GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated

Transcription

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
Consolidated Financial Statements
As of December 31, 2007 and 2006
(
Wi
t
ht
heI
nde
pe
nde
ntAudi
t
or
’
sRe
por
tThe
r
e
on)
(FREE TRANSLATION FROM SPANISH.
THE ACCOUNTING PRINCIPLES REFERRED TO
ARE THOSE GENERALLY ACCEPTED IN PERU)
(FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU)
Consolidated Balance Sheet
(Stated in thousands of nuevos soles)
Assets
Current assets:
Cash and banks and restricted funds (note 4)
Accounts receivable:
Trade (note 5)
Affiliates (note 6)
Consortiums (note 7)
Other accounts receivable (note 8)
Inventories, net (note 9)
Prepaid expenses and taxes
Available-for-sale non-financial assets
Total current assets
2007
2006
141,946
------------
150,088
------------
233,564
641
1,921
81,256
-----------317,382
-----------79,257
44,386
2,207
-----------585,178
------------
188,805
6,261
11,828
54,194
-----------261,088
-----------37,283
13,615
-----------462,074
------------
Li
a
bi
l
i
t
i
e
sa
ndSt
oc
k
hol
de
r
s
’Equi
t
y
Current liabilities:
Bank overdrafts and loans (note 15)
Trade accounts payable
Other accounts payable (note 16)
Commercial papers
Current portion of long-term
debt (note 17)
Total current liabilities
Long-term debt (note 17)
Deferred income tax (note 21.e)
Deferred income
Total liabilities
Long-term accounts receivable (note 10)
23,437
12,858
2,314
12,705
Investments (note 11)
111,980
89,980
Property, plant, and equipment (note 12)
328,005
272,836
34,458
32,497
62,643
-----------1,148,015
=======
45,508
-----------928,458
=======
Deferred income tax (note 21.e)
Goodwill (note 13)
Other assets (note 14)
Total assets
See the accompanying notes to the consolidated financial statements.
St
oc
k
hol
de
r
s
’e
qui
t
y
:
Capital stock (note 18)
Legal reserve (note 19)
Other reserves (note 19)
Retained earnings
Minority interest
Tot
a
ls
t
oc
k
hol
de
r
s
’e
qui
t
y
2007
2006
21,476
185,669
147,030
-
5,151
136,827
156,503
5,000
66,052
-----------420,227
51,245
-----------354,726
218,469
191,601
22,569
12,371
5,539
-----------666,804
------------
3,758
-----------562,456
------------
299,423
13,514
4,388
130,012
33,874
-----------481,211
235,787
3,373
101,386
25,456
-----------366,002
-----------1,148,015
=======
-----------928,458
=======
Commitments and contingencies (note 22)
Total l
i
a
bi
l
i
t
i
e
sa
nds
t
oc
k
hol
de
r
s
’
equity
(FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO
Consolidated Statement of Income
For the years ended December 31, 2007 and 2006
2007
Valuation of works (note 23)
Income from services rendered
Sale of merchandise and property
Total revenue
Cost of works (note 23)
Cost of rendered services
Cost of sales of merchandise and property
Total cost
1,019,200
360,807
59,967
--------------1,439,974
---------------
834,791
277,937
76,085
------------1,188,813
-------------
( 865,549)
( 222,569)
(
52,829)
--------------( 1,140,947)
---------------
( 668,279)
( 181,085)
( 66,694)
------------( 916,058)
-------------
Gross profit
Operating administrative and general expenses (note 24)
Operating profit
Other (expenses) income:
Financial, net (note 25)
Results attributable to associates
Various, net
Write-off of investments (note 11)
Exchange difference, net
Pr
of
i
tbe
f
or
ewor
k
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r
s
’pr
of
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ts
h
a
r
i
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g
and income tax
Wor
k
e
r
s
’pr
of
i
ts
h
a
r
i
n
g(
n
ot
e20)
Income tax (note 21)
Profit before minority interest
Minority interest
Net profit for the year
Earnings per basic share in S/. (note 26)
2006
299,027
272,755
(
79,014)
--------------220,013
---------------
( 59,731)
------------213,024
-------------
(
(
22,744)
4,029
(
2,525)
8,426
--------------(
12,814)
--------------207,199
(
9,721)
(
59,159)
--------------138,319
(
8,419)
--------------129,900
========
0.303
========
25,742)
701
( 11,085)
( 11,935)
9,410
------------( 38,651)
------------174,373
(
8,915)
( 54,339)
------------111,119
(
6,201)
------------104,918
=======
0.311
=======
(FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU)
Consolidated Statements of Changes in Stockhol
de
r
s
’Equi
t
y
Balances as of December 31, 2005
Capitalization
Transfer to legal reserve
Adjustment of subsidiaries
Dividends paid
Transfer to legal reserve
Dividends
Recording of unrestricted reserves
Capitalization
Adjustment
Treasury shares (note 18)
Capital
stock
(note 18)
Legal
reserve
(note 19)
206,335
29,452
--------------235,787
63,970
(
334)
--------------299,423
=========
101
3,272
---------------3,373
10,141
---------------13,514
=========
Other
reserves
(note 19)
---------------7,000
( 2,612)
---------------4,388
=========
Retained
earnings
Minority
interest
32,509
( 29,452)
( 3,272)
( 3,317)
104,918
---------------101,386
( 10,141)
( 20,277)
( 7,000)
( 63,970)
114
129,900
---------------130,012
=========
23,514
( 4,259)
6,201
--------------25,456
8,418
--------------33,874
=========
Total
262,459
(
3,317)
(
4,259)
111,119
--------------366,002
( 20,277)
114
( 2,946)
138,318
--------------481,211
=========
Consolidated Statement of Cash Flows
2007
Operating activities:
Adjustment to net result that do not affect the cash flow
of operating activities:
Depreciation
Deterioration of intangible assets
Amortization of other assets
Write-off of investments
Profit attributable to associates and subsidiaries
Adjustments
Loss on sale of assets
Net variations in assets and liabilities:
Trade accounts receivable
Other accounts receivable
Inventories
Prepaid expenses and taxes and other assets
Other accounts payable
Net cash provided by operating activities
Investing activities:
Sale of property, plant, and equipment
Acquisition of minority interest
Purchase of intangible assets
Purchase of investments
Purchase of fixed assets
Net cash used in investing activities
2006
129,900
(
58,528
2,904
5,161
19,418)
7,955
(
(
(
(
104,918
(
53,953
2,356
6,270
11,935
562)
177
3,878
44,759)
23,847)
41,974)
30,771)
48,842
31,299
--------------123,820
---------------
(
(
2,644)
21,741)
18,632
1,733
3,502
59,021
---------------241,428
----------------
8,630
(
4,865)
( 12,092)
(
3,874)
( 149,537)
--------------( 161,738)
---------------
6,033
( 10,050)
( 13,735)
( 83,880)
---------------( 101,632)
----------------
(Continued)
Consolidated Statement of Cash Flows, (cont.)
2007
Financing activities:
Loans received, net of amortizations
Securitization bonds, net of amortization
Dividends paid
Repurchase of own shares
Net cash provided by (used in)
investing activities
Net (decrease) increase in cash
Cash and cash equivalents at the beginning of the year
Variation in restricted funds
Cash at end of year
2006
78,140
(
25,140)
(
20,277)
(
2,946)
----------------
46,173)
26,803)
----------------
29,777
---------------
( 72,976)
----------------
(
66,820
48,818
22,009
---------------137,647
=========
8,141)
137,647
(
5,780)
--------------123,726
=========
(
(
Notes to the Consolidated Financial Statements
(1)
Business Activity
The Company was incorporated on August 12, 1996 as the holding company of Grupo Graña
y Montero. Its main activity is to invest in subsidiaries and related entities. Additionally,
as from September 2005, it renders services of general management, financial
management, commercial management, legal advisory and human resources management
(prior to that date, it rendered business advisory services) to said companies. Its legal
domicile is located at Av. Paseo de la República 4675, Surquillo.
Likewise, as from year 2006, the Company was engaged in the leasing of offices to the Group
companies and to third parties.
In conformity with Companies Act, the consolidated financial statements, as of December 31,
2007, have been prepared by the Board of Directors, which will submit them to General
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Consolidated financial statements as of December 31, 2006 were approved by the General
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h31,2007.
a) Subsidiaries:
The consolidated financial statements of the Company include assets, liabilities,
income and expenses of the following subsidiaries:
 GyM S.A. is engaged in the business of civil construction, electromechanical
assembly, buildings, management and development of real property projects and
other related services.
 GMP S.A. is engaged in the exploitation, production, treatment, and trading of
oil, natural gas and its derivatives, as well as the storage and delivery of fuels.
 GMD S.A. is engaged in providing IT solutions in the Peruvian corporate
market.
 GMI S.A. Ingenieros Constructores is engaged in providing services of advisory
and engineering consultancy, execution of surveys and projects, project
management and works supervision.
 Concar S.A. is engaged in the operation of concession of works and
infrastructure.
 Fashion Center S.A. is engaged in developing and operating the conditioning and
fitting out project for commercial and recreational use of the area of Parque
Salazar of the District of Miraflores.
 Until June 30, 2007, Larcomar S.A. was engaged in the operation of the project
that is currently operated by Fashion Center S.A.
(Continued)
.2.
 Survial S.A. is engaged in the execution of the concession agreement of phase 1
of Southern Inter-oceanic highway.
 Canchaque S.A. is engaged in the execution of the concession agreement of the
Buenos Aires- Canchaque highway.
b)
Consortiums:
Additionally, the consolidated financial statements of the Company include assets,
liabilities, revenue and expenses of the consortiums in which it participates, through
subsidiaries such as venturer and where there is jointly control, being the most
important the following:
Consortiums
Percentage of
shareholding
GyM S.A.
GyM S.A. - Skanska del Perú S.A.
GyM S.A. - JJC Contratistas Generales S.A. (Chinecas)
Constructores Transmantaro
Consorcio La Quinua 6
Consorcio Héroes Navales
Consorcio Pasco
Constructora Uyuni S.A.
Consorcio Constructor IIRSA Norte
50.00
60.00
50.00
50.00
50.00
75.00
70.00
10.20
GMP S.A.
ConsorcioTerminales
50.00
Concar S.A.
Consorcio GyM-Concar (since December 2007)
90.00
GMD S.A.
Procesos Electorales
50.00
Consorcio Ransa Comercial S.A. - GMD S.A. (since November 2006) 50.00
Graña y Montero S.A.A.
Joint venture Torre Siglo XXI
Asociación Edificio T 6 (20% in 2006)
58.00
50.00
(Continued)
.3.
In this respect, the consolidated financial statements include the following amounts
resulting from consortiums and joint ventures:
In thousands of S/.
2007
2006
Assets
Liabilities
Revenue
Expenses
88,134
========
57,956
========
126,097
========
104,730
========
55,614
========
37,517
========
124,600
========
96,436
========
The Company operates its divisions and/or business segments as described in note 27.
(2)
Accounting Principles and Practices
Main accounting principles applied in the preparation of consolidated financial statements are
detailed below. These principles and practices have been uniformly applied in all years,
unless otherwise indicated.
(a)
Basis for Presentation
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with accounting principles generally accepted in Peru, which comprise the
International Financial Reporting Standards (IFRS) authorized through
resolutions issued by the Consejo Normativo de Contabilidad - CNC (Peruvian
Accounting Board). The IFRSs include the International Accounting Standards
(IAS) and the pronouncements of the Interpretations Committee (SIC and
IFRIC). As of the date of the financial statements, the CNC made official the
compulsory application of the IASs from 1 to 41, IFRSs 1 to 6, and SICs 1 to 33.
The consolidated financial statements have been prepared in conformity with the
historical cost principle.
The preparation of the consolidated financial statements in conformity with
accounting principles requires the use of certain critical accounting estimates. It
also requires from management the use of its judgment in the process for the
a
ppl
i
c
a
t
i
on of t
he Compa
ny
’
sa
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c
ount
i
ng pol
i
c
i
e
s
.Cr
itical estimates and
accounting criteria are described in note 2d.
(Continued)
.4.
(b)
Consolidated Financial Statements
The consolidated financial statements comprise the financial statements of Graña y
Montero S.A.A., the financial statements of the subsidiaries and consortiums
detailed in note 1.
Subsidiaries
The subsidiaries are all entities over which the Company has authority to govern
their operating and financial policies generally for being holder of more than one
half of voting shares. Subsidiaries are consolidated from the date on which its
control is transferred to the Company. They are not consolidated anymore since
the date that control ceases.
The Company uses the purchase method to record the acquisition of subsidiaries.
The cost of acquisition is measured as the fair value of delivered assets, equity
instruments issued, and liabilities incurred or assumed at the date of exchange,
plus costs directly attributable to the acquisition. Identifiable assets acquired and
liabilities assumed in a business combination are initially measured at fair value
at the acquisition date. The excess of the cost of acquisition over the fair value of
t
he Compa
ny
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si
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ta
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or
de
da
s
goodwill.
Transactions, balances and unrealized gains among the companies that the Company
controls are eliminated. Also, unrealized losses are eliminated unless the
transaction provides evidence of an impairment of the assets transferred.
Consortiums
The Comp
a
ny
’
si
nt
e
r
e
s
ti
nj
oi
nt
l
yc
on
t
r
ol
l
e
de
nt
ities is recorded by the
proportionate consolidation method, through which the Company includes in the
relevant components of their consolidated financial statements the proportionate
shareholding of its interest in revenue and expenses, assets and liabilities and
individual cash flows of the joint venture. Significant transactions between the
Company and joint ventures have been eliminated.
(c)
Functional Currency and Foreign Currency Transactions
i) Functional and presentation currency
The items included i
nt
heCo
mpa
ny
’
sf
i
na
nc
i
a
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t
a
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e
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sa
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he
currency of the primary economic environment in which the entity operates
(functional currency). The consolidated financial statements are presented in
nue
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oss
ol
e
swh
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c
hi
st
heCompa
ny
’
sf
unc
t
i
on
a
land presentation currency.
(Continued)
.5.
(ii)Foreign currency transactions and balances
Foreign currency transactions are translated into functional currency using
exchange rates ruling at the dates of the transactions.
Gains or losses on exchange differences resulting from the collection and/or
payment of such transactions and from translating monetary assets and liabilities
stated in foreign currency at exchange rates ruling at year-end closing are
recognized in the statement of income.
(d)
Critical Accounting Estimates and Criteria
The estimates and criteria used are continuously evaluated and are based on
historical experience and other factors, including the reasonable expectation of
occurrence of future events depending on the circumstances.
i)
Critical Accounting Estimates and Criteria
The Company makes estimates and assumptions regarding the future. By
nature, resulting accounting estimates, very rarely will be the same as the
respective actual results. However, it is the opinion of Management that
estimates and assumptions applied by the Company do not have significant
risk as to produce a material adjustment to the balances of assets and
liabilities for next year.
Review of book value and provision for impairment
The Company applies the guidelines stated in IAS 36 to determine whether
a permanent asset requires from a provision for impairment. This
determination requires the use of professional judgment by Management to
analyze the indicators that might present impairment as well as the
determination of value in use. In this last case, it is required to apply
judgment in the elaboration of future cash flows that include the projection
of future operations level of the Company, projection of economic factors
that affect Annual Guaranteed Remuneration, as well as the election of the
discount rate to be applied in this flow.
Taxes
Interpretations of applicable tax legislation are required in determining
obligations and tax expenses. The Company looks for professional
counseling in tax matters before taking any decision on it. Although
Management considers that its estimates are prudent and appropriate,
interpretation differences may arise with tax authorities affecting the
charges for future taxes.
(Continued)
.6.
(ii) Critical Judgment in the Application of Accounting Policies
Management has exercised its critical judgment when applying accounting
policies for the preparation of the accompanying consolidated financial
statements, as explained in the corresponding accounting policies.
(e)
Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hands, overnight, time and sight
deposits held at banks with original maturities between two and three months.
(f)
Financial Instruments
A financial instrument is as any contract that gives rise to both a financial asset in
one entity and a financial liability, or equity instrument in another. In the case of
the Company, financial instruments correspond to primary instruments such as
accounts receivable, accounts payable, and shares representing capital share in
other companies.
Financial instruments are classified as asset, liability or equity according to the
substance of the contract. The interest, dividends, gains, and losses generated by
a financial instrument, and classified as liability, are recorded as income or
expense in the statement of income.
The payment to holders of financial
instruments classified as equity is recorded directly against equity. The financial
instruments are compensated when the Company has the legal right to
compensate them, and management has the intention of paying them on a net
basis or negotiating the asset, and paying the liability simultaneously.
Fair value is the amount for which an asset could be exchanged between
knowledgeable, willing parties, or a liability settled between a debtor and a
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31, 2007, is substantially similar to their fair values due to their short period of
realization and/or maturity. The recognition and valuation criteria of those
accounts are disclosed in their respective accounting policies.
(g)
Trade Accounts Receivable and Provision for Doubtful Accounts
Accounts receivable are initially recorded at their fair value and are subsequently
valued at amortized cost. The provision for deterioration of trade accounts
receivable is determined when there is objective evidence that the Company will
not collect all the amounts overdue according to terms originally established.
Management considers that the balances of trade accounts receivable as of
December 31, 2007 do not present uncollectibility risks.
(Continued)
.7.
Trade accounts receivable are presented net of the advances received from clients
provided that they are related with the same work agreement and said agreement
establishes the possibility of compensation.
(h)
Inventories
Inventories are valued at construction, acquisition and/or contribution costs, which
do not exceed the net realizable value. The cost of construction materials is
determined on a weighted average method, except in the case of inventories in
transit, determined by the specific identification method. The net realizable value
is the estimated selling price in the ordinary course of business, less cost to sale,
and the commercialization costs. For the reductions of inventory book value at
net realizable value, inventory impairment is charged to the results of the period
when those reductions occur.
(i)
Investments
The Company classifies its investments in the following categories: i) marketable
financial assets, ii) loans and accounts receivable, iii) Held-to-maturity
investments, and iv) available-for-sale financial assets. The classification
depends on the purpose for which investments were acquired. Management
determines the classification of their investments as of the date of their initial
recognition and reassesses this classification as of every closing date.
 Marketable financial assets
A financial asset is classified in this category if it was mainly acquired in
order to be sold in the short term or if it is so assigned by Management.
Derivative financial instruments are also classified as marketable unless they
are designated as hedges. Assets in this category are classified as current
assets if they are held as marketable or they are expected to be realized within
12 months as from the balance sheet date. During 2007 and 2006, the
Company did not hold any investment under this category.
 Loans and accounts receivable
Loans and accounts receivable are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market. They arise
when the Company provides with money, goods or services directly to a
debtor, with no intention to trading the account receivable. They are included
in current assets, except for maturities exceeding 12 months after the date of
the balance sheet. These ones are classified as non-current assets. Loans and
accounts receivable are included in trade accounts to affiliates and various
accounts receivable in the balance sheet (note 2g).
(Continued)
.8.
 Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or
determinable payments and fixed maturities acquired with the intention and
ability to hold them to maturity. During 2007 and 2006, the Company did not
hold any investment under this category.
 Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets
designated in this category or that do not classify in any of the other
categories. These assets are shown as non-current assets unless Management
has express intention to sell the investment within 12 months after the date of
the balance sheet.
Investment purchases and sales are recognized as of the date of negotiation, date on
which the Company commits to purchase or sale the asset. Transactions costs
related to financial assets recorded at fair value through gains and losses are
recognized in the statement of income. Financial assets are not recognized
anymore when the rights to receive cash flows from investments have expired or
have been transferred, and the Company has substantially transferred all risks
and rewards derived from ownership.
Available-for-sale financial assets and marketable financial assets are subsequently
recognized at fair value. Loans, accounts receivable, and held-to-maturity
investments are recorded at their amortized cost, using the effective interest
method.
Realized and unrealized gains and losses arising from changes in the fair value of
t
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income, in the period they are originated. Unrealized gains or losses arising from
changes in the fair value of non-monetary securities, classified as available-forsale, are recognized in equity. When securities classified as available-for-sale
are sold or impaired, accumulated fair value adjustments are included in the
statement of income as gains or losses in investment in securities.
Fair value of quoted investments is based on current bid prices. If market is not
active (or securities are not listed), the Company establishes the fair value by
using valuation techniques.
(Continued)
.9.
The Company evaluates at each balance sheet date, if there is objective evidence of
the impairment of a financial asset or group of financial assets.
(j)
Available-for-Sale Non-Financial Assets
Assets are classified as available for sale when their book value is expected to be
recovered through their sale, when there is a plan for such a sale, and it is highly
probable that their sale occurs in the short-term. These assets are valued at the
lower of their cost or at their realizable value.
If the realizable value is lower than the book value, a provision is recorded and
charged to revaluation surplus and deferred income tax and workers’pr
o
f
i
t
sharing or to results depending if it is a good that has been previously revalued or
not, respectively.
(k)
Investments in Associates and Consortiums
These investments are recorded at acquisition cost, crediting to results the dividends
received in cash.
(l)
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost less their depreciation.
Historical cost includes disbursements directly attributable to the acquisition of
these entries. Subsequent costs attributable to the goods of the fixed asset
increasing the original capacity of goods are capitalized, other costs are
recognized in the results.
Lands are not depreciated. Depreciation of plant and equipment and vehicles
r
e
c
og
ni
z
e
da
s“
La
r
g
eEqui
pme
nt
”i
sc
a
l
c
u
l
a
t
e
dba
s
e
dont
heir use hours, in
relation to the estimated useful hours of these assets. The depreciation of other
a
s
s
e
t
st
ha
tdonotqu
a
l
i
f
ya
s“
La
r
g
eEqu
i
pme
nt
”i
sc
a
l
c
ul
a
t
e
dbys
t
r
a
i
g
htl
i
ne
method to assign its cost less its residual value during the estimated useful life,
as follows:
Buildings and premises
Plant and equipment
Vehicles
Furniture and fixtures
Various equipment
Years __
between 5 and 33
between 5 and 10
between 5 and 10
between 4 and 10
between 4 and 10
(Continued)
. 10 .
Residual values and useful life of assets are reviewed and adjusted, if necessary, at
the date of each balance sheet. The assets book value is immediately written off
at its recoverable value if the asset book value is higher than the estimated
recoverable value. Gains and losses for the sale of goods of the fixed asset
correspond to the difference between transaction income and the assets book
value. These are included in the statement of income.
(m)
Finance Lease Agreements
Lease and/or sale agreements with a leaseback agreement on plant and equipment,
through which the Company substantially assumes all risks and benefits related
to the property of leased assets, are classified as finance lease and are capitalized
at the beginning of the agreement at the lesser value resulting from the fair value
of leased assets and the present value of the minimum payments of lease fees.
Lease fees payments are designated to reduce the liability and the recognition of
the financial charge in such a manner as to obtain a constant interest rate on the
debts pending of amortization. Obligations for financial and/or sale leases with
financial leaseback agreements, net of financial charges, are included in the longterm debt account in the balance sheet. The financial cost is charged to results in
the lease period. The cost of assets acquired through financial and/or sale lease
with financial leaseback agreement is depreciated in the estimation of its useful
life.
(n)
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of
t
heCo
mpa
ny
’
ss
h
a
r
e
soft
h
ei
de
nt
i
f
i
a
bl
ene
ta
s
s
e
t
sofas
ub
s
i
di
a
r
ya
soft
hed
a
t
e
of acquisition. Likewise, the goodwill arising during the acquisition of minority
interest in a subsidiary represents the excess of cost of the additional investment
over book value of net identifiable assets as of the date of acquisition. Goodwill
is reviewed to determine whether a recognition of provisions for impairment is
required. It is recorded at cost less accumulated provisions for impairment.
Impairment losses are recognized in the statement of income and are not
reversed. Gains and losses from the sale of subsidiaries or associates include the
book value of goodwill related to the sold entity.
Goodwill is allocated to cash-generating units to conduct impairment tests. Each of
t
hos
ec
a
s
hg
e
ne
r
a
t
i
nguni
t
sr
e
pr
e
s
e
nt
st
heCompa
ny
’
si
nv
e
s
t
me
nti
ne
v
e
r
ypl
a
c
e
where it operates per primary reporting segment (note 13).
(Continued)
. 11 .
(o)
Other Assets
Concessions included in Other Assets item of the balance sheet are recognized as
such based on the forecast that these will generate future economic benefits for
the Company. Concessions are recorded at cost. These fees are amortized at
straight-line method based on the remaining maturity of concession agreements.
Repairs of highways and works in parking lots are capitalized, and regular
maintenance of highways and parking lots are recognized in expenses when they
are incurred.
Investments in exploration, development and subscription rights of concession
agreements are amortized as from the period when income from its exploitation
is obtained until the maturity of the respective agreements. On the other hand, if
it were the case, investments in exploration and exploitation, referred to those
exploration agreements in which it has been determined that results are not
successful, are charged to the results in the period when this situation is
determined, after the compensation attributable to the shareholding of third
parties in said investments.
Costs related to the development or maintenance of software are recognized in
results when incurred. However, costs that are directly related to single and
identifiable software, that are controlled by the Company and that will provide
future economic benefits higher than their cost in more than one year, are
recognized as intangible assets. Direct costs related to the development of
software include personnel costs and an aliquot of general expenses.
Development costs of capitalized software are amortized by straight-line method
in the estimate of its useful life, without exceeding four years.
(p)
Impairment of Non-Financial Assets
Assets that have an indefinite useful life and are not subject to amortization, are
tested annually for impairment. Assets that are subject to depreciation or
amortization are reviewed for impairment whenever events or circumstances
indicate that the book value may not be recoverable.
Impairment losses are the amount by which the asset book value exceeds its
recoverable amount. The recoverable amount of assets corresponds to the higher
net amount that would be obtained from the sale or value in use. In order to
assess the impairment, assets are grouped at the lowest levels for which
identifiable cash flows are generated (cash-generating units).
(Continued)
. 12 .
(q)
Loans
Loans are initially recognized at their fair value, net of transaction costs incurred.
These loans are subsequently recorded at their amortized cost, and any resulting
difference between the funds received (net of transaction costs) and the
redemption value is recognized in the statement of income during the period of
the loan using the effective interest method.
Loans are classified as current liability unless the Company has the unconditional
right to differ settlement of the liability for at least twelve months after the
balance sheet date.
(r)
Provisions
Provisions are recognized when the Company has a present legal obligation, either
legal or constructive, as a result of past events, and when it is probable that an
outflow of resources will be required to settle the obligation, and it is possible to
reliably estimate its amount. Restructuring cost provisions comprise lease
termination penalties and employee termination payment.
When there are a number of similar obligations, the probability that an outflow of
resources will be required in settlement is determined by considering the class of
obligations as a whole. A provision is recognized although the likelihood of
outflow of resources for any one item included in the same class of obligations
may be small.
Provisions are recognized at present value of expenditures expected to be required
to settle the obligation using pre-tax rates that reflect the current market
assessment of the time value of money and the risks specific to the obligation.
The increase in the provision due to the passage of time is recognized as interest
expense in the statement of income.
(s)
Share of the Profits
TheCompa
nyr
e
c
og
ni
z
e
sal
i
a
bi
l
i
t
ya
nda
ne
xpe
ns
ef
orwor
k
e
r
s
’pr
ofit sharing in
profits equivalent to 5% and 10% of taxable base determined according to the
current tax legislation for each subsidiary.
(t)
Income Tax
Current income tax is determined according to current tax provisions (note 21).
Deferred income tax is recorded using the liability method, recognizing the effect of
(Continued)
. 13 .
of temporary differences that arise between the tax base of assets and liabilities
and its balance in the financial statements.
Deferred tax assets are only recognized as it is probable to have taxable benefits in
the future against the credits that can be used.
The effect of these temporary differences is also considered in the calculation of
wor
k
e
r
s
’pr
o
f
i
ts
h
a
r
i
ng
.
(u)
Capital
Common shares are classified as equity.
When the capital stock recognized as equity is repurchased (treasury shares in
conformity with the IFRSs), the payment made including any cost directly
r
e
l
a
t
e
d(
ne
toft
a
x
e
s
)i
sde
duc
t
e
df
r
om t
heComp
a
ny
’
se
qui
t
yunt
i
ls
ha
r
e
sa
r
e
amortized, reissued or sold (this repurchase has a different connotation under
article 105 of Companies Act). When such shares are subsequently reissued or
sold, any payment received, net of incremental costs directly attributable to the
transaction and effects corresponding to income tax, is included in the equity
(note 18).
(v)
Dividend Distribution
Dividend distribution to stockholders is recognized as liability in the financial
s
t
a
t
e
me
nt
si
nt
he p
e
r
i
od whe
n di
v
i
de
nd
sa
r
ea
ppr
ov
e
d by t
h
e Compa
ny
’
s
stockholders.
(w)
Contingent Assets and Liabilities
Contingent liabilities are not recognized in financial statements. They are only
disclosed in the notes to financial statements unless the possibility of an outflow
of economic resources is remote. Contingent assets are not recognized in
financial statements, and they are only disclosed when an inflow of economic
benefits is probable.
(x)
Revenue Recognition
The Company recognizes revenues when the amount can be reliably measured, it is
probable that future economic benefits will flow to the Company, and specific
criteria are met per type of revenue as described below. Revenues are recognized
in the results as follows:
Income for work valuations
(Continued)
. 14 .
Income for work valuations and their respective costs are recognized as such
when executing them, according to work advances. Additionally, such income
and costs are adjusted to recognize the final projected profit margin of works
which is monthly reviewed. Income is invoiced prior approval of works owners.
Sale of goods
Ordinary income resulting from sale of goods are recognized and recorded when
the products are delivered and the risks and rewards inherent to the ownership of
products are transferred to the buyer, and the corresponding collection of
accounts receivable is fairly assured.
Income from rendered services
Income for services rendered are recognized in the accounting period when they
are rendered, regarding the complete specific service, calculated on the service
actually provided as a portion of the total of services to be rendered.
Income and costs for rendered services are recognized as such when such
services are rendered.
Interest and dividends
Interest income is recognized on a time proportion basis, using the effective
interest method.
Revenues from dividends are recognized when the right to receive the payment
has been established.
(y)
Accounting Pronouncements Pending Approval
The International Accounting Standards Board (IASB) has issued certain
International Financial Reporting Standards (IFRS) effective since 2007;
however, official approval of these IFRSs in Peru is pending. For information
purposes, the IFRS that have been issued but are not yet effective as of
December 31, 2007 are detailed below:
- IFRS 7 – Financial Instruments: Disclosures. This IFRS is effective
internationally as from January 1, 2007. The objective of IFRS 7 is to include
in the financial statements, disclosures that allow users to evaluate the
s
i
g
ni
f
i
c
a
nc
eo
ff
i
na
nc
i
a
li
ns
t
r
ume
nt
sf
ora
ne
nt
i
t
y
’
sf
i
na
nc
i
a
lpos
i
t
i
ona
nd
performance, through the understanding of the nature and extent of risk
arising from financial instruments as well as the methods used to manage the
risks derived from these instruments.
(Continued)
. 15 .
- IFRS 8 –Operating Segments (effective for periods beginning on or after
January 1, 2008).
- IFRIC 7 –Applying the Restatement Approach under IAS 29 (effective for
periods beginning on or after March 1, 2006).
- IFRIC 8 - Scope of IFRS 2 (effective for periods beginning on or after May
2006).
- IFRIC 9 –Reassessment of Embedded Derivatives (effective for periods
beginning on or after June 1, 2006).
- IFRIC 10 –Interim Financial Reporting and Impairment (effective for
periods beginning on or after January 1, 2007).
- IFRIC 11 –IFRS 2: Group and Treasury Share Transactions (effective for
periods beginning on or after March 1, 2007).
- Review of IFRS 3 - Business Combinations and IAS 27 Consolidated and
Separate Financial Statements (modifications effective for periods beginning
on or after July 1, 2009).
Management estimates that these interpretations will not have a significant effect on
t
hes
t
oc
k
hol
de
r
s
’e
qui
t
yorr
e
s
u
l
t
s
.
(3)
Financial Risk Management
TheCompa
ny
’
sa
c
t
i
v
i
t
i
e
sma
ye
xpos
ei
tt
oav
a
r
i
e
t
yoff
i
na
n
c
i
a
lr
i
s
k
sr
e
l
a
t
e
dt
ot
hee
f
f
e
c
t
so
f
fluctuations in the debt and equity market prices, fluctuations in foreign exchange, interest
r
a
t
e
s
,a
n
df
a
i
rv
a
l
ue
soff
i
na
nc
i
a
la
s
s
e
t
sa
ndf
i
na
nc
i
a
ll
i
a
bi
l
i
t
i
e
s
.TheCompa
ny
’
sg
e
ne
r
a
l
program for the administration of risks is mainly focused on financial market
unpredictability, and seeks to minimize potential adverse effects on its financial behavior.
Administration and Finance Management is in charge of the administration of risk following
the policies approved by the Board of Directors. The Administration and Finance
Management identifies, evaluates, and covers the financial risks in close cooperation with
operating units. The Board of Directors provides guidelines for the global administration
of risks, as well as written policies that cover specific areas, such as risks of fluctuations in
foreign exchange rate, in interest rates, credit risks, and the investment of liquidity surplus.
(Continued)
. 16 .
(i) Currency risk
The Company's activities and indebtedness in foreign currency exposes it to exchange
rate fluctuation risk, especially concerning the U.S. dollar. In order to reduce the
Compa
ny
’
se
xpo
s
ur
e
,i
tc
o
nduc
t
se
f
f
or
t
st
ok
e
e
pa
na
ppr
opr
i
a
t
eb
a
l
a
nc
i
ngbe
t
we
e
n
assets and liabilities and between income and expenses in foreign currency.
Complementarily, the Company uses forward foreign exchange contracts, in order to
mitigate the risk associated to the exposure arising from the costs in nuevos soles
associated to income in foreign currency.
Balances in foreign currency as of December 31 are summarized as follows:
In thousands of US$
2007
2006
Assets:
Cash and banks and restricted funds
Trade accounts receivable
Other accounts receivable
Liabilities:
Bank loans
Other accounts payable
Long-term debts (including current portion)
Net liability position
32,065)
38,680)
45,232)
--------------115,977)
---------------
44,400)
29,921)
24,073)
-------------98,394)
--------------
( 14,805)
( 35,908)
( 29,073)
( 67,559)
--------------( 147,345)
--------------( (31,368))
========
( 1,611)
( 20,219)
( 10,427)
( 66,779)
-------------( 99,036)
-------------(
642)
========
(Continued)
. 17 .
Those balances have been stated in S/. at the following free market exchange rate,
ruling as of December 31:
In S/.
1 US$ - Exchange rate established by the
Superintendency of Banking,
Insurance and Private Pension Fund
Administrators (AFP) - purchase
(assets)
1 US$ - Exchange rate established by the
Superintendency of Banking,
Insurance and AFP - sale
(liabilities)
2007
2006
2.995
3.194
2.997
3.197
As of December 31, 2007 and 2006, the Company and its subsidiaries recorded gains
on exchange for S/. 65,704,000 and S/. 97,148,000 and losses on exchange for
S/. 57,278,000 and S/. 87,738,000, respectively.
(ii) Interest rate risk
TheCompa
ny
’
si
nc
o
mea
ndop
e
r
a
t
i
ngc
a
s
hf
l
owsa
r
ei
nde
pe
nd
e
ntf
r
om t
h
ec
ha
ng
e
s
in the market interest rates be
c
a
us
et
heCompa
n
y
’
sde
bti
ss
ubs
t
a
nt
i
a
l
l
ys
ubj
e
c
tt
o
fixed rate. Only the short-term debt corresponding to bank loans that finance working
capital are subject to fluctuation of interest rates.
(iii) Credit risk
The Company does not have significant credit concentration risk. Concerning the
loans to its related parties, the Company has established measures aimed at assuring
recoverability of such loans.
TheCompa
ny
’
sc
e
r
t
i
f
i
c
a
t
e
so
ft
i
mede
pos
i
t
sa
r
el
i
mi
t
e
dt
of
ours
oundf
i
na
nc
i
a
l
entities in order to avoid risk concentration.
(iv) Liquidity risk
Prudent management of liquidity risk implies keeping enough cash and marketable
securities, financing available through a proper number of credit sources, and the
capacity of closing positions in the market.
(Continued)
. 18 .
The Company maintains an average debt maturity greater than the DEBT/ EBITDA
ratio; additionally, the Company holds overnight deposits and certificates of time
deposits for an approximate amount of US$ 18 million destined to face cash demands
that new projects or investments may require.
Finally, the program of commercial papers obtained during 2006 has enabled lines
amounting to US$ 20 million that contribute to reduce the dependence on lines
granted by the financial system, diversifying financing sources.
(4)
Cash and Banks and Restricted Funds
They comprise the following:
In thousands of S/.
2007
2006
Cash and checking accounts
Overnight and time deposits
Collateral account
Restricted funds
Total
51,861
71,865
--------------123,726
4,743
13,477
--------------141,946
========
36,027
101,620
-------------137,647
3,292
9,149
-------------150,088
========
As of December 31, 2007, the Company holds checking accounts and time deposits at local
banks in local and foreign currency for approximately S/. 58.4 million and US$ 21.6
million, respectively (S/. 7.1 million and US$ 9 million, respectively, as of December 31,
2006).
As of December 31, 2007, the collateral account amounting to S/. 4.7 million (equivalent to
US$ 1.6 million) corresponds to a fund held at Banco de Crédito del Perú as a collateral
for the compliance bond of the Concess
i
onAg
r
e
e
me
ntoft
he“
Ej
eMul
t
i
moda
lSur
,Tr
a
mo
3(
I
I
RSASurTr
a
mo3)
”
.TheComp
a
n
ye
xpe
c
t
st
or
e
c
ov
e
rt
hi
sc
ol
l
a
t
e
r
a
ldur
i
ng200
8.
As of December 31, 2007, GMP S.A. holds at Banco de Crédito del Perú a restricted fund for
US$ 4.5 million that guarantees obligations of a related company. As of December 31,
2006, restricted funds corresponded to a collateral for US$ 2.9 million granted in favor of
Merrill-Lynch for the financing of the Southern Interoceanic highway.
(Continued)
. 19 .
(5)
Trade Accounts Receivable
Trade accounts receivable correspond mainly to revenue from work valuations. Trade
accounts receivable have current maturity, and do not accrue interest, and do not have
specific guarantees.
The detail of the aging of accounts receivable is as follows:
In thousands of S/.
2007
2006
Current
Overdue until 30 days
Overdue over 30 days
(6)
231,951
433
1,180
--------------233,564
========
187,019
1,124
662
-------------188,805
========
Related Parties
The movement of accounts receivable and payable with related entities for the period ended
December 31, 2007, is as follows:
In thousands of S/.
Name of affiliates and
related parties
Receivable:
GME S.A.
Norvial S.A.
Other minor
Payable:
GME S.A.
Norvial S.A.
Other minor
Initial
balances
Additions
Deductions
Final
balances
1,436
3,977
848
----------6,261
======
362
174
----------536
======
( 1,332)
( 3,977)
(
847)
----------( 6,156)
======
104
362
175
----------641
======
5,647
----------5,647
======
7
12
----------19(
======
-)
-----------)
======
5,647
7
12
----------5,666
======
(
(
(
Accounts receivable and payable have current maturity and do not have specific guarantees.
(Continued)
. 20 .
(7)
Consortiums
They comprise the following as of December 31:
In thousands of S/.
2007
2006
Receivable
Payable
Receivable Payable
Consorcio Constructor IIRSA-Norte
Consorcio Héroes Navales
Consorcio La Quinua
Constructora Uyuni S.A.
GyM JJC Contratistas Generales S.A.
GyM S.A. –Skanska del Perú S.A.
GyM S.A. (Constructores Transmantaro)
Consorcio GyM EVISAC
Consorcio Pasco
Consorcio Terminales
130
1
117
30
1,643
----------1,921
======
3,742
12
132
1,689
22
----------5,597
======
10,311
741
255
248
169
104
----------11,828
======
2,053
----------2,053
======
Accounts receivable and payable to consortiums are mainly related to loans for working
capital and lease of equipment.
(8)
Other Accounts Receivable
In thousands of S/.
2007
2006
Guaranty deposits for agreements
Advances to suppliers
Current portion of long-term account receivable
Various
16,046)
26,772)
2,825)
35,613)
--------------81,256)
========
17,989)
11,692)
3,336)
21,177)
-------------54,194)
========
Guaranty deposits are related to works of Sedapal, Blocks 6, 7 and 10 for S/. 6.5 million,
Campamentos LNG for S/. 2.8 million, Underground of LNG for S/. 1.7 million,
Fundaciones Tanques LNG for S/. 1.3 million, Ampliación Malvinas EPC 11 for S/. 1.2
million as of December 31, 2007 (Minera Cerro Verde S.A. for S/.9.2 million, Acid plant
of Southern Peru Cooper Corp in Ilo for S/. 4.2 million, Compañía Minera Antamina S.A.
for S/.0.7 million, and Etevensa for S/.0.6 million as of December 31, 2006).
(Continued)
. 21 .
Advances given to suppliers correspond to Golf Millenium works for S/. 6.2 million, Línea de
Transmisión de San Gaban for S/. 0.8 million, Edificio Santo Toribio for S/.1.1 million,
Hotel Novotel for S/.0.9 million, Clinica Ricardo Palma for S/.0.55 million, Ministry of
Transportation and Communications for S/. 5.1 million, and advances for imports and their
pertinent proceedings for S/. 7.2 million, as of December 31, 2007 (Sedapal Block 7 for S/.
1 million, Edificio Real Diez for S/.0.9 million, Cerro Verde S.A. for S/. 0.8 million, EPC
11 Malvinas for S/. 0.5 million, extension of Larcomar S.A. for S/. 0.3 million, and
advances for imports for S/. 1.3 million as of December 31, 2006).
Various accounts receivable include leasing of equipment and reimbursable expenses
receivable from CONIRSA for S/. 10.1 million, accounts receivable from Transportadora
de Gas del Perú for S/. 1.7 million, Colegio Fe y Alegría for S/. 1.2 million, Proyectos
Inmobiliarios Consultores for S/.1.3 million, Red Vial 5 for S/.2.7 million, MTC –
Canchaque for S/.2.8 million, Petróleos del Perú for S/.0.7 million, Transportadora de Gas
del Perú for S/. 1.7 million, and ICCGSA for S/.0.9 million (CONIRSA for S/.4.7 million,
Minera San Cristóbal for S/.1.1 million, Transportadora de Gas del Perú S.A.for S/.1.7
million, Real Once S.A. for S/.1.9 million, Intertítulos Sociedad Titulizadora S.A. for
S/.2.6 million, and Consorcio Terminales for S/.2.2 million as of December 31, 2006).
(9)
Inventories
This item as of December 31, comprises:
In thousands of S/.
2007
2006
Property and land
Construction materials
Supplies
Merchandise
Inventories in transit
Provision for inventory impairment
16,074)
51,939))
6,388)
4,128)
873)
--------------79,402)
(
145)
--------------79,257
========
8,851)
17,426)
5,246)
5,644)
278)
-------------37,445)
(
162)
-------------37,283
========
(Continued)
. 22 .
Property and Land
This item comprises lands T2, T8 and T9 of Centro Empresarial Camino Real amounting to
S/. 5.5 million, property Balta, Golf los Incas and Malecón Cisneros for S/. 8.3 million, the
lands of Playa Las Lomas for S/.2.2 million (lands T2, T8 and T9 of Centro Empresarial
Camino Real for S/.5.5 million and lands from Playa Las Lomas for S/. 3.3 million as of
December 31, 2006).
Construction Materials
As of December 31, 2007, these materials correspond mainly to the following works: Andoas
for S/.5.7 million, Parques de El Agustino for S/. 16.2 million, Ampliación Malvinas EPC
11 for S/. 3.1 million, Línea de Transmisión San Gaban for S/. 1.3 million, Javier Prado
for S/. 4.9 million, Red Vial for S/. 2.7 million, Sedapal for S/. 2.0 million,
Telecommunications for S/. 1.4 million, Brocal for S/. 1.2 million, Cashiriari for S/. 0.9
million, and Cerro Corona for S/. 0.8 million (Andoas Plus for S/.3.8 million, Brocal IV
for S/.1.3 million, Sedapal Block 7 for S/. 1.4 million, Edificio Real 10 for S/. 4.5 million
as of December 31, 2006.
Supplies and Merchandise
They mainly comprise spare parts, drilling equipment and supplies in general for the
exploitation of lots and gas plant, as well as accessories and supplies for computing and
communications equipment.
(10) Long-term Accounts Receivable
Name of Debtor
Consorcio Terminales
(1)
Petróleos del Perú
S.A. (2)
Proyectos Inmobiliarios
Consultores S.A.
Philip Morris S.A.
TGP S.A.
Inversiones Larcomar
S.A. (3)
Sunat (4)
Proyecto Especial
Kovire
Other
In thousands of US$
Authorized
and used
Total
amount
2007
2006
Type of
operation
Maturity
Loan
August 2011
Agreement
Loans
Agreement
Claim
Agreement
In thousands of S/.
Current
2007
2006
Non-current
2007
2006
3,800
8,118
10,481
2,112
2,207
6,006
8,274
Various
794
8,274
3,464
713
686
7,561
2,778
2008
October
Various
672
1,655
1,276
1,655
1,141
1,108
-
-
443
-
1,276
1,655
1,141
665
-
-
-
3,024
1,655
-
-
-
3,024
1,655
-
-
-
1,646
614
----------26,262
======
----------16,194
======
----------2,825
======
----------3,336
======
1,646
614
----------23,437
======
----------12,858
======
(Continued)
. 23 .
(1) In August 2003, the Company granted to Consorcio Terminales S.A. a loan for
US$ 9.2 million with funds obtained in the issuance process of securitization bonds. This
balance is shown at consolidation percentage of the Consortium (50%) for S/. 8,118,000
as of December 31, 2007 (S/. 10,481,000 in 2006). This account receivable accrues
interest at an annual rate of 9.65%.
(2) Long-term accounts receivable from Petróleos del Perú for S/. 8,274,000 (S/. 3,464,000
as of December 31, 2006) represent additional investments finished by Consorcio
Terminales and destined to the modernization and enlargement of the terminals under the
agreement. These investments will be transferred and invoiced at cost and discounted
from the monthly payment for right of use of terminals.
During 2007, said Consortium has incurred in additional investments for S/. 4,810,000
(S/. 3,314,000 in 2006).
(3) In June 2007, Inversiones Larcomar S.A. acquired from Larcomar S.A. several brands
which have non-current maturity.
(4) Claim filed by Larcomar S.A. against the payment of the Temporary Tax on Net Assets
of years 2005, 2006 and 2007. Tax Court has not issued a definite resolution; however,
Management considers that the recognition of the balance compensation is possible.
(Continued)
. 24 .
(11) Investments
As of December 31, this item comprises:
Quantity
of shares
Associates:
Norvial S.A.
Proyectos Inmobiliarios Consultores S.A.
Oiltanking Investments Bolivia S.A.
Inmobiliaria Almonte S.A.
Sierra Morena S.A.
Promotores Asociados de Inmobiliarias S.A.
Inmobiliaria Viena S.A.
Inversiones Larco Mar S.A.
Oiltanking Andina S.A.C.
Other investments
Consortiums:
Inversiones Real Once
Transportadora de Gas del Perú S.A.A
CONCIN
CONIRSA S.A.
CONIRSA Tramo 3
CONIRSA Tramo 2
Capital
shareholding in %
2007
2006
Book value
in thousands of S/.
2007
2006
10,422,200
398
160,963
3,299,740
4,973,115
41,732
2,759,909
513,380
-
34.00
17.91
49.00
13.82
33.33
41.12
13.99
20.15
-
34.00
17.91
49.00
13.82
33.33
41.12
13.99
20.15
-
31,626
12,197
5,098
8,645
5,713
4,051
2,691
1,110
1,290
2,063
----------74,484
-----------
25,866
12,197
12,275
8,645
6,497
4,051
2,691
1,110
2,582
----------75,914
-----------
1,250,000
1,138,473
190
2,806,500
1,914,701
29.07
0.6
10.20
19.00
19.00
19.00
0.6
10.20
19.00
19.00
4,037
5,645
3,285
15,595
5,430
3,504
----------37,496
----------111,980
======
5,396
3,794
2,961
1,915
----------14,066
----------89,980
======
Oiltanking Investment Bolivia S.A. On July 28, 2000, Oiltanking GHbH (hereinafter OT), GMP S.A. and Graña y Montero
S.A.A. incorporated Oiltanking Investment Bolivia S.A., with a shareholding of 51%, 48%
and 1% respectively, in order to incorporate Compañía Logística de Hidrocarburos
Boliviana S.A. (hereinafter CLHB), for the operation of multi-purpose pipelines and
storage plants owned by Yacimientos Petrolíferos Fiscales Bolivianos (hereinafter YPFB).
On May 1, 2006, the Bolivian government enacted Supreme Decree 28701 in which
“
na
t
i
ona
l
i
z
a
t
i
onofhy
dr
oc
a
r
bons
”i
se
s
t
a
bl
i
s
h
e
d,de
ma
ndi
ngoi
lc
ompa
n
i
e
st
ha
td
e
v
e
l
op
gas and oil production activities in Bolivian territory, to deliver all hydrocarbons
production. Through this decree, 50% is adjudicated to YPFB plus 1 share of certain
Bolivian companies in which CLHB is included.
(Continued)
. 25 .
Therefore, in May 2006, Management took the decision to change the investment accounting
method in Bolivia, from Valuation at Equity Sharing to Cost Method. As of December 31,
2006, 50% of investment value related to CLHB was considered as accounts receivable
and fully recorded for S/. 11.9 million, which was presented as investment write-off in the
statement of income of year 2006. As of December 31, 2007, the balance of the investment
exposure in CLHB amounts to S/. 5.1 million. As of December 31, 2007, CLHB is still
operated and managed by the Company and its partner OT, while transfer of shares is
made achieved.
As of December 31, 2007 and 2006, financial Statements do not include assets, liabilities,
revenue and expenses of OTIB due to the jointly control loss as a consequence of the
decrease of its shares, resulting from nationalization.
(12) Property, Plant, and Equipment
The movement of the Property, Plant, and Equipment account and the corresponding
accumulated depreciation for the year ended December 31, 2007 and 2006 is the
following:
Year 2007:
Initial
balances
Cost:
Land
Buildings and other constructions
Plant and equipment
Vehicles, various equipment
and other
Units in transit
Works-in-progress
Accumulated depreciation:
Plant and equipment
and other
Net cost
In thousands of S/.
Deductions
Additions and/or adjustments
Final
balances
1,665)
157,117)
294,239)
17,283)
73,906
50,850
3,331
(
5)
( 90,397)
( 108,751)
( 4,895)
1,660
140,626
236,338
15,719
110,715)
3,596)
9,522)
-----------594,137
------------
35,276
2,507
58,459
-----------224,329
=======
( 18,941)
(- )
( 20,737)
-----------( 243,726)
=======
127,050
6,103
47,244
-----------574,740
------------
24,549)
218,175)
9,297)
3,464
37,226
2,886
( 12,389)
( 107,305)
( 4,113)
15,624
148,096
8,070
69,280)
-----------321,301)
-----------272,836)
=======
14,952
-----------58,528
=======
( 9,287)
-----------( 133,094)
=======
74,945
-----------246,735
-----------328,005
=======
(Continued)
. 26 .
Year 2006:
Initial
balances
Cost:
Land
Plant and equipment
and other
Units in transit
Works-in-progress
Accumulated depreciation:
Plant and equipment
and other
Net cost
In thousands of S/.
Deductions
and/or
UnconAdditions adjustments
solidated
Final
balances
6,634)
134,951)
289,319)
16,909)
1,014
28,189
32,061
1,595
( 1,841)
( 8,880)
(
935)
( 4,142)
( 6,023)
( 18,261)
(
286)
1,665
157,117
294,239
17,283
102,993)
1,242)
8,796)
-----------560,844)
------------
20,586
2,354
11,198
-----------96,997
------------
( 6,471)
( 6,571)
-----------( 24,698)
------------
( 6,393)
( 3,901)
-----------( 39,006)
------------
110,715
3,596
9,522
-----------594,137
------------
21,459)
196,114)
8,636)
3,603
34,667
1,560
( 8,466)
(
816)
( 513)
( 4,140)
(
83)
24,549
218,175
9,297
60,376)
-----------286,585)
-----------274,259)
=======
14,123
-----------53,953
=======
( 2,780)
-----------( 12,062)
=======
( 2,439)
-----------( 7,175)
=======
69,280
-----------321,301
-----------272,836
=======
As of December 31, 2007, property, plant, and equipment accounts include assets acquired
under the modality of finance lease and sale with finance leaseback agreement for
approximately S/. 63.95 million (S/.32.6 million in 2006).
As of December 31, 2006, the Company transferred costs related to conditioning of wells
from the works-in-progress account to the intangibles item for approximately S/. 7 million
(S/. 5 million as of December 31, 2005).
(13) Goodwill
It comprises the highest value paid by the Company to obtain the total capital stock of GMA
S.A. regarding the value of its corr
e
s
pondi
ngi
n
t
e
r
e
s
ti
ns
t
oc
k
ho
l
de
r
s
’e
qui
t
y
.Theba
l
a
nc
e
as of December 31, 2007 of S/. 29.6 million (S/. 32.5 million in 2006) is shown net of loss
for impairment of S/. 2.9 million.
Likewise, in February 2007, the Company acquired 1,103,509 shares at market value that
represented an additional shareholding of 5.47% in the subsidiary GMD S.A., paying an
amount of S/.4.9 million and thus, increasing its shareholding from 83.21% to 88.68%.
(Continued)
. 27 .
The highest value paid on net assets acquired through this share block was S/. 4.8 million and
was recognized as goodwill in the balance sheet.
The evaluation of impairment of goodwill was made using the value in use of the
corresponding cash-generating unit. The key criteria for the calculation of the value in use
have been: a) projection period: 10 years, b) Growth rate: 6% and perpetual growth up to
3%, and c) discount rate: 11%. The results of this evaluation did not determine impairment
in book value.
(14) Other Assets
The annual movement of the other assets item comprises the following:
Year 2007:
Cost:
Arequipa - Matarani highway concession (a)
Block I
Block V (c)
Oracle (d)
CT Concession and rights
Parque Ovalo Gutiérrez Concession (b)
Licenses and software projects
Surface rights (e)
Other minor
Accumulated amortization:
Arequipa - Matarani highway concession
Block I
Block V
Oracle
CT Concessions and Rights
Parque Ovalo Gutiérrez Concession
Surface rights
Other minor
Net cost
Initial
balances
In thousands of S/.
Deductions and/or Final
Additions
adjustments
balances
41,681
32,296
8,752
14,352
9,545
9,512
3,592
12,383
4,795
-----------136,908
------------
2,022
1,748
11,537
1,819
-----------17,126
=======
17,489
1,588
4,691
( 9,512)
(
297)
( 8,180)
( 4,795)
-----------984
=======
41,681
49,785
10,340
21,065
9,545
5,043
15,740
1,819
-----------155,018
------------
41,681
16,981
6,878
12,647
5,454
2,948
497
839
3,475
-----------91,400
-----------45,508
=======
2,206
376
936
682
254
257
389
60
-----------5,160
=======
(
30)
1,994
(
2)
( 3,202)
1,349
(
819)
( 3,475)
-----------( 4,185)
=======
41,681
19,187
7,224
15,577
6,134
2,103
409
60
-----------92,375
-----------62,643
=======
(Continued)
. 28 .
Year 2006:
Initial
balances
Cost:
Block I
Block V
Software
CLHB Concessions
Surface rights
Other minor
Accumulated amortization:
Block I
Block V
Software
CLHB Concessions
Surface rights
Other minor
Net cost
In thousands of S/.
Deductions
and/or
UnconAdditions
adjustments solidated
Final
balances
41,681
25,468
8,442
13,852
9,545
9,512
6,673
1,644
5,742
4,453
-----------127,012
------------
88
162
500
1,948
6,641
711
-----------10,050
=======
6,740
148
( 369)
-----------6,519
=======
41,681
32,296
8,752
14,352
9,545
9,512
( 6,673)
3,592
12,383
4,795
------------ -----------( 6,673) 136,908
======= ------------
40,095
15,502
6,395
11,659
4,771
2,631
1,556
142
685
3,941
-----------87,377
-----------39,635
=======
1,586
1,479
483
988
683
317
355
154
225
-----------6,270
=======
( 691)
-----------( 691)
=======
41,681
16,981
6,878
12,647
5,454
2,948
( 1,556)
497
839
3,475
------------ -----------( 1,556)
91,400
======= -----------45,508
=======
Costs capitalized in the balance of this account are mainly referred to:
(a) The cost incurred in the fitting out of the Arequipa-Matarani highway whose concession
of maintenance, fitting out and exploitation matured in May 2006; however, due to
modifications in the agreement, the term of this concession was extended until May
2007. As of December 31, 2006, the Company had amortized the total of these assets.
(b) The cost incurred in the execution of the remodeling project of Parque Ovalo Gutiérrez
that grants the right of concession on parking lots and other services for a period of 30
years beginning as from September 1997.
(Continued)
. 29 .
Ge
ne
r
a
lSt
oc
k
hol
de
r
s
’Me
e
t
i
ng
,he
l
donOc
t
o
be
r19,2007,a
ppr
ov
e
dt
hes
pi
n-off of the
equity block composed of assets and liabilities related to said concession for the
e
xpl
oi
t
a
t
i
onofa
nunde
r
g
r
oundpa
r
k
i
ngl
otde
nomi
na
t
e
d“
Pl
a
y
aÓv
a
l
oGut
i
e
r
r
e
z
”
,whi
c
h
entered in force on the same date and had as consequence the reduction of capital of
Concar S.A.
(c) Investment expenses in exploration, development and subscription rights obtained
through oil exploitation agreements of blocks I and V and the right obtained for the
concession in the administration of oil distribution terminals owned by PETROPERU
S.A.
(d) Costs related to the acquisition of certain software licenses and Oracle implementation.
(e) Surface rights –Fashion Center S.A., correspond to the value of concession of the right of
use of surfaces granted by Municipality of Miraflores in December 1995, for a term of 60
years. Until May 2007, the surface right was granted in favor of Larcomar S.A.
(15) Bank Overdrafts and Loans
In thousands of S/.
2007
2006
Banco de Crédito del Perú
Interbank
Banco Interamericano de Finanzas S.A.
21,476
--------------21,476
========
2,946
2,081
124
-------------5,151
========
As of December 31, 2007, the Company held loans for working capital for the financing of
works for S/. 21 million.
(Continued)
. 30 .
(16) Other Accounts Payable
In thousands of S/.
2007
2006
Taxes, remunerations, and profit sharing
Advances for work agreements
Related entities (note 6)
Consortiums (note 7)
Various
61,662
34,716
5,666
5,597
39,389
--------------147,030
========
97,755
30,577
5,647
2,053
20,471
-------------156,503
========
Ta
xe
s
,r
e
mune
r
a
t
i
ons
,a
ndpr
o
f
i
ts
ha
r
i
ngc
ompr
i
s
ema
i
nl
yi
nc
omet
a
xa
ndwor
k
e
r
s
’pr
o
f
i
t
sharing pending payment of the period 2007 for S/. 31.2 million and S/. 5.9 million,
r
e
s
pe
c
t
i
v
e
l
y(
S/
.41.
1mi
l
l
i
ona
ndS/
.12.
7mi
l
l
i
on,i
nc
omet
a
xa
ndwor
k
e
r
s
’pr
of
i
ts
ha
r
i
ng
,
respectively, in 2006).
Advances for work agreements correspond mainly to advances for the Proyectos especiales de
Infraestructura de Transporte Nacional works S/. 13.9 million, Inmobiliaria Viena
S/.
5.9 million, Rio Tinto Minera S/. 3.5 million, Consorcio Héroes Navales S/.3.0 million,
and Planta de Indio- Banco Continental S/. 2.2 million, which are going to be applied to
the valuations in 2008 (Sedapal for S/. 22.1 million, Gold Fields La Cima S.A for S/. 4.5
million and Plus Petrol for S/.1.6 million).
Various accounts payable mainly comprise S/.7.3 million of provision of social benefits,
S/.1.9 million corresponding to the provision of bonuses, S/.3.9 of various accounts
payable in works, S/. 2.3 million corresponding to the current portion of the financing with
Hewlett Packard Perú S.R.L., S/. 1.2 million to the current portion of the debt with Cisco
Systems, and S/.0.9 million for stockholde
r
s
’l
oa
ns
.
As of December 31, 2006, various accounts payable comprised the provision for social
benefits and various accounts payable in works for S/. 2.9 million and S/. 4.9 million,
respectively.
(Continued)
. 31 .
(17) Long-term Debt
As of December 31, this item comprises:
In thousands of S/.
Total
2007
2006
Bank debt (a)
Securitization bonds
Financial debt
Debt with third parties
Various provisions
159,893
91,731
----------251,624
26,197
6,700
----------284,521
======
90,534
116,871
----------207,405
28,741
6,700
----------242,846
======
Current
2007
2006
38,424
27,628
----------66,052
----------66,052
======
18,501
27,148
----------45,649
5,596
----------51,245
======
Non-current
2007
2006
121,469
64,103
----------185,572
26,197
6,700
----------218,469
======
72,033
89,723
----------161,756
23,145
6,700
----------191,601
======
(a) Bank debt
Name of the creditor
Banco de Crédito de Bolivia
Banco Continental
Citileasing
Interbank
Interleasing
América Leasing
Banco Interamericano de Finanzas
Scotiabank
Scotiabank
Interbank
Interbank
Other minor
Type of
obligation
Total
Maturity 2007
2006
Loan
Leasing
Leasing
Leasing
Guarantee
Leasing
Promissory note
Leasing
Leasing
Leasing
Leasing
Syndicated loans
Syndicated loans
Loan
Leasing
2010
2010
2014
2014
2009
2010
2009
2010
2010
2009
2010
2013
2013
2008
-
14,483
8,719
27,402
46,506
6,403
22,322
19,182
5,752
2,500
3,380
2,245
999
---------159,893
======
1,153
8,148
12,489
3,999
9,591
7,041
4,527
3,359
22,305
17,223
699
---------90,534
======
In thousands of S/.
Current
2007
2006
4,906
1,572
2,860
2,021
13,751
5,758
2,523
1,152
1,093
2,245
543
---------38,424
======
Non-current
2007
2006
1,153
9,577
2,373
7,147
5,775
24,542
1,376
44,485
11,113
6,403
1,002
8,571
2,997
3,197
6,394
3,739
13,424
3,302
1,100
3,229
3,427
1,049
1,348
2,310
2,287
1,804
20,501
1,393
15,830
456
315
384
---------- ---------- ---------18,501 121,469
72,033
====== ====== ======
(Continued)
. 32 .
(b) Securitization Bonds
I
nOc
t
obe
r2003,b
yme
a
nsofpubl
i
cbi
d,t
het
ot
a
l
i
t
yo
f“
Se
c
ur
i
t
i
z
a
t
i
onBondsf
r
om
Graña y Montero and Subs
i
di
a
r
i
e
s
”
- First Issuance were placed for US$50 million,
with maturity in 2011 and with a return of 7.5% of annual nominal interest rate.
Thea
mor
t
i
z
e
dc
os
tofde
btf
ort
h
e“
Se
c
ur
i
t
i
z
a
t
i
onBondsf
r
o
m Gr
a
ñayMont
e
r
oa
nd
Subs
i
di
a
r
i
e
s
”i
t
e
mha
sbe
e
nde
t
ermined as follows:
In thousands of
2007
2006
US$
Original capital
Amortized capital
Total debt
Plus:
Accrued interest
Transaction costs
)
Less:
Prepaid costs
Amortization of transaction
costs
Amortized interest
Total amortized cost
Less current portion
Non-current amortized cost
S/.
US$
S/.
50,000)
( 19,940)
------------30,060)
-------------
149,847)
( 59,757)
------------(90,090)
-------------
50,000)
( 13,709)
------------36,291((
-------------
159,850)
( 43,828)
------------116,022
-------------
13,518)
(6,681)
------------(20,199)
-------------
40,513)
(20,023)
------------60,536)
-------------
11,009)
5,363)
------------16,372)
-------------
35,196)
17,146
------------52,342)
-------------
( 2,572)
( 4,193)
( 12,874)
------------( 19,639)
------------30,620)
( 9,222)
------------21,398)
=======
(
7,708)
( 12,566)
( 38,621)
------------( 58,895)
------------91,731)
( 27,628)
------------64,103)
=======
(
2,582)
( 3,264)
( 10,261)
------------( 16,107)
------------36,556)
( 8,450)
------------28,106)
=======
(
8,255)
( 10,435)
( 32,803)
------------( 51,493)
------------116,871)
( 27,148)
------------89,723
=======
Bondhol
de
r
s
’Me
e
t
i
ng
,da
t
e
dOc
t
ob
e
r2007,a
g
r
e
e
dont
hes
pi
no
f
foft
hee
q
ui
t
yb
l
oc
k
composed of the concession of Ovalo Gutierrez from originator Concar S.A. This spin
off did not affect future flows of originator Concar S.A. since the aforementioned
concession did not take part of the trust fund.
(Continued)
. 33 .
Bondhol
de
r
s
’Me
e
t
i
n
g
,da
t
e
dNo
v
e
mbe
r10
,2006,a
ppr
ov
e
ds
omemodi
f
i
c
a
t
i
onst
ot
he
initial conditions of the bond issuance process, basically, to generate a reduction in
the financial cost and maintain bonds under an AAA rating. Such changes were also
ratified by Inter-American Development Bank (IDB) and Nederlanse FinancieringMaatschappij Voor Ontwikkelingslanden N.V. (FMO), guarantors of the
securitization process. The main changes are detailed as follows:
 Reduction of the partial guarantee of IDB and FMO to 37.5% of the pending
balance of bonds.
 Release of the reserve account; said funds then have free withdrawal option for
the Group (note 4).
 Eliminate the provision mechanism that generated an obligatory prepayment of
bonds as a result of the increases in activity levels.
 Establishment of a prepayment option as from September 2009 and September
2010, with a penalty of 3% and 1.5%, respectively.
 Adaptation of the policies of dividends from the originators.
 Approval of the treasury shares policy with a maximum of 4% for 2006 and 2%
thereon.
The Company and the subsidiaries GMI S.A. Ingenieros Consultores, GMD S.A., Concar
S.A., Graña y Montero Petrolera S.A., and GyM S.A. shall comply with the
maintenance of certain financial indicators, in addition to certain clauses related to
events of economic and contractual nature, detailed in the corresponding Certificate
of Incorporation of Securitization Bonds. The indicators mentioned as of December
31, are detailed as follows:
Ratio
Consolidated debt to equity
Consolidated debt coverage
Consolidated current liquidity
GMP S.A. debt to equity
GMP S.A. debt coverage
GMP S.A. current liquidity
Required ratio
Maximum
Minimum
Minimum
Maximum
Minimum
Minimum
2.65
1.20
0.50
1.40
1.30
1.00
I
nMa
na
g
e
me
nt
’
sopi
n
i
on,t
he
s
eobl
i
g
a
t
i
onsdonotl
i
mi
tno
ra
f
f
e
c
tt
heCompa
ny
’
s
operations and are being satisfactorily complied.
(Continued)
. 34 .
The payment schedule of Securitization Bonds is the following:
Years
2008
2009
2010
2011
In thousands of
US$
S/.
6,706
7,219
7,771
8,364
--------------30,060
========
20,098
21,635
23,290
25,067
-------------90,090
========
(18) Capital Stock
As of December 31, 2007, authorized, subscribed and paid-in capital, according to the
Co
mpa
ny
’
sby
l
a
wsa
nda
me
ndme
nt
si
sr
e
p
r
e
s
e
nt
e
dby428,
223
,
83
3c
ommons
ha
r
e
swi
t
ha
face value of S/. 0.70 each (336,838,481 common shares as of December 31, 2006 with a
face value of S/. 0.70 each).
As of December 31, 2007, quote per common share has been S/.6 and its trading frequency
has been 97.60% on average.
General Stockhol
de
r
s
’Me
e
t
i
ng
,he
l
donMa
r
c
h31,2007,a
ppr
o
v
e
dt
hec
a
pi
t
a
l
i
z
a
t
i
o
no
f
results corresponding to the profit of year 2006 for S/. 63,970,000 after applying the
amount of S/. 10,141,000 to the legal reserve account, establishing the unrestricted reserve
account for S/.7,000,000 and allocate dividends for S/. 20,277,000.
As of December 31, 2007, the shareholding structure of Company is as follows:
Percentage of individual
shareholding
Up to 1.00
From 1.01 to 5.00
From 5.01 to 10.00
Over 10
Number of
stockholders
958
7
3
3
---------971
=====
Total
percentage of
participation
13.21
20.01
19.48
47.30
----------100.00
======
(Continued)
. 35 .
Treasury Shares
AtGe
ne
r
a
lSt
o
c
k
hol
d
e
r
s
’Me
e
t
i
n
g
,da
t
e
dMa
r
c
h31,200
7,a
ndba
s
e
dona
r
t
i
c
l
e104o
f
Companies Act, the Company established the policy to hold in portfolio up to 2% of own
shares to be used in the total or partial payment of Annual Allowances of the main
executives of Grupo Graña y Montero. As of the closing of 2007, the Company has
476,507 portfolio shares acquired in an amount of S/. 2,946,000. Such amount exceeds the
corresponding face value in S/. 2,612,000 that was applied to Other Reserves account.
(19) Legal Reserve and Other Reserves
Pursuant to Companies Act, the Company is required to allocate 10% of its net annual income
to a legal reserve. This allocation is required until the reserve equals 20% of paid-in
capital. The legal reserve must be used to compensate losses in the absence of earnings or
non-restricted reserves, and must be restored with future earnings. This reserve may also
be capitalized, but it shall be subsequently restored.
During year ended December 31, 2007, the amount S/. 10,141,000 was applied to the Legal
Reserve account (S/. 3,272,000 in 2006).
Other reserves comprise unrestricted reserves established in 2007 (note 18).
(20) Wor
k
e
r
s
’Pr
of
i
tSha
r
i
n
g
Ac
c
or
d
i
ngt
oc
ur
r
e
n
tl
e
g
i
s
l
a
t
i
oni
nPe
r
u,wor
k
e
r
s
’pr
of
i
ts
h
a
r
i
ngi
nt
heCompa
ny
’
spr
of
i
t
sa
nd
its subsidiaries fluctuates between 5% and 10% of the estimated net income of the separate
financial statements and the participation in its management should be carried out through
committees destined to improve production and productivity. Additionally, the current
legislation in Peru establishes that in the case of capital increase by public subscription of
shares, the Company and its local subsidiaries are obliged to offer their workers the first
option in the subscription of shares in no less than 10% of capital increase.
In 2007, the Company and its subsidiaries recorded S/. 5,885,000 (S/. 12,703,000 in 2006) for
profit sharing charged to results, amount that is deductible for purposes of calculating
income tax.
(21) Tax Matters
a)
According to current legislation, the consolidated determination of taxes is not allowed,
Graña y Montero S.A.A. and its Subsidiaries have made this determination individually.
(Continued)
. 36 .
b) Management considers that it has determined tax loss applying the income tax regime
according to current tax legislation, which requires adding and deducting to the result
shown in the financial statements, the entries that said legislation recognizes as taxable
and non-taxable, respectively.
For years ended December 31, 2007 and 2006, the income tax rate is 30%.
c) Thee
xpe
ns
eofwo
r
k
e
r
s
’pr
of
i
ts
ha
r
i
nga
n
di
nc
omet
a
xis composed as follows:
In thousands of S/.
2007
2006
Wor
k
e
r
s
’pr
of
i
ts
ha
r
i
ng
:
Current (note 20)
Deferred
Income tax:
Current
Deferred
( 5,885)
( 3,836)
--------------( 9,721)
========
12,703
( 3,788)
-------------8,915)
========
( 34,966)
( 24,193)
--------------( 59,159)
========
74,689)
( 20,350)
-------------54,339)
========
d) The determination of income tax of Graña y Montero S.A.A., GyM S.A. and GMD S.A.
considers the attributable result of each joint venture on the percentage of participation
in each of them.
On the other hand, the consortiums that keep independent records are considered
taxpayers of the Income Tax Regime; therefore, they should be fully subject to the
income tax resulting from commercial operations.
e)
Certain subsidiaries of the Company have determined the deferred tax on temporary
differences originated by entries that have a different treatment for tax and accounting
purposes. As of December 31, 2007, assets and liabilities for deferred income tax shown
in the balance sheet amounts to S/. 2.4 million and S/.22.6 million, respectively
(S/. 12.7 million of assets and S/.12.4 million of deferred liabilities as of December 31,
2006), which is mainly generated due to the deferral of work profits, different
depreciation rates, finance lease operations and provisions for tax contingencies.
(Continued)
. 37 .
f)
The Company and its subsidiaries have current agreements for the fractionating payment
of the tax debt amounting to S/. 7.2 million (S/.11 million as of December 31, 2006),
which are included in the Debt with Third Parties item. The requested fractionating
payment of tax debts will mature between years 2011 and 2012.
g) Tax Administration is empowered to review and, if it were the case, correct the income
tax and tax loss carry forward determined by the Company in the last four years,
beginning on the tax return filing date (years subject to review).
TheCompa
ny
’
st
a
xr
e
t
ur
nsf
or2003 through 2007 are subject to review by tax authorities.
According to current legislation, the Company is jointly responsible with companies merged
in previous years and whose periods are open to review, before any contingency that may
be originated by transactions made prior to the dates of the respective mergers.
Since there could be differences in the interpretation by the Tax Authorities concerning the
standards applicable to the Company, it is not possible to foreseen, to date, if there would
be additional tax liabilities as a result of eventual reviews. Any additional taxes, delays or
interest, if produced, are recognized in the results of the year in which the difference of
criteria with Tax Administration is resolved. Management and its legal advisors estimate
that there will not be significant liabilities as a result of these possible reviews.
(22) Contingencies, Guarantees, and Commitments
Contingencies
As a result of reviewing processes corresponding to periods 1999 and 2001 of the subsidiary
GyM S.A., the Peruvian Tax Authorities (SUNAT) has issued resolution determining
objections in tax determination and corresponding fines, amounting to approximately
S/. 29 million.
In this regard, the Company has made the corresponding claims, which are pending
resolution. Management and their legal advisors estimate that those claims will be
resolved in favor of the subsidiary. However, the Company, in order to cover any tax
contingency, has recorded a provision of S/. 6.7 million, which is included in the various
provision accounts. Management estimates that part of the adjustments made in the
determination of tax results of years 1999 and 2001 have a temporary effect, and will be
recovered by the Company, provided that the aforementioned temporary effects be
included in the determination of the taxable net income of non-prescribed fiscal periods at
the date when the case is resolved.
(Continued)
. 38 .
As of December 31, 2006, other subsidiaries of the Company have received objecting
resolutions from the tax authorities for approximately S/.15.2 million, substantially
referred to the income tax and sales tax, which are under claim process. Also, there are
claims from third parties for S/. 4.2 million.
I
nt
heopi
ni
ono
ft
h
ec
ompa
ni
e
s
’Ma
na
g
e
me
nta
ndtheir legal advisors, the aforementioned
claims will be declared well-founded and therefore, no liabilities will arise additionally to
the ones timely paid.
Guarantees
The Company holds a partial guarantee agreement with IDB and FMO that corresponds to
37.5% of the pending balance of the bonds.
In this respect, the Company has participated in the establishment of a trust fund managed in
order to support the partial guarantee granted by the two financial entities through the
delivery of the following assets to Scotiabank (trustee), as guarantee:
 Shares representatives of capital stock and the right of dividends of Sierra Morena
S.A. (4,973,115 shares), Promoción Inmobiliaria del Sur S.A. (2,241,266 shares),
Inmobiliaria Almonte S.A.C. (3,299,740 shares) and Inmobiliaria San Silvestre S.A.
(233,222 shares) amounting to US$ 18,010,000.
 Aliquot equivalent to 30% of the ownership of the property located at Av. Víctor
Andrés Belaúnde (Unidad T2, T8, T9) amounting to US$ 2,270,000.
Commitments
Letters of guarantee for approximately US$ 96.8 million and S/.60.5 million (US$ 77.3
million and S/. 72.5 million in 2006), stand by of US$ 29.8 million (US$ 10.9 million in
2006) and guarantee policies for US$ 7.3 million and S/. 9.8 million (US$ 7.7 million and
S/. 12.5 million in 2006) that guarantee agreements signed with third parties and bank
loans with maturities until years 2008 and 2009.
Collaterals
As of December 31, 2007, The Company holds US$ 18 million in collaterals granted in favor
of local and foreign financial institutions that guarantee credit lines and other operations
granted by said institutions.
(Continued)
. 39 .
(23) Valuation and Cost of Works
As of December 31, income and costs distributed per operating division of the subsidiary
GyM S.A. are the following:
2007
Income
Civil works division
Electromechanical division
Building division
Real property division
Various works
565,906
253,291
119,445
12,634
67,924
-------------1,019,200
========
In thousands of S/.
2006
Cost
Income
513,076
200,602
106,460
9,120
36,291
-------------865,549
========
360,158
395,575
70,676
8,382
-------------834,791
========
Cost
303,091
295,825
59,758
9,605
-------------668,279
========
(24) Operating, Administrative, and General Expenses
The operating, administrative, and general expenses for the years ended December 31, include
the following items:
In thousands of S/.
2007
2006
Personnel charges
Services rendered by third parties
Various charges for operations
Taxes
Provisions for the period
Depreciation and amortization
42,767
17,755
6,502
708
2,563
8,719
--------------79,014
========
36,413
6,981
3,989
1,009
2,097
9,242
-------------59,731
========
(Continued)
. 40 .
(25) Financial Expenses
Financial income and expenses for the years ended December 31 comprise:
In thousands of S/.
2007
2006
Financial income Interest on allocation of debt and loans
granted
Other financial income
Financial expenses Interest on bank obligations
Interest and expenses on securitization bonds (note 17)
Interest on lease agreements
Expenses for discounted documents
Interest on tax fractionating payment
Other financial expenses
Financial expenses, net
954)
8,420)
--------------9,374)
---------------
1,867)
3,216)
-------------5,083)
--------------
( 3,717)
( 12,334)
( 2,961)
(
-)
(
648)
( 12,458)
--------------( 32,118)
--------------( 22,744)
========
( 8,356)
( 14,808)
( 2,353)
(
731)
(
958)
( 3,619)
-------------( 30,825)
-------------( 25,742)
========
(26) Basic Earning per Share
The earnings per share have been determined as follows:
In thousands of S/.
2007
2006
Attributable profit (in thousands of nuevos soles)
Weighted average of shares outstanding
of S/.0.7 each
Earning per basic share (in S/.)
129,900
=========
104,918
=========
428,223,833
=========
0.303
=========
336,838,481
=========
0.311
=========
(Continued)
. 41 .
Earning per basic share is calculated by dividing the net profit corresponding to common
stockholders by the weighted average of common shares outstanding as of the financial
statements date.
(27) Segment Reporting
Segment Reporting is only required for companies whose securities are publicly traded and
for companies that are in the process to issue securities in the securities market. In these
financial statements, the basic format of the report comprises business segments, while the
secondary format of the report comprises geographical segments.
Basic reporting schedule –business segments:
For the year ended December 31, 2007:
Construction
Sales
Gross profit
Operating profit
Financial income (expenses), net
Other income and expenses, net
Pre-tax profit
Taxes
Net profit
Assets
Liabilities
Equity
1,019,200
153,651
108,476
(
3,545)
2,224
107,155
( 38,040)
69,115
540,084
341,777
198,307
Oil
Systems
183,930)
80,710
72,808)
(
739)
326
72,395
( 23,344)
49,051)
96,015
13,780
3,260
( 3,439)
(
730)
(
910)
219
(
690)
221,829
103,430
118,399
62,947
50,759
12,188
In thousands of S/.
Engineering
Concessions
67,968
19,272)
10,124
(
836)
(
654)
8,634
( 3,016)
5,618
23,173)
12,931)
10,242)
45,284
12,497)
6,518
(
906)
401
6,013
( 2,266)
3,747
42,327
27,394
14,943
Other
Total
27,577
19,117
18,827 2
( 13,279)
8,363
13,911
( 2,433)
11,478
1,439,974
299,027
220,013
( 22,744)
9,930
207,198
( 68,880)
138,319
257,655
130,513
127,142
1,148,015
666,804
481,211
Other
Total
35,875
11,417)
8,314
( 1,043)
460
7,551)
( 2,665)
4,886)
16,880)
10,923)
12,816)
( 7,451)
1,598
3,902
( 1,241)
( 3,540)
1,188,813)
272,755)
213,024)
( 16,332)
( 19,258)
174,373)
( 63,254)
104,918)
28,325)
20,849)
7,476)
220,820)
145,818
75,002)
928,458)
562,456)
366,002)
Construction
Sales
Gross profit
Operating profit
Financial income (expenses), net
Pre-tax profit
Taxes
Net profit
Assets
Liabilities
Equity
839,374
162,536
122,819
( 2,764)
( 8,859)
111,196
( 38,097)
73,099
465,172
282,159
183,013
Oil
Systems
159,930)
65348)
58,007)
(
2336)
( 7,755)
47,916)
( 19,008)
28,908
106,090)
13,579
6,682
( 2,058)
( 2,956)
1,668
( 1,028)
640)
140,861)
58,032)
82,829)
58,787)
46,586)
12,201
In thousands of S/.
Engineering
Concessions
30,664
8,952
4,566
(
680)
( 1,746)
2,140
( 1,215)
925
14,493
9,012
5,481
(Continued)
. 42 .
Secondary reporting schedule –geographical segments:
Peru
Sales
Gross profit
Operating profit
Profit before profit sharing and income tax
Taxes
Net profit
Assets
Liabilities
Equity
1,420,680
296,152
217,138)
( 22,744)
9,930
204,324)
( 68,031)
136,293
1,144,792
In thousands of S/.
Other
Total
19,294)
2,875)
2,875)
2,875)
(
849)
2,026)
3,223
665,606
479,186
1,198)
2,025)
1,439,974
299,027
220,013)
(
22,744)
9,930
207,199
(
68,880)
138,319
1,148,015
666,804
481,211
Peru
Sales
Gross profit
Operating profit
Profit before profit sharing and income tax
Taxes
Net profit
Assets
Liabilities
Equity
1,160,258)
270,898)
211,167)
( 16,332)
( 19,258)
175,577)
( 62,790)
103,525)
919,852)
555,243)
364,609)
In thousands of S/.
Other
Total
(
28,555)
1,857)
1,857)
1,857)
464)
1,393)
1,188,813)
272,755)
213,024)
( 16,332)
( 19,258)
174,373)
( 63,254)
104,918)
8,606)
7,213)
1,393)
928,458)
562,456
366,002
(Continued)

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated

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