INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A. ANNUALANNUAL

Business / Consolidation

Consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries, each made up to 31 December, together with the attributable share of results and reserves of associates and joint ventures, adjusted where appropriate to conform to the Group’s accounting policies. Subsidiaries are consolidated from the date of their acquisition, which is the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Control exists when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group applies the acquisition method to account for business combinations. The consideration paid is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Non-controlling interests represent the portions of profit or loss and net assets in subsidiaries that are not held by the Group and are presented separately within equity in the Consolidated balance sheet. Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, as at the acquisition date the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through the Income statement. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. All intragroup account balances, including intragroup profits, are eliminated in preparing the consolidated financial statements.