Annual Report 2023

2. Accounting policies

The recognition and measurement principles applied in these individual financial statements are the same as those applied in the consolidated financial statements (see accounting policies related to financial statements captions included in the relevant “Notes to the consolidated financial statements” and note 2 of the consolidated financial statements).

The accounting policies are applied across the preparation of the Financial Statements and were consistently applied in comparative periods, except where otherwise stated.

2.1. Basis for preparation

All amounts are shown in thousand euros (€ thousand) unless otherwise stated.

The Individual Financial Statements of JMH were prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU), as at 31 December 2023.

2.2. Investments and loans to subsidiaries

Subsidiaries are all entities over which JMH has control. JMH controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and when it has the ability to affect those returns through its power over the entity.

Investments and loans to subsidiaries are stated at cost. When so justified, adjustments for impairment losses are set up, namely when the financial shareholdings register significant deterioration in their financial position and the impairment tests performed by JMH conclude that it is necessary to recognise impairment losses in respect of investments and other net assets (note 2.3).

2.3. Impairment

2.3.1. Impairment of non-financial assets

Except for “Investment property” (note 12) and “Deferred tax assets” (note 6.3), all other JMH assets, essentially Investments in subsidiaries, are analysed at each balance sheet date in order to assess for indicators of possible impairment losses. If such indicators exist, the asset’s recoverable amount is estimated.

In the impairment tests for Investments in subsidiaries, the inputs of these valuations for calculation of the value in use are determined by past performance and the expectation of market development for each business area. Based on future cash flow projections, for a five-year period, and on medium and long-term plans approved by the Board of Directors.

The recoverable amount of assets with indicators of potential impairment loss is determined annually. Whenever the carrying value of an asset exceeds its recoverable amount, its value is reduced to the recoverable amount and the impairment is recognised in the income statement of the year.

Determining the recoverable amount of assets

The recoverable amount of non-financial assets corresponds to the higher amount of fair value less costs of disposal and value in use.

Value in use of an asset is calculated as the present value of estimated future cash flows. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and the specific risks of the asset in question.

The recoverable amount of assets that do not generate independent cash flows is determined together with the cash-generating unit to which these assets belong.

Reversal of impairment losses

Impairment losses are reversed whenever there are changes in the estimates used to determine the respective recoverable amount. Impairment losses are reversed to the extent of the amount, net of amortisation or depreciation, which would have been determined for the asset if no impairment loss was recognised.

2.3.2. Impairment of financial assets

Loans to subsidiaries

The impairment test for Loans to subsidiaries is held simultaneously with the impairment test to Investments in subsidiaries. The investment considered for comparison with the calculated value in use considers the historical cost of the subsidiary and the loans. An impairment loss on Loans to subsidiaries will only be recognised after the total investment in the subsidiary is fully covered by an impairment loss.

2.4. Critical accounting estimates and judgments made in preparation of Financial Statements

Impairment in investments and loans to subsidiaries

As a rule, according to IFRS an investment is recorded as impaired when the carrying amount of the investment exceeds the present value of future cash flows. Calculating the present value of estimated cash flows and the decision to consider an asset as impaired involves judgment and substantially relies on Management analysis of the future development of its subsidiaries. When measuring impairment, market prices are used if they are available, or other valuation parameters are used, based on the information available from the subsidiaries.

JMH considers the capacity and intention to retain the investment for a reasonable period of time that is sufficient to predict recovery of the fair value up to (or above) the carrying amount, including an analysis of factors such as the expected results of the subsidiary, the economic environment, and the status of the sector.

Deferred taxes

Recognising deferred taxes assumes the existence of results and future taxable income. Deferred tax assets and liabilities were determined based on tax legislation currently effective or on legislation already published for future application. Changes in the tax legislation may influence the value of deferred taxes.

If the rates used to recognise deferred taxes increase by 1 p.p., the impact in JMH accounts would be the following:

 

 

Impact on JMH accounts

 

 

Income statement

 

Other comprehensive income

Rate increase of 1 p.p.

 

70

 

60

A positive amount means a gain in JMH accounts.

Pensions and other long-term benefits granted to employees

Considering the information available from Bloomberg and some necessary estimation to derive the yield curve, JMH defined the following ranges for determining the appropriate discount rate:

  • Narrow range [3.60%-4.00%]
  • Extended range [3.40%-4.20%]

Based on these results, JMH, following the recommendation of external actuaries, has decided to increase its discount rate from 3.30% to 3.80%.

The table below shows the impacts on the obligations with defined benefit plans of JMH, resulting from changes in the following assumptions:

 

 

Impact on defined benefit liabilities

 

 

Assumption used

 

Change in assumption

 

Increase in assumption

 

Decrease in assumption

Discount rate

 

3.80%

 

0.50%

 

(327)

 

344

Salary growth rate

 

 

 

 

 

 

 

 

short term

 

4.00%

 

0.50%

 

43

 

(41)

long term

 

3.00%

 

 

 

 

 

 

Pension growth rate

 

4.00%

 

0.50%

 

301

 

(286)

Life expectancy

 

TV 88/90

 

1 year

 

708

 

(662)

A positive amount means an increase in liabilities. A negative amount means a decrease in liabilities.

Provisions

JMH exercises considerable judgment in measuring and recognising provisions and its exposure to contingent liabilities related to legal proceedings. This judgment is necessary to determine the probability that a lawsuit may be successful or to record a liability. Provisions are recognised when JMH expects that proceedings under way will result in cash outflows, the loss is considered probable and may be reasonably estimated. Due to the uncertainties inherent in the evaluation process, real losses may be different from those originally estimated. These estimates are subject to changes as new information becomes available, mainly with the support of internal specialists, if available, or through the support of external consultants, such as actuaries or legal advisers. Changes to estimates of potential losses on proceedings under way may affect future results.

2.5. Fair value hierarchy

The following table shows JMH’s financial assets and liabilities that are measured at fair value as at 31 December 2023 and 2022, according to the following fair value hierarchy levels:

  • Level 1: the fair value of financial instruments is based on quoted prices obtained in active and liquid markets at balance sheet date;
  • Level 2: the fair value is determined using valuation models, involving other comparable quoted prices obtained in active markets or adjusted quotes. Thus, main inputs used on these valuation models are based on observable market data;
  • Level 3: the fair value is determined by using valuation models which main inputs are not based on observable market data. This level includes Investment property, which are evaluated by external independent experts, using in their valuations inputs that are not directly observable in the market.

2023

 

Total

 

Level 1

 

Level 2

 

Level 3

Assets measured at fair value

 

 

 

 

 

 

 

 

Investment property

 

2,470

 

 

 

2,470

Total assets

 

2,470

 

 

 

2,470

Liabilities measured at fair value

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

2022

 

Total

 

Level 1

 

Level 2

 

Level 3

Assets measured at fair value

 

 

 

 

 

 

 

 

Investment property

 

2,470

 

 

 

2,470

Total assets

 

2,470

 

 

 

2,470

Liabilities measured at fair value

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

2.6. Financial instruments by category

2023

 

Financial
assets at
fair-value
through
results

 

Financial assets or liabilities at amortized cost

 

Other
financial
assets

 

Total financial
assets and
liabilities

 

Non-financial
assets and
liabilities

 

Total assets
and liabilities

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

228,638

 

 

228,638

 

 

228,638

Loans to subsidiaries

 

 

2,270,860

 

 

2,270,860

 

 

2,270,860

Other financial investments

 

 

 

148

 

148

 

 

148

Debtors, accruals and deferrals

 

267

 

43,969

 

 

44,236

 

3,265

 

47,501

Other non-financial assets

 

 

 

 

 

690,907

 

690,907

Total assets

 

267

 

2,543,467

 

148

 

2,543,882

 

694,172

 

3,238,054

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Lease liabilities

 

 

2,417

 

 

2,417

 

 

2,417

Creditors, accruals and deferrals

 

 

41,821

 

 

41,821

 

21,016

 

62,837

Other non-financial liabilities

 

 

 

 

 

16,644

 

16,644

Total liabilities

 

 

44,238

 

 

44,238

 

37,660

 

81,898

2022

 

Financial
assets at
fair-value
through
results

 

Financial assets or liabilities at amortized cost

 

Other
financial
assets

 

Total financial
assets and
liabilities

 

Non-financial
assets and
liabilities

 

Total assets
and liabilities

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

425,949

 

 

425,949

 

 

425,949

Loans to subsidiaries

 

 

1,862,780

 

 

1,862,780

 

 

1,862,780

Other financial investments

 

 

 

178

 

178

 

 

178

Debtors, accruals and deferrals

 

248

 

22,190

 

 

22,438

 

2,492

 

24,930

Other non-financial assets

 

 

 

 

 

683,150

 

683,150

Total assets

 

248

 

2,310,919

 

178

 

2,311,345

 

685,642

 

2,996,987

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Lease liabilities

 

 

2,237

 

 

2,237

 

 

2,237

Creditors, accruals and deferrals

 

 

15,981

 

 

15,981

 

15,165

 

31,146

Other non-financial liabilities

 

 

 

 

 

19,759

 

19,759

Total liabilities

 

 

18,218

 

 

18,218

 

34,924

 

53,142

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