MERLIN PROPERTIES SOCIMI, S.A. ANNUAL

Business / Consolidation

2.6Basis of consolidation applied All companies over which effective control is exercised by virtue of holding a majority of the voting rights in their representation and decision-making bodies and the power to determine the company's financial and operational policies were fully consolidated; and companies in which the Group owns more than a 20% interest and exercises significant influence without holding a majority of the voting rights were accounted for using the equity method (see Note 9). Likewise,a significant influence on the investments held by the Group with a participation rate of less than 20% is considered to exist if it has representation on the Board of these companies of the parties related to it. A number of adjustments have been made to align the accounting principles and measurement bases of Group companies with those of the Parent, including the application of International Financial Reporting Standards measurement bases to all Group companies and associates. It was not necessary to unify accounting periods since the balance sheet date of all the Group companies and associates is 31 December of each year. 2.6.1 Subsidiaries Subsidiaries are considered to be those companies over which the Parent directly or indirectly exercises control through subsidiaries. The Parent Company has control over a subsidiary when it is exposed or has rights to variable returns from its involvement with the subsidiary, and when it has the ability to exercise its power to affect its returns. The Parent Company has power when the voting rights are sufficient to give it the ability to direct the relevant activities of the subsidiary. The Parent Company is exposed or has rights to variable returns from its involvement with the subsidiary when its returns from its involvement have the potential to vary as a result of the subsidiary's performance. The financial statements of the subsidiaries are fully consolidated with those of the Parent. Accordingly, all material balances and effects of the transactions between consolidated companies are eliminated on consolidation. Any third-party interests in the Group's equity and profit or loss are recognised under "Non-controlling interests" in the consolidated statement of financial position and "Result attributable to non-controlling interests" in the consolidated income statement and consolidated comprehensive income statem