Blueprint
 
 
 
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Unaudited Condensed Interim Consolidated Financial Statements as of September 30, 2018 and for the three-month period ended as of that date, presented comparatively
 
 
 
 
 
 
 
 
 
 
 
Legal information
 
 
Denomination: IRSA Inversiones y Representaciones Sociedad Anónima.
 
Fiscal year N°: 76, beginning on July 1st, 2018.
 
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: 366,788,251 common shares.
 
Percentage of votes of the Parent Company (direct and indirect interest) on the shareholders’ equity: 63.74% (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 
14
Note 6 – Segment information 
14
Note 7 – Investments in associates and joint ventures 
16
Note 8 – Investment properties 
18
Note 9 – Property, plant and equipment 
19
Note 10 – Trading properties 
19
Note 11 – Intangible assets 
20
Note 12 – Financial instruments by category 
20
Note 13 – Trade and other receivables 
23
Note 14 – Cash flow information 
24
Note 15 – Trade and other payables 
25
Note 16 – Borrowings 
25
Note 17 – Provisions 
26
Note 18 – Taxes 
27
Note 19 – Revenues 
28
Note 20 – Expenses by nature 
29
Note 21 – Cost of goods sold and services provided 
29
Note 22 – Other operating results, net 
30
Note 23 – Financial results, net 
30
Note 24 – Related party transactions 
31
Note 25 – CNV General Resolution N° 622 
32
Note 26 – Foreign currency assets and liabilities 
33
Note 27 – Groups of assets and liabilities held for sale 
34
Note 28 – Results from discontinued operations 
34
Note 29 – Other significant events of the period 
35
Note 30 – Subsequent Events 
35
 
 
 
 
 
 
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
BACS
 
Banco de Crédito y Securitización 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
CODM
 
Chief operating decision maker
CPF
 
Collective Promotion Funds
Condor
 
Condor Hospitality Trust Inc.
Cresud
 
Cresud S.A.C.I.F. y A.
DIC
 
Discount Investment Corporation Ltd.
ECLSA
 
E-Commerce Latina S.A.
Efanur
 
Efanur S.A.
Financial Statements
 
Unaudited Condensed Interim Consolidated Financial Statements
Annual Financial Statements
 
Consolidated Financial Statements as of June 30, 2018
HASA
 
Hoteles Argentinos S.A.
IAS
 
International Accounting Standards
IASB
 
International Accounting Standards Board
IDB Tourism
 
IDB Tourism (2009) Ltd
IDBD
 
IDB Development Corporation Ltd.
IFISA
 
Inversiones Financieras del Sur S.A.
IFRS
 
International Financial Reporting Standards
IRSA, The Company”, “Us”, “We”
 
IRSA Inversiones y Representaciones Sociedad Anónima
IRSA CP
 
IRSA Propiedades Comerciales S.A.
Israir
 
Israir Airlines & Tourism Ltd.
LRSA
 
La Rural S.A.
Metropolitan
 
Metropolitan 885 Third Avenue Leasehold LLC
MPIT
 
Minimum presumed income tax
NCN
 
Non-convertible Notes
New Lipstick
 
New Lipstick LLC
NFSA
 
Nuevas Fronteras S.A.
NIS
 
New Israeli Shekel
PBC
 
Property & Building Corporation Ltd.
PBEL
 
PBEL Real Estate LTD
Quality
 
Quality Invest S.A.
Shufersal
 
Shufersal Ltd.
Tarshop
 
Tarshop S.A.
Tyrus
 
Tyrus S.A.
 
 
 
 
 
 
1
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Financial Position
as of September 30, 2018 and June 30, 2017
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Note
09.30.18
 
06.30.18
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Investment properties
8
225,746
 
162,726
Property, plant and equipment
9
19,402
 
13,403
Trading properties
10, 21
3,186
 
6,018
Intangible assets
11
17,400
 
12,297
Other assets
 
114
 
189
Investments in associates and joint ventures
7
34,122
 
24,650
Deferred income tax assets
18
406
 
380
Income tax and MPIT credit
 
415
 
415
Restricted assets
12
2,520
 
2,044
Trade and other receivables
13
11,637
 
8,142
Investments in financial assets
12
2,405
 
1,703
Financial assets held for sale
12
12,895
 
7,788
Total non-current assets
 
330,248
 
239,755
Current assets
 
 
 
 
Trading properties
10, 21
3,705
 
3,232
Inventories
21
880
 
630
Restricted assets
12
6,493
 
4,245
Income tax and MPIT credit
 
496
 
399
Group of assets held for sale
27
8,922
 
5,192
Trade and other receivables
13
21,125
 
14,947
Investments in financial assets
12
35,345
 
25,503
Financial assets held for sale
12
10,772
 
4,466
Derivative financial instruments
12
89
 
87
Cash and cash equivalents
12
70,788
 
37,317
Total current assets
 
158,615
 
96,018
TOTAL ASSETS
 
488,863
 
335,773
SHAREHOLDERS’ EQUITY
 
 
 
 
Shareholders' equity attributable to the parent (according to corresponding statement)
 
50,716
 
37,421
Non-controlling interest
 
52,274
 
37,120
TOTAL SHAREHOLDERS’ EQUITY
 
102,990
 
74,541
LIABILITIES
 
 
 
 
Non-current liabilities
 
 
 
 
Borrowings
16
263,765
 
181,046
Deferred income tax liabilities
18
33,312
 
26,197
Trade and other payables
15
2,138
 
3,484
Income tax and MPIT liabilities
 
27
 
 -
Provisions
17
5,454
 
3,549
Employee benefits
 
159
 
110
Derivative financial instruments
12
61
 
24
Salaries and social security liabilities
 
94
 
66
Total non-current liabilities
 
305,010
 
214,476
Current liabilities
 
 
 
 
Trade and other payables
15
16,729
 
14,617
Borrowings
16
53,363
 
25,587
Provisions
17
1,536
 
1,053
Group of liabilities held for sale
27
6,118
 
3,243
Salaries and social security liabilities
 
2,281
 
1,553
Income tax and MPIT liabilities
 
615
 
522
Derivative financial instruments
12
221
 
181
Total current liabilities
 
80,863
 
46,756
TOTAL LIABILITIES
 
385,873
 
261,232
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
488,863
 
335,773
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
                                             ..
Eduardo S. Elsztain   
President         
 
2
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Income and Other Comprehensive Income
for the three-month periods ended September 30, 2018 and 2017
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Three month
 
Note
09.30.18
 
09.30.17
Revenues
19
10,827
 
7,029
Costs
20, 21
(6,519)
 
(3,912)
Gross profit
 
4,308
 
3,117
Net gain from fair value adjustment of investment properties
8
16,012
 
3,360
General and administrative expenses
20
(1,241)
 
(793)
Selling expenses
20
(1,484)
 
(987)
Other operating results, net
22
321
 
103
Profit from operations
 
17,916
 
4,800
Share of profit of associates and joint ventures
7
436
 
393
Profit before financial results and income tax
 
18,352
 
5,193
Finance income
23
1,698
 
273
Finance costs
23
(14,146)
 
(4,888)
Other financial results
23
7,058
 
297
Financial results, net
 
(5,390)
 
(4,318)
Profit before income tax
 
12,962
 
875
Income tax expense
18
(1,832)
 
(1,152)
Profit / (loss) for the period from continuing operations
 
11,130
 
(277)
(Loss) / profit for the period from discontinued operations
28
(46)
 
351
Profit for the period
 
11,084
 
74
Other comprehensive income:
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
Currency translation adjustment
 
12,847
 
(179)
Share of other comprehensive income / (loss) of associates and joint ventures
 
4,345
 
(268)
Change in the fair value of hedging instruments net of income taxes
 
1
 
 -
Other comprehensive income / (loss) for the period from continuing operations
 
17,193
 
(447)
Other comprehensive income / (loss) for the period from discontinued operations
 
674
 
(4)
Total other comprehensive income / (loss) for the period
 
17,867
 
(451)
Total comprehensive income / (loss) for the period
 
28,951
 
(377)
 
 
 
 
 
Total comprehensive income / (loss) from continuing operations
 
28,323
 
(724)
Total comprehensive income from discontinued operations
 
628
 
347
Total comprehensive income / (loss) for the period
 
28,951
 
(377)
 
 
 
 
 
Profit / (loss) for the period attributable to:
 
 
 
 
Equity holders of the parent
 
9,401
 
553
Non-controlling interest
 
1,683
 
(479)
 
 
 
 
 
Profit / (loss) from continuing operations attributable to:
 
 
 
 
Equity holders of the parent
 
9,440
 
422
Non-controlling interest
 
1,690
 
(699)
 
 
 
 
 
Total comprehensive income / (loss) attributable to:
 
 
 
 
Equity holders of the parent
 
13,357
 
272
Non-controlling interest
 
15,594
 
(649)
 
 
 
 
 
Total comprehensive income / (loss) from continuing operations attributable to:
 
 
 
 
Equity holders of the parent
 
12,731
 
165
Non-controlling interest
 
15,592
 
(889)
 
 
 
 
 
Profit per share attributable to equity holders of the parent:
 
 
 
 
Basic
 
16.35
 
0.96
Diluted
 
16.24
 
0.96
 
 
 
 
 
Profit per share from continuing operations attributable to equity holders of the parent:
 
 
 
 
Basic
 
16.42
 
0.73
Diluted
 
16.30
 
0.73
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
                                            .
Eduardo S. Elsztain    
President         
 
3
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
for the three-month period ended September 30, 2018
(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, 2018
575
4
123
793
19
143
2,751
2,111
30,902
37,421
37,120
74,541
Adjustments previous periods (IFRS 9 and 15) (Note 2.2)
 -
 -
 -
 -
 -
 -
 -
 -
(73)
(73)
(3)
(76)
Restated balance as of July 1, 2018
575
4
123
793
19
143
2,751
2,111
30,829
37,348
37,117
74,465
Profit for the period
 -
 -
 -
 -
 -
 -
 -
 -
9,401
9,401
1,683
11,084
Other comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
3,956
 -
3,956
13,911
17,867
Total profit and other comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
3,956
9,401
13,357
15,594
28,951
Shared-based compensation
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
1
1
Dividends distribution to non-controlling interest in subsidiaries
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
(205)
(205)
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
 -
11
 -
11
(233)
(222)
Balance as of September 30, 2018
575
4
123
793
19
143
2,751
6,078
40,230
50,716
52,274
102,990
 
 
(1)
Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 16 to the Annual Financial Statements.
(2)
Related to CNV General Resolution N° 609/12.
(3)
Group´s other reserves for the period ended September 30, 2018 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
Revaluation surplus
Special reserve
Reserve for defined contribution plans
Other reserves from subsidiaries
Total Other reserves
Balance as of July 1, 2018
(25)
(2,471)
79
494
1,960
14
45
2,081
(103)
37
2,111
Other comprehensive profit for the period
 -
 -
 -
 -
3,943
13
 -
 -
 -
 -
3,956
Total comprehensive loss for the period
 -
 -
 -
 -
3,943
13
 -
 -
 -
 -
3,956
Share-based compensation
1
 -
(1)
 -
 -
 -
 -
 -
 -
 -
 -
Changes in non-controlling interest
 -
11
 -
 -
 -
 -
 -
 -
 -
 -
11
Balance as of September 30, 2018
(24)
(2,460)
78
494
5,903
27
45
2,081
(103)
37
6,078
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
                                            .
Eduardo S. Elsztain    
President         
 
 
4
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
for the three-month period ended September 30, 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 / (loss) for the period
 -
 -
 -
 -
 -
 -
 -
 -
553
553
(479)
74
Other comprehensive loss for the period
 -
 -
 -
 -
 -
 -
 -
(281)
 -
(281)
(170)
(451)
Total profit / (loss) and other comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
(281)
553
272
(649)
(377)
Issuance of capital
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
2
2
Shared-based compensation
 -
 -
 -
 -
 -
 -
 -
1
 -
1
18
19
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
 -
(30)
 -
(30)
(45)
(75)
Dividends distribution to non-controlling interest in subsidiaries
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
1
1
Balance as of September 30, 2017
575
4
123
793
17
143
2,751
1,855
19,846
26,107
20,799
46,906
 
(1)
Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 16 to the Annual Financial Statements.
(2)
Related to CNV General Resolution N° 609/12.
(3)
Group’s other reserves for the period ended September 30, 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 instruments
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
 -
 -
 -
 -
(239)
(4)
(38)
 -
(281)
Total comprehensive loss for the period
 -
 -
 -
 -
(239)
(4)
(38)
 -
(281)
Share-based compensation
 -
 -
1
 -
 -
 -
 -
 -
1
Changes in non-controlling interest
 -
(30)
 -
 -
 -
 -
 -
 -
(30)
Balance as of September 30, 2017
(28)
156
79
494
1,155
15
(53)
37
1,855
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
                                            .
Eduardo S. Elsztain    
President          

 
5
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Cash Flows
for the three-month periods ended September 30, 2018 and 2017
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Note
09.30.18
 
09.30.17
Operating activities:
 
 
 
 
Net cash generated from continuing operating activities before income tax paid
14
3,303
 
2,393
Income tax and MPIT paid
 
(60)
 
(155)
Net cash generated from continuing operating activities
 
3,243
 
2,238
Net cash generated from discontinued operating activities
 
191
 
400
Net cash generated from operating activities
 
3,434
 
2,638
Investing activities:
 
 
 
 
Increase of interest in associates and joint ventures
 
(61)
 
(30)
Acquisition, improvements and advance payments for the development of investment properties
 
(1,172)
 
(621)
Cash incorporated by deconsolidation of subsidiary
 
33
 
 -
Proceeds from sales of investment properties
 
7
 
26
Acquisitions and improvements of property, plant and equipment
 
(491)
 
(718)
Advanced payments
 
 -
 
(106)
Acquisitions of intangible assets
 
(433)
 
(114)
Net increase of restricted deposits
 
(181)
 
(223)
Dividends collected from associates and joint ventures
 
90
 
76
Proceeds from sales of interest held in associates and joint ventures
 
389
 
 -
Proceeds from loans granted
 
57
 
 -
Acquisitions of investments in financial assets
 
(4,984)
 
(6,675)
Proceeds from disposal of investments in financial assets
 
7,640
 
3,477
Interest received from financial assets
 
183
 
54
Dividends received
 
125
 
22
Loans granted to related parties
 
(5)
 
(229)
Loans granted
 
 -
 
(88)
Net cash generated from / (used in) continuing investing activities
 
1,197
 
(5,149)
Net cash used in discontinued investing activities
 
(119)
 
(379)
Net cash generated from / (used in) in investing activities
 
1,078
 
(5,528)
Financing activities:
 
 
 
 
Borrowings and issuance of non-convertible notes
 
14,383
 
4,803
Payment of borrowings and non-convertible notes
 
(2,830)
 
(1,326)
Obtention of short term loans, net
 
671
 
375
Interests paid
 
(1,590)
 
(1,572)
Issuance of capital in subsidiaries
 
 -
 
276
Repurchase of non-convertible notes
 
(496)
 
 -
Capital contributions from non-controlling interest in subsidiaries
 
 -
 
129
Acquisition of non-controlling interest in subsidiaries
 
(227)
 
(45)
Proceeds from sales of non-controlling interest in subsidiaries
 
7
 
18
Loans received from associates and joint ventures, net
 
53
 
 -
Payment of borrowings to related parties
 
(3)
 
 -
Dividends paid to non-controlling interest in subsidiaries
 
(220)
 
(131)
Proceeds from derivative financial instruments, net
 
233
 
22
Net cash generated from continuing financing activities
 
9,981
 
2,549
Net cash used in discontinued financing activities
 
99
 
1,463
Net cash generated from financing activities
 
10,080
 
4,012
Net increase in cash and cash equivalents from continuing activities
 
14,421
 
(362)
Net increase in cash and cash equivalents from discontinued activities
 
171
 
1,484
Net increase in cash and cash equivalents
 
14,592
 
1,122
Cash and cash equivalents at beginning of period
13
37,317
 
24,854
Cash and cash equivalents reclassified to held for sale
 
(184)
 
4
Foreign exchange gain on cash and changes in fair value of cash equivalents
 
19,063
 
52
Cash and cash equivalents at end of period
13
70,788
 
26,032
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
                                            .
Eduardo Elsztain     
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 November 7, 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.G. to the Annual Financial Statements for more information about the changes within the Operations Center in Israel.
 
 
2.
Summary of significant accounting policies
 
2.1.
Basis of preparation
 
The CNV, in Title IV "Periodic Information Regime" - Chapter III "Rules relating to the presentation and valuation of financial statements" - Article 1, of its standards, has established the application of the Technical Resolution No. 26 (RT 26) of the FACPCE and its amendments, which adopt IFRS, issued by the IASB, for certain companies included in the public offering regime of Law No. 26,831, either because of its stock or its non-convertible notes, or that have requested authorization to be included in the aforementioned regime.
 
Also, in Article 3 of the aforementioned CNV regulations, it is established that "The companies subject to the Commission's control cannot apply the method of restating financial statements in a homogeneous currency."
 
For the preparation of these financial statements, the Group has made use of the option provided by IAS 34, and has prepared them in a condensed form. Therefore, these financial statements do not include all the information required in a complete set of annual financial statements and, consequently, it is recommended that they be read together with the annual financial statements as of June 30, 2018.
 
In view of what has been mentioned in the preceding paragraphs, Group’s management has prepared these financial statements in accordance with the accounting principles established by the CNV, which are based on the application of IFRS, in particular of IAS 34, with the only exception to the application of IAS 29 (which determines the mandatory restatement of financial statements), excluded by the CNV from its accounting framework.
 
 
 
 
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IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Additionally, the information required by the CNV indicated in article 1, Chapter III, Title IV of General Resolution N° 622/13 has been included. Such information is included in a note to these financial statements.
 
IAS 29 "Financial Reporting in Hyperinflationary Economies" requires that the financial statements of an entity whose functional currency is one of a hyperinflationary economy be expressed in terms of the current unit of measurement at the closing date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. To do so, in general terms, the inflation produced from the date of acquisition or from the revaluation date, as applicable, must be calculated for non-monetary items. This requirement also includes the comparative information of the financial statements.
 
In order to conclude on whether an economy is categorized as high inflation in the terms of IAS 29, the standard details a series of factors to be considered, including the existence of an accumulated inflation rate in three years that approximates to or exceeds 100%. Accumulated inflation in Argentina in three years is over 100%. It is for this reason that, in accordance with IAS 29, Argentina has a high inflation economy starting July 1, 2018. In turn, on July 24, 2018, the FACPCE, issued a communication confirming the aforementioned. However, it must be taken into account that, at the time of issuance of these financial statements, National Executive Decree 664/03 is in force, which does not allow the presentation of restated financial statements before the CNV. Therefore, given this decree, and the regulatory framework of the CNV, the Group's management has not applied IAS 29 in the preparation of these financial statements.
 
In an inflationary period, any entity that maintains an excess of monetary assets over monetary liabilities, will lose purchasing power, and any entity that maintains an excess of monetary liabilities over monetary assets, will gain purchasing power, provided that such items are not subject to an adjustment mechanism.
 
Briefly, the restatement method of IAS 29 establishes that monetary assets and liabilities must not be restated since they are already expressed in the current unit of measurement at the end of the reporting period. Assets and liabilities subject to adjustments based on specific agreements must be adjusted in accordance with such agreements. The non-monetary items measured at their current values at the end of the reporting period, such as the net realization value or others, do not need to be restated. The remaining non-monetary assets and liabilities must be restated by a general price index. The loss or gain from the net monetary position will be included in the net result of the reporting year / period, revealing this information in a separate line item.
 
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 Annual Financial Statements, as described in Note 2 to those Financial Statements except for what it’s mentioned in Note 2.1 to the present Financial Statements.
 
As described in Note 2.2 to the Annual Financial Statements, the Group adopted IFRS 15 “Revenues from contracts with customers” and IFRS 9 “Financial instruments” in the present fiscal year using the cumulative effect approach, so that the cumulative impact of the adoption was recognized in the retained earnings at the beginning of the period, and the comparative figures have not been modified due to this adoption.
 
The main changes are the following:
 
IFRS 15: Revenues from contracts with customers
 
The standard introduces a new five-step model for recognizing revenue from contracts with customers:
1.
Identifying the contract with the customer.
2.
Identifying separate performance obligations in the contract.
3.
Determining the transaction price.
4.
Allocating the transaction price to separate performance obligations.
5.
Recognizing revenue when the performance obligations are satisfied.
 
 
 
 
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IRSA Inversiones y Representaciones Sociedad Anónima
 
 
IFRS 9: Financial instruments
 
The new standard includes a new model of "expected credit loss" for receivables or other assets not measured at fair value. The new model presents a dual measurement approach for impairment: if the credit risk of a financial asset has not increased significantly since its initial recognition, an allowance for impairment will be recorded in the amount of expected credit losses resulting from the possible non- compliance events within a certain period. If the credit risk has increased significantly, in most cases the allowance will increase and the amount of the expected losses should be recorded.
 
In accordance with the new standard, in cases where a change in terms or exchange of financial liabilities is immaterial and does not lead, at the time of analysis, to the reduction of the previous liability and recognition of the new liability, the new cash flows must be discounted at the original effective interest rate, recording the impact of the difference between the present value of the financial liability that has the new terms and the present value of the original financial liability in net income.
 
The effect on the income statement for the three-month period ended September 30, 2018 for the first implementation of IFRS 15 is as follows:
 
 
Three month
 
 
09.30.2018
 
 
According to previous standards
 
Implementation of IFRS 15
 
Current statement of income
Revenues
 
10,390
 
437
 
10,827
Costs
 
(6,165)
 
(354)
 
(6,519)
Gross profit
 
4,225
 
83
 
4,308
Net gain from fair value adjustment of investment properties
 
16,012
 
 -
 
16,012
General and administrative expenses
 
(1,241)
 
 -
 
(1,241)
Selling expenses
 
(1,688)
 
204
 
(1,484)
Other operating results, net
 
321
 
 -
 
321
Profit from operations
 
17,629
 
287
 
17,916
Share of profit of associates and joint ventures
 
416
 
20
 
436
Profit before financial results and income tax
 
18,045
 
307
 
18,352
Finance income
 
1,698
 
 -
 
1,698
Finance costs
 
(14,153)
 
7
 
(14,146)
Other financial results
 
7,058
 
 -
 
7,058
Financial results, net
 
(5,397)
 
7
 
(5,390)
Income before income tax
 
12,648
 
314
 
12,962
Income tax expense
 
(1,769)
 
(63)
 
(1,832)
Income for the period from continuing operations
 
10,879
 
251
 
11,130
Loss for the period from discontinued operations
 
(46)
 
 -
 
(46)
Profit for the period
 
10,833
 
251
 
11,084
 
 
 
 
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IRSA Inversiones y Representaciones Sociedad Anónima
 
 
The effect on the retained earnings as of July 1, 2018 for the first implementation of IFRS 9 and 15 is as follows:
 
 
 
07.01.2018
 
 
Implementation of IFRS 15
 
Implementation of IFRS 9
 
Total
ASSETS
 
 
 
 
 
 
Non- Current Assets
 
 
 
 
 
 
Trading properties
 
(3,339)
 
 -
 
(3,339)
Investments in associates and joint ventures
 
94
 
(85)
 
9
Deferred income tax assets
 
(95)
 
 -
 
(95)
Trade and other receivables
 
497
 
(63)
 
434
Total Non-Current Assets
 
(2,843)
 
(148)
 
(2,991)
Current Assets
 
 
 
 
 
 
Trading properties
 
(734)
 
 -
 
(734)
Trade and other receivables
 
292
 
39
 
331
Total Current Assets
 
(442)
 
39
 
(403)
TOTAL ASSETS
 
(3,285)
 
(109)
 
(3,394)
SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
Capital and reserves attributable to equity holders of the parent
 
 
 
 
 
 
Retained earnings
 
80
 
(153)
 
(73)
Total capital and reserves attributable to equity holders of the parent
 
80
 
(153)
 
(73)
Non-controlling interest
 
126
 
(129)
 
(3)
TOTAL SHAREHOLDERS’ EQUITY
 
206
 
(282)
 
(76)
LIABILITIES
 
 
 
 
 
 
Non-Current Liabilities
 
 
 
 
 
 
Trade and other payables
 
(1,561)
 
 -
 
(1,561)
Borrowings
 
 -
 
197
 
197
Deferred income tax liabilities
 
(60)
 
(79)
 
(139)
Total Non-Current Liabilities
 
(1,621)
 
118
 
(1,503)
Current Liabilities
 
 
 
 
 
 
Trade and other payables
 
(1,870)
 
 -
 
(1,870)
Borrowings
 
 -
 
55
 
55
Total Current Liabilities
 
(1,870)
 
55
 
(1,815)
TOTAL LIABILITIES
 
(3,491)
 
173
 
(3,318)
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
(3,285)
 
(109)
 
(3,394)
 

 
2.3.
Comparability of information
 
Balance items as of June 30, 2018 and September 30, 2017 presented in these Unaudited Condensed Interim Consolidated Financial Statements for comparative purposes arise from the financial statements as of and for such periods. Certain items from prior periods have been reclassified for consistency purposes regarding the loss of control in Shufersal. See note 4.G. to the Annual Financial Statements.
 
2.4.
Use of estimates
 
The preparation of Financial Statements at a certain date requires 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 as the ones applied by the Group in the preparation of the Annual Financial Statements 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.
 
 
 
 
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IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Operations Center in Israel
 
The results of operations of telecommunications and tourism are 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 three-month period ended September 30, 2018 are detailed below. Significant acquisitions and disposals for the fiscal year ended June 30, 2018, are detailed in Note 4 to the Annual Financial Statements.
 
Operations Center in Israel
 
Possible sale of a subsidiary of IDB Tourism
 
On August 14, 2018, the Board of Directors of IDB Tourism approved its engagement in a memorandum of understanding for the sale of 50% of the issued share capital of a company which manages the incoming tourism operation which is held by Israir for a total consideration of NIS 26 million (approximately Ps. 295 as of the date of issuance of these financial statements). The closing of the transaction is expected by November 30, 2018. This transaction does not change the intentions of selling the whole investment in IDBT, which the management of the company expects to complete before June 2019.
 
Partial sale of Clal
 
On August 30, 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 the same conditions that applied to the swap transactions performed in the preceding months of May and August 2017, January and May 2018 described in Note 4 to the Annual Consolidated Financial Statements. The consideration was set at an amount of approximately NIS 173 million (equivalent to approximately Ps. 1,766 as of the transaction date). After the completion of the transaction, IDBD’s interest in Clal was reduced to 29.8% of its share capital.
 
Agreement to sell plot of land in USA
 
In August 2018, a subsidiary of IDBG signed an agreement to sell a plot of land next to the Tivoli project in Las Vegas for a consideration of US$ 18 (approximately Ps. 739 as of the date of issuance of these financial statements).
 
Interest increase in DIC
 
On July 5, 2018 Tyrus acquired 2,062,000 of DIC’s shares in the market for a total amount of NIS 20 (equivalent to Ps. 227 as of that date), which represent 1.35% of the Company’s outstanding shares at such date. As a result of this transaction, the Group’s equity interest has increased from 76.57% to 77.92%. This transaction was accounted for as an equity transaction generating an increase in the net equity attributable to the controlling shareholders by Ps. 11.
 
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 Annual Financial Statements. There have been no changes in risk management or risk management policies applied by the Group since year-end.
 
Since June 30, 2018 and up to the date of issuance of these 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.
 
 
 
 
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IRSA Inversiones y Representaciones Sociedad Anónima
 
 
6.
Segment information
 
As explained in Note 6 to the Annual Financial Statements, the Group reports its financial performance separately in two Operations Centers. Since fiscal year 2018 the CODM reviews certain corporate expenses associated with each operation center in an aggregate manner and separately from each of the segments. Such expenses have been disclosed in the "Corporate" segment of each operation center. Additionally, since fiscal year 2018, the CODM also reviews the office business as a single segment and the entertainment business in an aggregate and separate manner from offices, including that concept in the "Others" segment. Also, as described in Note 4.G. to the Annual Financial Statements, the Group lost control of Shufersal as of June 30, 2018 and has reclassified its results to discontinued operations. Segment information for the period ended September 30, 2017 has been recast for the purposes of comparability with the present period.
 
Below is a summary of the Group’s business units 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 September 30, 2018 and 2017:
 
 
September 30, 2018
 
Operations Center in Argentina
Operations Center in Israel
Total
Joint ventures (1)
Expensesand collectivepromotion funds
Elimination of inter-segment transactions and non-reportable assets / liabilities (2)
Total as per statement of income / statement of financial position
Revenues
1,647
8,728
10,375
(12)
467
(3)
10,827
Costs
(327)
(5,718)
(6,045)
7
(481)
 -
(6,519)
Gross profit / (loss)
1,320
3,010
4,330
(5)
(14)
(3)
4,308
Net gain / (loss) from fair value adjustment of investment properties
16,717
(7)
16,710
(698)
 -
 -
16,012
General and administrative expenses
(280)
(967)
(1,247)
2
 -
4
(1,241)
Selling expenses
(174)
(1,311)
(1,485)
1
 -
 -
(1,484)
Other operating results, net
(18)
336
318
4
 -
(1)
321
Profit / (loss) from operations
17,565
1,061
18,626
(696)
(14)
 -
17,916
Share of profit / (loss) of associates and joint ventures
128
(218)
(90)
526
 -
 -
436
Segment profit / (loss)
17,693
843
18,536
(170)
(14)
 -
18,352
Reportable assets
83,149
386,351
469,500
(512)
 -
19,875
488,863
Reportable liabilities
 -
(326,598)
(326,598)
 -
 -
(59,275)
(385,873)
Net reportable assets
83,149
59,753
142,902
(512)
 -
(39,400)
102,990
 
 
September 30, 2017
 
Operations Center in Argentina
Operations Center in Israel
Total
Joint ventures (1)
Expensesand collectivepromotion funds
Elimination of inter-segment transactions and non-reportable assets / liabilities (2)
Total as per statement of income / statement of financial position
 
Revenues
1,220
5,412
6,632
(11)
411
(3)
7,029
 
Costs
(249)
(3,251)
(3,500)
4
(417)
1
(3,912)
 
Gross profit / (loss)
971
2,161
3,132
(7)
(6)
(2)
3,117
 
Net gain from fair value adjustment of investment properties
2,521
878
3,399
(39)
 -
 -
3,360
 
General and administrative expenses
(191)
(617)
(808)
12
 -
3
(793)
 
Selling expenses
(92)
(896)
(988)
1
 -
 -
(987)
 
Other operating results, net
(27)
115
88
16
 -
(1)
103
 
Profit / (loss) from operations
3,182
1,641
4,823
(17)
(6)
 -
4,800
 
Share of profit / (loss) of associates and joint ventures
487
(106)
381
12
 -
 -
393
 
Segment profit / (loss)
3,669
1,535
5,204
(5)
(6)
 -
5,193
 
Reportable assets
48,196
180,774
228,970
(265)
 -
10,649
239,354
 
Reportable liabilities
 -
(159,846)
(159,846)
 -
 -
(24,060)
(183,906)
 
Net reportable assets
48,196
20,928
69,124
(265)
 -
(13,411)
55,448
 
 
 (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 rights 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. 3,621 as of September 30, 2018.
 
 
 
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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 September 30, 2018 and 2017:
 
September 30, 2018
 
 
Operations Center in Argentina
 
 
Shopping Malls
Offices
Sales and developments
Hotels
International
Corporate
Others
Total
Revenues
1,039
212
25
352
 -
 -
19
1,647
Costs
(96)
(12)
(13)
(185)
 -
 -
(21)
(327)
Gross profit / (loss)
943
200
12
167
 -
 -
(2)
1,320
Net gain from fair value adjustment of investment properties
3,694
8,486
4,318
 -
 -
 -
219
16,717
General and administrative expenses
(115)
(28)
(22)
(54)
(11)
(40)
(10)
(280)
Selling expenses
(96)
(12)
(20)
(43)
 -
 -
(3)
(174)
Other operating results, net
(28)
(4)
(8)
14
2
 -
6
(18)
Profit / (loss) from operations
4,398
8,642
4,280
84
(9)
(40)
210
17,565
Share of profit of associates and joint ventures
 -
 -
15
 -
(70)
 -
183
128
Segment profit / (loss)
4,398
8,642
4,295
84
(79)
(40)
393
17,693
 
 
 
 
 
 
 
 
 
Investment properties and trading properties
44,273
21,707
15,396
 -
73
 -
841
82,290
Investment in associates and joint ventures
 -
 -
178
 -
(2,597)
 -
2,693
274
Other operating assets
95
42
46
175
127
 -
100
585
Operating assets
44,368
21,749
15,620
175
(2,397)
 -
3,634
83,149
 
For the three-month period ended September 30, 2018, the net gain from the fair value adjustment of investment property amounted to Ps. 16,717, and it was generated by:
1. Shopping Malls Segment
The net result of shopping malls was Ps. 3,694 during the current period, mainly as a result of the update of the macroeconomic inputs with respect to those used as of June 30, 2018, with the effects of each input being detailed below:
a) an increase of 26 basis points in the discount rate, representing a decrease of Ps. 1,164 in the value of shopping Malls;
b) an increase in the projected cash flows generated by the update of the projected inflation rates, representing an increase of Ps. 2,401 in the value of the shopping malls;
c) a net increase of Ps. 1,767, generated by the update of the future exchange rates used for the dollar conversion of the projected cash flows (Ps. 11,027 - loss) and for the conversion of the present value of the projected cash flows at the effective exchange rate for the period end (Ps. 12,794 - gain).
2. “Offices", "Sales and developments" and "Others" segments
The net result of the properties included in the present segments was Ps. 9,494, mainly generated by the depreciation of 43% of the Argentine peso and by the upkeep of the reference values in dollars of the square meters of the market comparable. Additionally, during the current period, a gain of Ps. 3,529 was recognized as a result of the fair value measurement of the Dot Zetta development given the fact that it has reached a development stage in which its fair value is reliably measurable.
 
 
September 30, 2017
 
Operations Center in Argentina
 
Shopping Malls
Offices
Sales and developments
Hotels
International
Corporate
Others
Total
 
Revenues
850
121
34
214
 -
 -
1
1,220
 
Costs
(85)
(6)
(10)
(147)
 -
 -
(1)
(249)
 
Gross profit
765
115
24
67
 -
 -
 -
971
 
Net gain from fair value adjustment of investment properties
2,044
270
197
 -
 -
 -
10
2,521
 
General and administrative expenses
(66)
(20)
(19)
(39)
(15)
(28)
(4)
(191)
 
Selling expenses
(49)
(10)
(5)
(28)
 -
 -
 -
(92)
 
Other operating results, net
(9)
(2)
(18)
(2)
(3)
 -
7
(27)
 
Profit / (loss) from operations
2,685
353
179
(2)
(18)
(28)
13
3,182
 
Share of profit of associates and joint ventures
 -
12
2
 -
113
 -
360
487
 
Segment profit / (loss)
2,685
365
181
(2)
95
(28)
373
3,669
 
 
 
 
 
 
 
 
 
 
 
Investment properties and trading properties
30,912
7,774
5,552
 -
 -
 -
257
44,495
 
Investment in associates and joint ventures
 -
 -
141
 -
705
 -
2,426
3,272
 
Other operating assets
84
51
44
170
54
 -
26
429
 
Operating assets
30,996
7,825
5,737
170
759
 -
2,709
48,196
 
 
For the three-month period ended September 30, 2017, the net gain from the fair value adjustment of investment property amounted to Ps. 2,521, and it was generated by:
1. Shopping Malls Segment
The net result of the shopping malls was Ps. 2,044 during the current period, mainly as a result of the update of the macroeconomic inputs with respect to those used as of June 30, 2017, with the effects of each input being detailed below:
a) a decrease of 25 basis points in the discount rate, representing an increase of Ps. 1,154 in the value of shopping Malls;
b) a decrease in the projected cash flows generated by the update of the projected inflation rates, representing a decrease of Ps. 1,305 in the value of the shopping malls;
c) a net increase of Ps. 2,190, generated by the update of the future exchange rates used for the dollar conversion of the projected cash flows (Ps. 984 - gain) and for the conversion of the present value of the projected cash flows at the effective exchange rate for the period end (Ps. 1,206 - gain).
2. “Offices", "Sales and developments" and "Others" segments
The net result of the properties included in the present segments was Ps. 477, mainly generated by the depreciation of 4% of the Argentine peso.
 
 
 
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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 September 30, 2018 and 2017:
 
 
September 30, 2018
 
Operations Center in Israel
 
Real Estate
Supermarkets
Telecommunications
Insurance
Corporate
Others
Total
Revenues
2,332
 -
6,205
 -
 -
191
8,728
Costs
(1,041)
 -
(4,558)
 -
 -
(119)
(5,718)
Gross profit
1,291
 -
1,647
 -
 -
72
3,010
Net loss from fair value adjustment of investment properties
(7)
 -
 -
 -
 -
 -
(7)
General and administrative expenses
(119)
 -
(553)
 -
(117)
(178)
(967)
Selling expenses
(40)
 -
(1,225)
 -
 -
(46)
(1,311)
Other operating results, net
 -
 -
 -
 -
 -
336
336
Profit / (loss) from operations
1,125
 -
(131)
 -
(117)
184
1,061
Share of loss of associates and joint ventures
(119)
 -
 -
 -
 -
(99)
(218)
Segment profit / (loss)
1,006
 -
(131)
 -
(117)
85
843
 
 
 
 
 
 
 
 
Operating assets
203,487
19,739
74,904
23,666
41,838
22,717
386,351
Operating liabilities
(160,228)
 -
(58,230)
 -
(99,330)
(8,810)
(326,598)
Operating assets (liabilities), net
43,259
19,739
16,674
23,666
(57,492)
13,907
59,753
 
 
 
September 30, 2017
 
Operations Center in Israel
 
Real Estate
Supermarkets
Telecommunications
Insurance
Corporate
Others
Total
 
Revenues
997
 -
4,226
 -
 -
189
5,412
 
Costs
(250)
 -
(2,991)
 -
 -
(10)
(3,251)
 
Gross profit
747
 -
1,235
 -
 -
179
2,161
 
Net gain from fair value adjustment of investment properties
878
 -
 -
 -
 -
 -
878
 
General and administrative expenses
(83)
 -
(382)
 -
(59)
(93)
(617)
 
Selling expenses
(26)
 -
(826)
 -
 -
(44)
(896)
 
Other operating results, net
22
 -
145
 -
 -
(52)
115
 
Profit / (loss) from operations
1,538
 -
172
 -
(59)
(10)
1,641
 
Share of (loss) / profit of associates and joint ventures
(211)
 -
 -
 -
 -
105
(106)
 
Segment profit / (loss)
1,327
 -
172
 -
(59)
95
1,535
 
 
 
 
 
 
 
 
 
 
Operating assets
83,752
37,486
32,601
8,652
11,228
7,055
180,774
 
Operating liabilities
(66,424)
(26,196)
(25,996)
 -
(35,869)
(5,361)
(159,846)
 
Operating assets (liabilities), net
17,328
11,290
6,605
8,652
(24,641)
1,694
20,928
 
 
7.
Investments in associates and joint ventures
 
Changes in the Group’s investments in associates and joint ventures for the three-month period ended September 30, 2018 and for the year ended June 30, 2018 were as follows:
 
 
September 30, 2018
 
June 30, 2018
Beginning of the period / year
22,198
 
7,813
Adjustment previous periods (IFRS 9 and 15)
9
 
 -
Increase in equity interest in associates and joint ventures
53
 
343
Issuance of capital and contributions
8
 
156
Capital reduction
 -
 
(284)
Decrease of interest in associate
 -
 
(339)
Share of profit / (loss)
436
 
(701)
Transfer to borrowings to associates
 -
 
(190)
Currency translation adjustment
7,887
 
3,056
Incorporation of deconsolidated subsidiary, net
 -
 
12,763
Dividends (i)
(90)
 
(319)
Distribution for associate liquidation
 -
 
(72)
Reclassification to held for sale
 -
 
(44)
Others
 -
 
16
End of the period / year (ii)
30,501
 
22,198
 
(i)
See Note 24.
(ii)
As of September 30, 2018 and June 30, 2017 includes Ps. (3,621) and Ps. (2,452) respectively, reflecting interests in companies with negative equity, which were disclosed in “Provisions” (see Note 17).
 
 
14
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Name of the entity
 
 
% ownership interest
 
Value of Group's interest in equity
 
Group's interest in comprehensive income / (loss)
 
September 30, 2018
June 30, 2018
 
September 30, 2018
June 30, 2018
 
September 30, 2018
September 30, 2017
Associates
 
 
 
 
 
 
 
 
 
New Lipstick (1)
 
49.90%
49.90%
 
(3,621)
(2,452)
 
(1,168)
111
BHSA
 
29.91%
29.91%
 
2,343
2,250
 
160
371
Condor
 
18.90%
18.90%
 
1,000
696
 
322
30
PBEL
 
45.40%
45.40%
 
1,555
1,049
 
506
(60)
Shufersal
 
33.57%
33.56%
 
19,739
12,763
 
6,018
 -
Other associates
 
N/A
N/A
 
2,228
2,610
 
476
(57)
Joint ventures
 
 
 
 
 
 
 
 
 
Quality
 
50.00%
50.00%
 
1,519
1,062
 
449
17
La Rural SA
 
50.00%
50.00%
 
116
94
 
22
11
Mehadrin
 
45.41%
45.41%
 
2,963
2,272
 
730
(67)
Other joint ventures
 
N/A
N/A
 
2,659
1,854
 
808
6
Total associates and joint ventures
 
 
 
 
30,501
22,198
 
8,323
362
 
(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
 
(*) (8)
 
(*) (186)
BHSA
 
Argentina
 
Financial
 
448,689,072
 
(***) 1,500
 
(***) 2,238
 
(***) 8,719
Condor
 
U.S.
 
Hotel
 
2,245,100
 
N/A
 
 (*) 6
 
 (*) 105
PBEL
 
India
 
Real estate
 
450
 
(**) 1
 
(**) (4)
 
(**) (491)
Shufersal
 
Israel
 
Retail
 
79,282,087
 
(**) 242
 
(**) 85
 
(**) 1,827
Other associates
 
 
 
 
 
 
 
N/A
 
N/A
 
N/A
Joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Quality
 
Argentina
 
Real estate
 
120,827,022
 
242
 
898
 
3,031
La Rural SA
 
Argentina
 
Organization of events
 
714,498
 
1
 
49
 
195
Mehadrin
 
Israel
 
Agriculture
 
1,509,889
 
(**) 3
 
(**) (39)
 
(**) 542
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 June 30, 2018 according to BCRA's standards. For the purpose of the valuation of the investment in the Company, preliminary figures as of September 30, 2018 with the necessary IFRS adjustments have been considered.
 
Puerto Retiro (joint venture):
 
At present, this 8.3 hectare plot of land, which is located in one of the most privileged areas of the city, near Catalinas, Puerto Madero and Retiro and is the only privately owned waterfront property facing directly to Río de la Plata, is affected by a zoning regulation defined as U.P. which prevents the property from being used for any purposes other than strictly port activities.
 
The Company was involved in a judicial bankruptcy action brought by the National Government, to which this Board of Directors is totally alien. Management and legal counsel of the Company believe that there are sufficient legal and technical arguments to consider that the petition for extension of the bankruptcy case will be dismissed by the court. However, in view of the current status of the action, its result cannot be predicted.
 
 
 
 
15
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Moreover, Tandanor filed a civil action against Puerto Retiro S.A. and the other defendants in the criminal case for violation of Section 174 (5) based on Section 173 (7) of the Criminal Code of Argentina. Such action seeks -on the basis of the nullity of the decree that approved the bidding process involving the Dársena Norte property- the restitution of the property and a reimbursement in favor of Tandanor for all such amounts it has allegedly lost as a result of a suspected fraudulent transaction involving the sale of the property. Puerto Retiro has presented the allegation on the merit of the evidence, highlighting that the current shareholders of Puerto Retiro did not participate in any of the suspected acts in the criminal case since they acquired the shares for consideration and in good faith several years after the facts told in the process. Likewise, it was emphasized that the company Puerto Retiro is foreign to the bidding / privatization carried out for the sale of Tandanor shares. The dictation of the sentence is expected.
 
On September 7, 2018, the Oral Federal Criminal Court No. 5 rendered a decision. According to the sentence read by the president of the Court, Puerto Retiro won the preliminary objection of limitation filed in the civil action. However, in the criminal case, where Puerto Retiro is not a party, it was ordered, among other issues, the confiscation (“decomiso”) of the property owned by Puerto Retiro known as Planta I. The grounds of the Court`s judgement will be read on November 11, 2018. From that moment, all the parties will be able to file the appeals. Although there are solid arguments to try to refute the disposed seizure, this can be affirmed with a greater degree of certainty after the publications of the fundamentals of the ruling, at this time only the resolute part of this ruling is known.
 
In the criminal action, the claimant reported the violation by Puerto Retiro of the injunction ordered by the criminal court consisting in an order to stay (“prohibición de innovar”) and not to contract with respect to the property disputed in the civil action. As a result of such report, the Oral Federal Court (Tribunal Oral Federal) No. 5 started interlocutory proceedings, and on June 8, 2017, it ordered and carried out the closing of the property that was subject to lease agreements with Los Cipreses S.A. and Flight Express S.A. with the aim of enforcing the referred order. As a result, the proceedings were forwarded to the Criminal Court for it to appoint the court that will investigate the alleged commission of the crime of contempt.
 
Our legal counsel considers that there is a chance of success of the defense of Puerto Retiro, always taking into account that this is a complex issue subject to more than one interpretation by legal scholars and case law.
 
8.
Investment properties
 
Changes in the Group’s investment properties for the three-month period ended September 30, 2018 and for the year ended June 30, 2018 were as follows:
 
Period ended September 30, 2018
 
Year ended June 30, 2018
 
Rental properties
 
Undeveloped parcels of land
 
Properties under development
 
Total
 
Total
Fair value at the beginning of the period / year
141,241
 
12,608
 
8,877
 
162,726
 
99,953
Additions
246
 
218
 
497
 
961
 
3,289
Capitalized finance costs
 -
 
 -
 
23
 
23
 
82
Capitalized leasing costs
2
 
 -
 
 -
 
2
 
18
Amortization of capitalized leasing costs (i)
(2)
 
 -
 
 -
 
(2)
 
(5)
Transfers
464
 
(105)
 
(359)
 
 -
 
 -
Transfers to / from property, plant and equipment
(9)
 
 -
 
 -
 
(9)
 
1,700
Transfers to / from trading properties
 -
 
(53)
 
59
 
6
 
353
Transfers to assets held for sale
 -
 
 -
 
 -
 
 -
 
(521)
Assets incorporated by business combination
 -
 
 -
 
 -
 
 -
 
107
Deconsolidation
 
 
 
 
 
 
 
 
 
Disposals
(5)
 
 -
 
 -
 
(5)
 
(571)
Currency translation adjustment
41,791
 
1,755
 
2,486
 
46,032
 
40,041
Net gain from fair value adjustment
8,086
 
3,798
 
4,128
 
16,012
 
22,769
Fair value at the end of the period / year
191,814
 
18,221
 
15,711
 
225,746
 
162,726
 
(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:
 
 
09.30.18
 
09.30.17
Rental and services income
3,350
 
2,454
Direct operating expenses
(914)
 
(654)
Development expenditures
(740)
 
(35)
Net realized gain from fair value adjustment of investment properties
 -
 
24
Net unrealized gain from fair value adjustment of investment properties
16,012
 
3,380
 
 
 
 
16
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Valuation techniques are described in Note 9 to the Annual Financial Statements. There were no changes to such techniques. The Company has reassessed the assumptions at the end of the period, incorporating the effect of the variation in the exchange rate in other assets denominated in US Dollars.
 
9.
Property, plant and equipment
 
Changes in the Group’s property, plant and equipment for the three-month period ended September 30, 2018 and for the year ended June 30, 2018 were as follows:
 
Period ended September 30, 2018
 
Year ended June 30, 2018
 
Buildings and facilities
 
Machinery and equipment
 
Communication networks
 
Others
 
Total
 
Total
Costs
1,809
 
489
 
14,975
 
4,093
 
21,366
 
32,316
Accumulated depreciation
(696)
 
(175)
 
(5,357)
 
(1,735)
 
(7,963)
 
(5,203)
Net book amount at the beginning of the period / year
1,113
 
314
 
9,618
 
2,358
 
13,403
 
27,113
Additions
35
 
5
 
422
 
307
 
769
 
3,984
Disposals
(2)
 
 -
 
(13)
 
 -
 
(15)
 
(95)
Deconsolidation
 -
 
 -
 
 -
 
 -
 
 -
 
(29,001)
Impairment / recovery
 -
 
 -
 
 -
 
 -
 
 -
 
(69)
Assets incorporated by business combinations
 -
 
 -
 
 -
 
 -
 
 -
 
217
Currency translation adjustment
405
 
118
 
4,218
 
1,125
 
5,866
 
16,332
Transfers from / to investment properties
 -
 
9
 
 -
 
 -
 
9
 
(1,568)
Depreciation charges (i)
(31)
 
(6)
 
(408)
 
(185)
 
(630)
 
(3,510)
Balances at the end of the period / year
1,520
 
440
 
13,837
 
3,605
 
19,402
 
13,403
Costs
2,422
 
639
 
22,248
 
6,399
 
31,708
 
21,366
Accumulated depreciation
(902)
 
(199)
 
(8,411)
 
(2,794)
 
(12,306)
 
(7,963)
Net book amount at the end of the period / year
1,520
 
440
 
13,837
 
3,605
 
19,402
 
13,403
 
(i)
As of September 30, 2018, depreciation charges of property, plant and equipment were recognized as follows: Ps. 570 in "Costs", Ps. 47 in "General and administrative expenses" and Ps. 13 in "Selling expenses", respectively in the Statement of Income (Note 20).
 
10.
Trading properties
 
Changes in the Group’s trading properties for the three-month period ended September 30, 2018 and for the year ended June 30, 2018 were as follows:
 
Period ended September, 2018
 
Year ended June 30, 2018
 
Completed properties
 
Properties under development
 
Undeveloped sites
 
Total
 
Total
Beginning of the period / year
2,609
 
5,026
 
1,615
 
9,250
 
5,781
Adjustment previous periods (IFRS 15)
(757)
 
(3,316)
 
 -
 
(4,073)
 
 -
Additions
 -
 
517
 
7
 
524
 
1,870
Currency translation adjustment
278
 
1,216
 
465
 
1,959
 
3,649
Transfers
 -
 
244
 
(244)
 
 -
 
 -
Transfers from intangible assets
 -
 
 -
 
 -
 
 -
 
9
Transfers to investment properties
 -
 
(6)
 
 -
 
(6)
 
(353)
Capitalized finance costs
 -
 
5
 
 -
 
5
 
11
Disposals
(731)
 
(37)
 
 -
 
(768)
 
(1,717)
End of the period / year
1,399
 
3,649
 
1,843
 
6,891
 
9,250
Non-current
 
 
 
 
 
 
3,186
 
6,018
Current
 
 
 
 
 
 
3,705
 
3,232
Total
 
 
 
 
 
 
6,891
 
9,250
 
 
 
 
17
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
11.
Intangible assets
 
Changes in the Group’s intangible assets for the three-month period ended September 30, 2018 and for the year ended June 30, 2018 were as follows:
 
Period ended September 30, 2018
Year ended June 30, 2018
 
Goodwill
Trademarks
Licenses
Customer relations
Information systems and software
Contracts and others
Total
Total
Costs
3,086
3,274
1,657
6,933
3,281
2,695
20,926
16,317
Accumulated amortization
 -
(197)
(481)
(4,632)
(1,627)
(1,692)
(8,629)
(3,930)
Net book amount at the beginning of the period / year
3,086
3,077
1,176
2,301
1,654
1,003
12,297
12,387
Additions
 -
 -
 -
 -
176
218
394
647
Disposals
 -
 -
 -
 -
(7)
 -
(7)
 -
Deconsolidation
 -
 -
 -
 -
 -
 -
 -
(7,108)
Transfers to trading properties
 -
 -
 -
 -
 -
 -
 -
(9)
Assets incorporated by business combination
 -
 -
 -
 -
 -
 -
 -
1,009
Currency translation adjustment
1,320
1,340
501
878
700
489
5,228
7,370
Amortization charges (i)
 -
(13)
(20)
(198)
(142)
(139)
(512)
(1,999)
Balances at the end of the period / year
4,406
4,404
1,657
2,981
2,381
1,571
17,400
12,297
Costs
4,406
4,711
2,383
9,985
4,949
4,239
30,673
20,926
Accumulated amortization
 -
(307)
(726)
(7,004)
(2,568)
(2,668)
(13,273)
(8,629)
Net book amount at the end of the period / year
4,406
4,404
1,657
2,981
2,381
1,571
17,400
12,297
 
(i) As of September 30, 2018, amortization charges were recognized in the amount of Ps. 150 in "Costs", Ps. 138 in "General and administrative expenses" and Ps. 224 in "Selling expenses", in the Statement of Income (Note 20).
 
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 Annual Financial Statements. Financial assets and financial liabilities as of September 30, 2018 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
 
 
 
 
 
 
September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables)
27,038
 
 -
 -
 -
 
27,038
 
7,485
 
34,523
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 
 
  - Public companies’ securities
 -
 
 -
 -
197
 
197
 
 -
 
197
  - Private companies’ securities
 -
 
 -
 -
1,658
 
1,658
 
 -
 
1,658
  - Deposits
2,838
 
 -
 -
 -
 
2,838
 
 -
 
2,838
  - Bonds
6
 
 -
715
 -
 
721
 
 -
 
721
  - Convertible Notes
 -
 
 -
 -
1,093
 
1,093
 
 -
 
1,093
  - Investments in financial assets with quotation
 -
 
31,243
 -
 -
 
31,243
 
 -
 
31,243
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
 -
 
 -
78
 -
 
78
 
 -
 
78
  - Others
 -
 
 -
11
 -
 
11
 
 -
 
11
Restricted assets (i)
9,013
 
 -
 -
 -
 
9,013
 
 -
 
9,013
Financial assets held for sale:
 
 
 
 
 
 
 
 
 
 
 
  - Clal
 -
 
23,667
 -
 -
 
23,667
 
 -
 
23,667
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
  - Cash at bank and on hand
9,932
 
 -
 -
 -
 
9,932
 
 -
 
9,932
  - Short-term investments
56,516
 
4,340
 -
 -
 
60,856
 
 -
 
60,856
Total assets
105,343
 
59,250
804
2,948
 
168,345
 
7,485
 
175,830
 
 
18
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
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
 
 
 
 
 
 
September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other payables
14,019
 
 -
 -
 -
 
14,019
 
4,848
 
18,867
Borrowings (excluding finance leases)
317,108
 
 -
 -
 -
 
317,108
 
 -
 
317,108
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
 -
 
 -
11
 -
 
11
 
 -
 
11
  - Swaps
 -
 
 -
67
 -
 
67
 
 -
 
67
  - Others
 -
 
11
 -
34
 
45
 
 -
 
45
  - Forwards
 -
 
 -
159
 -
 
159
 
 -
 
159
Total liabilities
331,127
 
11
237
34
 
331,409
 
4,848
 
336,257
 
Financial assets and financial liabilities as of June 30, 2018 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, 2018
 
 
 
 
 
 
 
 
 
 
 
Assets as per Statements of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables)
18,648
 
 -
 -
 -
 
18,648
 
5,246
 
23,894
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 
 
  - Public companies’ securities
 -
 
 -
 -
135
 
135
 
 -
 
135
  - Private companies’ securities
 -
 
 -
 -
1,168
 
1,168
 
 -
 
1,168
  - Deposits
1,397
 
 -
 -
 -
 
1,397
 
 -
 
1,397
  - Bonds
10
 
 -
505
 -
 
515
 
 -
 
515
  - Convertible Notes
 -
 
 -
 -
793
 
793
 
 -
 
793
  - Investments in financial assets with quotation
 -
 
23,198
 -
 -
 
23,198
 
 -
 
23,198
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
 -
 
 -
71
 -
 
71
 
 -
 
71
  - Swaps
 -
 
 -
16
 -
 
16
 
 -
 
16
Restricted assets (i)
6,289
 
 -
 -
 -
 
6,289
 
 -
 
6,289
Financial assets held for sale:
 
 
 
 
 
 
 
 
 
 
 
  - Clal
 -
 
12,254
 -
 -
 
12,254
 
 -
 
12,254
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
  - Cash at bank and on hand
6,452
 
 -
 -
 -
 
6,452
 
 -
 
6,452
  - Short term investments
28,334
 
2,531
 -
 -
 
30,865
 
 -
 
30,865
Total assets
61,130
 
37,983
592
2,096
 
101,801
 
5,246
 
107,047
 
 
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, 2018
 
 
 
 
 
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other payables
10,265
 
 -
 -
 -
 
10,265
 
7,836
 
18,101
Borrowings (excluding finance leases)
206,617
 
 -
 -
 -
 
206,617
 
 -
 
206,617
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
 -
 
 -
8
 -
 
8
 
 -
 
8
  - Swaps
 -
 
 -
47
 -
 
47
 
 -
 
47
  - Others
 -
 
8
 -
24
 
32
 
 -
 
32
  - Forwards
 -
 
 -
118
 -
 
118
 
 -
 
118
Total liabilities
216,882
 
8
173
24
 
217,087
 
7,836
 
224,923
 
(i) Corresponds to deposits in guarantee and escrows.
 
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, 2018.
 
As of September 30, 2018, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Group.
 
 
19
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
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 10 to 11
Share price volatility 58% to 78%
Market interest-rate
2.9% to 3.5%
Promissory note
 
Discounted cash flows - Theoretical price
 
Underlying asset price (Market price); share price volatility (historical) and market interest rate (Libor rate curve).
 
Level 3
 
Underlying asset price 10 to 11
Share price volatility 58% to 78%
Market interest-rate
2.9% to 3.5%
TGLT Non-Convertible Notes
 
Black-Scholes – Theoretical price
 
Underlying asset price (Market price); share price volatility (historical) and market interest rate (Libor rate curve).
 
Level 3
 
Underlying asset price 10 to 13
Share price volatility 55% to 75%
Market interest rate
8% to 9%
 
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 September 30, 2018 and June 30, 2018:
 
 
Investments in financial assets - Public companies’ Securities
 
Derivative financial instruments - Others
 
Investments in financial assets - Private companies’ Securities
 
Investments in financial assets - Convertible Notes
 
Total as of September 30, 2018
 
Total as of June 30, 2018
Balances at beginning of the period / year
135
 
(24)
 
1,168
 
793
 
2,072
 
1,036
Additions and acquisitions
 -
 
 -
 
7
 
 -
 
7
 
560
Transfer to level 1
 -
 
 -
 
 -
 
 -
 
 -
 
(100)
Currency translation adjustment
59
 
(10)
 
523
 
93
 
665
 
553
Deconsolidation
 -
 
 -
 
 -
 
 -
 
 -
 
(126)
Write off
 -
 
 -
 
 -
 
 -
 
 -
 
(67)
Gain / (loss) for the period / year (i)
3
 
 -
 
(40)
 
207
 
170
 
216
Balances at the end of the period / year
197
 
(34)
 
1,658
 
1,093
 
2,914
 
2,072
 
(i) Included within “Financial results, net” in the Statements of Income.
 
Clal
 
As mentioned in Note 13 to the Annual Financial Statements, IDBD is subject to a judicial process on the sale of its equity interest in Clal. Following completion of the transactions mentioned in note 4 to these financial statements, IDBD’s interest in Clal was reduced to 29.8% of its share capital.
 
20
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
13.
Trade and other receivables
 
Group’s trade and other receivables as of September 30, 2018 and June 30, 2018 are as follows:
 
 
Total as of September 30, 2018
 
Total as of June 30, 2018
Sale, leases and services receivables
23,183
 
15,728
Less: Allowance for doubtful accounts
(1,761)
 
(805)
Total trade receivables
21,422
 
14,923
Prepaid expenses
5,492
 
3,734
Borrowings, deposits and other debit balances
3,149
 
2,289
Advances to suppliers
944
 
733
Tax receivables
494
 
355
Others
1,261
 
1,055
Total other receivables
11,340
 
8,166
Total trade and other receivables
32,762
 
23,089
Non-current
11,637
 
8,142
Current
21,125
 
14,947
Total
32,762
 
23,089
 
Movements on the Group’s allowance for doubtful accounts were as follows:
 
 
September 30, 2018
 
June 30, 2018
Beginning of the period / year
805
 
312
Adjustments previous periods (IFRS 9)
117
 
 -
Additions
176
 
315
Recoveries
(23)
 
(28)
Currency translation adjustment
706
 
622
Deconsolidation
 -
 
(142)
Receivables written off during the period/year as uncollectable
(20)
 
(274)
End of the period / year
1,761
 
805
 
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 three-month periods ended September 30, 2018 and 2017:
 
Note
September 30, 2018
 
September 30, 2017
Profit for the period
 
11,084
 
74
(Loss) / profit for the period from discontinued operations
 
46
 
(351)
Adjustments for:
 
 
 
 
Income tax
18
1,832
 
1,152
Amortization and depreciation
20
1,144
 
863
Loss from disposal of property, plant and equipment
 
 -
 
22
Net gain from fair value adjustment of investment properties
 
(16,012)
 
(3,360)
Share-based compensation
 
7
 
15
Impairment of other assets
 
92
 
 -
Net gain from disposal of intangible assets
 
(7)
 
 -
Gain from disposal of subsidiary
 
(408)
 
(136)
Gain from disposal of trading properties
 
(10)
 
 -
Other financial results, net
 
6,119
 
4,727
Provisions and allowances
 
323
 
(10)
Share of profit of associates and joint ventures
7
(436)
 
(394)
Changes in operating assets and liabilities:
 
 
 
 
Decrease in inventories
 
6
 
28
Decrease in trading properties
 
121
 
99
Increase in restricted assets
 
(99)
 
 -
Increase in trade and other receivables
 
(507)
 
(178)
Increase in trade and other payables
 
115
 
80
Decrease in salaries and social security liabilities
 
(92)
 
(76)
Decrease in provisions
 
(15)
 
(162)
Net cash generated by continuing operating activities before income tax paid
 
3,303
 
2,393
Net cash generated by discontinued operating activities before income tax paid
 
191
 
400
Net cash generated by operating activities before income tax paid
 
3,494
 
2,793
 
21
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
The following table presents a detail of significant non-cash transactions occurred in the three-month periods ended September 30, 2018 and 2017:
 
 
September 30, 2018
 
September 30, 2017
Increase in investment properties through an increase in borrowings
 
23
 
 -
Increase in investment properties through an increase in trade and other payables
 
 -
 
66
Increase in trading properties through an increase in borrowings
 
5
 
 -
Increase in trading properties through a decrease in trade and other receivables
 
42
 
 -
Increase in investment properties through a decrease in trading properties
 
6
 
 -
Increase in property, plant and equipment through an increase in trade and other payables
 
507
 
 -
Increase in intangible assets through an increase in trade and other payables
 
237
 
 -
 
15.
Trade and other payables
 
Group’s trade and other payables as of September 30, 2018 and June 30, 2018 were as follows:
 
 
Total as of September 30, 2018
 
Total as of June 30, 2018
Trade payables
10,451
 
9,688
Sales, rental and services payments received in advance
2,968
 
3,572
Construction obligations
1,385
 
1,475
Accrued invoices
899
 
948
Deferred income
51
 
37
Total trade payables
15,754
 
15,720
Dividends payable to non-controlling shareholders
136
 
123
Tax payables
297
 
325
Construction obligations
602
 
521
Other payables
2,078
 
1,412
Total other payables
3,113
 
2,381
Total trade and other payables
18,867
 
18,101
Non-current
2,138
 
3,484
Current
16,729
 
14,617
Total
18,867
 
18,101
 
16.
Borrowings
 
The breakdown of the Group’s borrowings as of September 30, 2018 and June 30, 2018 was as follows:
 
 
Total as of September 30, 2018 (ii)
 
Total as of June 30, 2018 (ii)
 
Fair value as of September 30, 2018
 
Fair value as of June 30, 2018
NCN
264,692
 
171,142
 
256,081
 
183,338
Bank loans
46,694
 
31,244
 
44,919
 
31,837
Bank overdrafts
1,409
 
671
 
1,409
 
671
Other borrowings (i)
4,333
 
3,576
 
4,959
 
4,761
Total borrowings
317,128
 
206,633
 
307,368
 
220,607
Non-current
263,765
 
181,046
 
 
 
 
Current
53,363
 
25,587
 
 
 
 
 
317,128
 
206,633
 
 
 
 
 
(i) Includes finance leases in the amount of Ps. 20 and Ps. 16 as of September 30 and June 30, 2018, respectively.
(ii) Includes Ps. 281,127 and Ps. 180,814 as of September 30 and June 30, 2018, respectively, corresponding to the Operations Center in Israel.
 
The following table describes the Group’s issuance of debt during the present period:
Entity
Class
Issuance / expansion date
Amount in original currency
Maturity date
Interest
Principal payment
Interest payment
 
rate
Cellcom
SERIES K
Jul-18
NIS 220
7/5/2026
3.55% e.a.
Annual payments since 2021
annually
(1)
PBC
SERIES I
Jul-18
NIS 507
6/29/2029
3.95% e.a.
At expiration
quarterly
(1)
Gav - Yam
SERIES A
Jul-18
NIS 320
10/31/2023
3.55% e.a.
Annual payments since 2021
biannually
 
Gav - Yam
SERIES H
Sep-18
NIS 596
6/30/2034
2.55% e.a.
At expiration
annually
(1)
 
(1)
Corresponds to an expansion of the series.
 
On August 9, 2018 the Board of Directors of IDBD resolved to perform a partial prepayment of series M debentures of IDBD which took place on August 28, 2018. The partial prepayment amounted to NIS 146 million (approximately Ps 1,491 as of the date of issuance of these financial statements) which represents a 14.02% of the remaining amount of series M debentures.
 
 
 
22
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
17.
Provisions
 
The table below shows the movements in the Group's provisions categorized by type:
 
Period ended September 30, 2018
 
Year ended June 30, 2018
 
Legal claims (i)
 
Investments in associates and joint ventures (ii)
 
Site dismantling and remediation
 
Onerous contracts
 
Other provisions
 
Total
 
Total
Beginning of period / year
1,028
 
2,452
 
163
 
1
 
958
 
4,602
 
1,833
Additions
105
 
89
 
 -
 
 -
 
46
 
240
 
2,694
Incorporated by business combination
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
10
Recovery
(2)
 
 -
 
 -
 
 -
 
 -
 
(2)
 
(211)
Used during the period / year
(15)
 
 -
 
 -
 
 -
 
 -
 
(15)
 
(202)
Deconsolidation
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
(447)
Currency translation adjustment
469
 
1,080
 
73
 
 -
 
543
 
2,165
 
925
End of period / year
1,585
 
3,621
 
236
 
1
 
1,547
 
6,990
 
4,602
Non-current
 
 
 
 
 
 
 
 
 
 
5,454
 
3,549
Current
 
 
 
 
 
 
 
 
 
 
1,536
 
1,053
Total
 
 
 
 
 
 
 
 
 
 
6,990
 
4,602
(i)
Additions and recoveries are included in "Other operating results, net".
(ii)
Corresponds to the equity interest in New Lipstick with negative equity. Additions and recoveries are included in “Share of profit of associates and joint ventures”
.
There were no significant changes to the processes mentioned in Note 18 to the Annual Financial Statements.
 
18.
Taxes
 
The details of the Group’s income tax, is as follows:
 
 
September 30, 2018
 
September 30, 2017
Current income tax
(215)
 
(175)
Deferred income tax
(1,617)
 
(977)
Income tax from continuing operations
(1,832)
 
(1,152)
 
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 three-month periods ended September 30, 2018 and 2017:
 
 
September 30, 2018
 
September 30, 2017
Profit from continuing operations at tax rate applicable in the respective countries (*)
(3,671)
 
(496)
Permanent differences:
 
 
 
Share of profit of associates and joint ventures
148
 
61
Unrecognized tax loss carryforwards (i)
(186)
 
(800)
Tax rate differential
606
 
 -
Non-taxable profit / (loss), non-deductible expenses and others
1,271
 
83
Income tax from continuing operations
(1,832)
 
(1,152)
 
(*) The Income Tax rate in effect in Argentina as of September 30, 2017 was 35%, while as of September 30, 2018 is 30%. See note 20 to the Consolidated Financial Statements as of June 30, 2018.
(i) Corresponds principally to holding companies in Israel.
 
The gross movement in the deferred income tax account is as follows:
 
 
September 30, 2018
 
June 30, 2018
Beginning of period / year
(25,817)
 
(22,739)
Adjustments previous periods (IFRS 9 and 15)
(44)
 
 -
Deconsolidation
 -
 
2,808
Currency translation adjustment
(5,428)
 
(6,132)
Incorporated by business combination
 -
 
(13)
Deferred income tax charge
(1,617)
 
259
End of period / year
(32,906)
 
(25,817)
Deferred income tax assets
406
 
380
Deferred income tax liabilities
(33,312)
 
(26,197)
Deferred income tax liabilities, net
(32,906)
 
(25,817)
 
23
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
19.
Revenues
 
 
September 30, 2018
 
September 30, 2017
Income from communication services
4,631
 
3,224
Rental and services income
3,350
 
2,408
Sale of communication equipment
1,574
 
1,059
Sale of trading properties and developments
822
 
64
Revenue from hotels operation and tourism services
378
 
225
Other revenues
72
 
49
Total Group’s revenues
10,827
 
7,029
 
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 September 30, 2018
 
Total as of September 30, 2017
Cost of sale of goods and services
1,929
 
 -
 
 -
 
1,929
 
783
Salaries, social security costs and other personnel expenses
797
 
499
 
606
 
1,902
 
1,208
Depreciation and amortization
722
 
185
 
237
 
1,144
 
863
Fees and payments for services
645
 
302
 
22
 
969
 
598
Maintenance, security, cleaning, repairs and others
530
 
82
 
41
 
653
 
417
Advertising and other selling expenses
63
 
1
 
256
 
320
 
331
Taxes, rates and contributions
106
 
8
 
67
 
181
 
126
Interconnection and roaming expenses
652
 
 -
 
 -
 
652
 
457
Fees to other operators
870
 
 -
 
 -
 
870
 
518
Director´s fees
 -
 
56
 
 -
 
56
 
49
Leases and service charges
21
 
 -
 
44
 
65
 
44
Allowance for doubtful accounts, net
 -
 
9
 
144
 
153
 
45
Other expenses
184
 
99
 
67
 
350
 
253
Total as of September 30, 2018
6,519
 
1,241
 
1,484
 
9,244
 
 
Total as of September 30, 2017
3,912
 
793
 
987
 
 
 
5,692
 
21.
Cost of goods sold and services provided
 
 
Total as of September 30, 2018
 
Total as of September 30, 2017
Inventories at the beginning of the period (*)
9,855
 
10,036
Adjustments previous periods (IFRS 15)
(4,072)
 
 -
Purchases and expenses (**)
8,169
 
13,753
Capitalized finance costs
5
 
1
Currency translation adjustment
2,240
 
4
Transfers
(6)
 
3
Disposals
(37)
 
 -
Inventories at the end of the period (*)
(7,771)
 
(10,070)
Total costs
8,383
 
13,727
 
The following table presents the composition of the Group’s inventories as of September 30, 2018 and June 30, 2018:
 
 
Total as of September 30, 2018
 
Total as of June 30, 2018
Real estate
6,918
 
9,275
Telecommunications
840
 
592
Others
13
 
13
Total inventories at the end of the period (*)
7,771
 
9,880
 
(*) Inventories includes trading properties and inventories.
(**) Includes the cost of goods sold of Shufersal, which were reclassified to discontinued operations in an amount of Ps. 9,813 for September 30, 2017.
 
 
 
 
24
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
22.
Other operating results, net
 
September 30, 2018
 
September 30, 2017
Gain from disposal of subsidiary and associates (1)
408
 
136
Donations
(37)
 
(17)
Lawsuits and other contingencies
(11)
 
(5)
Others
(39)
 
(11)
Total other operating results, net
321
 
103
 
(1)
As of September 30, 2018 and 2017 includes the result from the sale of the Group´s equity interest in Cyber Secdo and Rimon, respectively.
 
23.
Financial results, net
 
 
September 30, 2018
 
September 30, 2017
Finance income:
 
 
 
 - Interest income
239
 
151
 - Foreign exchange gain
1,424
 
98
 - Dividends income
35
 
24
Total finance income
1,698
 
273
Finance costs:
 
 
 
 - Interest expenses
(3,261)
 
(1,893)
 - Loss on debt swap
 -
 
(2,228)
 - Foreign exchange loss
(10,770)
 
(629)
 - Other finance costs
(143)
 
(134)
Subtotal finance costs
(14,174)
 
(4,884)
Capitalized finance costs
28
 
(4)
Total finance costs
(14,146)
 
(4,888)
Other financial results:
 
 
 
 - Fair value gain of financial assets and liabilities at fair value through profit or loss, net
6,813
 
299
 - Gain from derivative financial instruments, net
245
 
(2)
Total other financial results
7,058
 
297
Total financial results, net
(5,390)
 
(4,318)
 
24.
Related party transactions
 
The following is a summary of the balances with related parties as of September 30, 2018 and June 30, 2018:
 
Item
 
 
 September 30, 2018
 
 June 30, 2018
Trade and other receivables
 
1,008
 
748
Investments in financial assets
 
490
 
343
Trade and other payables
 
(239)
 
(191)
Borrowings
 
(12)
 
(10)
Total
 
1,247
 
890
 
 
 
 
 
25
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
 Related party
 
 
 September 30, 2018
 
 June 30, 2018
 
 Description of transaction
 
 Item
Manibil S.A.
 
53
 
72
 
 Contributions in advance
 
 Trade and other receivable
New Lipstick LLC
 
841
 
585
 
 Loans granted
 
 Trade and other receivable
 
 
10
 
7
 
 Reimbursement of expenses receivable
 
 Trade and other receivable
Condor
 
14
 
 -
 
 Dividends receivable
 
 Trade and other receivable
 
 
197
 
135
 
 Public companies securities
 
 Investment in financial assets
Puerto Retiro
 
11
 
 -
 
 Loans granted
 
 Trade and other receivable
LRSA
 
2
 
29
 
 Leases and/or rights of use receivable
 
 Trade and other receivable
 
 
25
 
(1)
 
 Reimbursement of expenses
 
 Trade and other receivable
 
 
18
 
 -
 
 Loans granted
 
 Trade and other receivable
 
 
(2)
 
 -
 
 Fees payables
 
 Trade and other payables
 
 
 -
 
7
 
 Dividends receivable
 
 Trade and other receivable
Other associates and joint ventures
 
1
 
1
 
 Reimbursement of expenses receivable
 
 Trade and other receivable
 
 
(12)
 
(10)
 
 Loans granted
 
 Borrowings
 
 
 -
 
(1)
 
 Leases and/or rights of use payable
 
 Trade and other payables
 
 
5
 
4
 
 Leases and/or rights of use receivable
 
 Trade and other receivable
 
 
 -
 
1
 
 Management fees
 
 Trade and other receivable
 
 
5
 
7
 
 Loans granted
 
 Trade and other receivable
 
 
1
 
1
 
 Long-term incentive plan
 
 Trade and other receivable
 
 
(1)
 
(1)
 
 Reimbursement of expenses payable
 
 Trade and other receivable
Total associates and joint ventures
 
1,168
 
836
 
 
 
 
Cresud
 
(24)
 
(16)
 
 Reimbursement of expenses receivable
 
 Trade and other payables
 
 
(32)
 
(56)
 
 Corporate services receivable
 
 Trade and other payables
 
 
293
 
208
 
 NCN
 
 Investment in financial assets
 
 
(4)
 
(2)
 
 Leases and/or rights of use receivable
 
 Trade and other payables
 
 
(34)
 
(22)
 
 Management fee
 
 Trade and other payables
 
 
(3)
 
(3)
 
 Share based payments
 
 Trade and other payables
Total parent company
 
196
 
109
 
 
 
 
RES LP
 
 -
 
2
 
 Reimbursement of expenses receivable
 
 Trade and other receivable
 
 
 -
 
19
 
 Dividends receivables
 
 Trade and other receivable
Directores
 
(129)
 
(83)
 
 Fees for services received
 
 Trade and other payables
Others (1)
 
1
 
1
 
 Leases and/or rights of use receivable
 
 Trade and other receivable
 
 
12
 
7
 
 Fees receivable
 
 Trade and other receivable
 
 
(1)
 
(1)
 
 Fees for legal services
 
 Trade and other payables
Total others
 
(117)
 
(55)
 
 
 
 
Total at the end of the period/year
 
1,247
 
890
 
 
 
 
 
(1)
It includes CAMSA, Estudio Zang, Bergel & Viñes, Austral Gold, Fundación IRSA, Hamonet S.A., CAM Communication LP, Gary Gladstein and Fundación Museo de los Niños.
 
 
 
 
26
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
The following is a summary of the results with related parties for the three-month periods ended September 30, 2018 and 2017:
Related party
 
 
 September 30, 2018
 
 September 30, 2017
 
Description of transaction
 BACS
 
6
 
3
 
 Leases and/or rights of use
 Manibil
 
29
 
 -
 
 Corporate services
 Tarshop
 
6
 
5
 
 Leases and/or rights of use
 ISPRO - Mehadrin
 
 -
 
31
 
 Corporate services
 Other associate and joint venture
 
4
 
6
 
 Financial operations
Otras asociadas y negocios conjuntos
 
 -
 
1
 
 Management fees
Total associates and joint ventures
 
45
 
46
 
 
Cresud
 
5
 
1
 
 Leases and/or rights of use
Cresud
 
(73)
 
(52)
 
 Corporate services
Cresud
 
86
 
4
 
 Financial operations
Total parent company
 
18
 
(47)
 
 
 IFISA
 
 -
 
47
 
 Financial operations
 Directores
 
(64)
 
(5)
 
 Fees and remunerations
 Estudio Zang, Bergel & Viñes
 
(3)
 
(3)
 
 Legal services
 Taaman
 
 -
 
35
 
 Corporate services
 Fundación IRSA
 
(3)
 
(4)
 
 Donations
 BHN Vida S.A.
 
1
 
1
 
 Leases and/or rights of use
 Willifood
 
 -
 
70
 
 Corporate services
 Others (1)
 
10
 
 -
 
 Leases and/or rights of use
 Otras (1)
 
8
 
4
 
 Financial operations
 Otras (1)
 
 -
 
4
 
 Fees and remunerations
Total others
 
(51)
 
149
 
 
Total at the end of the period
 
12
 
148
 
 
 
(1)
 It includes Isaac Elsztain e Hijos, CAMSA. Hamonet S.A., Ramat Hanassi, Estudio Zang, Bergel y Viñes, Austral Gold, La Rural, TGLT, New Lipstick, Condor and Fundación IRSA.
 
The following is a summary of the transactions with related parties for the three-month periods ended September 30, 2018 and 2017:
 
Related party
 
 
September 30, 2018
 
September 30, 2017
 
Description of the operation
La Rural S.A.
 
 -
 
9
 
Dividends received
Nuevo Puerto Santa Fe S.A.
 
 -
 
 -
 
Dividends received
Condor
 
17
 
11
 
Dividends received
Mehadrin
 
46
 
27
 
Dividends received
Manaman
 
20
 
 -
 
Dividends received
Emco
 
7
 
104
 
Dividends received
Aviareps
 
 -
 
28
 
Dividends received
Millenium
 
 -
 
4
 
Dividends received
Cyrsa S.A.
 
 -
 
7
 
Dividends received
Total dividends received
 
90
 
190
 
 
Quality
 
8
 
-
 
Capital contributions
Total other transactions
 
8
 
-
 
 
 
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
 
 
 
 
27
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 09.30.18
Amount (2)
Exchange rate (3)
Total as of 06.30.17
Assets
 
 
 
 
 
 
Trade and other receivables
 
 
 
 
 
 
US Dollar
39
41.050
1,606
42
28.750
1,202
Euros
3
47.618
139
5
33.540
179
Receivables with related parties:
 
 
 
 
 
 
US Dollar
2
41.250
64
51
28.850
1,466
Total trade and other receivables
 
 
1,809
 
 
2,847
Investments in financial assets
 
 
 
 
 
 
US Dollar
128
41.050
5,271
125
28.750
3,592
Pounds
1
53.492
52
1
37.904
39
Total investments in financial assets
 
 
5,323
 
 
3,974
Derivative financial instruments
 
 
 
 
 
 
US Dollar
2
41.050
80
1
28.750
32
Total Derivative financial instruments
 
 
80
 
 
32
Cash and cash equivalents
 
 
 
 
 
 
US Dollar
278
41.050
11,428
269
28.750
7,734
Euros
2
47.618
95
2
33.540
66
Total Cash and cash equivalents
 
 
11,523
 
 
7,800
Total Assets
 
 
18,735
 
 
14,653
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Trade and other payables
 
 
 
 
 
 
US Dollar
197
41.250
8,129
104
28.850
3,007
Euros
2
47.953
111
3
33.729
88
Payables to related parties:
 
 
 
 
 
 
US Dollar
1
41.250
36
1
28.850
25
Total Trade and other payables
 
 
8,276
 
 
3,120
Borrowings
 
 
 
 
 
 
US Dollar
852
41.250
35,130
868
28.850
25,029
Total Borrowings
 
 
35,130
 
 
25,029
Total Liabilities
 
 
43,406
 
 
28,149
 
(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 September 30, 2018 and June 30, 2018, respectively according to Banco Nación Argentina.
 
27.
Groups of assets and liabilities held for sale
 
As mentioned in Note 4.F. to the Annual Financial Statements, the Group has certain assets and liabilities classified as held for sale. The following table shows the main ones:
 
 
September 30, 2018
 
June 30, 2018
Property, plant and equipment
4,075
 
2,698
Intangible assets
57
 
32
Investments in associates
91
 
47
Deferred income tax assets
148
 
103
Investment properties
749
 
521
Income tax credits
11
 
 -
Trade and other receivables
2,985
 
1,444
Cash and cash equivalents
806
 
347
Total group of assets held for sale
8,922
 
5,192
Trade and other payables
3,995
 
1,957
Employee benefits
216
 
150
Deferred income tax liability
23
 
16
Borrowings
1,884
 
1,120
Total group of liabilities held for sale
6,118
 
3,243
Total net assets held for sale
2,804
 
1,949
 
 
 
28
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
28.
Results from discontinued operations
 
The results from operations of Shufersal for the period ended September 30, 2017 and the results from Israir and IDB Tourism for both periods; have been reclassified in the Statements of Income under discontinued operations.
 
 
September 30, 2018
 
September 30, 2017
Revenues
1,970
 
14,544
Costs
(1,864)
 
(11,017)
Gross profit
106
 
3,527
Net gain from fair value adjustment of investment properties
 -
 
44
General and administrative expenses
(86)
 
(259)
Selling expenses
(92)
 
(2,640)
Other operating results, net
(13)
 
(88)
(Loss) / profit from operations
(85)
 
584
Share of profit of associates and joint ventures
6
 
14
(Loss) / profit before financial results and income tax
(79)
 
598
Finance income
33
 
22
Finance cost
(20)
 
(177)
Other financial results
20
 
(4)
Financial results, net
33
 
(159)
(Loss) / profit before income tax
(46)
 
439
Income tax
 -
 
(88)
(Loss) / profit from discontinued operations
(46)
 
351
 
 
 
 
(Loss) / profit for the period from discontinued operations attributable to:
 
 
 
Equity holders of the parent
(39)
 
131
Non-controlling interest
(7)
 
220
(Loss) / profit per share from discontinued operations attributable to equity holders of the parent:
 
 
 
Basic
(0.07)
 
0.23
Diluted
(0.07)
 
0.23
 
As of September 30, 2017, Ps. 13,182 of the total revenues from discontinued operations and Ps. 338 of the total profit from discontinued operations correspond to Shufersal.
 
29.
Other relevant events of the period
 
IRSA Class action
 
On September 10, 2018, the New York Court issued an order granting IRSA motion to dismiss in its entirety. Plaintiffs have appealed such order and the Court´s decision is pending.
 
The companies hold that such allegations are meritless and will continue making a strong defense in both actions.
 
30.
Subsequent events
 
DIC class action
 
On October 3, 2018 it was sent an action and a motion to approve that action as a class action (jointly – the "Motion"), which had been filed with the District Court of Tel Aviv Yafo (the "Court") against the Group; against Mr. Eduardo Elsztain, the controlling person of the Company (the "Controlling Person"), who serves as chairman of the Company's board of directors; against directors serving in the Group who have an interest in the Controlling Person; and against additional directors and officers serving in the Company (all jointly – the "Respondents"), in connection with the exit of the Company's share, on February 1, 2018, from the TA 90 and TA 125 indices, whereon it had been traded on the Tel Aviv Stock Exchange Ltd. up to that date (the "Indices"), by an applicant alleging to have held the Group's shares prior to February 1, 2018 and thereafter (the "Applicant").
 
In the Motion, the Court is requested, inter alia, to approve the action as a class action and to charge the Respondents with compensating the members of the group according to the damage caused them. The estimated amount is approximately NIS 17.6 million.
 
The Company believes that it acted lawfully and as required in all that pertains to the subject of the Motion, and accordingly, after having preliminarily reviewed the Group's Motion, feels that it is unfounded.
 
 
 
 
29
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
IDBD class action
 
On October 3, 2018, an action and a motion to approve a class action had been filed with the District Court in Tel Aviv Yafo (jointly – the "Motion"). The Motion had been filed, against the IDBD, against Dolphin IL, against Mr. Eduardo Elsztain and against the Official Receiver, and in it, the court was requested to hold that the Transaction was not in compliance with the provisions of the Centralization Law, to appoint a trustee over DIC's shares owned by the respondents and to order the payment of monetary damages to the public shareholders in DIC for the alleged preservation of the pyramidal structure in IDBD, at a scope of between NIS 58 and 73 million.
 
The bulk of the Applicant's allegations is that the Group continues to be the Controlling Person in DIC (potentially and effectively) even after the completion of the sale od DIC shares to DIL as described in Note 4 in the annual financial statements (the “transaction”) and that the controlling person of the IDBD (in his capacity as chairman of the board of directors and controlling person of DIC as well) had a personal interest separate from the personal interest of the minority shareholders in DIC, in the manner of implementation of the Centralization Law's provisions, and that he and the Group breached the duty of good faith and the duty of decency toward DIC, and additionally the controlling person of IDBD breached his duty of trust and duty of care toward DIC, this being, allegedly, due to the fact that the decision regarding the preferred alternative for complying with the Centralization Law's Provisions was not brought before DIC's general meeting. The Applicant further alleges deprivation of the minority shareholders in DIC.
 
Having preliminarily reviewed the Motion, the Management feels that it is unfounded and that it will not change the fact that after the making of the Transaction, IDBD complies with the provisions of the Centralization Law, all as set forth in the Company's reports.
 
Sale of real estate
 
In October 2019, a wholly owned subsidiary of Ispro entered into an agreement for the sale of all its rights in real estate on an area of approximately 29 dunam, (equivalent to 1 hectare) on which 12,700 sq.m. of industrial buildings are being built in the northern industrial zone in Yavneh for NIS 86 million.
 
Distribution of dividends
 
On October 29, 2018, the General Shareholders' Meeting of IRSA allocated the sum of Ps. 1,412 to the payment of a dividend in kind with shares of IRSA Propiedades Comerciales S.A.
 
Revaluation of the Argentine peso
 
As of the date of issuance of these financial statements, the argentine peso has suffered a revaluation against the US dollar and other currencies, close to 14%, which has an impact on the figures presented on these financial statements, mainly due to the exposure to the devaluation of certain revenues and costs of the “Offices” segment of the Operations Center in Argentina, revenues and costs of the Operations Center in Israel and our financial assets and liabilities nominated in foreign currency.
 
 
 
 
 
30
 
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 statements of financial position as of September 30, 2018 and the unaudited condensed interim consolidated statements of income and other comprehensive income for the three-month period ended September 30, 2018, the unaudited condensed interim consolidated statements of changes in shareholders’ equity and the unaudited condensed interim consolidated statements of cash flows for the three-month period then ended and selected explanatory notes.
 
The balances and other information corresponding to the fiscal year ended June 30, 2018 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 accounting framework established by the National Securities Commission (CNV). As indicated in Note 2.1 to the accompanying financial statements, such accounting framework is based in the application of International Financial Reporting Standards (IFRS) and, in particular, of International Accounting Standard No 34 "Interim Financial Reporting" (IAS 34). Those standards have been adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE), and were used for the preparation of these unaudited condensed interim consolidated financial statements, with the only exception of the application of International Accounting Standard No 29 (IAS 29), which was excluded by the accounting framework of the CNV.
 
 
 
 
 
 
 
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 statements of financial position, the consolidated statements of income and other comprehensive income and the consolidated statements 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 the accounting framework established by CNV.
 
Emphasis of Matter
 
Difference between the accounting framework of CNV and IFRS
 
Without qualifying our conclusion, we draw attention to Note 2.1 to the accompanying unaudited condensed interim consolidated financial statements, which qualitatively describes the difference between the accounting framework established by the CNV and IFRS, considering that the application of IAS 29 was excluded by CNV from its accounting framework.
 
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;
 
 
 
 
 
 
 
Free translation from the original prepared in Spanish for publication in Argentina 
 
REVIEW REPORT ON THE UNAUDITED CONDENSED
 INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
 
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;
  
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 September 30, 2018, 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. 88,709.28, which was not claimable at that date.
  
 
 
 
Autonomous City of Buenos Aires, November 7, 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
Roberto Daniel Murmis
Public Accountant (UBA)
C.P.C.E.C.A.B.A. T° 113 F° 195
 
 
 
 

 
 
 
 
 
 
 
 
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Separate Financial Statements as of September 30, 2018 and for the 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 September 30, 2018 and June 30, 2018
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Note
09.30.18
 
06.30.18
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Investment properties
7
11,435
 
7,984
Property, plant and equipment
8
8
 
8
Trading properties
9
371
 
532
Intangible assets
10
24
 
23
Investments in subsidiaries, associates and joint ventures
6
54,407
 
40,541
Income tax and MPIT credit
 
242
 
242
Trade and other receivables
12
329
 
246
Total non-current assets
 
66,816
 
49,576
Current assets
 
 
 
 
Inventories
 
1
 
1
Trading properties
9
27
 
44
Trade and other receivables
12
1,020
 
839
Income tax and MPIT credit
 
1
 
1
Investments in financial assets
11
4
 
9
Cash and cash equivalents
11
67
 
16
Total current assets
 
                1,120
 
                  910
TOTAL ASSETS
 
67,936
 
50,486
SHAREHOLDERS’ EQUITY
 
 
 
 
Shareholders' Equity (according to corresponding statements)
 
50,226
 
37,113
TOTAL SHAREHOLDERS’ EQUITY
 
50,226
 
37,113
LIABILITIES
 
 
 
 
Non-current liabilities
 
 
 
 
Trade and other payables
13
972
 
1,127
Borrowings
14
4,141
 
8,669
Deferred income tax liabilities
15
1,860
 
1,971
Provisions
16
33
 
37
Total non-current liabilities
 
7,006
 
11,804
Current liabilities
 
 
 
 
Trade and other payables
13
330
 
178
Income tax and MPIT liabilities
 
109
 
109
Salaries and social security liabilities
 
2
 
2
Borrowings
14
10,259
 
1,277
Provisions
16
4
 
3
Total current liabilities
 
10,704
 
1,569
TOTAL LIABILITIES
 
17,710
 
13,373
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
67,936
 
50,486
 
 
  The accompanying notes are an integral part of these Financial Statements
 
 
 
 
 
 
 
                       ____________________ .
Eduardo S. Elsztain      
President           
 
 
1
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Separate Statements of Income and Other Comprehensive Income
for the three-month periods ended September 30, 2018 and 2017
 (All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Note
09.30.18
 
09.30.17
Revenues
17
40
 
11
Costs
18
(9)
 
(7)
Gross profit
 
31
 
4
Net gain from fair value adjustment of investment properties
7
3,379
 
163
General and administrative expenses
18
(59)
 
(42)
Selling expenses
18
(21)
 
(5)
Other operating results, net
19
(5)
 
(5)
Profit from operations
 
3,325
 
115
Share of profit of subsidiaries, associates and joint ventures
6
9,855
 
776
Profit before financial results and income tax
 
13,180
 
891
Finance income
20
250
 
14
Finance costs
20
(4,343)
 
(368)
Other financial results
20
(1)
 
5
Financial results, net
 
(4,094)
 
(349)
Profit before income tax
 
9,086
 
542
Income tax
15
121
 
83
Profit for the period
 
9,207
 
625
 
 
 
 
 
Other comprehensive income:
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
Share of other comprehensive income / (loss) of subsidiaries, associates and joint ventures
 
13
 
(42)
Currency translation adjustment of subsidiaries, associates and joint ventures
 
3,943
 
(270)
Total other comprehensive income for the period (i)
6
3,956
 
(312)
Total comprehensive income for the period
 
13,163
 
313
 
 
 
 
 
Profit per share for the period:
 
 
 
 
Basic
 
16.01
 
1.08
Diluted
 
15.90
 
1.08
 
 
(i) Components of other comprehensive income have no impact on income tax.
 
The accompanying notes are an integral part of these Financial Statements.
 
 
 
 
 
 
 
                       ____________________ .
Eduardo S. Elsztain      
President             
 

                                           
2
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Separate Statements of Changes in Shareholders’ Equity
for the three-month periods ended September 30, 2018 and 2017
(All amounts in millions, except 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 (1)
Share premium
Additional Paid-in Capital from Treasury Shares
Legal reserve
Special reserve
CNV 609/12 Resolution reserve (2)
Other reserves (3)
Retained earnings
Total Shareholders’ equity
Balance as of June 30, 2018
575
3
123
793
19
143
2,081
2,751
(221)
30,846
37,113
Adjustments previous periods (IFRS 9 and 15)
 -
 -
 -
 -
 -
 -
 -
 -
 -
(61)
(61)
Balance as of June 30, 2018 (recast)
575
3
123
793
19
143
2,081
2,751
(221)
30,785
37,052
Profit for the period
 -
 -
 -
 -
 -
 -
 -
 -
 -
9,207
9,207
Other comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
 -
3,956
 -
3,956
Total comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
 -
3,956
9,207
13,163
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
 -
 -
11
 -
11
Balance as of September 30, 2018
575
3
123
793
19
143
2,081
2,751
3,746
39,992
50,226
 
(1)
Includes Ps. 1 of inflation adjustment of treasury shares. See Note 16 of Consolidated Financial Statements as of June 30, 2018.
(2)
Related to CNV General Resolution N° 609/12.
(3)
The composition of Other reserves of the Company as of September 30, 2018 is as follows:
 
 
 
Cost of Treasury shares
 
Changes in non-controlling interest
 
Reserve for share-based payments
 
Reserve for future dividends
 
Other reserves of subsidiaries
 
Currency translation adjustment reserve
 
Total Other reserves
Balance as of June 30, 2018
(25)
 
(2,722)
 
79
 
494
 
(7)
 
1,960
 
(221)
Other comprehensive income for the period
 -
 
 -
 
 -
 
 -
 
13
 
3,943
 
3,956
Changes in non-controlling interest
 -
 
11
 
 -
 
 -
 
 -
 
 -
 
11
Reserve for share-based payments
1
 
 -
 
(1)
 
 -
 
 -
 
 -
 
 -
Balance as of September 30, 2018
(24)
 
(2,711)
 
78
 
494
 
6
 
5,903
 
3,746
 
The accompanying notes are an integral part of these Financial Statements.
 
 
 
 
                       ____________________ .
Eduardo S. Elsztain      
President             
 
 
3
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Separate Statements of Changes in Shareholders’ Equity
for the three-month periods ended September 30, 2018 and 2017
(All amounts in millions, except 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 (1)
Share premium
Additional Paid-in Capital from Treasury Shares
Legal reserve
Special reserve
CNV 609/12 Resolution reserve (2)
Other reserves (3)
Retained earnings
Total Shareholders’ equity
Balance as of June 30, 2017
575
3
123
793
17
143
 -
2,756
2,143
19,930
26,483
Profit for the period
 -
 -
 -
 -
 -
 -
 -
 -
 -
625
625
Other comprehensive loss for the period
 -
 -
 -
 -
 -
 -
 -
 -
(312)
 -
(312)
Total comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
 -
(312)
625
313
Reserve for share-based payments
 -
 -
 -
 -
 -
 -
 -
 -
1
 -
1
Balance as of September 30, 2017
575
3
123
793
17
143
 -
2,756
1,832
20,555
26,797
 
 
(1)
Includes Ps. 1 of inflation adjustment of treasury shares. See Note 16 of Consolidated Financial Statements as of June 30, 2018.
(2)
Related to CNV General Resolution N° 609/12.
(3)
The composition of Other reserves of the Company as of September 30, 2017 is as follows:
 
 
 
 
Cost of Treasury shares
 
Changes in non-controlling interest
 
Reserve for share-based payments
 
Reserve for future dividends
 
Other reserves of subsidiaries
 
Currency translation adjustment reserve
 
Total Other reserves
Balance as of June 30, 2017
(28)
 
 -
 
78
 
494
 
42
 
1,557
 
2,143
Other comprehensive loss for the period
 -
 
 -
 
 -
 
 -
 
(42)
 
(270)
 
(312)
Reserve for share-based payments
 -
 
 -
 
1
 
 -
 
 -
 
 -
 
1
Balance as of September 30, 2017
(28)
 
 -
 
79
 
494
 
 -
 
1,287
 
1,832
 
The accompanying notes are an integral part of these Financial Statements.
 
 
 
 
 
 
 
 
                       ____________________ .
Eduardo S. Elsztain      
President             
 
 
     
 
4
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Separate Statements of Cash Flows
for the three-month periods ended September 30, 2018 and 2017
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Note
09.30.18
 
09.30.17
Operating activities
 
 
 
 
Profit for the period
 
9,207
 
625
Adjustments:
 
 
 
 
Income tax
15
(121)
 
(83)
Financial results, net
20
4,107
 
349
Increase of trading properties
9
(95)
 
(26)
Net gain from fair value adjustment of investment properties
7
(3,379)
 
(163)
Share of profit of subsidiaries, associates and joint ventures
6
(9,855)
 
(776)
Gain from disposal of trading properties (IFRS 15)
 
(28)
 
 -
Provisions and allowances
 
17
 
1
Decrease in trade and other receivables
 
(178)
 
(27)
Increase in trade and other payables
 
291
 
55
Net cash flow used in operating activities
 
(34)
 
(45)
Investing activities
 
 
 
 
Capital contributions to subsidiaries, associates and joint ventures
6
(132)
 
(242)
Acquisition and advanced payments of investment properties
 
(125)
 
(85)
Proceeds from sales of investment properties
7
 -
 
26
Acquisition of property, plant and equipment
8
 -
 
(2)
Acquisition of intangibles
10
(1)
 
 -
Increase of investments in financial assets
 
(115)
 
(112)
Proceeds from sales of investments in financial assets
 
119
 
147
Increase in loans granted to subsidiaries, associates and joint ventures
 
(1)
 
(9)
Proceeds from borrowings granted to subsidiaries, associates and joint ventures
 
49
 
48
Interests collected
 
4
 
 -
Net cash flow used in investing activities
 
(202)
 
(229)
Financing activities
 
 
 
 
Short-term loans obtained, net
 
738
 
375
Payment of loans
 
(94)
 
 -
Interests paid
 
(408)
 
(179)
Loans obtained from subsidiaries, associates and joint ventures
 
59
 
11
Payment of loans from subsidiaries, associates and joint ventures
 
(1)
 
(10)
Net cash flow generated by financing activities
 
294
 
197
Net increase / (decrease) in cash and cash equivalents
 
58
 
(77)
Cash and cash equivalents at the beginning of the period
11
16
 
148
Foreign exchange gain of cash and changes in fair value of cash equivalents
 
(7)
 
2
Cash and cash equivalents at the end of the period
11
67
 
73
 
 
 
 
 
Additional information
 
 
 
 
Reserve for share-based payments
 
 -
 
1
Currency translation adjustment
 
3,943
 
(270)
Share of other comprehensive income / (loss) of subsidiaries
 
13
 
(42)
Changes in non-controlling interest
 
11
 
 -
Increase of investment properties through a decrease in trade and other receivables
 
42
 
 -
Decrease in borrowings from subsidiaries, associates and joint ventures through an decrease in trade and other receivables
 
 -
 
1
Increase in investment properties through an increase of borrowings
 
4
 
 -
Increase of trading properties through an increase of borrowings
 
5
 
 -
 
 
The accompanying notes are an integral part of these Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                       ____________________ .
Eduardo S. Elsztain      
President             
 
 
 
     

 
5
IRSA Inversiones y Representaciones Sociedad Anónima
 
Notes to the Unaudited Condensed Interim Consolidated Separate Financial Statements
(All amounts in millions, unless 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, 1st. 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 November 7, 2018.
 
2.
Basis of preparation of the Unaudited Condensed Interim Separate Financial Statements
 
2.1. 
Basis of preparation
 
The National Securities Commission (CNV), in Title IV "Periodic Information Regime" - Chapter III "Rules relating to the presentation and valuation of financial statements" - Article 1, of its standards, has established the application of the Technical Resolution No. 26 (RT 26) of the FACPCE and its amendments, which adopt IFRS, issued by the IASB, for certain companies included in the public offering regime of Law No. 26,831, either because of its share capital or its non-convertible notes, or that have requested authorization to be included in the aforementioned regime.
 
Also, in Article 3 of the aforementioned CNV regulations, it is established that "The companies subject to the Commission's control cannot apply the method of restating financial statements in a homogeneous currency."
 
For the preparation of these Unaudited Condensed Interim Separate Financial Statements, the Company has made use of the option provided by IAS 34, and has prepared them in a condensed form. Therefore, these financial statements do not include all the information required in a complete set of annual financial statements and, consequently, it is recommended that they be read together with the annual financial statements as of June 30, 2018.
 
In view of what has been mentioned in the preceding paragraphs, the Company´s management has prepared these financial statements in accordance with the accounting principles established by the CNV, which are based on the application of IFRS, in particular of IAS 34, with the only exception of the application of IAS 29 (which determines the mandatory restatement of financial statements), excluded by the CNV from its accounting framework.
 
Additionally, the information required by the CNV indicated in article 1, Chapter III, Title IV of General Resolution N ° 622/13 has been included. Such information is included in a note to these Unaudited Condensed Interim Separate Financial Statements.
 
IAS 29 "Financial Reporting in Hyperinflationary Economies" requires that the financial statements of an entity whose functional currency is one of a hyperinflationary economy be expressed in terms of the current unit of measurement at the closing date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. To do so, in general terms, the inflation produced from the date of acquisition or from the revaluation date, as applicable, must be calculated for non-monetary items. This requirement also includes the comparative information of the financial statements.
 
 
 
6
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
In order to conclude on whether an economy is categorized as a high inflation one, in the terms of IAS 29, the standard details a series of factors to be considered, including the existence of an accumulated inflation rate in three years that approximates to or exceeds 100%. Accumulated inflation in Argentina in three years is over 100%. For this reason, in accordance with IAS 29, the Argentine economy must be considered as a high inflation economy starting July 1, 2018. In turn, on July 24, 2018, the Argentine Federation of Professional Councils in Economic Sciences (FACPCE), issued a communication confirming the aforementioned. However, it must be taken into account that, at the time of issuance of these financial statements, National Executive Decree 664/03 is in force, which does not allow the presentation of restated financial statements before the National Securities Commission (CNV). Therefore, given this decree, and the regulatory framework of the CNV, the Group's management has not applied IAS 29 in the preparation of these Unaudited Condensed Interim Separate Financial Statements.
 
In an inflationary period, any entity that maintains an excess of monetary assets over monetary liabilities, will lose purchasing power, and any entity that maintains an excess of monetary liabilities over monetary assets, will gain purchasing power, provided that such items are not subject to an adjustment mechanism.
 
Briefly, the restatement method of IAS 29 establishes that monetary assets and liabilities must not be restated since they are already expressed in the current unit of measurement at the end of the reporting period. Assets and liabilities subject to adjustments based on specific agreements must be adjusted in accordance with such agreements. The non-monetary items measured at their current values at the end of the reporting period, such as the net realization value or others, do not need to be restated. The remaining non-monetary assets and liabilities must be restated by a general price index. The loss or gain from the net monetary position will be included in the net result of the reporting year / period, revealing this information in a separate line item.
 
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, 2018. The principal accounting policies are described in Note 2 of those Annual Financial Statements, except for what is mentioned in Note 2.1 to these financial statements.
 
As described in Note 2.2 to the Annual Financial Statements, the Group adopted IFRS 15 “Revenues from contracts with customers” and IFRS 9 “Financial instruments” in the present fiscal year using the modified retrospective approach, so that the cumulative impact of the adoption was recognized in the retained earnings at the beginning, and the comparative figures were not modified due to this adoption.
 
The main changes are the following:
 
IFRS 15: Revenues from contracts with customers
 
The standard introduces a new five-step model for recognizing revenue from contracts with customers:
1.
Identifying the contract with the customer.
2.
Identifying separate performance obligations in the contract.
3.
Determining the transaction price.
4.
Allocating the transaction price to separate performance obligations.
5.
Recognizing revenue when the performance obligations are satisfied.
 
IFRS 9: Financial instruments
 
The new standard includes a new model of "expected credit loss" for receivables or other assets not measured at fair value. The new model presents a dual measurement approach for impairment: if the credit risk of a financial asset has not increased significantly since its initial recognition, an allowance for impairment will be recorded in the amount of expected credit losses resulting from the possible non- compliance events within a certain period. If the credit risk has increased significantly, in most cases the allowance will increase and the amount of the expected losses should be recorded.
 
In accordance with the new standard, in cases where a change in terms or exchange of financial liabilities is immaterial and does not lead, at the time of analysis, to the reduction of the previous liability and recognition of the new liability, the new cash flows must be discounted at the original effective interest rate, recording the impact of the difference between the present value of the financial liability that has the new terms and the present value of the original financial liability in net income.
 
 
 
 
 
7
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
The effect on the income statement for the three-month period ended September 30, 2018 for the first implementation of IFRS 15 is as follows:
 
 
 
09.30.18
 
 
According to previous standards
 
Implementation of IFRS 15
 
Current statement of income
Revenues
 
(155)
 
195
 
40
Costs
 
159
 
(168)
 
(9)
Gross profit
 
4
 
27
 
31
Net gain from fair value adjustment of investment properties
 
3,379
 
 -
 
3,379
General and administrative expenses
 
(59)
 
 -
 
(59)
Selling expenses
 
(21)
 
 -
 
(21)
Other operating results, net
 
(5)
 
 -
 
(5)
Profit from operations
 
3,298
 
27
 
3,325
Share of profit of subsidiaries, associates and joint ventures
 
9,855
 
 -
 
9,855
Profit before financial results and income tax
 
13,153
 
27
 
13,180
Finance income
 
250
 
 -
 
250
Finance costs
 
(4,343)
 
 -
 
(4,343)
Other financial results
 
(1)
 
 -
 
(1)
Financial results, net
 
(4,094)
 
 -
 
(4,094)
Profit before income tax
 
9,059
 
27
 
9,086
Income tax
 
131
 
(10)
 
121
Profit for the period
 
9,190
 
17
 
9,207
 
The effect on the retained earnings as of July 1, 2018 for the first implementation of IFRS 9 and 15 is as follows:
 
 
 
09.30.18
ASSETS
 
Implementation of IFRS 15
 
Implementation of IFRS 9
Non- Current Assets
 
 
 
 
Trading properties
 
(110)
 
 -
Investments in joint ventures
 
 -
 
(83)
Total Non-Current Assets
 
(110)
 
(83)
TOTAL ASSETS
 
(110)
 
(83)
SHAREHOLDERS’ EQUITY
 
 
 
 
Retained earnings
 
22
 
(83)
TOTAL SHAREHOLDERS’ EQUITY
 
22
 
(83)
LIABILITIES
 
 
 
 
Non-Current Liabilities
 
 
 
 
Trade and other payables
 
(142)
 
 -
Deferred income tax liabilities
 
10
 
 -
Total Non-Current Liabilities
 
(132)
 
 -
TOTAL LIABILITIES
 
(132)
 
 -
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
(110)
 
(83)
 
2.3.
    Comparability of information
 
Balance items as of June 30, 2018 and September 30, 2017 shown in these Unaudited Condensed Interim Separate Financial Statements for comparative purposes arise from financial statements then ended. Certain items from prior periods have been reclassified for consistency purposes.
 
2.4.         
Use of estimates
 
The preparation of Financial Statements at a certain date requires 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, 2018, described in Note 3.
 
3. 
Seasonal effects on operations
 
See Note 3 to the Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
8
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
4. 
Acquisitions and disposals
 
Significant acquisitions and disposals of the Company and/or its subsidiaries for the three-month period ended September 30, 2018 are detailed in Note 4 to the Unaudited Condensed Interim Consolidated Financial Statements.
 
5.            
Financial risk management and fair value estimates
 
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, 2018. There has been no changes in the risk management or risk management policies applied by the Company since the end of the annual fiscal year.
 
Since June 30, 2018 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.
 
6. 
Information about the main subsidiaries, associates and joint ventures
 
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 S.A. and Puerto Retiro S.A..
 
Detailed below are the evolutions of investments in subsidiaries, associates and joint ventures of the Company, for the three-month period ended September 30, 2018 and for the year ended June 30, 2018:
 
Subsidiaries, Associates and Joint ventures
 
 
09.30.18
 
06.30.18
Beginning of period / year
40,531
 
29,447
Adjustments previous periods (IFRS 9 and 15)
(83)
 
 -
Share of profit
9,855
 
14,604
Other comprehensive income
3,956
 
354
Capital contributions (Note 21)
132
 
1,328
Changes in non-controlling interest
11
 
(2,727)
Sale of subsidiaries, associates and joint ventures
 -
 
(1,965)
Dividends (Note 21)
 -
 
(597)
Other changes in the equity of subsidiaries
 -
 
87
End of the period / year (i)
54,402
 
40,531
 
(i)
As of September 30, 2018 and June 30, 2018 includes Ps. 5 and Ps. 10, respectively, corresponding to the equity interest in UTE IRSA - Galerías Pacífico S.A., included in Provisions (Note 16).
 
Name of the entity
 
% ownership interest
 
Company´s interest in equity
 
Company’s interest in comprehensive income
09.30.18
06.30.18
 
09.30.18
 
06.30.18
 
09.30.18
 
09.30.17
Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
IRSA CP
 
86.22%
86.22%
 
37,430
 
31,390
 
6,060
 
1,776
Tyrus
 
100.00%
100.00%
 
12,377
 
5,344
 
6,901
 
(1,643)
Efanur
 
100.00%
100.00%
 
1,331
 
914
 
417
 
25
Ritelco S.A.
 
100.00%
100.00%
 
1,044
 
823
 
231
 
92
ECLSA
 
96.74%
96.74%
 
587
 
527
 
71
 
53
Inversora Bolívar S.A.
 
95.13%
95.13%
 
452
 
438
 
24
 
59
Palermo Invest S.A.
 
97.00%
97.00%
 
385
 
367
 
29
 
64
Llao Llao Resort S.A.
 
50.00%
50.00%
 
27
 
24
 
3
 
 -
NFSA
 
76.34%
76.34%
 
13
 
9
 
4
 
(3)
HASA
 
80.00%
80.00%
 
12
 
4
 
8
 
(1)
Associates
 
 
 
 
 
 
 
 
 
 
 
BHSA (1) (2)
 
4.93%
4.93%
 
386
 
370
 
26
 
62
Manibil S.A.
 
49.00%
49.00%
 
179
 
165
 
15
 
2
BACS (2)
 
33.36%
33.36%
 
162
 
148
 
13
 
(17)
Joint ventures
 
 
 
 
 
 
 
 
 
 
 
Cyrsa S.A.
 
50.00%
50.00%
 
22
 
18
 
4
 
(3)
UTE IRSA - Galerías Pacífico S.A.
 
50.00%
50.00%
 
(5)
 
(10)
 
5
 
(2)
Total subsidiaries, associates and joint ventures
 
 
 
 
54,402
 
40,531
 
13,811
 
464
 
 
 
 
9
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 
Name of the entity
 
Location 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
108,652,579
 
126
7,087
43,634
Tyrus
 
Uruguay
Investment
16,025,861,475
 
7,460
3,311
12,379
Efanur
 
Uruguay
Investment
130,386,770
 
130
54
1,331
Ritelco S.A.
 
Uruguay
Investment
94,369,151
 
94
229
1,043
ECLSA
 
Argentina
Investment
77,316,130
 
80
73
606
Inversora Bolívar S.A.
 
Argentina
Investment
83,571,237
 
88
25
468
Palermo Invest S.A.
 
Argentina
Investment
155,953,673
 
161
30
428
Llao Llao Resort S.A.
 
Argentina
Hotel
73,580,206
 
147
5
54
NFSA
 
Argentina
Hotel
38,068,999
 
50
5
33
HASA
 
Argentina
Hotel
18,791,800
 
26
10
14
Associates
 
 
 
 
 
 
 
 
BHSA (1) (2)
 
Argentina
Financial
73,939,822
 
1,500
2,238
8,719
Manibil S.A.
 
Argentina
Real estate
130,122,874
 
266
30
366
BACS (2)
 
Argentina
Financial
29,297,626
 
88
(14)
445
Joint ventures
 
 
 
 
 
 
 
 
Cyrsa S.A.
 
Argentina
Real estate
8,748,269
 
17
8
44
UTE IRSA - Galerías Pacífico S.A.
 
Argentina
Real estate
500,000
 
1
9
(10)
 
(1)
Considered significant. See Notes 7 to 8 to the Annual Consolidated Financial Statements.
(2)
Information as of June 30, 2018 according to BCRA's standards. For the purpose of the valuation of the investments in the Company, preliminary figures as of September 30, 2018 have been considered, with the necessary IFRS adjustments. Share market price of Banco Hipotecario S.A as of September 30, 2018 amounts to Ps. 12.50. See Note 8 to the Consolidated Financial Statements as of June 30, 2018.
 
7.            
Investment properties
 
Changes in the Company’s investment properties for the three-month period ended September 30, 2018 and for the year ended June 30, 2018 were as follows:
 
 
Period ended September 30, 2018
 
Year ended June 30, 2018
 
Office buildings and other rental properties
 
Undeveloped parcels of land
 
Properties under development
 
Total
 
Total
Fair value at the beginning of the period / year
1,099
 
6,168
 
717
 
7,984
 
4,457
Additions
 -
 
 -
 
68
 
68
 
95
Capitalized finance costs
 -
 
 -
 
4
 
4
 
8
Disposals
 -
 
 -
 
 -
 
 -
 
(152)
Net gain from fair value adjustment (i)
472
 
2,651
 
256
 
3,379
 
3,576
Fair value at the end of the period / year
1,571
 
8,819
 
1,045
 
11,435
 
7,984
 
(i)
For the three-month period ended September 30, 2018, the net gain from fair value adjustment of the properties included in this note was Ps. 3,379, mainly generated by the depreciation of 43% of the Argentine peso and the maintenance of the reference values ​​in dollars of the square meters of market comparables.
 
The following amounts have been recognized in the Statements of Comprehensive Income:
 
 
09.30.18
 
09.30.17
Sale, rental and services´ income (Note 17)
12
 
8
Rental and services´ costs (Note 18)
(3)
 
(4)
Cost of sales and developments (Note 18)
(4)
 
(2)
Net unrealized gain from fair value adjustment of investment properties
3,379
 
139
Net realized gain from fair value adjustment of investment properties
 -
 
24
 
Valuation techniques are described in Note 9 to the Consolidated Financial Statements as of June 30, 2018. There were no changes to the valuation techniques.
 
 
 
 
10
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
8.            
Property, plant and equipment
 
Changes in the Company’s property, plant and equipment for the three-month period ended September 30, 2018 and for the year ended June 30, 2018 were as follows:
 
 
Period ended September 30, 2018
 
Year ended June 30, 2018
 
Buildings and facilities
 
Furniture and fixtures
 
Machinery and equipment
 
Total
 
Total
Costs
18
 
3
 
18
 
39
 
35
Accumulated depreciation
(13)
 
(3)
 
(15)
 
(31)
 
(29)
Net book amount at the beginning of the period / year
5
 
-
 
3
 
8
 
6
Additions
-
 
-
 
-
 
-
 
4
Depreciation
-
 
-
 
-
 
-
 
(2)
Balances at the end of the period / year
5
 
-
 
3
 
8
 
8
Costs
18
 
3
 
18
 
39
 
39
Accumulated depreciation
(13)
 
(3)
 
(15)
 
(31)
 
(31)
Net book amount at the end of the period / year
5
 
-
 
3
 
8
 
8
 
9.            
Trading properties
 
Changes in the Company’s trading properties for the three-month period ended September 30, 2018 and for the year ended June 30, 2018 were as follows:
 
 
Period ended September 30, 2018
 
Year ended June 30, 2018
 
Completed properties
 
Undeveloped properties
 
Properties under development
 
Total
 
Total
Beginning of the period / year
15
 
99
 
462
 
576
 
327
Adjustments previous periods (IFRS 15)
-
 
-
 
(110)
 
(110)
 
-
Additions
-
 
-
 
95
 
95
 
239
Capitalized finance costs
-
 
-
 
5
 
5
 
11
Disposals
-
 
-
 
(168)
 
(168)
 
(1)
End of the period / year
15
 
99
 
284
 
398
 
576
Non-current
 
 
 
 
 
 
371
 
532
Current
 
 
 
 
 
 
27
 
44
Total
 
 
 
 
 
 
398
 
576
 
10.            
Intangible assets
 
Changes in Company’s intangible assets for the three-month period ended September 30, 2018 and for the year ended June 30, 2018 were as follows:
 
 
Period ended September 30, 2018
 
Year ended June 30, 2018
 
Computer software
 
Future units to be received from barters
 
Total
 
Total
Costs
6
 
19
 
25
 
23
Accumulated amortization
(2)
 
-
 
(2)
 
(2)
Net book amount at the beginning of the period / year
4
 
19
 
23
 
21
Additions
1
 
-
 
1
 
2
Balances at the end of the period / year
5
 
19
 
24
 
23
Costs
7
 
19
 
26
 
25
Accumulated amortization
(2)
 
-
 
(2)
 
(2)
Net book amount at the end of the period / year
5
 
19
 
24
 
23
 
 
 
 
11
IRSA Inversiones y Representaciones Sociedad Anónima
 
11.            
Financial instruments by category
 
This note presents 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 13 to the Consolidated Financial Statements as of June 30, 2018.
 
Financial assets and financial liabilities as of September 30, 2018 and June 30, 2018 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
 
 
 
 
 
 
September 30, 2018
 
 
 
 
 
 
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 12)
484
 
 -
 
484
 
888
 
1,372
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 - Mutual funds
-
 
4
 
4
 
-
 
4
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
  - Cash at bank and on hand
67
 
-
 
67
 
-
 
67
Total
551
 
4
 
555
 
888
 
1,443
 
 
Financial liabilities at amortized cost (i)
 
Non-financial liabilities
 
Total
September 30, 2018
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
Trade and other payables (Note 13)
324
 
978
 
1,302
Borrowings (excluding finance leases) (Note 14)
14,398
 
-
 
14,398
Total
14,722
 
978
 
15,700
 
 
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, 2018
 
 
 
 
 
 
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 12)
361
 
-
 
361
 
732
 
1,093
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 - Bonds
-
 
6
 
6
 
-
 
6
 - Mutual funds
-
 
3
 
3
 
-
 
3
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 - Cash at bank and on hand
16
 
-
 
16
 
-
 
16
Total
377
 
9
 
386
 
732
 
1,118
 
 
Financial liabilities at amortized cost (i)
 
Non-financial liabilities
 
Total
June 30, 2018
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
Trade and other payables (Note 13)
221
 
1,084
 
1,305
Borrowings (excluding finance leases) (Note 14)
9,944
 
-
 
9,944
Total
10,165
 
1,084
 
11,249
 
(i)
The fair value of financial assets and liabilities at amortized cost does not differ significantly from their book value, except for borrowings (Note 14). 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.
 
As of September 30, 2018, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Company.
 
 
 
 
12
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
12.
Trade and other receivables
 
Company’s trade and other receivables, as of September 30, 2018 and June 30, 2018 are comprised as follows:
 
 
09.30.18
 
06.30.18
Receivables from the sale of properties
106
 
48
Leases and services receivables
78
 
67
Less: Allowance for doubtful accounts
(23)
 
(8)
Total trade receivables
161
 
107
Advance payments
628
 
501
Borrowings granted, deposits and others
306
 
250
VAT receivables
161
 
126
Prepaid expenses
51
 
45
Tax credits
19
 
15
Long-term incentive plan
16
 
15
Capital contributions pending integration
4
 
-
Advances granted
-
 
17
Others
3
 
9
Total other receivables
1,188
 
978
Total trade and other receivables
1,349
 
1,085
Non-current
329
 
246
Current
1,020
 
839
Total
1,349
 
1,085
 
Movements on the Company’s allowance for doubtful accounts are as follows:
 
 
09.30.18
 
06.30.18
Beginning of period /year
8
 
3
Additions
19
 
5
Disposals
(4)
 
-
End of the period / year
23
 
8
 
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.
 
13.
Trade and other payables
 
Company’s trade and other payables as of September 30, 2018 and June 30, 2018 were as follows:
 
 
09.30.18
 
06.30.18
Customers advances
922
 
1,043
Trade payables
239
 
182
Accrued invoices
84
 
38
Tenant deposits
1
 
1
Total trade payables
1,246
 
1,264
Director´s fees
24
 
17
Long-term incentive plan
14
 
13
Tax amnesty plan
9
 
5
Other tax payables
9
 
6
Total other payables
56
 
41
Total trade and other payables
1,302
 
1,305
Non-current
972
 
1,127
Current
330
 
178
Total
1,302
 
1,305
 
 
 
 
13
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
14.
Borrowings
 
Company’s borrowings as of September 30, 2018 and June 30, 2018 are as follows:
 
 
Book value as of 09.30.18
 
Book value as of 06.30.18
 
Fair value as of 09.30.18
 
Fair value as of 06.30.18
Non-convertible notes
10,277
 
7,838
 
11,055
 
7,930
Bank borrowings
1,690
 
1,263
 
1,708
 
2,543
Bank overdrafts
1,378
 
617
 
1,378
 
617
Related parties (Note 21)
1,053
 
226
 
1,053
 
226
Finance leases
2
 
2
 
2
 
2
Total borrowings
14,400
 
9,946
 
15,196
 
11,318
Non-current
4,141
 
8,669
 
 
 
 
Current
10,259
 
1,277
 
 
 
 
Total
14,400
 
9,946
 
 
 
 
 
15.
Current and deferred income tax
 
The provision for the Company’s income tax are as follows:
 
 
09.30.18
 
09.30.17
Deferred income tax
121
 
83
Income tax gain
121
 
83
 
Below is a reconciliation between income tax recognized and the amount which would arise from applying the prevailing tax rate on profit before income tax for the three-month periods ended September 30, 2018 and 2017:
 
 
09.30.18
 
09.30.17
Net income at tax rate (1)
(2,726)
 
(190)
Permanent differences:
 
 
 
Share of profit of subsidiaries, associates and joint ventures
2,957
 
272
Gain from the sale of interest in subsidiaries
(121)
 
-
Donations and non-deductible expenses
-
 
(2)
Others
11
 
3
Income tax – Gain
121
 
83
 
(1) Income tax rate in effect in Argentina as of September 30, 2017 was 35%, while as of September 30, 2018 is 30%. See note 19 to the Financial Statements as of June 30, 2018.
 
The gross movement on the deferred income tax account is as follows:
 
 
09.30.18
 
06.30.18
Beginning of the period / year
(1,971)
 
(2,247)
Adjustments previous periods (IFRS 15)
(10)
 
-
Income tax change
121
 
276
End of the period / year
(1,860)
 
(1,971)
 
16.
Provisions
 
The table below shows changes in Company's provisions:
 
Period ended September 30, 2018
 
Year ended June 30, 2018
 
Labor, legal and other claims (i)
 
Investments in associates and joint ventures (ii)
 
Total
 
Total
Beginning of period / year
30
 
10
 
40
 
36
Additions
2
 
-
 
2
 
13
Decrease (iii)
-
 
(5)
 
(5)
 
(5)
Utilization
-
 
-
 
-
 
(4)
End of period / year
32
 
5
 
37
 
40
Non current
 
 
 
 
33
 
37
Current
 
 
 
 
4
 
3
Total
 
 
 
 
37
 
40
 
(i)
   Additions and recoveries are included in "Other operating results, net”.
(ii)
  Corresponds to the equity interest in UTE IRSA – Galerías Pacífico S.A. with negative equity for an amount of Ps. 5 and Ps. 10 as of September 30, 2018 and June 30, 2018.
(iii)
 Included in “Share of profit of subsidiaries, associates and joint ventures” (Note 6).
 
 
 
14
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
17.
Revenues
 
 
09.30.18
 
09.30.17
Sale of trading properties
28
 
-
Rental income and averaging of scheduled rental escalation
10
 
7
Property management fees
2
 
1
Sales, rental and services´ income
40
 
8
Expenses
-
 
3
Total revenues
40
 
11
 
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 September 30, 2018 and 2017:
 
 
Costs (1)
 
General and administrative expenses
 
Selling expenses
 
09.30.18
 
09.30.17
Salaries, social security costs and other personnel expenses
-
 
30
 
2
 
32
 
26
Allowance for doubtful accounts (charge and recovery, net) (Note 12)
-
 
-
 
15
 
15
 
-
Director´s fees (Note 21)
-
 
11
 
-
 
11
 
9
Traveling, transportation and stationery expenses
-
 
7
 
-
 
7
 
4
Maintenance, security, cleaning, repairs and others
6
 
-
 
-
 
6
 
3
Taxes, rates and contributions
3
 
-
 
1
 
4
 
2
Fees and payments for services
-
 
4
 
-
 
4
 
4
Leases and services charges
-
 
3
 
-
 
3
 
2
Advertising and other selling expenses
-
 
-
 
3
 
3
 
2
Public services and others
-
 
2
 
-
 
2
 
1
Bank charges
-
 
2
 
-
 
2
 
1
Total expenses by nature as of 09.30.18
9
 
59
 
21
 
89
 
-
Total expenses by nature as of 09.30.17
7
 
42
 
5
 
-
 
54
 
(1)
For the three-month period ended September 30, 2018, includes Ps. 3 of rental and services costs; Ps. 6 of costs of sales and developments of which Ps. 4 correspond to investment properties and Ps. 2 to trading properties. For the three-month period ended September 30, 2017, includes Ps. 4 which correspond to rental and services costs; Ps. 3 to costs of sales and developments of which Ps. 2 correspond to investment properties and Ps. 1 to trading properties.
 
19.
Other operating results, net
 
 
09.30.18
 
09.30.17
Donations
(5)
 
(6)
Lawsuits and other contingencies (i)
(1)
 
(2)
Tax on shareholders’ personal assets
-
 
2
Others
1
 
1
Total other operating results, net
(5)
 
(5)
 
(i)
Includes legal costs and expenses.
 
20.
Financial results, net
 
 
09.30.18
 
09.30.17
 - Foreign exchange gain
241
 
10
 - Interest income
9
 
4
Total finance income
250
 
14
 - Foreign exchange loss
(3,917)
 
(214)
 - Interest expenses
(426)
 
(151)
 - Other finance costs
(9)
 
(4)
Subtotal finance costs
(4,352)
 
(369)
Capitalized finance costs
9
 
1
Total finance costs
(4,343)
 
(368)
 - Fair value gain of financial assets
(1)
 
1
 - Gain from derivative financial instruments, net
-
 
4
Total other financial results
(1)
 
5
Total financial results, net
(4,094)
 
(349)
 
 
 
 
15
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
21.
 Related party transactions
 
The following is a summary of the balances with related parties as of September 30, 2018 and June 30, 2018:
 
Item
 
09.30.18
 
06.30.18
Trade and other payables
 
(1,018)
 
(791)
Borrowings
 
(1,053)
 
(226)
Trade and other receivables
 
360
 
298
Total
 
(1,711)
 
(719)
 
Related parties
 
 
09.30.18
 
06.30.18
 
 Description of operation
 
Item
Cresud
 
8
 
4
 
Leases receivable
 
Trade and other receivables
 
 
(34)
 
(22)
 
Corporate services payable
 
Trade and other payables
 
 
(11)
 
(7)
 
Reimbursement of expenses payable
 
Trade and other payables
 
 
(1)
 
(1)
 
Long-term incentive plan payable
 
Trade and other payables
 
 
(1)
 
(1)
 
Management fee
 
Trade and other payables
Total parent company
 
(39)
 
(27)
 
 
 
 
IRSA CP
 
(780)
 
(673)
 
Sale of properties
 
Trade and other payables
 
 
(684)
 
-
 
Non-Convertible Notes
 
Borrowings
 
 
(84)
 
-
 
Other liabilities
 
Trade and other payables
 
 
(55)
 
(42)
 
Corporate services payable
 
Trade and other payables
 
 
(12)
 
(12)
 
Long-term incentive plan payable
 
Trade and other payables
 
 
(7)
 
(9)
 
Reimbursement of expenses payable
 
Trade and other payables
Tyrus
 
211
 
146
 
Borrowings granted
 
Trade and other receivables
ECLSA
 
1
 
1
 
Dividends receivable
 
Trade and other receivables
 
 
(177)
 
(105)
 
Loans received
 
Borrowings
Manibil S.A.
 
52
 
72
 
Borrowings granted
 
Trade and other receivables
Panamerican Mall S.A.
 
1
 
1
 
Long-term incentive plan receivable
 
Trade and other receivables
 
 
(60)
 
(42)
 
Non-Convertible Notes
 
Borrowings
Efanur
 
(52)
 
(18)
 
Loans received
 
Borrowings
Ritelco S.A.
 
(14)
 
(11)
 
Loans received
 
Borrowings
NFSA
 
26
 
18
 
Management fee
 
Trade and other receivables
 
 
(41)
 
(39)
 
Loans received
 
Borrowings
Fibesa S.A.
 
13
 
13
 
Long-term incentive plan receivable
 
Trade and other receivables
Real Estate Strategies LLC
 
14
 
10
 
Borrowings granted
 
Trade and other receivables
Palermo Invest S.A.
 
-
 
5
 
Borrowings granted
 
Trade and other receivables
 
 
-
 
3
 
Dividends receivable
 
Trade and other receivables
HASA
 
(8)
 
-
 
Hotel services payable
 
Trade and other payables
Llao Llao Resorts S.A.
 
4
 
-
 
Hotel services receivable
 
Trade and other receivables
 
 
1
 
-
 
Reimbursement of expenses receivable
 
Trade and other receivables
New Lipstick
 
10
 
7
 
Reimbursement of expenses receivable
 
Trade and other receivables
Cyrsa S.A.
 
(7)
 
(6)
 
Loans received
 
Borrowings
Inversora Bolívar S.A.
 
(14)
 
(5)
 
Loans received
 
Borrowings
Liveck S.A.
 
3
 
-
 
Borrowings granted
 
Trade and other receivables
UTE IRSA – Galerías Pacífico S.A.
 
3
 
-
 
Hotel services receivable
 
Trade and other receivables
Others subsidiaries, associates and
 
4
 
2
 
Reimbursement of expenses receivable
 
Trade and other receivables
joint ventures (1)
 
3
 
-
 
Dividends receivable
 
Trade and other receivables
 
 
1
 
1
 
Long-term incentive plan receivable
 
Trade and other receivables
 
 
(4)
 
-
 
Loans received
 
Borrowings
 
 
(1)
 
(1)
 
Reimbursement of expenses payable
 
Trade and other payables
 
 
-
 
10
 
Hotel services receivable
 
Trade and other receivables
 
 
-
 
1
 
Borrowings granted
 
Trade and other receivables
 
 
-
 
(6)
 
Hotel services payable
 
Trade and other payables
Total subsidiaries, associates and joint ventures
 
(1,653)
 
(679)
 
 
 
 
Directors
 
(24)
 
(17)
 
Fees
 
Trade and other payables
Total Directors
 
(24)
 
(17)
 
 
 
 
Others (2)
 
5
 
4
 
Reimbursement of expenses receivable
 
Trade and other receivables
Total others
 
5
 
4
 
 
 
 
Total at the end of the period/year
 
(1,711)
 
(719)
 
 
 
 
 
(1)
It includes BHSA, BACS, Palermo Invest S.A., Puerto Retiro S.A., Quality, Arcos del Gourmet S.A., Nuevo Puerto Santa Fe S.A. y Real Estate Investment Gr. V..
(2)
It includes Consultores Assets Management S.A., Austral Gold Argentina S.A., Fundación IRSA, Hamonet S.A. y Estudio Zang, Bergel & Viñes.
 
16
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
The following is a summary of the results with related parties for the three-month periods ended September 30, 2018 and 2017:
 
Related parties
 
09.30.18
 
09.30.17
 
 Description of operation
Cresud
 
4
 
 -
 
Leases and/or rights of use
 
 
(18)
 
(15)
 
Corporate services
Total parent company
 
(14)
 
(15)
 
 
IRSA CP
 
(11)
 
(7)
 
Corporate services
 
 
(1)
 
(1)
 
Leases and/or rights of use
Panamerican Mall S.A.
 
(18)
 
(1)
 
Financial operations
ECLSA
 
(49)
 
 -
 
Financial operations
Ritelco S.A.
 
(5)
 
 -
 
Financial operations
Efanur
 
(10)
 
 -
 
Financial operations
Tyrus
 
65
 
4
 
Financial operations
Manibil S.A.
 
29
 
6
 
Financial operations
Real Estate Strategies LLC
 
4
 
 -
 
Financial operations
Others subsidiaries, associates and joint ventures (1)
 
1
 
1
 
Fees
 
 
(4)
 
(1)
 
Financial operations
Total subsidiaries, associates and joint ventures
 
1
 
1
 
 
Directors
 
(11)
 
(9)
 
Fees
Senior Managment
 
(4)
 
(1)
 
Fees
Total Directors and Senior Managment
 
(15)
 
(10)
 
 
Fundación IRSA
 
(3)
 
(4)
 
Donations
Estudio Zang, Bergel & Viñes
 
(1)
 
(1)
 
Fees
Others (2)
 
1
 
 -
 
Leases and/or rights of use
 
 
(1)
 
 -
 
Donations
Total others
 
(4)
 
(5)
 
 
Total at the end of the period
 
(32)
 
(29)
 
 
 
 
(1)
It includes Inversora Bolívar S.A., HASA, NFSA, Cyrsa S.A., BACS, Liveck S.A. y Palermo Invest S.A..
(2)
It includes TGLT, Austral Gold Argentina S.A., Consultores Assets Management S.A., Fundación Puerta 18, Hamonet S.A. e Isaac Elsztain e Hijos S.C.A..
 
The following is a summary of the transactions with related parties without impact in results for the three-month periods ended September 30, 2018 and 2017:
 
Related parties
 
09.30.18
 
09.30.17
 
 Description of operation
Tyrus
 
(132)
 
(44)
 
Irrevocable contributions granted
Manibil S.A.
 
-
 
(198)
 
Irrevocable contributions granted
Total contributions to subsidiaries
 
(132)
 
(242)
 
 
 
 
 
 
 
17
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
22. Foreign currency assets and liabilities
 
Book amounts of foreign currency assets and liabilities are as follows:
 
Item (1)
 Amount (2)
 Foreign exchange rate (3)
Total as of 09.30.18
 Amount (2)
 Foreign exchange rate (3)
Total as of 06.30.18

Assets
 
 
 
 
 
 
Trade and other receivables
 
 
 
 
 
 
US Dollar
12.88
41.05
529
12.25
28.75
352
Euros
0.15
47.62
7
-
-
-
Receivables with related parties
 
 
 
 
 
 
US Dollar
7.74
41.25
319
8.83
28.85
255
Total Trade and other receivables
 
 
855
 
 
607
Investments in financial assets
 
 
 
 
 
 
US Dollar
0.11
41.05
4
0.31
28.75
9
Total Investments in financial assets
 
 
4
 
 
9
Cash and cash equivalents
 
 
 
 
 
 
US Dollar
1.54
41.05
63
0.45
28.75
13
Euros
0.07
47.62
3
0.07
33.54
2
Total Cash and cash equivalents
 
 
66
 
 
15
Total Assets
 
 
925
 
 
631
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Trade and other payables
 
 
 
 
 
 
US Dollar
8.36
41.25
344
9.63
28.85
278
Euros
0.18
47.95
9
-
-
-
Payables with related parties
 
 
 
 
 
 
US Dollar
6.27
41.25
259
3.74
28.85
108
Total Trade and other payables
 
 
612
 
 
386
Borrowings
 
 
 
 
 
 
US Dollar
281.30
41.25
11,603
306.93
28.85
8,855
Borrowings with related parties
 
 
 
 
 
 
US Dollar
23.93
41.25
987
2.07
28.85
60
Total Borrowings
 
 
12,590
 
 
8,915
Total Liabilities
 
 
13,202
 
 
9,301
 
(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 September 30, 2018 and June 30, 2018 according to Banco Nación Argentina records.
 
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 16 Provisions
Exhibit F - Cost of sales and services provided
Note 9 Trading properties and Note 18 Expenses by nature
Exhibit G - Foreign currency assets and liabilities
Note 22 Foreign currency assets and liabilities
 
 
 
 
18
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
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 CNV RULES (2013 as amended) are available at the registered office.
 
On February 5, 2014 there was a widely known accident 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.
Working capital deficit
 
At the end of the period, the Company has a working capital deficit of Ps. 9,584. Its treatment is being considered by the Board of Directors and Management. After September 30, 2018, the Company expects to receive dividends from IRSA CP for an amount of approximately Ps. 468 and Ps. 1,620 as part of the payment for the sale of the future units of "Catalinas" to IRSA CP (Note 26).
 
26.
Subsequent events
 
See subsequent events in Note 30 to Unaudited Condensed Interim Consolidated Financial Statements, in addition to the following:
 
Dividends from IRSA CP:
 
On October 29, 2018, the General Shareholders' Meeting of IRSA CP decided to distribute a cash dividend of Ps. 545. The Company maintains a holding percentage of 86.22% over said company.
 
Sale agreement of “Catalinas”:
 
On November 1, 2018, the Company subscribed a sale agreement for 14,213 square meters of the gross leaseable area of the building called "Catalinas" to its subsidiary IRSA CP. The total amount of the operation is estimated at Ps. 2,207, since it is composed of a fixed part and a variable part.
 
 
 
 
 
19
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 September 30, 2018
(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
 
09.30.18
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
Total
 
Accounts receivables
Trade and other receivables
90
564
87
64
59
236
7
235
-
-
7
1,349
 
Total
90
564
87
64
59
236
7
235
-
-
7
1,349
Liabilities
Trade and other payables
102
-
-
225
1
-
2
49
922
-
1
1,302
 
Borrowings
-
-
-
1,721
194
169
8,175
3,472
444
225
-
14,400
 
Salaries and social security liabilities
-
1
-
1
-
-
-
-
-
-
-
2
 
Provisions
-
4
33
-
-
-
-
-
-
-
-
37
 
Total
102
5
33
1,947
195
169
8,177
3,521
1,366
225
1
15,741
 
 
 
 
 
 
20
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 September 30, 2018
(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
195
825
1,020
299
30
329
494
855
1,349
 
Total
195
825
1,020
299
30
329
494
855
1,349
Liabilities
Trade and other payables
225
105
330
465
507
972
690
612
1,302
 
Borrowings
1,814
8,445
10,259
13
4,128
4,141
1,827
12,573
14,400
 
Salaries and social security liabilities
2
-
2
-
-
-
2
-
2
 
Provisions
4
-
4
33
-
33
37
-
37
 
Total
2,045
8,550
10,595
511
4,635
5,146
2,556
13,185
15,741
 
4.b. 
Breakdown of accounts receivable and liabilities by adjustment clause.
 
On September 30, 2018 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
 
Accruing interest
Non-accruing interest (*)
Total
Accruing interest
Non-accruing interest (*)
Total
Total
Fixed rate
Floating rate
Fixed rate
Floating rate
Fixed rate
Floating rate
 
Accounts receivables
Trade and other receivables
97
280
643
1,020
26
-
303
329
123
280
946
1,349
 
Total
97
280
643
1,020
26
-
303
329
123
280
946
1,349
Liabilities
Trade and other payables
-
-
330
330
2
-
970
972
2
-
1,300
1,302
 
Borrowings
8,327
1,758
174
10,259
4,127
10
4
4,141
12,454
1,768
178
14,400
 
Salaries and social security liabilities
-
-
2
2
-
-
-
-
-
-
2
2
 
Provisions
-
-
4
4
-
-
33
33
-
-
37
37
 
Total
8,327
1,758
510
10,595
4,129
10
1,007
5,146
12,456
1,768
1,517
15,741
 
(*) Includes the balance as of 09.30.2018 of the interest payable corresponding to the loans.
 
 
 
 
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 September 30, 2018
(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
86.22%
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.
 
 
 
 
 
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 September 30, 2018
(Stated in millions)
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
139
All operational risk with additional coverage and minor risks
Libertador 498
4
1,572
All operational risk with additional coverage and minor risks
Santa María del Plata
0.053
9,291
All operational risk with additional coverage and minor risks
Abril Manor House
4
5
All operational risk with additional coverage and minor risks
Catalinas Norte Plot
2
1,600
All operational risk with additional coverage and minor risks
Subtotal
12
12,607
 
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 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 cannot be released to make distributions in cash or in kind. See Note 16 to the Consolidated Financial Statements at June 30, 2018.
 
IRSA NCN due 2019 and 2020 both contain certain customary covenants and restrictions, including, among 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, November 7, 2018.
 
 
 
 
23
 
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 statements of financial position as of September 30, 2018, and the unaudited condensed interim separate statements of income and other comprehensive income for the three-month period ended September 30, 2018, the unaudited condensed interim separate statements of changes in shareholders’ equity and the unaudited condensed interim separate statements of cash flows for the three-month period then ended and selected explanatory notes.
 
The balances and other information corresponding to the fiscal year ended June 30, 2018 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 accounting framework established by the National Securities Commission (CNV). As indicated in Note 2.1 to the accompanying financial statements, such accounting framework is based in the application of International Financial Reporting Standards (IFRS) and, in particular, of International Accounting Standard No 34 "Interim Financial Reporting" (IAS 34). Those standards have been adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE), and were used for the preparation of these unaudited condensed interim separate financial statements, with the only exception of the application of International Accounting Standard No 29 (IAS 29), which was excluded by the accounting framework of the CNV.
 
 
 
 
 
 
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 statements of financial position, the separate statements 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 the accounting framework established by CNV.
 
 
Emphasis of Matter
 
Difference between the accounting framework of CNV and IFRS
 
Without qualifying our conclusion, we draw attention to Note 2.1 to the accompanying unaudited condensed interim separate financial statements, which qualitatively describes the difference between the accounting framework established by the CNV and IFRS, considering that the application of IAS 29 was excluded by CNV from its accounting framework.
 
 
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 recorded 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;
 
 
 
 
 
 
 
 
Free translation from the original prepared in Spanish for publication in Argentina
 
 
REVIEW REPORT ON THE UNAUDITED CONDENSED
INTERIM SEPARATE FINANCIAL STATEMENTS (Continued)
 
 
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;
 
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 September 30, 2018, 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. 88,709.28, which was not claimable at that date.
 
 
 
 
Autonomous City of Buenos Aires, November 7, 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
Roberto Daniel Murmis
Public Accountant (UBA)
C.P.C.E.C.A.B.A. T° 113 F° 195
 
 
 
 
 
 
 
 
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
I. Brief comment on the Company’s activities during the period, including references to significant events occurred after the end of the period.
 
 
Consolidated Results
In Ps. Million
IQ 19
IQ 18
YoY Var
Revenues
10,827
7,029
54.0%
Net gain from fair value adjustment of investment properties
16,012
3,360
376.5%
Profit from operations
17,916
4,800
273.3%
Depreciation and amortization
1,144
863
32.6%
EBITDA
19,060
5,663
236.6%
Adjusted EBITDA
3,048
2,327
31.0%
Profit for the period
11,084
74
14,878.4%
Attributable to equity holders of the parent
9,401
553
1,600.0%
Attributable to non-controlling interest
1,683
-479
-
*EBITDA: Net gain from fair value adjustment on investment properties plus disposal of investment properties.
 
Consolidated revenues from sales, rentals and services increased by 54.0% in the first quarter of fiscal year 2019 compared to the same period in 2018, while adjusted EBITDA, which excludes the effect of net unrealized gain from fair value adjustment of investment properties reached ARS 3,048 million, 31.0% higher than the same period in FY 2018.
 
 
The net result showed a profit of ARS 11,084 million for the first quarter of fiscal year 2019, as a result of a higher net gain from fair value adjustment of our investment properties in the operations center in Argentina and and the effect of the improvement in the market value of our investment in CLAL in the operations center in Israel.
 
 
Argentina Business Center
 
 
II. Shopping Malls (through our subsidiary IRSA Propiedades Comerciales S.A.)
 
 
Shopping malls operated by us comprise 345,929 square meters of GLA, increasing by approximately 2,000 sqm mainly due to the opening of the cinema theatres in Alto Comahue shopping. Total tenant sales in our shopping malls, as reported by retailers, were ARS 12,133 million for the first quarter of FY 2019, which implies an increase of 24.1% when compared to the same perior in FY 2018.
 
 
The occupancy rate stood at very high levels, reaching 98.7%.
 
 
Shopping Malls’ Financial Indicators
 
(in ARS million)
 
IQ 19
IQ 18
YoY Var
Revenues from sales, leases and services
1,039
850
22.2%
Net gain from fair value adjustment on investment properties
3,694
2,044
80.7%
Profit from operations
4,398
2,685
63.8%
Depreciation and amortization
11
6
88.0%
EBITDA
4,409
2,691
63.9%
Adjusted EBITDA
715
647
10.6%
 
 
 
 
Average Exchange rate (ARS)
32.10
17.28
85.8%
 
Shopping Malls’ Operating Indicators
(in ARS million, except indicated)
IQ 19
IVQ 18
IIIQ 18
IIQ 18
IQ 18
Gross leasable area (sqm)
345,929
344,025
343,023
340,111
339,080
Tenants’ sales (3 month cumulative)
12,133.0
11,971.0
9,358.0
12,031.0
9,777.7
Occupancy
98.7%
98.5%
98.6%
99.1%
98.8%
 
 
 
 
1
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
 
Revenues from this segment grew 22.2% during the three-month period, while Adjusted EBITDA reached ARS 715 million (+10.6% compared to the same period of 2018) and EBITDA margin, excluding income from expenses and collective promotion funds, was 68.8%. This is because tenants’ sales and our revenues have grown below the inflation of the quarter, which has accelerated after the exchange rate depreciation, while costs, as well as administrative and selling expenses, grew in line with inflation.
 
 
Operating data of our Shopping Malls
 
 
Date of opening
Location
Gross Leasable Area sqm (1)
Stores
Occupancy Rate (2)
IRSA CP’s Interest (3)
Alto Palermo
Dec-97
City of Buenos Aires
18,636
137
99.5%
100%
Abasto Shopping(4)
Nov-99
City of Buenos Aires
36,796
171
99.5%
100%
Alto Avellaneda
Dec-97
Province of Buenos Aires
38,033
132
99.0%
100%
Alcorta Shopping
Jun-97
City of Buenos Aires
15,803
115
98.4%
100%
Patio Bullrich
Oct-98
City of Buenos Aires
11,397
86
98.8%
100%
Buenos Aires Design
Nov-97
City of Buenos Aires
13,735
62
90.4%
53.70%
Dot Baires Shopping
May-09
City of Buenos Aires
49,407
157
100.0%
80%
Soleil
Jul-10
Province of Buenos Aires
15,211
80
99.8%
100%
Distrito Arcos (5)
Dec-14
City of Buenos Aires
14,169
68
100.0%
90.00%
Alto Noa Shopping
Mar-95
Salta
19,045
87
96.4%
100%
Alto Rosario Shopping(5)
Nov-04
Santa Fe
33,358
140
99.3%
100%
Mendoza Plaza Shopping
Dec-94
Mendoza
42,867
141
99.4%
100%
Córdoba Shopping
Dec-06
Córdoba
15,276
105
99.1%
100%
La Ribera Shopping
Aug-11
Santa Fe
10,530
68
96.6%
50%
Alto Comahue (6)
Mar-15
Neuquén
11,666
100
97.0%
99.10%
Patio Olmos(7)
Sep-15
Córdoba
 
 
 
 
Total
 
 
345,929
1,649
98.7%
 
(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 fiscal year.
(3) Company’s effective interest in each of its business units.
(4) Excludes Museo de los Niños (3,732 square meters in Abasto and 1,261 square meters in Alto Rosario).
(5) Opening December 18, 2014.
(6) Opening March 17, 2015.
(7) IRSA CP owns the historic building of the Patio Olmos shopping mall in the Province of Córdoba, operated by a third party.
 
Cumulative tenants’ sales as of September 30
 
(per Shopping Mall, in ARS. million)
IQ 19
IQ 18
YoY Var
Alto Palermo
1,450.9
1,129.9
28.4%
Abasto Shopping
1,644.3
1,317.4
24.8%
Alto Avellaneda
1,452.9
1,215.4
19.5%
Alcorta Shopping
799.3
602.8
32.6%
Patio Bullrich
483.6
335.6
44.1%
Buenos Aires Design
179.8
170.3
5.6%
Dot Baires Shopping
1,254.5
1,019.1
23.1%
Soleil
629.3
531.2
18.5%
Distrito Arcos
566.9
439.7
28.9%
Alto Noa Shopping
534.3
445.2
20.0%
Alto Rosario Shopping
1,170.1
918.5
27.4%
Mendoza Plaza Shopping
946.8
796.5
18.9%
Córdoba Shopping
379.1
321.6
17.9%
La Ribera Shopping(1)
280.0
246.0
13.8%
Alto Comahue
361.6
288.5
25.3%
Total
12,133.4
9,777.7
24.1%
(1) Through our joint venture Nuevo Puerto Santa Fe S.A.
 
 
 
 
2
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
 
Cumulative tenants’ sales as of September 30
 
(per Type of Business, in ARS. million)
IQ 19
IQ 18
YoY Var
Anchor Store
644.1
540.7
19.1%
Clothes and Footwear
6,424.2
4,985.5
28.9%
Entertainment
478.2
415.7
15.0%
Home
325.0
277.5
17.1%
Restaurant
1,472.1
1,203.6
22.3%
Miscellaneous
1,514.1
1,106.5
36.8%
Services
165.4
112.1
47.5%
Electronic appliances
1,110.3
1,136.1
-2.3%
Total
12,133.4
9,777.7
24.1%
 
Detailed Revenues as of September 30
 
 (in ARS million)
IQ 19
IQ 18
Var a/a
Base Rent(1)
585.7
470.3
24.5%
Percentage Rent
218.8
170.9
28.0%
Total Rent
804.5
641.2
25.5%
Revenues from non-traditional advertising
26.0
16.8
54.8%
Admission rights
94.7
73.3
29.2%
Fees
14.3
13.6
5.1%
Parking
70.7
60.0
17.8%
Commissions
22.1
42.0
-47.4%
Others
6.3
2.6
142.3%
Revenues before Expenses and CPF
1,038.7
849.6
22.3%
Expenses and Collective Promotion Fund
430.2
383.1
12.3%
Total(2)
1,468.9
1,232.7
19.2%
(1)
Includes Revenues from stands for ARS 72.3 million cum Sep, 2018.
(2)
Does not include Patio Olmos.
 
III. Offices
 
 
The A+ office market in the City of Buenos Aires remains robust even after the period of highest exchange volatility in recent years. The price of Premium commercial spaces stood at USD 5,000 per square meter while rental prices increased slightly as compared to the previous year, averaging USD 32 per square meter for the A+ segment, and vacancy increased lightly to 4.44% as of September 2018.
 
 
As concerns the A+ office market in the Northern Area of Buenos Aires, 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
 
 
 
3
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
Sale and Rental Prices of A+ Offices – Northern Area
Source: LJ Ramos
 
Gross leasable area was 83,213 sqm as of the first three-month period of fiscal year 2019, lower than the one recorded in the same period of the previous fiscal year, mainly due to the sale of one floor of approximately 900 sqm of Intercontinental Plaza building.
 
 
Portfolio average occupancy diminished at 93.4% regarding the same period of previous fiscal year, mainly due to the takeover of the total sqm in Philips Building in January 2018, which had a 69,8% occupancy during the quarter. Nevertheless, it has increased compared to the last quarter due to the occupation of one floor of BankBoston Tower. The average rental price slightly decreased to USD 25.7 per sqm.
 
 (In millions of ARS)
IQ 19
IQ 18
YoY Var
Revenues from sales, leases and services
212
121
75.2%
Net gain from fair value adjustment on investment properties
8,486
270
3,043.0%
Profit from operations
8,642
353
2,348.2%
Depreciation and amortization
2
-
100.0%
EBITDA
8,644
353
2,348.7%
Adjusted EBITDA
158
83
90.4%
 
 
IQ 19
IVQ 18
IIIQ 18
IIQ 18
IQ 18
Gross leasable area
83,213
83,213
84,982
85,378
85,378
Occupancy
93.4%
92.3%
91.1%
93.2%
96.2%
Rent (ARS./sqm)
1,061
755
541
505
464
Rent (USD/sqm)
25.7
26.1
26.9
26.9
26.8
 
During the first quarter of fiscal year 2019, revenues from offices increased 75.2% as compared to the same period of fiscal year 2018, mainly driven by the effect of the exchange rate depreciation in Argentina in our contracts denominated in dollars. Adjusted EBITDA from this segment grew 90.4% during the first quarter of 2019 compared to the same period of the previous year.
 
 
 
 
 
4
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
 
Below is information on our Office segment and other rental properties as of September 30, 2018.
 
 
Date of Acquisition
Gross Leasable Area (sqm) (1)
Occupancy (2)
IRSA’s Effective Interest

Offices
 
 
 
 
Edificio República (3)
04/28/08
19,885
98.4%
100%
Torre Bankboston (3)
08/27/07
14,873
91.6%
100%
Intercontinental Plaza (3)
11/18/97
2,979
100.0%
100%
Bouchard 710 (3)
06/01/05
15,014
100.0%
100%
Suipacha 652/64 (3)
11/22/91
11,465
86.2%
100%
Dot Building (3)
11/28/06
11,242
100.0%
80.0%
Philips Building (3)
06/05/17
7,755
69.8%
100%
Subtotal Offices
 
83,213
93.4%
N/A
 
 
 
 
 
Other Properties
 
 
 
 
Santa María del Plata
10/17/97
116,100
91.4%
100%
Nobleza Piccardo (4)
05/31/11
109,610
78.0%
50.0%
Other Properties (5)
N/A
12,928
39.2%
N/A
Subtotal Other Properties
 
238,638
82.6%
N/A
 
 
 
 
 
Total Offices and Others
 
321,851
85.4%
N/A
(1) Corresponds to the total leasable surface area of each property as of September 30, 2018. Excludes common areas and parking spaces.
(2) Calculated by dividing occupied square meters by leasable area as of September 30, 2018.
(3) Through IRSA CP.
(4) Through Quality Invest S.A.
(5) Includes the following properties: Ferro, Dot Adjoining Plot, Anchorena 665, Anchorena 545 (Chanta IV) and Intercontinental plot of land.
 
IV. Sales and Developments
 
 (In millions of ARS)
IQ 19
IQ 18
Var a/a
Revenues from sales, leases and services
25
34
-26.5%
Net gain from fair value adjustment of investment properties
4,318
197
2,091.9%
Profit from operations
4,280
179
2,291.1%
EBITDA
4,280
179
2,291.1%
Adjusted EBITDA
-38
241
-
 
Income from Sales and Developments segment decreased 26.5% in the first quarter of fiscal year 2019 compared to 2018. Adjusted EBITDA was ARS -38 million compared to ARS 241 million during previous year, because during the three-month period of fiscal year 2018 higher sales of investment properties were registered (Maipú 1300 and BAICOM plot).
 
 
 
 
 
5
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
 
V. CAPEX
 
 
Developments
 
Shopping Malls: Expansions
Offices: New
 
Alto Palermo
Alto Rosario
Mendoza Plaza(Sodimac & Falabella)
Polo Dot(1st stage)
Catalinas(2)
 
 
 
 
 
 
 
Start of works
FY2019
FY2018
FY2018
FY2017
FY2017
Estimated opening date
FY2020
FY2019
FY2019/20
FY2019
FY2020
GLA (sqm)
3,900
2.000
12,800
32,000
16,000
% held by IRSA Propiedades Comerciales
100%
100%
100%
80%
45%
Investment amount (in millions)
USD 28
USD 3.0
USD 13.7
~ARS 1,000
~ARS 720
Work progress (%)
0%
0%
0% - 90%(1)
91%
22%
Estimated stabilized EBITDA (USD million)
USD 4,5
USD 0.4
USD 1.3
USD 8-10
USD 6-8
(1)
Falabella’s work progress.
(2)
Does not include the purchase made by IRCP after the end of the period.
 
 
Shopping Mall Expansions
 
 
During fiscal year 2019, we expect to add approximately 15,000 sqm from malls’ expansions currently in progress. We recently opened 6 movie theatres of 2,200 sqm in Alto Comahue, and we will soon add an approximately 12,800 sqm Sodimac store in Mendoza Plaza Shopping while expanding its Falabella store and will incorporate 2,000 sqm of expansion in Alto Rosario, where we have recently opened a big Zara store.
 
 
In September 2018, we launched the works of expansion for Alto Palermo shopping mall, which has the highest sales per square meter in our portfolio, that will add a gross leasable area of approximately 4,000 square meters and will consist in moving the food court to a third level by using the area of an adjacent building acquired in 2015.
 
 
First Stage of Polo Dot
 
 
The project called “Polo Dot”, located in the commercial complex adjacent to our shopping mall Dot Baires, has experienced significant growth since our first investments in the area. The total project will consist in 4 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 GLA. At a first stage, we are developing 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 the total surface. The total estimated investment amounts to ARS 1,000 million and as of September 30, 2018, the degree of progress was 91%.
 
 
Catalinas building
 
 
The building to be constructed will have 35,000 sqm of GLA 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. As of September 30,2018, the Company owned 16,000 square meters consisting of 14 floors and 142 parking spaces in the building under construction The total estimated investment under IRSA Propiedades Comerciales as of September 30, 2018 amounts to ARS 720 million and, work progress was 22%.
 
 
On November 1, 2018, after the end of the period, the Board of Directors approved the sale of 14,213 GLA sqm of the Catalinas building from the subsidiary company (IRSA Propiedades Comerciales). The price of the transaction was established at a fixed amount of approximately USD 60.3 million equivalent to USD 4,200 / sqm.
 
 
 
 
6
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
VI. Hotels
 
 
In the first quarter of fiscal year 2018, the Hotels segment recorded an increase in revenues of 64.5% mainly due to the positive impact of the depreciation of the exchange rate in Argentina in dollarized rates, partially offset by a lower portfolio occupancy. The segment’s EBITDA reached ARS 88 million during the period under review.
 
Hotels (in millions of ARS)
IQ 19
IQ 18
YoY Var
Revenues
352
214
64.5%
Profit / (loss) from operations
84
-2
-
Depreciation and amortization
4
4
-
EBITDA
88
2
4,300.0%
 
 
IQ 19
IVQ 18
IIIQ 18
IIQ 18
IQ 18
Average Occupancy
64.5%
70.1%
71.9%
71.5%
68.4%
Average Rate per Room (ARS/night)
6.151
3,682
3,625
3,420
3,290
Average Rate per Room (USD/night)
189
191
198
195
190
 
The following is information on our hotels segment as of September 30, 2018:
Hotels
Date of Acquisition
IRSA’s Interest
Number of rooms
Occupancy(1)
Average Price per Room Ps. (2)

Intercontinental (3)
11/01/1997
76.34%
309
69.2%
4,520
Sheraton Libertador (4)
03/01/1998
80.00%
200
69.6%
4,712
Llao Llao (5)
06/01/1997
50.00%
205
52.4%
11,257
Total
-
-
714
64.5%
6,151
(1)
Accumulated average in the three-month period.
(2)
Accumulated average in the three-month period.
(3)
Through Nuevas Fronteras S.A. (Subsidiary of IRSA).
(4)
Through Hoteles Argentinos S.A.
(5)
Through Llao Llao Resorts S.A.
 
 
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 53th 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 58,000 sqm and consists of 34 floors.
 
 
As of September 30, 2018, the building’s occupancy rate was 96.9%, thus generating an average rent of USD 77.1 per sqm.
 
Lipstick
Sep-18
Sep-17
YoY Var
Gross Leasable Area (sqm)
58,092
58,094
-
Occupancy
96.9%
95.2%
1.7 p.p.
Rental price (USD/sqm)
77.1
69.2
11.4%
 
Investment in Condor Hospitality Inc.
 
 
We maintain our investment in the Condor Hospitality Trust Hotel REIT (NYSE: CDOR) mainly through our subsidiary Real Estate Investment Group VII L.P. (“REIG VII”), in which we hold a 100% interest. Condor is a REIT listed in NYSE focused on medium-class hotels located in various states of the United States of America, managed by various operators and franchises.
 
 
Condor's investment strategy is to build a branded premium, select service hotels portfolio within the top 100 Metropolitan Statistical Areas ("MSA") with a particular focus on the range of MSA 20 to 60. Since the beginning of the reconversion of the hotel portfolio in 2015, Condor has acquired 14 high quality select service hotels in its target markets for a total purchase price of approximately $ 277 million. In addition, during this time, he has sold 53 legacy assets for a total value of approximately $ 161 million.
 
 
 
 
7
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
As of September 30, 2018, the Group held 2,245,100 common shares of Condor’s capital stock, accounting for approximately 18.9% of that company’s capital stock and votes. The Group also held 325,752 Series E preferred shares, and a promissory note convertible into 64,964 common shares (at a price of USD 10.4 each).
 
 
VIII. Corporate
 
(in millions of ARS)
IVQ 18
IVQ 17
YoY Var
Revenues
-
-
-
Loss from operations
-40
-28
42.9%
Depreciation and amortization
-
-
-
EBITDA
-40
-28
42.9%
 
IX. Financial Operations 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 September 30, 2018. During the three-month period of 2019, the investment in Banco Hipotecario generated an income of ARS 160 million vs ARS 371 million on the three-month period of 2018. For further information, visit http://www.cnv.gob.ar or http://www.hipotecario.com.ar.
 
Operations Center in Israel
 
 
X. Investment in IDB Development Corporation and Discount Investment Corporation (“DIC”)
 
 
As of September 30, 2018, IRSA’s indirect equity interest in IDB Development Corp. was 100% of its stock capital and in Discount Corporation Ltd. (“DIC”) was 77.92% of its stock capital.
 
 
Within this operations center, the Group operates the following segments:
 
 
The “Real Estate” segment mainly includes the assets and profit from operations derived from the business related to the subsidiary PBC. Through PBC, the Group operates rental and residential properties in Israel, United States and other locations in the world, and executes commercial projects in Las Vegas, United States of America.
 
 
The “Telecommunications” segment includes the assets and profit from operations derived from the business related to the subsidiary Cellcom. Cellcom is supplier of telecommunication services and its main businesses include the provision of cellular and fixed telephone, data and Internet services, among others.
 
 
The “Insurance” segment includes the investment in Clal. This company is one of the largest insurance groups in Israel, whose businesses mainly comprise pension and social security insurance and other insurance lines. As stated in Note 12, the Group does not hold a controlling interest in Clal; therefore, it is not consolidated on a line-by-line basis, but presented under a single line as a financial instrument at fair value, as required under IFRS for the current circumstances in which no control is exercised.
 
 
The “Others” segment includes the assets and profit from other miscellaneous businesses, such as technological developments, tourism, oil and gas assets, electronics, and other sundry activities.
 
 
 
 
 
 
8
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
Segment Results
 
 
Following is the comparative information by segments of our Operations Center in Israel for the period between Abril 1 and June 30, 2018.
 
Real Estate (Property & Building - PBC) - ARS MM
IQ 19
IQ 18
YoY Var
Revenues
2,332
997
133.9%
Net (loss) / gain from fair value adjustment of investment properties
-7
878
-
Profit from operations
1,125
1,538
-26.9%
Depreciation and amortization
7
9
-22.2%
EBITDA
1,132
1,547
-26.8%
Adjusted EBITDA
1,139
669
70.3%
 
Revenues and operating income of the Real Estate segment through the subsidiary Property & Building ("PBC") reached in the 3-month period ended September 30, 2018 an amount of ARS 2,332 million and ARS 1,125 million, respectively, and for the same period ended on September 30, 2017, reached ARS 997 million and ARS 1,538 million respectively. This is mainly due to an average depreciation of 49% of the Argentine peso against the Israeli shekel, an increase of approximately 25,000 sqm compared to September 2017 and an increase in the value of the rent.
 
 
Additionally, as explained in note 2.2. to the financial statements, the group adopted IFRS 15 in the current fiscal year, which allows it to recognize the sales of properties under development according to the degree of progress of the work. Said standard was not in effect for the comparative period and it has not been restated. With respect to the variation in operating income, in the three-month period ended September 30, 2018, the impact of the net loss from fair value adjustment of investment properties was ARS 7 million, while for the same period of the year. For the previous it was a gain of ARS 878 million, this is due to the fact that property valuations in Israel were advanced by May 2018, so they are included in the year ended June 30, 2018, while for the comparative period were not advanced yet, so the effect of these valuations was recorded in September 2017.
 
Telecommunications (Cellcom) ARS MM
IQ 19
IQ 18
YoY Var
Revenues
6,205
4,226
46.8%
(Loss) / Profit from operations
-131
172
-
Depreciation and amortization
1,107
830
33.4%
EBITDA
976
1,002
-2.6%
 
The Telecommunications segment carried out by "Cellcom" reached ARS 6,205 million of revenue and an operating loss of ARS 131 million in the 3-month period ended September 30, 2018. For the period ended September 30, 2017, revenues were ARS 4,226 million and operating loss was ARS 172 million. This is mainly due to an average depreciation of 49% of the Argentine peso against the Israeli shekel and to the constant erosion in revenues from mobile services, which was partially offset by an increase in revenues related to landlines, television and the internet. In addition, content costs for television and internet increased more than the revenues generated, as well as an increase in marketing expenses, in order to attract more customers. During the 3-month period ended September 30, 2017, Cellcom sold its interest in the subsidiary Rimon, for which it recorded a gain in "other operating results, net" of approximately ARS 140 million.
 
Others (other subsidiaries) ARS MM
IQ 19
IQ 18
YoY Var
Revenues
191
189
1.1%
Profit / (Loss) from operations
184
-10
-
Depreciation and amortization
12
13
-7.7%
EBITDA
196
2
9,700.0%
 
 
 
 
 
 
9
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
The "Others" segment reached revenues of ARS 191 million and an operating gain of ARS 184 million in the three-month period ended September 30, 2018. During the same period ended September 30, 2017, it reached revenues of ARS 189 million and an operating loss of ARS 10 million. This is mainly due to an average depreciation of 49% of the Argentine peso against the Israeli shekel, a decrease in Epsilon's revenues and the result of the sale of Cyber Secdo by Elron as of September 30, 2018, which generated an approximate gain of ARS 214 million
 
Corporate (DIC, IDBD and Dolphin) ARS MM
IQ 19
IQ 18
YoY Var
Revenues
-
-
-
Loss from operations
-117
-59
98.3%
Depreciation and amortization
-
-
-
EBITDA
-117
-59
98.3%
 
The "Corporate" segment reached in the three-month period ended September 30, 2018 an operating loss of ARS 117 million and for the same period ended September 30, 2017, an operating loss of ARS 59 million. This is mainly due to an average depreciation of 49% of the Argentine peso against the Israeli shekel and an increase in legal fees.
 
 
In relation to "Clal", the Group values its holding in said insurance company as a financial asset at market value. The valuation of Clal's shares as of September 30, 2018 raised to $ 23,666 million.
 
 
Following instructions imparted by Israel’s Capital Market, Insurance and Savings Commission to the Trustee regarding the guidelines for selling Clal’s shares, during fiscal year 2018 and during the three-months period ended September 30, 2018, IDBD sold an additional 20% of its equity interest in Clal by way of four swap transaction, pursuant to terms identical to those applied to the swap transaction made and reported to the market on May 3, 2017. Upon completion of these transactions, IDBD’s equity interest in Clal was reduced to 29.8% of its stock capital. In addition, IDBD is entitled to a potencial result, in the framework of swap transactions, which amounts to 25% of Clal's shares.
 
 
XI. EBITDA by segment (ARS millions)
 
 
Operations Center in Argentina
 
IQ FY 19
Shopping Malls
Offices
Sales and Developments
Hotels
International
Corporate
Others
Total
Profit / (loss) from operations
4,398
8,642
4,280
84
-9
-40
210
17,565
Depreciation and amortization
11
2
-
4
-
-
1
18
EBITDA
4,409
8,644
4,280
88
-9
-40
211
17,583
 
IQ FY 18
Shopping Malls
Offices
Sales and Developments
Hotels
International
Corporate
Others
Total
Profit / (loss) from operations
2,685
353
179
-2
-18
-28
13
3,182
Depreciation and amortization
6
-
-
4
-
-
-
10
EBITDA
2,691
353
179
2
-18
-28
13
3,192
EBITDA Var
63.8%
2,348.7%
2,291.1%
4,300.0%
-50.0%
42.9%
1,523.1%
450.8%
 
Operations Center in Israel
 
IQ FY 19
Real Estate
Tele-communications
Others
Corporate
Total
Profit / (loss) from operations
1,125
-131
184
-117
1,061
Depreciations and amortizations
7
1,107
12
-
1,126
EBITDA
1,132
976
196
-117
2,187
Net unrealized gain from fair value adjustment of investment properties
-7
-
-
-
-7
Adjusted EBITDA
1,139
976
196
-117
2,194
 
 
 
 
 
10
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
IQ FY 18
Real Estate
Tele-communications
Other
Corporate
Total
Profit / (loss) from operations
1,538
172
-10
-59
1,641
Depreciations and amortizations
9
830
13
-
852
EBITDA
1,547
1,002
2
-59
2,492
Net unrealized gain from fair value adjustment of investment properties
878
-
-
-
878
Adjusted EBITDA
669
1,002
2
-59
1,614
EBITDA Var
-26.8%
-2.6%
9,700.0%
98.3%
-12.2%
Adjusted EBITDA Var
70.3%
-2.6%
9,700.0%
98.3%
35.9%
 
XII. Reconciliation with Consolidated Statements of Income (ARS million)
 
 
Below is an explanation of the reconciliation of the company’s profit by segment with its Consolidated Statements of Income. The difference lies in the presence of joint ventures included in the segment but not in the Statements of Income.
 
 
Total as per segment
Joint ventures*
Expenses and CPF
 Elimination of inter-segment transactions
Total as per Statements of Income
Revenues
10,375
-12
467
-3
10,827
Costs
-6,045
7
-481
-
-6,519
Gross profit
4,330
-5
-14
-3
4,308
Net gain from fair value adjustment of investment properties
16,710
-698
-
-
16,012
General and administrative expenses
-1,247
2
-
4
-1,241
Selling expenses
-1,485
1
-
-
-1,484
Other operating results, net
318
4
-
-1
321
Profit from operations
18,626
-696
-14
-
17,916
Share of (loss) / profit of associates and joint ventures
-90
526
-
-
436
Profit before financial results and income tax
18,536
-170
-14
-
18,352
*Includes Puerto Retiro, CYRSA, Nuevo Puerto Santa Fe and Quality (San Martín plot).
 
XIII. Financial Debt and Other Indebtedness
 
 
Operations Center in Argentina
 
 
The following table contains a breakdown of our indebtedness as of September 30, 2018:
 
Description
Currency
Amount (1)
Interest Rate
Maturity
Bank overdrafts
ARS
32.8
Floating
< 360 days
IRSA 2020 Series II Non-Convertible Notes.
USD
71.4
11.50%
Jul-20
Series VII Non-Convertible Notes
ARS
9.3
Badlar + 299
Sep-19
Series VIII Non-Convertible Notes
USD
184.5
7.00%
Sep-19
Other debt
USD
41.2
-
Feb-22
IRSA’s Total Debt
 
339.3
 
 
IRSA’s Cash + Cash Equivalents + Investments (2)
USD
1.7
 
 
IRSA’s Net Debt
USD
337.6
 
 
Bank overdrafts
ARS
0.3
 -
 < 360 d
PAMSA loan
USD
35.0
Fixed
Feb-23
IRCP NCN Class IV
USD
140.0
5.0%
Sep-20
IRSA CP NCN Class II
USD
360.0
8.75%
Mar-23
IRSA CP’s Total Debt
 
535.3
 
 
Cash & Cash Equivalents + Investments (3
 
270.5
 
 
Consolidated Net Debt
 
264.8
 
 
(1) 
Principal amount in USD (million) at an exchange rate of Ps. 41.25 Ps./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 and 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 and Investments in Current Financial Assets and our holding in TGLT's convertible Notes.
 
 
 
 
11
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
Operations Center in Israel
 
 
Financial debt as of June 30, 2018:
 
Indebtedness(1)
Total
Net
IDBD’s Total Debt
966
643
DIC’s Total Debt
973
684
(1) Principal amount in USD (million) at an exchange rate of 3.6573 NIS/USD, without considering accrued interest or elimination of balances with subsidiaries. Includes bonds and loans.
 
 
XIV. Material and Subsequent Events
 
 
Operations Center in Argentina
 
 
October 2018: General Ordinary and Extraordinary Shareholders’ Meeting
 
 
At the General Ordinary and Extraordinary Shareholders’ Meeting held on October 29, 2018, the following matters, inter alia, were resolved:
 
 
Distribution of a dividend in kind for ARS 1,412 million in shares of IRSA Propiedades Comerciales, subsidiary of IRSA.
 
 
Fees payable to the Board of Directors and Supervisory Committee for fiscal year 2018 ended as of June 30, 2018.
 
 
Renewal of regular and alternate Directors due to expiration of their terms and appointment of new alternate director.
 
 
Renewal of the Global Note Program for up to USD 350 million.
 
 
November 2018: Payment of cash dividend
 
 
At the General Ordinary and Extraordinary Shareholders’ Meeting held on October 29, 2018, it was approved the payment of a dividend in kind payable in shares of IRSA Propiedades Comerciales S.A. (IRSA PC), a subsidiary of the Company, for up to the amount of ARS 1,412,000,000, to be distributed among the shareholders of record date November 9, 2018.
 
 
The dividend in kind corresponds to a gross dividend of 0.0110911403208 IRSA Propiedades Comerciales S.A.’s shares per each IRSA Inversiones y Representaciones Sociedad Anónima’s share (0.110911403208 IRSA Propiedades Comerciales S.A.’s shares per IRSA Inversiones y Representaciones Sociedad Anónima’s GDS) and will be paid on November 12th, 2018 or the first business day after such date
 
 
Operations Center in Israel
 
 
July 2018: Increase in participation in DIC
 
 
On July 5, 2018 Tyrus acquired 2,062,000 shares of DIC in the market for NIS 20 million (equivalent to ARS 227 million at that date), equivalent to 1.35% of the outstanding shares of said company at that date. The Group's ownership increased from 76.57% to 77.92%.
 
 
August 2018: Possible sale of a subsidiary of IDB Tourism
 
 
IDB Tourism's Board of Directors, on August 14, 2018, approved the agreement to sell 50% of a subsidiary of IDBT which manages tourism operations for ISRAIR for a total of NIS 26 million (approximately ARS 295 million as of the date of the present financial statements). The transaction has an estimated closing date for November 30, 2018. This transaction does not modify the intent to sell IDBT as a whole, which is expected to be completed prior to June 2019.
 
 
 
 
 
 
12
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
August 2018: Clal shares sale
 
 
On August 30, 2018 continuing with the instructions given by the Capital Markets, Insurance and Savings Commission of Israel, IDBD has sold 5% of its shareholding in Clal through a swap transaction, according to the same principles that applied to swap transactions that were made and reported to the market in the preceding months of May and August of 2017; and January and May 2018 in Note 4 to the annual financial statements. The consideration for the transaction amounted to an approximate amount of NIS 173 million (equivalent to approximately ARS 1,766 million as of the date of the transaction). After completing the aforementioned transaction, the IDBD holding in Clal was reduced to 29.8% of its share capital
 
 
August 2018: Land sale agreement in the US
 
 
In August 2018, a subsidiary of IDBG signed an agreement for the sale of land adjacent to the Tivoli project in Las Vegas for a value of USD 18 million (approximately ARS 739 million as of the date of these financial statements).
 
 
XV. Summarized Comparative Consolidated Balance Sheet
 
(in ARS million) 
09.30.2018
09.30.2017
Non-current assets
330,248
167,145
Current assets
158,615
72,209
Total assets
488,863
239,354
Capital and reserves attributable to the equity holders of the parent
50,716
26,107
Non-controlling interest
52,274
20,799
Total shareholders’ equity
102,990
46,906
Non-current liabilities
305,010
148,410
Current liabilities
80,863
44,038
Total liabilities
385,873
192,448
Total liabilities and shareholders’ equity
488,863
239,354
 
XVI. Summarized Comparative Consolidated Income Statement
 
 (in ARS million) 
09.30.2018
09.30.2017
Profit from operations
17,916
4,800
Share of profit of associates and joint ventures
436
393
Profit from operations before financing and taxation
18,352
5,193
Financial income
1,698
273
Financial cost
-14,146
-4,888
Other financial results
7,058
297
Financial results, net
-5,390
-4,318
Profit before income tax
12,962
875
Income tax
-1,832
-1,152
Profit / (loss) for the period from continued operations
11,130
-277
(Loss) / Profit from discontinued operations after taxes
-46
351
Profit for the period
11,084
74
Other comprehensive income / (loss) for the period
17,867
-451
Total comprehensive income / (loss) for the period
28,951
-377
 
 
 
Attributable to:
 
 
Equity holders of the parent
13,357
272
Non-controlling interest
15,594
-649
 
 
 
 
 
 
13
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
XVII. Summary Comparative Consolidated Cash Flow
 
(in ARS million) 
09.30.2018
09.30.2017
Net cash generated from operating activities
3,434
2,638
Net cash generated from / (used in) investing activities
1,078
-5,528
Net cash generated from financing activities
10,080
4,012
Net increase in cash and cash equivalents
14,592
1,122
Cash and cash equivalents at beginning of year
37,317
24,854
Cash and cash equivalents reclassified to held for sale
-184
4
Foreign exchange gain on cash and changes in fair value of cash equivalents
19,063
52
Cash and cash equivalents at period-end
70,788
26,032
 
XVIII.                       
Comparative Ratios
 
(in ARS million) 
09.30.2018
 
09.30.2017
 
Liquidity
 
 
 
 
CURRENT ASSETS
158,615
1.96
72,209
1.64
CURRENT LIABILITIES
80,863
 
44,038
 
Indebtedness
 
 
 
 
TOTAL LIABILITIES
385,873
7.61
192,448
7.37
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
50,716
 
26,107
 
Solvency
 
 
 
 
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
50,716
0.13
26,107
0.14
TOTAL LIABILITIES
385,873
 
192,448
 
Capital Assets
 
 
 
 
NON-CURRENT ASSETS
330,248
0.68
167,145
0.70
TOTAL ASSETS
488,863
 
239,354
 
 
XIX. 
EBITDA Reconciliation
 
 
In this summary report we present EBITDA and Adjusted EBITDA. We define EBITDA as profit for the period excluding: (i) interest income, (ii) interest expense, (iii) income tax expense, and (iv) depreciation and amortization. We define Adjusted EBITDA as EBITDA minus (i) total financial results, net excluding interest expense, net (mainly foreign exchange differences, net gains/losses from derivative financial instruments; gains/losses of financial assets and liabilities at fair value through profit or loss; and other financial results, net) and minus (ii) share of profit of associates and joint ventures and minus (iii) net unrealized gains from fair value adjustment of investment properties.
 
 
EBITDA and Adjusted EBITDA are non-IFRS financial measures that do not have standardized meanings prescribed by IFRS. We present EBITDA and adjusted EBITDA because we believe they provide investors supplemental measures of our financial performance that may facilitate period-to-period comparisons on a consistent basis. Our management also uses EBITDA and Adjusted EBITDA from time to time, among other measures, for internal planning and performance measurement purposes. EBITDA and Adjusted EBITDA should not be construed as an alternative to profit from operations, as an indicator of operating performance or as an alternative to cash flow provided by operating activities, in each case, as determined in accordance with IFRS. EBITDA and Adjusted EBITDA, as calculated by us, may not be comparable to similarly titled measures reported by other companies. The table below presents a reconciliation of profit from operations to EBITDA and Adjusted EBITDA for the periods indicated:
 
 
 
 
 
14
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
For the three-month period ended September 30 (in ARS million)
 
2018
2017
Profit for the period
11,084
74
Profit /(loss) from discontinued operations
46
-351
Interest income 
-239
-151
Interest expense 
3,261
4,121
Income tax
1,832
1,152
Depreciation and amortization 
1,144
863
EBITDA (unaudited) 
17,128
5,708
Unrealized net gain from fair value adjustment of investment properties
-16,012
-3,336
Share of profit of associates and joint ventures 
-436
-393
Dividends earned
-35
-24
Foreign exchange differences net 
9,346
531
(Gain) / loss from derivative financial instruments 
-245
2
Fair value gains of financial assets and liabilities at fair value through profit or loss
-6,813
-299
Other financial costs 
115
138
Adjusted EBITDA (unaudited) 
3,048
2,327
Adjusted EBITDA Margin (unaudited)(1)
28.15%
33.11%
(1) Adjusted EBITDA margin is calculated as Adjusted EBITDA, divided by revenue from sales, rents and services.
 
 
 
 
 
 
15
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of September 30, 2018
 
 
 
XX. Brief comment on future prospects for the Fiscal Year
 
 
Our business in the operations centers in Argentina and Israel have posted sound results for 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, our subsidiary IRSA Propiedades Comerciales S.A. has shown a deceleration in consumption in its shopping centers as a result of the decline in the economic activity in recent months. Conversely, the office business has grown at the rate of peso depreciation since its contracts are denominated in dollars.
 
 
Regarding investments, during the current year, IRSA CP plans to incorporate approximately 15,000 m2 of the expansion works in progress in some of its shopping centers. It will also put into operation the "Polo Dot" office building, of 32,000 m2 of ABL, located in the commercial complex boundary to Dot Baires shopping, which is already rented in its entirety to high-level tenants as the e-commerce company "Mercado Libre" and retail company "Falabella". Likewise, it has launched the expansion project of Alto Palermo Shopping, the most profitable shopping center in the portfolio, on the land adjacent to its property.
 
 
Additionally, IRSA CP will continue with the development of 35,468 m2 of ABL of the "Catalinas" building located in one of the most premium areas for the offices’ development in Argentina.
 
 
In addition to the projects in progress, the company has a large reserve of lands for future developments of shopping centers and offices in Argentina in a context of a high potential industry. We hope to have the economic, financial and governmental conditions to be able to execute our growth plan.
 
 
In relation to the investment in the Israeli IDBD and DIC companies, we are very satisfied with the results obtained during the 2018 financial year. We will keep working in 2019 to continue reducing the company's debt levels, sell the non-strategic assets of the portfolio and improve the operating margins of each of the operating subsidiaries. Likewise, we will work on the fulfillment of the second stage of requirement of the Concentration Law, which requires eliminating one more of public company level before December 2019.
 
 
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.
 
 
 
 
 
 
 
 
Eduardo S. Elsztain       
 
Chairman             
  16