit rights associated with these businesses. This price was calculated based on (a) an enterprise value of Euros 70,500,000 for Schlecker Spain, and (b) Schlecker Spain and Schlecker Portugal’s respective debt and cash balances. This price has still to be adjusted using the usual mechanisms for transactions of this nature. Due to the reason that the acquired companies have not made their annual accounts for 2012, at the date of preparation of these consolidated financial statements has not been possible to determine the fair value of the assets, liabilities and contingent liabilities acquired by the Group.

5. INFORMATION ON OPERATING SEGMENTS

For management purposes the Group is organised into business units, based on the countries in which it operates, and has three reporting segments:

  • Segment 1 comprises Spain, Portugal and Switzerland.
  • Segment 2 comprises France.
  • Segment 3 comprises emerging countries (Turkey, Brazil, Argentina and China).

Management monitors the operating results of its business units separately in order to make decisions on resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments.

Transfer prices between operating segments are on an arm’s length basis similar to transactions with third parties.

Details of the key indicators expressed by segment are as follows:

Thousands of Euros at 31 december 2012 Segment 1
- Iberia -
Segment 2
- France-
Segment 3
- Emerging -
Consolidated
Sales (1) 5,117,529 2,139,544 2,867,255 10,124,328
Adjusted EBITDA (2) 456,860 93,584 59,032 609,476
% of sales 8.9% 4.4% 2.1% 6.0%
Non-current assets 1,103,846 744,352 353,919 2,202,117
Assets held for sale (3) - - 13,875 13,875
Liabilities 2,035,623 571,252 650,105 3,256,980
Liabilities associated with assets held for sale (3) - - 22,181 22,181
Acquisition of non-current assets 133,270 92,253 106,232 331,755
Number of outlets (4) 3,497 888 2,529 6,914

Thousands of Euros at 31 december 2011 Segment 1
- Iberia -
Segment 2
- France -
Segment 3
- Emerging -
Consolidated
Sales (1) 4,947,068 2,356,859 2,424,617 9,728,544
Adjusted EBITDA (2) 413,747 88,512 58,844 561,103
% of sales 8.4% 3.8% 2.4% 5.8%
Non-current assets 1,133,513 748,730 324,067 2,206,310
Liabilities 1,753,535 895,963 555,469 3,204,967
Liabilities associated with assets held for sale 1,892 - - 1,892
Acquisition of non-current assets 120,243 138,907 90,751 349,901
Investments in associates - 61 - 61
Number of outlets (4) 3,380 916 2,374 6,670

(1) Sales eliminations arising from consolidation are included in segment 1
(2) Adjusted EBITDA = operating income before depreciation, amortisation and impairment, profit/(loss) on changes in fixed assets and other restructuring revenues and expenses included under "Operating expenses".
(3) Data related to Beijing DIA Commercial Co. Ltd. is included in the segment 3
(4) Without data related to Beijing DIA Commercial Co. Ltd. is included in the segment 3

During 2012 transactions took place between segments 1 and 2 in respect of services rendered by the Parent, amounting to Euros 6,743 thousand (Euros 2,379 thousand at 31 December 2011). Sales between segments 1 and 2 total Euros 9,868 thousand. Sales between segments 1 and 3 during 2012 amounted to Euros 1,738 thousand (Euros 1,383 thousand at 31 December 2011) and services rendered by the Parent totalled Euros 9,631 thousand (Euros 10,179 thousand at 31 December 2011).

Details of revenues and non-current assets (except for financial assets and deferred tax assets) are as follows:

Sales Tangible and intangible assets
Thousands of Euros 2012 2011 2012 2011
Spain 4,317,346 4,140,622 781,640 813,322
Portugal 800,183 806,446 247,173 247,972
France 2,139,544 2,356,859 733,187 730,360
Argentina 951,644 695,547 91,197 79,195
Brazil 1,350,538 1,194,371 154,364 142,187
Turkey 416,774 412,073 61,542 57,657
China 148,299 122,626 10,708 15,991
Switzerland - - 163 195
Total 10,124,328 9,728,544 2,079,974 2,086,879

6. PROPERTY, PLANT AND EQUIPMENT

Details of property, plant and equipment and movements are as follows:

Thousands of Euros Land Buildings Technical installations, machinery and other fixed assets Total
Cost
At 1st january 2011 184,017 760,945 2,252,436 3,197,398
Additions 1,807 32,200 300,180 334,187
Disposals (1,014) (10,059) (238,622) (249,695)
Transfers 1,208 23,107 (22,253) 2,062
Additions to the consolidated group - 1,475 7,155 8,630
Other movements - (2) (450) (452)
Translation differences (1,991) (7,825) (21,371) (31,187)
At 31st december 2011 184,027 799,841 2,277,075 3,260,943
Additions 4,332 54,399 262,791 321,522
Disposals (262) (8,854) (184,777) (193,893)
Transfers - 35,458 (33,561) 1,897
Other movements - 1 (904) (903)
Transfers to assets held for sale - - (18,230) (18,230)
Translation differences (2,822) (16,500) (22,280) (41,602)
At 31st december 2012 185,275 864,345 2,280,114 3,329,734
Depreciation
At 1st january 2011 - (198,912) (1,362,786) (1,561,698)
Amortisation and depreciation - (32,359) (238,081) (270,440)
Disposals - 5,610 221,665 227,275
Transfers - (5,960) 2,806 (3,154)
Additions to the consolidated group - (230) (1,680) (1,910)
Other movements - (126) (1,096) (1,222)
Translation differences - 1,374 11,366 12,740
At 31st december 2011 - (230,603) (1,367,806) (1,598,409)
Amortisation and depreciation - (36,154) (235,673) (271,827)
Disposals - 4,452 168,232 172,684
Transfers - (1,631) 893 (738)
Other movements - (71) (1,309) (1,380)
Transfers to assets held for sale - - 9,599 9,599
Translation differences - 2,829 9,425 12,254
At 31st december 2012 - (261,178) (1,416,639) (1,677,817)
Impairment
At 1st january 2011 - (14,454) (23,825) (38,279)
Allowance - (3,364) (9,453) (12,817)
Distribution - 1,808 3,976 5,784
Reversals - 5,123 2,274 7,397
Other movements - - 33 33
Transfers - (609) 2,054 1,445
Translation differences - 117 (254) (137)
At 31st december 2011 - (11,379) (25,195) (36,574)
Allowance - (3,870) (11,457) (15,327)
Distribution - 997 5,180 6,177
Reversals - 5,339 2,292 7,631
Other movements - 58 (318) (260)
Transfers - 116 (27) 89
Transfers to assets held for sale - - 4,637 4,637
Translation differences - 293 48 341
At 31st december 2012 - (8,446) (24,840) (33,286)
Net carrying amount
At 31st december 2012 185,275 594,721 838,635 1,618,631
At 31st december 2011 184,027 557,859 884,074 1,625,960

Spain accounts for Euros 104,720 thousand of the additions recognised in 2012 (Euros 95,826 thousand at 31 December 2011), mainly comprising the extension, improvement and refurbishment work required to adapt stores to the new DIA MAXI and DIA MARKET formats, as well as new store openings. Euros 85,346 thousand of the additions recognised in 2012 were located in France, where investment included both the adaptation of former ED stores to the DIA format, and additions relating to the finance leases signed for three warehouses, Le Plessis, Macon and Boisseron (Euros 129,927 thousand at 31 December 2011, for the adoptions of former ED stores to the DIA format). Other additions in 2012 are due to store openings in emerging countries, mainly Brazil and Argentina.

Disposals for 2012 and 2011 primarily comprise items replaced as a result of these improvements and disposals due to store closures. Assets with a total carrying amount of Euros 7,537 thousand were derecognised in Spain in 2012 (Euros 9,066 thousand at 31 December 2011). Disposals in France in 2012 total Euros 8,431 thousand (Euros 10,075 thousand at 31 December 2011). Other disposals for 2012 and 2011 are related to store closures in France and the adaptation of stores in other countries in which the DIA Group operates.

In 2010 the Group re-estimated the useful lives of the assets of the ED-format stores adapted to the DIA format in France. The impact on depreciation in 2011 amounted to Euros 8,009 thousand, corresponding to 169 stores with an average carrying amount of approximately Euros 41 thousand. This year the impact on depreciation is much less significant, amounting to Euros 128 thousand.

The Group has written down the assets of certain CGUs to their value in use. In Spain this has had a net impact of Euros 791 thousand in 2012 and Euros 3,374 thousand in 2011, and in France the impact totals Euros 5,803 thousand and Euros 1,612 thousand, respectively (see note 21.5).

Details of the cost of fully depreciated property, plant and equipment in use at 31 December are as follows:

Thousands of Euros 2012 2011
Buildings 30,017 25,065
Technical installations, machinery and other fixed assets 669,381 623,340
Total 699,398 648,405

Buildings include the amount of the Seville warehouse of Twins Alimentación S.A., which is subject to a financing arrangement (see note 17.1).

The Group has taken out insurance policies to cover the risk of damage to its property, plant and equipment. The coverage of these policies is considered sufficient.

Finance leases

The Group has acquired the following items of property, plant and equipment under finance leases and hire purchase contracts:

Thousands of Euros 2012 2011
Land 5.676 4.181
Cost 5.676 4.181
Buildings 26.260 3.526
Cost 27.594 5.174
Accumulated depreciation (1.334) (1.648)
Technical installations, machinery and other fixed assets - 31
Cost 9.264 9.786
Accumulated depreciation (9.264) (9.755)
Net carrying amount 31.936 7.738

Finance leases are for stores at which the Group’s principal activities are carried out and three warehouses in France.

Finance lease contracts were signed for three warehouses in France (Le Plessis, Macon and Boisseron) during 2012. The total value of these contracts at 31 December 2012 is Euros 28,084 thousand (see note 17.1). Disposals reflect similar contracts that expired in Spain during 2012, for which the purchase options with carrying amounts totalling Euros 3,174 thousand have been exercised.

Interest incurred on finance leases totalled Euros 1,018 thousand in 2012 and Euros 100 thousand in 2011.

Future minimum lease payments under finance leases, together with the present value of the net minimum lease payments, are as follows:

2012 2011
Thousands of Euros Minimum payments Present value Minimum payments Present value
Less than one year 4,297 3,106 591 575
Two to five years 23,043 21,187 172 171
More than 5 years 424 337 - -
Total minimum payments and present value 27,764 24,630 763 746
Less current portion (4,297) (3,106) (591) (575)
Total non-current 23,467 21,524 172 171

Future minimum payments are reconciled with their present value as follows:

Thousands of Euros 2012 2011
Minimum future payments 12,773 650
Purchase option 14,991 113
Unaccrued finance expenses (3,134) (17)
Present value 24,630 746

7. INTANGIBLE ASSETS

7.1. Goodwill

Details of goodwill by operating segment before aggregation and movement during the period are as follows:

Thousands of Euros SPAIN FRANCE PORTUGAL TURKEY TOTAL
Net goodwill at 01/01/2011 219,356 133,858 39,754 21,467 414,435
Additions - 7,481 - - 7,481
Disposals (368) (947) - - (1,315)
Transfers (477) 629 - - 152
Provision for impariment - (2,607) - - (2,607)
Additions to the consolidated group - 1,681 - - 1,681
Translation differences - - - (3,284) (3,284)
Net goodwill at 31/12/2011 218,511 140,095 39,754 18,183 416,543
Additions - 6,076 - - 6,076
Transfers - (261) - - (261)
Provision for impariment - (72) - - (72)
Translation differences - - - 680 680
Net goodwill at 31/12/2012 218,511 145,838 39,754 18,863 422,966

The goodwill reported by the Group primarily relates to the following business combinations:

  • In Spain: the business combinations arising from the acquisition of Plus Supermercados S.A. for Euros 160,553 thousand in 2007, and the acquisition of Distribuciones Reus, S.A. for Euros 26,480 thousand in 1991.
  • In France: the business combinations arising from the acquisition of Penny Market, S.A. by DIA France and another company, Inmmobiliere Erteco, SAS, for Euros 67,948 thousand and Euros 3,501 thousand, respectively, in 2005, and the acquisition of Sonnenglut/Treff Marché for Euros 10,510 thousand in 2003.
  • In both Spain and France, goodwill has been generated in the past as a result of the acquisition of stores and groups of stores.
  • In Portugal: the business combination arising from the acquisition of Companhia Portuguesa de Lojas de Desconto, S.A. in 1998.
  • In Turkey: the acquisition of Endi Tüketim Mallari Ticaret Ve Sanayi Anonim Sirketi in 2006.

Additions recognised in 2012 reflect the acquisition of eight stores in France. Additions recognised in 2011 primarily related to the acquisition of stores from the Carrefour Group as a result of the spin-off carried out during the year.

Disposals for 2011 in France are due to the write-off of goodwill associated with stores closed during 2011. These stores were originally part of ED Est SNC, which merged with DIA France in 2010.

During 2011 Proved SAS and other minor interests in other associates were included in the consolidated group, increasing goodwill by Euros 1,681 thousand.

For impairment testing purposes, goodwill has been allocated to the DIA Group’s cash-generating units up to country level.

The recoverable amount of a group of CGUs is determined based on its value in use. These calculations are based on cash flow projections from the financial budgets approved by management over a period of five years. Cash flows beyond this five-year period are extrapolated using the estimated growth rates indicated below. The growth rate does not exceed the long-term average growth rate for the retail business in which the Group operates.

The following main assumptions are used to calculate value in use of intangible assets and property, plant and equipment:

Spain France
2012 2011 2012 2011
Sales growth rate (1) 4.80% 2.16% 3.20% 1.45%
Growth rate (2) 1.00% 1.00% 1.00% 1.00%
Discount rate (3) 8.35% 8.37% 7.50% 6.58%

Portugal Turkey
2012 2011 2012 2011
Sales growth rate (1) 3.30% 2.93% 11.70% 22.52%
Growth rate (2) 1.00% 1.00% 2.00% 2.00%
Discount rate (3) 9.39% 13.27% 11.36% 10.77%

(1) Weighted average annual growth rate of sales for the five years projected
(2) Weighted average growth rate used to extrapolate cash flow beyond the budgeted period
(3) Discount rate before tax applied to cash flow projections

These assumptions have been used to analyse each group of CGUs within the business segment.

The Group determines budgeted weighted average sales growth based on past experience and forecast market performance. The growth of sales in the European countries (Spain, France and Portugal) reflects the continuation and acceleration of the policy to adapt stores to the new DIA Market and DIA Maxi store formats, which has generated a significant increase in sales. The cash forecast for Turkey, which has been prepared in local currency, reflects a slower rate of new store openings.

According to the assumptions used to forecast cash flows, the gross margin will remain stable throughout the budgeted period. It is, therefore, the rise in sales that will generate the increase in projected cash flows.

The weighted average growth rates of income in perpetuity are consistent with the forecasts included in industry reports. The discount rates used are pre-tax values calculated by weighting the cost of equity against the cost of debt using the average industry weighting. The specific cost of equity in each country is calculated by adding inflation and the country-risk premium to the cost of equity in Spain. The risk premium is the difference between the five-year credit default swap (CDS) spread of each country in which the Group operates and the spread applicable to Spain.

In all cases sensitivity analyses are performed in relation to the discount rate used and the growth rate of income in perpetuity to ensure that reasonable changes in these assumptions would not have an impact on the possible recovery of the goodwill recognised. Specifically, a variation of 100 basis points in the discount rate used or a growth rate of income in perpetuity of 0% would not result in the impairment of any of the goodwill recognised.

For this analysis and for all the other countries, the following assumptions are used to calculate value in use:

Argentina Brazil
2012 2011 2012 2011
Sales growth rate (1) 15.70% 16.18% 19.00% 20.11%
Growth rate (2) 2.00% 2.00% 2.00% 2.00%
Discount rate (3) 26.94% 20.28% 10.89% 9.35%

China
2012 2011
Sales growth rate (1) 16.80% 23.23%
Growth rate (2) 2.00% 2.00%
Discount rate (3) 9.33% 7.87%

7.2. Other intangible assets

Details of other intangible assets and movements are as follows:

Thousands of Euros Development cost Industrial property Leaseholds Computer software Apliaciones Informáticas Other intangible assets Total
Cost
At 1st january 2011 - 77 39,404 27,364 18,788 85,633
Additions/Internal development - - 263 7,535 435 8,233
Disposals - - (1,412) (7,107) (37) (8,556)
Transfers - (5) 5,558 155 (1,052) 4,656
Additions to the consolidated group - - 159 37 - 196
Translation differences - - - (136) (293) (429)
At 31st december 2011 - 72 43,972 27,848 17,841 89,733
Additions/Internal development 668 - 21 2,851 617 4,157
Disposals - - (1,023) (994) (2,392) (4,409)
Transfers (244) - (1,282) 259 17 (1,250)
Transfers to assets held for sale - - - (41) - (41)
Translation differences - - - (177) (191) (368)
At 31st december 2012 424 72 41,688 29,746 15,892 87,822
Depreciation
At 1st january 2011 - (7) (11,927) (21,129) (4,803) (37,866)
Amortisation and depreciation - - (1,039) (5,049) (860) (6,948)
Disposals - - 410 7,095 36 7,541
Transfers - (65) (5,507) 150 248 (5,174)
Additions to the consolidated group - - - (20) - (20)
Other movements - - - (3) - (3)
Translation differences - - - 94 114 208
At 31st december 2011 - (72) (18,063) (18,862) (5,265) (42,262)
Amortisation and depreciation - - (1,122) (5,482) (684) (7,288)
Disposals - - 106 873 1,124 2,103
Transfers - - (14) 4 (2) (12)
Other movements - - - (4) - (4)
Transfers to assets held for sale - - - 12 12
Translation differences - - - 104 46 150
At 31st december 2012 - (72) (19,093) (23,355) (4,781) (47,301)
Impairment
At 1st january 2011 - - - (2,348) (2,348)
Allowance - - (1,089) - (110) (1,199)
Distribution - - 235 - - 235
Reversals - - 196 - 8 204
Transfers - - (2,094) (6) 2,113 13
At 31st december 2011 - - (2,752) (6) (337) (3,095)
Allowance - - (124) - (411) (535)
Distribution - - 917 - 162 1,079
Reversal - - 105 - 2 107
Transfers - - 275 (3) 3 275
Transfers to assets held for sale - - - 9 9
Translation differences - - - - 16 16
At 31st december 2012 - - (1,579) - (565) (2,144)
Net carrying amount
At 31st december 2012 424 - 21,016 6,391 10,546 38,377
At 31st december 2011 - - 23,157 8,980 12,239 44,376

The additions to computer software primarily reflect investments in Spain to acquire licences as a result of the spin-off from the Carrefour Group, and in France due to the implementation of several projects, in amounts of Euros 2,419 thousand in 2012 and Euros 7,055 thousand in 2011.

As indicated in note 7.1, the DIA Group has recognised impairment losses, adjusting its intangible assets by net amounts of Euros 210 thousand and Euros 242 thousand in Spain and Brazil, respectively, and writing off Euros 24 thousand in France in 2012 (adjustments of Euros 61 thousand in Spain and Euros 934 thousand in France in 2011). These impairment losses have been included in the income statement under amortisation, depreciation and impairment (see note 21.5).

Details of fully amortised intangible assets at each year end are as follows:

Thousands of Euros 2012 2011
Computer software 17,268 11,708
Leaseholds and other 2,505 2,633
Total 19,773 14,341

8. OPERATING LEASES

The Group has leased certain assets under operating leases from third parties.

The main operating leases are for warehouses used by the Group and the business premises from which it operates.

Details of the main operating lease contracts in force at 31 December 2012 are as follows:

Warehouse Country Minimum lease period
Getafe SPAIN 2,017
Mallén SPAIN 2,023
Manises SPAIN 2,016
Mejorada del Campo SPAIN 2,018
Miranda SPAIN 2,016
Orihuela SPAIN 2,023
Sabadell SPAIN 2,022
San Antonio SPAIN 2,023
Tarragona SPAIN 2,018
Villanubla SPAIN 2,019
Albufeira PORTUGAL 2,013
Ourique PORTUGAL 2,014
Loures PORTUGAL 2,014
Torres Novas PORTUGAL 2,015
Grijó PORTUGAL 2,013

Warehouse Country Minimum lease period
Fengshujinda CHINA 2,013
Taipingyang CHINA 2,013
Toyota CHINA 2,013
Saint Quentin FRANCE 2,020
Dambach FRANCE 2,019
Louviers FRANCE 2,021
Anhanghera BRAZIL 2,013
Guarulhos BRAZIL 2,013
Americana BRAZIL 2,015
Porto Alegre BRAZIL 2,013
Izmir TURKEY 2,013
Adana TURKEY 2,015
Ankara TURKEY 2,013
Campana ARGENTINA 2,013

Operating lease payments are recognised in the consolidated income statement as follows:

Thousands of Euros 2012 2011
Minimum lease payments, property 321,998 305,445
Minimum lease payments, furniture and equipment 11,129 8,921
Sublease payments (64,015) (52,849)
Total 269,112 261,517

Sublease revenues comprise the amounts received from the concessionaires to carry out their activities, and in turn improve the Group´s commercial offerings to its customers, as well as those received from subleases to franchise holders, none of which are significant.

Future minimum payments under non-cancellable operating leases for property are as follows:

Thousands of Euros 2012 2011
Less than one year 151,180 158,631
One to five years 199,273 245,565
Over five years 130,749 149,835
Total 481,202 554,031

Future minimum payments under non-cancellable operating leases for furniture and equipment are as follows:

Thousands of Euros 2012 2011
Less than one year 12,548 11,679
One to five years 14,831 15,753
Over five years 419 222
Total 27,798 27,654

9. FINANCIAL ASSETS

Details of financial assets in the consolidated statements of financial position at 31 December are as follows:

Thousands of Euros 2012 2011
Non-current assets
Non-current financial assets 65,253 57,668
Consumer loans from finance companies 1,037 1,973
Current assets
Trade and other receivables 179,556 191,254
Consumer loans from finance companies 5,444 5,364
Other current financial assets 30,643 18,981
TOTALES 281,933 275,240

9.1. Current and non-current consumer loans extended by finance companies

These balances reflect loans granted by the Group company FINANDIA EFC to individual residents in Spain, calculated at amortised cost, which does not differ from their fair value.

During 2012 and 2011 the effective interest rate on credit card receivables was between 0% and 2.16% of the nominal monthly interest rate for drawdowns from revolving credit facilities.

Interest and similar income from these assets recognised in the consolidated income statement amounted to Euros 1,072 thousand at 31 December 2012 (Euros 1,367 thousand in 2011).

9.2. Trade and other receivables

Details of current and non-current trade and other receivables are as follows:

Thousands of Euros 2012 2011
Trade receivables 201,379 206,244
Receivables from associates companies (note 23) 175 4,279
Total trade and other receivables 201,554 210,523
Less current portion 179,556 191,254
Total non-current (note 9,3) 21,998 19,269

a) Trade receivables

Trade receivables primarily comprise current trade credit for purchases of goods made by the Group’s franchises, with an average collection period of between two and ten days. This item also includes non-current loans as part of the financing extended by the Group to its franchisees. This amount is presented at present value and generated interest of Euros 1,408 thousand in 2012 and Euros 1,053 thousand in the prior year, which has been recognised in the consolidated income statement.

The Group has factoring facilities which amount to Euros 27,600 at 31 December 2012 (Euros 10,642 thousand at 31 December 2011), having drawn down an amount of Euros 13,842 thousand in 2012 (Euros 10,000 thousand at 31 December 2011).

b) Trade receivables from associates

As in the preceding year, in 2012 this item mainly reflects balances receivable by the French subsidiaries from their associates.

c) Impairment

At 31 December 2012 and 2011, full provision was made for trade receivables initially amounting to Euros 30,908 thousand and Euros 22,714 thousand, respectively. Movements in the provision for impairment of receivables (see other disclosures on credit risk in note 24) are as follows:

Thousands of Euros 2012 2011
At 1st january (22,714) (15,318)
Charge (14,823) (21,716)
Applications 1,241 2,016
Reversals 4,910 13,776
Transfers - (1,876)
Translation differences 449 310
Transfers to assets held for sale 29 -
Additions to the consolidated group - (24)
Other movements - 118
Closing balance (30,908) (22,714)

9.3. Other current and non-current financial assets

Details of financial assets are as follows:

Thousands of Euros 2012 2011
Guarantees 36,186 35,580
Equity instruments 1,220 1,310
Loans to personnel 2,980 3,568
Other loans 2,766 1,422
Receivables on disposal of fixed assets 2,313 -
Derivatives (note 10) 17,256 239
Current account with associated companies (note 23) 4,274 -
Other assets 6,903 15,261
Total other financial assets 73,898 57,380
Less current portion 30,643 18,981
Total 43,255 38,399
Trade receivables > 1 year (note 9,2) 21,998 19,269
Total non-current financial assets 65,253 57,668

Guarantees are the amounts pledged to lessors to secure lease contracts. These amounts are measured at present value and any difference with their nominal value is recognised under prepayments for current or non-current assets. The interest on these assets included in the consolidated income statement in 2012 amounted to Euros 507 thousand (Euros 468 thousand in the prior year).

Equity instruments primarily refer to the Group´s investments in unconsolidated French subsidiaries. These items are measured at cost as they are not significant.

Other assets include insurance claims receivable.

In 2012 the Group has contracted several different hedging instruments to mitigate the effect of possible interest rate rises. On 21 December 2011 the Company signed an equity swap contract with Société Générale whereby the latter acquired 13,586,720 own shares. This contract, which expires on 21 January 2013, can be settled by the Company receiving the shares or receiving a cash amount equal to the difference between the price at the purchase date and at the date of sale with a reference price of 3.5580 euros per share. At 31 December 2012 the balance under “derivatives” mainly reflects the cash settlement of this equity swap contract on expiry. This balance also includes the assets generated from the use of forward contracts in foreign currency to hedge the currency risk on purchases of inventories in US Dollars. At 31 December 2012, effective cash flow hedges represent a net unrealised loss of Euros 814 thousand and in 2011 a net unrealised gain of Euros 187 thousand. The corresponding deferred taxes are included in the consolidated statements of comprehensive income.

10. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGES

Details of derivative financial instruments at the 2012 and 2011 reporting dates are as follows:

Thousands of Euros 2012 2011
Exchange derivatives - Cash flows hedges (note 9.3) 245 239
Interest rate derivatives - Cash flows hedges (938) -
Share Options Derivatives - Equity Swap (note 9.3) 17,011 -
Total 16,318 239

In 2012 the Parent has contracted several different hedging instruments to mitigate the effect of possible interest rate rises. At 31 December 2012 these instruments have a fair value of Euros 938 thousand.

The effect of these instruments on the consolidated income statement for the period is not significant.

The derivative financial instrument which does not qualify for hedge accounting is an equity swap contract signed with Société Générale on 21 December 2011 whereby the latter acquired 13,586,720 own shares of the Parent. This contract, which expires on 21 January 2013, can be settled by the Parent receiving the shares or receiving a cash amount equal to the difference between the price at the purchase date and at the date of sale with a reference price of 3.5580 euros per share (see note 9.3).

The impact of this instrument on the DIA Group´s consolidated income statement for 2012 in change in fair value totals an income of Euros 18,281 thousand.

11. OTHER EQUITY-ACCOUNTED INVESTEES

On 2 May 2011 DIA France acquired all the shares of Erteco, SAS and its subsidiary Bladis SAS from Carrefour, S.A. This investment has been accounted for using the equity method since that date (see notes 1 and 4).

Movement in equity-accounted investees during 2012 and 2011 is as follows:

Thousands of Euros 2012 2011
Balance at 1st january 1,599 108
Share in profit 1,070 870
Additions to the consolidated group - 2,596
Dividends distributed (1,366) (1,867)
Outflow due to change in consolidation method - (108)
Balance 1,303 1,599

The key economic indicators presented by Bladis SAS in 2012 and 2011 are as follows:

Thousands of Euros 2012 2011
Assets 27,660 22,852
Net equity 4,263 5,150
Sales 110,313 108,688
Profit for the six-month periods 3,210 4,097

12. OTHER ASSETS

Details of other assets are as follows:

Thousands of Euros 2012
Current
2011
Current
Prepayments for operating leases 8,479 6,948
Prepayments for guarantees 497 507
Prepayments for insurance contracts 4,038 4,901
Other prepayments 2,285 1,744
Total other assets 15,299 14,100

Prepayments for operating leases comprise lease payments made in advance, primarily in France.

13 INVENTORIES

Details of inventories are as follows:

Thousands of Euros 2012 2011
Goods for resale 525,361 518,392
Other supplies 1,705 3,534
Total inventories 527,066 521,926

At 31 December 2012 and 2011 there are no restrictions to the availability of any inventories.

The Group has taken out insurance policies to cover the risk of damage to its inventories. The coverage of these policies is considered sufficient.

14. CASH AND CASH EQUIVALENTS

Details of cash and cash equivalents are as follows:

Thousands of Euros 2012 2011
Cash and current account balances 164,941 137,348
Cash equivalents 185,484 152,595
Total 350,425 289,943

Balances in current accounts earn interest at applicable market rates. Current investments are made for daily, weekly and monthly periods and generate interest at different rates depending on the country, ranging from 0.47% to 2.60% in 2012 and from 0.91% to 4% in 2011.

15. DISPOSAL GROUPS OF ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

In 2012 the Group has decided to put Beijing DIA Commercial Co.Ltd. up discontinued operations.

The income and expenses of this discontinued operation recognised in the income statement for 2012 and 2011 are as follows:

Thousands of Euros 2012 2011
Income 60,293 51,355
Amortisation and depreciation (1.642) (1,396)
Expenses (66,027) (54,084)
Gross Margin (7,376) (4,125)
Financial income 197 449
Financial expenses (280) (780)
Loos net of taxes of discontinued operations (7,459) (4,456)

The assets and liabilities of this discontinued operation, classified as held for sale at 31 December 2012, are as follows:

Thousands of Euros 2012
Assets
Tangible assets (Nota 6) 3,994
Intangible assets (Nota 7.2) 20
Other non-current finantial assets 185
Inventories 4,132
Trade and other receivables 1,757
Current tax assets 1,413
Other current financial assets 62
Other assets 293
Cash and cash equivalents 2,019
Non-current assets held for sale 13,875
Liabilities
Current borrowings 5,644
Trade and other payables 15,685
Current income tax liabilities 226
Other financial liabilities 626
Liabilities directly associated with non-current assets held for sale 22,181

16. EQUITY

16.1 Capital

At 31 December 2012 the Parent’s share capital is represented by 679,336,000 ordinary shares of Euros 0.10 par value each, subscribed and fully paid. These shares are freely transferable.

On 25 March 2011, Norfin Holder, S.L., the Parent’s sole shareholder at that date, approved a Euros 64,034,810.83 increase in DIA´s share capital with a charge to the share premium. As a result, the share capital of DIA now totals Euros 67,933,600, represented by 679,336,000 ordinary shares of Euros 0.10 par value each.

As stated in note 1, on 5 July 2011 the Parent´s shares were listed on the Spanish stock exchanges.

According to public information filed with the Spanish National Securities Market Commission, the members of the board of directors control approximately 0.032% of the Parent’s share capital at 31 December 2012.

According to the same public information, the most significant interests in the Parent’s share capital at year end are as follows:

  • Blue Capital Sà.r.l. 9.428%
  • Baillie Gifford & CO 3.003%

Nevertheless, the prospectus issued for the flotation of the Parent’s shares reported that certain major shareholders (Groupe Arnault, S.A.S., Colony Blue Investor S.à.r.l. and Blue Capital Sà.r.l., by mutual agreement) had committed to a share lock-up arrangement whereby they agreed not to sell their shares in the Parent for a year from the date on which they commenced trading (5 July 2011). This agreement expired on 5 July 2012. Groupe Arnault, S.A.S., Colony Blue Investor S.à.r.l. and Blue Capital Sà.r.l. have also declared that they have reached a verbal agreement to exercise their voting rights in the Parent jointly.

The Group manages its capital with the aim of safeguarding its capacity to continue operating as a going concern, so as to continue providing shareholder remuneration and benefiting other stakeholders, while maintaining an optimum capital structure to reduce the cost of capital.

To maintain and adjust the capital structure, the Group can adjust the amount of dividends payable to shareholders, reimburse capital, issue shares or dispose of assets to reduce debt.

Like other groups in the sector, the DIA Group controls its capital structure on a debt ratio basis. This ratio is calculated as net debt divided by Adjusted EBITDA. Net debt is the sum of financial debt less cash and cash equivalents. Adjusted EBITDA is operating profit before depreciation and amortisation, impairment, gains/losses on disposal of fixed assets and other restructuring income and costs included in “Operating expenses".

The ratios for 2012 and 2011 are calculated as follows:

Thousands of Euros 2012 2011
Total borrowings 979,735 865,802
Less: cash and cash equivalents (350,425) (289,943)
Net debt (629,310) (575,859)
Adjusted EBITDA 609,476 561,103
Debt ratio 1,0x 1,0x

16.2. Share premium

In 2004 a share premium amounting to Euros 847,736 thousand was created when share capital was increased. This increase was subscribed and fully paid by the French company Erteco, SAS, which contributed the 39,686 shares representing 100% of its investment in another French company, DIA France, as payment, measured at fair value in the annual accounts of the Parent. The share premium also includes Euros 797 thousand that arose from a share capital increase carried out in 1992.

As stated above, the share premium was reduced by Euros 64,034,810.83 due to a capital increase with a charge to this reserve carried out by the Parent’s sole shareholder prior to the spin-off from the Carrefour Group. This reserve was again reduced by Euros 166,341 thousand due to the distribution of extraordinary dividends on 23 June 2011, and as a result has a balance of Euros 618,157 thousand at the 2012 and 2011 reporting dates.

At 31 December 2012 the entire share premium is subject to the same restrictions and may be used for the same purposes as the Parent’s voluntary reserves, including conversion into share capital.

16.3. Reserves and retained earnings

Details of reserves and retained earnings are as follows:

Thousands of Euros 2012 2011
Legal reserve 13,587 780
Goodwill reserve 7,464 5,666
Other reserves (645,675) (655,414)
Profin attributable to equityholders ot the parent 157,884 98,462
Total (466,740) (550,506)

The Parent’s legal reserve has been provided for in compliance with article 274 of the Spanish Companies Act, which requires that companies transfer 10% of profits for the year to a legal reserve until this reserve reaches an amount equal to 20% of share capital.

The legal reserve is not distributable to shareholders and if it is used to offset losses, in the event that no other reserves are available, the reserve must be replenished with future profits.

At 31 December 2012 the Parent has provided this reserve with the minimum amount required by law.

Other reserves include the reserve for the translation of capital into Euros, totalling Euros 62.07. This non-distributable reserve reflects the amount by which share capital was reduced in 2001 as a result of rounding off the value of each share to two decimals on the conversion to Euros. The goodwill reserve has been provided for in compliance with the Spanish Companies Act, which requires companies to transfer profits equivalent to 5% of goodwill to a non-distributable reserve until this reserve reaches an amount equal to recognised goodwill. In the absence of profit, or if profit is insufficient, freely distributable reserves should be used.

At 31 December 2012 all voluntary reserves of the Parent, together with the share premium, are freely distributable.

16.4. Other own equity instruments

a) Own shares

On 27 July 2011, in accordance with article 146 and subsequent articles of the Spanish Companies Act, the board of directors of the Parent approved an own share buy-back programme, the terms of which are as follows:

  • The maximum number of own shares that can be acquired is equivalent to 2% of share capital.
  • The maximum duration of the programme will be 12 months, unless an amendment to the term is announced in accordance with article 4 of Commission Regulation (EC) No 2273/2003.
  • The purpose of the programme is to meet obligations derived from the remuneration plan for board members and from the terms of any share distribution or share option plans approved by the board of directors.
  • A financial intermediary will be appointed to manage the programme, in accordance with article 6.3 of Commission Regulation (EC) No 2273/2003.

By 13 October 2011 the Parent had acquired 13,586,720 own shares, reaching the maximum number foreseen in the buy-back programme.

On 14 November 2011 the Board of Directors agreed the realization of buy back own shares of DIA up to a maximum amount equivalent to 2% of the Company’s share capital (additional to those already held by the Company at the date of this agreement). (See notes 9.3 and 10)

On 07 June 2012 the board of directors agreed the realization of additional buy back own shares of DIA up to a maximum amount equivalent to 1% of the Parent’s share capital, under the authorisation conferred by the Board in relation with the decision taken by the Sole Shareholder of the Company at 9 May 2011 and in accordance with the definition in the Parent’s Internal Regulations of Conduct on Stock Markets and the Own Share Policy approved by the board of directors. On 2 July 2012 the programme of rebuying of 6.793.360 shares was completed.

Other transactions during 2012 include the transfer of 115,622 shares to the Parent’s directors and senior management personnel as remuneration, with a charge of Euros 148 thousand to voluntary reserves. In 2011 85,736 shares were transferred to the Group´s directors as remuneration, with a charge of Euros 22 thousand to voluntary reserves.

As a result, at the 2012 year end the Parent holds 20,178,722 own shares with an average purchase price of Euros 3.1107 per share which represent a total amount of 62,769,075.43 Euros.

b) Other own equity instruments

This reserve includes obligations derived from equity-settled share-based payment transactions following the approval by the Board and the shareholders general meeting of the 2011-2014 long-term incentive plan and a multi-year incentive plan for executives. Beneficiaries were informed of the plan regulations on 11 June 2012 (see note 20).

16.5. Dividends paid and proposed

Details of dividends paid are as follows:

Thousands of Euros 2012 2011
Dividends on ordinary shares 72,498 368,600
Dividend per share (in Eruros) 0.11 0.54

On 23 June 2011 the Parent’s sole shareholder prior to the spin-off from the Carrefour Group approved the distribution of extraordinary dividends of Euros 368,600 thousand with a charge to voluntary reserves and the share premium (see note 16.2).

Dividends per share (in Euros) are calculated based on the number of shares existing at the distribution date; i.e. for 2012 the number of shares is 659,072,702 whereas in 2011 there were 679,336,000 shares.

The proposed distribution the Parent’s profit for 2012 to be submitted to the shareholders for approval at their ordinary general meeting is as follows:

Basis of allocation Euros
Profit for the year 184,849,621.10
Distribution
Dividends (*) 85,690,446.14
Goodwill reserve 1,797,810.8
Other reserves 97,361,364.88
Total 184,849,621.10

(*) The ordinary dividend proposed to be distributed by the directors amounts to Euros 0.13 (gross) per each share with the right to perceive it. The figure given is an estimate under the assumption that the number of shares with the right to perceive it is 659,157,278 shares, after making the appropriate deductions. The estimate can vary depending on, among other factors, the amount of shares held by the Company.

16.6. Earnings per share

Basic earnings per share are calculated by dividing net profit for the period attributable to the Parent by the weighted average number of ordinary shares in circulation throughout the period, excluding own shares.

The weighted average number of ordinary shares outstanding is determined as follows:

Weighted average ordinary shares in circulation at 31/12/2012 Ordinary shares at 31/12/2012 Weighted average ordinary shares in circulation at 31/12/2011 Ordinary shares at 31/12/2011
Total shares issued 679,336,000 679,336,000 679,336,000 679,336,000
Own shares (17,042,103) (20,178,722) (4,531,060) (13,500,984)
Total shares availabel and diluted 662,293,897 659,157,278 674,804,940 665,835,016

Details of the calculation of basic earnings per share are as follows:

Basic and diluted earnings per share (Euros) 2012 2011
Average number of shares 662,293,897 674,804,940
Profit for the period in thousands of Euros 157,884 98,462
Profit per share in Euros 0.24 0.14

There are no equity instruments that could have a dilutive effect on earnings per share. Diluted earnings per share are therefore equal to basic earnings per share.

16.7. Non-controlling interests

Details of non-controlling interests at 31 December are as follows:

Non-controlling interests
Thousands of Euros Diasa DIA Sabanci Supermarketleri Ticaret, A,S, Proved, SAS Total
At 1st january 2011 (7,794) - (7,794)
Profit/(loss) for the year (3,236) (852) (4,088)
Other comprehensive income for the year, net of tax 1,539 - 1,539
Issue of share capital 16,093 - 16,093
Addition to the consolidated group - 94 94
At 31st december 2011 6,602 (758) 5,844
At 1st january 2012 6,602 6,602 (758) 5,844
Proft/(loss) for the year (11,039) (459) (11,498)
Other comprehensive income for the year, net of tax 460 - 460
Addition to the consolidated group - 758 758
At 31st december 2012 (3,977) (459) (4,436)

17. FINANCIAL LIABILITIES

Details of financial liabilities in the consolidated statement of financial position at 31 December are as follows:

Thousands of Euros 2012 2011
Non-current liabilities
Non-current borrowings 553,112 599,656
Current liabilities
Current borrowings 426,623 266,146
Trade and other payables 1,758,570 1,780,233
Other financial liabilities 154,687 178,287
Total financial liabilities 2,892,992 2,824,322

17.1. Borrowings

Details of borrowings are as follows:

Thousands of Euros 2012 2011
Bank loan 521,745 589,682
Mortgage loan 4,501 5,604
Finance lease payables (note 6) 21,524 171
Guarantees and deposits received 5,331 4,182
Other non-current borrowings 11 17
Total non-current borrowings 553,112 599,656
Bank loan 317,906 247,875
Mortgage loan 1,103 1,771
Credit facilities drawn down 96,483 10,220
Expired Interests 2,001 1,305
Finance lease payables (note 6) 3,106 575
Guarantees and deposits received 4,991 3,362
Liabilities Derivatives 938 -
Other current borrowings 95 1,038
Total current borrowings 426,623 266,146

The Parent holds a long-term syndicated financing contract with a number of financial institutions in Spain and international, which was arranged in 2011 for a maximum amount of Euros 1,050,000 thousand.

This loan is divided into three tranches:

  • Tranche A consists of a five-year loan for a maximum amount of Euros 350,000 thousand, repayable in annual instalments on 31 December 2011 (10%), 31 December 2012 (20%), 31 December 2013 (20%), 31 December 2014 (20%), 31 December 2015 (20%), and any outstanding amount on maturity.
  • Tranche B is a five-year loan for a maximum amount of Euros 350,000 thousand, repayable on maturity.
  • Tranche C comprises a revolving credit facility for a maximum amount of Euros 350,000 thousand to finance working capital requirements, whereby the Parent is required to repay each of the amounts drawn down on the last day of the related interest period, charging the repayment of the amount drawn down to the revolving facility.
    The interest rates in force at the 2012 reporting date are as follows:
    • Tranche A: Euribor +1.55%
    • Tranche B: Euribor +1.70%
    • Euribor + 1.30% - 1.70% (depending on drawdowns)
    The interest rates in force at the 2011 reporting date were as follows:
    • Tranche A: Euribor +1.75%
    • Tranche B: Euribor +1.90%
    • Tranche C: Euribor + 1.50% - 1.90% (depending on drawdowns)

The guarantees extended by the Parent are jointly and severally secured by its subsidiaries Twins Alimentación S.A., Pe-Tra Servicios a la Distribución, S.L., DIA Portugal Supermercados S.Lda. and DIA Brasil Sociedade Limitada. The shares of DIA France have also been pledged as collateral.

The DIA Group is required to comply with certain covenants throughout the term of this financing agreement. The lenders verify compliance with these covenants every six months using figures for the last twelve months.

On 5 July 2011, the Parent received Euros 865,000 thousand under this financing agreement, used mainly to repay, on the same date, borrowings from various Carrefour Group companies at 30 June 2011. Arrangement costs and fees totalled Euros 14,358 thousand and were recognised as a reduction in the financing received. At 31 December 2012 drawdowns total Euros 834,950 thousand (Euros 832,077 thousand at 31 December 2011).

At the 2012 year end, all covenant ratios, calculated based on the DIA Group´s consolidated annual accounts, have been met. Details are as follows:

  • Total recalculated net debt/recalculated EBITDA < 2.75x
  • EBITDA/net finance costs > 6.5x

The mortgage loan includes two agreements relating to a building owned by the subsidiary Twins Alimentación, S.A.U., which has a carrying amount of Euros 10,290 thousand at 31 December 2012 (Euros 10,586 thousand in 2011). These loan agreements include annual nominal interest at fixed market rates of 6.250% and 5.070% and mature in 2013 and 2019, respectively.

At 31 December 2012 the Group has credit facilities with a credit limit of Euros 376,941 thousand (Euros 241,238 thousand in 2011), of which Euros 96,483 thousand has been drawn down at that date (Euros 10,220 thousand in 2011). The credit facilities contracted by the Group in 2012 and 2011 accrue interest at market rates.

The maturities of borrowings are as follows:

Thousands of Euros 2012 2011
Less than one year 426,623 266,146
One to two years 84,576 69,892
Three to five years 460,213 521,712
Over five years 8,323 8,052
Total 979,735 865,802

17.2. Trade and other payables

Details are as follows:

Thousands of Euros 2012 2011
Suppliers 1,586,584 1,625,886
Advances received from receivables 134 -
Trade payables 171,852 150,132
Trade payables, group companies - 4,215
Total other liabilities 1,758,570 1,780,233

Suppliers and trade payables essentially include current payables to suppliers of goods and services, including those represented by accepted giro bills and promissory notes.

Trade and other payables do not bear interest.

The Group has reverse factoring facilities with limits of Euros 446,571 thousand and Euros 566,893 thousand at 31 December 2012 and 2011, respectively. Drawdowns total Euros 314,751 thousand in 2012 and Euros 337,221 thousand in 2011.

The information to be provided by the Spanish companies of the DIA Group as required by the reporting duty established in Spain’s Law 15/2010 of 5 July 2010, which amended Law 3/2004 of 29 December 2004 and introduced measures to combat late payment in commercial transactions, is as follows:

Payments made or outstanding at the balance sheet date
2012 2013
Thousands of Euros Amount % * Amount % *
**Within the maximum legal period 2,857,511 80.83% 3,161,425 91.52%
Other 677,899 19.17% 292,993 8.48%
Total payments for the year 3,535,410 100% 3,454,418 100%
Weighted average period by which payments are past due (in days) 17,79 28,70
Late payments exceeding the maximum legal period at the end of the period 23,884 22,134

* Percentage of total
** The maximum legal payment period is, in each case, determined by the nature of the goods or services received by the company in accordance with Law 3/2004 of 29 December, containing measures to combat late payments in commercial transactions.

17.3. Other financial liabilities

Details of other financial liabilities are as follows:

Thousands of Euros 2012 2011
Personnel 84,884 92,718
Suppliers of fixed assets 57,327 78,995
Current account with associated companies (note 23) 4,533 -
Other current liabilities 7,943 6,574
Total other liabilities 154,687 178,287

17.4. Fair value estimates

The fair value of financial assets and liabilities is determined by the amount for which the instrument could be exchanged between willing parties in a normal transaction and not in a forced transaction or liquidation.

The following methods and assumptions were used to estimate the fair values:

  • Trade and other receivables, trade and other payables and other current assets and liabilities approximate their carrying amounts, due, largely, to the short-term maturities of these instruments.
  • The fair value of unlisted instruments, bank loans, finance lease payables and other non-current financial assets and liabilities is estimated by discounting future cash flows, using the available rates for debts with similar terms, credit risk and maturities, and is very similar to their carrying amount.
  • Derivative financial instruments are contracted with financial institutions with sound credit ratings. The fair value of derivatives is calculated using valuation techniques using observable market data for forward contracts.

18. PROVISIONS

Details of provisions are as follows:

Thousands of Euros Provisions for long-term employee benefits under defined Taxes, legal contingencies and social security contributions Other provisions Total provisions
At 1st january 2011 4,903 176,038 3,492 184,433
Translation differences (60) (707) (108) (875)
Charge 1,650 29,576 5,324 36,550
Applications (653) (42,017) (1,162) (43,832)
Reversals (664) (6,180) (99) (6,943)
Transfers - (156) 156 -
Additions to the consolidated group 193 - 31 224
Other movements 59 (1,307) 666 (582)
At 31st december 2011 5,428 155,247 8,300 168,975
At 1st january 2012 5,428 155,247 8,300 168,975
Translation differences 15 (1,040) (313) (1,338)
Charge 2,458 13,894 75 16,427
Applications (6) (75,849) (1,312) (77,167)
Reversals (114) (6,020) (3,991) (10,125)
Other movements 534 3,289 35 3,858
At 31st december 2012 8,315 89,521 2,794 100,630

18.1. Provisions for long-term employee benefits under defined benefit plans

The Parent has commitments with current employees for pensions and length-of-service bonuses amounting to Euros 865 thousand in 2012 and Euros 793 thousand in 2011. Of these amounts, Euros 334 thousand and Euros 297 thousand were externalised in 2012 and 2011, respectively, in accordance with Spanish legislation. Additionally, Group companies in France and Turkey have undertaken similar commitments with their employees in 2012 and 2011 in amounts of Euros 7,784 thousand and Euros 4,932 thousand, respectively.

The Euros 2,010 thousand variation in this provision reflects the elimination of the corridor method in France. IAS 19 stipulates that this method may no longer be used after 1 January 2013, and the DIA Group has decided to adopt this change in 2012 in order to present adjusted comparative figures (see note 2.5).

Movement in the present value of defined benefit obligations is as follows:

Thousands of Euros 2012 2011
Current service cost 446 (185)
Past service cost - 396
Finance expenses 352 340
Expected return on financial assets (12) (11)
Other (70) (126)
Total expenses (revenues) 716 414

The principal actuarial assumptions used are as follows:

Assumptions 2012 2011
Retirement age 58-65 58-65
Salary growth rate del 2% al 5% del 2,5% al 5%
Discount rate del 3,5% al 5% del 4% al 5%

Liabilities recognised for defined benefit pension plans are as follows:

Thousands of Euros 2012 2011
Defined benefit pension plans 8,649 7,735
Unrecognised actuarial adjustments - (2,010)
Fair value of oustanding assets (334) (297)
Total provision 8,315 5,428

Movement in the consolidated statement of financial position is as follows:

Thousands of Euros Amount
Provision at 1st january 2011 4,903
Impact on profit 414
Translation differences (54)
Other movements (28)
Additions to the consolidated group 193
Provision at 31st december 2011 5,428
Impact on protif 716
Translation differences 18
Other movements 143
Recognised actuarial adjustments 2,010
Provision at 31st december 2012 8,315

Movement in the fair value of plan assets is as follows:

Thousands of Euros Amount
At 1 January 2011 264
Expected return 11
Annual premium 31
Actuarial losses (9)
At 31st december 2011 297
Expected return 12
Annual premium 32
Actuarial losses (7)
At 31st december 2012 334

18.2. Taxes, legal contingencies and social security contributions

This provision mainly comprises risks deriving from tax inspections and at 31 December 2012 amounts to Euros 70,506 thousand (Euros 134,489 thousand at 31 December 2011).

During 2012, DIA Brazil booked a provisions of Euros 4,965 thousand for employment-related contingencies and Euros 879 thousand for costs relating to legal disputes with the owners of certain premises. DIA France made provisions of Euros 1,780 thousand for certain legal risks and Euros 1,395 thousand for employment-related contingencies. Finally, provisions recognised by the Parent include Euros 1,467 thousand to cover other legal risks.

In 2011 DIA France recognised a Euros 11,847 thousand provision (including the associated finance costs) in relation to a lawsuit over the rounding-off of VAT to Euro decimals. The Parent recognised provisions of Euros 3,791 thousand in respect of the restatement of tax risks.

In 2012 the Parent has applied Euros 49,180 thousand to pay additional taxes raised on inspection of income tax filed for the 1994-2002 period, and Euros 15,536 thousand to pay additional taxes raised on inspection of income tax filed for 2004, 2005 and 2006. Applications also include additional Social Security payments of Euros 2,056 thousand following an inspection and payments of Euros 1,693 thousand relating to other legal risks.

Provisions applied during 2011 included Euros 15,893 thousand paid in relation to a lawsuit over the rounding-off of VAT to Euro decimals in DIA France. The Group also settled additional income tax assessments of Euros 18,190 thousand for 1993, 1994,1997 and 2007 corresponding to the Parent. This amount includes the associated finance cost. Moreover, the Parent paid additional VAT assessments of Euros 4,684 thousand for 1995 and 1996.

19. TAX ASSETS AND LIABILITIES AND INCOME TAX

INCOME TAX

Details of the income tax expense are as follows:

Thousands of Euros 2012 2011
Current income taxes
Current year 84,330 36,143
Provisions for tax risk 45 1,237
Prior years´ current income taxes (961) 1,061
Total current income taxes 83,414 38,441
Deferred taxes
Source of taxable temporary differences 8,695 169,461
Source of deductible temporary differecnces (15,554) (124,848)
Reversal of taxable temporary differences (29,241) (4,90