IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Unaudited Condensed Interim Consolidated Financial Statements as of December 31, 2017 and for the six-month and three-month periods ended as of that date, presented comparatively
 
 
 
 
 
 
 
 
 
 
 
Legal information
 
 
Denomination: IRSA Inversiones y Representaciones Sociedad Anónima.
 
Fiscal year N° :   75, beginning on July 1st, 2017.
 
Legal address: 108 Bolívar St., 1st floor, Autonomous City of Buenos Aires, Argentina.
 
Company activity: Real estate investment and development.
 
Date of registration of the by-laws in the Public Registry of Commerce: June 23, 1943.
 
Date of registration of last amendment of the by-laws in the Public Registry of Commerce: August 7, 2017.
 
Expiration of the Company’s by-laws: April 5, 2043.
 
Registration number with the Superintendence: 213,036.
 
Capital: 578,676,460 shares.
 
Common Stock subscribed, issued and paid up (in millions of Ps.):   579.
 
Parent Company: Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
(Cresud S.A.C.I.F. y A.).
 
Legal Address: 877 Moreno St., 23rd. floor, Autonomous City of Buenos Aires, Argentina.
 
Main activity: Real estate, agricultural, commercial and financial activities.
 
Direct and indirect interest of the Parent Company on the capital stock: 366,788,243 common shares.
 
Percentage of votes of the Parent Company (direct and indirect interest) on the shareholders’ equity: 63.76% (1).
 
 
Type of stock
CAPITAL STATUS
Shares authorized for Public Offering (2)
Subscribed, issued and paid up
(in millions of Pesos)
Common stock with a face value of Ps. 1 per share and entitled to 1 vote each
578,676,460
579
 
(1) For computation purposes, Treasury shares have been subtracted.
(2) Company not included in the Optional Statutory System of Public Offer of Compulsory Acquisition.
 
 
 
 
 
Index
 
Glossary  ...
1
Unaudited Condensed Interim Consolidated Statements of Financial Position                                                                                                                              
2
Unaudited Condensed Interim Consolidated Statements of Income and Other Comprehensive Income
3
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
4
Unaudited Condensed Interim Consolidated Statements of Cash Flows                                                                                                                              
6
Notes to the Unaudited Condensed Interim Consolidated Financial Statements:
 
Note 1 – The Group’s business and general information 
7
Note 2 – Summary of significant accounting policies 
7
Note 3 – Seasonal effects on operations 
11
Note 4 – Acquisitions and disposals 
11
Note 5 – Financial risk management and fair value estimates 
13
Note 6 – Segment information 
14
Note 7 – Investments in associates and joint ventures 
17
Note 8 – Investment properties 
18
Note 9 – Property, plant and equipment 
18
Note 10 – Trading properties 
19
Note 11 – Intangible assets 
19
Note 12 – Financial instruments by category 
20
Note 13 – Trade and other receivables 
23
Note 14 – Cash flow information 
23
Note 15 – Trade and other payables 
24
Note 16 – Borrowings 
25
Note 17 – Provisions 
26
Note 18 – Taxes 
26
Note 19 – Revenues 
27
Note 20 – Expenses by nature 
28
Note 21 – Cost of goods sold and services provided 
28
Note 22 – Other operating results, net 
28
Note 23 – Financial results, net 
29
Note 24 – Related party transactions 
29
Note 25 – CNV General Resolution N° 622 
30
Note 26 – Foreign currency assets and liabilities 
31
Note 27 – Groups of assets and liabilities held for sale 
32
Note 28 – Results from discontinued operations 
32
Note 29 – Subsequent Events 
32
 
 
Glossary
 
The following are not technical definitions, but help the reader to understand certain terms used in the wording of the notes to the Group´s Financial Statements.
 
Terms
 
Definitions
Adama
 
Adama Agricultural Solutions Ltd.
BACS
 
Banco de Crédito y Securitización S.A.
Baicom
 
Baicom Networks S.A.
BCRA
 
Central Bank of the Argentine Republic
BHSA
 
Banco Hipotecario S.A.
Cellcom
 
Cellcom Israel Ltd.
Clal
 
Clal Holdings Insurance Enterprises Ltd.
CNV
 
Securities Exchange Commission
Condor
 
Condor Hospitality Trust Inc.
Cresud
 
Cresud S.A.C.I.F. y A.
Cyrsa
 
Cyrsa S.A.
DIC
 
Discount Investment Corporation Ltd.
Dolphin
 
Dolphin Fund Ltd. and Dolphin Netherlands B.V.
Financial Statements
 
Unaudited Condensed Interim Consolidated Financial Statements
Annual Financial Statements
 
Consolidated Financial Statements as of June 30, 2017
CPF
 
Collective Promotion Funds
IASB
 
International Accounting Standards Board
IDB Tourism
 
IDB Tourism (2009) Ltd
IDBD
 
IDB Development Corporation Ltd.
IFISA
 
Inversiones Financieras del Sur S.A.
IRSA, The Company”, “Us”, “We”
 
IRSA Inversiones y Representaciones Sociedad Anónima
IRSA CP
 
IRSA Propiedades Comerciales S.A.
Israir
 
Israir Airlines & Tourism Ltd.
Lipstick
 
Lipstick Management LLC
LRSA
 
La Rural S.A.
Metropolitan
 
Metropolitan 885 Third Avenue Leasehold LLC
MPIT
 
Minimum Presumed Income Tax
New Lipstick
 
New Lipstick LLC
IAS
 
International Accounting Standards
IFRS
 
International Financial Reporting Standards
NIS
 
New Israeli Shekel
NPSF
 
Nuevo Puerto Santa Fe S.A.
NCN
 
Non-Convertible Notes
PBC
 
Property & Building Corporation Ltd.
PBEL
 
PBEL Real Estate LTD
Quality
 
Quality Invest S.A.
Shufersal
 
Shufersal Ltd.
Tarshop
 
Tarshop S.A.
 
 
1
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Financial Position
as of December 31, 2017 and June 30, 2017
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Note
12.31.17
 
06.30.17
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Investment properties
8
113,465
 
99,953
Property, plant and equipment
9
28,015
 
27,113
Trading properties
10, 21
3,496
 
4,532
Intangible assets
11
12,809
 
12,387
Investments in associates and joint ventures
7
8,195
 
7,885
Deferred income tax assets
18
306
 
285
Income tax and MPIT credit
 
43
 
145
Restricted assets
12
1,048
 
448
Trade and other receivables
13
5,316
 
4,974
Investments in financial assets
12
1,266
 
1,772
Financial assets held for sale
12
6,667
 
6,225
Derivative financial instruments
12
 -
 
31
Total non-current assets
 
180,626
 
165,750
Current assets
 
 
 
 
Trading properties
10, 21
2,962
 
1,249
Inventories
21
4,184
 
4,260
Restricted assets
12
1,157
 
506
Income tax and MPIT credit
 
83
 
339
Group of assets held for sale
26
3,062
 
2,681
Trade and other receivables
13
17,094
 
17,264
Investments in financial assets
12
19,312
 
11,951
Financial assets held for sale
12
2,503
 
2,337
Derivative financial instruments
12
60
 
51
Cash and cash equivalents
12
29,495
 
24,854
Total current assets
 
79,912
 
65,492
TOTAL ASSETS
 
260,538
 
231,242
SHAREHOLDERS’ EQUITY
 
 
 
 
Shareholders´equity (according to corresponding statement)
 
30,585
 
25,864
Non-controlling interest
 
27,221
 
21,472
TOTAL SHAREHOLDERS’ EQUITY
 
57,806
 
47,336
LIABILITIES
 
 
 
 
Non-current liabilities
 
 
 
 
Borrowings
16
128,088
 
109,489
Deferred income tax liabilities
18
22,396
 
23,024
Trade and other payables
15
2,379
 
3,040
Provisions
17
795
 
943
Employee benefits
 
823
 
763
Derivative financial instruments
12
103
 
86
Salaries and social security liabilities
 
96
 
127
Total non-current liabilities
 
154,680
 
137,472
Current liabilities
 
 
 
 
Trade and other payables
15
23,120
 
20,839
Borrowings
16
19,307
 
19,926
Provisions
17
941
 
890
Group of liabilities held for sale
26
2,087
 
1,855
Salaries and social security liabilities
 
2,036
 
2,041
Income tax and MPIT liabilities
 
420
 
797
Derivative financial instruments
12
141
 
86
Total current liabilities
 
48,052
 
46,434
TOTAL LIABILITIES
 
202,732
 
183,906
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
260,538
 
231,242
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
                                                                                                                                                                                                                                                                      ______________________                                                             
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II acting as
                                                                                                                                                                                                                                                                                               President
 
 
 
 
2
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Income and Other Comprehensive Income
for the six-month and three-month periods ended December 31, 2017 and 2016
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Six month
 
Three month
 
Note
12.31.17
 
12.31.16(recast)
 
12.31.2017
 
12.31.2016(recast)
Revenues
19
43,040
 
36,831
 
22,827
 
19,044
Costs
20, 21
(29,277)
 
(25,625)
 
(15,550)
 
(13,299)
Gross profit
 
13,763
 
11,206
 
7,277
 
5,745
Net gain from fair value adjustment of investment properties
8
11,502
 
3,470
 
8,098
 
2,074
General and administrative expenses
20
(2,195)
 
(1,809)
 
(1,200)
 
(957)
Selling expenses
20
(7,717)
 
(6,564)
 
(4,156)
 
(3,395)
Other operating results, net
22
604
 
(121)
 
580
 
(52)
Profit from operations
 
15,957
 
6,182
 
10,599
 
3,415
Share of profit / (loss) of associates and joint ventures
7
393
 
62
 
(5)
 
53
Profit before financial results and income tax
 
16,350
 
6,244
 
10,594
 
3,468
Finance income
23
650
 
510
 
355
 
230
Finance costs
23
(8,069)
 
(4,715)
 
(3,026)
 
(2,684)
Other financial results
23
1,196
 
1,531
 
903
 
1,269
Financial results, net
 
(6,223)
 
(2,674)
 
(1,768)
 
(1,185)
Profit before income tax
 
10,127
 
3,570
 
8,826
 
2,283
Income tax
18
497
 
(1,027)
 
1,737
 
(435)
Profit for the period from continuing operations
 
10,624
 
2,543
 
10,563
 
1,848
Profit for the period from discontinued operations
28
207
 
4,273
 
194
 
4,624
Profit for the period
 
10,831
 
6,816
 
10,757
 
6,472
Other comprehensive income:
 
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
Currency translation adjustment
 
457
 
2,502
 
944
 
277
Share of other comprehensive loss of associates and joint ventures
 
(208)
 
(1,923)
 
(352)
 
(207)
Change in the fair value of hedging instruments net of income taxes
 
(33)
 
(10)
 
(24)
 
(66)
Items that may not be reclassified subsequently to profit or loss, net of income tax:
 
 
 
 
 
 
 
 
Actuarial (loss) /profit from defined contribution plans
 
(47)
 
(19)
 
(34)
 
3
Share of other comprehensive income generated by associates
 
 -
 
 -
 
 -
 
3
Other comprehensive income for the period from continuing operations
 
169
 
550
 
534
 
10
Other comprehensive income for the period from discontinued operations
 
(8)
 
 -
 
78
 
 -
Total other comprehensive income for the period
 
161
 
550
 
612
 
10
Total comprehensive income for the period
 
10,992
 
7,366
 
11,369
 
6,482
 
 
 
 
 
 
 
 
 
Total comprehensive income from continuing operations
 
10,793
 
3,093
 
11,097
 
1,858
Total comprehensive income from discontinued operations
 
199
 
4,273
 
272
 
4,624
Total comprehensive income for the period
 
10,992
 
7,366
 
11,369
 
6,482
 
 
 
 
 
 
 
 
 
Profit for the period attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
8,918
 
3,835
 
8,365
 
3,635
Non-controlling interest
 
1,913
 
2,981
 
2,392
 
2,837
 
 
 
 
 
 
 
 
 
Profit from continuing operations attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
8,778
 
1,503
 
8,233
 
1,044
Non-controlling interest
 
1,846
 
1,040
 
2,330
 
804
 
 
 
 
 
 
 
 
 
Total comprehensive income attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
8,646
 
3,857
 
8,374
 
3,429
Non-controlling interest
 
2,346
 
3,509
 
2,995
 
3,053
 
 
 
 
 
 
 
 
 
Profit per share from continuing operations attributable to equity holders of the parent:
 
 
 
 
 
 
 
 
Basic
 
15.51
 
6.67
 
14.55
 
6.32
Diluted
 
15.40
 
6.62
 
14.45
 
6.28
 
 
 
 
 
 
 
 
 
Profit per share from continuing operations attributable to equity holders of the parent:
 
 
 
 
 
 
 
 
Basic
 
15.27
 
2.61
 
14.32
 
1.82
Diluted
 
15.16
 
2.60
 
14.22
 
1.80
 
 
(i)
   As of December 31, 2017, it includes Ps. (2,228) which corresponds to the DIC´s debt exchange (see Note 16).
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
The previous period has been recast due to the change in the accounting policy for investment properties described in Note 2.3.
 
 
 
 
 
 
                                                                                                                                                                                                                                                                      ______________________                                                             
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II acting as
                                                                                                                                                                                                                                                                                               President
 
 
 
 
 
 
3
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
for the six-month period ended December 31, 2017
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Attributable to equity holders of the parent
 
 
 
Share capital
Treasury shares
Inflation adjustment of share capital and treasury shares (1)
Share premium
Additional paid-in capital from treasury shares
Legal reserve
Special reserve Resolution CNV 609/12 (2)
Other reserves (3)
Retained earnings
Subtotal
Non-controlling interest
Total Shareholders’ equity
Balance as of July 1, 2017
575
4
123
793
17
143
2,751
2,165
19,293
25,864
21,472
47,336
Profit for the period
 -
 -
 -
 -
 -
 -
 -
 -
8,918
8,918
1,913
10,831
Other comprehensive (loss) / profit for the period
 -
 -
 -
 -
 -
 -
 -
(272)
 -
(272)
433
161
Total comprehensive (loss) / profit for the period
 -
 -
 -
 -
 -
 -
 -
(272)
8,918
8,646
2,346
10,992
Appropriation of retained earnings approved by Shareholders’ meeting held as of 10.31.17
 -
 -
 -
 -
 -
 -
 -
2,081
(2,081)
 -
 -
 -
Shared-based compensation
 -
 -
 -
 -
1
 -
 -
2
 -
3
33
36
Dividends distribution
 -
 -
 -
 -
 -
 -
 -
 -
(1,400)
(1,400)
(100)
(1,500)
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
 -
(2,528)
 -
(2,528)
3,470
942
Balance as of December 31, 2017
575
4
123
793
18
143
2,751
1,448
24,730
30,585
27,221
57,806
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
(1)
Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 17 to the Consolidated Financial Statements as of June 30, 2017
(2)
Related to CNV General Resolution N° 609/12. See Notes 2.1.b) and 17 to the Consolidated Financial Statements as of June 30, 2017.
(3)
  Group´s other reserves for the period ended December 31, 2017 are comprised as follows:
 
 
Cost of treasury stock
 
Changes in non-controlling interest
 
Reserve for share-based payments
 
Reserve for future dividends
 
Currency translation adjustment reserve
 
Hedging instrument
 
Special reserve
 
Reserve for defined contribution plans
 
Other reserves from subsidiaries
 
Total Other reserves
Balance as of July 1, 2017
(28)
 
186
 
78
 
494
 
1,394
 
19
 
 -
 
(15)
 
37
 
2,165
Other comprehensive loss for the period
 -
 
 -
 
 -
 
 -
 
(216)
 
(9)
 
 -
 
(47)
 
 -
 
(272)
Total comprehensive loss for the period
 -
 
 -
 
 -
 
 -
 
(216)
 
(9)
 
 -
 
(47)
 
 -
 
(272)
Share-based compensation
 -
 
 -
 
2
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
2
Appropriation of retained earnings approved by Shareholders’ meeting held as of 10.31.17
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
2,081
 
 -
 
 -
 
2,081
Changes in non-controlling interest
 -
 
(2,527)
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
(1)
 
(2,528)
Balance as of December 31, 2017
(28)
 
(2,341)
 
80
 
494
 
1,178
 
10
 
2,081
 
(62)
 
36
 
1,448
 
 
 
 
 
 
                                                                                                                                                                                                                                                                      ______________________                                                             
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II acting as
                                                                                                                                                                                                                                                                                               President
 

                                                                                                                                                                                                                                                                                                                                       

 
 
4
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
for the six-month period ended December 31, 2016
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Attributable to equity holders of the parent
 
 
 
Share capital
Treasury shares
Inflation adjustment of share capital and treasury shares (1)
Share premium
Additional paid-in capital from treasury shares
Legal reserve
Special reserve Resolution CNV 609/12 (2)
Other reserves (3)
Retained earnings
Subtotal
Non-controlling interest
Total Shareholders’ equity
Balance as of July 1, 2016 (recast)
575
4
123
793
16
117
2,755
990
16,259
21,632
14,224
35,856
Profit for the period
 -
 -
 -
 -
 -
 -
 -
 -
3,835
3,835
2,981
6,816
Other comprehensive profit for the period
 -
 -
 -
 -
 -
 -
 -
22
 -
22
528
550
Total comprehensive profit for the period
 -
 -
 -
 -
 -
 -
 -
22
3,835
3,857
3,509
7,366
Appropriation of retained earnings approved by Shareholders’ meeting held as of 10.31.16
 -
 -
 -
 -
 -
26
(4)
(26)
4
 -
 -
 -
Shared-based compensation
 -
 -
 -
 -
 -
 -
 -
6
 -
6
 -
6
Currency translation adjustment for interest held before business combination 
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
2
2
Incorporated by business combination
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
45
45
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
 -
(202)
 -
(202)
1,245
1,043
Dividends distribution to non-controlling interest in subsidiaries
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
(157)
(157)
Balance as of December 31, 2016 (recast)
575
4
123
793
16
143
2,751
790
20,098
25,293
18,868
44,161
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
The previous period has been recast due to the change in the accounting policy for investment properties described in Note 2.3.
(1)
Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 17 to the Consolidated Financial Statements as of June 30, 2017.
(2)
Related to CNV General Resolution N° 609/12. See Notes 2.1.b) and 17 to the Consolidated Financial Statements as of June 30, 2017.
(3)
  Group’s other reserves for the period ended December 31, 2016 are comprised as follows:
 
 
Cost of treasury stock
 
Changes in non-controlling interest
 
Reserve for share-based payments
 
Reserve for future dividends
 
Currency translation adjustment reserve
 
Hedging instruments
 
Reserve for defined contribution plans
 
Other reserves from subsidiaries
 
Total Other reserves
Balance as of July 1, 2016 (recast)
(29)
 
21
 
67
 
520
 
421
 
(37)
 
(10)
 
37
 
990
Other comprehensive income / (loss) for the period
 -
 
 -
 
 -
 
 -
 
33
 
1
 
(12)
 
 -
 
22
Total comprehensive income / (loss) for the period
 -
 
 -
 
 -
 
 -
 
33
 
1
 
(12)
 
 -
 
22
Share-based compensation
 -
 
 -
 
6
 
 -
 
 -
 
 -
 
 -
 
 -
 
6
Appropriation of retained earnings approved by Shareholders’ meeting held as of 10.31.16
 -
 
 -
 
 -
 
(26)
 
 -
 
 -
 
 -
 
 -
 
(26)
Changes in non-controlling interest
 -
 
(202)
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
(202)
Balance as of December 31, 2016 (recast)
(29)
 
(181)
 
73
 
494
 
454
 
(36)
 
(22)
 
37
 
790
 
 
 
 
 
 
 
 
 
                                                                                                                                                                                                                                                                      ______________________                                                             
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II acting as
                                                                                                                                                                                                                                                                                               President
 
                                 .

 
 
5
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Cash Flows
for the six-month periods ended December 31, 2017 and 2016
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Note
12.31.17
 
12.31.16 (recast)
Operating activities:
 
 
 
 
Net cash generated from continuing operating activities before income tax paid
14
6,792
 
5,559
Income tax and MPIT paid
 
(231)
 
(488)
Net cash generated from continuing operating activities
 
6,561
 
5,071
Net cash generated from (used in) discontinued operating activities
 
246
 
(209)
Net cash generated from operating activities
 
6,807
 
4,862
Investing activities:
 
 
 
 
Interest held decrease (increase) in associates and joint ventures
 
12
 
(360)
Acquisition and improvements of investment properties
 
(1,247)
 
(1,346)
Advance payments
 
(146)
 
 -
Proceeds from sales of investment properties
 
258
 
171
Acquisitions and improvements of property, plant and equipment
 
(1,715)
 
(1,302)
Proceeds from sales of property, plant and equipment
 
4
 
 -
Acquisitions of intangible assets
 
(323)
 
(209)
Acquisitions of subsidiaries, net of cash acquired
 
(719)
 
(46)
Net increase of restricted assets
 
(624)
 
 -
Dividends received
 
75
 
60
Proceeds from sales of interest held in associates and joint ventures
 
241
 
 -
Proceeds from loans granted
 
558
 
 -
Proceeds from liquidation of an associate
 
65
 
 -
Acquisitions of investments in financial assets
 
(13,113)
 
(1,582)
Proceeds from disposal of investments in financial assets
 
7,168
 
2,679
Interest received from financial assets
 
137
 
68
Loans granted to related parties
 
(345)
 
(4)
Loans granted
 
(88)
 
 -
Net cash used in continuing investing activities
 
(9,802)
 
(1,871)
Net cash (used in) / generated from discontinued investing activities
 
(61)
 
4,027
Net cash (used in) / generated from in investing activities
 
(9,863)
 
2,156
Financing activities:
 
 
 
 
Borrowings
 
14,831
 
13,657
Payment of borrowings
 
(6,183)
 
(9,422)
Payment of borrowings to related parties
 
 -
 
(9)
Interests paid
 
(2,636)
 
(2,407)
Capital distributions to non-controlling interest in subsidiaries
 
(18)
 
(43)
Capital contributions from non-controlling interest in subsidiaries
 
82
 
2
Acquisition of non-controlling interest in subsidiaries
 
(612)
 
(990)
Proceeds from sales of non-controlling interest in subsidiaries
 
3,303
 
2,440
Dividends paid
 
(1,400)
 
(515)
Dividends paid to non-controlling interest in subsidiaries
 
(179)
 
 -
Payments of derivative financial instruments
 
(29)
 
(90)
Proceeds from derivative financial instruments
 
137
 
69
Net cash generated from continuing financing activities
 
7,296
 
2,692
Net cash used in discontinued financing activities
 
(111)
 
(515)
Net cash generated from financing activities
 
7,185
 
2,177
Net increase in cash and cash equivalents from continuing activities
 
4,055
 
5,892
Net increase in cash and cash equivalents from discontinued activities
 
74
 
3,303
Net increase in cash and cash equivalents
 
4,129
 
9,195
Cash and cash equivalents at beginning of period
13
24,854
 
13,866
Cash and cash equivalents reclassified to held for sale
 
(74)
 
 -
Foreign exchange gain on cash and changes in fair value orf cash equivalents
 
586
 
639
Cash and cash equivalents at end of period
13
29,495
 
23,700
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
The previous period has been recast due to the change in the accounting policy for investment properties described in Note 2.3.
 
 
 
 
 
 
 
 
                                                                                                                                                                                                                                                                        ______________________                                                              
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II acting as
                                                                                                                                                                                                                                                                                               President
  
 
 
                                             .
 
 
6
IRSA Inversiones y Representaciones Sociedad Anónima
 
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
(Amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
1.
The Group’s business and general information
 
These Financial Statements have been approved for issuance by the Board of Directors, on February 8, 2018.
 
IRSA was founded in 1943, and it is engaged in a diversified range of real estate activities in Argentina since 1991. IRSA and its subsidiaries are collectively referred to hereinafter as “the Group”. Cresud is our direct parent company and IFIS Limited is our ultimate parent company.
 
The Group has established two Operations Centers, Argentina and Israel, to manage its global business, mainly through the following companies:
 
(*) See note 4. for more information about the changes within the Operations Center in Israel.
 
 
2.
Summary of significant accounting policies
 
2.1.
Basis of preparation
 
These Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting", therefore, should be read together with the Annual Financial Statements of the Group as of June 30, 2017 prepared in accordance with IFRS in force. Furthermore, these Financial Statements include supplementary information required by Law N° 19,550 and/or regulations of the CNV. Such information is included in notes to these Financial Statements according to IFRS.
 
These Financial Statements corresponding to the interim six-month periods ended December 31, 2017 and 2016 have not been audited. The management considers they include all necessary adjustments to fairly present the results of each period. The Company’s interim periods results do not necessarily reflect the proportion of the Group’s full-year results.
 
 
 
 
7
IRSA Inversiones y Representaciones Sociedad Anónima
   
 
 
Under IAS 29 “Financial Reporting in Hyperinflationary Economies”, the Financial Statements of an entity whose functional currency belongs to a hyperinflationary economy, regardless of whether they apply historic cost or current cost methods, should be stated at the current unit of measure as of the date of this Consolidated Financial Statements. For such purpose, in general, inflation is to be computed in non-monetary items from the acquisition or revaluation date, as applicable. In order to determine whether an economy is to be considered hyperinflationary, the standard lists a set of factors to be taken into account, including an accumulated inflation rate near or above 100% over a three-year period.
 
For the Groups' business in Argentina, considering the released inflation data in Argentina and the declining inflation trend in recent years, the Management is of the view that there is not enough evidence to conclude that Argentina is a hyperinflationary economy. Therefore, no restatement has been applied on financial information, as set forth by IAS 29, for the reporting periods. However, over the last years, certain macroeconomic variables, such as payroll costs and goods prices, have experienced significant annual changes, which should be taken into consideration in assessing and interpreting the financial situation and results of operations of the Group in these Financial Statements.
 
2.2.
Significant accounting policies
 
The accounting policies applied in the presentation of these Financial Statements are consistent with those applied in the preparation of the Consolidated Financial Statements as of June 30, 2017, as described in Note 2 to those Financial Statements.
 
2.3.
Comparability of information
 
Balance items as of June 30, 2017 and December 31, 2016 shown in these Unaudited Condensed Interim Consolidated Financial Statements for comparative purposes arise from financial statements then ended. As mentioned in Note 2 to the Consolidated Financial Statements as of June 30, 2017, during the fiscal year ended June 30, 2017 the Group’s Board of Directors decided to change the accounting policy for investment property from cost model to fair value model, as permitted under IAS 40. Therefore, the previously issued Interim Financial Statements were retroactively recast as required by IAS 8.
 
The table below includes the reconciliation between the Statements of Income and Other Comprehensive Income for the six-month and the three-month periods ended December 31, 2016 as they were originally issued, and the recast statements included in these Financial Statements for comparative purposes. There is no impact on any of the relevant total sums of the Consolidated Statement of Cash Flows.
 
 
 
 
 
8
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Statement of Income and Other Comprehensive Income for the six-month period ending as of December 31, 2016:
 
 
Six month
 
12.31.2016 (originally issued)
 
12.31.2016 (adjustment)
 
12.31.2016 (other reclassifications) g)
 
12.31.2016 (recast)
Revenues
36,831
 
 -
 
 -
 
36,831
Costs
(25,945)
 
531
a)
(211)
 
(25,625)
Gross profit
10,886
 
531
 
(211)
 
11,206
Gain from disposal of investment properties
105
 
(105)
b)
 -
 
 -
Net gain from fair value adjustment of investment properties
 -
 
3,470
c)
 -
 
3,470
General and administrative expenses
(1,831)
 
 -
 
22
 
(1,809)
Selling expenses
(6,749)
 
 -
 
185
 
(6,564)
Other operating results, net
(123)
 
(2)
 
4
 
(121)
Profit from operations
2,288
 
3,894
 
 -
 
6,182
Share of (loss) / profit of associates and joint ventures
(93)
 
86
d)
69
 
62
Profit before finance results and income tax
2,195
 
3,980
 
69
 
6,244
Finance income
732
 
 -
 
(222)
 
510
Finance costs
(4,868)
 
 -
 
153
 
(4,715)
Other financial results
1,531
 
 -
 
 -
 
1,531
Financial results, net
(2,605)
 
 -
 
(69)
 
(2,674)
(Loss) / profit before income tax
(410)
 
3,980
 
 -
 
3,570
Income tax
334
 
(1,361)
e)
 -
 
(1,027)
(Loss) / profit from continuing operations
(76)
 
2,619
 
 -
 
2,543
Profit from discontinued operations
4,273
 
 -
 
 -
 
4,273
Profit for the period
4,197
 
2,619
 
 -
 
6,816
Other comprehensive income
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
Currency translation adjustment
121
 
2,381
f)
 -
 
2,502
Share of other comprehensive income / (loss) of associates and joint ventures
310
 
(2,233)
d)
 -
 
(1,923)
Change in the fair value of hedging instruments net of income tax
(10)
 
 -
 
 -
 
(10)
Items that may not be reclassified subsequently to profit or loss, net of income tax
 
 
 
 
 
 
 
Actuarial loss from defined contribution plans
(19)
 
 -
 
 -
 
(19)
Other comprehensive income for the period from continuing operations
402
 
148
 
 -
 
550
Other comprehensive income for the period
4,599
 
2,767
 
 -
 
7,366
 
 
 
 
 
 
 
 
Profit for the period attributable to:
 
 
 
 
 
 
 
Equity holders of the parent
2,067
 
1,768
 
 -
 
3,835
Non-controlling interest
2,130
 
851
 
 -
 
2,981
 
 
 
 
 
 
 
 
Total comprehensive income for the period attributable to:
 
 
 
 
 
 
 
Equity holders of the parent
2,034
 
1,823
 
 -
 
3,857
Non-controlling interest
2,565
 
944
 
 -
 
3,509
 
 
 
9
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Statement of Income and Other Comprehensive Income for the three-month period ending as of December 31, 2016:
 
 
Three month
 
12.31.2016 (originally issued)
 
12.31.2016 (adjustment)
 
12.31.2016 (other reclassifications) g)
 
12.31.2016 (recast)
Revenues
18,144
 
 -
 
900
 
19,044
Costs
(12,678)
 
269
a)
(890)
 
(13,299)
Gross profit
5,466
 
269
 
10
 
5,745
Gain from disposal of investment properties
86
 
(86)
b)
 -
 
 -
Net gain from fair value adjustment of investment properties
 -
 
2,074
c)
 -
 
2,074
General and administrative expenses
(897)
 
 -
 
(60)
 
(957)
Selling expenses
(3,453)
 
 -
 
58
 
(3,395)
Other operating results, net
(61)
 
(2)
 
11
 
(52)
Profit from operations
1,141
 
2,255
 
19
 
3,415
Share of (loss) / profit of associates and joint ventures
(50)
 
61
d)
42
 
53
Profit before finance results and income tax
1,091
 
2,316
 
61
 
3,468
Finance income
344
 
 -
 
(114)
 
230
Finance costs
(2,744)
 
 -
 
60
 
(2,684)
Other financial results
1,269
 
 -
 
 -
 
1,269
Financial results, net
(1,131)
 
 -
 
(54)
 
(1,185)
(Loss) / profit before income tax
(40)
 
2,316
 
7
 
2,283
Income tax
388
 
(823)
e)
 -
 
(435)
Profit from continuing operations
348
 
1,493
 
7
 
1,848
Profit from discontinued operations
4,631
 
 -
 
(7)
 
4,624
Profit for the period
4,979
 
1,493
 
 -
 
6,472
Other comprehensive (loss) / income
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
Currency translation adjustment
(360)
 
637
f)
 -
 
277
Share of other comprehensive income / (loss) of associates and joint ventures
327
 
(534)
d)
 -
 
(207)
Change in the fair value of hedging instruments net of income tax
(66)
 
 -
 
 -
 
(66)
Items that may not be reclassified subsequently to profit or loss, net of income tax
 
 
 
 
 
 
 
Actuarial profit from defined contribution plans
3
 
 -
 
 -
 
3
Other profit generated by associates
3
 
 -
 
 -
 
3
Other comprehensive (loss) / income for the period from continuing operations
(93)
 
103
 
 -
 
10
Other comprehensive income for the period
4,886
 
1,596
 
 -
 
6,482
 
 
 
 
 
 
 
 
Profit for the period attributable to:
 
 
 
 
 
 
 
Equity holders of the parent
2,644
 
991
 
 -
 
3,635
Non-controlling interest
2,335
 
502
 
 -
 
2,837
 
 
 
 
 
 
 
 
Total comprehensive income for the period attributable to:
 
 
 
 
 
 
 
Equity holders of the parent
2,399
 
1,030
 
 -
 
3,429
Non-controlling interest
2,487
 
566
 
 -
 
3,053
 
a)
 Corresponds to the elimination of depreciation expense from investment property, and the adjustment, if applicable, to the depreciation of property, plant and equipment to   adjust the value of transfers from investment property to that item.
b)
It relates to the elimination of the gain from disposal of investment property, as such property is accounted for at its fair value on the date of sale, which generally coincides with the transaction price.
c)
It represents the net change in fair value of investment property.
d)
It relates to change in the value, as per the equity method, in associates and joint ventures after applying the change to equity in the accounting policy implemented by the Group.
e)
It reflects the tax effect on the items indicated above, as applicable.
f)
It pertains to exchange differences related to the change in the accounting policy implemented by the Group in subsidiaries, associates and joint ventures with functional currency other than the peso.
g)
See Notes 2.26 and 32 to the Consolidated Financial Statements as of June 30, 2017.
 
 
10
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
 
2.4.
Use of estimates
 
The preparation of Financial Statements at a certain date requires the Management to make estimations and evaluations affecting the amount of assets and liabilities recorded and contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the period. Actual results might differ from the estimates and evaluations made at the date of preparation of these financial statements. In the preparation of these financial statements, the significant judgments made by Management in applying the Group’s accounting policies and the main sources of uncertainty were the same applied by the Group in the preparation of the Consolidated Financial Statements as of June 30, 2017 described in Note 3 to those Financial Statements.
 
3.
Seasonal effects on operations
 
Operations Center in Argentina
 
The operations of the Group’s shopping malls are subject to seasonal effects, which affect the level of sales recorded by lessees. During summer time in Argentina (January and February), the lessees of shopping malls experience the lowest sales levels in comparison with the winter holidays (July) and Christmas and year-end holidays celebrated in December, when they tend to record peaks of sales. Apparel stores generally change their collections during the spring and the fall, which impacts positively on shopping malls sales. Sale discounts at the end of each season also affect the business. As a consequence, for shopping mall operations, a higher level of business activity is expected in the period ranging between July and December, compared to the period between January and June.
 
Operations Center in Israel
 
The operations of the supermarket chain are subject to fluctuations of quarterly sales and income due to the increase in activity during religious holidays in different quarters throughout the year. For instance, in Pesaj (Passover) sometime between March and April, and Rosh Hashaná (Jewish New Year), sometime between September and October each year.
 
The results of operations of Telecommunications and Tourism are also usually affected by seasonality in summer months in Israel and by the Jewish New Year, given a higher consumption due to internal and external tourism.
 
4.
Acquisitions and disposals
 
Significant acquisitions and disposals for the six-month period ended December 31, 2017 are detailed below. Significant acquisitions and disposals for the fiscal year ended June 30, 2017, are detailed in Note 4 to the Consolidated Financial Statements as of June 30, 2017.
 
Operations Center in Argentina
 
Sale of ADS of IRSA CP
 
During October 2017, IRSA completed the sale in the secondary market of 10,240,000 ordinary shares of IRSA CP, par value Ps. 1 per share, represented by American Depositary Shares (“ADSs”), representing four ordinary shares each, which represents nearly 8.1% of IRSA CP capital for a total amount of Ps. 2,440 (US$ 138). After the transaction, IRSA’s direct and indirect interest in IRSA CP amounts to approximately 86.5%. This transaction was accounted in equity as an increase in the equity attributable to the parent for an amount of Ps. 271, net of taxes.
 
 
 
11
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Operations Center in Israel
 
Purchase of DIC shares by Dolphin
 
As mentioned in Note 7 to the Consolidated Financial Statements as of June 30, 2017, in connection with the Promotion of Competition and Reduction of Concentration Law in Israel, after June 30, 2017, Dolphin Netherlands B.V. made a non-binding tender offer for the acquisition of all DIC shares held by IDBD. For purposes of the transaction, a committee of independent directors has been set up to assess the tender offer and negotiate the terms and conditions. The Audit Committee has issued an opinion without reservations as to the transaction in accordance with the terms of section 72 et al. of the Capital Markets Law N° 26,831.
 
 
In November 2017, Dolphin IL Investments Ltd. (Dolphin IL), a subsidiary of Dolphin Netherlands B.V., has subscribed the final documents for the acquisition of the total shares owned by IDBD in DIC.
 
 
The transaction has been made for an amount of NIS 1,843 (equivalent to NIS 17.20 per share of DIC). The consideration was paid NIS 70 in cash (equivalent to Ps. 348 as of the date of the transaction) and NIS 1,773 (equivalent to Ps. 8,814 as of the date of the transaction) were financed by IDBD to Dolphin, maturing in five years, with the possibility of an extension of three additional years in tranches of one year each, that will accrue an initial interest of 6.5% annually, which will increase by 1% annually in case of extension for each annual tranche. Furthermore, guarantees have been implemented for IDBD, for IDBD bondholders and their creditors, through pledges of different degree of privilege over DIC shares resulting from the purchase. Moreover, a pledge will be granted in relation to 9,636,097 (equivalent to 6.38%) of the shares of DIC that Dolphin currently holds in the first degree of privilege in favor of IDBD and in second degree of privilege in favor of IDBD's creditors. This transaction has no effect in the Groups consolidation structure and has been accounted in equity as a decrease in the equity attributable to the parent for an amount of Ps. 114.
 
 
It should be noted that the financial position of IDBD and its subsidiaries at the Operations Center in Israel does not affect the financial position of IRSA and subsidiaries at the Operations Center in Argentina. In addition, the commitments and other covenants resulting from IDBD’s financial debt do not have impact on IRSA since such indebtedness has no recourse against IRSA and it is not granted by IRSA’s assets.
 
Purchase of IDBD shares by IFISA
 
In December, 2017, Dolphin Netherlands BV (Dolphin), has executed a stock purchase agreement for all of the shares that IFISA held of IDBD, which amounted to 31.7% of the capital stock. In this way, as of the end of December 31, 2017, Dolphin holds the 100% of IDBD's shares.
 
The transaction was made at a price of NIS 398 (equivalent to NIS 1.894 per share and approximately to
Ps. 1,968 as of the date of the transaction). As consideration of the transaction all receivables from IFISA to Dolphin have been canceled plus a payment of USD 33.7 (equivalents to Ps. 588 as of the date of the transaction). This transaction was accounted in equity as a decrease in the equity attributable to the parent for an amount of Ps. 2,923.
 
Tender offer for Clal
 
In July 2017, IDBD received a non-binding offer from an international group for the potential acquisition of its entire interest in Clal. The consideration will be based on the equity value of Clal, in accordance with Clal Financial Statement at the time of completing the transaction and is subject to the performance of a due diligence and the execution of an agreement, as well as obtaining the approvals required by law. IDBD is analyzing the offer. On June 30, 2017, this value amounted to NIS 4,880 (equivalent to approximately Ps. 23,278 as of the date of these Financial Statements), at the proportionate equity interest as of the date of the transaction. In November 2017 the period for the parties to execute an agreement for the sale of the shares, has expired. However, the parties continue negotiating according to the principles of the initial proposal. There is no certainty that the offer will go forward under the terms proposed, or that the transaction will be completed.
 
 
 
12
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Sale of Shufersal shares
 
On December 24, 2017, DIC sold shares of Shufersal, in a manner whereby its equity interest decreased from 53.30% to 50.12%. The consideration with respect to the sale of the aforementioned shares amounted to NIS 169.5 (equivalent to Ps. 847 as of the date of the transaction). This transaction was accounted in equity as an increase in the equity attributable to the parent for an amount of Ps. 385.
 
Acquisition of New Pharm
 
As mentioned in Note 4.G to the Consolidated Financial Statements as of June 30, 2017, Shufersal entered into an agreement for the purchase of the shares of New Pharm Drugstores Ltd. ("New Pharm"), representative of 100% of that Company’s share capital. On December 20, 2017, the transaction was completed and Shufersal is the sole shareholder of New Pharm, after the sale of one of its stores and the approval by the antitrust committee. The total consideration was NIS 151 (equivalent to Ps. 734 as of the date of the transaction).
 
The Group is working on the allocation of the purchase price of the net assets acquired. The information below is preliminar and is subject to change. The following table summarizes the consideration, the fair value of the assets acquired and the liabilities assumed:
 
 
 
December 2017
Identified assets and assumed liabilities:
 
 
 
 
 
Assets
 
850
Liabilities
 
926
Total identified net assets
 
(76)
Goodwill (pending allocation)
 
810
Total consideration
 
734
 
 
Ispro
 
In August 2017, PBC’s Board of Directors, decided to start a process to examine the potential sale of its interest in Ispro. In this respect, it has received several offers. As of the date of these Financial Statements, the transaction does not comply with the requirements to be classified as assets held for sale.
 
 
5.
Financial risk management and fair value estimates
 
These Financial Statements do not include all the information and disclosures on financial risk management; therefore, they should be read along with Note 5 to the Consolidated Financial Statements as of June 30, 2017.   There have been no changes in risk management or risk management policies applied by the Group since year-end.
 
Since June 30, 2017 as of the date of this Financial Statements, there have been no significant changes in business or economic circumstances affecting the fair value of the Group's assets or liabilities (either measured at fair value or amortized cost). Furthermore, there have been no transfers between the different hierarchies used to assess the fair value of the Group’s financial instruments.
 
 
13
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
6.
Segment information
 
As explained in Note 6. to the Consolidated Financial Statements as of June 30, 2017, the Group reports its financial performance separately in two Operations Centers. As of the year ended June 30, 2017 the CODM reviews certain corporate expenses associated with all the segments of the Operations Center in Argentina in an aggregate and separate manner from each of the segments, and has been disclosed in the Financial Operations, Corporate and Others segment. The segment information for the period ended December 30, 2016 has been modified for the purposes of comparability. Below is a summary of the business unit and a reconciliation between the operating income according to segment information and the operating income of the statement of income and other comprehensive income of the Group for the periods ended December 31, 2017 and 2016:
 
 
December 31, 2017
 
 
Operations Center in Argentina
 
Operations Center in Israel
 
Total
 
Joint ventures (1)
 
Expenses and collective promotion funds
 
Elimination of inter-segment transactions and non-reportable assets / liabilities
 
Total as per statement of income / statement of financial position
Revenues
2,593
 
39,621
 
42,214
 
(28)
 
860
 
(6)
 
43,040
Costs
(517)
 
(27,896)
 
(28,413)
 
11
 
(876)
 
1
 
(29,277)
Gross profit
2,076
 
11,725
 
13,801
 
(17)
 
(16)
 
(5)
 
13,763
Net gain from fair value adjustment of investment properties
10,476
 
1,150
 
11,626
 
(124)
 
 -
 
 -
 
11,502
General and administrative expenses
(421)
 
(1,793)
 
(2,214)
 
13
 
 -
 
6
 
(2,195)
Selling expenses
(202)
 
(7,519)
 
(7,721)
 
4
 
 -
 
 -
 
(7,717)
Other operating results, net
(46)
 
635
 
589
 
16
 
 -
 
(1)
 
604
Profit / (loss) from operations
11,883
 
4,198
 
16,081
 
(108)
 
(16)
 
 -
 
15,957
Share of profit / (loss) of associates and joint ventures
460
 
(227)
 
233
 
160
 
 -
 
 -
 
393
Segment profit / (loss)
12,343
 
3,971
 
16,314
 
52
 
(16)
 
 -
 
16,350
Reportable assets
56,466
 
194,258
 
250,724
 
(198)
 
 -
 
10,012
 
260,538
Reportable liabilities
 -
 
(170,926)
 
(170,926)
 
 -
 
 -
 
(31,806)
 
(202,732)
Net reportable assets
56,466
 
23,332
 
79,798
 
(198)
 
 -
 
(21,794)
 
57,806
 
 
December 31, 2016 (recast)
 
 
Operations Center in Argentina
 
Operations Center in Israel
 
Total
 
Joint ventures (1)
 
Expenses and collective promotion funds
 
Elimination of inter-segment transactions and non-reportable assets / liabilities
 
Total as per statement of income / statement of financial position
Revenues
2,085
 
34,021
 
36,106
 
(18)
 
745
 
(2)
 
36,831
Costs
(411)
 
(24,463)
 
(24,874)
 
8
 
(759)
 
 -
 
(25,625)
Gross profit
1,674
 
9,558
 
11,232
 
(10)
 
(14)
 
(2)
 
11,206
Net gain from fair value adjustment of investment properties
3,045
 
973
 
4,018
 
(548)
 
 -
 
 -
 
3,470
General and administrative expenses
(337)
 
(1,478)
 
(1,815)
 
2
 
 -
 
4
 
(1,809)
Selling expenses
(185)
 
(6,381)
 
(6,566)
 
2
 
 -
 
 -
 
(6,564)
Other operating results, net
(19)
 
(95)
 
(114)
 
(5)
 
 -
 
(2)
 
(121)
Profit / (loss) from operations
4,178
 
2,577
 
6,755
 
(559)
 
(14)
 
 -
 
6,182
Share of (loss) / profit of associates and joint ventures
(58)
 
86
 
28
 
34
 
 -
 
 -
 
62
Segment profit / (loss)
4,120
 
2,663
 
6,783
 
(525)
 
(14)
 
 -
 
6,244
Reportable assets
41,913
 
154,468
 
196,381
 
(213)
 
 -
 
7,073
 
203,241
Reportable liabilities
 -
 
(133,155)
 
(133,155)
 
 -
 
 -
 
(25,925)
 
(159,080)
Net reportable assets
41,913
 
21,313
 
63,226
 
(213)
 
 -
 
(18,852)
 
44,161
 
(1)
Represents the equity value of joint ventures that were proportionately consolidated for the segment information.
(2)
Includes deferred income tax assets, income tax and MPIT credits, trade and other receivables, investment in financial assets, cash and cash equivalents and intangible assets except for right to receive future units under barter agreements, net of investments in associates with negative equity which are included in provisions in the amount of Ps. 16 and Ps. 80, as of December 31, 2017 and 2016.
 
 
 
14
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Below is a summarized analysis of the business unit of the Group’s Operations Center in Argentina for the periods ended December 31, 2017 and 2016:
 
 
December 31, 2017
 
Operations Center in Argentina
 
Shopping Malls
 
Officesand others
 
Sales and developments
 
Hotels
 
International
 
Financial operations, Corporate and others
 
Total
Revenues
1,810
 
251
 
54
 
478
 
 -
 
 -
 
2,593
Costs
(173)
 
(17)
 
(20)
 
(307)
 
 -
 
 -
 
(517)
Gross profit
1,637
 
234
 
34
 
171
 
 -
 
 -
 
2,076
Net gain from fair value adjustment of investment properties
9,041
 
885
 
550
 
 -
 
 -
 
 -
 
10,476
General and administrative expenses
(135)
 
(19)
 
(29)
 
(90)
 
(44)
 
(104)
 
(421)
Selling expenses
(108)
 
(17)
 
(9)
 
(57)
 
 -
 
(11)
 
(202)
Other operating results, net
(24)
 
10
 
(23)
 
(2)
 
(5)
 
(2)
 
(46)
Profit / (loss) from operations
10,411
 
1,093
 
523
 
22
 
(49)
 
(117)
 
11,883
Share of profit of associates and joint ventures
 -
 
25
 
11
 
 -
 
40
 
384
 
460
Segment profit / (loss)
10,411
 
1,118
 
534
 
22
 
(9)
 
267
 
12,343
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment properties and trading properties
37,987
 
8,783
 
5,992
 
 -
 
 -
 
 -
 
52,762
Investment in associates and joint ventures
 -
 
126
 
150
 
 -
 
671
 
2,326
 
3,273
Other operating assets
85
 
75
 
43
 
170
 
58
 
 -
 
431
Operating assets
38,072
 
8,984
 
6,185
 
170
 
729
 
2,326
 
56,466
 
 
December 31, 2016 (recast)
 
Operations Center in Argentina
 
Shopping Malls
 
Officesand others
 
Sales and developments
 
Hotels
 
International
 
Financial operations, Corporate and Others
 
Total
Revenues
1,494
 
217
 
1
 
373
 
 -
 
 -
 
2,085
Costs
(146)
 
(17)
 
(14)
 
(234)
 
 -
 
 -
 
(411)
Gross profit / (loss)
1,348
 
200
 
(13)
 
139
 
 -
 
 -
 
1,674
Net gain / (loss) from fair value adjustment of investment properties
1,698
 
1,505
 
(158)
 
 -
 
 -
 
 -
 
3,045
General and administrative expenses
(123)
 
(16)
 
(19)
 
(66)
 
(42)
 
(71)
 
(337)
Selling expenses
(93)
 
(22)
 
(9)
 
(46)
 
 -
 
(15)
 
(185)
Other operating results, net
(24)
 
46
 
(30)
 
 -
 
(9)
 
(2)
 
(19)
Profit / (loss) from operations
2,806
 
1,713
 
(229)
 
27
 
(51)
 
(88)
 
4,178
Share of (loss) / profit of associates and joint ventures
(1)
 
32
 
7
 
 -
 
(140)
 
44
 
(58)
Segment profit / (loss)
2,805
 
1,745
 
(222)
 
27
 
(191)
 
(44)
 
4,120
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment properties and trading properties
28,385
 
6,800
 
4,368
 
 -
 
 -
 
 -
 
39,553
Investment in associates and joint ventures
 -
 
148
 
69
 
 -
 
4
 
1,768
 
1,989
Other operating assets
82
 
92
 
32
 
163
 
2
 
 -
 
371
Operating assets
28,467
 
7,040
 
4,469
 
163
 
6
 
1,768
 
41,913
 
 
 
15
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Below is a summarized analysis of the business unit of the Group’s Operations Center in Israel for the periods ended December 31, 2017 and 2016:
 
 
December 31, 2017
 
Operations Center in Israel
 
Real Estate
 
Supermarkets
 
Telecommunications
 
Insurance
 
Others
 
Total
Revenues
2,503
 
27,854
 
9,065
 
 -
 
199
 
39,621
Costs
(753)
 
(20,654)
 
(6,377)
 
 -
 
(112)
 
(27,896)
Gross profit
1,750
 
7,200
 
2,688
 
 -
 
87
 
11,725
Net gain from fair value adjustment of investment properties
1,150
 
 -
 
 -
 
 -
 
 -
 
1,150
General and administrative expenses
(171)
 
(430)
 
(848)
 
 -
 
(344)
 
(1,793)
Selling expenses
(51)
 
(5,659)
 
(1,787)
 
 -
 
(22)
 
(7,519)
Other operating results, net
22
 
(103)
 
146
 
 -
 
570
 
635
Profit from operations
2,700
 
1,008
 
199
 
 -
 
291
 
4,198
Share of (loss) / profit of associates and joint ventures
(146)
 
9
 
 -
 
 -
 
(90)
 
(227)
Segment profit
2,554
 
1,017
 
199
 
 -
 
201
 
3,971
 
 
 
 
 
 
 
 
 
 
 
 
Operating assets
88,661
 
42,214
 
31,115
 
9,170
 
23,098
 
194,258
Operating liabilities
(70,253)
 
(30,443)
 
(24,447)
 
 -
 
(45,783)
 
(170,926)
Operating assets (liabilities), net
18,408
 
11,771
 
6,668
 
9,170
 
(22,685)
 
23,332
 
 
 
December 31, 2016 (recast)
 
Operations Center in Israel
 
Real Estate
 
Supermarkets
 
Telecommunications
 
Insurance
 
Others
 
Total
Revenues
2,492
 
23,439
 
7,748
 
 -
 
342
 
34,021
Costs
(1,234)
 
(17,769)
 
(5,275)
 
 -
 
(185)
 
(24,463)
Gross profit
1,258
 
5,670
 
2,473
 
 -
 
157
 
9,558
Net gain from fair value adjustment of investment properties
973
 
 -
 
 -
 
 -
 
 -
 
973
General and administrative expenses
(130)
 
(303)
 
(728)
 
 -
 
(317)
 
(1,478)
Selling expenses
(46)
 
(4,593)
 
(1,714)
 
 -
 
(28)
 
(6,381)
Other operating results, net
31
 
(31)
 
(19)
 
 -
 
(76)
 
(95)
Profit / (loss) from operations
2,086
 
743
 
12
 
 -
 
(264)
 
2,577
Share of (loss) / profit of associates and joint ventures
(87)
 
 -
 
 -
 
 -
 
173
 
86
Segment profit / (loss)
1,999
 
743
 
12
 
 -
 
(91)
 
2,663
 
 
 
 
 
 
 
 
 
 
 
 
Operating assets
64,189
 
32,545
 
28,532
 
6,143
 
23,059
 
154,468
Operating liabilities
(51,822)
 
(25,964)
 
(22,641)
 
 -
 
(32,728)
 
(133,155)
Operating assets (liabilities), net
12,367
 
6,581
 
5,891
 
6,143
 
(9,669)
 
21,313
 
 
16
IRSA Inversiones y Representaciones Sociedad Anónima
 
7.
Investments in associates and joint ventures
 
Changes in the Group’s investments in associates and joint ventures for the six-month period ended December 31, 2017 and for the year ended June 30, 2017 were as follows:
 
December 31, 2017
 
June 30, 2017
Beginning of the period / year
7,813
 
16,835
Increase in equity interest in associates and joint ventures
49
 
1,102
Issuance of capital and contributions
89
 
160
Capital reduction
(150)
 
(32)
Decrease for control obtainment
 -
 
(59)
Associates incorporated by business combination
 -
 
107
Share of profit
393
 
378
Currency translation adjustment
140
 
232
Cash dividends (i)
(51)
 
(250)
Distribution for associate liquidation (ii)
(65)
 
 -
Reclassification to held for sale
(44)
 
(10,709)
Others
5
 
49
End of the period / year (iii)
8,179
 
7,813
 
(i)    
During the period ended December 31, 2017 the amount corresponds Ps. 23 to Condor, Ps. 13 to LRSA and Ps. 15 to Manaman. During the fiscal year ended June 30, 2017 the amount corresponds Ps. 101 to Emco, Ps. 36 to Aviareps AG, Ps. 22 to Condor, Ps. 19 to Manibil,   Ps. 7 to Millenium, Ps. 36 to Manaman, Ps. 12 to NPSF, Ps. 9 to LRSA, Ps. 7 to Cyrsa S.A. and Ps. 1 to Baicom.
(ii)   
It corresponds to the distribution following the partial liquidation of Baicom
(iii) As of December 31, 2017 and June 30, 2017 includes Ps. (16) and Ps. (72) respectively, reflecting interests in companies with negative equity, which were disclosed in “Provisions” (see Note 17)

 
Name of the entity
 
% ownership interest
 
Value of Group's interest in equity
 
Group's interest in comprehensive income / (loss)
 
 
December 30, 2017
June 30, 2017
 
December 30, 2017
June 30, 2017
 
December 30, 2017
December 30, 2016 (recast)
Associates
 
 
 
 
 
 
 
 
 
New Lipstick (1)
 
49.9%
49.9%
 
(16)
(72)
 
56
(99)
BHSA
 
29.9%
29.9%
 
2,103
1,693
 
410
38
Condor
 
28.2%
28.7%
 
678
634
 
64
(35)
PBEL
 
45.4%
45.4%
 
661
768
 
 -
48
Other associates
 
 -
 -
 
1,484
1,552
 
(139)
392
Joint ventures
 
 
 
 
 
 
 
 
 
Quality
 
50.0%
50.0%
 
618
482
 
124
16
La Rural SA
 
50.0%
50.0%
 
124
113
 
24
11
Mehadrin
 
45.4%
45.4%
 
1,219
1,312
 
(92)
16
Other joint ventures
 
-
-
 
1,308
1,331
 
86
(23)
Total associates and joint ventures
 
 
 
 
8,179
7,813
 
533
364
 
(1)  
Metropolitan, a subsidiary of New Lipstick, has renegotiated its non-recourse debt with IRSA, which amounted to US$ 113.1, and obtained a debt reduction of US$ 20 by the lending bank, an extension to April 30, 2020 and an interest rate reduction from LIBOR + 4 b.p. to 2 b.p. upon payment of US$ 40 in cash (US$ 20 in September 2017 and US$ 20 in October 2017), of which IRSA has contributed with US$ 20. Following the renegotiation, Metropolitan’s debt amounts to US$ 53.1. Additionally, Metropolitan has agreed to exercise on or before February 1, 2019 the purchase option on part of the land where the property is built and, to deposit the sum of money corresponding to 1% of the purchase price. Furthermore, Metropolitan has agreed to cause IRSA and other shareholders to furnish the bank, on or before February 1, 2020, with a payment guarantee with financial ratios acceptable to the Bank for the outstanding balance of the purchase price, or a letter of credit in relation to the loan balance then outstanding.
 
Below is additional information about the Group’s investments in associates and joint ventures:
 
Name of the entity
 
Place of business / Country of incorporation
 
Main activity
 
Common shares 1 vote
 
Latest financial statements issued
 
 
 
 
Share capital (nominal value)
 
Profit / (loss) for the period
 
Shareholders’ equity
Associates
 
 
 
 
 
 
 
 
 
 
 
 
New Lipstick
 
U.S.
 
Real estate
 
N/A
 
N/A
 
(*) (24)
 
(*) (159)
BHSA
 
Argentina
 
Financial
 
448,689,072
 
(***) 1,500
 
(***) 486
 
(***) 7,167
Condor
 
U.S.
 
Hotel
 
3,337,613
 
N/A
 
 (*) (1)
 
 (*) 111
PBEL
 
India
 
Real estate
 
450
 
(**) 1
 
(**) (63)
 
(**) (619)
Other associates
 
 
 
 
 
 
 
N/A
 
N/A
 
N/A
Joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Quality
 
Argentina
 
Real estate
 
81,814,342
 
164
 
249
 
1,229
La Rural SA
 
Argentina
 
Organization of events
 
714,498
 
1
 
90
 
201
Mehadrin
 
Israel
 
Agriculture
 
1,509,889
 
(**) 3
 
(*) (36)
 
(*) 503
Other joint ventures
 
 
 
 
 
-
 
N/A
 
N/A
 
N/A
 
(*)      
Amounts in millions of US Dollars under USGAAP. Condor’s year-end falls on December 31, so the Group estimates their interest with a three-month lag, including material adjustments, if any.
(**)    
Amounts in millions of NIS.
(***)  
Information as of September 30, 2017 according to BCRA's standards. For the purpose of the valuation of the investment in the Company, preliminary figures as of December 31, 2017 have been considered with the necessary IFRS adjustments.
 
17
IRSA Inversiones y Representaciones Sociedad Anónima
 
8.
Investment properties
 
Changes in the Group’s investment properties for the six-month period ended December 31, 2017 and for the year ended June 30, 2017 were as follows:
 
Period ended December 31, 2017
 
Year ended June 30, 2017
 
Rental properties
 
Undeveloped parcels of land
 
Properties under development
 
Total
 
Total
Fair value at the beginning of the period / year
89,301
 
7,647
 
3,005
 
99,953
 
82,703
Additions
576
 
19
 
652
 
1,247
 
2,651
Capitalized finance costs
 -
 
 -
 
8
 
8
 
3
Capitalized leasing costs
15
 
 -
 
1
 
16
 
24
Amortization of capitalized leasing costs (i)
(2)
 
 -
 
 -
 
(2)
 
(2)
Transfers
(4)
 
4
 
 -
 
 -
 
 -
Transfers from property, plant and equipment
 -
 
 -
 
 -
 
 -
 
156
Transfers to trading properties
(351)
 
 -
 
 -
 
(351)
 
(14)
Transfers to assets held for sale
 -
 
 -
 
 -
 
 -
 
(71)
Reclassifications previous periods
 -
 
 -
 
 -
 
 -
 
(224)
Disposals due to sales
(26)
 
 -
 
 -
 
(26)
 
(220)
Currency translation adjustment
1,086
 
33
 
(1)
 
1,118
 
10,494
Net gain from fair value adjustment
10,881
 
571
 
50
 
11,502
 
4,453
Fair value at the end of the period / year
101,476
 
8,274
 
3,715
 
113,465
 
99,953
 
(i)
Amortization charges of capitalized leasing costs were included in “Costs” in the Statements of Income (Note 20).
 
The following amounts have been recognized in the Statements of Income:
 
December 31, 2017
 
December 31, 2016 (recast)
Rental and services income
5,241
 
4,242
Direct operating expenses
(1,474)
 
(1,351)
Development expenditures
(347)
 
(822)
Net realized gain from fair value adjustment of investment properties
84
 
105
Net unrealized gain from fair value adjustment of investment properties
11,418
 
3,365
 
Valuation techniques are described in Note 10 to the Consolidated Financial Statements as of June 30, 2017. There were no changes to the valuation techniques. The Company has reassessed the assumptions at the end of the period, incorporating the effect of the tax reform described in Note 18 to these financial statements, which increased the fair value of the shopping malls.
 
 
9.
Property, plant and equipment
 
Changes in the Group’s property, plant and equipment for the six-month period ended December 31, 2017 and for the year ended June 30, 2017 were as follows:
 
 
Period ended December 31, 2017
 
Year ended June 30, 2017
 
Buildings and facilities
 
Machinery and equipment
 
Communication networks
 
Others
 
Total
 
Total
Costs
17,573
 
4,614
 
8,156
 
1,973
 
32,316
 
25,839
Accumulated depreciation
(1,418)
 
(1,152)
 
(1,994)
 
(639)
 
(5,203)
 
(1,790)
Net book amount at the beginning of the year
16,155
 
3,462
 
6,162
 
1,334
 
27,113
 
24,049
Additions
435
 
357
 
497
 
413
 
1,702
 
2,751
Disposals
(2)
 
(19)
 
(39)
 
(9)
 
(69)
 
(241)
Reclassification to assets held for sale
 -
 
 -
 
 -
 
 -
 
 -
 
(1,557)
Impairment / recovery
(31)
 
 -
 
 -
 
 -
 
(31)
 
12
Assets incorporated by business combinations
80
 
150
 
 -
 
 -
 
230
 
 -
Currency translation adjustment
428
 
90
 
156
 
40
 
714
 
5,013
Transfers to investment properties
 -
 
 -
 
 -
 
 -
 
 -
 
(156)
Depreciation charges (i)
(423)
 
(303)
 
(624)
 
(294)
 
(1,644)
 
(2,758)
Balances at the end of the period / year
16,642
 
3,737
 
6,152
 
1,484
 
28,015
 
27,113
Costs
18,570
 
5,239
 
8,861
 
2,436
 
35,106
 
32,316
Accumulated depreciation
(1,928)
 
(1,502)
 
(2,709)
 
(952)
 
(7,091)
 
(5,203)
Net book amount at the end of the period / year
16,642
 
3,737
 
6,152
 
1,484
 
28,015
 
27,113
 
(i)
As of December 31, 2017, depreciation charges of property, plant and equipment were recognized as follows: Ps. 978 in "Costs", Ps. 97 in "General and administrative expenses" and Ps. 569 in "Selling expenses", respectively in the statement of income (Note 20).
 
18
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
10.
Trading properties
 
Changes in the Group’s trading properties for the six-month period ended December 31, 2017 and for the year ended June 30, 2017 were as follows:
 
Period ended December 31, 2017
 
Year ended June 30, 2017
 
Completed properties
 
Properties under development
 
Undeveloped sites
 
Total
 
Total
Beginning of the period / year
801
 
3,972
 
1,008
 
5,781
 
4,971
Additions
5
 
695
 
46
 
746
 
1,229
Capitalized finance costs
 -
 
3
 
 -
 
3
 
 -
Currency translation adjustment
71
 
142
 
22
 
235
 
971
Transfers
325
 
(268)
 
(57)
 
 -
 
 -
Transfers from intangible assets
4
 
 -
 
 -
 
4
 
13
Transfers from investment properties
351
 
 -
 
 -
 
351
 
14
Disposals
(661)
 
(1)
 
 -
 
(662)
 
(1,417)
End of the period / year
896
 
4,543
 
1,019
 
6,458
 
5,781
Non-current
 
 
 
 
 
 
3,496
 
4,532
Current
 
 
 
 
 
 
2,962
 
1,249
Total
 
 
 
 
 
 
6,458
 
5,781
 
 
11.
Intangible assets
 
Changes in the Group’s intangible assets for the six-month period ended December 31, 2017 and for the year ended June 30, 2017 were as follows:
 
 
Period ended December 31, 2017
 
Year ended June 30, 2017
 
Goodwill
 
Trademarks
 
Licenses
 
Customer relations
 
Information systems and software
 
Contracts and others
 
Total
  
Total
Costs
2,778
 
4,029
 
1,002
 
4,746
 
2,103
 
1,659
 
16,317

12,979
Accumulated amortization
 -
 
(75)
 
(210)
 
(2,184)
 
(814)
 
(647)
 
(3,930)

(1,216)
Net book amount at the beginning of the period / year
2,778
 
3,954
 
792
 
2,562
 
1,289
 
1,012
 
12,387

11,763
Additions
 -
 
 -
 
 -
 
27
 
256
 
40
 
323

612
Disposals
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -

(52)
Reclassifications previous periods
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -

31
Transfers to assets held for sale
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -

(182)
Transfers to trading properties
 -
 
 -
 
 -
 
 -
 
 -
 
(4)
 
(4)

(13)
Assets incorporated by business combination
810
 
 -
 
 -
 
 -
 
 -
 
 -
 
810

26
Currency translation adjustment
60
 
106
 
19
 
43
 
33
 
13
 
274

2,284
Amortization charges (i)
 -
 
(23)
 
(32)
 
(486)
 
(248)
 
(192)
 
(981)

(2,082)
Balances at the end of the period / year
3,648
 
4,037
 
779
 
2,146
 
1,330
 
869
 
12,809

12,387
Costs
3,648
 
4,140
 
1,029
 
4,639
 
2,158
 
1,737
 
17,351

16,317
Accumulated amortization
 -
 
(103)
 
(250)
 
(2,493)
 
(828)
 
(868)
 
(4,542)

(3,930)
Net book amount at the end of the period / year
3,648
 
4,037
 
779
 
2,146
 
1,330
 
869
 
12,809

12,387
 
 
(i) 
As of December 31, 2017, amortization charges were recognized in the amount of Ps. 223 in "Costs", Ps. 208 in "General and administrative expenses" and Ps. 550 in "Selling expenses", in the statement of income (Note 20).
 
19
IRSA Inversiones y Representaciones Sociedad Anónima
 
12.
Financial instruments by category
 
The present note shows the financial assets and financial liabilities by category of financial instrument and a reconciliation to the corresponding line in the Consolidated Statements of Financial Position, as appropriate. Financial assets and liabilities measured at fair value are assigned based on their different levels in the fair value hierarchy. For further information, related to fair value hierarchy see Note 14 to the Consolidated Financial Statements as of June 30, 2017.
 
 Financial assets and financial liabilities as of December 31, 2017 are as follows:
 
 
Financial assets at amortized cost
 
Financial assets at fair value through profit or loss
 
Subtotal financial assets
 
Non-financial assets
 
Total
 
 
 
Level 1
Level 2
Level 3
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables)
16,356
 
 -
 -
2,288
 
18,644
 
4,130
 
22,774
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 
 
  - Public companies’ securities
 -
 
2,204
 -
124
 
2,328
 
 -
 
2,328
  - Private companies’ securities
 -
 
 -
 -
823
 
823
 
 -
 
823
  - Deposits
1,846
 
15
 -
 -
 
1,861
 
 -
 
1,861
  - Mutual funds
 -
 
5,034
 -
 -
 
5,034
 
 -
 
5,034
  - Bonds
 -
 
10,066
343
 -
 
10,409
 
 -
 
10,409
  - Others
 -
 
123
 -
 -
 
123
 
 -
 
123
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
 -
 
 -
51
 -
 
51
 
 -
 
51
  - Swaps
 -
 
 -
4
 -
 
4
 
 -
 
4
  - Others
 -
 
 -
5
 -
 
5
 
 -
 
5
Restricted assets
2,205
 
 -
 -
 -
 
2,205
 
 -
 
2,205
Financial assets held for sale:
 
 
 
 
 
 
 
 
 
 
 
  - Clal
 -
 
9,170
 -
 -
 
9,170
 
 -
 
9,170
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
  - Cash at bank and on hand
4,923
 
 -
 -
 -
 
4,923
 
 -
 
4,923
  - Short-term investments
21,304
 
3,268
 -
 -
 
24,572
 
 -
 
24,572
Total assets
46,634
 
29,880
403
3,235
 
80,152
 
4,130
 
84,282
 
 
Financial liabilities at amortized cost
 
Financial liabilities at fair value through profit or loss
 
Subtotal financial liabilities
 
Non-financial liabilities
 
Total
 
 
 
Level 1
Level 2
Level 3
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other payables
17,425
 
 -
 -
 -
 
17,425
 
8,074
 
25,499
Borrowings (excluding finance leases)
147,388
 
 -
 -
 -
 
147,388
 
 -
 
147,388
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
 -
 
 -
38
 -
 
38
 
 -
 
38
  - Swaps
 -
 
 -
54
 -
 
54
 
 -
 
54
  - Others
 -
 
5
 -
15
 
20
 
 -
 
20
  - Forwards
 -
 
 -
132
 -
 
132
 
 -
 
132
Total liabilities
164,813
 
5
224
15
 
165,057
 
8,074
 
173,131
 
 
 
20
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Financial assets and financial liabilities as of June 30, 2017 were as follows:
 
 
Financial assets at amortized cost
 
Financial assets at fair value through profit or loss
 
Subtotal financial assets
 
Non-financial assets
 
Total
 
 
 
Level 1
Level 2
Level 3
 
 
 
 
 
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Assets as per Statements of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables)
16,575
 
 -
 -
2,156
 
18,731
 
3,819
 
22,550
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 
 
  - Public companies’ securities
 -
 
1,665
 -
82
 
1,747
 
 -
 
1,747
  - Private companies’ securities
 -
 
16
 -
964
 
980
 
 -
 
980
  - Deposits
1,235
 
13
 -
 -
 
1,248
 
 -
 
1,248
  - Mutual funds
 -
 
3,855
 -
 -
 
3,855
 
 -
 
3,855
  - Bonds
 -
 
4,719
425
 -
 
5,144
 
 -
 
5,144
  - Others
 -
 
749
 -
 -
 
749
 
 -
 
749
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Warrants
 -
 
 -
26
 -
 
26
 
 -
 
26
  - Foreign-currency future contracts
 -
 
 -
27
 -
 
27
 
 -
 
27
  - Swaps
 -
 
 -
29
 -
 
29
 
 -
 
29
Restricted assets
954
 
 -
 -
 -
 
954
 
 -
 
954
Financial assets held for sale:
 
 
 
 
 
 
 
 
 
 
 
  - Clal
 -
 
8,562
 -
 -
 
8,562
 
 -
 
8,562
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
  - Cash at bank and on hand
8,529
 
 -
 -
 -
 
8,529
 
 -
 
8,529
  - Short term investments
14,510
 
1,815
 -
 -
 
16,325
 
 -
 
16,325
Total assets
41,803
 
21,394
507
3,202
 
66,906
 
3,819
 
70,725
 
 
Financial liabilities at amortized cost
 
Financial liabilities at fair value through profit or loss
 
Subtotal financial liabilities
 
Non-financial liabilities
 
Total
 
 
 
Level 1
Level 2
Level 3
 
 
 
 
 
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other payables
16,166
 
 -
 -
 -
 
16,166
 
7,713
 
23,879
Borrowings (excluding finance leases)
129,412
 
 -
 -
 -
 
129,412
 
 -
 
129,412
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
 -
 
 -
5
 -
 
5
 
 -
 
5
  - Forwards
 -
 
5
152
10
 
167
 
 -
 
167
Total liabilities
145,578
 
5
157
10
 
145,750
 
7,713
 
153,463
 
 
The fair value of financial assets and liabilities at their amortized cost does not differ significantly from their book value, except for borrowings (Note 16). The fair value of payables approximates their respective carrying amounts because, due to their short-term nature, the effect of discounting is not considered significant. Fair values are based on discounted cash flows (Level 3).
 
The valuation models used by the Group for the measurement of Level 2 and Level 3 instruments are no different from those used as of June 30, 2017.
 
As of December 31, 2017, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Group.
 
 
 
21
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
The Group uses a range of valuation models for the measurement of Level 2 and Level 3 instruments, details of which may be obtained from the following table. When no quoted prices are available in an active market, fair values (particularly with derivatives) are based on recognized valuation methods.
 
 
 
 
 
 
 
 
 
 
Description
 
Pricing model / method
 
Parameters
 
Fair value hierarchy
 
Range
Trade and other receivables - Cellcom
 
Discounted cash flows
 
Discount interest rate.
 
Level 3
 
3.3
Interest rate swaps
 
Cash flows - Theoretical price
 
Interest rate future contracts and cash flows
 
Level 2
 
-
Preferred shares of Condor
 
Binomial tree – Theoretical price I
 
Underlying asset price (Market price); share price volatility (historical) and market interest-rate (Libor rate curve).
 
Level 3
 
Underlying asset price 1.8 to 2.2
Share price volatility 58% to 78%
Market interest-rate
1.7% to 2.1%
Promissory note
 
Discounted cash flows - Theoretical price
 
Market interest-rate (Libor rate curve)
 
Level 3
 
Market interest-rate
1.8% to 2.2%
Warrants of Condor
 
Black-Scholes – Theoretical price
 
Underlying asset price (Market price); share price volatility (historical) and market interest-rate (Libor rate curve).
 
Level 2
 
Underlying asset price 1.8 to 1.7
Share price volatility 58% to 78%
Market interest-rate
1.7% to 2.1%
Call option of Arcos
 
Discounted cash flows
 
Projected revenues and discounting rate.
 
Level 3
 
-
Investments in financial assets - Other private companies’ securities
 
Cash flow / NAV - Theoretical price
 
Projected revenue discounted at the discount rate /
The value is calculated in accordance with shares in the equity funds on the basis of their Financial Statements, based on fair value or investments assessments.
 
Level 3
 
1 - 3.5
Investments in financial assets - Others
 
Discounted cash flow - Theoretical price
 
Projected revenue discounted at the discount rate /
The value is calculated in accordance with shares in the equity funds on the basis of their Financial Statements, based on fair value or investment assessments.
 
Level 3
 
1 - 3.5
Derivative financial instruments – Forwards
 
Theoretical price
 
Underlying asset price and volatility
 
Level 2 and 3
 
-
 
The following table presents the changes in Level 3 instruments as of December 31, 2017 and June 30, 2017:
 
 
 
Investments in financial assets - Public companies’ Securities
 
Derivative financial instruments - Forwards
 
Investments in financial assets - Private companies’ Securities
 
Trade and other receivables
 
Total as of December 31, 2017
 
Total as of June 30, 2017
Balances at beginning of the period / year
82
 
(10)
 
964
 
2,156
 
3,192
 
(7,105)
Additions and acquisitions
 -
 
 -
 
9
 
1,038
 
1,047
 
1,761
Transfer to level 1 (i)
 -
 
 -
 
(100)
 
,
 
(100)
 
 -
Transfer to current trade and other receivables
 -
 
 -
 
 -
 
(964)
 
(964)
 
(1,874)
Currency translation adjustment
13
 
(5)
 
(2)
 
58
 
64
 
875
Reclassification to liabilities held for sale
 -
 
 -
 
 -
 
 -
 
 -
 
11,272
Write off
 -
 
 -
 
 -
 
 -
 
 -
 
(782)
Gain / (loss) for the period / year (ii)
29
 
 -
 
(48)
 
 -
 
(19)
 
(955)
Balances at the end of the period / year
124
 
(15)
 
823
 
2,288
 
3,220
 
3,192
 
(i)
The group transferred a financial asset measured at fair value from level 3 to level 1, because it began trading in the stock exchange.
(ii)
Included within “Financial results, net” in the Statements of Income.
 
Clal
 
As mentioned in Note 14 to the Annual Financial Statements, IDBD is subject to a judicial process on the sale of its equity interest in Clal. On August 30, 2017, IDBD sold an additional 5% of its equity interest in Clal through a swap transaction, based on the same principles that were applied to the swap transaction mentioned in Note 14 to the Consolidated Financial Statements as of June 30, 2017. The consideration for the transaction amounted to around NIS 152.5 (equivalent to approximately Ps. 762 as of the transaction date). Following completion of the transaction, IDBD’s interest in Clal was reduced from 49.9% to 44.9% of its capital share.
 
22
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
13.
Trade and other receivables
 
Group’s trade and other receivables as of December 31, 2017 and June 30, 2017 are as follows:
 
 
Total as of December 31, 2017
 
Total as of June 30, 2017
Sale, leases and services receivables
16,507
 
16,127
Less: Allowance for doubtful accounts
(364)
 
(312)
Total trade receivables
16,143
 
15,815
Prepaid expenses
2,597
 
2,532
Borrowings, deposits and other debit balances
1,731
 
2,378
Advances to suppliers
856
 
825
Tax receivables
233
 
216
Others
850
 
472
Total other receivables
6,267
 
6,423
Total trade and other receivables
22,410
 
22,238
Non-current
5,316
 
4,974
Current
17,094
 
17,264
Total
22,410
 
22,238
 
Movements on the Group’s allowance for doubtful accounts were as follows:
 
 
December 31, 2017
 
June 30, 2017
Beginning of the period / year
312
 
173
Additions
118
 
234
Recoveries
(17)
 
(11)
Currency translation adjustment
27
 
182
Receivables written off during the period/year as uncollectable
(76)
 
(266)
End of the period / year
364
 
312
 
The creation and release of the allowance for doubtful accounts have been included in “Selling expenses” in the Statement of Income (Note 20).
 
14.
Cash flow information
 
Following is a detailed description of cash flows generated by the Group’s operations for the six-month periods ended December 31, 2017 and 2016:
 
 
Nota
December 31, 2017
 
December 31, 2016 (recast)
Profit for the period
 
10,831
 
6,816
Profit for the period from discontinued operations
 
(207)
 
(4,273)
Adjustments   for :
 
 
 
 
Income tax
18
(497)
 
1,027
Amortization and depreciation
20
2,627
 
2,374
Loss from disposal of property, plant and equipment
 
22
 
19
Net gain from fair value adjustment of investment properties
 
(11,502)
 
(3,470)
Share-based compensation
 
35
 
52
Expenses for sale of investment properties
 
 -
 
2
Derecognition of intangible assets by TGLT agreement
 
 -
 
27
Result from business combination
 
 -
 
(44)
Disposal of investment properties
 
 -
 
(4)
Gain from disposal of subsidiary
 
(393)
 
 -
Other financial results, net
 
6,553
 
3,087
Provisions and allowances
 
(84)
 
23
Share of profit of associates and joint ventures
7
(393)
 
(62)
Changes in operating assets and liabilities:
 
 
 
 
Decrease in inventories
 
487
 
126
Decrease in trading properties
 
71
 
301
Increase in trade and other receivables
 
(593)
 
(1,640)
(Decrease) / increase in trade and other payables
 
(18)
 
1,163
(Decrease) / increase in salaries and social security liabilities
 
(144)
 
22
(Decrease) / increase in provisions
 
(3)
 
13
Net cash generated by continuing operating activities before income tax paid
 
6,792
 
5,559
Net cash generated by / (used in) discontinued operating activities before income tax paid
 
246
 
(209)
Net cash generated by operating activities before income tax paid
 
7,038
 
5,350
 
 
23
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
The following table show a detail of significant non-cash transactions occurred in the six-month periods ended December 31, 2017 and 2016:
 
 
 
December 31, 2017
 
December 31, 2016 (recast)
Decrease in investments in associates and joint ventures through an increase in trade and other receivables
 
 -
 
8
Increase in investments in intangible assets through an increase in trade and other payables
 
 -
 
64
Increase in investment properties through an increase in trade and other payables
 
 -
 
339
Decrease in investments in associates and joint ventures through a decrease in borrowings
 
 -
 
8
Increase in investments in associates and joint ventures through a decrease in trade and other receivables
 
 -
 
20
Acquisition of non-controlling interest through a decrease in trade and other receivables
 
1,380
 
 -
Changes in non-controlling interest through a decrease in trade and other receivables
 
218
 
 -
Increase in property, plant and equipment through an increase of trade and other payables
 
13
 
 -
Increase in investment properties through a decrease in trade and other receivables
 
35
 
 -
Dividends distribution to non-controlling shareholders not yet paid
 
 -
 
22
 
Balances incorporated as result of business combination / reclassification of assets and liabilities held for sale:
 
 
 
December 31, 2016 (recast)
Property, plant and equipment
 
1,482
Intangible assets
 
4
Investments in associates and joint ventures
 
123
Deferred income tax
 
41
Trade and other receivables
 
950
Inventories
 
8
Trade and other payables
 
(1,007)
Salaries and social security liabilities
 
(114)
Borrowings
 
(648)
Provisions
 
2
Income tax and MPIT liabilities
 
1
Employee benefits
 
(43)
Group of liabilities held for sale
 
 -
Net amount of non-cash assets incorporated / held for sale
 
799
Cash and cash equivalents
 
54
Non-controlling interest
 
45
Goodwill not yet allocated
 
(23)
Net amount of assets incorporated / held for sale
 
875
Interest held before acquisition
 
31
Seller financing
 
44
Cash and cash equivalents incorporated / held for sale
 
(54)
Net outflow of cash and cash equivalents / assets and liabilities held for sale
 
896
 
15.
Trade and other payables
 
Group’s trade and other payables as of December 31, 2017 and June 30, 2017 were as follows:
 
 
Total as of December 31, 2017
 
Total as of June 30, 2017
Trade payables
15,734
 
14,793
Sales, rental and services payments received in advance
5,007
 
4,339
Construction obligations
1,317
 
1,226
Accrued invoices
918
 
633
Deferred income
70
 
73
Total trade payables
23,046
 
21,064
Dividends payable to non-controlling shareholders
54
 
251
Tax payables
149
 
510
Construction obligations
285
 
343
Other payables
1,965
 
1,711
Total other payables
2,453
 
2,815
Total trade and other payables
25,499
 
23,879
Non-current
2,379
 
3,040
Current
23,120
 
20,839
Total
25,499
 
23,879
 
 
24
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
16.
Borrowings
 
The breakdown of the Group’s borrowings as of December 31, 2017 and June 30, 2017 was as follows:
 
 
Total as of December 31, 2017
 
Total as of June 30, 2017
 
Fair value as of December 31, 2017
 
Fair value as of June 30, 2017
NCN
127,311
 
108,417
 
127,573
 
110,164
Bank loans
18,017
 
12,012
 
17,963
 
12,048
Non-recourse loans
 -
 
7,025
 
 -
 
6,930
Bank overdrafts
133
 
91
 
133
 
91
Other borrowings (i)
1,934
 
1,870
 
1,888
 
1,828
Total borrowings
147,395
 
129,415
 
147,557
 
131,061
Non-current
128,088
 
109,489
 
 
 
 
Current
19,307
 
19,926
 
 
 
 
 
147,395
 
129,415
 
 
 
 
 
(i) Includes finance leases in the amount of Ps. 7 as of December 31, 2017 and Ps. 3 as of June 30, 2017.
 
The following table describes the Group’s issuance of debt during the present period:
 
Entity
Title
Issuance / expansion date
Amount
Maturity
Interest rate
Principal payment
Interest payment
 
IRSA CP
Class IV
Sep-17
US$ 140
09/14/2020
5% n.a.
At expiration
quarterly
 
IDBD
SERIES N
Jul-17
NIS 642.1
12/30/2022
5.3% e.a
At expiration
quarterly
(1)
IDBD
SERIES N
Nov-17
NIS 357
12/30/2022
5.3% e.a
At expiration
quarterly
(2)
DIC
SERIES J
Dic-17
NIS 762
12/30/2026
4.8% e.a.
6 annual payments since 2021
biannual
(2)
PBC
SERIES I
Dic-17
NIS 496
07/01/2029
3.95% e.a.
At expiration
quarterly
(2)
Gav - Yam
SERIES H
Sep-17
NIS 424
06/30/2034
2.55% e.a
annually
biannual
 
 
(1)
IDBD has the right to make an early repayment, total or partial. As a collateral for the full compliance of all the commitments IDBD has placed approximately 60.4 million shares in DIC under a single fixed charge of first line and, in an unlimited amount, in favor of the trustee for the holders of the NCN.
(2)
Corresponds to an expansion of the series.
 
DIC : On September 28, 2017 DIC offered the holders of Series F NCN to swap their notes for Series J NCN. Series J NCN terms and conditions differ substantially from those of Series F. Therefore, DIC recorded the payment of Series F NCN and recognized a new financial commitment at fair value for Series J NCN. As a result of the swap, DIC recorded a loss resulting from the difference between the Series F NCN cancellation value and the new debt value in the amount of approximately NIS 461 (equal to approximately Ps. 2,228 as of that date), which was accounted for under “Finance costs” (Note 23).
 
IDBD : On November 28, 2017, IDBD made an early redemption of the Series L NCN for an amount of NIS 424 (or
Ps. 2,120 as of the transaction date).
 
 
 
25
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
17.
Provisions
 
The table below shows the movements in the Group's provisions categorized by type:
 
 
Period ended December 31, 2017
 
Year ended June 30, 2017
 
Legal claims (i)
 
Investments in associates and joint ventures (ii)
 
Site dismantling and remediation
 
Onerous contracts
 
Other provisions
 
Total
 
Total
Beginning of period / year
821
 
72
 
140
 
220
 
580
 
1,833
 
1,571
Additions
118
 
 -
 
5
 
 -
 
 -
 
123
 
502
Incorporated by business combination
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
2
Recovery
(49)
 
(56)
 
(48)
 
(47)
 
(11)
 
(211)
 
(319)
Used during the period / year
(21)
 
 -
 
 -
 
 -
 
 -
 
(21)
 
(219)
Currency translation adjustment
22
 
 -
 
(2)
 
4
 
(12)
 
12
 
296
End of period / year
891
 
16
 
95
 
177
 
557
 
1,736
 
1,833
Non-current
 
 
 
 
 
 
 
 
 
 
795
 
943
Current
 
 
 
 
 
 
 
 
 
 
941
 
890
Total
 
 
 
 
 
 
 
 
 
 
1,736
 
1,833
 
(i)
Additions and recoveries are included in "Other operating results, net".
(ii)
As of December 31 and June 30, 2017 corresponds to the equity interest in New Lipstick with negative equity.
 
There were no significant changes to the processes mentioned in Note 19 to the Consolidated Financial Statements as of June 30, 2017.
 
18.
Taxes
 
Argentine tax reform
 
On December 27, 2017, the Argentine Congress approved the Tax Reform, through Law No. 27,430, which was enacted on December 29, 2017, and has introduced many changes to the income tax treatment applicable to financial income. The key components of the Tax Reform are as follows:
 
Dividends: Tax on dividends distributed by argentine companies would be as follows: (i) dividends originated from profits obtained before fiscal year ending June 30, 2018 will not be subject to withholding tax; (ii) dividends derived from profits generated during fiscal years of the Company ending June 30, 2019 and 2020 paid to argentine individuals and/or foreign residents, will be subject to a 7% withholding tax; and (iii) dividends originated from profits obtained during fiscal year ending June 30, 2021 onward will be subject to withholding tax at a rate of 13%.
 
Income tax: Corporate income tax would be gradually reduced to 30% for fiscal years commencing after January 1, 2018 through December 31, 2019, and to 25% for fiscal years beginning after January 1, 2020, inclusive.
 
Presumptions of dividends: Certain facts will be presumed to constitute dividend payments, such as: i) withdrawals from shareholders, ii) shareholders private use of property of the company, iii) transactions with shareholders at values different from market values, iv) personal expenses from shareholders or shareholder remuneration without substance.
 
Revaluation of assets: The regulation establishes that, at the option of the companies, tax revaluation of assets is permitted for assets located in Argentina and affected to the generation of taxable profits. The special tax on the amount of the revaluation depends on the asset, being (i) 8% for real estate not classified as inventories, (ii) 15% for real estate classified as inventories, (iii) 5% for shares, quotas and equity interests owned by individuals and (iv) 10% for the rest of the assets. As of the date of these financial statements, the Group has not exercised the option. The gain generated by the revaluation is exempted according to article 291 of Law 27,430 and, the additional tax generated by the revaluation is not deductible.
 
In addition, the argentine tax reform contemplates other amendments regarding the following matters: social security contributions, tax administrative procedures law, criminal tax law, tax on liquid fuels, and excise taxes, among others. As of the date of presentation of these Financial Statements, many aspects are pending regulation by the National Executive Power.
 
 
26
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
US tax reform
 
In December 2017, a bill was passed to reform the Federal Taxation Law in the United States. The reform included a reduction of the corporate tax rate from 35% to 21%, for the tax years 2018 and thereafter. The reform has impact in certain subsidiaries of the Group in the United States.
 
The details of the provision for the Group’s income tax, is as follows:
 
 
December 31, 2017
 
December 31, 2016 (recast)
Current income tax
(562)
 
(383)
Deferred income tax
1,059
 
(644)
Income tax from continuing operations
497
 
(1,027)
 
Below is a reconciliation between income tax recognized and the amount which would result from applying the prevailing tax rate on profit before income tax for the six-month periods ended December 31, 2017 and 2016:
 
 
December 31, 2017
 
December 31, 2016 (recast)
Profit from continuing operations at tax rate applicable in the respective countries
(3,407)
 
(1,350)
Permanent differences:
 
 
 
Share of profit of associates and joint ventures
107
 
661
Unrecognized tax loss carryforwards (i)
(864)
 
(356)
Change of income tax rate (ii)
3,971
 
455
Non-taxable profit, non-deductible expenses and others
690
 
(437)
Income tax from continuing operations
497
 
(1,027)
(i)
Corresponds principally to holding companies in Israel.
(ii)
As of December 31, 2017 corresponds to the effect of applying the changes in the tax rates applicable in accordance with the tax reform explained above, being Ps. 390 the effect of the rate change in US and Ps. 3,581 the effect of the rate change in Argentina.
 
The gross movement in the deferred income tax account is as follows:
 
 
December 31, 2017
 
June 30, 2017
Beginning of period / year
(22,739)
 
(19,099)
Incorporated by business combination
 -
 
(6)
Reclassification to liabilities held for sale
 -
 
(12)
Use of tax loss carryforwards
(114)
 
(171)
Change of income tax rate
3,971
 
529
Reclassification previous periods
 -
 
59
Currency translation adjustment
(296)
 
(1,440)
Deferred income tax expense
(2,912)
 
(2,599)
End of period / year
(22,090)
 
(22,739)
Deferred income tax assets
306
 
285
Deferred income tax liabilities
(22,396)
 
(23,024)
Deferred income tax assets (liabilities), net
(22,090)
 
(22,739)
 
19.
Revenues
 
 
December 31, 2017
 
December 31, 2016 (recast)
Revenue from supermarkets
27,854
 
23,476
Income from communication services
6,827
 
5,937
Rental and services income
5,241
 
4,242
Sale of communication equipment
2,238
 
1,926
Sale of trading properties and developments
380
 
814
Revenue from hotels operation and tourism services
500
 
436
Total Group’s revenues
43,040
 
36,831
 
 
 
27
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
20.
Expenses by nature
 
The Group discloses expenses in the statements of income by function as part of the line items “Costs”, “General and administrative expenses” and “Selling expenses”. The following table provides additional disclosures regarding expenses by nature and their relationship to the function within the Group.
 
 
Costs
 
General and administrative expenses
 
Selling expenses
 
Total as of December 31, 2017
 
Total as of December 31, 2016 (recast)
Cost of sale of goods and services
21,178
 
 -
 
 -
 
21,178
 
18,955
Salaries, social security costs and other personnel expenses
2,423
 
891
 
2,820
 
6,134
 
4,874
Depreciation and amortization
1,203
 
305
 
1,119
 
2,627
 
2,374
Fees and payments for services
854
 
414
 
1,020
 
2,288
 
2,007
Maintenance, security, cleaning, repairs and others
798
 
57
 
437
 
1,292
 
1,050
Advertising and other selling expenses
156
 
 -
 
865
 
1,021
 
935
Taxes, rates and contributions
133
 
22
 
423
 
578
 
466
Interconnection and roaming expenses
976
 
 -
 
 -
 
976
 
870
Fees to other operators
1,135
 
 -
 
 -
 
1,135
 
762
Director´s fees
 -
 
112
 
 -
 
112
 
89
Leases and service charges
18
 
6
 
67
 
91
 
29
Allowance for doubtful accounts, net
 -
 
9
 
92
 
101
 
119
Other expenses
403
 
379
 
874
 
1,656
 
1,468
Total as of December 31, 2017
29,277
 
2,195
 
7,717
 
39,189
 
 -
Total as of December 31, 2016 (recast)
25,625
 
1,809
 
6,564
 
 -
 
33,998
 
21.
Cost of goods sold and services provided
 
Total as of December 31, 2017
 
Total as of December 31, 2016 (recast)
Inventories at the beginning of the period (*)
10,041
 
7,938
Purchases and expenses
28,715
 
24,072
Capitalized finance costs
3
 
 -
Currency translation adjustment
779
 
1,495
Incorporated by business combination
4
 
 -
Transfers
377
 
(4)
Inventories at the end of the period (*)
(10,642)
 
(7,876)
Total costs
29,277
 
25,625
 
The following table presents the composition of the Group’s inventories for the periods ended December 31, 2017 and 2016:
 
 
Total as of December 31, 2017
 
Total as of December 31, 2016(recast)
Real estate
6,485
 
4,548
Supermarkets
3,835
 
3,056
Telecommunications
279
 
237
Others
43
 
35
Total inventories at the end of the period (*)
10,642
 
7,876
 
(*) Inventories includes trading properties and inventories.
 
22.
Other operating results, net
 
December 31, 2017
 
December 31, 2016 (recast)
Gain from disposal of subsidiary (1)
393
 
44
Donations
(30)
 
(29)
Loss from TGLT agreement
 -
 
(27)
Lawsuits and other contingencies (2)
387
 
(15)
Others
(146)
 
(94)
Total other operating results, net
604
 
(121)
 
(1)
Includes the gain from the sale of the Group´s equity interest in Cloudyn for Ps. 252.
(2)
As of December 31, 2017 corresponds to the favourable resolution of a judicial process in the Operations Center in Israel for Ps. 400. Includes legal costs and expenses.
 
 
28
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
23.
Financial results, net
 
December 31, 2017
 
December 31, 2016 (recast)
Finance income:
 
 
 
 - Interest income
363
 
319
 - Foreign exchange gain
201
 
125
 - Dividends income
42
 
28
 - Other finance income
44
 
38
Total finance income
650
 
510
Finance costs:
 
 
 
 - Interest expenses
(3,981)
 
(3,340)
 - Loss on debt swap (Note 16)
(2,228)
 
 -
 - Foreign exchange loss
(1,550)
 
(794)
 - Other finance costs
(310)
 
(581)
Total finance costs
(8,069)
 
(4,715)
Other financial results:
 
 
 
 - Fair value gain of financial assets and liabilities at fair value through profit or loss, net
1,138
 
1,465
 - Gain from derivative financial instruments, net
58
 
66
Total other financial results
1,196
 
1,531
Total financial results, net
(6,223)
 
(2,674)
 
24.
Related party transactions
 
The following is a summary of the balances with related parties as of December 31, 2017 and June 30, 2017:
 
Item
 
 December 31, 2017
 
 June 30, 2017
Trade and other receivable
 
513
 
1,434
Investments in financial assets
 
382
 
324
Trade and other payable
 
(223)
 
(172)
Borrowings
 
(10)
 
(11)
Total
 
662
 
1,575
 
 Related party
 
 December 30, 2017
 
 June 30, 2017
 
 Description of transaction
Manibil S.A.
 
47
 
84
 
 Contributions in advance
New Lipstick LLC
 
376
 
 -
 
 Loans granted
 
 
6
 
 -
 
 Reimbursement of expenses
Condor
 
124
 
8
 
 Dividends receivables
 
 
10
 
82
 
 Public companies securities
LRSA
 
1
 
29
 
 Leases and/or rights of use
 
 
(1)
 
 -
 
 Reimbursement of expenses
 
 
4
 
 -
 
 Loans granted
 
 
40
 
 -
 
 Canon
 
 
5
 
 -
 
 Dividends receivables
Other associates and joint ventures
 
2
 
3
 
 Loans granted
 
 
2
 
8
 
 Foreign-currency future contracts
 
 
(5)
 
 -
 
 Commissions
 
 
(10)
 
(11)
 
 Mortgage bond
 
 
(5)
 
(5)
 
 Derivatives
 
 
(2)
 
(1)
 
 Leases and/or rights of use
 
 
5
 
5
 
 NCN
 
 
(6)
 
 -
 
 Advances of clients
 
 
 -
 
1
 
 Management fees
 
 
1
 
1
 
 Proceeds from leases
 
 
 -
 
(1)
 
 Credit for capital reduction
Total associates and joint ventures
 
594
 
203
 
 
Cresud
 
(27)
 
(36)
 
 Reimbursement of expenses
 
 
(48)
 
(23)
 
 Corporate services
 
 
258
 
242
 
 NCN
 
 
(3)
 
(1)
 
 Leases and/or rights of use
 
 
 -
 
5
 
 Leases and/or rights of use
 
 
(20)
 
 -
 
 Leases and/or rights of use receivable
 
 
(2)
 
(1)
 
 Long-term incentive plan
Total parent company
 
158
 
186
 
 
IFISA
 
 -
 
1,283
 
 Loans granted
Taaman
 
(29)
 
(24)
 
 Leases and/or rights of use
Willifood
 
(34)
 
(29)
 
 NCN
Directors
 
(35)
 
(44)
 
 Fees for services received
Others (1)
 
1
 
2
 
 Leases and/or rights of use
 
 
7
 
2
 
 Fees
 
 
1
 
 -
 
 Management fees
 
 
(1)
 
(4)
 
 Loans
Total others
 
(90)
 
1,186
 
 
Total at the end of the period/year
 
662
 
1,575
 
 
 
(1)
It includes CAMSA, Avenida compras, Avenida Inc., Estudio Zang, Bergel & Viñes, Austral Gold, Fundación IRSA, Hamonet S.A. and Museo de los Niños
 
 
29
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
The following is a summary of the results with related parties for the six-month periods ended December 31, 2017 and 2016:
Related party
 
 December 31, 2017
 
 December 31, 2016 (recast)
 
Description of transaction
 BACS
 
8
 
4
 
 Leases and/or rights of use
 
 
 -
 
16
 
 Financial operations
 Adama
 
 -
 
64
 
 Corporate services
 Condor
 
23
 
196
 
 Financial operations
 ISPRO - Mehadrin
 
50
 
 -
 
 Corporate services
 Other associates and joint ventures
 
(1)
 
 -
 
 Financial operations
 
 
13
 
8
 
 Leases and/or rights of use
 
 
2
 
 -
 
 Fees and remunerations
 
 
 -
 
2
 
 Management fees
Total associates and joint ventures
 
95
 
290
 
 
Cresud
 
3
 
1
 
 Leases and/or rights of use
 
 
(113)
 
( 85)
 
 Corporate services
 
 
9
 
24
 
 Financial operations
Total parent company
 
(101)
 
(60)
 
 
 IFISA
 
56
 
 -
 
 Financial operations
 Inversiones Financieras del Sur S.A.
 
 -
 
54
 
 Financial operations
 Directores
 
(86)
 
(84)
 
 Fees and remunerations
 Taaman
 
74
 
 -
 
 Corporate services
 Willifood
 
129
 
 -
 
 Corporate services
 Others (1)
 
4
 
 -
 
 Corporate services
 
 
 -
 
(1)
 
 Leases and/or rights of use
 
 
4
 
 -
 
 Financial operations
 
 
(7)
 
(4)
 
 Donations
 
 
(6)
 
(5)
 
 Legal services
Total others
 
168
 
(40)
 
 
Total at the end of the period
 
162
 
190
 
 
 
(1)
 It includes Isaac Elsztain e Hijos, CAMSA. Hamonet S.A., Ramat Hanassi, Estudio Zang, Bergel y Viñes, and Fundación IRSA.
 
The following is a summary of the transactions with related parties for the six-month periods ended December 31, 2017 and 2016:
 
Related party
 
December 31, 2017
 
December 31, 2016 (recast)
 
Description of the operation
La Rural S.A.
 
13
 
 -
 
Dividends received
Cresud
 
882
 
-
 
Dividends received
Helmir
 
5
 
-
 
Dividends paid
Total distribution
 
900
 
 -
 
 
Manibil
 
44
 
-
 
Additional paid-in capital
Total subsidiaries contributions
 
44
 
 -
 
 
IFISA (see Note 4.)
1,968
 
-
 
Acquisition of non-controlling interest
Total other transactions
 
1,968
 
-
 
 
 
 
25.
CNV General Resolution N° 622
 
As required by Section 1°, Chapter III, Title IV of CNV General Resolution N° 622, below there is a detail of the notes to the Unaudited Condensed Interim Consolidated Financial Statements that disclose the information required by the Resolution in Exhibits.
 
Exhibit A - Property, plant and equipment
Note 8 Investment properties and Note 9 Property, plant and equipment
Exhibit B - Intangible assets
Note 11 Intangible assets
Exhibit C - Equity investments
Note 7 Equity interest in associates and joint ventures
Exhibit D - Other investments
Note 12 Financial instruments by category
Exhibit E - Provisions
Note 17 Provisions
Exhibit F - Cost of sales and services provided
Note 21 Cost of goods sold and services provided
Exhibit G - Foreign currency assets and liabilities
Note 26 Foreign currency assets and liabilities
 
30
IRSA Inversiones y Representaciones Sociedad Anónima
 
26.
Foreign currency assets and liabilities
 
Book amounts of foreign currency assets and liabilities are as follows:
 
Item / Currency (1)
Amount (2)
Exchange rate (3)
Total as of 12.31.17
Amount (2)
Exchange rate (3)
Total as of 06.30.17
Assets
 
 
 
 
 
 
Trade and other receivables
 
 
 
 
 
 
US Dollar
77
18.549
1,420
35
16.530
572
Euros
6
22.283
140
9
18.848
172
Receivables with related parties:
 
 
 
 
 
 
US Dollar
50
18.649
932
52
16.630
855
Total trade and other receivables
 
 
2,492
 
 
1,599
Restricted assets
 
 
 
 
 
 
US Dollar
 -
18.549
3
2
16.530
41
Total Restricted assets
 
 
3
 
 
41
Investments in financial assets
 
 
 
 
 
 
US Dollar
195
18.549
3,620
61
16.530
1,014
Pounds
1
25.071
19
1
21.486
18
Investments with related parties:
 
 
 
 
 
 
US Dollar
20
18.649
382
20
16.630
324
Total investments in financial assets
 
 
4,021
 
 
1,356
Derivative financial instruments
 
 
 
 
 
 
US Dollar
1
18.549
15
1
16.530
10
Derivative financial instruments with related parties:
 
 
 
 
 
 
US Dollar
  -
18.649
 -
2
16.630
26
Total Derivative financial instruments
 
 
15
 
 
36
Cash and cash equivalents
 
 
 
 
 
 
US Dollar
240
18.549
4,444
318
16.530
5,250
Euros
3
22.283
70
3
18.848
49
New Israel Shekel
 -
4.899
 -
 -
4.770
1
Total Cash and cash equivalents
 
 
4,514
 
 
5,300
Total Assets
 
 
11,045
 
 
8,332
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Trade and other payables
 
 
 
 
 
 
US Dollar
89
18.649
1,662
57
16.630
955
Euros
11
22.450
255
1
19.003
19
Payables to related parties:
 
 
 
 
 
 
US Dollar
1
18.649
18
1
16.630
21
Total Trade and other payables
 
 
1,935
 
 
995
Borrowings
 
 
 
 
 
 
US Dollar
1,192
18.649
22,223
1,123
16.630
18,683
Total Borrowings
 
 
22,223
 
 
18,683
Total Liabilities
 
 
24,158
 
 
19,678
 
(1)   Considering foreign currencies those that differ from each Group’s subsidiaries functional currency at each period/year-end.
(2)   Stated in millions of the corresponding in foreign currency.
(3)   Exchange rates as of December 31, 2017 and June 30, 2017, respectively according to Banco Nación Argentina.
 
 
31
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
27.
Groups of assets and liabilities held for sale
 
As mentioned in Note 4.F to the Consolidated Financial Statements as of June 30, 2017, the Group has certain assets and liabilities classified as held for sale. The following table shows the main ones:
 
 
December 31, 2017
 
June 30, 2017
Property, plant and equipment
1,690
 
1,712
Intangible assets
20
 
19
Investments in associates
29
 
33
Deferred income tax assets
64
 
57
Employee benefits
 -
 
5
Income tax credits
 -
 
10
Trade and other receivables
1,024
 
688
Cash and cash equivalents
235
 
157
Total group of assets held for sale
3,062
 
2,681
Trade and other payables
1,200
 
930
Salaries and social security liabilities
127
 
148
Employee benefits
113
 
52
Deferred income tax liability
15
 
10
Borrowings
632
 
715
Total group of liabilities held for sale
2,087
 
1,855
Total net assets held for sale
975
 
826
 
 
28.
Results from discontinued operations
 
The results from operations of Israir, Open Sky and IDB Tourism, and the share of profit of Adama and the finance costs associated to the non-recourse loan, until its sale in November 2016; have been reclassified in the Statements of Income under discontinued operations.
 
December 31, 2017
 
December 31, 2016 (recast)
Revenues
3,619
 
2,603
Costs
(3,107)
 
(2,193)
Gross profit
512
 
410
General and administrative expenses
(130)
 
(93)
Selling expenses
(148)
 
(131)
Other operating results, net
(4)
 
4,803
Profit from operations
230
 
4,989
Share of profit of associates and joint ventures
18
 
406
Profit before financial results and income tax
248
 
5,395
Finance cost
(41)
 
(1,122)
Financial results, net
(41)
 
(1,122)
Profit before income tax
207
 
4,273
Income tax
 -
 
 -
Profit from discontinued operations
207
 
4,273
 
 
 
 
 
 
 
 
Profit for the period from discontinued operations attributable to:
 
 
 
Equity holders of the parent
140
 
2,332
Non-controlling interest
67
 
1,941
 
 
 
 
Profit per share from discontinued operations attributable to equity holders of the parent:
 
 
 
Basic
0.24
 
4.06
Diluted
0.24
 
4.03
 
29.
Subsequent events
 
 
Israir
 
On January 10, 2019, the Anti-Trust Authority communicated IDBD its objection to the transaction between Sun D’or and Israir, described in note 4.f to the consolidated financial statements as of June 31, 2017. The Group is evaluating the reasons for the objection and the decision regarding whether to appeal.
 
32
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Sale of Clal shares
 
On January 1, 2018, continuing with the instructions given by the Commissioner of Capital Markets, Insurance and Savings of Israel, IDBD has sold 5% of its stake in Clal through a swap transaction, in accordance with the same principles that applied to the swap transactions made and informed to the market on May and August 2017.
 
The consideration was set at an amount of approximately NIS 170.5 (equivalent to approximately Ps. 852). After the completion of the transaction, IDBD’s interest in Clal was reduced to 39.8% of its share capital.
 
Transfer of shares of Cellcom
 
On January 22, 2018 DIC transferred 5% of Cellcom’s shares (the “Transferred Shares”), by way of a loan transaction in equal parts to two private companies incorporated in Israel, which are related parties to the Group. The agreement will be in effect from the date of its closing until December 31, 2018 and will be extended automatically for a year, until it is terminated in accordance with its terms. DIC will be entitled to terminate the agreement at any time, in its discretion, and to receive back all or some of the Transferred Shares. The Israeli entities will not be entitled to transfer the Transferred Shares to any entity whatsoever without DIC’s consent. The Israeli entities will together be entitled to appoint 10% of Cellcom directors (i.e., as of the present date - one director). Additionally, the Israeli entities and the designated director will undertake to vote, together with DIC, on all resolutions which will be presented to Cellcom’s general meeting. Furthermore, the economic benefits of the Transferred Shares will be kept by DIC. The Transferred Shares are pledged in favor of DIC.
 
Shufersal Corporate Notes
 
On January 22, 2018, Shufersal issued an expansion of Series E NCN of NIS 544 for a total gross consideration of NIS 567 (equivalent to Ps. 2,835 as of the date of the transaction).
 
Cellcom Corporate Notes
 
On January 24, 2018, Cellcom issued Serie L NCN at par value of NIS 401 for a total net consideration of NIS 396 (equivalent to Ps. 1,980 as of the date of the transaction).
 
Eurocom purchase offer
 
On February 4, 2018, DIC made a binding offer for the acquisition in stages of Eurocom Communications Ltd ("Eurocom"), a private Israeli group whose business is developed in the communications, real estate and renewable energy industries. Eurocom is Bezeq's parent company (Israel's leading telecommunications company). The proposal must be approved by Eurocom and by the authorities and creditors involved in the Eurocom debt restructuring process. Should the proposal succeed, this transaction requires the approval of different regulatory authorities and a disinvestment of the Group's interest in Cellcom.
 
33
Free translation from the original prepared in Spanish for publication in Argentina
 
REVIEW REPORT ON THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 
 
To the Shareholders, President and Directors of
IRSA Inversiones y Representaciones Sociedad Anónima
Legal address: Bolivar 108 – 1° floor
Autonomous City Buenos Aires
Tax Code No. 30-52532274-9
 
Introduction
 
 
We have reviewed the unaudited condensed interim consolidated financial statements of IRSA Inversiones y Representaciones Sociedad Anónima and its subsidiaries (hereinafter “the Company”) which included the unaudited condensed interim consolidated statement of financial position as of December 31, 2017 and the unaudited condensed interim consolidated statements of income and other comprehensive income for the six-month period and three-month period ended December 31, 2017, the unaudited condensed interim consolidated statements of changes in shareholders’ equity and the unaudited condensed interim consolidated statements of cash flows for the six-month period then ended and selected explanatory notes.
 
The balances and other information corresponding to the fiscal year ended June 30, 2017 and the interim periods within that fiscal year are an integral part of these financial statements and, therefore, they should be considered in relation to those financial statements.
 
Management responsibility
 
 
The Board of Directors of the Company is responsible for the preparation and presentation of these unaudited condensed interim consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS), adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) as professional accounting standards and added by the National Securities Commission (CNV) to its regulations, as approved by the International Accounting Standard Board (IASB) and , for this reason, is responsible for the preparation and presentation of the unaudited condensed interim consolidated financial statements above mentioned in the first paragraph according to the International Accounting Standard No 34 "Interim Financial Reporting" (IAS 34).
 
 
Free translation from the original prepared in Spanish for publication in Argentina
 
REVIEW REPORT ON THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
 
 
 
Scope of our review
 
Our review was limited to the application of the procedures established in the International Standard on Review Engagements ISRE 2410 "Review of interim financial information performed by the independent auditor of the entity", which was adopted as a review standard in Argentina in Technical Resolution No. 33 of the FACPCE, without modification as approved by the International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists of making inquiries of persons responsible for the preparation of the information included in the unaudited condensed interim consolidated financial statements , and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated statement of financial position, the consolidated statement of income , the consolidated statement of income and other comprehensive income and consolidated statement of cash flows of the Company.
 
Conclusion
 
Nothing came to our attention as a result of our review that caused us to believe that these unaudited condensed interim consolidated financial statements above mentioned in the first paragraph of this report have not been prepared in all material respects in accordance with International Accounting Standard 34.
 
Report on compliance with current regulations
 
In accordance with current regulations, we report about IRSA Inversiones y Representaciones Sociedad Anónima that:
 
a)
the unaudited condensed interim consolidated financial statements of IRSA Inversiones y Representaciones Sociedad Anónima are being processed for recording in the "Inventory and Balance Sheet Book", and comply, as regards those matters that are within our competence, with the provisions set forth in the Commercial Companies Law and in the corresponding resolutions of the National Securities Commission;
 
b)
the unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima arise from accounting records carried in all formal respects in accordance with applicable legal provisions;
 
 
 
Free translation from the original prepared in Spanish for publication in Argentina
 
REVIEW REPORT ON THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
c)
we have read the Business Summary (“Reseña Informativa”) on which, as regards those matters that are within our competence, we have no observations to make;
 
d)
at December 31, 2017, the debt of IRSA Inversiones y Representaciones Sociedad Anónima owed in favor of the Argentina Integrated Pension System which arises from accounting records amounted to Ps. 105,647.22, which was not claimable at that date.
 
 
 
Autonomous City of Buenos Aires, February 8, 2018.
 
 
 
 
 
 
 
PRICE WATERHOUSE & CO. S.R.L.
 
 
 
                                                          (Partner)
C.P.C.E.C.A.B.A. Tº 1 Fº 17
Dr. Mariano C. Tomatis
Public Accountant (UBA)
C.P.C.E.C.A.B.A. T° 241 F° 118
 
ABELOVICH, POLANO & ASOCIADOS S.R.L.
 
 
 
                                                     (Partner)
C.P.C.E. C.A.B.A. T° 1 F° 30
Marcelo Héctor Fuxman
Public Accountant (UBA)
C.P.C.E.C.A.B.A. T° 134 F° 85
 
 
 
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Separate Financial Statements as of December 31, 2017 and for the six-month and three-month periods ended as of that date, presented comparatively
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Financial Position
as of December 31, 2017 and June 30, 2017
(All amounts in millions, except shares and per share data and as otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Note
12.31.17
 
06.30.17
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Investment properties
7
4,970
 
4,457
Property, plant and equipment
8
7
 
6
Trading properties
9
388
 
319
Intangible assets
10
21
 
21
Investments in subsidiaries, associates and joint ventures
6
36,087
 
29,450
Income tax and MPIT credit
 
27
 
133
Trade and other receivables
12
308
 
211
Total non-current assets
 
41,808
 
34,597
Current assets
 
 
 
 
Inventories
 
1
 
1
Trading properties
9
3
 
8
Trade and other receivables
12
588
 
568
Income tax and MPIT credit
 
 -
 
1
Investments in financial assets
11
41
 
38
Derivative financial instruments
11
15
 
8
Restricted assets
11
1
 
4
Cash and cash equivalents
11
34
 
148
Total current assets
 
683
 
776
TOTAL ASSETS
 
42,491
 
35,373
SHAREHOLDERS’ EQUITY
 
 
 
 
Shareholders' Equity (according to corresponding statements)
 
33,077
 
26,483
TOTAL SHAREHOLDERS’ EQUITY
 
33,077
 
26,483
LIABILITIES
 
 
 
 
Non-current liabilities
 
 
 
 
Trade and other payables
13
883
 
784
Borrowings
14
5,839
 
5,340
Deferred income tax liabilities
15
1,969
 
2,247
Provisions
16
35
 
32
Total non-current liabilities
 
8,726
 
8,403
Current liabilities
 
 
 
 
Trade and other payables
13
143
 
123
Salaries and social security liabilities
 
1
 
2
Borrowings
14
543
 
358
Provisions
16
1
 
4
Total current liabilities
 
688
 
487
TOTAL LIABILITIES
 
9,414
 
8,890
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
42,491
 
35,373
 
  The accompanying notes are an integral part of these Unaudited Condensed Interim Separate Financial Statements.
 
 
 
 
 
 
 
                                                                                                                                                                                                                                                                        ______________________                                                              
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II
                                                                                                                                                                                                                                                                                            acting as President
 
 
 
 
1
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Changes in Shareholders’ Equity
for the six-month periods ended December 31, 2017 and 2016
(All amounts in millions, except shares and per share data and as otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
 
 
Six months
 
Three months
 
Note
12.31.17
 
12.31.16 (recast)
 
12.31.17
 
12.31.16 (recast)
Revenues
17
35
 
18
 
24
 
10
Costs
18
(18)
 
(11)
 
(11)
 
(5)
Gross profit
 
17
 
7
 
13
 
5
Net gain from fair value adjustment of investment properties
7
491
 
196
 
328
 
139
General and administrative expenses
18
(105)
 
(77)
 
(63)
 
(42)
Selling expenses
18
(10)
 
(13)
 
(5)
 
(8)
Other operating results, net
19
489
 
(38)
 
494
 
(34)
Profit from operations
 
882
 
75
 
767
 
60
Share of profit of subsidiaries, associates and joint ventures
6
8,797
 
4,132
 
8,021
 
3,806
Profit before financial results and income tax
 
9,679
 
4,207
 
8,788
 
3,866
Finance income
20
12
 
44
 
(2)
 
11
Finance costs
20
(948)
 
(517)
 
(580)
 
(263)
Other financial results
20
21
 
1
 
16
 
1
Financial results, net
 
(915)
 
(472)
 
(566)
 
(251)
Profit before income tax
 
8,764
 
3,735
 
8,222
 
3,615
Income tax
15
172
 
111
 
89
 
45
Profit for the period
 
8,936
 
3,846
 
8,311
 
3,660
 
 
 
 
 
 
 
 
 
Other comprehensive income:
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
Share of other comprehensive loss of subsidiaries, associates and joint ventures
 
(56)
 
(12)
 
(14)
 
(29)
Currency translation adjustment of subsidiaries, associates and joint ventures
 
(889)
 
34
 
(619)
 
(177)
Total other comprehensive (loss) / income for the period (i)
6
(945)
 
22
 
(633)
 
(206)
Total comprehensive income for the period
 
7,991
 
3,868
 
7,678
 
3,454
 
 
 
 
 
 
 
 
 
Profit per share for the period:
 
 
 
 
 
 
 
 
Basic
 
15.54
 
6.69
 
14.46
 
6.37
Diluted
 
15.43
 
6.64
 
14.36
 
6.32
 
 
(i) Components of other comprehensive (loss) / income have no impact on income tax.
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Separate Financial Statements .
 
 
 
 
 
 
 
 
                                                                                                                                                                                                                                                                        ______________________                                                              
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II
                                                                                                                                                                                                                                                                                              acting as President
 
 
 
 

2
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Changes in Shareholders’ Equity
for the six-month periods ended December 31, 2017 and 2016
(All amounts in millions, except shares and per share data and as otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
 
Share capital
Treasury shares
Inflation adjustment of Share Capital and Treasury Shares
Share premium
Additional Paid-in Capital from Treasury Shares
Legal reserve
Special reserve
Resolution reserve CNV 609/12 (1)
Other reserves (2)
Retained earnings
Total Shareholders’ equity

Balance at June 30, 2017
575
3
123
793
17
143
 -
2,756
2,143
19,930
26,483
Profit for the period
 -
 -
 -
 -
 -
 -
 -
 -
 -
8,936
8,936
Other comprehensive loss for the period
 -
 -
 -
 -
 -
 -
 -
 -
(945)
 -
(945)
Total comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
 -
(945)
8,936
7,991
Appropriation of retained earnings approved by Shareholders’ meeting held as of 10.31.17
 -
 -
 -
 -
 -
 -
2,081
 -
 -
(2,081)
 -
Dividends distribution
 -
 -
 -
 -
 -
 -
 -
 -
 -
(1,400)
(1,400)
Reserve for share-based payments
 -
 -
 -
 -
1
 -
 -
 -
2
 -
3
Balance at December 31, 2017
575
3
123
793
18
143
2,081
2,756
1,200
25,385
33,077
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Separate Financial Statements.
(1)
Related to CNV General Resolution N° 609/12. See Note 2.1.b) and 17 of Consolidated Financial Statements as of June 30, 2017.
(2)
The composition of Other reserves of the Company as of December 31, 2017 is as follows:
 
 
 
 
Cost of Treasury shares
 
Reserve for share-based payments
 
Reserve for future dividends
 
Other reserves of subsidiaries
 
Other comprehensive income / (loss) of subsidiaries
 
Currency translation adjustment reserve
 
Total Other reserves


Balance at June 30, 2017
(28)
 
78
 
494
 
-
 
42
 
1,557
 
2,143
Other comprehensive loss for the period
 -
 
 -
 
 -
 
 -
 
(56)
 
(889)
 
(945)
Reserve for share-based payments
 -
 
2
 
 -
 
 -
 
 -
 
 -
 
2
Balance at December 31, 2017
(28)
 
80
 
494
 
 -
 
(14)
 
668
 
1,200
 
 
 
 
 
 
 
 
 
 
                                                                                                                                                                                                                                                                        ______________________                                                              
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II
                                                                                                                                                                                                                                                                                              acting as President
 
 
 
                     3                     
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Changes in Shareholders’ Equity
for the six-month periods ended December 31, 2017 and 2016
(All amounts in millions, except shares and per share data and as otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
 
 
Share capital
Treasury shares
Inflation adjustment of Share Capital and Treasury Shares
Share premium
Additional Paid-in Capital from Treasury Shares
Legal reserve
Special reserve
Resolution reserve CNV 609/12 (1)
Other reserves (2)
Retained earnings
Total Shareholders’ equity

Balance at June 30, 2016
575
4
123
793
16
117
4
2,756
1,022
16,447
21,857
Profit for the period
 -
 -
 -
 -
 -
 -
 -
 -
 -
3,846
3,846
Other comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
 -
22
 -
22
Total comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
 -
22
3,846
3,868
Appropriation of retained earnings approved by Shareholders’ meeting held as of 10.31.16
 -
 -
-
 -
 -
26
(4)
 -
(26)
4
 -
Changes of interest in subsidiaries
 -
 -
-
 -
 -
 -
 -
 -
(152)
 -
(152)
Reserve for share-based payments
 -
 -
-
 -
 -
 -
 -
 -
6
 -
6
Balance at December 31, 2016 (recast)
575
4
123
793
16
143
 -
2,756
872
20,297
25,579
 
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Separate Financial Statements.
(1)
Related to CNV General Resolution N° 609/12. See Note 2.1.b) of Consolidated Financial Statements as of June 30, 2017.
(2)
The composition of Other reserves of the Company as of December 31, 2016 is as follows:
 
 
 
Cost of Treasury shares
 
Reserve for share-based payments
 
Reserve for future dividends
 
Other reserves of subsidiaries
 
Other comprehensive loss of subsidiaries
 
Currency translation adjustment reserve
 
Total Other reserves


Balance at June 30, 2016
(29)
 
67
 
520
 
 -
 
(10)
 
474
 
1,022
Other comprehensive income for the period
 -
 
 -
 
 -
 
 -
 
(12)
 
34
 
22
Appropriation of retained earnings approved by Shareholders’ meeting held as of 10.31.16
 -
 
 -
 
(26)
 
 -
 
 -
 
 -
 
(26)
Changes of interest in subsidiaries
 -
 
 -
 
 -
 
(152)
 
 -
 
 -
 
(152)
Reserve for share-based payments
 -
 
6
 
 -
 
 -
 
 -
 
 -
 
6
Balance at December 31, 2016 (recast)
(29)
 
73
 
494
 
(152)
 
(22)
 
508
 
872
 
 
 
 
 
 
                                                                                                                                                                                                                                                                        ______________________                                                              
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II
                                                                                                                                                                                                                                                                                            acting as President
 

4
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Cash Flows
for the six-month periods ended December 31, 2017 and 2016
(All amounts in millions, except shares and per share data and as otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Note
12.31.17
 
12.31.16 (recast)
 
Operating activities
 
 
 
 
 
Profit for the period
 
8,936
 
3,846
 
Adjustments:
 
 
 
 
 
Income tax
15
(172)
 
(111)
 
Amortization and depreciation
18
1
 
-
 
Financial results, net
20
915
 
472
 
Decrease of intangible assets due to TGLT agreement
19
 -
 
27
 
Net gain from fair value adjustment of investment properties
7
(491)
 
(196)
 
Gain from disposal of trading properties
 
(8)
 
-
 
Gain from disposal of subsidiaries
19
(496)
 
-
 
Share of profit of subsidiaries, associates and joint ventures
6
(8,797)
 
(4,132)
 
Increase in trade and other receivables
 
(55)
 
(62)
 
Increase / (Decrease) in trade and other payables
 
89
 
(79)
 
Net cash used in operating activities before income tax paid
 
(78)
 
(235)
 
Income tax paid
 
 -
 
(18)
 
Net cash flow used in investing activities
 
(78)
 
(253)
 
Investing activities
 
 
 
 
 
Capital contributions to subsidiaries, associates and joint ventures
6
(1,316)
 
(488)
 
Acquisition and advanced payments of investment properties
 
(129)
 
(4)
 
Proceeds from sales of investment properties
7
26
 
2
 
Proceeds from sales of trading properties
17
9
 
 -
 
Acquisition of property, plant and equipment
8
(2)
 
(1)
 
Increase of trading properties
9
(62)
 
(5)
 
Acquisition of intangibles
 
 -
 
(1)
 
Increase of investments in financial assets
 
(1,962)
 
 -
 
Proceeds from sales of investments in financial assets
 
1,970
 
1
 
Increase in loans granted to subsidiaries, associates and joint ventures
 
(10)
 
 -
 
Dividends collected
6
587
 
 -
 
Net cash flow used in investing activities
 
(889)
 
(496)
 
Financing activities
 
 
 
 
 
Obtaining/ (payment) of short-term loans, nets
 
37
 
(661)
 
Payment of principal of Non-Convertible Notes
 
 -
 
(1,126)
 
Interests paid
 
(286)
 
(299)
 
Loans obtained from subsidiaries, associates and joint ventures
 
11
 
21
 
Payment of loans from subsidiaries, associates and joint ventures
 
(10)
 
(300)
 
Proceeds from borrowings granted to subsidiaries, associates and joint ventures
 
51
 
 -
 
Issuance of non-convertible notes
 
 -
 
3,129
 
Disposal of interest in subsidiaries
 
2,440
 
 -
 
Dividends paid
 
(1,392)
 
 -
 
Net cash flow generated by financing activities
 
851
 
764
 
Net (decrease) / increase in cash and cash equivalents
 
(116)
 
15
 
Cash and cash equivalents at the beginning of the period
11
148
 
6
 
Foreign exchange gain of cash and changes in fair value of cash equivalents
 
2
 
1
 
Cash and cash equivalents at the end of the period
11
34
 
22
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
Reserve for share-based payments
3
 
6
 
 
Currency translation adjustment
(889)
 
34
 
 
Share of other comprehensive loss of subsidiaries, associates and joint ventures
(56)
 
(12)
 
 
Decrease in trade and other receivables through advanced payments utilization
(35)
 
 -
 
 
Share of changes in equity of subsidiaries
 -
 
152
 
 
Decrease of borrowings through an increase in investment properties
2
 
 -
 
 
Decrease of borrowings through an increase of trading properties
3
 
 -
 
 
Increase in dividends receivable through a decrease in investments in subsidiaries, associates and joint ventures
 -
 
443
 
 
Decrease in Dividends receivables through an increase in investments in subsidiaries
 -
 
434
 
 
Dividends paid through an increase in trade and other payables
8
 
 -
 
 
(Increase) / Decrease in income tax payable, offset with tax credits
(106)
 
25
 
 
Increase in borrowings from subsidiaries, associates and joint ventures through an increase in trade and other receivables
 -
 
167
 
 
Decrease in intangible assets through an increase in other receivables
 -
 
24
 
 
 
 
 
 
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Separate Financial Statements.
 
 
 
 
 
 
 
 
                                                                                                                                                                                                                                                                        ______________________                                                              
                                                                                                                                                                                                                                                                                               Alejandro G. Elsztain
                                                                                                                                                                                                                                                                                              Vice-president II
                                                                                                                                                                                                                                                                                             acting as President
 
 
 
 
5
IRSA Inversiones y Representaciones Sociedad Anónima
 
Notes to the Unaudited Condensed Interim Consolidated Separate Financial Statements
(All amounts in millions, except shares and per share data and as otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
1.
General information and company’s business
 
IRSA Inversiones y Representaciones Sociedad Anónima (“IRSA” or “The Company”) was founded in 1943, it is primarily engaged in managing real estate holdings in Argentina since 1991.
 
IRSA is a corporation incorporated and domiciled in Argentina. The registered office is Bolívar 108, 1 st . Floor, Buenos Aires, Argentina.
 
The Company owns, manages and develops, directly and indirectly through its subsidiaries, a portfolio of office and other rental properties in Buenos Aires. In addition, IRSA through its subsidiaries, associates and joint ventures manages and develops shopping malls and branded hotels across Argentina, and also office properties in the United States of America and Israel.
 
These Unaudited Condensed Interim Separate Financial Statements have been approved for issue by the Board of Directors on February 8, 2018.
 
2.
Basis of preparation of the Unaudited Condensed Interim Separate Financial Statements
 
2.1. 
Basis of preparation
 
These Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting", therefore, should be read together with the Annual Financial Statements of the Group as of June 30, 2017 prepared in accordance with IFRS in force. Furthermore, these Financial Statements include supplementary information required by Law N° 19,550 and/or regulations of the CNV. Such information is included in notes to these Financial Statements according to IFRS.
 
These Financial Statements corresponding to the interim six-month periods ended December 31, 2017 and 2016 have not been audited. The management considers they include all necessary adjustments to fairly present the results of each period. The Company’s interim periods results do not necessarily reflect the proportion of the Company’s full-year results.
 
Under IAS 29 “Financial Reporting in Hyperinflationary Economies”, the Financial Statements of an entity whose functional currency belongs to a hyperinflationary economy, regardless of whether they apply historic cost or current cost methods, should be stated at the current unit of measure as of the date of this Consolidated Financial Statements. For such purpose, in general, inflation is to be computed in non-monetary items from the acquisition or revaluation date, as applicable. In order to determine whether an economy is to be considered hyperinflationary, the standard lists a set of factors to be taken into account, including an accumulated inflation rate near or above 100% over a three-year period.
 
For the Company’s business in Argentina, considering the released inflation data in Argentina and the declining inflation trend in recent years, the Board of Directors is of the view that there is not enough evidence to conclude that Argentina is a hyperinflationary economy. Therefore, no restatement has been applied on financial information, as set forth by IAS 29, for the reporting periods. However, over the last years, certain macroeconomic variables, such as payroll costs and input prices, have experienced significant annual changes, which should be taken into consideration in assessing and interpreting the financial situation and results of operations of the Company in these Financial Statements.
 
 
 
6
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
2.2.     Significant accounting policies
 
The accounting policies adopted in the preparation of these Unaudited Condensed Interim Separate Financial Statements are consistent with those applied in the Annual Financial Statements as of June 30, 2017. The principal accounting policies are described in Note 2 of those Annual Financial Statements.
 
2.3.
Comparability of information
 
Balance items as of June 30, 2017 and December 31, 2016 shown in these Unaudited Condensed Interim Separate Financial Statements for comparative purposes arise from financial statements then ended. As mentioned in Note 2 to the Consolidated Financial Statements as of June 30, 2017, during the fiscal year ended June 30, 2017 the Group’s Board of Directors decided to change the accounting policy for investment property from cost model to fair value model, as permitted under IAS 40. Therefore, the previously issued Interim Financial Statements were retroactively recast as required by IAS 8.
 
The table below includes the reconciliation between the Statements of Income and Other Comprehensive Income for the period ended December 31, 2016 (six and three months), as they were originally issued, and the statements included in these Interim Financial Statements for comparative purposes. There is no impact on the relevant total amounts of the statement of cash flows.
 
Statement of Income and Other Comprehensive Income for the six-month period ending as of December 31, 2016:
 
 
 
 
 
Six months
 
 
 
12.31.16 (originally issued)
 
12.31.16 (adjustment)
 
12.31.16 (recast)
 
 
 
Revenue
18
 
 -
 
18
Costs
(12)
 
1
 
(11)
Gross Profit
6
 
1
 
7
Net gain from fair value adjustment of investment properties
 -
 
196
a)
196
General and administrative expenses
(77)
 
 -
 
(77)
Selling expenses
(13)
 
 -
 
(13)
Other operating results, net
(38)
 
 -
 
(38)
(Loss) / Profit from operations
(122)
 
197
 
75
Share of profit of subsidiaries, associates and joint ventures
2,481
 
1,651
b)
4,132
Profit from operations before financial results and income tax
2,359
 
1,848
 
4,207
Finance income
44
 
 -
 
44
Finance costs
(517)
 
 -
 
(517)
Other financial results
1
 
 -
 
1
Financial results, net
(472)
 
 -
 
(472)
Profit before income tax
1,887
 
1,848
 
3,735
Income tax
180
 
(69)
c)
111
Profit for the period
2,067
 
1,779
 
3,846
 
 
 
 
 
 
Other comprehensive income
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
Share of other comprehensive loss of subsidiaries, associates and joint ventures
(12)
 
 -
 
(12)
Currency translation adjustment of subsidiaries, associates, and joint ventures
(21)
 
55
 
34
Other comprehensive (loss) / income for the period
(33)
 
55
 
22
Total comprehensive income for the period
2,034
 
1,834
 
3,868
 
 
 
7
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Statement of Income and Other Comprehensive Income for the three-month period ending as of December 31, 2016:
 
 
 
 
 
Three months
 
 
 
12.31.16 (originally issued)
 
12.31.16 (adjustment)
 
12.31.16 (recast)
 
 
 
Revenue
10
 
 -
 
10
Costs
(6)
 
1
 
(5)
Gross Profit
4
 
1
 
5
Net gain from fair value adjustment of investment properties
 -
 
139
a)
139
General and administrative expenses
(42)
 
 -
 
(42)
Selling expenses
(8)
 
 -
 
(8)
Other operating results, net
(34)
 
 -
 
(34)
(Loss) / Profit from operations
(80)
 
140
 
60
Share of profit of subsidiaries, associates and joint ventures
2,881
 
925
b)
3,806
Profit from operations before financial results and income tax
2,801
 
1,065
 
3,866
Finance income
11
 
 -
 
11
Finance costs
(263)
 
 -
 
(263)
Other financial results
1
 
 -
 
1
Financial results, net
(251)
 
 -
 
(251)
Profit before income tax
2,550
 
1,065
 
3,615
Income tax
94
 
(49)
c)
45
Profit for the period
2,644
 
1,016
 
3,660
 
 
 
 
 
 
Other comprehensive income
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
Share of other comprehensive loss of subsidiaries, associates and joint ventures
(29)
 
 -
 
(29)
Currency translation adjustment of subsidiaries, associates, and joint ventures
(216)
 
39
 
(177)
Other comprehensive loss for the period
(245)
 
39
 
(206)
Total comprehensive income for the period
2,399
 
1,055
 
3,454
 
 
Explanation of the changes in the separate statement of comprehensive income:
 
a) It represents the net change in fair value of investment properties.
b) It relates to change in the value, as per the equity method, in subsidiaries, associates and joint ventures after applying the change to equity in the accounting policy implemented by the Company.
c) It represents the tax impact of the change in accounting policy.
 
2.4.        
Use of estimates
 
The preparation of Financial Statements at a certain date requires the Management to make estimates and evaluations affecting the amount of assets and liabilities recorded and contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the period. Actual results might differ from the estimates and evaluations made at the date of preparation of these Unaudited Condensed Interim Separate Financial Statements. In the preparation of these Unaudited Condensed Interim Separate Financial Statements, the main significant judgments made by Management in applying the Company’s accounting policies and the major sources of uncertainty were the same that the Company used in the preparation of the Separate Financial Statements for the fiscal year ended June 30, 2017.
 
3. 
Seasonal effects on operations
 
See Note 3 to the Unaudited Condensed Interim Consolidated Financial Statements.
 
4. 
Acquisitions and disposals
 
Significant acquisitions and disposals for the six-month period ended December 31, 2017 are detailed below. Significant acquisitions and disposals for the fiscal year ended June 30, 2017, are detailed in Note 4 to the Consolidated Financial Statements as of June 30, 2017.
 
Purchase of DIC shares by Dolphin
 
As described in Note 4 to the Consolidated Financial Statements as of June 30, 2017, at the end of November Dolphin IL Investments Ltd. (Dolphin IL), a subsidiary of Dolphin Netherlands B.V., has subscribed the final documents for the acquisition of the total shares of DIC owned by IDBD.
 
 
8
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
The transaction has been made for an amount of NIS 1,843 (equivalent to NIS 17.20 per share of DIC). The consideration was paid NIS 70 in cash (equivalent to Ps. 348 as of the date of the transaction) and NIS 1,773 (equivalent to Ps. 8,814 as of the date of the transaction) were financed by IDBD to Dolphin, maturing in five years, with the possibility of an extension of three additional years in tranches of one year each, that will accrue an initial interest of 6.5% annually, which will increase by 1% annually in case of extension for each annual tranche. The pre-existing guarantees from the IDBD's corporates notes over DIC shares remain in force after the detailed transfer of shares and the remaining DIC shares that are not guarantying the aforementioned corporate bonds are pledged in favor of IDBD until the cancellation of debt. This transaction was accounted as an increase in the investment in DIC for an amount of Ps. 114 in the separate financial statements.
 
Purchase of IDBD shares by IFISA
 
In December 2017, Dolphin Netherlands BV (Dolphin), executed a stock purchase agreement for all of the shares that IFISA held of IDBB, which amounted to 31.7% of the share capital. In this way, as of the end of December 31, 2017, Dolphin holds the 100% of IDBD's shares.
 
The transaction was made at a price of NIS 398 million (equivalent to NIS 1.894 per share and approximately to $1,968 as of the date of the transaction). As consideration of the transaction all receivables from Dolphin to IFISA were canceled and a payment of USD 33.7 million (equivalent to $588 as of the date of the transaction) was made. This transaction was accounted as an increase in the investment in IDBD for an amount of Ps. 2,923 in the separate financial statements.
 
Sale of Shufersal shares
 
On December 24, 2017, DIC sold shares of Shufersal, in a manner whereby its equity interest decreased from 53.30% to 50.12%. The consideration with respect to the sale of the aforementioned shares amounted to approximately NIS 169.5 million (equivalent to Ps 847 as of the date of the transaction). This transaction generated a gain of Ps. 203 in the separate financial statements.
 
Sale of ADS from IRSA CP
 
During October 2017, IRSA completed the sale in the secondary market of 10,240,000 ordinary shares of IRSA CP, N.V. Ps. 1 per share, represented by American Depositary Shares (“ADSs”), representing four ordinary shares each, which represents nearly 8.1% of IRSA CP capital for a total amount of Ps. 2,440 (US$ 138). After the transaction, IRSA’s direct and indirect interest in IRSA CP amounts to approximately 86.29%. This transaction generated a gain of Ps. 496 in the separate financial statements
 
5. 
Financial risk management and fair value estimate s
 
The Unaudited Condensed Interim Financial Statements do not include all the information and disclosures of the risk management, so they should be read together with the annual Separate Financial Statements as of June 30, 2017.
 
There has been no change in the risk management or risk management policies applied by the Company since the end of the annual fiscal year.
 
Since June 30, 2017 there have been no significant changes in business or economic circumstances affecting the fair value of the Company's financial assets or liabilities (either measured at fair value or amortized cost). See notes to the Unaudited Condensed Interim Consolidated Financial Statements. Furthermore, there have been no transfers between the different hierarchies used to assess the fair value of the Company’s financial instruments.
 
 
 
9
IRSA Inversiones y Representaciones Sociedad Anónima
 

 
6. 
Information about the main subsidiaries, associates and joint ventures inancial risk management and fair value estimate s
 
The Company conducts its business through several operating and holding subsidiaries, associates and joint ventures. Its main subsidiaries include IRSA CP and Tyrus. The main associates include BHSA and New Lipstick. Its main joint ventures include Cyrsa, Puerto Retiro.
 
Detailed below are the evolutions of investments in subsidiaries, associates and joint ventures of the Company, for the six-month period ended December 31, 2017 and for the year ended June 30, 2017:
 
Subsidiaries, Associates and Joint ventures
 
 
12.31.17
 
06.30.17
Beginning of period / year
29,447
 
23,342
Share of profit
8,797
 
4,485
Capital contributions (i)
1,316
 
1,121
Sale of subsidiaries, associates and joint ventures
(1,944)
 
 -
Others comprehensive (loss) / income
(945)
 
1,135
Cash dividends (ii)
(587)
 
(755)
Others reserve
(1)
 
 -
Increase in equity interest in associates
 -
 
119
End of the period / year (iii)
36,083
 
29,447
 
(i)
During the period ended December 31, 2017, capital contributions were made to Tyrus and Manibil for Ps. 1,272 and Ps. 44, respectively. During the fiscal year ended June 30, 2017 capital contributions were made to Tyrus, Llao, HASA, Palermo Invest S.A., Inversora Bolivar S.A. and Manibil for Ps. 1,072, Ps. 2, Ps. 3, Ps. 3, Ps. 3 and Ps. 38, respectively.
(ii)
During the period ended December 31, 2017 IRSA CP and ECLSA distributed dividends to the Company for an amount of Ps. 586 and Ps. 1, respectively. During the year ended June 30, 2017 Palermo Invest S.A., Inversora Bolívar S.A., ECLSA, CYRSA and IRSA CP distributed dividends to the Company for an amount of Ps. 0.2, Ps. 1, Ps. 0.3, Ps. 7.5, Ps. 727 and Ps. 19, respectively.
(iii)
As of December 31, 2017 includes Ps. 4, corresponding to equity interest in IRSA - Galerías Pacífico UTE and June 30, 2017 includes Ps. 3, corresponding to equity interest in HASA, included in Provisions (Note 16).
 
 
Name of the entity
 
% ownership interest
 
Company´s interest in equity
 
Company’s interest in comprehensive income
 
12.31.17
06.30.17
 
12.31.17
 
06.30.17
 
12.31.17
 
12.31.16 (recast)
 
 
 
 
Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
IRSA CP
 
86.29%
94.41%
 
28,126
 
20,807
 
9,850
 
1,898
 
Tyrus
 
100.00%
100.00%
 
4,885
 
6,053
 
(2,439)
 
2,080
 
Ritelco S.A.
 
100.00%
100.00%
 
612
 
494
 
117
 
28
 
EFANUR
 
100.00%
100.00%
 
580
 
522
 
58
 
102
 
ECLSA
 
96.74%
96.74%
 
462
 
390
 
73
 
10
 
Inversora Bolívar S.A.
 
95.13%
95.13%
 
406
 
341
 
65
 
5
 
Palermo Invest S.A.
 
97.00%
97.00%
 
332
 
263
 
69
 
6
 
NFSA (3)
 
76.34%
76.34%
 
22
 
23
 
(2)
 
2
 
Llao Llao Resort S.A. (3)
 
50.00%
50.00%
 
20
 
13
 
6
 
5
 
HASA (3)
 
80.00%
80.00%
 
 -
 
(3)
 
4
 
2
 
Associates
 
 
 
 
 
 
 
 
 
 
 
 
BHSA (1) (2)
 
5.05%
5.05%
 
346
 
278
 
68
 
6
 
Manibil
 
49.00%
49.00%
 
150
 
95
 
11
 
7
 
BACS (2)
 
33.36%
33.36%
 
134
 
158
 
(24)
 
1
 
Joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Cyrsa
 
50.00%
50.00%
 
12
 
13
 
 -
 
2
 
UTE IRSA - Galerías Pacífico S.A.
 
50.00%
50.00%
 
(4)
 
 -
 
(4)
 
 -
 
Total subsidiaries, associates and joint ventures
 
 
 
 
36,083
 
29,447
 
7,852
 
4,154
 
 
 
 
10
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
Name of the entity
 
 
Place of business / Country of incorporation
Main activity
Common shares 1 vote
 
Latest financial statements issued
 
 
Share capital (nominal value)
Profit / (loss) for the period
Shareholders’ equity
Subsidiaries
 
 
 
 
 
 
 
 
IRSA CP
 
Argentina
Real estate
108,732,579
 
126
11,242
32,707
Tyrus
 
Uruguay
Investment
16,025,861,475
 
7,318
(1,441)
4,884
Ritelco S.A.
 
Uruguay
Investment
94,369,151
 
94
120
611
EFANUR
 
Uruguay
Investment
130,386,770
 
131
1
580
ECLSA
 
Argentina
Investment
77,316,130
 
80
74
476
Inversora Bolívar S.A.
 
Argentina
Investment
83,571,237
 
88
69
420
Palermo Invest S.A.
 
Argentina
Investment
155,953,673
 
161
71
373
NFSA (3)
 
Argentina
Hotel
38,068,999
 
50
(2)
45
Llao Llao Resort S.A. (3)
 
Argentina
Hotel
73,580,206
 
147
13
39
HASA (3)
 
Argentina
Hotel
18,791,800
 
23
5
1
Associates
 
 
 
 
 
 
 
 
BHSA (1) (2)
 
Argentina
Financial
73,939,822
 
1,500
486
7,167
Manibil
 
Argentina
Real estate
130,122,874
 
266
23
306
BACS (2)
 
Argentina
Financial
29,297,626
 
88
(50)
423
Joint ventures
 
 
 
 
 
 
 
 
Cyrsa
 
Argentina
Real estate
8,748,269
 
17
(1)
25
UTE IRSA - Galerías Pacífico S.A.
 
Argentina
Real estate
500,000
 
1
(8)
(7)
 
(1)
Considered significant. See Notes 7 to 9 to the Annual Consolidated Financial Statements.
(2)
Information as of September 30, 2017 according to BCRA's standards. For the purpose of the valuations of the investments in the Company, preliminary figures as of December 31, 2017 have been considered with the necessary IFRS adjustments. Share market price of Banco Hipotecario S.A as of December 31, 2017 amounts to Ps. 13.60. See Note 9 to the Consolidated Financial Statements as of June 30, 2017.
(3)
The Company has secured loans of Hoteles Argentinos S.A., Llao Llao Resorts S.A. and Nuevas Fronteras S.A. with BHSA for Ps.5.5, Ps. 1.0 and Ps. 5.1, respectively.
 
 
7. 
Investment properties
 
Changes in the Company’s investments properties for the six-month period ended December 31, 2017 and for the year ended June 30, 2017 were as follows:
 
 
Period ended December 31, 2017
 
Year ended June 30, 2017
 
Office buildings and other rental portfolio
 
Undeveloped parcels of land
 
Properties under development
 
Total
 
Total
Fair value hierarchy
2
 
2
 
2
 
 
 
 
Fair value at the beginning of the period / year
891
 
3,218
 
348
 
4,457
 
3,540
Additions
 -
 
 -
 
46
 
46
 
15
Capitalized finance costs
 -
 
 -
 
2
 
2
 
-
Disposals
(26)
 
 -
 
-
 
(26)
 
(37)
Net gain from fair value adjustment
107
 
391
 
(7)
 
491
 
939
Fair value at the end of the period / year
972
 
3,609
 
389
 
4,970
 
4,457
 
The following amounts have been recognized in the statements of comprehensive income:
 
 
12.31.17
 
12.31.16 (recast)
Rental income and averaging of scheduled rental escalation (Note 17)
17
 
15
Property management fees (Note 17)
3
 
1
Costs (Note18)
(16)
 
(10)
Net unrealized gain from fair value adjustment of investment properties
467
 
196
Net realized gain from fair value adjustment of investment properties
24
 
 -
 
Valuation techniques are described in Note 10 to the Consolidated Financial Statements as of June 30, 2017. There were no changes to the valuation techniques.
 
11
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
8. 
Property, plant and equipment

Changes in the Company’s property, plant and equipment for the six-month period ended December 31, 2017 and for the year ended June 30, 2017 were as follows:
 
Period ended December 31, 2017
 
Year ended June 30, 2017
 
Buildings and facilities
 
Furniture and fixtures
 
Machinery and equipment
 
Total
 
Total
Costs
16
 
3
 
16
 
35
 
31
Accumulated depreciation
(12)
 
(3)
 
(14)
 
(29)
 
(28)
Net book amount at the beginning of the year
4
 
-
 
2
 
6
 
3
Additions
1
 
-
 
1
 
2
 
4
Depreciation (Note 18)
(1)
 
-
 
-
 
(1)
 
(1)
Balances at the end of the period / year
4
 
-
 
3
 
7
 
6
Costs
17
 
3
 
17
 
37
 
35
Accumulated depreciation
(13)
 
(3)
 
(14)
 
(30)
 
(29)
Net book amount at the end of the period / year
4
 
-
 
3
 
7
 
6
 
 
9. 
Trading properties
 
 
 
 
 
Changes in the Company’s trading properties for the six-month period ended December 31, 2017 and for the year ended June 30, 2017 were as follows:
 
Period ended December 31, 2017
 
Year ended June 30, 2017

 
Completed properties
 
Properties under development
 
Total
 
Total
Beginning of the period / year
5
 
322
 
327
 
304
Additions
-
 
62
 
62
 
23
Capitalized finance costs
-
 
3
 
3
 
-
Disposals
-
 
(1)
 
(1)
 
-
End of the period / year
5
 
386
 
391
 
327
Non-current
 
 
 
 
388
 
319
Current
 
 
 
 
3
 
8
Total
 
 
 
 
391
 
327
 
The following amounts have been recognized in the statements of comprehensive income:
 
12.31.17
 
12.31.16 (recast)
Sales revenue (Note 17)
9
 
-
Cost of sales and developments (Note 18)
(2)
 
(1)
 
10. 
Intangible assets
 
Changes in Company’s intangible assets for the six-month period ended December 31, 2017 and for the year ended June 30, 2017 were as follows:
 
Period ended December 31, 2017
 
Year ended June 30, 2017
 
Computer software
 
Future units to be received from barters
 
Total
 
Total
Costs
4
 
19
 
23
 
54
Accumulated amortization
(2)
 
-
 
(2)
 
(2)
Net book amount at the beginning of the period / year
2
 
19
 
21
 
52
Additions
-
 
-
 
-
 
21
Disposals
-
 
-
 
-
 
(52)
Balances at the end of the period / year
2
 
19
 
21
 
21
Costs
4
 
19
 
23
 
23
Accumulated amortization
(2)
 
-
 
(2)
 
(2)
Net book amount at the end of the period / year
2
 
19
 
21
 
21
 
 
 
12
IRSA Inversiones y Representaciones Sociedad Anónima
 
11. 
Financial instruments by category
 
The note shows the financial assets and financial liabilities by category of financial instrument and a reconciliation to the corresponding line item in the Interim Statements of Financial Position, as appropriate. Financial assets and liabilities measured at fair value are assigned based on their different levels in the fair value hierarchy. For further information, related to fair value hierarchy see Note 14 to the Consolidated Financial Statements as of June 30, 2017.
 
Financial assets and financial liabilities as of December 31, 2017 and June 30, 2017 are as follows:
 
 
Financial assets at amortized cost (i)
 
Financial assets at fair value through profit or loss
 
Subtotal financial assets
 
Non-financial assets
 
Total
 
 
 
 
Level 1
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 12)
278
 
-
 
278
 
621
 
899
 
Restricted assets (*)
1
 
-
 
1
 
-
 
1
 
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 
 - Bonds
-
 
39
 
39
 
-
 
39
 
 - Mutual funds
-
 
2
 
2
 
-
 
2
 
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
-
 
15
 
15
 
-
 
15
 
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
  - Cash at bank and on hand
34
 
-
 
34
 
-
 
34
 
Total
313
 
56
 
369
 
621
 
990
 
(*) Corresponds to the capitalization plan.
 
 
Financial liabilities at amortized cost (i)
 
Non-financial liabilities
 
Total
Liabilities as per Statement of Financial Position
 
 
 
 
 
Trade and other payables (Note 13)
98
 
928
 
1,026
Borrowings (Note 14)
6,382
 
-
 
6,382
Total
6,480
 
928
 
7,408
 
 
Financial assets at amortized cost (i)
 
Financial assets at fair value through profit or loss
 
Subtotal financial assets
 
Non-financial assets
 
Total
 
 
 
Level 1
 
 
 
 
 
 
June 30, 2017
 
 
 
 
 
 
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 12)
290
 
-
 
290
 
492
 
782
Restricted assets (*)
4
 
-
 
4
 
-
 
4
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 - Bonds
-
 
27
 
27
 
-
 
27
 - Mutual funds
-
 
11
 
11
 
-
 
11
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
-
 
8
 
8
 
-
 
8
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 - Bonds
-
 
67
 
67
 
-
 
67
 - Mutual funds
-
 
56
 
56
 
-
 
56
 - Cash at bank and on hand
25
 
-
 
25
 
-
 
25
Total
319
 
169
 
488
 
492
 
980
(*) Corresponds to the capitalization plan.
 
Financial liabilities at amortized cost (i)
 
Non-financial liabilities
 
Total
Liabilities as per Statement of Financial Position
 
 
 
 
 
Trade and other payables (Note 13)
101
 
806
 
907
Borrowings (Note 14)
5,698
 
-
 
5,698
Total
5,799
 
806
 
6,605
 

 (i)   The fair value of financial assets and liabilities at their amortized cost does not differ significantly from their book value, except for borrowings (Note 14).
 
 
 
13
IRSA Inversiones y Representaciones Sociedad Anónima
 
During the period ended on December 31, 2017, there were no transfers between levels of the fair value hierarchy.
 
As of December 31, 2017, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Group.
 

12. 
Trade and other receivables
 
Company’s trade and other receivables, as of December 31, 2017 and June 30, 2017 is as follows:
 
 
 
12.31.17
 
06.30.17
Leases and services receivables
58
 
43
Receivables from the sale of properties
50
 
51
Less: Allowance for doubtful accounts
(3)
 
(3)
Total trade receivables
105
 
91
Advance payments
416
 
354
Borrowings, deposits and other debit balances
152
 
169
VAT receivables
105
 
66
Prepaid expenses
41
 
38
Receivable from TGLT agreement (i)
25
 
25
Long-term incentive program
15
 
17
Loans granted
12
 
10
Advances granted
10
 
-
Others
10
 
3
Tax credits
5
 
6
Total other receivables
791
 
688
Total trade and other receivables
896
 
779
Non-current
308
 
211
Current
588
 
568
Total
896
 
779
 
(i)   See Note 11 to the Unaudited Condensed Interim Consolidated Financial Statements.
 
Movements on the Company’s allowance for doubtful accounts are as follows:
 
 
12.31.17
 
06.30.17
Beginning of period /year
3
 
4
Additions (Note 18)
1
 
1
Utilization
(1)
 
(2)
End of the period / year
3
 
3
 
The creation and release of the allowance for doubtful accounts have been included in “Selling expenses” in the Statements of Income (Note 18). Amounts charged to the allowance for doubtful accounts are generally written off, when there is no expectation of recovery.
 
 
 
14
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
13. 
Trade and other payables
 
Company’s trade and other payables as of December 31, 2017 and June 30, 2017 were as follows:
 
 
12.31.17
 
06.30.17
Customers advances
905
 
786
Trade payables
86
 
72
Invoices to be received
10
 
20
Total trade payables
1,001
 
878
Long-term incentive plan
14
 
10
Director´s fees
3
 
7
Tax payables
3
 
4
Tax amnesty plan for payable taxes
2
 
2
Tax on shareholders’ personal assets
-
 
2
Others
3
 
4
Total other payables
25
 
29
Total trade and other payables
1,026
 
907
Non-current
883
 
784
Current
143
 
123
Total
1,026
 
907
 
14. 
Borrowings
 
Company’s borrowings as of December 31, 2017 and June 30, 2017 are as follows:
 
 
12.31.17
 
06.30.17
Non-convertible notes
5,193
 
4,667
Bank borrowings
1,050
 
951
Related parties (Note 21)
87
 
80
Bank overdrafts
52
 
-
Total borrowings
6,382
 
5,698
Non-current
5,839
 
5,340
Current
543
 
358
Total
6,382
 
5,698
 
15. 
Current and deferred income tax
 
The provision for the Company’s income tax are as follows:
 
 
12.31.17
 
12.31.16 (recast)
Current income tax
106
 
55
Deferred income tax
(278)
 
(166)
Income tax gain
(172)
 
(111)
 
The gross movement on the deferred income tax account is as follows:
 
 
12.31.17
 
06.30.17
Beginning of the period / year
(2,247)
 
(1,516)
Income tax expense
278
 
(731)
End of the period / year
(1,969)
 
(2,247)
 
 
 
15
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Below is a reconciliation between income tax recognized and the amount which would result from applying the prevailing tax rate on profit before income tax for the six-month periods ended December 31, 2017 and 2016:
 
 
12.31.17
 
12.31.16 (recast)
Net income at tax rate
3,067
 
1,307
Permanent differences:
 
 
 
Share of profit of subsidiaries, associates and joint ventures
(2,651)
 
(1,420)
Gain on sales of interest in subsidiary
42
 
-
Donations and non-deductible expenses
3
 
2
Others
8
 
-
Change of income tax rate
(641)
 
-
Income tax – Gain
(172)
 
(111)
 
Argentine Tax Reform
 
On December 27, 2017, the Argentine Congress approved the Tax Reform, through Law No. 27,430, which was enacted on December 29, 2017, and has introduced many changes to the income tax treatment applicable to finance income. The key components of the Tax Reform are as follows:
 
Dividends : Tax on dividends distributed by Argentine companies would be as follows: (i) dividends originated from profits obtained before fiscal year of the Company ending June 30, 2018 will not be subject to withholding tax; (ii) dividends derived from profits generated during fiscal years of the Company ending June 30, 2019 and 2020 paid to Argentine Individuals and/or foreign residents, will be subject to a 7% withholding tax; and (iii) dividends originated from profits obtained during fiscal year ending June 30, 2021 onward will be subject to withholding tax at a rate of 13%.
 
Income tax : Corporate income tax would be gradually reduced to 30% for fiscal years commencing after January 1, 2018 through December 31, 2019, and to 25% for fiscal years beginning after January 1, 2020, inclusive.
 
Presumptions of dividends : Certain facts will be presumed to constitute dividend payments, such as: i) withdrawals from shareholders, ii) shareholders private use of property of the company, iii) transactions with shareholders at values different from market values, iv) personal expenses from shareholders or shareholder remuneration without substance.
 
Revaluation of assets : The regulation establishes that, at the option of the companies, tax revaluation of assets is permitted for assets located in Argentina and affected to the generation of taxable profits. The special tax on the amount of the revaluation depends on the asset, being (i) 8% for real estate not classified as inventories, (ii) 15% for real estate classified as inventories, (iii) 5% for shares, quotas and equity interests owned by individuals and (iv) 10% for the rest of the assets. As of the date of these financial statements, the Group has not exercised the option. The gain generated by the revaluation is exempted according to article 291 of Law 27,430 and, the additional tax generated by the revaluation is not deductible.
 
In addition, the Argentine tax reform contemplates other amendments regarding the following matters: social security contributions, Tax Administrative Procedures Law, Criminal Tax Law, tax on liquid fuels, and excise taxes, among others. As of the date of presentation of these Financial Statements, many aspects are pending regulation by the National Executive Power.
 
 
16
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
16. 
Provisions
 
The table below shows changes in Company's provisions:
 
 
Period endedDecember 31, 2017
 
Year endedJune 30, 2017
 
Labor, legal and other claims
 
Investments in associates and joint ventures (i)
 
Total
 
Total
Beginning of period / year
33
 
3
 
36
 
35
Additions (Note 19)
3
 
4
 
7
 
11
Decrease (Note 19)
(2)
 
(3)
 
(5)
 
(8)
Utilization
(2)
 
-
 
(2)
 
(2)
End of period / year
32
 
4
 
36
 
36
Non current
 
 
 
 
35
 
32
Current
 
 
 
 
1
 
4
Total
 
 
 
 
36
 
36
 
(i)   Corresponds to the investment in IRSA – Galerías Pacífico UTE with negative equity.
 
17. 
Revenues
 
12.31.17
 
12.31.16 (recast)
Rental income and averaging of scheduled rental escalation
17
 
15
Sales of trading properties
9
 
-
Property management fees
3
 
1
Sales, rental and services income
29
 
16
Expenses
6
 
2
Total revenues
35
 
18
 

18. 
Expenses by nature
 
The Company discloses expenses in the Unaudited Condensed Interim Statements of Income and Other Comprehensive Income by function as part of the line items “Costs”, “General and administrative expenses” and “Selling expenses”.
The following table provides additional disclosure regarding expenses by nature and their relationship to the function within the Company.
 
For the period ended December 31, 2017 and 2016:
 
 
 
 
 
 
 
 
 
 
 
Costs (1)
 
General and administrative expenses
 
Selling expenses
 
12.31.17
 
12.31.16 (recast)
Salaries, social security costs and other personnel expenses
3
 
51
 
4
 
58
 
43
Fees and payments for services
-
 
21
 
1
 
22
 
18
Director´s fees
-
 
17
 
-
 
17
 
15
Traveling, transportation and stationery
-
 
7
 
-
 
7
 
4
Taxes, rates and contributions
4
 
-
 
2
 
6
 
4
Leases and service charges
2
 
4
 
-
 
6
 
2
Public services and others
3
 
3
 
-
 
6
 
3
Maintenance, security, cleaning, repairs and others
4
 
1
 
-
 
5
 
5
Advertising and other selling expenses
-
 
-
 
2
 
2
 
7
Amortization and depreciation
1
 
-
 
-
 
1
 
-
Cost of sales of trading properties
1
 
-
 
-
 
1
 
-
Allowance for doubtful accounts (charge and recovery, net) (Note 12)
-
 
-
 
1
 
1
 
-
Bank charges
-
 
1
 
-
 
1
 
-
Total expenses by nature as of 12.31.17
18
 
105
 
10
 
133
 
-
Total expenses by nature as of 12.31.16 (recast)
11
 
77
 
13
 
-
 
101
 
 (1)  For the six-month period ended December 31, 2017, includes Ps. 15 of rental and service costs; Ps. 3 of costs for sales and developments of which Ps. 1 corresponds to investment properties and Ps. 2 to trading properties. For the six-month period ended December 31, 2016, includes Ps. 5 corresponds to rental and service costs; Ps. 6 to costs for sales and developments of which Ps. 5 corresponds to investment properties and Ps. 1 to trading properties.
 
17
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
19. 
Other operating results, net
 
12.31.17
 
12.31.16 (recast)
Gain from disposal of associates, subsidiaries and joint ventures
496
 
-
Tax on shareholders’ personal assets
2
 
(1)
Donations
(10)
 
(4)
Lawsuits and other contingencies (i)
(1)
 
(7)
Loss from TGLT agreement (ii)
-
 
(27)
Others
2
 
1
Total other operating results, net
489
 
(38)
 

  (i)   Includes legal costs and expenses .
  (ii) See Note 13 to Consolidated Financial Statements June 30, 2017.

 
 
20.
Financial results, net
 
 
12.31.17
 
12.31.16 (recast)
Finance income:
 
 
 
 - Interest income
7
 
19
 - Foreign exchange gain
5
 
25
Total finance income
12
 
44
Finance costs:
 
 
 
 - Foreign exchange loss
(626)
 
(231)
 - Interest expenses
(312)
 
(269)
 - Other finance costs
(10)
 
(19)
 - Costs from repayment of borrowings
-
 
2
Total finance costs
(948)
 
(517)
Other financial results:
 
 
 
 - Fair value gain of financial assets
14
 
1
 - Gain from derivative financial instruments, net
7
 
-
Total other financial results
21
 
1
Total financial results, net
(915)
 
(472)
 
 

21. 
Related party transactions
 
The following is a summary of the balances with related parties as of December 31, 2017 and June 30, 2017:
 
Item
 
12.31.17
 
06.30.17
Trade and other payables
 
(685)
 
(623)
Borrowings
 
(87)
 
(80)
Trade and other receivables
 
208
 
206
Total
 
(564)
 
(497)
 
 
 
18
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
Related parties
 
 
12.31.17
 
06.30.17
 
 Description of operation
Cresud
 
4
 
4
 
Leases and/or rights of use receivables
 
 
(20)
 
(8)
 
Corporate services payable
 
 
(8)
 
(12)
 
Reimbursement of expenses payable
Total parent company
 
(24)
 
(16)
 
 
IRSA CP
 
(610)
 
(542)
 
Sale of properties
 
 
(18)
 
(23)
 
Corporate services payable
 
 
(12)
 
(10)
 
Long-term incentive plan payable
 
 
(6)
 
(16)
 
Reimbursement of expenses payable
 
 
(1)
 
 -
 
Leases and/or rights of use payable
 
 
 -
 
1
 
Other receivables
 
 
 -
 
(1)
 
Lease collections
Palermo Invest S.A.
 
5
 
5
 
Borrowings granted
 
 
3
 
3
 
Dividends receivable
 
 
1
 
1
 
Other receivables
Inversora Bolívar S.A
 
(6)
 
(6)
 
Loans received
Tyrus
 
92
 
71
 
Borrowings granted
NFSA
 
11
 
7
 
Management fees
 
 
(37)
 
(34)
 
Loans received
Efanur S.A.
 
(11)
 
(10)
 
Loans received
Fibesa S.A.
 
12
 
14
 
Long-term incentive plan receivables
 
 
(2)
 
 -
 
Reimbursement of expenses payable
PAMSA
 
6
 
 -
 
Reimbursement of expenses receivable
 
 
1
 
1
 
Long-term incentive plan receivable
 
 
(27)
 
(24)
 
Non-Convertible Notes
Real Estate Strategies LLC
 
6
 
5
 
Borrowings granted
Manibil
 
47
 
84
 
Borrowings granted
Cyrsa
 
(6)
 
(6)
 
Loans received
Others subsidiaries, associates and joint ventures
 
11
 
3
 
Hotel services receivable
 
 
6
 
5
 
Reimbursement of expenses receivable
 
 
1
 
2
 
Long-term incentive plan receivable
 
 
(4)
 
(3)
 
Hotel services payable
 
 
(1)
 
(1)
 
Reimbursement of expenses payable
 
 
1
 
 -
 
Dividend receivables
Total subsidiaries, associates and joint ventures
 
(538)
 
(474)
 
 
Directors
 
(3)
 
(7)
 
Fees
Total Directors
 
(3)
 
(7)
 
 
Others
 
2
 
 -
 
Reimbursement of expenses receivable
 
 
(1)
 
 -
 
Reimbursement of expenses payable
Total others
 
1
 
 -
 
 
Total at the end of the period/year
 
(564)
 
(497)
 
 
 
The following is a summary of the transactions with related parties for the six-month periods ended December 31, 2017 and 2016:
Related parties
 
12.31.17
 
12.31.16 (recast)
 
 Description of operation

Cresud
 
1
 
1
 
Leases and/or rights of use
 
 
(32)
 
(22)
 
Corporate services
Total parent company
 
(31)
 
(21)
 
 
IRSA CP
 
(16)
 
(10)
 
Corporate services
 
 
(1)
 
(1)
 
Leases and/or rights of use
 
 
 -
 
(4)
 
Financial operations
BACS
 
 -
 
16
 
Financial operations
Tyrus
 
11
 
 -
 
Financial operations
Manibil
 
10
 
4
 
Financial operations
Others subsidiaries, associates and joint ventures
 
1
 
1
 
Fees
 
 
(5)
 
 -
 
Donations
 
 
 -
 
(5)
 
Financial operations
Total subsidiaries, associates and joint ventures
 
 -
 
1
 
 
Directors
 
(17)
 
(15)
 
Fees
Senior Managment
 
(3)
 
(1)
 
Fees
Total Directors and Senior Managment
 
(20)
 
(16)
 
 
Fundación IRSA
 
(6)
 
(4)
 
Donations
Estudio Zang, Bergel & Viñez
 
(2)
 
(2)
 
Fees
Others
 
1
 
 -
 
Leases and/or rights of use
Total others
 
(7)
 
(6)
 
 
Total at the end of the period
 
(58)
 
(42)
 
 
 
 
19
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
The following is a summary of the transactions with related parties for the six-month periods ended December 31, 2017 and 2016:
 
Related parties
 
12.31.17
 
12.31.16 (recast)
 
 Description of operation

IRSA CP
 
(586)
 
(434)
 
Dividends collected
ECLSA
 
(1)
 
 -
 
Dividends collected
Cyrsa
 
 -
 
(7)
 
Dividends collected
Cresud
 
882
 
 -
 
Dividends granted
Helmir
 
5
 
 -
 
Dividends granted
Otras
 
 -
 
(2)
 
Dividends collected
Total Distributions
 
300
 
(443)
 
 
Tyrus
 
1,272
 
911
 
Irrevocable contributions granted
Manibil
 
44
 
 -
 
Irrevocable contributions granted
Otras
 
 -
 
11
 
Irrevocable contributions granted
Total Contributions to Subsidiaries
 
1,316
 
922
 
 
 
22.   Foreign currency assets and liabilities
 
Book amounts of foreign currency assets and liabilities are as follows:
 
Item (3)
Amount (1)
Foreign exchange rate (2)
Total as of 12.31.17
Amount (1)
Foreign exchange rate (2)
Total as of 06.30.17

Assets
 
 
 
 
 
 
Trade and other receivables
 
 
 
 
 
 
US Dollar
11.67
18.55
217
6.94
16.53
115
Receivables with related parties
 
 
 
 
 
 
US Dollar
8.76
18.65
163
10.57
16.63
176
Total Trade and other receivables
 
 
380
 
 
291
Investments in financial assets
 
 
 
 
 
 
US Dollar
2.21
18.55
41
1.75
16.53
29
Total Investments in financial assets
 
 
41
 
 
29
Cash and cash equivalents
 
 
 
 
 
 
US Dollar
1.69
18.55
31
1.04
16.53
17
Euros
0.07
22.28
2
0.07
18.84
1
Total Cash and cash equivalents
 
 
33
 
 
18
Total Assets
 
 
454
 
 
338
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Trade and other payables
 
 
 
 
 
 
US Dollar
6.57
18.65
123
4.54
16.63
76
Payables with related parties
 
 
 
 
 
 
US Dollar
3.55
18.65
66
2.28
16.63
38
Total Trade and other payables
 
 
189
 
 
114
Borrowings
 
 
 
 
 
 
US Dollar
308.74
18.65
5,758
308.69
16.63
5,134
Borrowings with related parties
 
 
 
 
 
 
US Dollar
2.05
18.65
38
2.05
16.63
33
Total Borrowings
 
 
5,796
 
 
5,167
Total Liabilities
 
 
5,985
 
 
5,281
 
 
 
 
 
 
 
 
(1)
Considering foreign currencies those that differ from Group’s functional currency at each period / year.
(2)
Expressed in millions of foreign currency
(3)
Exchange rate as of December 31, 2017 and June 30, 2017 according to Banco Nación Argentina records.
 
 
 
20
IRSA Inversiones y Representaciones Sociedad Anónima
 
 

23. CNV General Resolution N° 622/13
 
As required by Section 1°, Chapter III, Title IV of CNV General Resolution N° 622/13, below is a detail of the notes to the Unaudited Condensed Interim Separate Financial Statements that disclose the information required by the Resolution in Exhibits.
 
Exhibit A - Property, plant and equipment
Note 7 Investment properties and Note 8 Property, plant and equipment
Exhibit B - Intangible assets
Note 10 Intangible assets
Exhibit C - Equity investments
Note 6 Information about the main subsidiaries, associates and joint ventures
Exhibit D - Other investments
Note 11 Financial instruments by category
Exhibit E - Provisions
Note 12 Trade and other receivables and Note 17 Provisions
Exhibit F - Cost of sales and services provided
Note 9 Trading properties and Note 19 Expenses by nature
Exhibit G - Foreign currency assets and liabilities
Note 22 Foreign currency assets and liabilities
 
24. CNV General Resolution N° 629/14 – Storage of documentation
 
On August 14, 2014, the CNV issued General Resolution N° 629 whereby it introduced amendments to rules related to storage and conservation of corporate books, accounting books and commercial documentation. In this sense, it should be noted that the Company has entrusted the storage of certain non-sensitive and old information to the following providers:
 
Storage of documentation responsible
 
Location
Iron Mountain Argentina S.A.
 
Av. Amancio Alcorta 2482, Autonomous City of Buenos Aires
 
Pedro de Mendoza 2143, Autonomous City of Buenos Aires
 
Saraza 6135, Autonomous City of Buenos Aires
 
Azara 1245, Autonomous City of Buenos Aires
 
Polígono industrial Spegazzini, Autopista Ezeiza Km 45, Cañuelas, Province of Buenos Aires
 
 
Cañada de Gómez 3825, Autonomous City of Buenos Aires
 
It is further noted that a detailed list of all documentation held in custody by providers, as well as documentation required in section 5 a.3) of Section I, Chapter V, Title II of the RULES (2013 as amended) are available at the registered office.
 
On February 5, 2014 there was a widely known fire in Iron Mountain’s warehouse. Such company is a supplier of the Company and Company’s documentation was being kept in the mentioned warehouse. Based on the internal review carried out by the Company, duly reported to the CNV on February 12, 2014, the information kept at the Iron Mountain premises that were on fire do not appear to be sensitive or capable of affecting normal operations.
 
 
25. Subsequent events
 
See subsequent events in Note 29 to Unaudited Condensed Interim Consolidated Financial Statements.
 
21
IRSA Inversiones y Representaciones Sociedad Anónima
 
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of December 31, 2017
Stated in millions
Free translation from the original prepared in Spanish for publication in Argentina
 

1. Specific and significant systems that imply contingent lapsing or rebirth of benefits envisaged by such provisions.
 
None.
 
2.     Significant changes in the Company´s activities or other similar circumstances that occurred during the fiscal years included in the financial statements, which affect their comparison with financial statements filed in previous fiscal years, or that could affect those to be filed in future fiscal years.
 
See Note 2.3.
 
3.     Receivables and liabilities by maturity date
 
Items
Past due
Without term
Without term
To be due
Total
12.31.17
Current
Non-current
Up to 3 months
From 3 to 6 months
From 6 to 9 months
From 9 to 12 months
From 1 to 2 years
From 2 to 3 years
From 3 to 4 years
From 4 years on

Accounts receivables
Trade and other receivables
85
334
101
49
103
5
12
190
10
-
7
896
 
Total
85
334
101
49
103
5
12
190
10
-
7
896
Liabilities
Trade and other payables
15
-
-
108
3
-
17
1
881
-
1
1,026
 
Borrowings
-
-
-
205
228
55
55
4,030
1,548
219
42
6,382
 
Salaries and social security liabilities
-
1
-
-
-
-
-
-
-
-
-
1
 
Provisions
-
1
35
-
-
-
-
-
-
-
-
36
 
Total
15
2
35
313
231
55
72
4,031
2,429
219
43
7,445
 
 
 
22
IRSA Inversiones y Representaciones Sociedad Anónima
 
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of December 31, 2017
Stated in millions
Free translation from the original prepared in Spanish for publication in Argentina
 

4.a.     Breakdown of accounts receivable and liabilities by maturity and currency.
 
Items
 
Current
Non-current
Totals
Local currency
Foreign currency
Total
Local currency
Foreign currency
Total
Local currency
Foreign currency
Total

Accounts receivables
Trade and other receivables
276
312
588
240
68
308
516
380
896
 
Total
276
312
588
240
68
308
516
380
896
Liabilities
Trade and other payables
109
34
143
728
155
883
837
189
1,026
 
Borrowings
225
318
543
361
5,478
5,839
586
5,796
6,382
 
Salaries and social security liabilities
1
-
1
-
-
-
1
-
1
 
Provisions
1
-
1
35
-
35
36
-
36
 
Total
336
352
688
1,124
5,633
6,757
1,460
5,985
7,445
 

4.b     Breakdown of accounts receivable and liabilities by adjustment clause.
 
On December 31, 2017 there are no receivables and liabilities subject to adjustment clause.
 

4.c     Breakdown of accounts receivable and liabilities by interest clause
 
Items
Current
Non-current
Accruing interest
Non-Accruinginterest
Total
Accruing interest
Non-accruing interest (*)
Total
Accruing interest
Non-accruing interest (*)
Total
Fixed rate
Floating rate
Fixed rate
Floating rate
Fixed rate
Floating rate
Accounts receivables
Trade and other receivables
38
102
448
588
66
-
242
308
104
102
690
896
 
Total
38
102
448
588
66
-
242
308
104
102
690
896
Liabilities
Trade and other payables
-
-
143
143
2
-
881
883
2
-
1,024
1,026
 
Borrowings
356
76
111
543
5,450
385
4
5,839
5,806
461
115
6,382
 
Salaries and social security liabilities
-
-
1
1
-
-
-
-
-
-
1
1
 
Provisions
-
-
1
1
-
-
35
35
-
-
36
36
 
Total
356
76
256
688
5,452
385
920
6,757
5,808
461
1,176
7,445
 
(*) Includes as of 12.31.2017 the balance of the interest payable corresponding to the loans.
 
 
23
IRSA Inversiones y Representaciones Sociedad Anónima
 
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of December 31, 2017
Stated in millions
Free translation from the original prepared in Spanish for publication in Argentina
 

5.     Related parties.
 
a: Interest in related parties:
Name of the entity
% of ownership interest held by the Group
Direct Controlling interest of IRSA:
 
IRSA CP
86.29%
Ecommerce Latina S.A.
96.74%
Efanur S.A.
100.00%
Hoteles Argentinos S.A.
80.00%
Inversora Bolívar S.A.
95.13%
Llao Llao Resorts S.A.
50.00%
Nuevas Fronteras S.A.
76.34%
Palermo Invest S.A.
97.00%
Ritelco S.A.
100.00%
Tyrus S.A.
100.00%

b:  Related parties debit/credit balances. See Note 21 to the Unaudited Condensed Interim Separate Financial Statements.
 
6.     Loans to Directors.
 
See Note 21 to the Unaudited Condensed Interim Separate Financial Statements.
 
7.     Physical inventory.
 
In view of the nature of the inventories, no physical inventories are performed and there are no slow turnover assets.
 
8.     Current values.
 
See Notes 7, 8 and 10 to the Unaudited Condensed Interim Separate Financial Statements.
 
9.     Appraisal revaluation of property, plant and equipment .
 
None.
 
10.     Obsolete unused property, plant and equipment
 
None.
 

11.     Equity interest in other companies in excess of that permitted by section 31 of law N° 19,550.
  
None.
 
12.     Recovery values .
 
See Notes 6, 7, 8 and 10 to the Unaudited Condensed Interim Separate Financial Statements.
 
 
 
 
24
IRSA Inversiones y Representaciones Sociedad Anónima
 
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of December 31, 2017
Stated in millions of Argentine pesos
Free translation from the original prepared in Spanish for publication in Argentina

13.     Insurances.
 
Insured Assets.
 
Real Estate
Insured
amounts (1)
 
Accounting values
Risk covered
Bouchard 551
2
61
All operational risk with additional coverage and minor risks
Maipú 1300
2
26
All operational risk with additional coverage and minor risks
Libertador 498
3
105
All operational risk with additional coverage and minor risks
Santa María del Plata
0.053
4,006
All operational risk with additional coverage and minor risks
Casona Abril
4
5
All operational risk with additional coverage and minor risks
Catalinas Norte plot of land
2
769
All operational risk with additional coverage and minor risks
Subtotal
13
4,972
 
Single policy
15,000
 
Third party liability
 
(1)
The insured amounts are in US Dollars.
 
In our opinion, the above-described insurance policies cover current risks adequately.
 

14.     Allowances and provisions that, taken individually or as a whole, exceed 2% of the shareholder´s equity .
 
None.
 
15.     Contingent situations at the date of the financial statements which probabilities are not remote and the effects on the Company´s financial position have not been recognized.
 
Not applicable.
 

16.     Status of the proceedings leading to the capitalization of irrevocable contributions towards future subscriptions.
                                         
Not applicable.
 

17.     Unpaid accumulated dividends on preferred shares.
 
None.
 
18.     Restrictions on distributions of profits.
 
According to the Argentine law, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution.
 
In addition, according to CNV General Resolution N° 609/12, a special reserve was constituted which could not be released to make distributions in cash or in kind. See Note 17 to the Consolidated Financial Statements at June 30, 2017.
 
IRSA NCN due 2019 and 2020 both contain certain customary covenants and restrictions, including amount others, limitations for the incurrence of additional indebtedness, restricted payments, disposal of assets, and entering into certain transactions with related companies. Restricted payments include restrictions on the payment of dividends.
 
Autonomous City of Buenos Aires February 8, 2018.
 
25
 
Free translation from the original prepared in Spanish for publication in Argentina
 
REVIEW REPORT ON THE UNAUDITED CONDENSED
INTERIM SEPARATE FINANCIAL STATEMENTS
 
To the Shareholders, President and Directors of
IRSA Inversiones y Representaciones Sociedad Anónima
Legal address: Bolivar 108 – 1° floor
Autonomous City Buenos Aires
Tax Code No. 30-52532274-9
 
 
Introduction
 
We have reviewed the unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima (hereinafter “the Company”) which included the unaudited condensed interim separate statement of financial position as of December 31, 2017, and the unaudited condensed interim separate statements of income and other comprehensive income for the six-month period and three-month period ended December 31, 2017, the unaudited condensed interim separate statements of changes in shareholders’ equity and the unaudited condensed interim separate statements of cash flows for the six-month period then ended and selected explanatory notes.
 
The balances and other information corresponding to the fiscal year ended June 30, 2017 and the interim periods within that fiscal year are an integral part of these financial statements and, therefore, they should be considered in relation to those financial statements.
 
 
Management responsibility
 
The Board of Directors of the Company is responsible for the preparation and presentation of these unaudited condensed interim separate financial statements in accordance with the International Financial Reporting Standards (IFRS), adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) as professional accounting standards and added by the National Securities Commission (CNV) to its regulations, as approved by the International Accounting Standard Board (IASB) and, for this reason, is responsible for the preparation and presentation of the unaudited condensed interim separate financial statements above mentioned in the first paragraph according to the International Accounting Standard No 34 "Interim Financial Reporting" (IAS 34).
 
 
Free translation from the original prepared in Spanish for publication in Argentina
 
REVIEW REPORT ON THE UNAUDITED CONDENSED
INTERIM SEPARATE FINANCIAL STATEMENTS (Continued)
 
 
Scope of our review
 
Our review was limited to the application of the procedures established in the International Standard on Review Engagements ISRE 2410 "Review of interim financial information performed by the independent auditor of the entity", which was adopted as a review standard in Argentina in Technical Resolution No. 33 of the FACPCE, without modification as approved by the International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists of making inquiries of persons responsible for the preparation of the information included in the unaudited condensed interim separate financial statements, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the separate statement of financial position, the separate statement of income and other comprehensive income and the separate statement of cash flows of the Company.
 
 
Conclusion
 
Nothing came to our attention as a result of our review that caused us to believe that these unaudited condensed interim separate financial statements above mentioned in the first paragraph of this report have not been prepared in all material respects in accordance with International Accounting Standard 34.
 
 
Report on compliance with current regulations
 
In accordance with current regulations, we report about IRSA Inversiones y Representaciones Sociedad Anónima that:
 
 
a)
the unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima are being processed for recording in the "Inventory and Balance Sheet Book", and comply, as regards those matters that are within our competence, with the provisions set forth in the Commercial Companies Law and in the corresponding resolutions of the National Securities Commission;
 
b)
the unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima arise from accounting records carried in all formal respects in accordance with applicable legal provisions;
 
 
Free translation from the original prepared in Spanish for publication in Argentina
 
 
REVIEW REPORT ON THE UNAUDITED CONDENSED
INTERIM SEPARATE FINANCIAL STATEMENTS (Continued)
 
 
c)
we have read the additional information to the notes to the unaudited condensed interim separate statements required by section 12 of Chapter III Title IV of the text of the National Securities Commission, on which, as regards those matters that are within our competence, we have no observations to make;
 
d)
at December 31, 2017, the debt of IRSA Inversiones y Representaciones Sociedad Anónima owed in favor of the Argentina Integrated Pension System which arises from accounting records amounted to Ps. 105,647.22, which was not claimable at that date.
 
 
 
Autonomous City of Buenos Aires, February 8, 2018.
 
 
 
 
 
 
 
 
PRICE WATERHOUSE & CO. S.R.L.
 
 
                                                (Partner)
C.P.C.E.C.A.B.A. Tº 1 Fº 17
Dr. Mariano C. Tomatis
Public Accountant (UBA)
C.P.C.E.C.A.B.A. Tº 241 Fº 118
 
 
ABELOVICH, POLANO & ASOCIADOS S.R.L.
 
 
                                                (Partner)
C.P.C.E. C.A.B.A. T° 1 F° 30
Marcelo Héctor Fuxman
Public Accountant (UBA)
C.P.C.E.C.A.B.A. T° 134 F° 85
 
 
 
 
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
 
I. Brief comment on the Company’s activities during the period, including references to significant events occurred after the end of the period.
 
Argentine Tax reform: Main impacts
 
On December 27, 2017, the Argentine Congress approved the Tax Reform, through Law No. 27,430, which was enacted on December 29, 2017, and has introduced many changes to the income tax treatment applicable to financial income. The key components of the Tax Reform are as follows:
 
Income tax : Corporate income tax gradually would be reduced to 30% for fiscal periods commencing after January 1st, 2018 through December 31, 2019, and to 25% for fiscal periods commencing after January 1st, 2020, inclusive.
 
Dividends : Tax on dividends distributed by Argentine companies would be as follows: (i) dividends originated from profits obtained before fiscal year ending June 30, 2018 will not be subject to withholding tax; (ii) dividends derived from profits generated during fiscal years ending June 30, 2019 and 2020 paid to Argentine Individuals and/or foreign residents, will be subject to a 7% withholding tax; and (iii) dividends originated from profits obtained during fiscal year ending June 30, 2021 onward will be subject to withholding tax at a rate of 13%.
 
Presumptions of dividends : Certain facts will be presumed to constitute dividend payments, such as: i) withdrawals from shareholders, ii) shareholders private use of property of the company, iii) transactions with shareholders at values different from market values, iv) personal expenses from shareholders or shareholder remuneration without substance.
 
Revaluation of assets : The regulation establishes that, at the option of the companies, tax revaluation of assets is permitted for assets located in Argentina and affected to the generation of taxable profits. The special tax on the amount of the revaluation depends on the asset, being (i) 8% for real estate not classified as inventories, (ii) 15% for real estate classified as inventories, (iii) 5% for shares, quotas and equity interests owned by individuals and (iv) 10% for the rest of the assets. As of the date of these financial statements, the Group has not exercised the option. The gain generated by the revaluation is exempted according to article 291 of Law No. 27,430 and, the additional tax generated by the revaluation is not deductible.
 
In addition, the Argentine tax reform contemplates other amendments regarding the following matters: social security contributions, tax administrative procedures law, criminal tax law, tax on liquid fuels, and excise taxes, among others. At the date of presentation of these financial statements, many aspects are pending regulation by the National Executive Power.
 
USA Tax reform: Main impacts
 
In December 2017, a bill was passed to reform the federal taxation law in the United States. The reform included a reduction of the corporate tax rate from 35% to 21%, for the tax years 2018 and thereafter.
 
1
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
Consolidated Results
 
In Ps. Million
IITQ 18
IIQ 17
YoY Var
6M 18
6M 17
YoY Var
Revenues
22,827
19,044
19.9%
43,040
36,831
16.9%
Net gain from fair value adjustment of investment properties
8,098
2,074
290.5%
11,502
3,470
231.5%
Profit from operations
10,599
3,415
210.4%
15,957
6,182
158.1%
Depreciation and amortization
1,390
1,261
10.2%
2,627
2,374
10.7%
EBITDA
11,989
4,677
156.3%
18,584
8,557
117.2%
Adjusted EBITDA
3,951
2,689
46.9%
7,166
5,191
38.0%
Profit for the period
10,757
6,472
66.2%
10,831
6,816
58.9%
Attributable to equity holders of the parent
8,365
3,635
130.1%
8,918
3,835
132.5%
Attributable to non-controlling interest
2,392
2,837
-15.7%
1,913
2,981
-35.8%
 
 
Consolidated revenues from sales, leases and services increased by 16 . 9% during the first semester of FY2018 compared to the same semester of FY2017, whereas adjusted EBITDA, which excludes the effect of the net gain from fair value adjustment not realized of investment properties, reached Ps. 7,166 million, 38.0% higher than in the same period of 2017.
 
 
 
Profit for the first semester of fiscal year 2018 reached Ps. 10 , 831 million, mainly explained by a higher net gain from fair value adjustment on investment properties due to the positive impact of tax reform driven by the Government, mainly in the value of shopping malls valued through the discounted cash flow method, and the changes in the exchange rate of our assets denominated in U.S. dollars. This effect was partially offset by a non-monetary effect in the operations center in Israel in September 2017, Discount Corporation (“DIC”), subsidiary of IDB Development Corporation (“IDBD”) made a partial debt exchange, recognizing a loss equal to the difference between the repayment of the existing loan and the fair value of the new debt for an approximate amount of NIS 461 million (equivalent to Ps. 2,228 million) recorded under “Financial Results” as financial costs.
 
Operations Center in Argentina
 
II. Shopping Malls (through our subsidiary IRSA Propiedades Comerciales S.A.)
 
During the first six months of fiscal year 2018, our tenants’ sales reached Ps. 21,801 million , 22.6% higher than in the same period of 2017. Our portfolio’s leasable area totaled 340,111 square meters during the quarter under review, whereas the occupancy rate stood at optimum levels of 99.1%, reflecting the quality of our portfolio.
 
Shopping Malls’ Financial Indicators
(in Ps. million)
 
 
IITQ 18
IIQ 17
YoY Var
6M 18
6M 17
YoY Var
Revenues from sales, leases and services
960
812
18.2%
1,810
1,494
21.2%
Net gain from fair value adjustment of investment properties
6,997
812
761.7%
9,041
1,698
432.4%
Profit from operations
7,725
1,412
447.1%
10,410
2,806
271.0%
Depreciation and amortization
6
8
-25.0%
12
13
-7.7%
EBITDA
7,731
1,420
444.4%
10,422
2,820
269.6%
Adjusted EBITDA
734
608
20.7%
1,381
1,121
23.1%
 
 
2
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
Shopping Malls’ Operating Indicators
(in Ps. million, except as indicated)
 
 
IIQ 18
IQ 18
IVQ 17
IIIQ 17
IIQ 17
Total leasable area (sqm)
340,111
339,080
341,289
341,391
337,396
Tenants’ sales (3 month cumulative)
12,031.0
9,777.7
9,306.4
7,331.7
9,804.1
Occupancy
99.1%
98.8%
98.6%
98.0%
98.4%
 
Revenues from this segment grew 21.2% during this six-month period, whereas adjusted EBITDA, which excludes the impact of changes in the fair value of investment properties, reached Ps. 1,381 million (+ 23.1% compared to the same period of 2017). The EBITDA margin was 76.4%, 1.1 pp higher than the figure recorded in the same semester of the previous fiscal year.
 
Operating data of our Shopping Malls
 
Shopping Mall
Date of Acquisition
Gross Leasable Area (sqm) (1)
Stores
IRSA Propiedades Comerciales S.A.’s Interest
Occupancy (2)
Alto Palermo
Dec-97
18,633
138
100.0%
98.7%
Abasto Shopping (3)
Nov-99
36,795
171
100.0%
100.0%
Alto Avellaneda
Dec-97
36,039
134
100.0%
99.9%
Alcorta Shopping
Jun-97
15,721
114
100.0%
99.4%
Patio Bullrich
Oct-98
11,503
92
100.0%
99.4%
Buenos Aires Design
Nov-97
13,735
61
53.7%
100.0%
Dot Baires Shopping
May-09
49,407
156
80.0%
99.9%
Soleil
Jul-10
15,214
79
100.0%
100.0%
Distrito Arcos
Dec-14
14,325
69
90.0%
100.0%
Alto Noa Shopping
Mar-95
19,059
90
100.0%
99.4%
Alto Rosario Shopping (4)
Nov-04
31,507
149
100.0%
99.7%
Mendoza Plaza Shopping
Dec-94
42,867
141
100.0%
96.7%
Córdoba Shopping
Dec-06
15,317
106
100.0%
98.6%
La Ribera Shopping (5)
Aug-11
10,530
68
50.0%
96.1%
Alto Comahue
Mar-15
9,459
100
99.1%
97.1%
Patio Olmos (6)
Sep-07
 
 
 
 
Total
 
340,111
1,668
 
99.1%
 
(1) Corresponds to gross leasable area in each property. Excludes common areas and parking spaces.
(2) Calculated dividing occupied square meters by leasable area as of the last day of the period.
(3) Excludes Museo de los Niños (3,732 square meters).
(4) Excludes Museo de los Niños (1,261 square meters).
(5) Through our joint venture Nuevo Puerto Santa Fe S.A.
(6) IRSA CP owns the historic building of the Patio Olmos shopping mall in the province of Córdoba, operated by a third party.
 
 
 
3
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
Cumulative tenants’ sales as of December 31
(per Shopping Mall, for the quarter of each fiscal year, in Ps. million)
 
Shopping mall
IIQ 18
IIQ 17
YoY Var
6M 18
6M 17
YoY Var
Alto Palermo
1,446.9
1,234.6
17.2%
2,576.7
2,208.0
16.7%
Abasto Shopping
1,573.7
1,322.7
19.0%
2,891.1
2,424.0
19.3%
Alto Avellaneda
1,521.4
1,236.5
23.0%
2,726.8
2,245.0
21.5%
Alcorta Shopping
813.3
682.3
19.2%
1,417.9
1,181.4
20.0%
Patio Bullrich
447.3
376.6
18.8%
782.9
657.1
19.1%
Buenos Aires Design
172.4
139.3
23.8%
342.7
269.7
27.1%
Dot Baires Shopping
1,366.9
1,116.4
22.4%
2,386.1
1,959.2
21.8%
Soleil
610.5
453.1
34.7%
1,141.7
853.2
33.8%
Distrito Arcos
527.5
420.0
25.6%
967.1
739.5
30.8%
Alto Noa Shopping
522.9
424.7
23.1%
968.1
797.0
21.5%
Alto Rosario Shopping
1,089.4
885.2
23.1%
2,008.6
1,626.0
23.5%
Mendoza Plaza Shopping
894.2
706.9
26.5%
1,690.7
1,354.6
24.8%
Córdoba Shopping
415.0
337.6
22.9%
736.3
607.2
21.3%
La Ribera Shopping (1)
274.1
198.4
38.2%
520.1
379.2
37.2%
Alto Comahue
355.5
269.7
31.8%
644.0
486.2
32.5%
Total
12,031.0
9,804.0
22.7%
21,800.8
17,787.3
22.6%
 
(1) Through our joint venture Nuevo Puerto Santa Fe S.A.
 
 
Cumulative tenants’ sales as of December 31
(per Type of Business, in Ps. million)
 
Type of Business
IIQ 18
IIQ 17
YoY Var
6M 18
6M 17
YoY Var
Anchor Store
696.9
527.7
32.1%
 1,237.5
945.2
30.9%
Clothes and Footwear
6,701.5
5,586.8
19.4%
 11,687.2
9,732.0
20.1%
Entertainment
236.0
201.5
17.1%
 651.7
545.5
19.5%
Home
311.7
252.1
23.6%
 590.4
471.5
25.2%
Restaurant
1,126.7
871.4
29.3%
 2,329.8
1,771.8
31.5%
Miscellaneous
1,465.5
1,208.5
21.3%
 2,572.0
2,122.0
21.2%
Services
110.5
53.4
106.9%
 213.0
108.2
96.9%
Electronic appliances
1,382.2
1,102.6
25.4%
 2,519.2
2,091.1
20.5%
Total
12,031.0
9,804.0
22.7%
21,800.8
17,787.3
22.6%
 
Revenues from cumulative leases as of December 31
(Breakdown per quarter of each fiscal year, in Ps. million)
 
 
IIQ 18
IIQ 17
YoY Var
6M 18
6M 17
YoY Var
Base rent (1)
503.6
411.0
22.5%
973.9
785.8
23.9%
Percentage rent
247.6
232.4
6.5%
418.5
382.7
9.4%
Total rent
751.2
643.4
16.8%
1,392.4
1,168.5
19.2%
Revenues from non-traditional advertising
27.5
16.2
69.7%
44.3
32.3
37.2%
Admission rights
77.2
63.7
21.1%
150.5
125.6
19.8%
Fees
14.6
11.9
23.2%
28.3
22.6
25.1%
Parking
59.0
48.9
20.5%
119.0
95.0
25.3%
Commissions
27.3
23.7
15.2%
69.3
45.0
54.0%
Others
3.1
4.1
-24.2%
5.8
6.3
-8.7%
Revenues from sales, leases and services
959.9
812.0
18.2%
1,809.5
1,495.3
21.0%
 
(1)
Includes Revenues from stands for Ps. 101.6 million.
 
 
 
4
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 

III. Offices
 
 
The A+ office market in the City of Buenos Aires remains robust. The price of Premium commercial spaces stood at USD 4,600 per square meter. Rental prices remained at the same levels as in the previous year, averaging USD 30 per square meter for the A+ segment, and vacancy continues to fall, reaching 3.30% as of December 2017.
 
As concerns the A+ office market in the Northern Area, we have noted a significant improvement in the price of units during the last 10 years, and we believe in its potential during the next years. Rental prices have remained at USD 27 per square meter.
 
Sale and Rental Prices of A+ Offices – City of Buenos Aires
 
                                                                                                    Source: LJ Ramos
 
Sale and Rental Prices of A+ Offices – Northern Area
                                                                                                    Source: LJ Ramos
 
 
5
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
During the first six months of fiscal year 2018, revenues from the offices segment increased 15.7% as compared to the same period of 2017, whereas Adjusted EBITDA from this segment reached Ps. 211 million, 1.4% lower than in the previous year, mainly due to   the realized gain registered in IIQ 17 for the additional purchase of 30% of Entertainment Holdings S.A. whose share, passing to be a controlled company, was revalued at fair value.
 Rental prices in USD per sqm increased, reaching USD 26.9 per sqm.
 
The EBITDA margin from the offices segment reached 84%.
 
 
IIQ 18
IIQ 17
YoY Var
6M 18
6M 17
YoY Var
Revenues
129
116
11.2%
251
217
15.7%
Net gain from fair value adjustment of investment properties
605
1,358
-55.4%
885
1,505
-41.2%
Profit from operations
709
1,489
-52.4%
1,093
1,713
-36.2%
Depreciation and Amortization
3
6
-50.0%
3
6
-50.0%
EBITDA
712
1,495
-52.4%
1,096
1,719
-36.2%
Adjusted EBITDA
107
137
-21.9%
211
214
-1.4%
 
 
 
IIQ 18
IQ 18
IVQ 17
IIIQ 17
IIQ 17
Gross leasable area
85,378
85,378
85,784
86,682
87,232
Occupancy
93.2%
96.2%
96.2%
97.9%
100.0%
Rent (ARS/sqm)
505
464
436
409
414
Rent (USD/sqm)
26.9
26.8
26.2
26.2
26.1
 
Below is information on our offices and other rental properties’ segment as of December 31, 2017.
 
 
Date of Acquisition
Leasable Area sqm (1)
Occupancy Rate (2)
 
IRSA’s Effective Interest
Offices
 
 
 
 
Edificio República (3)
04/28/08
19,885
94%
100%
Torre Bankboston (3)
08/27/07
14,873
86%
100%
Intercontinental Plaza (3)
11/18/97
3,876
100%
100%
Bouchard 710 (3)
06/01/05
15,014
100%
100%
Maipú 1300 (4)
09/28/95
397
-
100%
Libertador 498
12/20/95
620
100%
100%
Suipacha 652/64 (3)
11/22/91
11,465
86%
100%
Dot Building (3)(7)
11/28/06
11,242
100%
80%
Philips (3) (7)
06/05/17
8,006
24%
100%
Subtotal Offices
 
85,378
93.2%
 
Other Properties
 
 
 
 
Santa María del Plata S.A.
17/10/97
116,100
91%
100%
Ex – Nobleza Piccardo (5)
05/31/11
109,610
89%
50%
Other Properties (6)
 
22,654
67%
 
Subtotal Other Properties
 
248,364
88%
 
TOTAL OFFICES AND OTHERS
 
333,743
90%
 
(1) 
Total leasable area for each property as of December 31, 2017. Excludes common areas and parking.
(2) 
Calculated dividing occupied sqm by leasable area as of December 31, 2017.
(3) 
Through IRSA Propiedades Comerciales S.A.
(4) 
As of December 31, 2017, a sale ticket with possession for the remaining meters of the Maipú 1300 building has been signed. The title deed of the building has not yet been signed.
(5) 
Through Quality Invest S.A.
(6) 
Includes the following properties: Dot adjacent plot, Intercontinental plot, Anchorena 665, Chanta IV, Ferro, Puerto Retiro, Abril Manor House, Constitución 1111 and Rivadavia 2774.
(7) As of December 31, 2017, 24% of the sqm of the Philips Building had been taken over, which were included in the calculation of the average occupation of IIT 17.
 
 
6
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
IV. Sales and Developments
 
 
IQ 18
IVQ 17
IIIQ 17
IIQ 17
IQ 17
IQ 18
Revenues from sales, leases and services
20
0
100.0%
54
1
5,300.0%
Net gain from fair value adjustment of investment properties
353
-195
-281.0%
550
-158
-448.1%
Profit from operations
342
-245
-239.6%
523
-229
-328.4%
Depreciation and amortization
0
0
0.0%
0
0
0.00%
EBITDA
342
-245
-239.6%
523
-229
-328.4%
Adjusted EBITDA
-11
-50
-78.0%
-27
-71
-62.0%
 
For the six months’ period of fiscal year 2018, adjusted EBITDA from the Sales and Developments segment was a loss of Ps. 27 million as compared to a loss of Ps. 71 million during the first semester of 2017, due to the sale of apartment units and parking spaces in Astor Beruti, a floor and parking spaces from the building Maipú 1300 and the sale of the Baicom plot.
 
V. CAPEX 2018
 
 
Alto Palermo Expansion
The expansion project of Alto Palermo shopping mall will add a gross leasable area of approximately 4,000 square meters to the shopping mall with the highest sales per square meter in our portfolio and it consists in moving the food court to a third level by using the area of an adjacent building acquired in 2015. Demolition was completed in FY2017, and the expansion works are estimated to start during this fiscal year 2018.
 
First Stage of Polo Dot
The project called “Polo Dot”, located in the commercial complex adjacent to our Dot Baires shopping mall, has experienced significant growth since our first investments in the area. The total project will consist in 3 office buildings (one of them could include a hotel) in land reserves owned by the Company and the expansion of the shopping mall by approximately 15,000 square meters of gross leasable area. At a first stage, we will develop an 11-floor office building with an area of approximately 32,000 square meters on an existing building, in respect of which we have already executed lease agreements for almost all the footage. As of December 31, 2017, degree of progress was 44%. The second stage of the project will include two office/hotel buildings that will add 38,400 square meters of gross leasable area to the complex. We have seen a significant demand for Premium office spaces in this new commercial hotspot, and we are confident that we will be able to open these buildings with attractive rent levels and high occupancy.
 
 
7
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 

Catalinas Building
The building to be constructed will have 35,000 square meters of gross leasable area consisting of 30 office floors and 316 parking spaces, and will be located in the “Catalinas” area in the City of Buenos Aires, one of the most sought-after spots for Premium office development in Argentina. The Company owns 16,000 square meters consisting of 14 floors and 142 parking spaces in the building project. Construction works started during the second quarter of FY2017, and are expected to be completed in about 3 years. As of December 31, 2017, work progress was 8.6%.
 
Other Projects
We will build 2,200 sqm to add 6 cinema screens in Alto Comahue, a large store of 2,400 sqm in Alto Rosario shopping mall, 12,800 sqm mainly in a Sodimac store in Mendoza Plaza Shopping, and we will expand by 3,000 sqm Alto Avellaneda, our shopping mall located in the southern region of Buenos Aires. In addition, we will continue working on optimizing the performance of our current properties through improvements that allow us to take best advantage of their GLA potential and to furnish them with increased functionality and appeal for the benefit of consumers and tenants alike.
 
 
VI.             
Hotels
 
 
For the first six months of fiscal year 2018, revenues from the hotel segment grew 28.2%, mainly due to the increase in the average rate per room and a 3.1% rise in the occupancy rate, which reached 71.5% in IIQ18. However, this segment’s EBITDA totaled Ps. 29 million during the semester under review.
 
Hotels (in millions of ARS)
IITQ 18
IIQ 17
YoY Var
6M 18
6M 17
YoY Var
Revenues
264
200
32.0%
478
373
28.2%
(Loss) / profit from operations
24
23
4.3%
22
27
-18.5%
Depreciation and amortization
3
3
0.0%
7
7
0.0%
EBITDA
27
26
3.8%
29
33
-14.7%
 
 
 
IIQ 18
IQ 18
IVQ 17
IIIQ 17
IIQ 17
Average Occupancy
71.5%
68.4%
67.3%
69.6%
69.1%
Average Rate per Room (ARS/night)
3,420
3,290
2,803
2,873
2,784
Average Rate per Room (USD/night)
195
190
181
186
182
 
The following is information on our hotel segment as of December 31, 2017:
 
Hotels
Date of
Acquisition
IRSA’s
Interest
Number
of Rooms
Average
Occupancy (1)
Average
 Rate (2)
Intercontinental (3)
11/01/97
76.34%
309
74.6%
2,538
Sheraton Libertador (4)
03/01/98
80.00%
200
81.1%
2,416
Llao Llao (5)
06/01/97
50.00%
205
57.6%
6,520
Total
-
 
714
71.5%
3,420
1) Cumulative average for the 6-months period.
2) Cumulative average for the 6-months period.
3) Through Nuevas Fronteras S.A. (IRSA’s subsidiary).
4) Through Hoteles Argentinos S.A. (IRSA’s subsidiary).
5) Through Llao Llao Resorts S.A. (IRSA’s subsidiary).
 
 
 
8
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
VII.             
International
 
Lipstick Building, New York, United States
 
The Lipstick Building is a landmark building in the City of New York, located at Third Avenue and 53 th Street in Midtown Manhattan, New York. It was designed by architects John Burgee and Philip Johnson (Glass House and Seagram Building, among other renowned works) and it is named after its elliptical shape and red façade. Its gross leasable area is approximately 57,500 sqm and consists of 34 floors.
 
As of December 31, 2017, the building reached an occupancy rate of 94.7%, thus generating an average rent of USD 71.6 per sqm.
 
 
Lipstick
Dec-17
Dec-16
YoY Var
Gross Leasable Area (sqm)
58,092
58,092
0.0%
Occupancy
94.7%
96.6%
-1.93
Rental price (USD/sqm)
71.6
68.9
3.9%
 
 
Investment in Condor Hospitality Inc.
 
We maintain our 28.2% investment in the Condor Hospitality Trust hotel REIT’s voting rights (NASDAQ: CDOR) through our subsidiary Real Estate Strategies L.P. (“RES”), in which we hold a 66.83% interest. Condor is a REIT listed in Nasdaq focused on medium-class and long-stay hotels located in various states of the United States of America, operated by various operators and franchises.
 
During the semester under review, the company’s results have shown an improvement in operating levels and it has continued with its strategy of selectively disposing of lower-class hotels at very attractive prices and replacing them with higher-class hotels.
 
 
VIII. Financial Operations , Corporate and Others
 
 
Interest in Banco Hipotecario S.A. (“BHSA”) through IRSA
 
BHSA is a leading bank in the mortgage lending industry, in which IRSA held an equity interest of 29.91% as of December 31, 2017 (excluding treasury shares). During the first six months of fiscal year 2018, the investment in Banco Hipotecario generated income of Ps. 410.0 million, compared to income of Ps. 38 million in the same period of 2017, mainly due to the increase in the present value of the bank’s financial assets. For further information, visit http://www.cnv.gob.ar or http://www.hipotecario.com.ar .
 
 
9
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
Operations Center in Israel
 
IX. Investment in IDB Development Corporation
 
 
As of December 31, 2017, IRSA’s indirect equity interest reached 100% of IDBD’s stock capital.
 
 
Below is comparative segment information on our operations center in Israel for the period from July 1 to September 30 of both fiscal years.
 
 
 
 
Real Estate (Property & Building - PBC) - Ps. MM
IIQ 18
IIQ 17
YoY Var
6M 18
6M 17
Var a/a
Revenues
1,506
1,443
4.4%
2,503
2,492
0.4%
Net gain from fair value adjustment of investment properties
228
637
-64.3%
1,150
973
18.2%
Profit from operations
1,118
1,194
-6.4%
2,700
2,086
29.4%
Depreciation and amortization
5
5
0.0%
14
12
16.7%
EBITDA
1,123
1,199
-6.3%
2,714
2,098
29.4%
Adjusted EBITDA
895
562
59.3%
1,564
1,125
39.0%
 
 
It should be clarified that the Argentine peso suffered a 21% devaluation on the one year period that started on September 2016. The Real Estate segment recorded a decrease in its revenues in the first half of fiscal year 2018 compared with the same semester of 2017 (taking into account the devaluation) mainly due to less availability of apartments available for sale offset by an increase in rents of projects completed in 2017 and an increase in the value of rents. Adjusted EBITDA for the first semester of 2018 reached Ps. 1,624 million, increasing 42.0% with respect to the same semester of 2017.
 
 
Supermarkets (Shufersal) - $ MM
IIQ 18
IIQ 17
YoY Var
Var a/a
6M 18
6M 17
Revenues
14,672
11,972
22.6%
27,854
23,439
18.8%
Profit from operations
519
358
45.0%
1,008
743
35.7%
Depreciation and amortization
428
327
30.9%
801
629
27.3%
EBITDA
947
685
38.2%
1,809
1,372
31.9%
 
The supermarket segment recorded an increase of 18.8% in revenues and 31.9% in EBITDA in the six months FY18 compared to the same period of 2017. The higher results in pesos are explained by the devaluation. The growth was lower than the devaluation mainly due to the seasonality of the Jewish holidays, which are within the semester 2018 but not so during the first semester of 2017, this fall in sales is offset by a better sales mix and growth of the own brand of Shufersal.
 
Telecommunications (Cellcom) - $ MM
IIQ 18
IIQ 17
YoY Var
6M 18
6M 17
Var a/a
Revenues
4,839
3,907
23.9%
9,065
7,748
17.0%
Profit from operations
27
-51
-152.9%
199
12
1,558.3%
Depreciation and amortization
932
822
13.4%
1,762
1,602
10.0%
EBITDA
959
771
24.4%
1,961
1,614
21.5%
 
 
The Telecommunications segment recorded a 17% rise in its revenues due to the effect of the devaluation of the Argentine peso. In Israeli currency, revenues fell slightly in IIQ18 in comparison to IIQ17 as a result of a decline in revenues from the mobile segment offset by an increase in fixed line segment revenues. Operating Income increased by 1,558.3% reaching Ps. 199 million, of which Ps. 145 million comes from the sale of Rimon, a subsidiary of Cellcom.
 
 
 
10
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
 
Others (Corporate expenses and other subsidiaries) - $ MM
IIQ 18
IIQ 17
YoY Var
6M 18
6M 17
Var a/a
Revenues
10
200
-95.0%
199
342
-41.8%
Loss from operations
329
-138
-338.4%
291
-264
-210.2%
Depreciation and amortization
10
92
-89.1%
23
106
-78.3%
EBITDA
339
-46
-837.00%
314
-158
-298.7%
 
As concerns “Clal”, the Group values ​​its holding in this insurance company as a financial asset at market value. The variation in the share price of CLAL during the semester 2018 generated a profit for the period of Ps. 368 million, while in the first semester of 2017 the profit was Ps. 1,278.
 
X. Reconciliation with Consolidated Income Statement (ARS million)
 
Below is an explanation of the reconciliation of the Company’s income by segment with its consolidated income statement. The difference lies in the presence of joint ventures included in the segment but not in the income statement.
 
 
Total as per Segment information
Adjustment for share of profit/(loss) of Joint Ventures *
Expenses and Collective Promotion Funds
Adjustment to income for elimination of inter-segment transactions
Total as per Statement of Income
Revenues
42,214
-28
860
-6
43,040
Costs
-28,413
11
-876
1
-29,277
Gross profit
13,801
-17
-16
-5
13,763
Net gain from fair value adjustment of investment properties
11,626
-124
-
-
11,502
General and administrative expenses
-2,214
13
-
6
-2,195
Selling expenses
-7,721
4
-
-
-7,717
Other operating results, net
589
16
-
-1
604
Profit / (loss) from operations
16,081
-108
-16
-
15,957
Share of profit of associates and joint ventures
233
160
-
-
393
Net segment profit before financial results and income tax
16,314
52
-16
-
16,350
* Includes Puerto Retiro, Baicom, CYRSA, Nuevo Puerto Santa Fe and Quality (San Martín plot).
 
11
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
XI. Financial Debt and Other Indebtedness
 
Operations Center in Argentina
 
Financial debt as of December 31, 2017:
 
Description
Currency
Amount (1)
Interest Rate
Maturity
Bank overdrafts
ARS
5.6
Floating
< 360 days
IRSA 2020 Series II Non-Convertible Notes.
USD
71.4
11.50%
Jul-20
Series VII Non-Convertible Notes
ARS
20.6
Badlar + 299
Sep-19
Series VIII Non-Convertible Notes
USD
184.5
7.00%
Sep-19
ICBC Dubai Loan
USD
50.0
5.95%
Feb-22
ICBC Loan
ARS
6.7
21.20%
May-18
IRSA’s Total Debt
 
338.9
 
 
IRSA’s Cash + Cash Equivalents + Investments (2)
USD
4.0
 
 
IRSA’s Net Debt
USD
334.9
 
 
Bank overdrafts
ARS
1.3
Floating
< 360 d
CAPEX Citi 5600 loan
ARS
0.1
Fixed
Jan-18
ICBC loan
ARS
4.0
Fixed
May-18
IRCP Class IV Non-Convertible Notes
USD
140.0
5.0%
Sep-20
IRSA CP Class II Non-Convertible Notes
USD
360.0
8.75%
Mar-23
IRSA CP’s Total Debt
 
505.4
 
 
Cash + Cash Equivalents + Investments (3)
 
314.8
 
 
IRSA CP’s Net Debt
 
190.6
 
 
(1) 
Principal amount in USD (million) at an exchange rate of Ps. 18.65/USD, without considering accrued interest or eliminations of balances with subsidiaries.
(2) 
“IRSA’s Cash & Cash Equivalents plus Investments” includes IRSA’s Cash & Cash Equivalents + IRSA’s Investments in current and non-current financial assets.
(3)  
“IRSA CP’s Cash & Cash Equivalents plus Investments” includes IRSA CP’s Cash and cash equivalents + Investments in Current Financial Assets and our holding in TGLT's convertible Notes.
 
 
Operations Center in Israel
 
Net financial debt (USD million)
 
Indebtedness (1)
 
Amount
IDBD
 
704
DIC
 
978
(1)
Net Debt as of September 30, 2017 according to the companies Separate Statutory Financial Statements.
 
On September 28, 2017 DIC offered the holders of NCN Series F to swap their notes for NCN Series J. NCN Series J terms and conditions differ substantially from those of Series F. Therefore, DIC recorded the payment of NCN Series F and recognized a new financial commitment at fair value for NCN Series J. As a result of the swap, DIC recorded a loss resulting from the difference between the NCN Series F cancellation value and the new debt value in the amount of approximately NIS 461 (equal to approximately Ps. 2,228 as of that date), which was accounted for under “Financial costs” .
 
 
 
12
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
XII. Material and Subsequent Events
 
Operations Center in Argentina
 
October 2017: Lipstick’s Debt Refinancing
 
In October 2017, in light of the approaching maturity of the USD 113.1 million non-recourse-to-IRSA debt owed by Metropolitan 885 3rd Ave (“Metropolitan”), owner of the Lipstick Building, the term of such debt was extended to April 30, 2020 with respect to an amount of USD 53.1 million, and USD 40 million were repaid in cash. Out of this sum, IRSA contributed USD 20 million, and an additional reduction of debt in an amount of USD 20 million was obtained from the lender bank.
 
In addition, as a result of the negotiations held, a reduction in the interest rate of this loan from Libor + 4% to Libor + 2% was achieved.
 
October 2017: Sale of Equity Interest in IRSA Propiedades Comerciales
 
On October 26, 2017, IRSA completed the sale in the secondary market of 10,240,000 ordinary shares of IRSA CP, N.V. Ps. 1 per share, represented by American Depositary Shares (“ADSs”), representing four ordinary shares each, which represents nearly 8.1% of IRSA CP capital for a total amount of Ps. 2,440 million (USD 138 million). After the transaction, IRSA’s direct and indirect interest in IRSA CP amounts to approximately 86.5%. This transaction was accounted in equity as an increase in the equity attributable to the parent for an amount of Ps. 271 million, net of taxes.
 
October 2017: General Ordinary and Extraordinary Shareholders’ Meeting
 
At the General Ordinary and Extraordinary Shareholders’ Meeting held on October 31, 2017, the following matters, inter alia, were resolved:
 
Distribution of a cash dividend for Ps. 1,400 million.
Fees payable to the Board of Directors and Supervisory Committee for fiscal year 2017 closed as of June 30, 2017.
Renewal of regular and alternate directors due to expiration of their terms and appointment of new alternate director.
Creation of a new Global Note Program for up to USD 350 million.
 
November 2017: Payment of cash dividend
 
At the Board meeting held on November 1, 2017, it was resolved to make available to the shareholders, as from November 14, 2017, a cash dividend of Ps. 1,400,000,000 (Argentine legal tender) equivalent to 241 . 931389433% of the Stock Capital, i.e., an amount per share (Ps. 1 par value) of $2.41931389433 and an amount per ADR (Argentine Pesos per ADR) of $24.1931389433 to be charged against the fiscal year ended June 30, 2017, which was paid to all the shareholders recorded as such as of November 13, 2017, according to the register kept by Caja de Valores S.A.
 
Operations Center in Israel
 
November 2017: Purchase of DIC shares by Dolphin
 
As mentioned in Note 7 to the Consolidated Financial Statements as of June 30, 2017, in connection with the Promotion of Competition and Reduction of Concentration Law in Israel, after June 30, 2017, Dolphin Netherlands B.V. made a non-binding tender offer for the acquisition of all DIC shares held by IDBD. For purposes of the transaction, a committee of independent directors has been set up to assess the tender offer and negotiate the terms and conditions. The Audit Committee has issued an opinion without reservations as to the transaction in accordance with the terms of section 72 et al. of the Capital Markets Law N° 26,831.
 
 
 
13
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
In November 2017, Dolphin IL Investment Ltd. (Dolphin IL), a subsidiary of Dolphin Netherlands B.V., has subscribed the final documents for the acquisition of the total shares owned by IDBD in DIC.
 
 
The transaction has been made for an amount of NIS 1,843 million (equivalent to NIS 17.20 per share of DIC). The consideration was paid NIS 70 million in cash (equivalent to Ps. 348 million as of the date of the transaction) and NIS 1,773 million (equivalent to Ps. 8,814 million as of the date of the transaction) was financed by IDBD to Dolphin, maturing in five years, with the possibility of an extension of three additional years in tranches of one year each, that will accrue an initial interest of 6.5% annually, which will increase by 1% annually in case of extension for each year. Furthermore, guarantees have been implemented for IDBD, for IDBD bondholders and their creditors, through pledges of different degree of privilege over DIC shares resulting from the purchase. Moreover, a pledge will be granted in relation to 9,636,097 (equivalent to 6.38%) of the shares of DIC that Dolphin currently holds in the first degree of privilege in favor of IDBD and in second degree of privilege in favor of IDBD's creditors. This transaction has no effect in the Groups consolidation structure and has been accounted in equity as a decrease in the equity attributable to the parent for an amount of Ps. 114 million.
 
 
It should be noted that the financial position of IDBD and its subsidiaries at the Operations Center in Israel does not affect the financial position of IRSA and subsidiaries at the Operations Center in Argentina. In addition, the commitments and other covenants resulting from IDBD’s financial debt do not have impact on IRSA since such indebtedness has no recourse against IRSA and it is not granted by IRSA’s assets.
 
 
  November 2017: Tender offer for Clal
 
 
In July 2017, IDBD received a non-binding offer from an international group for the potential acquisition of its entire interest in Clal. The consideration will be based on the equity value of Clal, in accordance with Clal Financial Statement at the time of specifying the transaction and is subject to the performance of a due diligence and the execution of an agreement, as well as getting the approvals required by law. IDBD is analyzing the offer. On June 30, 2017, this value amounted to NIS 4,880 million (equivalent to approximately Ps. 23,278 million as of the date of these Financial Statements), at the proportionate equity interest as of the date of the transaction. In November 2017 the period to perform each party undertaking expired. However, the parties are continuing to conduct negotiations in connection with the sale of the sold shares.   There is no certainty that the offer will go forward under the terms offered, or that the transaction will be completed.
 
December 2017: Purchase of IDBD shares by IFISA
 
In December 1, 2017, Dolphin Netherlands BV (Dolphin), has executed a share purchase agreement for all of the shares that IFISA held of IDBD, which amounted to 31.7% of the capital stock. In this way, as of the end of December 31, 2017, Dolphin controls 100% of IDBD's shares.
 
 
 The transaction was made at a price of NIS 398 million (equivalent to NIS 1.968 per share and approximately to Ps. 1,968 million as of the date of the transaction). As consideration of the transaction all receivables from IFISA to Dolphin have been canceled plus a payment of USD 33.7 million (equivalents to Ps. 588 million as of the date of the transaction). This transaction was accounted in equity as a decrease in the equity attributable to the parent for an amount of Ps. 2,923 million.
 
December 2017: Sale of Shufersal shares
 
On December 24, 2017, DIC sold shares of Shufersal, in a manner whereby its equity interest decreased from 53.30% to 50.12%. The consideration with respect to the sale of the aforementioned shares amounted to NIS 169.5 million (equivalent to Ps 847 million as of the date of the transaction). This transaction was accounted in equity as an increase in the equity attributable to the parent for an amount of Ps 385 million.
 
 
December 2017: New Pharm Acquisition
 
 
As mentioned in Note 4.G to the Consolidated Financial Statements as of June 30, 2017, Shufersal entered into an agreement for the purchase of the shares of New Pharm Drugstores Ltd. ("New Pharm"), representative of 100% of that Company’s share capital. On December 20, 2017, the transaction was completed and Shufersal is the sole shareholder of New Pharm, after the sale of one of its stores and the approval by the antitrust committee. The total consideration was NIS 151 millones (equivalent to Ps. 734 millones as of the date of the transaction).
 
 
14
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
The Group is working on the allocation of the purchase price of the net assets acquired. The information below is preliminar and is subject to change.
 
 
The following table summarizes the consideration, the fair values of the assets acquired and the liabilities assumed.
 
 
 
December 2017
Identified assets and liabilities:
 
 
 
 
 
Assets
 
850
Liabilities
 
926
Total identified net assets
 
-76
Goodwill (pending allocation)
 
810
Total consideration
 
734
 
 
 
February 2018: Eurocom purchase offer
 
On February 4, 2018, DIC made a binding offer for the acquisition in stages of Eurocom Communications Ltd ("Eurocom"), a private Israeli group whose business is developed in the communications, real estate and renewable energy industries. Eurocom is Bezeq's parent company (an Israel's leading telecommunications company). The proposal must be approved by Eurocom and by the authorities and creditors involved in the Eurocom debt restructuring process. Should the proposal succeed, this transaction requires the approval of different regulatory authorities and a divestment of the group's holding in Cellcom.
 
XIII. Comparative Summary Consolidated Balance Sheet Data
 
 
12.31.17
12.31.16
Non-current assets
180,626
144,551
Current assets
79,912
58,690
Total Assets
260,538
203,241
Capital and reserves attributable to equity holders of the parent
30,585
25,293
Non-controlling interest
27,221
18,868
Total shareholders’ equity
57,806
44,161
Non-current liabilities
154,680
117,917
Current liabilities
48,052
41,163
Total Liabilities
202,732
159,080
Total liabilities and shareholders’ equity
260,538
203,241
 
XIV. Summary Consolidated Income Statement Data
 
 
12.31.17
12.31.16
Profit from operations
15,957
6,182
Share of profit of associates and joint ventures
393
62
Profit before financial results and income tax
16,350
6,244
Finance income
650
510
Finance expenses
-8,069
-4,715
Other financial results
1,196
1,531
Financial results, net
-6,223
-2,674
Income before income tax
10,127
3,570
Income tax expense
497
-1,027
Profit for the period from continuing operations
10,624
2,543
I ncome / (loss) for the period from discontinued operations after income tax
207
4,273
Profit for the period
10,831
6,816
Other comprehensive (loss) / income for the period
161
550
Comprehensive net (loss) / income for the period
10,992
7,366
 
 
 
Attributable to :
 
 
Equity holders of the parent
8,918
3,835
Non-controlling interest
1,913
2,981
 
 
15
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 

XV. Comparative Summary Consolidated Cash Flow Data
 
 
12.31.17
12.31.16
Net cash generated by operating activities
6,807
4,862
Net cash used in investing activities
-9,863
2,156
Net cash generated by financing activities
7,185
2,177
Net increase in cash and cash equivalents
4,129
9,195
Cash and cash equivalents at beginning of fiscal year
24,854
13,866
Cash and cash equivalents reclassified to held for sale
-74
0
Foreign exchange gain on cash and cash equivalents
586
639
Cash and cash equivalents at the end of the period
29,495
23,700
 
XVI. Comparative Ratios
 
 
12.31.17
 
12.31.16
 
Liquidity
 
 
 
 
CURRENT ASSETS
79,912
                   1.66
58,690
                 1.43
CURRENT LIABILITIES
48,052
 
41,163
 
Indebtedness
 
 
 
 
TOTAL LIABILITIES
202,732
                   6.63
159,080
                 6.29
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
30,585
 
25,293
 
Solvency
 
 
 
 
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
30,585
                   0.15
25,293
                 0.16
TOTAL LIABILITIES
202,732
 
159,080
 
Restricted Assets
 
 
 
 
NON-CURRENT ASSETS
180,626
                   0.69
144,551
                 0.71
TOTAL ASSETS
260,538
 
203,241
 
 
XVII. Brief comment on prospects for the next period
 
Our businesses in the Operations Center in Argentina and Israel have posted sound operating results in the first semester of fiscal year 2018. We believe that the diversification of our business, with real estate assets in Argentina and abroad, favorably positions us to face all the challenges and opportunities that may arise in the coming years.
 
As concerns our Operations Center in Argentina and our subsidiary IRSA Propiedades Comerciales S.A., prospects for fiscal year 2018 are positive, in light of the rebound in economic activity and consumption, which decelerated in 2017 as compared to 2016. We hope to continue growing in terms of sales, visitors to our shopping malls and tenants in our office spaces, as well as maintaining optimum occupancy levels.
 
 
 
16
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2017
 
 
During the second semester of the fiscal year 2018, we expect to consummate certain acquisitions of new lands or existing commercial properties, and we plan to make progress in the commercial developments already launched, including the 4,000 sqm expansion of our Alto Palermo shopping mall, the development of the 32,000 sqm office building in the commercial complex adjoining our Dot Baires shopping mall, and the “Catalinas” building in Buenos Aires, in which we own 16,012 sqm. In addition, in fiscal year 2018 and 2019 we expect to finish the expansion works in some of our shopping malls for approximately 21,000 of GLA. We will build 2,200 sqm to add 6 cinema screens in Alto Comahue, a large store of 2,400 sqm in Alto Rosario shopping mall, 12,800 sqm mainly in a Sodimac store in Mendoza Plaza Shopping, and we will expand by 3,500 sqm Alto Avellaneda, our shopping mall located in the southern region of Buenos Aires. In addition, we will continue working on optimizing the performance of our current properties through improvements that allow us to take best advantage of their GLA potential and to furnish them with increased functionality and appeal for the benefit of consumers and tenants alike.
 
We will continue to promote marketing actions, events and targeted promotions at our shopping malls to attract consumers, through the joint endeavors of the Company, the retailers and the credit card issuer banks, as these actions have proved to be highly effective and are welcomed by the public.
 
We are optimistic about the opportunities that may arise in Argentina for the second semester fiscal year 2018. We have a large reserve of lands for future shopping mall and office development projects in an industry scenario with high growth potential.
 
As concerns our investments outside Argentina, we will continue working in the improvement of the operating ratios of our “Lipstick” building in New York and backing the new strategy of selectively selling low-class hotels and replacing them with higher-class hotels, that is being developed by the “Condor Hospitality Trust” hotel REIT (NASDAQ: CDOR).
 
Regarding our investment in the Israeli company IDBD, we are much pleased with the results obtained in the first semester of FY18 we will continue to work towards deleveraging the company, selling non-strategic assets in its portfolio and improving the operating margins of each of its operating subsidiaries.
 
Taking into account the quality of the real estate assets in our portfolio, the Company’s financial position and low indebtedness level and its franchise for accessing the capital markets, we remain confident that we will continue consolidating the best real estate portfolio in Argentina and Israel. Moreover, in line with our continuous pursuit of business opportunities and having in mind the general and specific conditions of the national and international markets, we keep evaluating different actions to optimize our capital structure. As concerns our operations center in Argentina, to keep increasing the liquidity of our controlled company IRSA Propiedades Comerciales S.A., the Company could make additional sales of the shares held by it in such company, in one or more tranches, in the over-the-counter market or through a private sale, aps agreed by the Company’s shareholders in due course.
 
 
17
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