ATENTO S.A., 20-F filed on 4/27/2018
Annual and Transition Report (foreign private issuer)
v3.8.0.1
Document and Entity Information - shares
12 Months Ended
Dec. 31, 2017
Jul. 28, 2016
Document Entity Information [Abstract]    
Document Type 20-F  
Document Period End Date Dec. 31, 2017  
Amendment Flag false  
Document Fiscal Period Focus FY  
Document Fiscal Year Focus 2017  
Current Fiscal Year End Date --12-31  
Entity Central Index Key 0001606457  
Entity Current Reporting Status Yes  
Entity Filer Category Accelerated Filer  
Trading symbol ATTO  
Entity Registrant Name Atento S.A.  
Entity Voluntary Filers No  
Entity Well Known Seasoned Issuer Yes  
Entity Common Stock Shares Outstanding   73,909,056
v3.8.0.1
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - USD ($)
Dec. 31, 2017
Dec. 31, 2016
Assets [abstract]    
Non-current assets $ 764,127,000 $ 802,944,000
Intangible assets 230,104,000 226,553,000
Goodwill 153,144,000 146,015,000
Property, plant and equipment 152,195,000 165,270,000
Non-current financial assets 90,076,000 138,950,000
Trade and other receivables 21,677,000 20,911,000
Other taxes receivable 7,282,000 7,815,000
Other non-current financial assets 60,222,000 40,565,000
Derivative financial instruments 8,177,000 77,474,000
Deferred tax assets 131,326,000 118,341,000
Current assets 566,178,000 574,674,000
Trade and other receivables 410,534,000 373,047,000
Trade and other receivables 388,565,000 350,902,000
Current income tax receivable 21,969,000 22,145,000
Other taxes receivable 12,072,000 6,452,000
Other current financial assets 1,810,000 1,140,000
Cash and cash equivalents 141,762,000 194,035,000
Total Assets 1,330,305,000 1,377,618,000
Equity and liabilities [abstract]    
Total Equity 377,839,000 430,203,000
Non-controlling interests 9,476,000 (718,000)
Owners of the parent company 368,363,000 430,921,000
Share capital 48,000 48,000
Reserve for acquisition of non-controlling interest (23,531,000) (1,057,000)
Share premium 639,435,000 639,435,000
Retained losses (94,535,000) (53,598,000)
Translation differences (170,063,000) (193,529,000)
Cash flow/net investment hedge 9,594,000 35,521,000
Stock-based compensation 7,415,000 4,101,000
Non-current liabilities 582,870,000 598,808,000
Deferred tax liabilities 43,942,000 45,597,000
Debt with third parties 439,731,000 480,359,000
Derivative financial instruments 5,140,000 184,000
Provisions and contingencies 61,186,000 69,895,000
Non-trade payables 8,094,000 618,000
Option for the acquisition of non-controlling interest 23,752,000 1,057,000
Other taxes payable 1,025,000 1,098,000
Current liabilities 369,596,000 348,607,000
Debt with third parties 46,560,000 54,576,000
Derivative financial instruments 1,212,000 0
Trade and other payables 302,756,000 279,313,000
Trade payables 94,078,000 75,268,000
Income tax payables 8,058,000 4,030,000
Other taxes payables 86,166,000 68,800,000
Other non-trade payables 114,454,000 131,215,000
Current provisions 19,068,000 14,718,000
Total Equity and liabilities $ 1,330,305,000 $ 1,377,618,000
v3.8.0.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Profit or loss [abstract]      
Revenue $ 1,921,311 $ 1,757,498 $ 1,949,883
Other operating income [1] 16,437 5,880  
Other gains 372 41,748  
Operating expenses:      
Supplies 74,899 65,598  
Employee benefits expenses 1,429,076 1,309,901  
Depreciation 49,226 46,448 51,430
Amortisation 55,195 50,916 50,077
Changes in trade provisions (627) (1,902)  
Other operating expenses 236,648 214,015  
Impairment charges   0  
OPERATING PROFIT 92,449 116,346  
Finance income 7,858 7,188 15,459
Finance costs 78,145 [1] 59,151 [1] 75,682
Change in fair value of financial instruments 230 675 17,535
Net foreign exchange loss (23,427) [1] (56,494) [1] (3,979)
(LOSS)/PROFIT BEFORE TAX (1,035) 8,564  
Income tax expense 12,533 5,207  
(LOSS)/PROFIT FROM CONTINUING OPERATIONS [2] (13,568) 3,357 52,230 [3]
LOSS FROM DISCONTINUED OPERATIONS (**) [2] 0 [4] (3,206) [4] (3,082) [3]
(LOSS)/PROFIT FOR THE YEAR (13,568) 151 49,148
(LOSS)/PROFIT ATTRIBUTABLE TO:      
OWNERS OF THE PARENT (16,790) 65  
NON-CONTROLLING INTEREST 3,222 86  
(LOSS)/PROFIT FOR THE YEAR (13,568) 151 $ 49,148
Net finance expense $ (93,484) $ (107,782)  
EARNINGS PER SHARE:      
Basic (loss)/earnings per share from continuing operations (in U.S. dollars) $ (0.18) $ 0.05 $ 0.71 [3]
Basic loss per share from discontinued operations (in U.S. dollars) 0 (0.04) (0.04) [3]
Diluted (loss)/earnings per share from continuing operations (in U.S. dollars) (0.18) 0.05 0.7 [3]
Diluted loss per share from discontinued operations (in U.S. dollars) $ 0 $ (0.04) $ (0.04) [3]
[1]
(1) The year ended December 31, 2016 contains the impacts of the CVI termination. The reversal of the principal amount of 41,749 thousand U.S. dollars was recognized in "Other gains and own work capitalized", the interest reversal of 19,936 thousand U.S. dollars was recognized in "Finance costs" and the loss of 35,373 thousand U.S. dollars on the conversion of Argentine pesos to U.S. dollars was recognized in "Net foreign exchange loss".
[2]

(1) A s of December 31, 2017 , potential ordinary shares of 1,090,060 , relating to the stock option plan were excluded from the calculation of diluted lo ss per share as the loss in 2017 is anti-dilutive .

[3]

(*) E xclude discontinued operations – Mo roc c o.

[4]
(**) Discontinued operations did not generate any income tax expense.
v3.8.0.1
CONSOLIDATED INCOME STATEMENTS - EXCLUDING DISCONTINUED OPERATIONS
$ in Thousands
12 Months Ended
Dec. 31, 2015
USD ($)
$ / shares
Disclosure Of Operating Segments [Line Items]  
Revenue $ 1,949,883
Operating expenses:  
Depreciation 51,430
Amortisation 50,077
Finance income 15,459
Finance costs 75,682
Change in fair value of financial instruments 17,535
Net foreign exchange loss (3,979)
(LOSS)/PROFIT FROM CONTINUING OPERATIONS 52,230 [1],[2]
LOSS FROM DISCONTINUED OPERATIONS (**) (3,082) [1],[2]
(LOSS)/PROFIT FOR THE YEAR $ 49,148
EARNINGS PER SHARE:  
Basic (loss)/earnings per share from continuing operations (in U.S. dollars) | $ / shares $ 0.71 [1]
Basic loss per share from discontinued operations (in U.S. dollars) | $ / shares (0.04) [1]
Diluted (loss)/earnings per share from continuing operations (in U.S. dollars) | $ / shares 0.7 [1]
Diluted loss per share from discontinued operations (in U.S. dollars) | $ / shares $ (0.04) [1]
Atento Morocco [member]  
Disclosure Of Operating Segments [Line Items]  
Revenue $ 1,949,883 [3]
Other operating income 4,325 [3],[4]
Other gains 0 [3]
Operating expenses:  
Supplies 77,604 [3]
Employee benefits expenses 1,410,526 [3]
Depreciation 50,077 [3]
Amortisation 51,430 [3]
Changes in trade provisions (1,319) [3]
Other operating expenses 241,478 [3]
Impairment charges 0
OPERATING PROFIT 121,774 [3]
Finance income 15,459 [3]
Finance costs 75,469 [3],[4]
Change in fair value of financial instruments 17,535 [3]
Net foreign exchange loss (3,919) [3],[4]
(LOSS)/PROFIT BEFORE TAX 75,380 [3]
Income tax expense 23,150 [3]
(LOSS)/PROFIT FROM CONTINUING OPERATIONS 52,230 [3]
LOSS FROM DISCONTINUED OPERATIONS (**) (3,082) [3],[5]
(LOSS)/PROFIT FOR THE YEAR 49,148 [3]
(LOSS)/PROFIT ATTRIBUTABLE TO:  
OWNERS OF THE PARENT 49,148 [3]
NON-CONTROLLING INTEREST 0 [3]
Net finance expense $ (46,394) [3]
EARNINGS PER SHARE:  
Basic (loss)/earnings per share from continuing operations (in U.S. dollars) | $ / shares $ 0.71 [3]
Basic loss per share from discontinued operations (in U.S. dollars) | $ / shares (0.04) [3]
Diluted (loss)/earnings per share from continuing operations (in U.S. dollars) | $ / shares 0.7 [3]
Diluted loss per share from discontinued operations (in U.S. dollars) | $ / shares $ (0.04) [3]
[1]

(*) E xclude discontinued operations – Mo roc c o.

[2]

(1) A s of December 31, 2017 , potential ordinary shares of 1,090,060 , relating to the stock option plan were excluded from the calculation of diluted lo ss per share as the loss in 2017 is anti-dilutive .

[3]
(*) Exclude discontinued operations - Morocco.
[4]
(1) The year ended December 31, 2016 contains the impacts of the CVI termination. The reversal of the principal amount of 41,749 thousand U.S. dollars was recognized in "Other gains and own work capitalized", the interest reversal of 19,936 thousand U.S. dollars was recognized in "Finance costs" and the loss of 35,373 thousand U.S. dollars on the conversion of Argentine pesos to U.S. dollars was recognized in "Net foreign exchange loss".
[5]
(**) Discontinued operations did not generate any income tax expense.
v3.8.0.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement of comprehensive income [abstract]      
(LOSS)/PROFIT FROM CONTINUING OPERATIONS [1] $ (13,568) $ 3,357 $ 52,230 [2]
LOSS FROM DISCONTINUED OPERATIONS (**) [1] 0 [3] (3,206) [3] (3,082) [2]
(LOSS)/PROFIT FOR THE YEAR (13,568) 151 49,148
Other comprehensive income(loss) to be reclassified to profit and loss in subsequent periods:      
Cash flow/net investment hedge (Note 15) (26,329) 13,971  
Tax effect on hedge (402) (2,921)  
Translation differences 22,934 15,701  
Other comprehensive income/(loss) (2,993) 32,593 (118,205)
Total comprehensive (loss)/income (16,561) 32,744 (69,057)
Total comprehensive income/(loss) attributable to:      
Owners of the parent (19,251) 32,652  
Non-controlling interest 2,690 92  
Total comprehensive (loss)/income $ (16,561) $ 32,744 $ (69,057)
[1]

(1) A s of December 31, 2017 , potential ordinary shares of 1,090,060 , relating to the stock option plan were excluded from the calculation of diluted lo ss per share as the loss in 2017 is anti-dilutive .

[2]

(*) E xclude discontinued operations – Mo roc c o.

[3]
(**) Discontinued operations did not generate any income tax expense.
v3.8.0.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - EXCLUDING DISCONTINUED OPERATIONS
$ in Thousands
12 Months Ended
Dec. 31, 2015
USD ($)
Disclosure Of Operating Segments [Line Items]  
(LOSS)/PROFIT FROM CONTINUING OPERATIONS $ 52,230 [1],[2]
LOSS FROM DISCONTINUED OPERATIONS (**) (3,082) [1],[2]
(LOSS)/PROFIT FOR THE YEAR 49,148
Other comprehensive income(loss) to be reclassified to profit and loss in subsequent periods:  
Other comprehensive income/(loss) (118,205)
Total comprehensive (loss)/income (69,057)
Atento Morocco [member]  
Disclosure Of Operating Segments [Line Items]  
(LOSS)/PROFIT FROM CONTINUING OPERATIONS 52,230 [3]
LOSS FROM DISCONTINUED OPERATIONS (**) (3,082) [3],[4]
(LOSS)/PROFIT FOR THE YEAR 49,148 [3]
Other comprehensive income(loss) to be reclassified to profit and loss in subsequent periods:  
Cash flow/net investment hedge (Note 15) 18,955 [5]
Tax effect on hedge (314) [5]
Translation differences (137,474) [5]
Other comprehensive income/(loss) (118,205) [5]
Total comprehensive (loss)/income (69,057) [5]
Total comprehensive income/(loss) attributable to:  
Owners of the parent (69,057) [5]
Non-controlling interest $ 0 [5]
[1]

(*) E xclude discontinued operations – Mo roc c o.

[2]

(1) A s of December 31, 2017 , potential ordinary shares of 1,090,060 , relating to the stock option plan were excluded from the calculation of diluted lo ss per share as the loss in 2017 is anti-dilutive .

[3]
(*) Exclude discontinued operations - Morocco.
[4]
(**) Discontinued operations did not generate any income tax expense.
[5]
(*) Exclude discontinued operations - Morocco.
v3.8.0.1
CONSOLIDATED STATEMENTS OF CASH FLOW - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash flows from (used in) operating activities [abstract]      
Accounting profit $ (1,035) $ 8,564 $ 72,933
Adjustments to reconcile profit (loss) [abstract]      
Amortization and depreciation 104,421 97,364 102,858
Impairment losses 627 1,902 1,230
Changes in provisions 4,364 20,312 344
Grants released to income (860) (673) (626)
Losses on disposal of fixed assets 4,106 1,063 703
Finance income (7,858) (7,188) (15,459)
Finance costs 78,145 [1] 59,151 [1] 75,682
Net foreign exchange differences 23,427 [1] 56,494 [1] 3,979
Change in fair value of financial instruments (230) (675) (17,535)
Changes in other gains and own work capitalized 2,422 (49,540) 1,080
Cash flows from (used in) operations before changes in working capital 208,562 178,210 152,256
Changes in working capital [abstract]      
Changes in trade and other receivables (31,486) 62,409 (74,366)
Changes in trade and other payables 11,507 22,004 (14,321)
Other assets/(payables) (7,947) (16,264) (19,614)
Increase (decrease) in working capital (27,926) 68,149 (108,301)
Interest paid (76,496) (73,168) (66,178)
Interest received 49,014 3,683 17,760
Income tax paid (20,587) (24,294) (16,212)
Other payments 17,080 19,198 15,280
Total inflows (outflows) of cash, classified as operating activities (65,149) (112,977) (79,910)
Net cash flow from operating activities 114,452 141,946 36,978
Cash flows from (used in) investing activities [abstract]      
Payments for acquisition of intangible assets (28,439) (30,000) (15,137)
Payments for acquisition of property, plant and equipment (48,423) (39,851) (81,310)
Acquisition of subsidiaries, net of cash acquired (14,512) (8,638) 0
Payments for financial instruments 0 0 0
Disposals of financial instruments 0 0 26,866
Proceeds from sale of subsidiaries 0 2,435 0
Net cash flow used in investment activities (90,943) (75,076) (67,195)
Cash flows from (used in) financing activities [abstract]      
Proceeds from issuance of common stock 0    
Proceeds from borrowings from third parties 474,465 235 38,739
Proceeds from borrowings from group companies 0 0 0
Repayment of borrowings from third parties (534,460) (62,930) (2,101)
Dividends (24,353) 0 0
Net cash flow provided by/(used in) financing activities (84,348) (62,695) 36,638
Net increase in cash and cash equivalents (60,839) 4,175 6,421
Exchange differences 8,566 5,840 (33,841)
Cash and cash equivalents at beginning of year 194,035 184,020 211,440
Cash and cash equivalents at end of year $ 141,762 $ 194,035 $ 184,020
[1]
(1) The year ended December 31, 2016 contains the impacts of the CVI termination. The reversal of the principal amount of 41,749 thousand U.S. dollars was recognized in "Other gains and own work capitalized", the interest reversal of 19,936 thousand U.S. dollars was recognized in "Finance costs" and the loss of 35,373 thousand U.S. dollars on the conversion of Argentine pesos to U.S. dollars was recognized in "Net foreign exchange loss".
v3.8.0.1
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($)
$ in Thousands
Total
Share capital
Share premium [member]
Reserve to acquisition of non - controlling interest [member]
Retained earnings/(losses)
Translation differences
Cash flow/net investment hedge
Stock-based compensation
Non-controlling interests [member]
Total owners of the parent company
Equity at beginning of period at Dec. 31, 2014 $ 464,866 $ 48 $ 639,435 $ 0 $ (102,811) $ (71,750) $ (640) $ 584 $ 0 $ 464,866
Comprehensive income/(loss) for the year (69,057) 0 0 0 49,148 (137,474) 19,269 0 0 (69,057)
Loss for the year 49,148 0 0 0 49,148 0 0 0 0 49,148
Other comprehensive income/(loss) (118,205) 0 0 0 0 (137,474) 19,269 0 0 (118,205)
Stock-based compensation 1,982 0 0 0 0 0 0 1,982 0 1,982
Equity at end of period at Dec. 31, 2015 397,791 48 639,435 0 (53,663) (209,224) 18,629 2,566 0 397,791
Comprehensive income/(loss) for the year 32,744 0 0 0 65 15,695 16,892 0 92 32,652
Loss for the year 151 0 0 0 65 0 0 0 86 65
Other comprehensive income/(loss) 32,593 0 0 0 0 15,695 16,892 0 6 32,587
Change In Reserve For Acquisition Of Non Controlling Interest (1,057) 0 0 (1,057) 0 0 0 0 0 (1,057)
Stock-based compensation 1,535 0 0 0 0 0 0 1,535 0 1,535
Non controlling interest participation (810) 0 0 0 0 0 0 0 (810) 0
Equity at end of period at Dec. 31, 2016 430,203 48 639,435 (1,057) (53,598) (193,529) 35,521 4,101 (718) 430,921
Comprehensive income/(loss) for the year (16,561) 0 0 0 (16,790) 23,466 (25,927) 0 2,690 (19,251)
Loss for the year (13,568) 0 0 0 (16,790) 0 0 0 3,222 (16,790)
Other comprehensive income/(loss) (2,993) 0 0 0 0 23,466 (25,927) 0 (532) (2,461)
Change In Reserve For Acquisition Of Non Controlling Interest (22,474) 0 0 (22,474) 0 0 0 0 0 (22,474)
Stock-based compensation 3,314 0 0 0 0 0 0 3,314 0 3,314
IPO Proceeds, gross 0                  
Non controlling interest participation 7,836 0 0 0 0 0 0 0 7,836 0
Dividends Declared (24,479) 0 0 0 (24,147) 0 0 0 (332) (24,147)
Equity at end of period at Dec. 31, 2017 $ 377,839 $ 48 $ 639,435 $ (23,531) $ (94,535) $ (170,063) $ 9,594 $ 7,415 $ 9,476 $ 368,363
v3.8.0.1
ACTIVITY OF ATENTO S.A. AND CORPORATE INFORMATION
12 Months Ended
Dec. 31, 2017
Disclosure of notes and other explanatory information [abstract]  
Disclosure of notes and other explanatory information [text block]
  • COMPANY ACTIVITY AND CORPORATE INFORMATION
  • Description of business

Atento S.A. (the “Company”) and its subsidiaries (“Atento Group”) offer customer relationship management services to their clients through contact centers or multichannel platforms.

The Company was incorporated on March 5, 2014 under the laws of the Grand­Duchy of Luxembourg, with its registered office in Luxembourg at 4, Rue Lou Hemmer.

The Atento Group was acquired in 2012 by Bain Capital Partners, LLC (“Bain Capital”). Bain Capital is a private investment fund that invests in companies with a high growth potential. Notable among its investments in the Customer Relationship Management (“CRM”) sector is in Bellsystem 24, a leader in customer service in Japan, and Genpact, the largest business management services company in the world.

In December 2012, Bain Capital entered into a final agreement with Telefónica, S.A. for the transfer of nearly 100% of the CRM business carried out by the Atento Group (the “Acquisition”), the parent company of which was Atento Inversiones y Teleservicios, S.A. (“AIT”). The Venezuelan based subsidiaries of the group headed by AIT, and AIT , except for some specific assets and liabilities, were not included in the Acquisition. Control was transferred for the purposes of creating the consolidated Atento Group on December 1, 2012.

The majority direct shareholder of the Company, ATALAYA Luxco PIKCo, S.C.A. (Luxembourg), is a holding company incorporated under the laws of the Grand-Duchy of Luxembourg.

The Company may also act as the guarantor of loans and securities, as well as assisting companies in which it holds direct or indirect interests or that form part of its group. The Company may secure funds, with the exception of public offerings, through any kind of lending, or through the issuance of bonds, securities or debt instruments in general.

The Company may also carry on any commercial, industrial, financial, real estate business or intellectual property related activity that it deems necessary to meet the aforementioned corporate purposes.

The corporate purpose of its subsidiaries, with the exception of the intermediate holding companies, is to establish, manage and operate CRM centers through multichannel platforms; provide telemarketing, marketing and “call center” services through service agencies or in any other format currently existing or which may be developed in the future by the Atento Group; provide telecommunications, logistics, telecommunications system management, data transmission, processing and internet services and to promote new technologies in these areas; offer consultancy and advisory services to clients in all areas in connection with telecommunications, processing, integration systems and new technologies, and other services related to the above. The Company’s ordinary shares are traded on NYSE under the symbol “ATTO”.

v3.8.0.1
BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
12 Months Ended
Dec. 31, 2017
Disclosure of basis of consolidation [abstract]  
Disclosure of basis of consolidation [text block]

2) BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

a) Statement of compliance with IFRS and basis of preparation

The consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standard Board (“IASB”) prevailing at December 31, 2017. The consolidated financial statements have been prepared on a historical costs basis, with the exception of derivative financial instruments and financial liability related to the option for acquisition of non-controlling interest, which have been measured at fair value.

The consolidated financial statements have been approved by the Board of Directors (the Board”) and Audit Committee of the Company, Atento S.A. in Luxembourg on April 19, 2018. These consolidated financial statements have not been yet approved by the General Shareholders Meeting of the Parent Company. However, the Board of Directors expects them to be approved without amendments.

The preparation of financial statements under IFRS as issued by the IASB requires the use of certain key accounting estimates. IFRS also requires Management to exercise judgment throughout the process of applying the Atento Group’s accounting policies. Note 3r discloses the areas requiring a more significant degree of judgment or complexity and the areas where assumptions and estimates are more relevant to the consolidated financial statements. Also, Note 3 contains a detailed description of the most significant accounting policies used to prepare these consolidated financial statements.

The amounts in these consolidated financial statements, comprising the consolidated statements of financial position, the consolidated statements of operations, the consolidated statements of comprehensive income/(loss), the consolidated statements of changes in equity, the consolidated statements of cash flows, and the notes thereto are expressed in thousands of U.S. dollars, unless otherwise indicated.

b) Comparative information

The main changes are:

On September 2, 2016, the Company through its direct subsidiary Atento Brasil acquired 81,49%, the controlling interest of RBrasil Soluções S.A. (RBrasil) and on September 30, 2016 the Company through its direct subsidiary Atento Teleservicios España sold 100% of Atento Morocco. In accordance with IFRS 5 the results of the operations in Morocco are presented in consolidated statements of operations as discontinued operations for the years ended December 31, 2016 and 2015.

On June 9, 2017, the Company, through its subsidiary Atento Brasil, acquired control of Interfile Serviços de BPO Ltda. and of Interservicer – Serviços em Crédito Imobiliário Ltda. (jointly, “Interfile”), a leading provider of BPO services and solutions, including credit origination, for the banking and financial services sector in Brazil. Through this acquisition, the Company expects to be able to expand the capabilities in the financial services sector, especially in credit origination, accelerate the penetration into higher value-added solutions, strengthen the leadership position in the Brazilian market and facilitate the expansion of the credit origination sector into other Latin American markets. See more details of this acquisition in Note 5.

c) Consolidated statements of cash flows

The consolidated statements of cash flows has been prepared using the indirect method pursuant to IAS 7, “Statement of Cash Flow”. Foreign currency transactions are translated at the average exchange rate for the period, in those cases where the currency differs from the presentation currency of Atento Group (U.S. dollar), as indicated in Note 3c. The effect of exchange rate fluctuations on cash and cash equivalents, maintained or owed, in foreign currency, is presented in the statements of cash flows to reconcile cash and cash equivalents at the beginning of the year and at year-end.

v3.8.0.1
ACCOUNTING POLICIES
12 Months Ended
Dec. 31, 2017
Disclosure of objectives, policies and processes for managing capital [abstract]  
Disclosure of changes in accounting policies, accounting estimates and errors [text block]

3) ACCOUNTING POLICIES

The main accounting policies used to prepare the accompanying consolidated financial statements are set out below.

a) Principles of consolidation, business combinations and goodwill

(i) Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Atento Group has control. The Atento Group controls an entity when the Atento Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Group, until the Group loses control of the entity.

Intercompany transactions, balances and unrealized gains on transactions between the Atento Group companies are eliminated on consolidation, except those arisen from exchange variations. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Atento Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of operations, statement of comprehensive income/(loss), statement of changes in equity and financial position, respectively.

(ii) Business combinations and goodwill

The Atento Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets acquired, the liabilities assumed vis-à-vis the former owners of the acquire, and any equity instruments therein issued by the Atento Group. The consideration transferred includes the fair value of any asset or liability resulting from any contingent consideration.

Any contingent consideration to be transferred by the Atento Group is recognized at its fair value as of the acquisition date. Subsequent changes in the fair value of any contingent consideration deemed an asset or a liability are recognized in the statements of operations or as a change in other comprehensive income/(loss), in accordance with IAS 39, “Financial Instruments: Recognition and Measurement”. Contingent consideration classified as equity is not remeasured, and any subsequent settlement thereof is also recognized in equity. Costs related to the acquisition are recognized as expenses in the year in which they are incurred.

Identifiable assets acquired and identifiable liabilities and contingent liabilities assumed in a business combination are initially measured at fair value as of the acquisition date.

Goodwill is initially measured as any excess of the total consideration paid over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is greater than the aggregate consideration transferred, the difference is recognized in the statements of operations as a gain or bargain purchase. Goodwill acquired in a business combination is allocated to each cash-generating unit, or group of cash-generating units, that are expected to benefit from the synergies arising in the business combination. Goodwill is tested for impairment annually or whrenever if there are certain events or changes in circumstances indicating potential impairment. The carrying amount of the assets allocated to each cash-generating unit is then compared with its recoverable amount, which is the greater of its value in use or fair value less costs to sell. Any impairment loss is immediately taken to the statements of operations, and may not be reversed (see Note 3h).

b) Functional and presentation currency

Items included in the financial statements of each of the Atento Group’s entities are measured using the currency of the primary economic environment in which the entities operate (‘the functional currency’). The consolidated financial statements are presented in thousands of U.S. dollars, which is the presentation currency of the Atento Group.

c) oreign currency translation

The results and financial position of all Atento Group entities whose functional currency is different from the presentation currency are translated into the presentation currency as follow:

Statements of financial position assets and liabilities are translated at the exchange rate prevailing at the reporting date.

Statements of operations items are translated at average exchange rates for the year (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions).

Proceeds and payments shown on the statements of cash flows are translated at the average exchange rates for the period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions.

Retained earnings are translated at historical exchange rates.

All resulting exchange differences are recognized in other comprehensive income/(loss).

Goodwill and fair value adjustments to net assets arising from the acquisition of a foreign company are considered to be assets and liabilities of the foreign company and are translated at year­end exchange rates. Exchange differences arising are recognized in other comprehensive income/(loss).

d) Foreign currency transactions

Transactions in foreign currency are translated into the functional currency using the exchange rates prevailing at the date of the transactions or valuation date, in the case of items being remeasured. Foreign exchange gains and losses resulting from the settlement of these transactions and from the translation at reporting date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statements of operations, except when deferred in other comprehensive income/(loss).

All differences arising on non–trading activities are taken to other operating income/expense in the statements of operations, with the exception of the effective portion of the differences on cash flows and net investment hedge that are accounted for as an effective hedge against a net investment in a foreign entity. These differences are recognised in other comprehensive income/(loss) (OCI) until the hedge settlement and disposal of the net investment, at which time, they are recognised in the statements of operations. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI.

Non–monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the date of recognition.

e) Segment information

Segment information is presented in accordance with management information reviewed by the Chief Operating Decision Maker (“CODM”). The CODM, responsible for allocating resources and assessing performance of operational segments, has been identified as the Chief Executive Officer (“CEO”) responsible for strategic decisions.

The CODM considers the business from a geographical perspective and analyzes it across three operational segments—EMEA, Americas and Brazil.

f) Intangible assets

Intangible assets are stated at acquisition cost, less any accumulated amortization and any accumulated impairment losses.

The intangible assets acquired in a business combination are initially measured at their fair value as of the acquisition date.

The useful lives of intangible assets are assessed on a case­by­case basis to be either finite or indefinite. Intangible assets with finite lives are amortized on a straight line basis over their estimated useful life and assessed for impairment whenever events or changes indicate that their carrying amount may not be recoverable. Intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. The amortization charge on intangible assets is recognized in the consolidated statements of operations under “Amortization”.

Amortization methods and useful lives are revised annually at the end of each reporting period and, where appropriate, adjusted prospectively.

Customer bases

Customer bases acquired in a business combination are recognised at fair value at the acquisition date and have finite useful lives and are subsequently carried at cost less accumulated amortization, which has been estimated to be between seven and twelve years. The customer bases relate to all agreements, tacit or explicit, entered into between the Atento Group and the former owner of the Atento Group and between the Atento Group and other customers, in relation to the provision of services, and that were acquired as part of the business combinations indicated in Note 5.

Software

Software is measured at cost (at acquisition or development costs) and amortized on a straight line basis over its useful life, generally estimated to be between three and five years. Maintenance cost of software is expensed as incurred.

Development costs directly attributable to the design and creation of software that are identifiable and unique, and that may be controlled by the Group, are recognized as an intangible asset providing the following conditions are met:

It is technically feasible for the intangible asset to be completed so that it will be available for use or sale.

Management intends to complete the asset for use or sale.

The Group has the capacity to use or sell the asset.

It is possible to show evidence of how the intangible asset will generate probable future economic benefits.

Adequate technical, financial and other resources are available to complete the development and to use or sell the intangible asset.

The outlay attributable to the intangible asset during its development can be reliably determined.

Directly attributable costs capitalized in the value of the software include the cost of personnel developing the programs and an appropriate percentage of overheads.

Costs that do not meet the criteria listed above are recognized as an expense as incurred. Expenditure for an intangible asset that is initially recognized within expenses for the period may not be subsequently recognized as intangible assets.

Other intangible assets

Other intangible assets mainly include payment of loyalty incentives which are amortized on a straight line basis over the term of the agreements which range from four to ten years.

g) Property, plant and equipment

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

Acquisition costs include, when appropriate, the initial estimates of decommissioning, withdrawal and site reconditioning costs when the Atento Group is obliged to bear this expenditure as a condition of using the assets. Repairs that do not prolong the useful life of the assets and maintenance costs are recognized directly in the statements of operations. Costs that prolong or improve the life of the asset are capitalized as an increase in the cost of the asset.

Property, plant and equipment acquired in a business combination are initially measured at fair value as of the acquisition date.

The Atento Group assesses the need to write down, if appropriate, the carrying amount of each item of property, plant and equipment to its period-end recoverable amount whenever there are indications that the assets’ carrying amount may not be fully recoverable through the generation of sufficient future revenue. The impairment allowance is reversed if the factors giving rise to the impairment cease to exist.

The depreciation charge for items of property, plant and equipment is recognized in the consolidated statements of operations under “Depreciation”.

Depreciation is calculated on a straight line basis over the useful life of the asset applying individual rates to each type of asset, which are reviewed at the end of each reporting period.

The useful lives generally used by the Atento Group are as follow:

Years of useful life
Buildings5 - 40
Plant and machinery3 - 6
Furniture, tools1 - 10
Other tangible assets5 - 8

 NameRegistered addressLine of business% interestHolding company
Atento Luxco Midco, S.à.r.l.LuxembourgHolding company100Atento S.A.
Atento Luxco 1 S.A.LuxembourgHolding company100Atento Luxco Midco, S.à.r.l
Atalaya Luxco 2. S.à.r.l.LuxembourgHolding company100Atento Luxco 1. S.A.
Atalaya Luxco 3. S.à.r.l.LuxembourgHolding company100Atento Luxco 1. S.A.
Atento Argentina. S.A Buenos Aires (Argentina)Operation of call centers90Atalaya Luxco 2. S.à.r.l.
10Atalaya Luxco 3. S.à.r.l.
Global Rossolimo. S.L.UMadrid (Spain)Holding company100Atento Spain Holdco. S.L.U.
Atento Spain Holdco. S.L.UMadrid (Spain)Holding company100Atento Luxco 1. S.A.
Atento Spain Holdco 6. S.L.UMadrid (Spain)Holding company100Atento Spain Holdco. S.L.U.
Atento Spain Holdco 2. S.A.U Madrid (Spain)Holding company100Atento Spain Holdco 6. S.L.U.
Atento Teleservicios España. S.A.UMadrid (Spain)Operation of call centers100Atento Spain Holdco 2. S.A.U.
Atento Servicios Técnicos y Consultoría S.A.UMadrid (Spain)Execution of technological projects and services, and consultancy services100Atento Teleservicios España S.A.U.
Atento Impulsa. S.A.UBarcelona (Spain)Management of specialized employment centers for disabled workers100Atento Teleservicios España S.A.U.
Atento Servicios Auxiliares de Contact Center. S.A.UMadrid (Spain)Execution of technological projects and services, and consultancy services100Atento Teleservicios España. S.A.U.
Atento B VAmsterdam (Netherlands)Holding company100Atento Spain Holdco 2. S.A.U.
Teleatento del Perú. S.A.CLima (Peru)Operation of call centers83.3333Atento B.V.
(Class A)
16.6667Atento Holding Chile. S.A.
(Class B)
Woknal. S.A.Montevideo (Uruguay)Operation of call centers100Atento B.V.
Atento Colombia. S.A.Bogotá DC (Colombia)Operation of call centers94.97871Atento B.V.
0.00424Atento Servicios Auxiliares de Contact Center. S.L.U.
0.00854Atento Servicios Técnicos y Consultoría. S.L.U.
5.00427Atento Teleservicios España. S.A.U.
0.00424Teleatento del Perú SAC.
Atento Holding Chile. S.A.Santiago de Chile (Chile)Holding company99.9999Atento B.V.
0.0001Atento Spain Holdco 2
Atento Chile. S.A.Santiago de Chile (Chile)Operation of call centers99.99Atento Holding Chile. S.A.
0.01Atento B.V.
Atento Educación LimitadaSantiago de Chile (Chile)Operation of call centers99Atento Chile. S.A.
1Atento Holding Chile. S.A.
Atento Centro de Formación Técnica LimitadaSantiago de Chile (Chile)Operation of call centers99Atento Chile. S.A.
1Atento Holding Chile. S.A.
Atento Spain Holdco 4. S.A.UMadrid (Spain)Holding company100Atento Spain Holdco. S.L.U.
Atento Brasil. S.ASão Paulo (Brazil)Operation of call centers99.999Atento Spain Holdco 4. S.A.U.
0.001Atento Spain Holdco. S.L.U.
R Brasil Soluções S.A.São Paulo (Brazil)Operation of call centers81.4885Atento Brasil. S.A.
9.25Flávio Luiz Rossetto
9.25Jorge Luiz Rossetto
Atento Spain Holdco 5. S.L.UMadrid (Spain)Holding company100Atento Spain Holdco. S.L.U.
Atento Mexico Holdco S. de R.L. de C.V.MexicoHolding company99.966Atento Spain Holdco 5. S.L.U.
0.004Atento Spain Holdco. S.L.U.
Atento Puerto Rico. Inc.Guaynabo (Puerto Rico)Operation of call centers100Atento Mexico Holdco S. de R.L. de C.V.
Contact US Teleservices Inc.Houston, Texas (USA)Operation of call centers100Atento Mexico Holdco S. de R.L. de C.V.
Atento Panamá. S.A.Panama CityOperation of call centers100Atento Mexico Holdco S. de R.L. de C.V.
Atento Atención y Servicios. S.A. de C.V.Mexico City (Mexico)Administrative, professional and consultancy services99.998Atento Mexico Holdco S. de R.L. de C.V.
0.002Atento Servicios. S.A. de C.V.
Atento Servicios. S.A. de C.V.Mexico City (Mexico)Sale of goods and services99.998Atento Mexico Holdco S. de R.L. de C.V.
0.002Atento Atención y Servicios. S.A. de C.V.
Atento Centroamérica. S.A.Guatemala (Guatemala)Holding company99.9999Atento Mexico Holdco S. de R.L. de C.V.
0.0001Atento El Salvador S.A. de C.V.
Atento de Guatemala. S.A.Guatemala (Guatemala)Operation of call centers99.99999Atento Centroamérica. S.A.
0.00001Atento El Salvador S.A. de C.V.
Atento El Salvador. S.A. de C.V.City of San Salvador (El Salvador)Operation of call centers7.4054Atento Centroamerica. S.A.
92.5946Atento de Guatemala. S.A.
Atento Nicaragua S.A. NicaraguaOperation of call centers4.35Atento Centroamerica. S.A.
95.65Atento Mexico Holdco S. de R.L. de C.V.
Atento Costa Rica S.A.Costa RicaOperation of call centers99.999Atento Mexico Holdco S. de R.L. de C.V.
0.0001Atento Centroamerica. S.A.
Interservicer - Serviços de BPO LtdaSão Paulo (Brasil)Operation of call centers50.00002Nova Interfile e Holding Ltda.
Interfile Serviços de BPO Ltda.São Paulo (Brasil)Operation of call centers50.00002Nova Interfile e Holding Ltda.
Nova Interfile Holding Ltda.São Paulo (Brasil)Holding company100Atento Brasil. S.A.

At December 31, 2015, 2016 and 2017, none of the Group’s subsidiaries is listed on a stock exchange, except for Atento Luxco 1 S.A., which has debt securities listed in the International Stock Exchange (TISE) in Guernsey. All subsidiaries use year-end December 31 as their reporting date.

t) New and amended standards adopted by the Group

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing on or after January 1, 2017:

  • Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12; and
  • Disclosure Initiative – Amendments to IAS 7.

The adoption of these amendments did not have any material impact on the current period or any prior period and is not likely to affect future periods.

u) New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for December 31, 2017 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below:

Title of standard

IFRS 9 Financial Instruments

Nature of change

IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets.

Impact

The Group has reviewed its financial assets and liabilities and is expecting the following impact from the adoption of the new standard on January 1, 2018:

Financial assets

The Company’s loans and receivables as per IAS 39 that are held to collect contractual cash flows that solely represent payments and interest satisfy the conditions for classification as at amortized cost for IFRS 9 and hence there will be no change to the accounting for these assets.

 

We also expect no changes for derivatives, that as per IAS 39 are classified at fair value through profit or loss (unless they are designated as hedges) and would appear to be classified as FVPL as per IFRS 9.

 

Accordingly, the Atento Group does not expect the new guidance to have a significant impact on the classification and measurement of its financial assets.

Financial liabilities

There will be no impact on the Atento Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Atento Group does not have such liabilities other than derivatives, that as per IAS 39 are classified at fair value through profit or loss (unless they are designated as hedges) and will be classified as FVPL (fair value through profit or loss) as per IFRS 9. The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been changed.

 

The new hedge accounting rules will align the accounting for hedging instruments more closely with the Atento Group’s risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. The Atento Group’s current hedge relationships will qualify as continuing hedges upon the adoption of IFRS 9. Accordingly, the Atento Group does not expect a significant impact on the accounting for its hedging relationships.

 

The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortized cost, debt instruments measured at FVOCI (fair value through other comprehensive income), contract assets under IFRS 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts. Management does not expect a significant increase in the credit losses, as well as losses on investments held at amortized cost.

The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Atento Group’s disclosures about its financial instruments particularly in 2018.

Mandatory application date/ Date of adoption by the Group

Must be applied for financial years commencing on or after January 1, 2018.

 

The Group will apply the new rules retrospectively from January 1, 2018, with the practical expedients permitted under the standard. Comparatives for 2017 will not be restated.

Title of standard

IFRS 15 Revenue from Contracts with Customers

Nature of change

The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts.

 

The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer.

Impact

Management has assessed the effects of applying the new standard on the Atento Group’s financial statements and has identified the following services that are likely to be affected:

  • Accounting for certain costs incurred in fulfilling a contract – certain costs which are currently expensed may need to be recognised as an asset under IFRS 15.

  • Variable consideration – IFRS 15 establishes that the Atento Group includes in the transaction price of services the amount of variable consideration estimated only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Some contracts with customer may be impacted for this requirement due to the existence of clauses containing service level requirements, trade discounts, penalties or volume rebates. This could result in different amounts being recognized and/or delay the recognition of a portion of the revenue.

  • Presentation disclosure - IFRS 15 provides presentation and disclosure requirements, which are more detailed than under current IFRS. The presentation requirements represent a significant change from current practice and significantly increases the volume of disclosures required in Atento Group’s financial statements. Many of the disclosure requirements in IFRS 15 are completely new. The Atento Group is reassessing its systems, internal controls, policies and procedures necessary to collect and disclose the required information. 

The Atento’s Group continue to evaluate customer contracts to determine the estimated variable consideration as disclosed above. Based on the assessment conducted in 2017, the Company and its subsidiaries do not foresee a significant impact through the adoption of IFRS 15.

Mandatory application date/ Date of adoption by the Group

The Group intends to adopt the standard using the modified retrospective approach as of January 1, 2018 and the comparatives will not be restated.

Title of standard

IFRS 16 Leases

Nature of change

IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.

 

The accounting for lessors will not significantly change.

Impact

The standard will affect primarily the accounting for the Atento Group’s operating leases. As at the reporting date, the Atento Group has operating lease commitments of 240,113 thousand U.S. dollars. However, the Atento Group has not yet determined to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Atento Group’s profit and classification of cash flows.

 

Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under IFRS 16.

Mandatory application date/ Date of adoption by group

Mandatory for financial years commencing on or after January 1, 2019. At this stage, the Atento Group does not intend to adopt the standard before its effective date.

Title of standard

IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2

Key requirements

The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas:

  • the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction;

  • the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and

  • accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled.

Mandatory application date/ Date of adoption by group

On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after January 1, 2018, with early application permitted.

Expected date of adoption by the Atento Group is January 1, 2018.

Title of standard

IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration

Key requirements

The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the

related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the transaction date for each payment or receipt of advance consideration. Entities may apply the amendments on a fully retrospective basis.

Mandatory application date/ Date of adoption by group

Alternatively, an entity may apply the Interpretation prospectively to all assets, expenses and income in its scope that are initially recognised on or after:

(i) The beginning of the reporting period in which the entity first applies the interpretation; or

(ii) The beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the interpretation.

The Interpretation is effective for annual periods beginning on or after January 1, 2018. Early application of interpretation is permitted and must be disclosed.

Expected date of adoption by the Atento Group is January 1, 2018.

Title of standard

IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

Key requirements

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.

The Interpretation specifically addresses the following:

  • Whether an entity considers uncertain tax treatments separately;

  • The assumptions an entity makes about the examination of tax treatments by taxation authorities;

  • How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates;

  • How an entity considers changes in facts and circumstances.

Mandatory application date/ Date of adoption by group

An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed.

The interpretation is effective for annual reporting periods beginning on or after January 1, 2019, but certain transition reliefs are available. The Group will apply interpretation from its effective date.

h) Impairment of non­current assets

The Atento Group assesses as of each reporting date whether there is an indicator that a non­current asset may be impaired. If any such indicator exists, or when annual impairment testing for an asset is required (e.g. goodwill), the Atento Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell or its value in use. In assessing the value in use, the estimated future cash flow is discounted to its present value using a pre­tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered to be impaired. In this case, the carrying amount is written down to its recoverable amount, and the resulting loss is recognized in the statements of operations. Future depreciation/amortization charges are adjusted to reflect the asset’s new carrying amount over its remaining useful life. Management analyzes the impairment of each asset individually, except in the case of assets that generate cash flow which are interdependent on those generated by other assets (cash generating units – “CGU”).

The Atento Group bases the calculation of impairment on the business plans of the various cash generating units to which the assets are allocated. These business plans cover five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.

When there are new events or changes in circumstances that indicate that a previously recognized impairment loss no longer exists or has been decreased, a new estimate of the asset’s recoverable amount is made. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. The reversal is limited to the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. This reversal is recognized in the statements of operations and the depreciation charge is adjusted in future periods to reflect the asset’s revised carrying amount. Impairment losses relating to goodwill cannot be reversed in future periods.

i) Financial assets and liabilities

Financial assets

Upon initial recognition, the Atento Group classifies its financial assets into one of four categories: financial assets at fair value through profit or loss, loans and receivables, held­to­maturity investments and available­for­sale financial assets. These classifications are reviewed at the end of each reporting period and modified if appropriate.

The Atento Group has classified all of its financial assets as loans and receivables, except for derivative financial instruments.

All purchases and sales of financial assets are recognized on the statement of financial position on the transaction date, i.e. when the commitment is made to purchase or sell the asset.

A financial asset is fully or partially derecognized from the statement of financial position only when:

  • The rights to receive cash flow from the asset have expired.
  • The Atento Group has assumed an obligation to pay the cash flow received from the asset to a third party or
  • The Atento Group has transferred its rights to receive cash flow from the asset to a third party, thereby substantially transferring all of the risks and rewards of the asset.

Financial assets and financial liabilities are offset and presented on a net basis in the statement of financial position when a legally enforceable right exists to offset the amounts recognized and the Atento Group intends to settle the assets and liabilities net or to simultaneously realize the asset and cancel the liability.

Loans and receivables include fixed­maturity financial assets not listed in active markets and which are not derivatives. They are classified as current assets, except for those maturing more than twelve months after the reporting date, which are classified as non­current assets. Loans and receivables are initially recognized at fair value plus any transaction costs, and are subsequently measured at amortized cost, using the effective interest method. Interest calculated using the effective interest method is recognized under finance income in the statements of operations.

The Atento Group assesses at each reporting date whether a financial asset is impaired. Where there is objective evidence of impairment of a financial asset valued at amortized cost, the amount of the loss to be taken to the statements of operations is measured as the difference between the carrying amount and the present value of estimated future cash flow (without taking into account future losses), discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the impairment loss is expensed in the consolidated statements of operations.

Trade receivables

Trade receivables are amounts due from customers for the sale of services in the normal course of business. Receivables slated for collection in twelve months or less are classified as current assets; otherwise, the balances are considered non­current assets.

Trade receivables are recognized at the original invoice amount. An impairment provision is recorded when there is objective evidence of collection risk. The amount of the impairment provision is calculated as the difference between the carrying amount of the doubtful trade receivables and their recoverable amount. In general, cash flow relating to short-term receivables is not discounted.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and in banks, demand deposits and other highly liquid investments with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.

Financial liabilities

Debt with third parties (Borrowing)

Debt with third parties is initially recorded at the fair value of the consideration received, less any directly attributable transaction costs. After initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. Any difference between the cash received (net of transaction costs) and the repayment value is recognized in the statements of operations over the life of the debt. Debt with third parties is considered to be non­current when the maturity date is longer than twelve months from the reporting date, or when the Atento Group has full discretion to defer settlement for at least another twelve months from that date.

Financial liabilities are derecognized in the statement of financial position when the respective obligation is settled, cancelled or matures.

Trade payables

Trade payables are payment obligations in respect of goods or services received from suppliers in the ordinary course of business. Trade payables falling due in twelve months or less are classified as current liabilities; otherwise, the balances are considered as non­current liabilities.

j) Derivative financial instruments and hedging

Derivative financial instruments are initially recognized at their fair values on the date on which the derivative contract is entered into and are subsequently re-measured at their fair value.

Any gains or losses resulting from changes in the fair value of a derivative instrument are recorded in the statements of operations, except for the effective portion of cash flow hedges, which is recognized in other comprehensive income/(loss) and later reclassified to profit or loss when the hedge item affects the statements of operations.

At the inception of the derivative instrument contract, the Atento Group documents the relationship between the hedging instruments and the hedged items, as well as the risk management objectives and the strategy for groups of hedges. The Atento Group also documents its assessment, both at the inception of the hedge and throughout the term thereof, of whether the derivatives used are highly effective at offsetting changes in the fair value or cash flow of the hedged items.

The fair value of a hedging derivative is classified as a non-current asset or liability, as applicable, if the remaining maturity of the hedged item exceeds twelve months, otherwise it is classified as a current asset or liability.

For purpose of hedge accounting the Atento Group designates certain derivatives as either:

Cash flow hedges

Cash flow hedge is defined as a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction that could affect profit or loss.

The effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income in the cash flow hedge reserve in equity. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, any gain or loss on the hedging instrument that was previously recognized directly in equity is recycled from reserves into the statements of operations in the same period(s) in which the financial asset or liability affects profit or loss.

Net investment hedges

Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized in other comprehensive income. Gains or losses relating to the ineffective portion are recognized in the statements of operations. Gains and losses accumulated in equity are included in the statements of operations when the foreign operation is partially disposed of or sold.

k) Share capital

The ordinary shares of the Company are classified in equity (see Note 19).

Issuance costs directly attributable to the issuance of new shares or options are deducted from the proceeds raised in equity, net of the tax effect.

l) Provisions

Provisions are recognized when the Atento Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions for restructuring include penalties for the cancellation of leases and other contracts, as well as employee termination payments. Provisions are not recognized for future operating losses.

When the Atento Group is virtually certain that some or all of a provision is to be reimbursed, for example under an insurance contract, a separate asset is recognized in the statement of financial position, and the expense relating to the provision is recorded in the statements of operations, net of the expected reimbursement.

Provisions are measured at the present value of expenditure expected to be required to settle the obligation, using a pre­tax rate that reflects current market assessments of the time value of money and the specific risks inherent to the obligation. Any increase in the provision due to the passage of time is recognized as a finance cost.

Contingent liabilities represent possible obligations to third parties, and existing obligations that are not recognized, given that it is not likely that an outflow of economic resources will be required in order to settle the obligation or because the amount cannot be reliably estimated. Contingent liabilities are not recognized on the consolidated statement of financial position unless they are recorded as part of a business combination.

m) Employee benefit

Share­based payments

Atento S.A. has a share­based compensation plan, under which the subsidiaries of Atento S.A. receive services from employees as consideration for the equity instruments of Atento S.A. The subsidiaries themselves are not party to any of the contracts; Atento S.A. settles these agreements. The plan offers various instruments (award agreements, stock options, restricted stock units, etc.), but so far only five types of restricted stock units (“RSUs”) have been granted to selected employees, being two on December 3, 2014, two on July 1, 2016 and one on July 3, 2017.

The fair value of the employee services received in exchange for the grant of the RSUs is recognized as an expense in the consolidated financial statements of Atento S.A. The total amount to be expensed is determined with reference to the fair value of the RSUs granted:

Including any market performance conditions (for example, an entity’s share price);

Excluding the impact of any service and non­market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

Including the impact of any non­vesting conditions (for example, the requirement for employees to save or hold shares for a specific period of time).

At the end of each reporting period, the group revises its estimates of the number of RSUs that are expected to vest based on the non­market vesting conditions and service conditions. It recognizes the impact of the revisions to original estimates, if any, in the statements of operations, with a corresponding adjustment to equity.

When the RSUs vest, Atento S.A. issues new shares or buys them back in the market. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium.

The social security contributions payable in connection with the granting of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash­settled transaction.

Termination benefits

Termination benefits are paid to employees when the Atento Group decides to terminate their employment contracts prior to the usual retirement age or when the employee agrees to resign voluntarily in exchange for these benefits. The Atento Group recognizes these benefits as an expense for the year, at the earliest of the following dates: (a) when the Atento Group is no longer able to withdraw the offer for these benefits; or (b) when the Atento Group company recognizes the costs of a restructuring effort as per IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”, and when this restructuring entails the payment of termination benefits. When benefits are offered in order to encourage the voluntary resignation of employees, termination benefits are measured on the basis of the number of employees expected to accept the offer. Benefits to be paid in more than twelve months from the reporting date are discounted to their present value.

n) Income tax

The income tax expense includes all the expenses and credits arising from the corporate income tax levied on all the Atento Group companies.

Income tax expenses for each period represent the aggregate amounts of current and deferred taxes, if applicable.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amounts are those that are enacted at the reporting date in each country in which the Atento Group operates. The Atento Group determines deferred tax assets and liabilities by applying the tax rates that will be effective when the corresponding asset is received or the liability settled, based on tax rates and tax laws that are enacted (or substantively enacted) at the reporting date.

Deferred taxes are calculated on temporary differences arising from differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax assets also arise from unused tax credits and tax loss carryforwards.

The carrying amounts of deferred income tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of that deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax liabilities associated with investments in subsidiaries and branches are not recognized when the timing of the reversal can be controlled by the parent company, and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax relating to items directly recognized in equity is also recognized in equity. Deferred tax assets and liabilities resulting from business combinations are added to or deducted from goodwill.

Deferred tax assets and liabilities are offset only if a legally enforceable right exists to offset current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

o) Revenue and expenses

Revenue and expenses are recognized on the statements of operations on an accruals basis, i.e. when the services are rendered, regardless of when actual payment or collection occurs.

Revenue is measured at the fair value of the consideration received or to be received, and represents the amounts expected to be collected for services sold, net of discounts, returns and value added tax. Revenue is recognized when it can be reliably measured, when it is probable that the Group will receive a future economic benefit, and when certain conditions are met for each Group activity carried out.

Services revenues are recognized when services are rendered, when the revenue and costs of the services contract, can be reliably estimated, and it is probable that the related receivables will be recovered.

The Atento Group obtains revenue mainly from services provided to customer, recognizing the revenue when the call center services are performed or when certain contact center consulting work is carried out.

Expenses are recognized in the statements of operations an accrual basis, regardless of when actual payment or collection occurs.

The Atento Group’s incorporation, start­up and research expenses, as well as expenses that do not qualify for capitalization under IFRS, are recognized in the consolidated statements of operations when incurred and classified in accordance with their nature.

p) Interest income and expenses

Interest expenses incurred in the construction of any qualified asset are capitalized during the time necessary to complete the asset and prepare it for the intended use. All other interest expenses are expensed as incurred.

Interest income is recognized using the effective interest method. When a loan or a receivable has been impaired, the carrying amount is reduced to the recoverable amount, discounting the estimated future cash flow at the instrument’s original effective interest rate and recognizing the discount as a decrease in interest income. Interest income on impaired loans is recognized when the cash is collected or on the basis of the recovery of the costs when the loan is secured.

q) Leases (as lessee)

The Atento Group rents certain properties. Leases where the lessor does not transfer substantially all of the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the statements of operations on a straight line basis over the lease term.

Those lease arrangements under which the Atento Group holds the significant risks and benefits inherent in owning the leased item are treated as finance leases. Finance leases are capitalized as an asset at the inception of the lease period and classified according to their nature. Finance leases are capitalized at the lower of the present value of the minimum lease payments agreed, and the fair value of the leased asset. Lease payments are proportionally allocated to the principal of the lease liability and to finance charges. Finance charges are reflected in the statements of operations over the lease term so as to achieve a constant rate of interest on the balance pending repayment in each period.

r) Critical accounting estimates and assumptions

The preparation of consolidated financial statements under IFRS as issued by the IASB requires the use of certain assumptions and estimates that affect the carrying amount of assets and liabilities within the next financial year.

Some of the accounting policies applied in preparing the accompanying consolidated financial statements required Management to apply significant judgments in order to select the most appropriate assumptions for determining these estimates. These assumptions and estimates are based on Management experience, the advice of consultants and experts, forecasts and other circumstances and expectations prevailing at year end. Management’s evaluation takes into account the global economic situation in the sector in which the Atento Group operates, as well as the future outlook for the business. By virtue of their nature, these judgments are inherently subject to uncertainty. Consequently, actual results could differ substantially from the estimates and assumptions used. Should this occur, the values of the related assets and liabilities would be adjusted accordingly.

Although these estimates were made on the basis of the best information available at each reporting date on the events analyzed, events that take place in the future might make it necessary to change these estimates in coming years. Changes in accounting estimates would be applied prospectively in accordance with the requirements of IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, recognizing the effects of the changes in estimates in the related consolidated statements of operations.

An explanation of the estimates and judgments that entail a significant risk of leading to a material adjustment in the carrying amounts of assets and liabilities is as follow:

Useful lives of property, plant and equipment and intangible assets

The accounting treatment of items of property, plant and equipment and intangible assets entails the use of estimates to determine their useful lives for depreciation and amortization purposes. In determining the useful life, it is necessary to estimate the level of use of assets as well as forecast technological trends in the assets. Assumptions regarding the level of use, the technological framework and the future development require a significant degree of judgment, bearing in mind that these aspects are rather difficult to foresee. Changes in the level of use of assets or in their technological development could result in a modification of their useful lives and, consequently, in the associated depreciation or amortization.

Impairment of goodwill

The Atento Group tests goodwill for impairment annually, in accordance with the accounting principle described in Note 3h. Goodwill is subject to impairment testing as part of the cash­generating unit to which it has been allocated. The recoverable amounts of cash­generating units defined in order to identify potential impairment in goodwill are determined on the basis of value in use, applying five­year financial forecasts based on the Atento Group’s strategic plans, approved and reviewed by Management. These calculations entail the use of assumptions and estimates, and require a significant degree of judgment. The main variables considered in the sensitivity analyses are growth rates, discount rates using the Weighted Average Cost of Capital (“WACC”) and the key business variables.

Deferred taxes

The Atento Group assesses the recoverability of deferred tax assets based on estimates of future earnings. The ability to recover these deferred amounts depends ultimately on the Atento Group’s ability to generate taxable earnings over the period in which the deferred tax assets remain deductible. This analysis is based on the estimated timing of the reversal of deferred tax liabilities, as well as estimates of taxable earnings, which are sourced from internal projections.

The appropriate classification of tax assets and liabilities depends on a series of factors, including estimates as to the timing and realization of deferred tax assets and the projected tax payment schedule. Actual income tax receipts and payments could differ from the estimates made by the Atento Group as a result of changes in tax legislation or unforeseen transactions that could affect the tax balances (see Note 20).

The Atento Group has recognized deferred tax assets corresponding to losses carried forward since, based on internal projections, it is probable that it will generate future taxable profits against which they may be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting date, and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of that deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Provisions and contingencies

Provisions are recognized when the Atento Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. This obligation may be legal or constructive, deriving from, inter alia, regulations, contracts, customary practice or public commitments that would lead third parties to reasonably expect that the Atento Group will assume certain responsibilities. The amount of the provision is determined based on the best estimate of the outflow of resources embodying economic benefit that will be required to settle the obligation, taking into account all available information as of the reporting date, including the opinions of independent experts such as legal counsel or consultants.

No provision is recognized if the amount of liability cannot be estimated reliably. In such cases, the relevant information is disclosed in the notes to the consolidated financial statements.

Given the uncertainties inherent in the estimates used to determine the amount of provisions, actual outflows of resources may differ from the amounts recognized originally on the basis of these estimates (see Note 21).

Fair value of derivatives

The Atento Group uses derivative financial instruments to mitigate risks, primarily derived from possible fluctuations in interest rates. Derivatives are recognized at the inception of the contract at fair value.

The fair values of derivative financial instruments are calculated on the basis of observable market data available, either in terms of market prices or through the application of valuation techniques. The valuation techniques used to calculate the fair value of derivative financial instruments include the discounting of future cash flow associated with the instruments, applying assumptions based on market conditions at the valuation date or using prices established for similar instruments, among others. These estimates are based on available market information and appropriate valuation techniques. The fair values calculated could differ significantly if other market assumptions and/or estimation techniques were applied.

s) Interest in subsidiaries

All subsidiaries are fully consolidated. Where necessary, the accounting policies of subsidiaries have been aligned to those adopted in the Atento Group.

The details of Atento Group subsidiaries at December 31, 2017 are as follow:

v3.8.0.1
FINANCIAL RISK MANAGEMENT
12 Months Ended
Dec. 31, 2017
Disclosure of risk management strategy related to hedge accounting [abstract]  
Disclosure of financial risk management [text block]

4) MANAGEMENT OF FINANCIAL RISK

4.1 Financial risk factors

The Atento Group’s activities are exposed to various types of financial risk: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The Atento Group’s global risk management policy aims to minimize the potential adverse effects of these risks on the Atento Group’s financial returns. The Atento Group also uses derivative financial instruments to hedge certain risk exposures.

a) Market risk

Interest rate risk in respect of cash flow and fair value

Interest rate risk arises mainly as a result of changes in interest rates which affect: finance costs of debt bearing interest at variable rates (or short-term maturity debt expected to be renewed), as a result of fluctuations in interest rates, and the value of non­current liabilities that bear interest at fixed rates. Atento Group’s finance costs are exposed to fluctuations in interest rates. As of December 31, 2017, 12.8% of Atento Group’s finance costs are exposed to fluctuations in interest rates(excluding the effect of financial derivative instruments), compared to 40.6% as of December 31, 2016.

The Atento Group’s policy is to monitor the exposure to interest at risk. As described in Note 14, the Atento Group has entered to interest rate swaps that have the economic effect of converting floating­rate borrowings into fixed interest rate borrowings.

As of December 31, 2017, the estimated fair value of the interest rate hedging instruments related to the Brazilian Debentures totaled 1,212 thousand U.S. dollars (1,330 thousand U.S. dollars financial asset as of December 31, 2016), which was recorded as a financial liability. Based on the total indebtedness of 486,291 thousand U.S. dollars as of December 31, 2017 and not taking into account the impact of the interest rate hedging instruments referred to above, a 1% change in interest rates would impact our net interest expense by 1,648 thousand U.S. dollars (2,353 thousand U.S. dollars as of December 31, 2016).

The table below shows the impact of a +/­10 basis points variation in the CDI interest rate curves on these derivatives.

Thousands of U.S. dollars
INTEREST RATE2017
FAIR VALUE(1,212)
0.10%(1,174)
-0.10%(1,248)

Foreign currency risk

Our foreign currency risk arises from local currency revenues, receivables and payables, while the U.S. dollar is our functional and reporting currency. We benefit to a certain degree from the fact that the revenue we collect in each country, in which we have operations, is generally denominated in the same currency as the majority of the expenses we incur.

In accordance with our risk management policy, whenever we deem it appropriate, we manage foreign currency risk by using derivatives to hedge any exposure incurred in currencies other than those of the functional currency of the subsidiary. .

Upon issuance of the Senior Secured Notes due 2022 denominated in U.S. dollars, we entered into new cross-currency swaps pursuant to which we exchanged an amount of U.S. dollars for an amount of Euro, Mexican Pesos, Peruvian Soles and Brazilian Reais.

The table below shows the impact of a +/­10 basis points variation in the interest rate curve on the value of the cross-currency swaps.

Thousands of U.S. dollars
CROSS-CURRENCY2017
FAIR VALUE3,037
0.10%2,718
-0.10%3,838

As of December 31, 2017, the estimated fair value of the cross-currency swaps designated as hedging instruments totaled an asset of 3,037 thousand U.S. dollars (asset of 75,960 thousand U.S. dollars as of December 31, 2016).

2016Financial assets (*)Financial liabilities (*)Sensitivity analysis
Functional currency - financial asset/liability currencyFunctional currency (thousands) Asset currency (thousands) U.S. Dollar (thousands) Functional currency (thousands)Liability currency (thousands)U.S. Dollar (thousands)Appreciation of asset/liability currency vs functional currency Appreciation of financial assets in functional currency Statements of operations (thousands of U.S. dollar) Appreciation of financial liabilities in functional currency Statements of operations (thousands of U.S. dollar)
Euro - Colombian Pesos244817,344272---10%2,846.743569928745--
Euro - Dirham Moroccan 2522,848281---10%9.606434929747--
Euro - Peruvian Nuevos Soles6424172---10%3.18380367612--
Euro - USD 3,5153,7053,705---10%0.94869003,905412--
Chilean Pesos – USD212-----10%0.0013487235---
Mexican Pesos – USD6-----10%0.0436482----
Brazilian Reais – USD622---10%0.27614997---
Guatemalan Quetzal – USD2,442325325---10%0.11964702,71336--
Colombian Pesos – USD590,271197197---10%0.0002999655,85722--
Peruvian Nuevos Soles - USD 23,4846,9986,9985,1381,5311,53110%0.268176426,0947785,709(170)
United States Dolar - Euro11,06810,50011,068---10%0.853808912,2981,230--
United States Dolar - MXN791,62779---10%18.5574600889--
Chilean Pesos – Euro292-----10%0.0012795324---
(*) Financial liabilities correspond to borrowing in currencies other than functional currencies. Financial assets correspond to cash and cash equivalents in currencies other than functional currencies.

2017Financial assets (*)Financial liabilities (*)Sensitivity analysis
Functional currency - financial asset/liability currencyFunctional currency (thousands) Asset currency (thousands) U.S. Dollar (thousands) Functional currency (thousands)Liability currency (thousands)U.S. Dollar (thousands)Appreciation of asset/liability currency vs functional currency Appreciation of financial assets in functional currency Statements of operations (thousands of U.S. dollar) Appreciation of financial liabilities in functional currency Statements of operations (thousands of U.S. dollar)
Euro - Colombian Pesos253904,880303---10%3,220.840080028134--
Euro - Dirham Moroccan 5275,915632---10%10.100096858670--
Euro - Peruvian Nuevos Soles3714444---10%3.5025557415--
Euro - USD 2,9993,5973,597---10%1.07937003,332400--
Chilean Pesos – USD7,9821313---10%0.00146298,8751--
Mexican Pesos – USD970-49---10%0.0457715-(49)--
Brazilian Reais – USD2788---10%0.2720677301--
Guatemalan Quetzal – USD821111---10%0.1225362911--
Colombian Pesos – USD610,695205205---10%0.0003016678,55023--
Peruvian Nuevos Soles - USD 26,3588,1238,1235,8221,7941,79410%0.277349829,2879036,469(199)
United States Dolar - Euro868---10%0.750437891--
United States Dolar - MXN1020210---10%17.6966100111--
Chilean Pesos – Euro132,016179215---10%0.0012198146,42320--
(*) Financial liabilities correspond to borrowing in currencies other than functional currencies. Financial assets correspond to cash and cash equivalents in currencies other than functional currencies.

b) Credit risk

The Atento Group seeks to conduct all of its business with reputable national and international companies and institutions established in their countries of origin, to minimize credit risk. As a result of this policy, the Atento Group has no material adjustments to make to its credit accounts (see Note 13).

Accordingly, the Atento Group’s commercial credit risk management approach is based on continuous monitoring of the risks assumed and the financial resources necessary to manage the Group’s various units, in order to optimize the risk­reward relationship in the development and implementation of business plans in the course of their regular business.

Credit risk arising from cash and cash equivalents is managed by placing cash surpluses in high quality and highly liquid money-market assets. These placements are regulated by a master agreement revised annually on the basis of the conditions prevailing in the markets and the countries where Atento operates. The master agreement establishes: (i) the maximum amounts to be invested per counterparty, based on their ratings (long- and short-term debt ratings); (ii) the maximum period of the investment; and (iii) the instruments in which the surpluses may be invested.

The Atento Group’s maximum exposure to credit risk is primarily limited to the carrying amounts of its financial assets (see Notes 11 to 15). The Atento Group holds no guarantees as collection insurance. As disclosed in Note 23, the Atento Group carries out significant transactions with the Telefónica Group, which represents 39.2% in 2017 and 33.7% in 2016.

c) Liquidity risk

The Atento Group seeks to match its debt maturity schedule to its capacity to generate cash flows to meet the payments falling due, factoring in a degree of cushion. In practice, this has meant that the Atento Group’s average debt maturity must be longer enough to support business operation normal conditions (assuming that internal projections are met). A maturity schedule for the Atento Group’s financial liabilities is provided in Note 16.

4.2 Capital Management

The Atento Group’s Finance Department, which is in charge of the capital management, takes various factors into consideration when determining the Group’s capital structure.

The Atento Group’s capital management goal is to determine the financial resources necessary both to continue its recurring activities and to maintain a capital structure that optimizes own and borrowed funds.

The Atento Group sets an optimal debt level in order to maintain a flexible and comfortable medium-term borrowing structure, in order to be able to carry out its routine activities under normal conditions and to address new opportunities for growth. Debt levels are kept in line with forecasted future cash flows and with quantitative restrictions imposed under financing contracts.

As indicated in Note 17, among the restrictions imposed under financing arrangements, the debenture contract lays out certain general obligations and disclosures in respect of the lending institutions, specifically, Atento Brasil S.A. must comply with the quarterly net financial debt/EBITDA ratio set out in the contract terms.

In addition to these general guidelines, we take into account other considerations and specifics when determining our financial structure, such as country risk, tax efficiency and volatility in cash flow generation.

The contract also sets out additional restrictions, including limitations on dividends, payments and distributions to shareholders and capacity to incur additional debt.

The Super Senior Revolving Credit Facility, described in Note 17, carries no financial covenant obligations regarding debt levels. However, the notes do impose limitations on the distributions on dividends, payments or distributions to the shareholders, the incurring of additional debt, and on investments and disposal of assets.

As of the date of these consolidated financial statements, the Atento Group was in compliance with all restrictions established in the aforementioned financing contracts, and does not foresee any future non-compliance. To that end, the Atento Group regularly monitors figures for net financial debt with third parties and EBITDA.

Net financial debt with third parties at December 31, 2016 and 2017 is as follow:

Thousands of U.S. dollars
20162017
Senior Secured Notes (Note 17)303,350398,346
Brazilian bonds - Debentures (Note 17)156,59621,055
Bank borrowings (Note 17)71,35356,392
Finance lease payables (Note 17)3,63610,498
Less: Cash and cash equivalents (Note 15)(194,035)(141,762)
Net financial debt with third parties 340,900344,529

Fair value estimation

a) Level 1: The fair value of financial instruments traded on active markets is based on the quoted market price at the reporting date.

b) Level 2: The fair value of financial instruments not traded in active market (i.e. OTC derivatives) is determined using valuation techniques. Valuation techniques maximize the use of available observable market data, and place as little reliance as possible on specific company estimates. If all of the significant inputs required to calculate the fair value of a financial instrument are observable, the instrument is classified in Level 2. The Atento Group’s Level 2 financial instruments comprise interest rate swaps used to hedge floating rate loans and cross-currency swaps.

c ) Level 3: If one or more significant inputs are not based on observable market data, the instrument is classified in Level 3.

The Atento Group’s assets and liabilities measured at fair value as of December 31, 2016 and 2017 are classified in Level 2. No transfers were carried out between the different levels during the period.

The assets measured at fair value are the derivative financial instruments. The liabilities measured at fair value are the derivative financial instruments and the options for acquisitions of NCI.

v3.8.0.1
BUSINESS COMBINATIONS
12 Months Ended
Dec. 31, 2017
Disclosure of detailed information about business combination [abstract]  
Disclosure of business combinations [text block]
Thousands of U.S. dollars
Assets
Cash and cash equivalents315
Accounts receivable2,273
Escrow account2,884
Deferred taxes assets2,079
Other credits679
Property, plant and equipment 491
Intangibles (b)2,628
Liabilities
Other obligations(2,932)
Provisions for legal proceedings and contingent liabilities(13,105)
Total net liabilities assumed at fair value(4,688)
Non-controlling interest measured at fair value928
Goodwill on acquisition15,214
Total of the consideration11,454
Purchase price consideration
Consideration paid8,953
Contingent consideration2,501
Total consideration11,454
Analysis of the cash flow of the acquisition
Consideration paid8,953
Net cash acquired(315)
Outflow cash, net (a)8,638

  • Included in the cash flow from investing activities
  • Refer to customer base, non-compete agreement, backlog and database identified as part of the purchase price allocation.

The acquisition transaction costs totaling 890 thousand Brazilian Reais (273 thousand U.S. dollars) were recognized in the statements of operations.

Since the acquisition date, RBrasil contributed to the Company with revenues of 5,951 thousand U.S. dollars and pre-tax profit of 858 thousand U.S. dollars. If the acquisition had occurred on January 1, 2016, the contribution of net revenues and pre-tax result in the Companys consolidated financial statements for the year ended December 31, 2016, would amount 18,392 and (2,254) thousand U.S. dollars, respectively.

Guarantees

The amount equivalent to 9,400 Brazilian Reais (2,884 thousand U.S. dollars) of the consideration transferred to the sellers that no longer are shareholders of RBrasil was transferred to an escrow account in order to guarantee payment for any loss that is indemnifiable by them.

The guarantee of the payment of any potential loss identifiable by the sellers who continue being minority shareholders of RBrasil to the Company pledged their rights to all dividends, interest in own capital, incomes, distributions, salaries, bonuses, remuneration, capital reimbursement and any other amounts that may come to be credited, paid, distributed or otherwise delivered, for any reason, by RBrasil to these shareholders.

Put/Call options

As per the Shareholders' Agreement, the Company has a purchase option, where non-controlling shareholders irrevocably and irreversibly grant to the Company, through that instrument, the right, but not the obligation, at the sole discretion of the Company, to acquire all of their shares, and the non-controlling shareholders, through the exercise of that right, shall be obliged to sell their shares to the Company ("call option"). The call option may be exercised by any controlling shareholder between January 1, 2019 and December 31, 2020. The Shareholders' Agreement also provides for a put option, where the non-controlling shareholders have the right, irrevocable and irreversible, but not the obligation, to sell all of their shares to the Company ("put option"). The put option may be exercised by non-controlling shareholders between January 1, 2019 and December 31, 2020.

The exercise price of the call option will be determined by multiples, already defined in the Shareholders' Agreement, of the EBITDA of the year immediately prior to the exercise of the option, multiplied by the percentage of participation to be acquired.

IFRS 3 does not provide specific guidance on how such contracts should be accounted for in a business combination. To determine the appropriate accounting treatment, IAS 39 - financial Instruments: recognition and measurement and IAS 32- financial instruments: presentation, were considered.

On the basis of the above, the Company recognized a financial liability related to the potential for acquisition of non-controlling interest for an amount of 3,444 Brazilian Reais (1,057 thousand U.S. dollars). The financial liability was recognized against specific reserve in shareholders' equity, considering that these are transactions between shareholders.

b) Nova Interfile Holding Ltda

On June 9, 2017, the Company through its indirect subsidiary Atento Brasil S.A. acquired the control and 50,00002% of Interfile Serviços de BPO Ltda. and 50,00002% of Interservicer – Serviços em Crédito Imobiliário Ltda, (“Interfile”) leading providers of BPO services and solutions, including credit origination, for the banking and financial services sector in Brazil.

The total amount paid for this acquisition was 14,664 thousand U.S. dollars, net of cash acquired.

Valuations were carried out to measure the preliminary fair value of assets acquired and liabilities assumed for the a