| Accounting policies | Note 4 |
Accounting policies The main accounting policies
used in the preparation of these financial statements are detailed below.
Note 4.1 |
New accounting standards, amendments
and interpretations issued by the IASB that are
effective as of December 31, 2023 and have been adopted by the Company The
Company has first applied the following standards and/or amendments s
from January 1, 2023: - IFRS 17 “Insurance
contracts”, issued in May 2017 and amended in June 2020 and December 2021. It replaces IFRS 4, introduced as an interim standard
in 2004, which allowed entities to account for insurance contracts using their local accounting requirements, resulting in multiple application
approaches. IFRS 17 sets the principles for the recognition, measurement, presentation, and disclosure of insurance contracts. - IAS 1 “Presentation
of financial statements”, amended in January and July 2020, February 2021 and October 2022. It incorporates the requirement that
an entity disclose its material accounting policies rather than its significant accounting policies. It explains how an entity can identify
a material accounting policy. - IAS 8 “Accounting
policies, changes in accounting estimates and errors”, amended in February 2021. It replaces the definition of accounting estimates.
Under the new definition, accounting estimates are monetary amounts in the financial statements that are subject to measurement uncertainty. - IAS 12 “Income tax”,
amended in May 2021. It clarifies how an entity accounts for deferred tax on transactions such as leases and decommissioning obligations. There are no new IFRS or IFRIC
applicable as from this fiscal year that have a material impact on the Company’s financial statements. New
accounting standards, amendments and interpretations issued by the IASB that are not yet effective and have not been early
adopted by the Company - IAS 1 “Presentation
of financial statements”, amended in January and July 2020, February 2021 and October 2022. It incorporates amendments to the classification
of liabilities as current or non-current. The amendments apply to annual periods beginning as from January 1, 2024, with early adoption
permitted. The application thereof will impact neither the Company’s results of operations nor its financial position. - IFRS 16 “Leases”,
amended in September 2022. It clarifies how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements
in IFRS 15 to be accounted for as a sale. The amendments apply to annual periods beginning as from January 1, 2024. - IFRS Sustainability Disclosure
Standards, amended in June 2023. IFRS S1 sets out overall requirements in order for an entity to disclose information about its sustainability-related
risks and opportunities that is useful to the users of general purpose financial reports in making decisions relating to providing resources
to the entity. IFRS S2 sets out the requirements for identifying, measuring and disclosing information about climate-related risks and
opportunities that is useful to the users of general purpose financial reports in making decisions relating to providing resources to
the entity. The amendments apply to annual periods beginning as from January 1, 2024.
Note 4.2 |
Property, plant and equipment Property, plant and equipment,
except for works in progress, is valued at acquisition cost restated to reflect the effects of inflation, net of accumulated depreciation
and recognized impairment losses. Depreciation has been calculated by applying the straight-line method over the remaining useful life
of the assets, which was determined on the basis of engineering studies. Subsequent costs (major maintenance
and reconstruction costs) are either included in the value of the assets or recognized as a separate asset, only if it is probable that
the future benefits associated with the assets will flow to the Company, being it possible as well that the costs of the assets may be
measured reliably and the investment will improve the condition of the asset beyond its original state. The other maintenance and repair
expenses are recognized in profit or loss in the year in which they are incurred. In accordance with the Concession
Agreement, the Company may not pledge the assets used in the provision of the public service nor grant any other security interest thereon
in favor of third parties, without prejudice to the Company’s right to freely dispose of those assets which in the future may become
inadequate or unnecessary for such purpose. This prohibition does not apply in the case of security interests granted over an asset at
the time of its acquisition and/or construction as collateral for payment of the purchase and/or installation price. The residual value and the remaining
useful lives of the assets are reviewed and adjusted, if appropriate, at the end of each fiscal year (reporting period). Land is not depreciated Facilities in service: between
30 and 50 years Furniture, tools and equipment:
between 5 and 20 years Construction in process is valued
based on the degree of completion and is recorded at cost restated to reflect the effects of inflation less any impairment loss, if applicable.
Cost includes expenses attributable to the construction, when they are part of the cost incurred for the purposes of acquisition, construction
or production of property, plant and equipment that necessarily takes a substantial period of time to get ready for its intended use.
These assets begin to be depreciated when they are in economic conditions of use. Gains and losses on the sale
of property, plant and equipment are calculated by comparing the price collected with the carrying amount of the asset, and are recognized
within Other operating expense or Other operating income in the Statement of Comprehensive Income (Loss). The Company considers three alternative
probability-weighted scenarios and analyzes the recoverability of its long-lived assets as described in Critical accounting estimates
and judgments. The valuation of property, plant
and equipment, taken as a whole, does not exceed its recoverable value, which is measured as the higher of value in use and fair value
less costs to sell at the end of the year (Note 6.c).
Note 4.3 |
Interests in joint ventures The main conceptual definitions
are as follow:
i. A joint arrangement takes place
among two or more parties when they have joint control: joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
ii. A joint venture is a joint arrangement
whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Such parties are called
joint venturers.
iii. A joint operation is a joint
arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities,
relating to the arrangement. These parties are called joint operators. The Company accounts for its
investment in joint ventures in accordance with the equity method. Under this method, the interest is initially recognized at cost and
subsequently adjusted by recognizing the Company’s share in the profit or loss obtained by the joint venture, after acquisition
date. The Company recognizes in profit or loss its share of the joint venture’s profit or loss and in other comprehensive income
its share of the joint venture’s other comprehensive income. When the Company carries out
transactions in the joint ventures, the unrealized gains and losses are eliminated in accordance with the percentage interest held by
the Company in the jointly controlled entity. The joint ventures’ accounting
policies have been modified and adapted, if applicable, to ensure consistency with the policies adopted by the Company. Furthermore, taking into account
that the interests in joint ventures are not regarded as significant balances, the disclosures required under IFRS 12 have not been made.
Note 4.4 |
Revenue recognition In accordance with IFRS 15 Revenue
from Contracts with Customers, the Company has classified the most relevant contracts with customers as detailed herein below:
a. Revenue from sales The contracts with customers
for the provision of the electricity distribution service and other services (Note 9) are recognized when all of the following conditions
is met:
1. Identification of the contracts
with customers, where “contract” is understood to mean an agreement between two or more parties that creates enforceable rights
and obligations.
2. Identification of the performance
obligations, which are understood to mean a promise in the contract with the customer to either transfer a good or provide a service.
3. Determination of the transaction
price, in reference to the amount of the consideration for satisfying each performance obligation.
4. Allocation of the transaction
price to each of the identified performance obligations, in accordance with the methods described in the standard.
5. Recognition of revenue when the
performance obligations identified in the contracts with customers are satisfied. According to IFRS 15, revenue
is recognized when the customer obtains control of the service or product, in this case the electricity supply. Furthermore, the incremental
costs of obtaining the contracts with customers are recognized as an asset, if the Company expects to recover those costs. Revenue from sales is measured
at the fair value of the consideration collected or to be collected, taking into account the estimated amount of any discount, thus determining
the net amounts. Revenue from the electricity
supplied by the Company to low-income areas and shantytowns is recognized to the extent that a renewal of the Framework Agreement is formalized
for the period in which the service was rendered (Note 2.d). Revenue from operations is recognized
on an accrual basis and derives mainly from electricity distribution. Such revenue includes electricity supplied, whether billed or unbilled,
at the end of each year, which has been valued on the basis of applicable electricity rates. The Company also recognizes revenue
from other concepts included in distribution services, such as new connections, reconnections, rights of use on poles, transmission of
electricity to other distribution companies, inasmuch as the services are provided on the basis of the price established in each contract.
Revenue is not adjusted for the effect of the financing components as sales’ payments are not deferred over time, which is consistent
with market practice.
b. Interest income Interest income is disclosed
separately from revenue from contracts with customers and has been recognized only to the extent that the related asset of the contract
(or account receivable) has been recognized in the accounting for a contract with a customer. Interest income is recognized when it is
probable that the economic benefits associated with the transaction will flow to the Entity and the amount of the transaction can be measured
reliably. Interest income is recognized
by applying the effective interest rate method. Interest income is recorded in the accounting on a time basis by reference to the principal
amount outstanding and the applicable effective rate.
Note 4.5 |
Effects of the changes in foreign currency exchange rates a.
Functional and presentation currency The information included in the
financial statements is measured using the Company’s functional currency, which is the currency of the main economic environment
in which the Entity operates. The financial statements are measured in pesos (legal currency in Argentina), restated to reflect the effects
of inflation as indicated in Note 3, which is also the presentation currency. b.
Transactions and balances Foreign currency denominated
transactions and balances are translated into the functional and presentation currency using the rates of exchange prevailing at the date
of the transactions or revaluation, respectively. The gains and losses generated by foreign currency exchange differences resulting from
each transaction and from the translation of monetary items valued in foreign currency at the end of the year are recognized in the Statement
of Comprehensive Income. The foreign currency exchange
rates used are the buying (bid price) and selling (offer price) rates for monetary assets and liabilities, respectively, and the specific
exchange rate for foreign currency denominated transactions.
Note 4.6 |
Trade and other receivables
a. Trade receivables The receivables arising from
services billed to customers but not collected as well as those arising from services rendered but unbilled at the closing date of each
year are recognized at fair value and subsequently measured at amortized cost using the effective interest rate method. The receivables from electricity
supplied to low-income areas and shantytowns are recognized, along with revenue, when the Framework Agreement has been renewed for the
period in which the service was provided and the Federal or the Provincial Government assumes responsibility for the payment of consumption.
b. Other receivables Other receivables are initially
recognized at fair value (generally the original billing/settlement amount) and subsequently measured at amortized cost, using the effective
interest rate method, and when significant, adjusted by the time value of money. The Company records impairment allowances when there
is objective evidence that it will not be able to collect all the amounts owed to it in accordance with the original terms of the receivables. Assigned and held-in-custody
assets are measured in accordance with Note 4.8. The subsidies received from the
Government are recognized when the defined works plans are carried out.
Note 4.7 |
Inventories The Company’s inventories
are materials and supplies to be consumed in the service rendering process. Inventories are valued at acquisition cost restated to reflect
the effects of inflation, less recognized impairment losses. They are valued based on the
purchase price, import duties (if applicable), and other taxes (that are not subsequently recovered), and other costs directly attributable
to the acquisition of those assets. Cost is determined by applying
the weighted average price (WAP) method. The Company has classified inventories
into current and non-current depending on the period of time in which they are expected to be used, whether for maintenance or capital
expenditures. The non-current portion of inventories is disclosed in the “Property, plant and equipment” account. The valuation of inventories,
taken as a whole, does not exceed their recoverable value at the end of each fiscal year.
Note 4.8 |
Financial assets
Note 4.8.1
|
Classification The Company classifies financial
assets into the following categories: those measured at amortized cost and those subsequently measured at fair value. This classification
depends on whether the financial asset is an investment in a debt or an equity instrument. In order for a financial asset to be measured
at amortized cost, the two conditions described in the following paragraph must be met. All other financial assets are measured at fair
value. IFRS 9 requires that all investments in equity instruments be measured at fair value. a.
Financial assets at amortized cost Financial assets are measured
at amortized cost if the following conditions are met:
i. The objective of the Company’s
business model is to hold the assets to collect the contractual cash flows; and
ii. The contractual terms give rise,
on specified dates, to cash flows that are solely payments of principal and interest on principal. b.
Financial assets at fair value If any of the above-detailed
conditions is not met, financial assets are measured at fair value through profit or loss. All investments in equity instruments
are measured at fair value. For those investments that are not held for trading, the Company may irrevocably elect at the time of their
initial recognition to present the changes in fair value in other comprehensive income. The Company’s decision was to recognize
the changes in fair value in profit or loss.
Note 4.8.2
|
Recognition and measurement The regular way purchase or sale
of financial assets is recognized on the trade date, i.e. the date on which the Company agrees to acquire or sell the asset. Financial
assets are derecognized when the rights to receive the cash flows from the investments have expired or been transferred and the Company
has transferred substantially all the risks and rewards of the ownership of the assets. Financial assets are initially
recognized at fair value plus, in the case of financial assets that are not measured at fair value through profit or loss, transaction
costs directly attributable to the acquisition of those financial assets. The gains or losses generated
by investments in debt instruments that are subsequently measured at fair value and are not part of a hedging transaction are recognized
in profit or loss. Those generated by investments in debt instruments that are subsequently measured at amortized cost and are not part
of a hedging transaction are recognized in profit or loss when the financial asset is derecognized or impaired and by means of the amortization
process using the effective interest rate method. The Company subsequently measures
all the investments in equity instruments at fair value. When it elects to present the changes in fair value in other comprehensive income,
such changes cannot be reclassified to profit or loss. Dividends arising from these investments are recognized in profit or loss to the
extent that they represent a return on the investment. The Company reclassifies financial
assets if and only if its business model to manage financial assets is changed. The expected losses, in accordance
with calculated coefficients, are detailed in Note 6.a).
Note 4.8.3
|
Impairment of financial
assets At the end of each annual reporting
period, the Company assesses whether there is objective evidence that the value of a financial asset or group of financial assets measured
at amortized cost is impaired. The value of a financial asset or group of financial assets is impaired, and impairment losses are incurred
only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the
asset (a “loss event”), and that loss event (or events) has an impact on the estimated future cash flows of the financial
asset or group of financial assets that can be reliably measured. Impairment tests may include
evidence that the debtors or group of debtors are undergoing significant financial difficulties, have defaulted on interest or principal
payments or made them after they had come due, the probability that they will enter bankruptcy or other financial reorganization, and
when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in payment terms
or in the economic conditions that correlate with defaults. In the case of financial assets
measured at amortized cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial
asset’s original effective interest rate. The asset’s carrying amount is reduced and the amount of the impairment loss is
recognized in the Statement of Comprehensive Income. While cash, cash equivalents
and financial assets measured at amortized cost are also subject to the impairment requirements of IFRS 9, the identified impairment loss
is immaterial.
Note 4.8.4
|
Offsetting of financial
instruments Financial assets and liabilities
are offset, and the net amount reported in the Statement of Financial Position, when there is a legally enforceable right to offset the
recognized amounts, and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
Note 4.9 |
Derivative financial instruments Derivative financial instruments
are initially recognized at fair value on the date on which the relevant contract is signed. Subsequent to the initial recognition, they
are remeasured at their fair value. The method for recognizing the resulting loss or gain depends on whether the derivative has been
designated as a hedging instrument and, if that is the case, on the nature of the item being hedged. As of December 31, 2022, the economic
impact of these transactions, which resulted in a loss of $ 539, is recorded in the “Other finance income (costs)” account
of the Statement of Comprehensive Income (Loss).
Note 4.10 |
Cash and cash equivalents Cash and cash equivalents include
cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months
or less from their acquisition date, with significant low risk of change in value.
i. Cash and banks in local currency:
at nominal value.
ii. Cash and banks in foreign currency:
at the exchange rate in effect at the end of the year.
iii. Money market funds, which have
been valued at the prevailing market price at the end of the year. Those that do not qualify as cash equivalents are disclosed in the
Financial assets at fair value through profit or loss account.
Note 4.11 |
Equity Changes in this account have
been accounted for in accordance with the relevant legal or statutory regulations and the decisions adopted by the shareholders’
meetings. a.
Share capital Share capital represents issued
capital, which is comprised of the contributions committed and/or made by the shareholders, represented by shares, including outstanding
shares at nominal value, restated to reflect the effects of inflation as indicated in Note 3. b.
Treasury stock The Treasury stock account represents
the nominal value of the Company’s own shares acquired by the Company, restated to reflect the effects of inflation as indicated
in Note 3. c.
Other comprehensive income (loss) Represents recognition, at the
end of the year, of the actuarial gain (loss) associated with the Company’s employee benefit plans, restated to reflect the effects
of inflation as indicated in Note 3. d.
Retained earnings Retained earnings are comprised
of profits or accumulated losses with no specific appropriation. When positive, they may be distributed, if so decided by the Shareholders’
Meeting, to the extent that they are not subject to legal restrictions. Retained earnings, where applicable, are comprised of the amounts
transferred from other comprehensive income and prior year adjustments due to the application of accounting standards, restated to reflect
the effects of inflation as indicated in Note 3. Pursuant to Section 27 Part I
Chapter I of the CNV’s Regulations, the Shareholders in the Meetings at which they should decide upon the approval of financial
statements in which the Unappropriated retained earnings account has a significant negative balance that requires the application, as
appropriate, of sections 94 -sub-section 5-, 96 or 206 of the Business Organizations Law, or, quite to the contrary, a positive balance,
must adopt an express resolution as to the allocation of such balance (taking into consideration for calculation purposes the fiscal year’s
results as well as its retained earnings/accumulated deficit), whether to dividend distribution, capitalization, setting up of reserves
or a combination of these. The Company Shareholders’ Meetings have complied with the above-mentioned requirement. CNV General Resolution No. 593/11
provided that Shareholders in the Meetings at which they should decide upon the approval of financial statements in which the Unappropriated
retained earnings account has a positive balance, must adopt an express resolution as to the allocation of such balance.
Note 4.12 |
Trade and other payables
a. Trade payables Trade payables are payment obligations
with suppliers for the purchase of goods and services in the ordinary course of business. Trade payables are classified as current liabilities
if payments fall due within one year or in a shorter period of time. Otherwise, they are classified as non-current liabilities. Trade payables are initially
recognized at fair value and subsequently measured at amortized cost using the effective interest rate method.
b. Customer deposits Customer deposits are initially
recognized at the amount received and subsequently measured at amortized cost using the effective interest rate method. In accordance with the Concession
Agreement, the Company is allowed to receive customer deposits in the following cases:
i. When the power supply is requested
and the customer is unable to provide evidence of his legal ownership of the premises;
ii. When service has been suspended
more than once in one-year period;
iii. When the power supply is reconnected
and the Company is able to verify the illegal use of the service (fraud).
iv. When the customer is undergoing
liquidated bankruptcy or reorganization proceedings. The Company has decided
not to request customer deposits from residential tariff customers. Customer deposits may be paid
either in cash or through the customer’s bill and accrue monthly interest at a specific rate of BNA for each customer category. When the conditions for which
the Company is allowed to receive customer deposits no longer exist, the customer’s account is credited with the principal amount
plus any interest accrued thereon, after deducting, if appropriate, any amount owed by the customer to the Company.
c. Customer contributions Refundable
d. Other payables The financial liabilities recorded
in Other Payables and the advances for the execution of works are initially recognized at fair value and subsequently measured at amortized
cost. The recorded liabilities for
penalties accrued, whether imposed or not yet issued by the ENRE (Note 2.f), and other provisions are the best estimate of the settlement
value of the present obligation in the framework of IAS 37 provisions at the closing date of these financial statements. The balances of ENRE Penalties
and Discounts are updated in accordance with the regulatory framework applicable thereto and on the basis of the Company’s estimate
of the outcome of the renegotiation process described in Note 2.f.
Note 4.13 |
Borrowings Borrowings are initially recognized
at fair value, less direct costs incurred in the transaction. Subsequently, they are measured at amortized cost; any difference between
the funds obtained (net of direct costs incurred in the transaction) and the amount to be paid at maturity is recognized in profit or
loss during the term of the borrowings using the effective interest rate method.
Note 4.14 |
Deferred revenue Non-refundable customer contributions
· Customer connection to the grid:
revenue is accrued until such connection is completed;
· Continuous provision of the electric
power supply service: throughout the shorter of the useful life of the asset and the term for the provision of the service. Government grants
Note 4.15 |
Employee benefits
· Benefit plans The Company operates several
benefit plans. Usually, benefit plans establish the amount of the benefit an employee will receive at the time of his/her retirement,
generally based on one or more factors such as age, years of service and salary. The liability recognized in the
Statement of Financial Position in respect of benefit plans is the present value of the benefit plan obligation at the closing date of
the year, together with the adjustments for past service costs and actuarial gains or losses. The benefit plan obligation is calculated
annually by independent actuaries in accordance with the projected unit credit method. The present value of the benefit plan obligation
is determined by discounting the estimated future cash outflows using actuarial assumptions about demographic and financial variables
that affect the determination of the amount of such benefits. The benefit plans are not funded. The Company’s accounting
policy for benefit plans is as follow:
a. Service costs are immediately recorded in profit
or loss, unless the changes to the benefit plan are conditional on the employees’ remaining in service for a specified period of
time (the vesting period). In this case, past service costs are amortized on a straight-line basis over the vesting period.
b. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are recognized in “Other comprehensive income” in the year in which they
arise.
· The Company’s Share-based Compensation
Plan The Company had a share-based
compensation plan under which it received services from some employees in exchange for the Company’s shares. The fair value of the
services received is recognized as an operating expense in the “Salaries and social security taxes” line item. The total amount
of the referred to expense is determined by reference to the fair value of the shares granted. When the employees provide the
services before the shares are granted, the fair value at the grant date is estimated in order to recognize the relevant result. Furthermore, taking into account
that share-based payments are not considered significant balances, the disclosures required under IFRS 2 have not been made.
Note 4.16 |
Income tax The income tax is recognized
in profit or loss, other comprehensive income or in equity depending on the items from which it originates. The Company determines the income
tax payable by applying the effective 35 By means of Law No. 27,630, a
change was introduced in the corporate income tax rate, applicable to fiscal years beginning from January 1, 2021. The tax is determined
according to the following scale:
Schedule
of tax determination
Accumulated net taxable income Amount to be paid $
Plus % On the amount exceeding $
From more than $ To $
$ 0 $ 5 $ 0 25 $ 0
$ 5 $ 50 $ 1.25 30 $ 5
$ 50 onwards $ 14.75 35 $ 50 The amounts of the detailed scale will be
adjusted annually, beginning January 1, 2022, taking into consideration the annual variation of the Consumer Price Index (CPI) provided
by the National Institute of Statistics and Census (INDEC). Additionally, the deferred tax
is recognized, in accordance with the liability method, on the temporary differences arising between the tax base of assets and liabilities
and their carrying amounts in the Statement of Financial Position. However, no deferred tax liability is recognized if such difference
arises from the initial recognition of goodwill, or from the initial recognition of an asset or liability other than in a business combination,
which at the time of the transaction affected neither the accounting nor the taxable profit. The deferred tax is determined
using the effective rate resulting from the application of the tax scale in effect at the closing date of the financial statements and
which is expected to apply when the deferred tax assets are realized or the deferred tax liabilities are settled. Deferred tax assets and liabilities
are offset if the Company has a legally enforceable right to offset recognized amounts and when deferred tax assets and liabilities relate
to income tax levied by the same tax authority on the same taxable entity. Deferred tax assets and liabilities are stated at their undiscounted
nominal value. Moreover, in accordance with
the provisions of Law No. 27,430, the Company has applied the tax inflation adjustment set forth in Title VI of the Income Tax Law, effective
for fiscal years beginning as from January 1, 2018, albeit with a limited scope of application for certain accounts. The tax inflation adjustment
for the first, second and third fiscal year was applicable as from its effective date in the year 2018, if the CPI cumulative variation,
calculated from the beginning to the end of each year, exceeded fifty-five percent (55%), thirty percent (30%) and fifteen percent (15%)
for fiscal years 2018, 2019 and 2020, respectively. Although as of December 31, 2018, the CPI cumulative variation did not exceed the
55% threshold for the application of the tax inflation adjustment in that first fiscal year, as of December 31, 2020 and 2019, the CPI
cumulative variations for the 12 months of each year had amounted to 36.13% and 53.77%, respectively, which exceeded the 15% and 30% thresholds
fixed for the third and second transition years of the tax inflation adjustment, and, therefore, the Company recognized the ef |
