CORPORACION AMERICA AIRPORTS S.A., 20-F filed on 4/8/2020
Annual and Transition Report (foreign private issuer)
v3.20.1
Document and Entity Information
12 Months Ended
Dec. 31, 2019
shares
Cover [Abstract]  
Entity Registrant Name CORPORACION AMERICA AIRPORTS S.A.
Entity Central Index Key 0001717393
Entity Interactive Data Current Yes
Trading Symbol caap
Entity Current Reporting Status Yes
Document Registration Statement false
Entity Filer Category Accelerated Filer
Current Fiscal Year End Date --12-31
Entity Well-known Seasoned Issuer No
Entity Voluntary Filers No
Entity Common Stock, Shares Outstanding 160,022,262
Document Type 20-F
Document Period End Date Dec. 31, 2019
Amendment Flag false
Document Fiscal Year Focus 2019
Document Fiscal Period Focus FY
Entity Emerging Growth Company false
Entity Shell Company false
Document Annual Report true
Document Transition Report false
Document Shell Company Report false
v3.20.1
CONSOLIDATED STATEMENT OF INCOME - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
CONSOLIDATED STATEMENT OF INCOME      
Revenue $ 1,558,640 $ 1,426,145 $ 1,575,153
Cost of services (1,138,425) (971,425) (1,029,983)
Gross profit 420,215 454,720 545,170
Selling, general and administrative expenses (168,291) (171,899) (194,201)
(Impairment loss) / Reversal of previous impairment (42,801)   3,065
Other operating income 17,259 20,207 19,953
Other operating expense (2,747) (4,054) (4,838)
Operating income 223,635 298,974 369,149
Share of loss in associates (5,353) (4,146) (15,841)
Income before financial results and income tax 218,282 294,828 353,308
Financial income 51,889 76,281 62,555
Financial loss (233,521) (331,147) (302,047)
Inflation adjustment (25,391) (36,460)  
Income before income tax expense 11,259 3,502 113,816
Income tax expense (17,079) (14,101) (46,925)
(Loss) / Income for the year (5,820) (10,599) 66,891
Attributable to:      
Owners of the parent 9,099 7,125 63,491
Non-controlling interest (14,919) (17,724) 3,400
(Loss) / Income for the year $ (5,820) $ (10,599) $ 66,891
Earnings per share attributable to the owners of the parent      
Weighted average number of ordinary shares (thousands) 160,022 158,848 148,118
Basic and diluted earnings per share (In dollars per share) $ 0.06 $ 0.04 $ 0.43
v3.20.1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME      
(Loss) / Income for the year $ (5,820) $ (10,599) $ 66,891
Items that will not be reclassified subsequently to profit or loss:      
Remeasurement of defined benefit obligation (208) 277 18
Items that may be subsequently reclassified to profit or loss:      
Share of other comprehensive income / (loss) from associates 35 (1,150) 432
Currency translation adjustment (24,847) (247,712) (25,585)
Other comprehensive loss for the year, net of income tax (25,020) (248,585) (25,135)
Total comprehensive (loss) / income for the year (30,840) (259,184) 41,756
Attributable to:      
Owners of the parent (4,295) (154,213) 34,926
Non-controlling interest (26,545) (104,971) 6,830
Total comprehensive (loss) / income for the year $ (30,840) $ (259,184) $ 41,756
v3.20.1
CONSOLIDATED STATEMENT OF FINANCIAL POSITION - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Non-current assets    
Intangible assets, net $ 3,002,121 $ 2,933,542
Property, plant and equipment, net 79,612 74,299
Right-of-use asset 8,380  
Investments in associates 9,929 10,886
Other financial assets at fair value through profit or loss 3,309 3,372
Other financial assets at amortized cost 2,494 2,339
Deferred tax assets 147,475 153,486
Other receivables 119,954 133,193
Trade receivables 1,326 1,419
Total non-current assets 3,374,600 3,312,536
Current assets    
Inventories 11,302 9,769
Other financial assets at fair value through profit or loss 17,341 38,007
Other financial assets at amortized cost 66,413 42,972
Other receivables 101,676 66,531
Current tax assets 10,311 13,701
Derivative financial instruments 27  
Trade receivables 104,877 116,897
Cash and cash equivalents 195,696 244,865
Total current assets 507,643 532,742
Total assets 3,882,243 3,845,278
EQUITY    
Share capital 160,022 160,022
Share premium 180,486 180,486
Free distributable reserve 385,055 385,055
Non-distributable reserve 1,351,883 1,351,883
Currency translation adjustment (392,101) (378,803)
Legal reserves 176 176
Other reserves (1,324,887) (1,324,731)
Retained earnings 403,255 394,156
Total attributable to owners of the parent 763,889 768,244
Non-controlling interests 434,725 454,453
Total equity 1,198,614 1,222,697
Non-current liabilities    
Borrowings 1,033,221 1,027,751
Deferred tax liabilities 233,115 271,175
Other liabilities 848,410 871,596
Lease liabilities 5,783  
Trade payables 798 1,508
Total Non-current liabilities 2,121,327 2,172,030
Current liabilities    
Borrowings 175,123 98,907
Other liabilities 230,122 225,448
Lease liabilities 3,144  
Current tax liabilities 5,156 11,555
Trade payables 148,757 114,641
Total current liabilities 562,302 450,551
Total liabilities 2,683,629 2,622,581
Total equity and liabilities $ 3,882,243 $ 3,845,278
v3.20.1
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - USD ($)
$ in Thousands
Share Capital
Share Premium
Free Distributable Reserves
Non Distributable Reserves
Legal Reserves
Currency Translation Adjustment
Other reserves
Retained Earnings
Total
Non-controlling interests
Total
Balance at Dec. 31, 2016 $ 20 $ 0 $ 1,907,328 $ 0 $ 2 $ (188,721) $ (1,344,022) $ 74,543 $ 449,150 $ 354,174 $ 803,324
Shareholders contributions (Note 25f and 25b)     6,600           6,600   6,600
Income / (loss) for the year               63,491 63,491 3,400 66,891
Refund of cash contributions (Note 25b)     (28,893)           (28,893)   (28,893)
Conversion (Note 25a) 1,499,980   (1,499,980)                
Other comprehensive (loss) / income for the year           (28,579) 14   (28,565) 3,430 (25,135)
Changes in non-controlling interests (Note 25f and 25d)                   (25,645) (25,645)
Balance at Dec. 31, 2017 1,500,000 0 385,055 0 2 (217,300) (1,344,008) 138,034 461,783 335,359 797,142
Adjustment on adoption of IFRS 9 (net of tax)               2,356 2,356 542 2,898
Adjustment on initial application of IAS 29 (Note 2.X)               246,815 246,815 196,408 443,223
Adjusted balances at January 1, 2018 1,500,000   385,055   2 (217,300) (1,344,008) 387,205 710,954 532,309 1,243,263
Shareholders contributions (Note 25f and 25b)                   43,703 43,703
Income / (loss) for the year               7,125 7,125 (17,724) (10,599)
Transfer to legal reserve         174     (174)      
Reverse stock split (Note 25a) (1,351,883)     1,351,883              
Initial Public Offering (Note 25a and 25c) 11,905 180,486             192,391   192,391
Other comprehensive (loss) / income for the year           (161,503) 165   (161,338) (87,247) (248,585)
Changes in non-controlling interests (Note 25f and 25d)             19,112   19,112 (16,588) 2,524
Balance at Dec. 31, 2018 160,022 180,486 385,055 1,351,883 176 (378,803) (1,324,731) 394,156 768,244 454,453 1,222,697
Shareholders contributions (Note 25f and 25b)                   27,506 27,506
Income / (loss) for the year               9,099 9,099 (14,919) (5,820)
Other comprehensive (loss) / income for the year           (13,298) (96)   (13,394) (11,626) (25,020)
Changes in non-controlling interests (Note 25f and 25d)             (60)   (60) (20,689) (20,749)
Balance at Dec. 31, 2019 $ 160,022 $ 180,486 $ 385,055 $ 1,351,883 $ 176 $ (392,101) $ (1,324,887) $ 403,255 $ 763,889 $ 434,725 $ 1,198,614
v3.20.1
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities      
(Loss) / Income for the year $ (5,820) $ (10,599) $ 66,891
Adjustments for:      
Amortization and depreciation 182,270 175,829 138,130
Deferred income tax (31,346) (24,999) (41,843)
Current income tax 48,425 39,100 88,768
Share of loss in associates 5,353 4,146 15,841
(Impairment loss) / Reversal of previous impairment 42,801   (3,065)
(Gain) / Loss on disposals of property, plant and equipment and intangible assets (16) 3,170 3,210
Unpaid concession fees 47,658 45,581 44,159
Low value, short term and variable lease payments (2,831)    
Changes in liability for concessions 88,488 86,331 98,122
Interest expense 92,687 96,301 115,223
Other financial results, net (36,210) (22,467) (28,955)
Net foreign exchange 37,390 91,434 59,221
Other accruals 22,763 4,027 7,033
Inflation adjustment 41,032 35,901  
Acquisition of Intangible assets (353,725) (206,622) (255,488)
Income tax paid (45,213) (45,664) (105,716)
Changes in working capital (153,419) (79,808) (250,953)
Net cash (used in) / provided by operating activities (19,713) 191,661 (49,422)
Cash flows from investing activities      
Cash contribution in associates (4,425) (2,907)  
Acquisition of other financial assets (103,421) (76,671) (51,202)
Disposals of other financial assets 110,005 39,406 31,608
Purchase of Property, plant and equipment (17,117) (11,139) (11,503)
Acquisition of Intangible assets (960) (1,176) (1,664)
Loans with related parties 4,157 (3,349) (12,762)
Proceeds from sale of Property, plant and Equipment 23 49 175
"Piana di Castello" land advance   (3,583)  
Others (408) 185 186
Net cash used in investing activities (12,146) (59,185) (45,162)
Cash flows from financing activities      
Proceeds from cash contributions 27,506 43,703 6,600
Refund of cash contributions     (28,893)
Additional acquisitions in subsidiaries   (40,731)  
Disposal of partial interest in subsidiaries   56,638  
Proceeds from borrowings 196,977 194,546 594,439
Initial Public Offering   195,601  
Initial Public Offering expenses paid   (5,495)  
Release of guarantee deposits   92,913  
Release of restricted cash     30,873
Leases payments (5,130)    
Loans paid (90,457) (517,253) (250,276)
Interest paid (78,832) (70,637) (106,953)
Guarantee deposit (3,007)   (92,999)
Dividends paid (22,482) (14,965) (23,836)
Net cash provided by/ (used in) financing activities 24,575 (65,680) 128,955
(Decrease) / Increase in cash and cash equivalents (7,284) 66,796 34,371
Cash and cash equivalents      
At the beginning of the year 244,865 221,601 182,116
Effects of exchange rate changes and inflation adjustment on cash and cash equivalents (41,885) (43,532) 5,114
(Decrease) / Increase in cash and cash equivalents (7,284) 66,796 34,371
At the end of the year $ 195,696 $ 244,865 $ 221,601
v3.20.1
General information and initial public offering
12 Months Ended
Dec. 31, 2019
General information and initial public offering  
General information and initial public offering

1       General information and initial public offering

General Information

Corporación América Airports S.A. (the “Company” or “CAAP”) is a holding company primarily engaged through its operating subsidiaries in the acquisition, development and operation of airport concessions. The Company and its operating subsidiaries are collectively referred to hereinafter as the “Group”.

The Company was formed as a private limited liability company under the laws of the Grand Duchy of Luxembourg on December 14, 2012. The Company is ultimately controlled by Southern Cone Foundation (“SCF”), a foundation organized under the laws of the Principality of Liechtenstein. The address of its registered office is in Vaduz.

The Group currently has operations in Argentina, Brazil, Uruguay, Armenia, Italy, Ecuador and Peru.

Initial Public Offering

In connection with the initial public offering, the Company was converted on September 14, 2017, from a Luxembourg Limited Liability Company named A.C.I. Airports International S.à r.l. (“ACI”) into a Luxembourg Corporation and changed its name to Corporación América Airports S.A. (the “Conversion”). In conjunction with the Conversion, all of the Company’s outstanding equity interests were converted into one billion five hundred million (1,500,000,000) shares of common stock which were held by ACI Airports S.à r.l. (the “Shareholder”). In connection with the Conversion, Corporación América Airports S.A. continues to hold all assets of ACI and assumes all of its liabilities and obligations.

The main adjustment of the Conversion principally gave effect to the recognition of the share capital of Corporación América Airports S.A. for a total nominal value of USD 1,500 million (USD 1 per share) and the elimination of the shares of A.C.I. Airports International S.à r.l. for a total amount of USD 20 thousand and of the Free distributable reserves for a total amount of USD 1,499.9 million.

On January 19, 2018, the Shareholder approved a 1-to-10.12709504 reverse stock split of its common shares, consequently decreasing the outstanding common shares from 1,500,000,000 common shares to 148,117,500 common shares (the “Reverse Stock Split”). The nominal value of USD 1.00 of each common share did not change as a result of the Reverse Stock Split. It implied a reduction of share capital of USD 1,351,883 and an increase in Non-Distributable Reserves. In accordance with the provisions of the amended and restated articles of association of the Company, the non-distributable reserve may be distributed to its shareholders, from time to time, on a pro rata basis.

On February 2, 2018, CAAP submitted the final prospectus to the U.S. Securities and Exchange Commission as an initial public offering of common shares of Corporación América Airports S.A. which was declared effective by such commission. The offering was of 11,904,762 common shares with a nominal value of USD 1 and the Shareholder offered 16,666,667 common shares which were fully subscribed. As a consequence of the Initial Public Offering, the share capital of CAAP has increased to 160,022,262 shares. The initial public offering price per common share was USD 17.00. As a result, CAAP had proceeds of USD 195,601 net of underwriting discounts and commissions but before other issuing expenses.

On February 5, 2018, the Executive Committee; in accordance with (i) the provisions of the articles of associations of the Company, and (ii) the resolutions taken by the Company´s board of directors which determined and confirmed the creation and composition of the Executive Committee and also the powers delegated to it with respect of the Initial Public Offering; resolved to approve the issuance of the new shares, acknowledged having received sufficient evidence showing that the subscription price of the new shares had been paid, and the amendment of the articles of associations in respect of the new share capital of USD 160,022,262.

These consolidated financial statements have been approved for issuance by the Company on April 3, 2020.

v3.20.1
Basis of presentation and accounting policies
12 Months Ended
Dec. 31, 2019
Basis of presentation and accounting policies  
Basis of presentation and accounting policies

2       Basis of presentation and accounting policies

A.      Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of preparation

The Group’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the Interpretations of the International Financial Reporting Interpretations Committee (IFRIC) applicable to companies reporting under IFRS. The consolidated financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB).

Presentation in the consolidated statement of financial position differentiates between current and non-current assets and liabilities. Assets and liabilities are regarded as current if they mature within one year or within the normal business cycle of the Group, or are held for sale.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.F.

Several balance sheet consolidated statements of final position and consolidated statement of income items have been combined in the interests of clarity. These items are stated and explained separately in the notes to the consolidated financial statements. The statement of income is structured according to the function of expense method (nature of the expenses is classified in notes).

The consolidated financial statements are presented in thousands of U.S. Dollars unless otherwise stated. All amounts are rounded off to thousands of U.S. Dollars unless otherwise stated.

As such, insignificant rounding differences may occur. A dash (“—”) indicates that no data was reported for a specific line item in the relevant financial year or period or when the pertinent figure, after rounding, amounts to nil.

The fiscal year begins on January 1 and ends on December 31.

New and amended standards adopted by the Group

The group has applied the following standard for the first time for their annual reporting period commencing on January 1, 2019:

·

IFRS 16 Leases

·

Prepayment Features with Negative Compensation - Amendments to IFRS 9

·

Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28

·

Annual Improvements to IFRS Standards 2015 - 2017 Cycle

·

Plan Amendment, Curtailment or Settlement - Amendments to IAS 19

·

Interpretation 23 Uncertainty over Income Tax Treatments.

The group had to change its accounting policies as a result of adopting IFRS 16. The group elected to apply the simplified transition approach and has not restated comparative amounts for the year prior to first adoption. This is disclosed in Note 2.Y. The other amendments and interpretations listed above did not have any material impact on the amounts recognized in prior periods and are not expected to significantly affect the current or future periods.

During the period ended December 31, 2018, the group has applied the following standards and amendments for the first time for their annual reporting period commencing on January 1, 2018:

-  IFRS 9 Financial Instruments

-  IFRS 15 Revenue from Contracts with Customers

-  Annual Improvements 2014‑2016 cycle

-  Interpretation 22 Foreign Currency Transactions and Advance Consideration

The group had to change its accounting policies and make certain retrospective adjustments following the adoption of IFRS 9 as disclosed in Note 3.A(iii). 

New and amended standards not yet adopted for CAAP

Certain new accounting standards and interpretations have been published that are not mandatory for December 31, 2019 reporting periods and have not been early adopted by the group. The group’s management is currently evaluating the potential impact of the new standards and interpretations that are set out below.

Other standards and interpretations non-significant for the Company’s financial statements:

- Amendments to IAS 1 and 8 – Definition of Material. These amendments must be applied prospectively for annual periods beginning on or after January 1, 2020.

- Amendments to IFRS 3 – Definition of a Business. Entities are required to apply the amendments to transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020.

- Amendments to references to the conceptual framework in IFRS standards (issued in March 2018). These amendments must be applied as from January 1, 2020.

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

B         Group accounting policies

(1)       Subsidiaries and transactions with non-controlling interests

Subsidiaries are all entities over which the Group has control. The Group controls an entity when it 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 over the entity. Subsidiaries are fully consolidated from the date on which control is exercised by the Company and are no longer consolidated from the date control ceases.

The acquisition method is used to account for the business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred or assumed at the date of exchange, and the equity interest issued by the group. Acquisition-related costs are expensed as incurred. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

Any non-controlling interest in the acquiree is measured either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. Accounting treatment is applied on an acquisition by acquisition basis.

The excess of the aggregate of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the Consolidated Statement of Income.

Transactions with non-controlling interests that do not result in a loss of control are accounted as equity transactions with owners of the Company. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

Material inter-company transactions, balances and unrealized gains and losses have been eliminated in consolidation. However, financial gains and losses from intercompany transactions may arise when the subsidiaries have different functional currencies. These financial gains and losses are included in the Consolidated Statement of Income under Financial income and Financial loss.

(2)       Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor`s share of profit or loss of the investee after the date of acquisition. The Company’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.

Unrealized gains or losses arising from transactions between the Group and its associates are eliminated to the extent of CAAP’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group. The Company’s pro-rata share of earnings in associates is recorded in the Consolidated Statement of Income under Share of loss in associates and Share of other comprehensive income/ (loss) from associates. The Company’s pro-rata share of changes in other reserves is recognized in the Consolidated Statement of Changes in Equity under Other Reserves.

(3)       List of Subsidiaries

Detailed below are the subsidiaries of the Company which have been consolidated in the Consolidated Financial Statements. The percentage of ownership refers to the direct and indirect ownership of Corporación América Airports S.A in their subsidiaries at each period-end.

Holdings companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of ownership at

 

 

 

Country of

 

 

 

 

 

December 31, 

 

Company

    

incorporation

    

Local currency

    

Main activity

    

2019

    

2018

 

2017

 

Abafor S.A. (1)

 

Uruguay

 

Uruguayan pesos

 

Holding company

 

 100.00

%  

 100.00

%  

 100.00

%

ACI Airport Sudamérica S.A.U.

 

Spain

 

Euros

 

Holding company

 

 100.00

%  

 100.00

%  

 100.00

%

ACI Airports Italia S.A.U. (1) 

 

Spain

 

Euros

 

Holding company

 

 100.00

%  

 100.00

%  

 100.00

%

America International Airports LLC (AIA) (1)

 

USA

 

U.S. dollars

 

Holding company

 

 100.00

%  

 100.00

%  

 100.00

%

Cargo & Logistics S.A. (1)

 

Argentina

 

Argentine pesos

 

Holding company

 

81.49

%  

81.49

%  

81.49

%

CASA Aeroportuaria S.A. (2)

 

Argentina

 

Argentine pesos

 

Holding company

 

 —

 

 99.98

%  

 99.98

%

Cedicor S.A.

 

Uruguay

 

Uruguayan pesos

 

Holding company

 

 100.00

%  

 100.00

%  

 100.00

%

Cerealsur S.A.

 

Uruguay

 

Uruguayan pesos

 

Holding company

 

 100.00

%  

 100.00

%  

 100.00

%

Corporación Aeroportuaria S.A. (2)

 

Argentina

 

Argentine pesos

 

Holding company

 

 99.98

%  

 99.98

%  

 99.98

%

Corporación América Italia S.p.A.

 

Italy

 

Euros

 

Holding company

 

 75.00

%  

 75.00

%  

 100.00

%

Corporación América S.A.

 

Argentina

 

Argentine pesos

 

Holding company

 

 95.37

%  

 95.37

%  

 95.37

%

Corporación América Sudamericana S.A.

 

Panamá

 

U.S. dollars

 

Holding company

 

94.69

%  

 94.69

%  

 94.69

%

DICASA Spain S.A.U. (1)

 

Spain

 

Euros

 

Holding company

 

 100.00

%  

 100.00

%  

 100.00

%

GOFI Investments S.L (3)

 

Spain

 

Euros

 

Holding company

 

 —

 

 —

 

 100.00

%

Inframerica Participaçoes S.A. (1)

 

Brazil

 

Brazilian real

 

Holding company

 

 99.97

%  

 99.96

%  

 99.96

%

Yokelet S.L. (1)

 

Spain

 

Euros

 

Holding company

 

 100.00

%  

 100.00

%  

 100.00

%

 

(1) These companies do not have relevant net assets other than the share of ownership in the operating companies included in the table below.

(2) These companies were merged on June 30, 2019.

(3) This company was dissolved on March 15, 2018.

Operating companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of ownership at

 

 

 

Country of

 

 

 

 

 

December 31, 

 

Company

    

incorporation

    

Local currency

    

Main activity

    

2019

    

2018

    

2017

 

ACI do Brasil S.A.

 

Brazil

 

Brazilian real

 

Service company

 

99.99

%  

99.99

%  

 —

 

Aerocombustibles Argentinos S.A.

 

Argentina

 

Argentine pesos

 

Fueling company

 

92.98

%  

92.98

%  

92.98

%

Aeropuerto de Bahía Blanca S.A.

 

Argentina

 

Argentine pesos

 

Airports Operation

 

81.06

%  

81.06

%  

81.06

%

Aeropuertos Argentina 2000 S.A.("AA2000") (4)

 

Argentina

 

Argentine pesos

 

Airports Operation

 

81.29

%  

81.29

%  

81.29

%

Aeropuertos del Neuquén S.A.

 

Argentina

 

Argentine pesos

 

Airports Operation

 

74.10

%  

74.10

%  

74.10

%

Armenia International Airports C.J.S.C.

 

Armenia

 

Dram

 

Airports Operation

 

100.00

%  

100.00

%  

100.00

%

Consorcio Aeropuertos Internacionales S.A.

 

Uruguay

 

Uruguayan pesos

 

Airports Operation

 

100.00

%  

100.00

%  

100.00

%

Enarsa Aeropuertos S.A.

 

Argentina

 

Argentine pesos

 

Fuel plants

 

76.29

%  

76.29

%  

76.29

%

Inframerica Concessionária do Aeroporto de Brasilia S.A. ("ICAB")

 

Brazil

 

Brazilian real

 

Airports Operation

 

50.98

%  

50.98

%  

50.98

%

Inframerica Concessionária do Aeroporto de São Gonçalo do Amarante S.A. ("ICASGA")

 

Brazil

 

Brazilian real

 

Airports Operation

 

99.98

%  

99.98

%  

99.97

%

Paoletti América S.A. (5)

 

Argentina

 

Argentine pesos

 

Service company

 

40.65

%  

40.65

%  

40.65

%

Puerta del Sur S.A.

 

Uruguay

 

Uruguayan pesos

 

Airports Operation

 

100.00

%  

100.00

%  

100.00

%

Servicios y Tecnología Aeroportuaria S.A.

 

Argentina

 

Argentine pesos

 

Service company

 

81.39

%  

81.39

%  

81.39

%

TCU S.A.

 

Uruguay

 

Uruguayan pesos

 

Service company

 

100.00

%  

100.00

%  

100.00

%

Terminal Aeroportuaria Guayaquil S.A. ("TAGSA") (6)

 

Ecuador

 

U.S. dollars

 

Airports Operation

 

49.99

%  

49.99

%  

49.99

%

Texelrío S.A.

 

Argentina

 

Argentine pesos

 

Service company

 

56.91

%  

56.91

%  

56.91

%

Toscana Aeroporti S.p.A. (7) (8)

 

Italy

 

Euros

 

Airports Operation

 

46.71

%  

46.71

%  

51.13

%

Villalonga Furlong S.A.

 

Argentina

 

Argentine pesos

 

Service company

 

81.50

%  

81.50

%  

81.50

%

 

(4) Includes a 9.35% direct interest of Cedicor S.A. in AA2000, acquired by Cedicor S.A. in 2011. This participation is subject to the authorization by the ORSNA pursuant to section 7.2 of the Argentine Concession Agreement. As of the date of issuance of these Consolidated Financial Statements, the ORSNA has not issued any resolution approving or rejecting the aforementioned transaction. While this approval is pending, all economic and political rights pertaining to the shares, including all distributed dividends, have been assigned to Cedicor S.A.

(5) The group has control over this company based on having majority representation in the board, power to direct the process of setting of financial and operating policies and execute the operational management of such Company.

(6) The group has control over this company based on having power to direct the process of setting of financial and operating policies and execute the operational management of such Company.

(7) The group has control over this company based on having a majority stake in Corporación América Italia S.A. that has 62.28% of ownership of Toscana Aeroporti S.p.A., power to direct the process of setting of financial and operating policies and execute the operational management of such Company.

(8) The group Toscana Aeroporti S.p.A. has control over the following companies: Jet Fuel Co. S.r.l., Parcheggi Peretola S.r.l., Toscana Aeroporti Engineering S.r.l., Toscana Aeroporti Handling S.r.l. and Vola S.r.l.

Summarized financial information in respect of each of the Group´s subsidiaries that has most significant non-controlling interests is set below. The summarized financial information below represents amounts before intragroup elimination.

 

 

 

 

 

 

 

 

Toscana Aeroporti S.p.A. 

 

 

December 31, 

 

December 31, 

 

    

2019

    

2018

Non-current assets

 

245,541

 

239,489

Current assets

 

55,248

 

51,192

Total assets

 

300,789

 

290,681

Non-current liabilities

 

60,650

 

65,552

Current liabilities

 

105,298

 

89,414

Total liabilities

 

166,523

 

154,966

Equity

 

134,266

 

135,715

Revenue

 

145,633

 

155,482

Gross profit

 

41,061

 

40,405

Operating income

 

25,938

 

26,795

Financial Results

 

(1,752)

 

(1,543)

Share of income in associates

 

35

 

43

Income tax expense

 

(8,174)

 

(7,927)

Net income

 

16,047

 

17,368

Other comprehensive loss for the year

 

(2,722)

 

(6,115)

Total comprehensive income for the year

 

13,325

 

11,253

Dividends paid

 

(14,774)

 

(11,757)

 

 

 

 

 

Increase/(Decrease) in cash

 

 

 

 

Provided by operating activities

 

24,166

 

24,552

Used in investing activities

 

(8,452)

 

(11,765)

Used in financing activities

 

(9,240)

 

(11,181)

 

 

 

 

 

 

 

 

Terminal Aeroportuaria de

 

 

Guayaquil S.A. 

 

 

December 31, 

 

December 31, 

 

    

2019

    

2018

Non-current assets

 

63,914

 

46,009

Current assets

 

50,629

 

44,145

Total assets

 

114,543

 

90,154

Non-current liabilities

 

17,839

 

2,098

Current liabilities

 

49,616

 

45,130

Total liabilities

 

67,455

 

47,228

Equity

 

47,088

 

42,926

Revenue

 

109,608

 

89,226

Gross profit

 

37,650

 

37,844

Operating income

 

20,663

 

18,717

Financial Results

 

125

 

(49)

Share of income in associates

 

 —

 

 —

Income tax expense

 

(2,047)

 

(4,053)

Net income

 

18,741

 

14,615

Other comprehensive income for the year

 

36

 

63

Total comprehensive income for the year

 

18,777

 

14,678

Dividends paid

 

(14,616)

 

(16,954)

 

 

 

 

 

Increase/(Decrease) in cash

 

 

 

 

Provided by operating activities

 

8,233

 

24,743

Provided by / (Used in) investing activities

 

18,035

 

(427)

Used in financing activities

 

(619)

 

(22,298)

 

 

 

 

 

 

 

 

Inframerica Concessionária do

 

 

Aeroporto de Brasília S.A. 

 

 

December 31, 

 

December 31, 

 

    

2019

    

2018

Non-current assets

 

1,022,213

 

1,114,656

Current assets

 

42,369

 

38,807

Total assets

 

1,064,581

 

1,153,463

Non-current liabilities

 

972,476

 

1,036,857

Current liabilities

 

121,564

 

99,566

Total liabilities

 

1,094,040

 

1,136,423

Equity

 

(29,459)

 

17,040

Revenue

 

102,438

 

107,359

Gross profit

 

23,069

 

20,905

Operating income

 

12,592

 

4,188

Financial Results

 

(112,933)

 

(113,639)

Share of income in associates

 

 —

 

 —

Income tax expense

 

 —

 

41,989

Net loss

 

(100,341)

 

(67,462)

Other comprehensive loss for the year

 

(2,307)

 

(10,552)

Total comprehensive loss for the year

 

(102,648)

 

(78,014)

Dividends paid

 

 —

 

 —

 

 

 

 

  

Increase / (Decrease) in cash

 

 

 

  

(Used in) / Provided by operating activities

 

(34,947)

 

42,185

Used in investing activities

 

(106)

 

(344)

Provided by / (Used in) financing activities

 

43,286

 

(30,561)

 

 

 

 

 

 

 

 

Aeropuertos Argentina 2000 S.A.

 

 

December 31, 

 

December 31, 

 

    

2019

    

2018

Non-current assets

 

1,223,668

 

1,053,818

Current assets

 

145,516

 

199,532

Total assets

 

1,369,184

 

1,253,350

Non-current liabilities

 

513,118

 

503,679

Current liabilities

 

217,989

 

146,274

Total liabilities

 

731,107

 

649,953

Equity

 

638,077

 

603,397

Revenue

 

924,842

 

813,248

Gross profit

 

222,733

 

257,940

Operating income

 

149,788

 

197,846

Financial Results

 

(62,682)

 

(137,265)

Share of income in associates

 

 —

 

 —

Income tax expense

 

11,647

 

(33,388)

Net income

 

98,753

 

27,193

Other comprehensive loss for the year

 

(19,094)

 

(214,547)

Total comprehensive income / (loss) for the year

 

79,659

 

(187,354)

Dividends paid

 

(52,354)

 

 —

 

 

 

 

  

Increase / (Decrease) in cash

 

 

 

  

(Used in) / Provided by operating activities

 

(66,850)

 

57,527

Provided by / (Used in) investing activities

 

14,639

 

(3,732)

Provided by / (Used in) financing activities

 

12,469

 

(33,687)

 

C        Foreign currency translation

(1)     Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’).

The consolidated financial statements are presented in U.S. dollars, which is the Company’s functional currency and the Group´spresentation currency.

(2)     Transactions in currencies other than the functional currency

Transactions in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuations where items are re-measured.

At the end of each reporting period: (i) monetary items denominated in currencies other than the functional currency are translated using the closing rates; (ii) non-monetary items that are measured in terms of historical cost in a currency other than the functional currency are translated using the exchange rates prevailing at the date of the transactions; and (iii) non-monetary items that are measured at fair value in a currency other than the functional currency are translated using the exchange rates prevailing at the date when the fair value was determined. If such transactions occurred in a company applying IAS 29, after the above-mentioned translation, transactions are re-expressed in terms of the measuring unit current at the end of the reporting period.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than the functional currency are recorded as gains and losses from foreign exchange and included, if applicable, in “Financial income / Financial loss” in the Consolidated Statement of Income. Foreign exchange gains and losses derived from the net monetary position in subsidiaries applying IAS 29 are presented in real (inflation-adjusted) terms.

(3)     Translation of financial information in currencies other than the Company’s functional currency

Income and expenses of the subsidiaries whose functional currencies are not the U.S. dollar and are not in a hyperinflationary economy, are translated into U.S. dollars at average exchange rates. Assets and liabilities for each balance sheet presented are translated at the balance sheet date exchange rates.

All figures (income, expenses, assets and liabilities) of the subsidiaries whose functional currencies are the one of a hyperinflationary economy, are translated into U.S. dollars at the balance sheet date exchange rates, considering that all items are expressed in terms of the measuring unit current at the end of the reporting period.

Translation differences are recognized in  the Consolidated Statement of Comprehensive Income as “Currency Translation Adjustment”. As of December 31, 2019, 2018 and 2017, the Company recognized a translation loss of USD 24.8 million, USD 247.7 million and USD 25.6 million, respectively, arising from the translation of the investments in Argentina, Brazil, Italia and Armenia. In the case of a sale or other disposal of any of such subsidiaries, any cumulative translation difference would be recognized in income as a gain or loss from the sale of such subsidiary.

D        Intangible assets

(1)     Concession Assets

The Group, through some of its subsidiaries has been awarded the concession for the administration and operation of the following airports:

-

Puerta del Sur S.A. and Consorcio Aeropuertos Internacionales S.A. (“C.A.I.S.A.”), of major airports in Uruguay (Montevideo and Punta del Este).

-

Toscana Aeroporti S.p.A. (“TA”) a merger of Aeroporto di Firenze S.p.A. (“ADF”) and Società Aeroporto Toscano Galileo Galilei S.p.A. (“SAT”) of Florence and Pisa airports, respectively.

-

Inframerica Concessionária do Aeroporto de Brasilia S.A. and Inframerica Concessionária do Aeroporto de São Gonçalo do Amarante S.A. of Brasilia and São Gonçalo do Amarante airports, respectively.

-

Terminal Aeroportuaria de Guayaquil S.A. (TAGSA) of Guayaquil airport, “José Joaquin de Olmedo”.

-

Aeropuertos Argentina 2000 S.A. 35 airports in Argentina.

-

Armenia International Airports C.J.S.C. of the “Zvartnots” International Airport of Yerevan, Republic of Armenia.

The concession agreements are accounted for in accordance with the principles included in IFRIC 12 “Service Concession Arrangements”. The Company recognized an intangible asset for:

a)

Fixed fees payables as the result of the acquisition of the right (license) to charge users for the service of airport concession (see Note 23),

b)

Right to obtain benefits for services provided using the assets built under the construction services performed under the concession contracts.

Acquisitions correspond, according to the terms of the Concession contract, to the improvements over existing infrastructure to increase the useful life or its capacity, or the construction of new infrastructure.

General and specific borrowing costs, attributable to the acquisition, construction or production of assets that necessarily take a substantial period to get ready for their intended use or sale are added to the cost of such assets until the assets are substantially ready to be used or sold.

The intangible asset for infrastructure under each concession agreement is amortized over the contract term in accordance with an appropriate method reflecting the rate of consumption of the concession asset’s economic benefits as from the date the infrastructure is brought into service.

Accounting of the fixed concession fee under the Brazilian concession agreements is described in Note 23 a).

As part of the obligations arising from the concession agreements, the Group provides construction or upgrade services. IFRIC 12 “Service Concession Arrangements” requires to recognize revenues and costs from the construction or upgrade services provided.

The fair value of the construction or upgrade service is equal to the construction or upgrade costs plus a reasonable margin.

The concession fee paid to the grantor derived from the concession agreements are recognized depending on the terms defined in the concession agreement:

a)

Fixed concession fee is recognized at the beginning of the concession as it is reliably measurable, as a counterpart an intangible asset is recognized, this type of fee is independent form the revenue.

b)

Variable fees payables that are defined as a percentage over certain revenue streams, recognized monthly by monthly in the income statement.

Each operating company is responsible for obtaining the necessary guarantees for the commitments assumed in each concession. They are mostly covered by insurance that it is paid in advance and it is recorded in Other receivables, and is accrued over the life of the coverage.

Main commitments under each concession agreement are included in Note 26 b.

(2)      Goodwill

Goodwill represents the excess of the acquisition cost over the fair value of the Group’s share of net identifiable assets, liabilities and contingent liabilities acquired as part of business combinations determined by management. Goodwill impairment reviews are performed annually or more frequently if events or changes in circumstances indicate a potential impairment. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. Impairment losses on goodwill are not reversed. Goodwill, net of impairment losses, if any, is included on the Consolidated Statement of Financial Position under Intangible assets, net.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each cash-generating units (CGUs) of a subsidiary or group of subsidiaries that are expected to benefit from such business combination.

E      Property, plant and equipment

Property, plant and equipment is recognized at historical acquisition or construction cost less accumulated depreciation and impairment losses; historical cost includes expenses directly attributable to the acquisition of the items.

Major overhaul and rebuilding expenditures are capitalized as property, plant and equipment only when it is probable that future economic benefits associated with the item will flow to the group and the investment enhances the condition of assets beyond its original condition.

Depreciation is calculated using the straight-line method to allocate the cost of each asset to its residual value over the estimated useful life, as follows:

 

 

 

 

 

Buildings and improvements

    

25‑30 

years

Plant and production equipment

 

3‑10

years

Vehicles, furniture and fixtures, and other equipment

 

4‑10

years

 

The residual values and useful lives of significant property, plant and equipment are reviewed and adjusted, if appropriate, at each year-end date.

Gain and losses on disposals are determined by comparing the proceeds with the carrying amount and are included in Other operating (expense) / income in the Consolidated Statement of Income.

F       Critical accounting estimates and judgments

Critical accounting estimates are those that require management to make significant judgments and estimates about matters that are inherently uncertain. Management bases its estimates on historical experience and other assumptions that it believes are reasonable. Actual results could differ from estimates used in employing the critical accounting policies and these could have a material impact on the Group’s results of operations.

The Group’s critical accounting estimates are discussed below.

(a)Impairment testing

At the date of each statement of financial position, the Group reviews the carrying amounts of its property, plant and equipment, investment in associates and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Assets that have an indefinite useful life or assets not ready to use are not subject to amortization and are tested annually for impairment.

An impairment loss, if applicable, is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units or CGUs). Prior impairments of nonfinancial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

A previously recognized impairment loss is reversed if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the reversal of the previously recognized impairment loss is recognized in the Consolidated Statement of Income.

(b)Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be settled. Deferred tax assets and liabilities are not discounted. In assessing the recoverability of deferred tax assets, management considers whether it is probable that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

(c)Application of IFRIC 12

The Group has carried out a comprehensive implementation of the standards applicable to the accounting treatment of their concession and has determined that, among others, IFRIC 12 is applicable. The Group treats their investments related to improvements and upgrades to be performed in connection with the concession obligation under the intangible asset model established by IFRIC 12, as all investments required by the concession obligation, regardless of their nature, directly increase the maximum tariff per traffic unit. Accordingly, all amounts invested under the concession obligation have a direct correlation to the amount of fees the Group will be able to charge each passenger or cargo service provider, and thus, a direct correlation to the amount of revenues the Group will be able to generate. As a result, the Group defines all expenditures associated with investments required by the concession obligation as revenue generating activities given that they ultimately provide future benefits, whereby subsequent improvements and upgrades made to the concession are recognized as intangible assets based on the principles of IFRIC 12. Additionally, compliance with the committed investments per the Master Development Programs is mandatory, as well as the fulfillment of the maximum tariff and therefore, in case of a failure to meet any one of these obligations, the Group could be subject to sanctions and the concessions could be revoked.

G       Inventories

Inventories are stated at the lower of cost and net realizable value.

Net realizable value is the estimated price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the weighted averaged principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

If applicable, the Group establishes an allowance for obsolete or slow-moving inventory related to finished goods. For slow moving or obsolete finished products, an allowance is established based on management’s analysis of product aging.

H       Trade and other receivables

Trade receivables are initially recognized at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognized at fair value. They are subsequently measured at amortized cost using the effective interest method, less loss allowance. See Note 3A(iii) for a description of the group’s impairment policies.

I       Cash and cash equivalents

Cash and cash equivalents are comprised of cash in banks, mutual funds and short-term investments with an original maturity of three months or less at the date of purchase which are readily convertible to known amounts of cash.

In the Consolidated Statement of Financial Position, bank overdrafts are included in Borrowings in current liabilities. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents includes bank overdrafts.

J       Equity

(1)       Equity components

The Consolidated Statement of Changes in Equity includes:

-

The share capital, share premium, legal reserve, free distributable reserves and non-distributable reserves calculated in accordance with Luxembourg Law;

-

The currency translation adjustment, other reserves, retained earnings and non-controlling interest.

(2)      Share capital

Share capital is stated at nominal value. The Company had an authorized share capital of 20,000 shares having a nominal value of USD 1 per share as of December 31, 2016. As a consequence of the Conversion of the Company mentioned in Note 1 the share capital as of December 31, 2017 has a nominal value of USD 1,500 million (USD 1 per share). According to Note 1, and considering the reverse stock split and the initial public offering, share capital as of December 31, 2019 and 2018 is USD 160 million (USD 1 per share).

All issued shares are fully paid.

Pursuant to Luxembourg regulations, contributions in kind made by shareholders must be at fair value and must be considered as Free Distributable Reserve.

(3)      Dividends distribution by the Company to shareholders

Dividends distributions are recorded in the Company’s financial statements when Company’s shareholders have the right to receive the payment, or when interim dividends are approved by the Board of Directors in accordance with the by-laws of the Company. Dividends may be paid by the Company to the extent that it has distributable retained earnings, calculated in accordance with Luxembourg law (see Note 26 c.).

(4)      Other reserves

SCF's airport business was historically conducted through a large number of entities as to which there was no single holding entity but which were separately owned by entities directly or indirectly controlled by SCF during all the periods presented. In order to facilitate the Company's initial public offering, SCF completed a reorganization (the "Reorganization") whereby, each of the operating and holding entities under SCF´s common control, were ultimately contributed to the Company.

The reorganization was accounted for as a reorganization of entities under common control, using the predecessor cost method. The net effect was recorded in Net Equity under Other Reserves. Moreover, in 2016, and considering that the shares of America International Airports (“AIA”) were contributed to the Free Distributable Reserves of the Company at the fair value a significant negative amount was included in Other Reserves to reflect the reduction to the predecessor´s cost of the shares.

(5)      Non-controlling interest

The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognized in Other reserves within equity attributable to owners of Corporación América Airports S.A.

K       Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Subsequently borrowings are measured at amortized cost.

L       Current and Deferred income tax

The tax expense for the year comprises current and deferred tax. Tax is recognized in the Consolidated Statement of Income, except for tax items recognized in the Consolidated Statement of Comprehensive Income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where the Group entities operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions when appropriate.

Deferred income taxes recognized applying the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The principal temporary differences arise from intangible assets adjusted for the effects of IAS 29 in Argentine subsidiaries, and the effect of valuation on fixed assets, inventories and provisions. Deferred tax assets are also recognized for net operating loss carry-forwards. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the time period when the asset is realized or the liability is settled, based on tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax assets are recognized to the extent it is probable that future taxable income will be available against which the temporary differences can be utilized.

Deferred tax liabilities and assets are not recognized for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

At the end of each reporting period, CAAP reassesses unrecognized deferred tax assets. The group recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future taxable income will allow the deferred tax asset to be recovered.

M       Employee benefits

Compensation to employees in the event of dismissal is charged to income in the year in which it becomes payable.

Some entities of the Group have long term employee benefits that are unfunded defined benefit plan in accordance with IAS 19 - “Employee Benefits”.

The company calculates annually the provision for employee retirement cost based on actuarial calculations performed by independent professionals using the Projected Unit Credit Costs method. The present value of the defined benefit obligations at each year-end is calculated discounting estimated future cash outflows at an annual rate equivalent to the average rate of high quality corporate bonds, which are denominated in the same currency in which the benefits will be paid, and whose terms approximate the terms of the pension obligations.

Service cost and interest cost are recognized in the income statement, with actuarial gains and losses arising from changes in actuarial assumptions are recognized in the Consolidated Statement of Comprehensive Income.

Actuarial assumptions include variables such as, in addition to the discount rate, death rate, age, sex, years of service, current and future level of salaries, turnover rates, among others.

N       Provisions

Provisions for legal claims and other charges are recognized when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

The concession agreements in the different jurisdictions include certain commitments to be complied by each company. These commitments can be grouped in two categories:

·

Works that can be classified as standard maintenance of the infrastructure, which are expensed as incurred.

·

Major scheduled maintenance and refurbishments of the infrastructure in the future.

Since IFRIC 12 does not recognize infrastructure as property, plant and equipment, rather as a right to charge customers for the use of the infrastructure, major refurbishments and renewals to be performed in future years to maintain or restore the infrastructure asset to its level of functionality, operation and safety should be recognized in accordance with IAS 37 - Provisions, Contingent Liabilities and Assets (unless the grantor agrees to reimburse the operator). Provision is recorded at the best estimate of the amount of the expenditure expected to be incurred to perform the major overhaul or restoration work, discounted using a rate that reflects time value of money and risks involved.

O       Trade payables

Trade payables are initially recognized at fair value, generally the nominal invoice amount and are subsequently measured at amortized cost.

P       Concession fee payable

Each concession agreement determines different types of concession fees to be paid to the corresponding regulatory authority. Fees could be fixed or variable. Some concession agreements establish both a minimum fixed payment, and an additional variable amount if certain conditions are met (such as a minimum number of passengers, among others).

For those concession agreements that require payment of a fixed amount, the Company recognized the obligation at present value. The increase in the provision due to the passage of time is recognized as interest expense. The variable concession fees paid to the grantor derived from the concession agreements are recognized as cost of the period. The fixed concession fee payable is capitalized at the inception of the agreement as concession assets- intangible asset.

Q       Leases / Sub-concession of spaces

Assets owned under finance leases, through which all the risks and benefits associated with ownership are substantially transferred into the Group, are recognized as owned assets at their current value or, if lower, at the actual value of the minimum payments due for the leasing. The corresponding liability for the lessor is booked in the financial statement as financial debt. Assets are depreciated by applying the criterion and the rates used for owned assets.

The leases/sub-concessions where the lessor substantially maintains all the risks and benefits associated with the ownership of the assets are classified as operating leases. Costs referred to operating leases are recognized line-by-line in the Statement of Income along the term of the lease agreement.

Lease income from operating leases where the group is a lessor is recognized in income on a straight-line basis over the lease term. The respective leased assets are included in the balance sheet based on their nature.

As explained in Note 2.A above, the Group has changed its accounting policy for leases where the group is the lessee. The new policy and its impact is described in Note 2.Y.

R       Revenue recognition

Group revenue arises mainly from airports operations and includes:

Aeronautical revenues

These revenues are those generally regulated under each airport’s concession agreement. They consist of passengers’ departure fees, landing, parking and other fees paid by the airlines.

Non-aeronautical revenues

- Commercial revenues: those are typically not regulated under the applicable concession agreement. Commercial revenues are leases and/or rent fees from retail (including duty free), food and beverage, services and car rental companies, advertising and car parking, fueling charges and cargo fees, among others.

- Construction service revenues: IFRIC 12 requires to recognize revenues and costs from the construction or upgrade services provided. Construction service revenue equals the construction or upgrade costs plus a reasonable margin.

Under the terms of IFRIC 12 “Service Concession Arrangements”, a concession operator may have a twofold activity:

- a construction activity in respect of its obligations to design, build and finance a new asset that it delivers to the grantor;

- an operating and maintenance activity in respect of concession assets.

Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service.

Revenue is recognized either over time or at a point in time, when (or as) the Group satisfies performance obligations by transferring the promised services or goods to its customers.

Revenue from aeronautical services, derived from the use of airports facilities by aircrafts and passengers, is recognized over time as the services are provided. The Group considers that it has completed its performance obligations when the services are rendered to its customers. The Group does not defer collection terms in excess of the normal market terms, so there is no need to distinguish between a commercial component and a revenue interest component.

Revenue from non-aeronautical activities such as commercial revenue (excluding sale of goods, leases and sub-concession of spaces) and construction services are recognized over time. The Group considers that it has completed its performance obligations when the services are rendered to its customers or construction costs are incurred.

Revenue from sale of goods, mainly fueling, is recognized at a point in time when control of the goods is transferred to the customer and the customer obtains the benefits from the goods. The Group considers that it has completed its performance obligations when the goods are supplied to its customers.

Contracts relating to the sub-concession of spaces and commercial areas (non-aeronautical revenues) are excluded from the application of IFRS 15 as they fall within the scope of IFRS 16 "Leases", see Note 2.Y.

The Group recognizes contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognizes either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due.

Revenue is shown net of value-added tax and discounts. Intercompany balances with subsidiaries have been eliminated in consolidation.

As of December 31, 2017 revenue was recognized when the amount of revenue may have been reliably measured; it was probable that economic benefits associated with the transaction would have flowed to the Company, and when collection was reasonably assured.

Effective January 1, 2018, the Group adopted IFRS 15 using the modified retrospective adoption approach. No cumulative effect adjustment was recorded upon transition to IFRS 15.

S       Cost of services and other expenses

Cost of services and expenses are accrued and recognized in the Consolidated Statement of Income.

Construction service cost: IFRIC 12 requires to recognize revenues and costs from the construction or upgrade services provided. Construction service revenue equals the construction or upgrade costs plus a reasonable margin.

Commissions, freight and other selling expenses, including services and fees, office expenses and maintenance, are recorded in Selling, general and administrative expenses in the Consolidated Statement of Income.

T       Government grant

As consideration for having granted the concession of the Group A of the Argentine Airports, AA2000 assigns to the Government 15% of the total revenues of the concession, 2.5% of such revenues are destined to fund the investments commitments of AA2000 corresponding to the investment plan under the concession agreement by means of a trust in which AA2000 is the settlor; Banco de la Nación Argentina, the trustee; and the beneficiaries are AA2000 and constructors of the airports’ works. The funds in the trust are used to settle the accounts payable to suppliers of the infrastructure being built in the Argentine Airport System. As per IAS 20, the benefit received by AA2000 qualifies as a grant related to income on a monthly basis that it is recognized at fair value since there is a reasonable assurance that such benefit will be received.

U       Financial instruments

Non derivative financial instruments comprise investments in debt instruments, corporate bonds, time deposits, trade and other receivables, cash and cash equivalents, borrowings, and trade and other payables.

The Company classifies its financial assets in the following measurement categories:

(i)Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method.

(ii)Fair value through other comprehensive income (“FVOCI”): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss.

(iii)Fair value through profit or loss (“FVPL”): Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognized in profit or loss and presented net within other gains/(losses) in the period in which it arises.

The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows.

V       Derivative financial instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into, and they are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged.

Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognized immediately in profit or loss and are included in “Other financial income/loss” line.

Derivatives are classified as ‘held for trading’ for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.

Derivative financial instruments are classified within Level 2 of the fair value hierarchy.

W       Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM"), which is the Group´s Board of Directors. The CODM is responsible for allocating resources and assessing performance of the operating segments. The operating segments are described in Note 4.

For management purposes, the Company analyzes its business based on strategic business units providing airport and non-airport services to clients in the different countries where business units are located. Assets, liabilities and results from holding companies are included as Unallocated.

X       Application of IAS 29 in financial reporting of Argentine subsidiaries and associates

IAS 29 “Financial Reporting in Hyperinflationary Economies” requires that the financial statements of entities whose functional currency is that of a hyperinflationary economy to be adjusted for the effects of changes in a suitable general price index and to be expressed in terms of the current unit of measurement at the closing date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. Accordingly, the inflation produced from the date of acquisition or from the revaluation date, as applicable, must be computed in the non-monetary items.

In order to conclude on whether an economy is categorized as hyperinflationary in the terms of IAS 29, the standard details a series of factors to be considered, including the existence of a cumulative inflation rate in three years that approximates or exceeds 100%. Considering that the inflation in Argentina has exceed the 100% three-year cumulative inflation rate in July 2018, and that the rest of the indicators do not contradict the conclusion that Argentina should be considered a hyperinflationary economy for accounting purposes, the Group understands that there is sufficient evidence to conclude that Argentina is a hyperinflationary economy under the terms of IAS 29 as from July 1, 2018, and, accordingly, it has applied IAS 29 as from that date in the financial reporting of its subsidiaries and associates with the Argentine peso as functional currency.

The inflation adjustment was calculated by means of conversion factor derived from the Argentine price indexes published by the National Institute of Statistics (“INDEC”).

The Government Board of the Argentine Federation of Professional Councils of Economic Sciences (FACPCE) issued Resolution JG 539/18, which prescribes the indices to be used by entities with a functional currency of the Argentine peso for the application of the restatement procedures. These indices are largely based on the Wholesale Price Index for periods up to December 31, 2016 and the Retail Price Index thereafter.

The price index as of December 31, 2019 was 283.44 (184.25 as of December 31, 2018) and the conversion factor derived from the indexes for the year ended December 31, 2019, was 1.54  (1.48 as of December 31, 2018).

The main procedures for the above-mentioned adjustment are as follows:

·

Monetary assets and liabilities which are carried at amounts current at the balance sheet date are not restated because they are already expressed in terms of the monetary unit current at the balance sheet date.

·

Non-monetary assets and liabilities which are not carried at amounts current at the balance sheet date, and components of shareholders’ equity are adjusted by applying the relevant conversion factors at the date of the transactions.

·

All items in the statement of income are restated by applying the relevant conversion factors.

·

The effect of inflation on the Company’s net monetary position is included in Inflation adjustment in the statement of income. Exchange rate gains and losses derived from the net monetary position are presented in real (inflation-adjusted) terms.

·

The ongoing application of the re-translation of comparative amounts to closing exchanges rates under IAS 21 and the hyperinflation adjustments required by IAS 29 will lead to a difference in addition to the difference arising on the adoption of hyperinflation accounting. This is because the rate at which the hyper-inflationary currency depreciates against a stable currency is rarely equal to the rate of inflation. The inflation adjustment and the translation of the current period is included in Other comprehensive (loss) / income for the period line.

·

On the initial application of IAS 29, comparative amounts were the figures presented as current year amounts in the relevant prior year financial statements, according to IAS 21, considering that were translated into the currency of a non- hyperinflationary economy. Therefore, the adjustment of the restated amounts of net assets as of prior period to reflect the cumulative inflation was included as an initial balance adjustment within Retained earnings line.

Y       Change in accounting policies

The group has applied the following standard for the first time for its annual reporting period commencing January 1, 2019:

IFRS 16, “Leases”

The group has adopted IFRS 16 retrospectively as of January 1, 2019, but has not restated comparatives for the 2018 reporting period as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on January 1, 2019.

(a) Adjustments recognized on adoption of IFRS 16

On adoption of IFRS 16, the group recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 5.2%.

For leases previously classified as finance leases the entity recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date.

 

 

 

 

 

    

Lease liabilities

 

 

 

Operating lease commitments as at December 31, 2018

 

14,167

Discounted using lessee’s incremental borrowing rate

 

(2,204)

Operating lease commitments discounted at the date of initial application

 

11,963

Add: finance lease liabilities recognized as at December 31, 2018

 

1,715

(Less): short-term leases recognized on a straight-line basis as expense

 

(59)

(Less): low-value leases recognized on a straight-line basis as expense

 

(70)

Lease liability recognized as at January 1, 2019

 

13,549

Of which are:

 

  

 Current lease liabilities

 

4,942

 Non-current lease liabilities

 

8,607

 

 

13,549

 

Right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet as at December 31, 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

The recognized right-of-use assets as at January 1, 2019 relate to the following types of assets: