ORGANIZACIÓN TERPEL S.A. Y SUBORDINADAS (TERPEL S.A ...

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ORGANIZACIÓN TERPEL S.A. Y SUBORDINADAS

(TERPEL S.A. ORGANIZATION AND SUBORDINATES)

Consolidated financial statements in COP$

December 31, 2015 and 2014

(With the Statutory Auditor’s Report)

2


(TERPEL S.A. ORGANIZATION AND SUBORDINATES)

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CONTENTS

Consolidated statements of financial position, classified

Consolidated statements of income by function

Consolidated statements of comprehensive income

Consolidated statements of changes in equity, Net

Consolidated statements of cash flows, direct method

Notes to consolidated statements

4

COP$ : amounts expressed in Colombian pesos

USD$ : amounts expressed in US dollars

M$ : amounts expressed in thousands of Colombian pesos


Index of Consolidated financial statements

Note Page

Consolidated statements of financial position, Classified 5

Consolidated statements of income by function 7

Consolidated statements of comprehensive income 8

Consolidated statements of changes in equity, Net 9

Consolidated statements of cash flows, direct method 11

Notes to consolidated statements

1 General Information 12

5

2 Basis of preparation of Consolidated financial statements 12

2.1 Technical standards framework 12

2.2 Measurement basis 13

2.3 Foreign currency transactions 14

2.4 Basis of consolidation 14

3 Applied accounting criteria 17

(a) Financial assets and liabilities 18

(b) Issued capital 19

(c) Inventories 19

(d) Intangible assets not capital gain 20

(e) Capital gain 21

(f) Impairment 21

(g) Properties, plant and equipment 23

(h) Investment properties 24

(i) Accounting provisions 24

(j) Employee benefits 25

(k) Classification of current and non-current balances 25

(l) Income tax and deferred taxes 26

(m) Distribution of dividends 27

(n) Income recognition 27

(o) Expenses by function 28

(p) Leases 28

(q) Consolidated statement of cash flows 29

(r) Cash and cash equivalents 29

(s) Borrowing costs 30

(t) Earnings per share 30

(u) Operation segments 30

(v) New standards and interpretations not adopted yet 31

4 Financial Risk Management 37

5 Accounting estimates and judgments 45

6 Cash and cash equivalents 45


Index of Consolidated financial statements

Notes Page

7 Financial instruments 46

8 Financial assets at a fair value with changes in net income 46

9 Other non-financial assets 47

10 Commercial debtors and other accounts receivable 47

11 Balances and transactions with related entities 48

12 Inventories 50

6

13 Assets and liabilities by current taxes 50

14 Investments accounted using the equity method 51

15 Intangible assets not capital gain 52

16 Capital gain 53

17 Properties, plant and equipment 55

18 Investment properties 57

19 Operational Leasing 58

20 Deferred taxes 58

21 Other current and non-current financial liabilities 61

22 Commercial accounts payable and other accounts payable 63

23 Current and non-current accounting provisions for employee benefits 63

24 Other current and non-current accounting provisions 64

25 Equity 65

26 Earnings per share 67

27 Income on ordinary activities 67

28 Cost of sales 67

29 Geographic segments 68

30 Expenses by nature 70

31 Other expenses by function 71

32 Financial result 72

33 Capital gains tax 73

34 Contingencies 74

35 Commitments 75

36 Subsequent events 75

37 Explanation of the transition of accounting standards and of financial information (IFRS)

75


Consolidated statements of financial position, Classified


7


Consolidated statements of financial position, Classified


Nota 2015 2014 1 enero 2014

Assets M$ M$ M$

Current assets:

Cash and cash equivalents 6 287.991.889 298.577.233 278.265.738

Other non-financial assets 9 78.087.117 71.064.066 4.153.514

Trade debtor and other accounts payable 10 425.930.362 449.691.089 543.092.964

Accounts payable from related parties 11 284.469 970.911 53.085

Inventory 12 511.184.914 471.547.262 515.832.135

Tax assets 13 26.333.175 27.111.675 6.666.456

Total Current assets 1.329.811.926 1.318.962.236 1.348.063.892

Non-current assets:

Financial assets at fair value through profit or loss 8 1.252.312 1.222.537 3.166.104

Other non-financial assets 9 306.505 721.111 1.185.537

Trade debtor and other accounts payable 10 39.335.312 34.167.416 5.288.006

Investments accounted using the

equity method 14 6.244.090 4.649.899 35.740.245

Intangible assets other than capital gain 15 463.168.261 509.131.377 589.764.292

Capital gain 16 351.312.537 344.675.854 306.031.991

Properties, plant and equipment 17 1.676.825.586 1.315.261.406 1.112.695.441

Investment property 18 6.036.210 6.072.057 5.982.135

Deferred Tax Asset 20 18.555.169 19.879.495 23.131.094

Total Non-current assets 2.563.035.982 2.235.781.152 2.082.984.845

Total assets 3.892.847.908 3.554.743.388 3.431.048.737

The accompanying notes are an integral part of these consolidated financial statements.

Sylvia Escovar GómezLegal Representative

Member of KPMG Ltda.(See my report of Feburary 23, 2016)

Julián Andrés Viracachá M.

T.P. 144154-TAccountant

Milton Alejandro Garzón ForeroFiscal AuditorT.P. 92144-T

8


Consolidated statements of income by function

For the fiscal year ending on December 31, 2015 and 2014

Nota 2015 2014 01 enero 2014

Liability and Equity M$ M$ M$

Current liabilities:

Other financial liabilities 21 105.511.756 485.209.407 274.560.471

Trade account payable and others

account payable 22 638.513.262 560.135.691 546.580.887

Accounts payable from related parties

and associates non-current 11 - - 5.920.092

Other provision 24 341.289 243.963 1.466.286

Tax Liabilities 13 113.301.788 118.663.509 133.601.201

Provision of employee benefits 23 2.060.139 461.156 406.185

Total Current liabilities 859.728.234 1.164.713.726 962.535.122

Non-Current liabilities:

Other financial liabilities 21 1.343.134.378 850.107.804 835.465.556

Deferred Tax liabilities 20 225.065.125 200.124.844 186.696.543

Provision of employee benefits 23 873.478 834.868 956.788

Total Non-Current liabilities 1.569.072.981 1.051.067.516 1.023.118.887

Total liabilities 2.428.801.215 2.215.781.242 1.985.654.009

Equity 25

Issued Capital 195.999.466 195.999.466 191.915.421

Share Premium 219.365.731 219.365.731 664.534.946

Surplus equity method 27.066.698 (54.680.378) (108.320.792)

Reserves 155.575.328 161.450.873 179.920.314

Retained earnings 865.507.246 816.418.412 516.905.461

Equity attributable to owners 1.463.514.469 1.338.554.104 1.444.955.350

Non-controlling interest 532.224 408.042 439.378

Total equity 1.464.046.693 1.338.962.146 1.445.394.728

Total Liability and Equity 3.892.847.908 3.554.743.388 3.431.048.737


Sylvia Escovar Gómez

Legal Representative

(See my report of Feburary 23, 2016)

Julián Andrés Viracachá M.

Accountant

T.P. 144154-T

Milton Alejandro Garzón Forero

Fiscal Auditor

T.P. 92144-T

Member of KPMG Ltda.

9


Consolidated statements of comprehensive income

for the fiscal year ending on December 31, 2015 and 2014

Nota 2015 2014

M$ M$

Income from ordinary activities 27 14.235.502.200 15.004.008.050

Cost of sales 28 (13.024.104.540) (13.887.904.229)

Gross Profits 1.211.397.660 1.116.103.821

Other incomes, by function 23.556.150 27.317.880

Distribution Cost 30 (695.847.983) (623.254.348)

Administrative Expenses 30 (201.897.262) (173.909.760)

Other Expenses 31 (60.020.789) (61.110.712)

Financial Income 32 9.935.898 6.987.782

Financial expenses 32 (87.129.126) (77.061.198)

Share of profits of the corporate group and joint

business which are accounted.

using equity method 14 1.575.710 994.073

Translation differences 32 6.195.163 8.126.187

Profit before income tax 207.765.421 224.193.725

Income tax expense 33 (101.744.673) (97.285.713) - -

Net Income 106.020.748 126.908.012

Net income attributable to:Net income attributable to

owners 105.958.219 126.896.560

Net income attributable to non-controlling

interests 62.529 11.452

Net income 106.020.748 126.908.012

Basic earnings per share 584,38 699,51

The accompanying notes are an integral part of these consolidated financial statements

Sylvia Escovar Gómez Julián Andrés Viracachá M.

Legal Representative Accountant

T.P. 144154-T



Fiscal Auditor

T.P. 92144-T


10

2015 2014

M$ M$

Net Income 106.020.748 126.908.012

Profits (loss) of Translation differences before taxes

80.017.978 44.290.688

Actuarial gain on defined benefit plans 5.850 -

Total other components of other comprehensive income

before taxes 80.023.828 44.290.688

Total comprehensive income 186.044.576 171.198.700

Total comprehensive income attributable to:

owners 185.920.394 171.130.987

attributable to non-controlling 124.182 67.713

Total comprehensive income 186.044.576 171.198.700




T.P. 144154-T



Fiscal Auditor

T.P. 92144-T


11







December 31, 2014 Share Capital Issue Premium

Legal and

statutory

reserves

Surplus equity

method

Retained

earnings

Net worth

attributable to

owners

Non-controlling

interests Total Net worth

M$ M$ M$ M$ M$ M$ M$ M$

Opening Balance at January 1, 2014 191.915.421 664.534.946 179.920.314 (108.320.792) 516.905.461 1.444.955.350 439.378 1.445.394.728

Other comprehensive income - - - 44.234.427 - 44.234.427 56.261 44.290.688

Net Income - - - - 126.896.560 126.896.560 11.452 126.908.012

Total comprehensive income - - - 44.234.427 126.896.560 171.130.987 67.713 171.198.700

Fusion Effect 4.084.045 (445.169.215) (18.469.441) 9.528.599 272.616.391 (177.409.621) (99.049) (177.508.670)

Equity method - - - (122.612) - (122.612) - (122.612)

Dividends declared - - - - (100.000.000) (100.000.000) - (100.000.000)

Total Equity increase (decrease) 4.084.045 (445.169.215) (18.469.441) 53.640.414 299.512.951 (106.401.246) (31.336) (106.432.582)

Ending balance at December 31, 2014 195.999.466 219.365.731 161.450.873 (54.680.378) 816.418.412 1.338.554.104 408.042 1.338.962.146




Issued Capital Other Reserves

Julián Andrés Viracachá M. Milton Alejandro Garzón Forero

Accountant Fiscal Auditor

T.P. 144154-T T.P. 92144-T



12

December 31, 2015 Capital en

acciones

Prima de

emisión

Legal and

statutory

reserves

Surplus equity

method

Reserves

Employee

Benefits

Retained

earnings

Net worth

attributable to

owners

Non-controlling

interests

Total Net

Worth

M$ M$ M$ M$ M$ M$ M$ M$ M$

Opening Balance at January 1, 2015 195.999.466 219.365.731 161.450.873 (54.680.378) - 816.418.412 1.338.554.104 408.042 1.338.962.146

Other comprehensive income - - - 79.956.519 5.656 - 79.962.175 61.653 80.023.828

Net Income - - - - - 105.958.219 105.958.219 62.529 106.020.748

Total comprehensive income 79.956.519 5.656 105.958.219 185.920.394 124.182 186.044.576

Equity method - - - 1.784.901 - (33.736) 1.751.165 - 1.751.165

Reserve releases - - (5.875.545) - - 5.875.545 - - -

Dividends declared - - - - - (62.711.194) (62.711.194) - (62.711.194)

Total Equity increase (decrease) - - (5.875.545) 81.741.420 5.656 49.088.834 124.960.365 124.182 125.084.547

Ending balance at December 31, 2015 195.999.466 219.365.731 155.575.328 27.061.042 5.656 865.507.246 1.463.514.469 532.224 1.464.046.693




Capital emitido Otras reservas



Julián Andrés Viracachá M. Milton Alejandro Garzón Forero

Accountant Fiscal Auditor

T.P. 144154-T T.P. 92144-T

13


Consolidated statements of cash flows, direct method


2015 2014

M$ M$

Cash Flows from Operating Activities:

Payments from sales of good and services 14.399.660.249 14.636.571.392

Payments from premium and benefits, annuity and others 680.579 591.418

Other payments from Operating Activities 13.761.949 8.389.722

Payment to suppliers for goods and services (13.667.074.454) (13.931.368.337)

Payments to employees or on behalf of employees (110.383.023) (102.272.427)

Payments to premium and benefits, annuity (8.075.448) (7.853.104)

and other policy benefits

Other payments from Operating Activities (13.149.169) (8.248.994)

Dividends received 1.353.299 1.358.522

Interest payments (339.876) (490.358)

Interest received 5.323.093 4.729.173

Income taxes paid (153.672.563) (174.796.505)

Others cash inflow (outflow) (1.063.467) 2.301.615

Net Cash Flow from Operating Activities 467.021.169 428.912.117

Cash Flows from Investing Activities:

Proceeds from sales of properties, plants and equipment 3.889.930 4.059.185

Purchase from sales of properties, plants and equipment (321.370.432) (213.371.319)

Purchase of intangible assets (79.154.997) (81.602.531)

Cash advances and loans made to a third-party (2.753.507) (3.471.041)

Interest received 4.315.814 3.096.437

Others cash inflow 1.228.152 17.893

Net Cash Flow from Investing Activities (393.845.040) (291.271.376)

Cash Flows from Financing Activities:

Borrow from related entities 567.266 599.032

Proceeds from long term borrowings 469.107.715 17.762.077

Proceeds from short term borrowings 168.007.820 214.499.423

Payment of borrows (571.557.057) (213.850.677)

Payment of liabilities for leasing (5.511.405) (5.323.886)

Payment of dividends (62.689.708) (73.756.698)

nterest Paid (92.683.233) (62.418.476)

Others cash outflow (5.248.359) (4.949.374)

Net Cash Flow from Financing Activities (100.006.961) (127.438.579)

Net increase(decrease) in cash and cash equivalents

before the effect of changes in the exchange rate (26.830.832) 10.202.162

The effect of changes in the exchange rate in cash and cash equivalents 16.245.488 8.349.713

Net increase(decrease) in cash and cash equivalents (10.585.344) 18.551.875

Cash and cash equivalents at beginning of the year 298.577.233 280.025.358

Cash and cash equivalents at end of the year 287.991.889 298.577.233




T.P. 144154-T



Fiscal Auditor

T.P. 92144-T



Notes to the Consolidated Financial Statements on December 31, 2015 and 2014

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(Expressed in thousands of Colombian pesos, unless otherwise instructed)

Note 1. General information

Reporting entity

Terpel S.A. (herein after the “Company”) is a company with its registered office in Colombia.

The address of its registered office is Carrera 7 No. 75-51, in the city of Bogota, Colombia. The

company was incorporated in accordance with Colombian laws in November 2001 via public

instrument 6038 drawn up at the 6th Notary Public Office of Bogota circuit and its duration

expires on December 31, 2090.

The company's Consolidated financial statements up to December 2015 include the company

and its subordinates (together “the Group” and individually as “ entities of the group”), and also

the participation of the group in entities that control together. Subordinates, joint businesses and

percentages of participation are shown in note 2.4.

The company's main corporate object is to purchase, sell, any kind of acquisition, importation,

distribution and supply of hydrocarbons and their derivatives, as well as refining, transporting,

storing and packing. The object also includes the purchase, sale, importation, exportation,

distribution, supply, storage and transportation via land, the sea or rivers, via multi-purpose

pipelines, oil pipes, gas pipelines, propaneducts for natural gas or propane gas, or any other

combustible product derived or not from hydrocarbons.

Merging process

The general shareholders’ assembly of Organización Terpel S.A. In a meeting held on January

29th 2014 through minutes number 37 approved the merger by absorption presented by the

administration in which Organización Terpel S.A. is the absorbing company, and Proenergía

Internacional S.A., Sociedad de Inversiones de Energía S.A. and Terpel del Centro S.A. are the

absorbed companies. On August 1, 2014, the Colombian Superintendence of Finances

authorized the merger process into one company named “Organización Terpel S.A.,” through

resolution No. 1368. It authorized the merger project to form just one company which was Note

rized through public instrument No. 01320 drawn up at the 16th Public Notary Office of Bogota

Circuit on August 15, 2014.

Accordingly, it occurred that Proenergía Internacional S.A., Sociedad de Inversiones de Energía

S.A. and Terpel del Centro S.A. had a direct or indirect interest in Organización Terpel S.A. of

46.22%, 88.89% and 28.7%, respectively. Therefore, the structure the company chose was

named an ascending merger which is characterized when an affiliate company absorbs the parent

company. The net effect of the merger was M$177.508.668.

Note 2. Basis of preparation of financial statements

2.1. Technical standards framework

These Consolidated financial statements have been prepared in accordance with the accounting

and financial reporting standards accepted in Colombia (IFRS), established in law 1314 of 2009,

governed by single regulation decree number 2420 of 2015 modified by decree 2496 of 2015.

IFRS are based on International standards.

Note 2. Basis of preparation of financial statements, continued



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2.1. Technical standards framework, continued

Financial reporting (IFRS), and the interpretations issued by the International Accounting

Standards Board – IASB; the basic rules correspond to the rules translated to Spanish and issued

on January 1, 2012 and the amendments made during 2012 by the IASB.

For legal purposes in Colombia, principal financial statements are separate financial statements.

These are the first consolidated financial statements prepared in accordance with the IFRS; to

make the conversion to the new technical standards framework, the company has contemplated

the exceptions and exemptions established in the IFRS 1- adopting the international financial

reporting standards described in note 37.

Until December 31, 2014, the group prepared its Consolidated financial statements in accordance

with generally accepted accounting principles (GAAP) in Colombia. This financial information

corresponds to prior periods included in these consolidated financial statements; it is to be used

for comparison, and it has been modified and presented in accordance with the new technical

standards framework. The effects of the changes between GAAP applied at the closing of the

fiscal year ending on December 31, 2013, and IFRS are explained in the detailed considerations

in note 37.

Consolidated financial statements and its attached notes were submitted before the audit

committee through minutes 41 of February 22, 2016. Likewise, they were approved by the board

of directors in accordance with minutes 183 of February 23, 2016 and by the legal representative

so that they may be submitted before the general shareholders’ assembly to be approved or

modified.

2.2. Measurement basis

The Group’s consolidated financial statements have been prepared based on historical cost.

Some of the group's assets, properties, plant and equipment were revalued in the catching up

process of the new technical standards framework. The preparation of consolidated financial

statements in accordance with IFRS requires the use of some critical accounting estimates. It

also requires the administration to apply its judgment in a process of implementing the group's

accounting policies.

Note 5 reveals the areas that imply a greater degree of judgment or complexity or the areas where

positions and estimates are significant for consolidated financial statements.


2.3. Foreign currency transactions

• functional currency and presentation currency

The items included in the group's consolidated financial statements are expressed in the currency

of the primary economic environment of the place where the company operates (Colombian

pesos). Consolidated financial statements are presented "in thousands of Colombian pesos"

which is the group's functional and presentation currency. All the information is presented in



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thousands of Colombian pesos and has been rounded off to the nearest unit (M$), except when

otherwise indicated.

• transactions and balances

Transaction in a currency which is not the functional currency of the company is converted to

the functional currency using the average types of exchange rates in effect on the date of a

transaction.

Balances of assets and liabilities given in foreign currency on the date of the report are converted

to the functional currency at the exchange rate on that date.

2.4. Basis of consolidation

The subordinates, joint businesses and their participation percentages are included in these

Consolidated financial statements as follows:


2.4. Basis of consolidation, consolidation

Consolidated company

Taxpayer Identification

NumberDirect Indirect Total

Organización Terpel Chile S.A. 76004261-7 99,99 0,01 100,00

Inversiones Organización Terpel Chile S.A. 76127612-3 99,99 0,01 100,00

Lutexsa Industrial Comercial Cía Ltda. 990962170001 - 99,99 99,99

Combustibles Ecológicos Mexicanos S.A. de C.V. CEM970905VB3 96,67 - 96,67

Gazel Perú S.A.C. 20511995028 100,00 - 100,00

Petrolera Nacional S.A. 1019-225-108400 DV-92. 100,00 - 100,00

Orlyn S.A. 630483123250 - 100,00 100,00

Fuel Petroleum Service S.A. 466889-1-433695 - 100,00 100,00

Transmarine Transportation & Burging S.A. 227411-1-399369 - 100,00 100,00

Vonport Corp. 2564344-1-828346 - 100,00 100,00

Terpel Energía S.A.S. E.S.P (Antes Terpel

Combustibles S.A.S. en liquidación).900433032-9 100,00

- 100,00

Terpel República Dominicana S.R.L. 1-30-78033-1 100,00 - 100,00

Operaciones y Servicios de Combustibles S.A.S. 900491889-0 - 100,00 100,00

Masser S.A.S. (Antes Operaciones y Tiendas S.A.S.) 900761009-5 - 100,00 100,00

PGN Norte S.A.C. 20521921618 25,00 25,00 50,00

PGN Sur S.A.C. 20521021880 25,00 25,00 50,00

Adesgae Cia Ltda. 1792605504001 - 99,99 99,99

Percentage of Participation

31-12-2015



17

In 2015, the main variations of the consolidation perimeter correspond to:

• Adesgae Cia Ltda.: A subordinate of Lutexa Industrial Comercial Cía Ltda. which was

incorporated to manage the EDS' minority operations.

• GNC Inversiones S.A.S. (being liquidated): The general shareholders’ assembly in a

meeting on November 13, 2015 through minutes 15 approved the final payment of liabilities and

asset repossession to make definite the liquidation and cancellation of the company's business

registration. As a result of the liquidation of 100% of Gazel Peru S.A.C.'s shares and 82.21%

(96.67% running total) Combustibles Ecológicos Mexicanos S.A. de C.V.'s shares were

repossessed as equity repayment made to shareholder, Organización Terpel S.A.

• Terpel Energía S.A.S. E.S.P.: The General shareholders’ assembly in a meeting on

September 24, 2015, and through Minutes No. 10 decided to reactivate the Terpel Combustibles

S.A.S. company which is in liquidation changing the company name to Terpel Energía S.A.S.

E.S.P., whose main corporate purpose is to generate and commercialize electric Power.


2.4. Basis of consolidation, continued

A) Subordinates

Consolidated company

Taxpayer Identification

NumberDirect Indirect Total

Organización Terpel Chile S.A. 76004261-7 99,99 0,01 100,00

Inversiones Organización Terpel Chile S.A. 76127612-3 99,99 0,01 100,00

Lutexsa Industrial Comercial Cía Ltda. 990962170001 - 99,99 99,99

GNC Inversiones S.A.S. (En Liquidación). 900.036.599-1 100,00 - 100,00

Combustibles Ecológicos Mexicanos S.A. de C.V. CEM970905VB3 14,46 82,21 96,67

Gazel Perú S.A.C. 20511995028 - 100,00 100,00

Petrolera Nacional S.A. 1019-225-108400 DV-92. 100,00 100,00

Orlyn S.A. 630483123250 - 100,00 100,00

Fuel Petroleum Service S.A. 466889-1-433695 - 100,00 100,00

Transmarine Transportation & Burging S.A. 227411-1-399369 - 100,00 100,00

Vonport Corp. 2564344-1-828346 - 100,00 100,00

Terpel Energía S.A.S. E.S.P (Antes Terpel

Combustibles S.A.S. en liquidación).900433032-9 100,00 - 100,00

Terpel República Dominicana S.R.L. 1-30-78033-1 100,00 - 100,00

Operaciones y Servicios de Combustibles S.A.S. 900491889-0 48,39 51,61 100,00

Masser S.A.S (Antes Operaciones y Tiendas S.A.S.). 900761009-5 - 100,00 100,00

PGN Norte S.A.C. 20521921618 25,00 25,00 50,00

PGN Sur S.A.C. 20521021880 25,00 25,00 50,00

Percentage of Participation

31-12-2014



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Subordinates are entities controlled by the group. The group controls an acquired company when

it is exposed or has a right to variable yields resulting from its implication in the acquired

company and has the capability of influencing those yields using its power on the acquired

company. The subordinate company’s financial statements are included in consolidated financial

statements from the date when the company took control until the end of that control.

b) losing control

When there is a loss of control, the group derecognizes its accounting subordinate's assets and

liabilities, non-controlling participations, other component of the equity related to the

subordinate. Any profit or loss resulting from a loss of control is recognized in the results. The

group keeps some participation in the above subordinate, it will be valuated at the fair value on

the date the group loses control. Afterwards, this participation the company keeps will be

accounted for by the equity method, or as a non-derivative financial asset (see Note 3 (a.1)),

depending on the level of influence the group has kept.

c) participation in investments accounted by the equity method

The Group's participation in investments accounted by the equity method includes participation

in joint businesses. A joint business is an agreement in which the group has joint control of the

business or when the group only has rights to the net assets of the agreement and no rights to its

assets and obligations for its liabilities.

Joint business Investments are initially recognized at cost, and then, depending on the equity

method. Investment costs include transaction costs.

Consolidated financial statements include the group's participation in profits or losses and other

comprehensive income accounted by the group's equity method after making adjustments to

align the business' accounting policies with the group's from the date on which a significant

influence begins until it ends. When the Group share of losses exceeds the group's equity in an

investment recognized by the equity method, the carrying value of this equity including any

long-term investment is reduced to zero, and the group stops recognizing any other losses except

when the group has an obligation or has made payments on behalf of the company it has a stake

in.

d) transactions eliminated in the consolidation

The balances and transactions conducted with other entities of the group including any

unrealized income or expense arising from those transactions are eliminated in the process of


2.4. Basis of consolidation, continued

d) transactions eliminated in the consolidation, continued

consolidation. Unrealized earnings resulting from transactions with companies whose

investment is recognized by the equity method are eliminated from the investment in proportion

to the group's interest. Unrealized losses are eliminated in the same manner as unrealized

earnings, yet it is done in as much as that there is no evidence of impairment.

e) The Group's Entities



19

The income and the financial situation of all of the group's entities which have a functional

currency different from the presentation currency are translated to the presentation currency as

follows:

- assets and liabilities are translated to the exchange rate in effect on the date of the

statement of financial position.

- the earnings and expenses of each of the income accounts are translated to the average

exchange rates unless it is not a fair approximation.

The difference resulting from applying at the closing of each fiscal year the exchange rates in

effect and to income and expenses average exchange rates are recognized in equity as a

difference in translation and on the other comprehensive income.

A subordinate's cash flow in foreign currency will be converted at the average exchange rate for

the term reported. Received and paid dividends will be converted at the exchange rate on the day

the cash flow took place.

When the group loses control of a foreign business, a significant influence or joint control, by

the company's disposition, the amount corresponding to the foreign currency translation reserve

(FCTR) is transferred to income as part of a profit or loss by elimination. When one of the

subordinates has a partial disposition which includes an operation abroad but still keeps control,

the share corresponding to this cumulative amount of uncontrolled interest is reassigned.

When the group alienates just part of its investment in an associate or joint business which

includes an operation abroad but still keep significant influence or joint control, the share

corresponding to the total amount is reclassified as income.|.

Note 3. Applied accounting criteria

The accounting policies established herein have been applied consistently in the preparation of

the consolidated statement of the opening financial position and of consolidated financial

statements

Note 3. Applied accounting criteria, continued

Prepared in accordance with the accounting and the financial information standards accepted in

Colombia (in Spanish, CASIFRS), unless indicated otherwise.

a) Financial assets and liabilities

Initially, the group recognizes loans and receivables and debt securities issued on the date they

originate.

The group derecognizes a financial asset when contractual rights expire on the cash flows of the



20

financial asset, or when it transfers the right to receive contractual cash flows in a transaction in

which all risks and advantages of the ownership of the financial asset are substantially

transferred, or not transferred and does not keep all the risks and advantages related to the

ownership and has no control of the transferred assets.

The group derecognizes a financial liability when its contractual obligations are paid or

cancelled, or which may have expired.

A financial asset and a financial liability will be a balancing object in such a way that its net

value is presented in the consolidated statement of the financial position, only and only if, the

group has the enforceable right to compensate the value is recognized and has the intention to

liquidate it by the net value, or realize the asset and settle the liability simultaneously.

(a.1) designation, recognition and measurement

The group designated its Financial Assets into the following categories: A fair value at an

amortized cost. The assignation was determined based on the entity's business model to manage

its financial instruments and the characteristics of their contractual cash flows.

(a.1.1) fair price

• financial assets at a fair price with a change in results

financial assets at a fair price with a change in results are financial assets kept to negotiate. A

financial asset is classified in this category if it is mainly acquired to be sold in the short-term.

Financial derivatives are also designated as acquired for trading, unless they are designated as

accounting hedges. Financial Assets in this category are designated as current assets.

(a.1.2) amortized cost

• loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted

in an active market, which are not intended for trading in the short-term. They are included in


(a.1.2) amortized cost, continued

current assets except those maturing more than twelve months from date of the consolidated

statement of financial position which are designated as non-current assets. At first, these assets

are recognized for their fair value, and later for their amortized cost using the effective interest



21

method. Nevertheless, business operation credits maturing in under a year and which do not have

contractual interests, and personal credits, dividends receivable and capital calls on equity

instruments, the amount of which the company expects to receive in the short term, can be

valuated for their nominal value when the effect of not updating cash flows is not significant.

• non derivative Financial liabilities

the Group designates non derivative Financial liabilities in the other Financial liabilities

category. At first, these held Financial liabilities are recognized at fair value plus any directly

attributable transaction costs. After the initial recognition, these Financial liabilities are valued

at the amortized cost using the effective interest method.

Trading operation liabilities maturing in over a year and which do not have contractual interest,

the amount of which the company expects to pay in the short-term can be evaluated for their

nominal value when the effect of not updating cash flows is not significant.

Other Financial liabilities consist of loans and obligations, issued debt securities, commercial

accounts payable and other accounts payable. Bank overdrafts are payable on demand, are an

integrated part of the group's cash management, are included as a cash component and cash

equivalents for the cash flow statement.

b) Issued capital

Share capital consists of common shares which are recorded under equity (see Note 25).

c) Inventories

Inventories are valuated at cost or at the net realizable value, whichever is less. Inventory costs

are based on a weighted average. Regarding manufactured products and products being

processed, general production costs are based on a normal operating capacity, but does not

include interest costs or the difference in change; these are recognized in the results of the

corresponding period.

the net realizable value is the sales value estimated during the normal course of business, without

finishing costs and the costs estimated necessary to make a sale.


d) Intangible assets not capital gain

(d.1) computer programs

The licenses acquired for computer programs are capitalized based on the cost the company

incurs in to acquire and prepare them to be used in a specific program.

Expenses related to computer program maintenance are recognized as an expense when the

company incurs in them. Costs directly related to the development of exclusive identifiable

controlled computer programs will probably generate economic benefits surpassing the cost for

more than one year are recognized as intangible assets. Direct costs include the expenses of the

personnel developing the computer programs and an adequate percentage of general expenses.

The cost of the development of computer programs recognized as assets are amortized during

their estimated useful lives, which do not surpass 5 years.



22

(d.2) flagging and conversion rights

While conducting its operations, the group incurs in costs to acquire customer relationships.

These calls respond individually or jointly to any of the following situations:

• Cash disbursement (a capital premium).

• contribution to upgrade service stations.

• delivery of equipment or items for service stations.

• contribution to convert gasoline engines to gas.

After executing these costs, the company signs contracts with third-party beneficiaries of these

payments; obtaining a flagging right with which it may exhibit the names of the group's brands

in service stations and the exclusivity of the sale of products to service station owners (retailers)

and the owners of vehicles who transformed to gas.

Equipment and items delivered to customers are to be used solely to exploit the Terpel brand

during the term of the contract.

(d.3) other intangible assets

other intangible assets the group acquires and which have a definite useful life are valued at cost

minus the cumulative amortization and accumulated losses resulting from impairment.

(d.4) subsequent expenditures

subsequent expenditures are only capitalized when economic benefits increase


d) Intangible assets not capital gain, continued

(d.4) subsequent expenditures, continued

futures are incorporated into the specific asset related to them. All other disbursements including

disbursements to generate capital gains and brands internally are recognized in the results when

the company incurs in them

(d.5) Amortization

Amortization is based on the cost of an asset. Intangible assets are amortized in the results based

on a linear amortization method during the estimated useful life of intangible assets, except

capital gain.

The estimated useful life for the periods presented in consolidated statement of the financial



23

position are as follows:

• computer programs 3 - 5 years

• other intangible assets 8 - 12 years

• flagging rights 3 – 10 years

flagging rights are amortized in accordance with a calculated rate between the values purchased

by a service station and the volume to which they are contractually committed. For conversions,

it is the relation between real consumption and consumptions to which they are contractually

committed. Amortization methods utilized and residual values are revised in each Financial year,

and they are adjusted if necessary.

e) Capital gain

The capital gain which arises during the acquisition of subordinates is included in the intangible

assets. Capital gain is valued at cost minus accumulated impairment losses. Regarding the

Investments accounted in accordance with the equity method, the carrying value of the capital

gain is included in the carrying value of the investment, and any impairment loss is distributed

to the carrying value of the investment accounted in accordance with the equity method as a

whole.

Capital gain is assigned to the cash generating units (CGU), to test impairment losses. The

assignment is conducted in those CGUs which are expected to benefit from the business

combination in which that capital gain arose.

f) Impairment

(f.1) non derivative financial assets

A financial asset which is not recorded at a fair value with changes in results including an interest

in an investment accounted under the equity method is valuated on the date of each financial

position statement to determine if there is objective evidence of impairment. A financial asset is

impaired if there is objective evidence of impairment resulting from one or more loss events

which occurred after


f) Impairment, continued

(f.1) non derivative financial assets, continued

The initial recognition of the asset, and that or those loss events have had a negative effect on

future cash flows of the asset which may be estimated reliably.

The objective evidence that the financial assets are impaired includes an evaluation of the

historical trend of non-compliance probabilities, an opportunity to recover and the sum of the

loss incurred, adjusted according to the criteria of management related to current economic and

credit conditions make it likely that the real losses will be higher or lower than those suggested

by historical trends.



24

When evaluating impairment, the Group considers the following among other aspects:

• Existence of a debtor's significant financial difficulties.

• probability that the group will not receive payments in accordance with original sales

terms.

• probabilities that the debtor may go bankrupt or enter into financial reorganization.

• defaults or arrears on payments, or

• When the group has exhausted all collection instances of a debt in a reasonable lapse of

time.

Losses are recognized in results and are reflected in an accounting provision against loans and

receivables or investment instruments measured at fair value. Interest on unimpaired assets

continues being recognized. When an event happens after an impairment, interests continue to

be recognized. When an event occurs after an impairment has been recognized, it decreases in

the amount of impairment loss, and introverts affecting the results of the period.

(f.2) non-financial assets

The accounting value of the group's non-financial assets, among them some assets of properties,

the plant, equipment, Inventories and deferred taxes are reviewed on the date of each

consolidated statement of financial position to determine if there is any sign of impairment. Then,

if there are signs of impairment, the company estimates the recoverable amount of that asset.

Intangible assets with an indefinite useful life are evaluated yearly. An impairment loss is

recognized if the carrying value of an asset or of the cash generating unit (CGU) it is assigned

to exceeds its recoverable value.

The recoverable amount of an asset or of a CGU is the highest value between value in use and

its fair value minus sales cost. To determine the value in use, two major future cash flows are

discounted from its present value using a discount rate that reflects current market evaluations

on the temporary value of money and the specific risks that the asset or CGU may have. For

impairment evaluation purposes, the assets that cannot be tested individually or grouped in the

smallest group of assets which generate cash flows from continuous use are


f) Impairment, continued

(f.2) non-financial assets, continued

independent of the cash inflows from other assets or CGUs. Impairment losses are recognized in

the results. On the other hand, impairment losses recognized related to CGUs are assigned first

to reduce the carrying value of any capital gain assigned in the units (or CGU groups), and then

reduce the carrying value of other assets in the unit (or CGU groups) on a pro rata basis. An

impairment loss related to capital gain is not reversed. For other assets, an impairment loss in as

much as that the carrying value of an asset does not exceed the determined carrying value, net

of depreciation or amortization if no impairment loss were recognized.

g) Properties, plant and equipment



25

It mainly includes land, plant and equipment, buildings and ongoing constructions. The items of

the properties, plant and equipment are recognized for their cost minus the accumulated

depreciation and impairment losses. The costs include amounts that are directly attributable to

the acquisition of the asset.

The cost of the properties, plant and equipment was determined in reference to the revaluation

of previous GAAP. Brooke decided to apply an optional exemption to use this revaluation as an

attributed cost on January 1, 2014, which is the transition date. (See Note 37- 4.3b). Further

measurement of the items above the properties, plant and equipment is at cost.

Further costs are included in the initial value of the asset or are recognized as a separate asset

only when it is probable that future economic benefits associated to the items of the properties,

plant and equipment will flow to the group, and the cost of the item can be determined reliably.

Maintenance work or major equipment repairs, in which there are important replacement parts

will be capitalized if it is possible to identify in accounting the equipment subject to the repair

so that equipment repaired can be derecognized as new equipment and the cost the company

incurred in; on the other hand, they are recognized in the income statement as an expense of the

period in which it was incurred.

the items of the properties, plant and equipment depreciate from the date they are installed and

made ready to use, or in case of assets constructed internally from the date on which the asset is

completed and it is in conditions to be used, using a linear method based on the estimated useful

life of each component. Land does not depreciate.

The estimated useful life for current periods comparative of significant line items of properties,

plant and equipment are as follows:


g) Properties, plant and equipment, continued

Constructions and buildings 50 years

Plants and equipment

Oil piplines, plant and network 50 years

Machinery and equipment – Tanks in supply plant 50 years

Machinery and equipment – Tanks located in EDS 30 years

Machinery and equipment – Unlike tanks located in the plants 20 years

Machinery and equipment – Unlike tanks located in EDS 15 years

Fixed installations and accessories, net

Furniture and Fixtures, and office equipment 10 years

Technology equipment, net

Computing and Telecommunication equipment 5 years

Medical-scientific equipment 5 years

Automotive equipment, net

Transport fleet and equipment different from Refueller 5 years

Transport fleet and equipment for Refueller 12 years

Fluvial transport fleet and equipment 5 years



26

Depreciation method, useful lives and residual values are revised in each fiscal year and they are

adjusted if necessary.

Losses and profits from the sale of fixed assets are calculated comparing income obtained with

net carrying value. These are included in the statement of income.

g) Investment properties

Investment properties is real estate held for the purpose of obtaining income by leasing it or to obtain

capital appreciation of an investment or both things at the same time, yet the properties are not to be

sold during the normal course of business, and in the supply of goods or services, or administrative

purposes. Investment properties are valued under the cost model.

The cost includes the mountains that are directly attributable to the acquisition of an investment

property.

Any profit or loss for the sale of an investment (estimated as the difference between the obtained

sales price, availability and the carrying value of the item) is recognized in the results.

When the use of real estate changes, it is reclassified as properties, plant and equipment, its

carrying value on the date of the reclassification becomes its cost for subsequent accounting.

h) Accounting provisions

The group recognizes an accounting provision if as a result of a past event, it has a legal or implicit

obligation that can be estimated reliably, and it is probable that an outflow of economic benefits

may be necessary to liquidate the obligation. Accounting Provisions are


i) Accounting provisions, continued

It determines a discount in future expected cash flow from the interest rate that the current market

evaluation reflects on the value of money in time and the specific risks of the obligation. The

reversal of the effect of that discount is recognized as a financial cost.

j) Employee benefits

Short-term employee benefit obligations are measured using a non-discounted base and are

recognized as expenses in as much as that a related service is provided. An obligation is

recognized by the amount the company expects to pay under short-term cash bonds or employee

participation plans in profits if the group has plans for employee participation in profits, and if

the group has a current legal or constructive obligation to pay this amount as a result of a service

provided by an employee in the past, and the obligation can be reliably estimated.

(j.1) retirement pensions

The obligation for retirement pensions represents the present value of all future expenditures

that the group must pay those employees who fulfill certain requirements of the law regarding

age, time on the job and others, and it is determined based on actuarial studies and prepared in



27

compliance with legal standards.

(j.2) workers' vacation

The expense for workers vacation is recognized using the accrual method, and it is recorded at

its nominal value.

(j.3) bonds

An expense for bonds is recognized when there is a decision made by the management making

bonds effective. A provision is recognized when the group is contractually obligated or when

practice in the past has created a constructive obligation and when a reliable estimate of the

obligation can be conducted.

Note 23 presents the amount corresponding to the obligations of employees' benefits.

k) Classification of current and non-current balances

The group presents as separate categories in consolidated statement of financial position current

and non-current assets, current and non-current liabilities. Consolidated statement of financial

position, the company designates assets and liabilities depending on their maturity. Current

assets and liabilities must fulfill the Following conditions:

• It is expected to realize the asset and settle the liability in its normal operating cycle,

12 months starting on the date of its liquidation.

• this assets or liabilities are mainly held for negotiation purposes.


k) Classification of current and non-current balances, continued

a. An asset is cash or cash equivalent unless it is restricted and cannot be exchanged or

used to pay a liability for a minimum 12-month fiscal year after the fiscal year it reports.

b. it does not have an unconditional right to postpone the payment of a liability during at

least the 12 months following tne date of period being reported.

All the other headings will be designated as non-current assets and liabilities. Deferred tax

assets or liabilities are designated as non-current.

l) Income tax and deferred taxes

Income tax expenses consist of a current tax and a deferred tax. Current and deferred taxes are

recognized in the results.

(l.1) current tax

An expense or income from taxes consists of an income tax and a current and deferred tax for



28

equality.

A current tax is the amount to pay or recover for income tax and equality tax (in Spanish, CREE).

Taxes are calculated based on enacted tax laws or substantially enacted on the date of the financial

position statement. General management regularly evaluates the position assumed income tax

returns regarding situations in which tax laws are the object of interpretation, and if necessary, it

establishes accounting provisions regarding the amounts it expects to pay tax authorities.

(l.2) deferred tax

A deferred tax is recognized by the existing temporary differences between the carrying value of

assets and liabilities for financial information purposes and the amount used for tax purposes. A

deferred tax is not recognized by existing temporary differences between the carrying value of

assets and liabilities for financial information purposes and the amount used for tax purposes. A

deferred tax is not recognized for:

• the initial recognition of an asset or a liability in a transaction that is not a business

combination, and which did not affect either the profits or accounting or taxable losses.

• differences related to investments in subordinates, associates, orange joint businesses

and as much as the group gun control when reversing the temporary differences, and they will

not probably be reversed in the future.

• the temporary taxable differences which arise from the initial recognition of a capital

gain.

Measuring deferred taxes reflects the fiscal consequences which would derive from the way the

entity expects to recover or liquidate the amount in the carrying value of its assets and liabilities

at the end of the period being reported.


l) Income tax and deferred taxes, continued

(l.2) deferred tax, continued

A deferred tax is is recognized taxable rates expected to apply to Temporary differences when

they are reversed based on the laws that have been approved or which are about to be approved

on the date of the statement of financial position.

A deferred tax asset is recognized by a non-used tax loss, tax credits and temporary deductible

differences in as much as that it is probable that its future taxable earnings will be available to

be used against them. A deferred tax asset is revised on every date of the statement of financial

position and it is reduced in as much as that it is not probable to realize benefits for related

taxes.

Distribution of dividends

The distribution of dividends the company's shareholders is recognized as a liability in the fiscal

year in which the Dividends are approved by the company's shareholders.

Income recognition



29

(n.1) sales of goods

Earnings from the sale of goods during the course of ordinary business are recognized at a fair value

of the consideration received or which will be received, net refunds, discounts, bonds or commercial

discounts. Earnings are recognized when the derivative risks and significant advantages of the

ownership of the goods are transferred to the customer, and it is probable that economic benefits

associated with a transaction, cost incurred or which will be incurred in so that the transaction can

be measured reliably and the group does not hold for itself any implication in the current

management of the sold goods.

(n.2) sale of services

Income from providing services is recognized in the results of the period once the services have

been provided.

(n.3) interest income

Interest income is recognized using the effective interest method.

(n.4) dividend income

dividend income is recognized when the right to receive a payment is established.


l) Expenses by function

In consolidated statements of income (results), expenses are designated in accordance with their

function as part of the sales cost, and the costs of distribution and administration operations

revealing separately sales from other expenses. The costs of distribution operations are those in

which the company incurs to sell the group's products and services.

m) Leases

(p.1) leased assets

Agreement to lease goods which substantially transfer to the group all the risks and advantages

related to ownership are designated financial leases. In the initial recognition, a lease is measured

at the lowest value between its fair value and the present value of minimum lease payments.

Assets held on the other leases are designated as operating leases and they are not recognized in

the Group's consolidated statement of financial position.

(p.2) lease payments

Payments made on the operating leases are recognized in the results under the lineal method

during the duration of the lease.



30

Payments made under a financial lease are distributed among financial expenses which are

recorded in the results, and a decrease in outstanding liabilities.

(p.3) determining if an agreement contains a lease

When a contract is described, the group determines if the contract corresponds to or contains a

lease, and if the following two criteria are met, it will be as follows:

• the performance of the contract depends on the use of a specific asset or specific assets;

• the contract contains a right to use an asset or assets.

When describing or reevaluating a contract, the group separates payments and other

considerations required by the contract among which they correspond to a lease and are related

with other elements based on relative fair values.

(p.3) determining if an agreement contains at lease

If the group concludes that financial lease it is impractical to separate payments reliably, an asset

and a liability are recognized for the amount equal to the fair value of the underlying asset.

Afterwards, the liability is decreased as payments are made


p) Leases

(p.3) determining if an agreement contains a lease, continued

and the financial cost allocated to a liability using an incremental interest rate is recognized

q) Consolidated statement of cash flows

A consolidated statement of cash flows gathers all the cash movements made during a fiscal

year, determined by the direct method. In consolidated statement of cash flows, the following

expressions are used:

• cash flows: Cash inflows and outflows or other equivalent terms, which are highly liquid

in nature with an original 3-month term or less and subject to an insignificant risk of value

changes.

• operating activities: They are activities that constitute the Group's main source of

ordinary income, and other activities that cannot be designated as investment or financing.

• Investment activities: This is an acquisition, transfer, alienation or disposal using other

means of non-current assets and other investments not included in cash and cash equivalents.

• financing activities: Activities that produce changes in size and the composition of total

equity and financial liabilities.

In addition, overdrafts will be part of cash management. Therefore, they are included as components

of cash or cash equivalents with their corresponding disclosure.

Interests and dividends

Regarding the presentation of Consolidated cash flows, the group designates cash flows

corresponding to interest as operating activities, investment activities or financing activities



31

depending on the origin provided that the origin of each transaction can be identified. In general, the

obligations acquired are destined to cover the Group's operating-activity obligations. Interests paid

in a period will be revealed including those which have been recognized as an expense in the result

of the period or the ones that have been capitalized in accordance with the guidelines established in

IAS 23-Borrowing costs.

Paid dividends are designated in the cash flow of financing activities in accordance with information

reporting guidelines of the parent company.

r) Cash and cash equivalents

Cash and cash equivalents include cash in hand, term deposits in credit entities, other highly liquid

short-term investments with an original 3-month or less maturity. In addition, overdrafts will be part

of cash management. Therefore, they are included as cash components and cash equivalents with

their corresponding disclosure.


s) Borrowing costs

General and specific debt interest costs are directly attributable to acquisition, construction or

production of qualified assets which are assets that require a substantial period before being ready

for the use which they are destined to or a sale, added to the costs of these assets up to the moment

in which those assets are prepared for their intended use or sale. When there are earnings from

investments obtained from the temporary investment of specific loans, the company has to invest in

qualified assets. They are deduced from interest costs eligible for capitalization.

All other interest costs are recognized as income or expenses in the period in which the company

incurs.

t) Earnings per share

The group calculates basic earnings per share, finds the quotient between net earnings (loss) of the

period attributable to the company and the weighted average number of outstanding ordinary shares

of a company during the same period.

Potential ordinary shares will be treated as diluted when and only when, their translation to ordinary

shares could reduce earnings per share of the activities which continue.

When the potential ordinary shares of subordinates, a joint business or of the associates have a diluted

effect on earnings per basic share of the organization, they must be included in the estimate of

earnings per diluted shares.

u) Operation segments

Operation segments

An operation segment is a component of the company in view:

• that the company conducts business operations from which it can obtain earnings from

ordinary activities and incur in expenses (including earnings from ordinary activities and



32

the expenses for transactions with other components belonging to the company itself).

• that the operating results are regulated by the maximum decision-making authority for

the operation of the entity, to decide about the resources which must be assigned to the

segment and evaluate performance.

• that there is discrete financial information available.

The operation segment has a person in charge who is directly accountable to the maximum

Authority in decision-making of the operation, and regularly stays in contact the authority

to discuss operation activities, financial results, and forecasts for segment plans. This

segment the group defined is detailed in Note 29.


v) New standards and interpretations not adopted yet

i. new applicable standards starting on January 1, 2016.

On December 14, 2015, decreed 2420 was issued, “Single Regulatory Decree of the accounting

financial information standards and the assurance of information and other Provisions are

issued” (modified by decree 2496 of December 2015), and it includes the standards that have

been issued by the IASB and adopted in Colombia and which will be in effect starting on January

1, 2016.

Financial

Information

Standard

Subject of the

amendment

Detail

IFRIC 21 –

Encumbrances

(May of 2013)

Interpretation of IAS

37

Contributes a guide regarding the cases in which a

liability must be recognized for encumbrances in

accordance to what is set forth in IAS 37. The

IFRIC can be applied to any situation that generates

a current obligation to pay taxes or encumbrances

to the government.



33

Yearly improvements

2010 – 2012 Cycle

(December 2013)

These amendments

reflect subjects

discussed by the

IASB, which were

later on included as

IFRS modifications

IFRS 2 - payments based on shares: Definition

of the conditions of the acquisition of rights.

IFRS 3 - Business combinations: Accounting

of contingent considerations in a business

combination.

IFRS 8 - Operation segments: Auditioning of

operation segments and considering the total

assets of the reportable segments of the

entities’ assets.

IAS 16 - Properties, plant and equipment /

Yearly improvements

2010 – 2012 Cycle

(December 2013)

These amendments

reflect subjects

discussed by

IASB, which were

later on included as

IFRS modifications

IAS 38 - Intangible assets: revaluation

method- proportional method to re-express

cumulative depreciation.

IAS 24 - information to be disclosed by

related parties: key executive personnel.

IAS 38 - Intangible asset module of the

revaluation.


w) New standards and interpretations not adopted yet, continued

Other Issued Standards

According to what is established in decree 2496 of December 2015, the following are the

applicable standards issued in 2017 (except for IFRS 15, applicable on January 1, 2018).

Financial

Information

Standard

Subject of the amendment

Detail



34

IAS 1 –

Presentation of

financial

statements

Disclosure initiative.

Regarding the presentation of

financial statements, an

amendment clarifies

disclosure requirements.

Some relevant matters indicated in the

amendments are as follows:

• requirements of materiality IAS 1.

• it indicates that the specific lines in the

income statement, of comprehensive results

and financial position changes which can be

disaggregated.

• flexibility regarding the order in which

they are presented in the notes of the

financial statements.

Yearly

improvements

2011 – 2013

Cycle

(December 2013)

The nature of yearly

improvements is to clear up or

correct, and they do not

propose new principles or

changes to the existing ones.

IFRS 3 - business combinations: Scope

Exceptions for mixed Enterprises and the scope

of application of paragraph 52 (accept portfolio);

and

IFRS 13 - fair value measurement,

compensation of financial assets and

liabilities related to the market risk or the

counterpart's credit risk.

IAS 40 - Investment properties:

Clarification of the inter relation of IFRS

3 business combinations and IAS 40

Investment properties when designating

the property as an investment property or

investment properties.

IAS 16 -

Properties, plant

and equipment

Clarifying acceptable

depreciation methods Entities are not allowed to use a depreciation

method based on income for the items of

property, and equipment.


x) New standards and interpretations not adopted yet, continued

ii. Other standards issued, continued

Financial

Information

Standard


Detail



35

IFRS 9 –

Financial

instruments

Financial instruments (in its

2014 revised version).

The replacement project refers to the

following phases:

• Phase 1: Classification and

measurement of financial assets and

liabilities.

• Phase 2: Impairment methodology.

• Phase 3: Hedging accounting.

In July 2014, IASB form of the accounting of

financial instruments completed the reform of

the accounting of financial instruments and

issued IFRS 9 - financial instrument

accounting (in its 2014 revised version),

which will replace IAS 39

IFRS 11 – Joint

operations

Accounting for acquisitions of

interest in joint operations.

Provides indications regarding the accounting

of the acquisition of an interest in a joint

operation which has activities that constitute a

business, in accordance with the definition of

IFRS 3 - business combinations.

Entities must implement the modifications

prospectively of the acquisitions of interests

in joint operations (into which the activities of

the joint operations constitute a business in

accordance with what is defined in IFRS 3).

IFRS 14 –

deferred

regulatory

accounts

Deferral accounts of regulated

activities. It is an optional standard that allows an entity

when it adopts for the first time the IFRS and

whose activities are subject to the regulation

of rates, to continue applying most of the

above accounting policies for regulated

deferred accounts.


y) New standards and interpretations not adopted yet, continued


Financial

Information

Standard


Detail



36

IFRS 10 -

consolidated

financial

statements

IFRS 12 -

information to

disclose

regarding

interests in other

entities

IAS 28 -

Investment

entities

Application of the exception for

consolidation. It clarifies that the exception of the

preparation of Consolidated financial

statements applies for a controlling entity

which is the subordinate of an investment

when the investment entity measures all

its subordinates at a fair value in

accordance with IFRS 10.

It allows an investor in an associate or a

joint business the application of the

equity method if it is a subordinate of an

investment entity that measures all its

subordinates at a fair value.

IAS 38 –

Intangible assets

Clarifying acceptable

amortization methods.

It establishes conditions related to the

amortization of intangible assets as:

a) when an intangible asset is expressed

as a measure of income.

b) when it can be demonstrated that the

income and the consumption of economic

benefits of the intangible assets are

closely related.

IFRS 10 -

Consolidated

financial

statements

IAS 28 -

Investment

entities

Sale or property contribution

between an investor and its

associate or joint business.

They deal with whatever is related to

IFRS 10 and IAS 28 in the treatment of

losing control of a subordinate which is

sold or contributed to an associate or a

joint business.

It clarifies that the earning or loss

resulting from the sale or contribution of

assets represents a business, as defined in

IFRS 3, between an investor and its

associate or joint business and is totally

recognized.


z) New standards and interpretations not adopted yet, continued


Financial

Information

Standard


Detail



37

IAS 27 - Separate

financial statements

Equity Method in separate

financial statements.

The use of the equity method is allowed to

account for Investments in subordinates,

joint businesses and associates in their

separate financial statements.

Modifications clarify that when a holding

entity ceases to be an investment entity or

becomes and investment entity the change

must be accounted for from the date on

which the change takes place.

IFRS 15 –

earnings from

contracts with

customers

earnings from contracts with

customers

It establishes a five-step model

applied to earnings from contracts

with customers.

It will replace the following standards and

the interpretations of income after the date

on which it comes into effect:

IAS 18 - Income;

IAS 11 - Construction contracts;

IFRIC 13 - customer loyalty

programs;

IFRIC 15 - real estate Construction

agreements;

IFRIC 18 - transfer of customers'

assets and

SIC 31 - barter transactions which

include advertising services.


v) New standards and interpretations not adopted yet, continued


Financial

Information

Standard


Detail



38

IAS 16 - properties,

plant and equipment

IAS 41 -

Agriculture

Producing plants.

It defines the concept of producing plant

and requires the biological assets that meet

this definition to be accounted as property,

plant and equipment in accordance with

IAS 16, instead of IAS 41. Regarding

modifications, producing plans can be

measured using the cost method or the

revaluation model established in IAS 16.

Products that grow in producing plans

continue being accounted for in compliance

with IAS 41.

Yearly

improvements

2012 - 2014 Cycle

These amendments reflect

subjects discussed by IASB,

which were later included as

IFRS modifications

- IFRS 5 - not current assets held for sale

and discontinued operations in asset

disposal method changes.

- IFRS 7 - financial instruments:

Information to disclose (with modifications

resulting from modifications to IFRS 1)

- modifications related to service contracts.

- applicability of modifications to IFRS 7 in

the disclosure of compensation on the

condensed intermediate financial

statements.

- IAS 19 - employees' benefits. Discount

rate: Regional market matters.

- IAS 34 - intermediate financial

information: Disclosure of information

included in any other place on the

intermediate financial report.

The group is evaluating the impact that these standards will have when they are put into effect.

Note 4. Financial Risk Management

The group is exposed to the following risks related to the use of financial instruments.

- market risk

- credit risk

- liquidity risk

This note presents information regarding the group's exposure to each one of the aforementioned risks,

and the group's purposes, policies and procedures to measure and manage risks, and manage the group's

capital.

Risk management framework

The board of directors of the company supervises the group's policies via its control body. These internal

policies seek to identify, analyze and monitor controls to mitigate financial, operational and compliance



39

risks. The group assures its compliance through its standards, management procedures and its good

corporate governance policies.

4.1. market risk

Risk management considers an individual analysis of each identified risk exposure situation; that analysis

determines if financial hedging instruments are contracted or not, if there are natural hedging

mechanisms, or simply, the company assumes the risk associated to not considering it critical for the

business and the operation.

a) foreign exchange risk

One of the market risks that the group faces is foreign exchange risk (peso/dollar), a product of

importation operations of lubricant bases for the local market and exportations of finished products.

Since both operations are denominated in dollars, there is natural hedging of most of this risk at the level

of the statement of financial position statement. Regarding cash flow, the risk is minimal because foreign

currency operations represent less than 1% of the fiscal year performed on December 31, 2015 and 2014.

Each country operates with locally accepted currency and financial indebtedness is also taken in local

currency to avoid exchange exposure. The treasuries of the different countries cover 100% of their

operation. Operations in Colombia are conducted in Colombian pesos accept for customer billings in

dollars with a monthly average of US$5.000.000, and these resources are destined to pay for suppliers

abroad in the same currency. Based on the above there is no currency risk.

The CNG trading business is exposed to an exchange risk in as much as that the cost of gas consists of

70% of rates established in dollars, for supplies, transportation and trading. In as much as that the

exchange rate fluctuates, the cost of gas in Colombian pesos also varies. For the sake of maintaining the

competitiveness of the price of CNG in comparison with gasoline, an increase in the exchange rate which

results in a higher cost impact negatively the business margin.

Note 4. Financial Risk Management, continued

4.1. market risk, continued

a) interest rate risk

78% of the debt acquired issuing Bonds in February 2013 and February 2015 pays interest at

CPI indexed rates. The risk of increase in the cost of the debt resulting from an increase in the

CPI would be partly compensated to pay yearly adjustment of the wholesale margin which must

increase on June 1st each year with an annual CPI increase of the last 12 months in accordance

with decree 90675 of 2014. 4.

Mainly cash surpluses are kept in savings account and/or collective portfolios at sight; the profitability

rate corresponds to the market rate

Short and long-term loans on December 31, 2015 and 2014 are held at the best market condition, either

at a fixed or variable rate. Loans are taken out with the option of prepaying without penalties, and this

allows the structuring of the debt at any moment if market conditions change. The group does not have

interest rate hedging.

At the end of the period, reporting the situation of the type of interest of the group's financial

instruments that bear interest is as follows:



40

Analysis of the sensitivity of the fair value for fixed-rate instruments

The group does not account for financial liabilities at a fixed rate at the fair value with result

changes, and does not use derivatives (financial interest rate swap), as hedging instruments.

Therefore, a variation in the type of interest at the end of the period being reported is not

reasonably possible.

Analysis of the sensitivity of the cash flow for variable-rate instruments

The group's debt on December 31, 2015 was M$1,448,646,134 (M$1,335,317,211 in 2014) of

which 18% was at a fixed rate at 82% at a variable rate (21% was at a fixed rate and 79% at a

variable rate in 2014).

The debt for the issuing of bonds in Colombia at a variable rate was referred to a 12-month CPI;

on December 31, 2015, it increased to M$865,728,618 (M$460,885,207 on December 31, 2014).

A variation of 100 base points in this indicator at the end of


4.1. Market risk, continued

b) a) interest rate risk, continued

a reported period is considered reasonably possible.

The debt taken out in Panama is indexed at Libor rate and the debt in Mexico equals 4.3% of the

total debt variable and is indexed at TIEE. A variation in Libor and in TIEE, would not have a

significant effect on consolidated financial statements. The debt in Peru represents 1.5% of the

Group’s total debt and is taken at a fixed rate.

2015 2014

M$ M$

Fixed rate instrument:

Financial Liabilities (259.632.278) 280.416.614

Total (259.632.278) 280.416.614

Variable rate instrument:

Financial assets 30.818.261 68.863.946

Financial Liabilities (1.189.013.856) 1.054.900.597

Total (1.158.195.595) 1.123.764.543



41

In as much, an increase of 100 points in the CPI to calculate the wholesale margin would imply

a recovery of M$4,500,000 which partly covers the impact of the financial liabilities of

M$8.149.305.

Capital Management

The board of directors’ policy is to maintain a solid capital base to conserve investors, creditors

and the market's trust, and support the future development of the business. The board of directors

also monitors the return on Capital and the level of dividends paid to shareholders.

The Group's debt-equity index at the end of the fiscal years of 2015 and 2014 was as follows:


4.2. Credit Risk

Credit risk is the risk of financial loss the group faces if a customer or counterpart does not fulfill its

contractual obligations on a financial instrument, and the principle originates in cash and cash

equivalents, and the commercials and other accounts receivable and cash and cash equivalents.

Working capital loans or rotating credits are granted, specifically aimed at the purchase of inventories

of the products the group trades. Every credit granted by the group must meet the information

requirements established in accordance with the type of customer and the guarantee submitted. The

documentation presented must guarantee that the group has all the necessary information to know its

Impact in profits

Increase 100 pb Decrease 100 pb

M$ M$

December 31, 2015



(8.163.364) 8.283.773

December 31, 2014



(8.149.305) 7.974.295

2015 2014

M$ M$

Total Liabilities 2.428.801.215 2.215.781.242

Less: Cash and cash equivalents (287.991.889) (298.577.233)

Net Debt 2.140.809.326 1.917.204.009

Total Equity 1.464.046.693 1.338.962.146

Debt-equity ratio 1,46 1,43



42

customers, their general, commercial data and identification; likewise, it guarantees a general

knowledge of the customer's financial position.

In addition to the guarantees demanded from customers, the group has contracted accredited

insurance that partly covers the credit risk with customers when their guarantee does not cover their

credit line. In December 2015 and 2014, 54% and 45% respectively of the portfolio had a guarantee.

a) commercial debtors and other account receivables

The group's exposure to credit risk is principally affected by the individual characteristics of each

customer, segment and Country.

Currently the group has not granted Financial guarantees to support third-party obligations.

In the framework of the groups risk policy, a financial analysis of each new customer must be conducted

individually based on external ratings or on a connection and the start of commercial relation. Credit

lines and limits are established for each customer, and they are approved in accordance with the levels

of authorization established by the board of directors; these customer credit lines are permanently

reviewed and they are adjusted according to a customer's solvency and business need.

Every semester, customers' assets are reviewed in centers to monitor if customers' financial position has

deteriorated.


4.2. Credit risk, continued

a) Commercial debtors and other accounts receivable, continued

The report obtained from this review allows the company to determine the need to obtain an

additional guarantee, decide regarding credit cancellation or a change of sales modality to

prepaid; in case of high-risk, the company can decide to cancel a commercial relationship.

The treasury and Financial Risk manager's office along with the manager's office of each business

line monitor the economic and political environment in the countries where it operates to be

prompt in decision-making regarding the credits granted to be affected by changes or decisions.

The company has made transactions with more than 58% of the group's customers for more than

four years, and no impairment losses have been recognized against these customers. When

Credit Risk esposure

2015 2014

M$ M$

Trade debtor and other accounts payable 465.265.674 483.858.505

Cash and cash equivalents 287.991.889 298.577.233

753.257.563 782.435.738



43

monitoring customers credit risk, they are grouped according to credit characteristics, commercial

debtors, and other accounts receivable are mainly related with the group's wholesale customers.

Customers classified “high risk” are included in a list of restricted customers, and they are

monitored by the financial resources manager's office. The case manager is in charge of risk

management, and future sales use the prepaid method and/or demand real future payment

guarantees.

The group has established the requirement of a guarantee which backs the obligations in case of

non-payment. This guarantee is constituted by some customers and sectors that allow it

commercially.

The group establishes an impairment provision based on a monthly monitoring of commercial

debtors and other accounts receivable of each of the businesses the group conducts which allows

it to have visibility of the accounts that begin to present recovery risk and to conduct our

respective accounting search individually.

The group does not have significant credit for its concentrations. The group has policies to assure

that product wholesale sales are made to customers with suitable credit histories. Retail customer

sales are made in cash or using credit cards. The Group's maximum credit risk exposure is with

commercial debtors and other accounts receivable at the end of the period which was reported by

geographical region.



a) Commercial debtors and other accounts receivable, continued

b) Cash and cash equivalents

The Group had cash and cash equivalents for M$287,991,889 on December 31, 2015

(M$298,577,233 on December 31, 2014), which represent their maximum exposure to credit risk

for those assets. Cash and cash equivalents are kept in Banks and financial institutions which are

ranked in accordance with the following:

2015 2014

M$ M$

Colombia 576.399.873 654.731.509

Panama 107.520.415 75.230.172

Ecuador 25.505.022 17.265.367

Mexico 10.056.122 8.733.683

Peru 4.912.841 5.464.151

Republica Dominicana 27.767.262 20.239.985

Chile 1.096.028 770.871

753.257.563 782.435.738



44



guarantees

The group policy is to submit Financial guarantees to its subordinates and in some cases when

required by legal topics.

4.3. liquidity risk

liquidity risk is the risk in which the group has trouble to fulfill its obligations associated with its

Financial liabilities which are liquidated by the delivery of cash or other Financial assets. The group

monitors its risks every day using the treasury's position and prevision, from which it obtains

obligations and cash surpluses to determine the source and the destination of resources.

The purpose of the group is to maintain balance between the continuity of financing and flexibility

using bank overdrafts, bank loans and/or leasing contracts, among others.

The group seeks to maintain the level of its cash and cash equivalents and of other investments at

sight, in an amount that allows it clear financial liabilities within a thirty-day term.

The profile of the current debt allows the company to maintain its cash position to cover the surface

of the debt in accordance with their maturity schedules.

On December 31, 2015, the group has credit lines approved for USD$915 million, of which the

company has used USD$95 million and still has USD$820 million available which could be used for

overdrafts, treasury credits, and for short and long-term financing. Financing rates are agreed on at

the moment of acquiring an obligation depending on market conditions. On December 31, 2014, the

Country Bank Rating Rating Organization

Banco Agrario AAA BRC Standard & Poor´s

Banco de Bogotá AAA BRC Standard & Poor´s

Bancolombia AAA BRC Standard & Poor´s

BBVA AAA RAC Fitvh Ratings

Corredores Asociados AAA BRC Standard & Poor´s

Davivienda AAA RAC Fitvh Ratings

GNB Sudameris - HSBC AA+ BRC Standard & Poor´s

JP Morgan AAA RAC Fitvh Ratings

Interbank AAA Cass & Asociados S.A.

BBVA Continental A+ Equilibrium Clasificadora de Riesto S.A.

Banco Financiero del Perú AAA Cass & Asociados S.A.

Banco Interamericado de Finanzas AA+ Cass & Asociados S.A.

Banco Internacional AAA- Bank Watch Ratings S.A.

Banco de Guayaquil AAA PCR Pacific Credit Ratings

Banco Nacional de Panamá AA+ RAC Fitvh Ratings

Banco de Bogotá (Panamá) AAA Investor Services S.A. (BRC)

Citibank N.A. A BRC Standard & Poor´s

México Banamex AAA BRC Standard & Poor´s

Citibank AAA RAC Fitvh Ratings

Scotiabank AAA RAC Fitvh RatingsRepública Dominicana

Colombia

Perú

Ecuador

Panamá



45

group had credit lines approved for USD$1,086 million, of which it had used USD$250 million and

had USD$836 million available.

The following are the remaining contractual maturity schedules of financial liabilities at the end of

the period being reported including estimated interest payments:



46


4.3. Liquidity risk, continued

• the projection of bond interests is calculated using the latest CPI (consumer Price Index) for 12

months corresponding to 2015 and 2014; this is, that it varies in as much as that the CPI fluctuates,

except for series A bonds at a fixed rate.

• the flows disclosed in the above table represent not discounted contractual cash flows related to

derivative financial liabilities held for risk management and which generally do not close before a

contractual maturity date.

• payments of interest for variable rate loans and bonds included in the above table reflect the

interest rates at market terms at the end of period and these amounts can change if the interest rates

change.

Note 5. Accounting estimates and judgments

Preparing consolidated financial statements in accordance with accounting and financial reporting

standards accepted in Colombia require the administration to make judgments, estimates which

affect the application of accounting policies and the amounts of assets, liabilities and contingent

liabilities on the date of the statement of financial position and earnings and expenses for the year.

Real Results can defer these estimates call.

Relevant estimates and assumptions are revised regularly. The revisions of accounting estimates are

recognized in the period in which the estimate is revised pending any other future period that is

affected.

Information regarding clinical judgment in the application of accounting policies which have the

most important effect on the financial statements, is described in the following notes:

Financial Liabilities 2015

Book values Total One month or less 1 - 3 months 3 - 12 months 1 - 5 yearsMore than 5

years

Bonds 1.107.668.437 1.932.987.490 - 31.670.280 70.351.905 693.471.126 1.137.494.179

Liabilities for leasing 296.877.851 316.354.136 1.830.205 90.632.960 6.070.166 217.820.805 -

Bank unsecured loan 44.099.846 59.921.432 776.887 1.553.848 6.992.343 36.449.289 14.149.065

1.448.646.134 2.309.263.058 2.607.092 123.857.088 83.414.414 947.741.220 1.151.643.244

Financial Liabilities 2014

Book values Total One month or less 1 - 3 months 3 - 12 months 1 - 5 yearsMore than 5

years

Bonds 702.758.992 1.013.174.835 - 14.181.797 30.364.550 265.962.024 702.666.464

Liabilities for leasing 48.385.505 67.141.982 788.678 1.577.237 7.099.603 35.547.319 22.129.145

Bank unsecured loan 584.172.714 610.407.701 6.958.279 452.236.140 36.443.382 114.769.900 -

1.335.317.211 1.690.724.518 7.746.957 467.995.174 73.907.535 416.279.243 724.795.609


Notes to Consolidated Financial Statements on December 31, 2015 and 2014

47

Note 3(f) Impairment: Estimates and assumptions of the calculation of impairment for cash

generating units.

Note 17 Properties, plant and equipment: Used for Life estimates which are revised each fiscal year.

Note 24 other current and non-current accounting provisions: Estimates for the amount to be

disbursed.

Note 6. Cash and cash equivalents

The group's cash and cash equivalents are made up as follows:

a) The detail of foreign currency of the previous balance is as follows:

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Cash flow 31.999.841 33.156.924 31.299.239

Bank balance 223.836.223 196.556.363 221.132.825

Short-term deposit 30.818.261 68.863.946 25.833.674

Overnight investment 1.337.564 - -

Total 287.991.889 298.577.233 278.265.738

31/12/2015 31/12/2014 01/01/2014

Currency: M$ M$ M$

Dollar 68.471.000 39.928.088 43.330.345

Colombian pesos 211.514.356 252.261.676 229.700.183

Other Currency 8.006.533 6.387.469 5.235.210

Total 287.991.889 298.577.233 278.265.738



48

Note 7. Financial instruments

a) Classification of Financial instruments by nature and category

The detail of asset financial instruments, classified by nature and category on December 31, 2015

and 2014 is as follows:

Note 8. Financial assets at a fair value with changes in results

Non-current financial assets at a fair value with changes in results include:

Accounting Provisions have not been identified for value impairment losses in these Financial assets.

Headings of the condensed Fair Value Depreciable cost 31/12/2015 31/12/2014 01/01/2014

financial statements M$ M$ Total Total Total

M$ M$ M$

Financial assets at fair value through profit or loss 1.252.312 - 1.252.312 1.222.537 3.166.104 Trade debtor and other accounts payable - 465.265.674 465.265.674 483.858.505 548.380.970 Accounts payable from related parties - 284.469 284.469 970.911 53.085 Cash and cash equivalents - 287.991.889 287.991.889 298.577.233 278.265.738

Total 1.252.312 753.542.032 754.794.344 784.629.186 829.865.897

Headings of the condensed Depreciable cost 31/12/2015 31/12/2014 01/01/2014

financial statements M$ Total Total Total

M$ M$ M$

Trade debtor and other accounts payable 638.513.262 638.513.262 560.135.691 546.580.887 Other financial liabilities 1.448.646.134 1.448.646.134 1.335.317.211 1.110.026.027

Total 2.087.159.396 2.087.159.396 1.895.452.902 1.656.606.914

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Equity Instruments (shares) 1.252.312 1.222.537 3.166.104

Total 1.252.312 1.222.537 3.166.104



49

Note 9. Other non-financial assets

Note 10. Commercial debtors and other accounts receivable

Note 10. Commercial debtors and other accounts receivable, continued

The movements of the debtor impairment provision were as follows:

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Current:

Prepaid expenses 2.408.354 2.781.512 3.084.945

Rent 6.202.978 3.070.076 1.068.569

Advance to suppliers 69.475.785 65.212.478 -

Totals 78.087.117 71.064.066 4.153.514

Non- Current:

Rent 81.643 491.823 951.823

Other several assets 224.862 229.288 233.714

Totals 306.505 721.111 1.185.537

Note 10 Trade debtor and other accounts payable

31/12/15 31/12/14 1/01/14

M$ M$ M$

Trade debtor 419.486.456 468.594.253 484.728.399

Less: Provision for impairment of Trade debtor

(14.156.774) (21.305.677) (9.927.094)

Trade debtor, net 405.329.682 447.288.576 474.801.305

Other accounts payable 59.935.992 36.569.929 73.811.667

Less: Provision for impairment of

other accounts payable - - (232.002)

Other accounts payable, net 59.935.992 36.569.929 73.579.665

Totals 465.265.674 483.858.505 548.380.970

Less: Non-current (39.335.312) (34.167.416) (5.288.006)

Total Trade debtor and other accounts payable

425.930.362 449.691.089 543.092.964



50

Note 11. Balances and transactions with related entities

a) Commercial debtors represent the enforceable rights which originate in the normal course of

business and other accounts receivable from sales, services or loans outside the normal course

of business.

b) The Constitution and reversal of the value impairment of accounts receivable has been included

as “doubtful expense provisions” in a consolidated statement of income in the item for

management expenses.

c) The amortized cost of these financial instruments does not differ significantly from its fair

value.

d) Accounts receivable and accounts payable to related entities that the group has are short-term,

so its nominal value is recognized without having the effect of a financial component, and the

contractual flows are done for just one amount; in other words, they are not paid in installments.

They are paid in full. On the date of these consolidated financial statements, there are no

guarantees granted associated with balances between related companies, or accounting

provisions for doubtful debts.

Note 11. Balances and transactions with related entities, continued

e) Accounts payable to related entities

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Opening balance (21.305.677) (10.159.096) (10.159.096)

5.344.840 (12.192.566) -

Uncollectible accounts receivable discharged 2.008.950 1.228.153 -

Other adjustments (204.887) (182.168) -

Ending balance (14.156.774) (21.305.677) (10.159.096)

Provision for impairment of accounts receivable (reversal

of provision)

31/12/2015 31/12/2014 01/01/2014

Taxpayer

Identification

Number Company Country

Nature of the

relation Controller M$ M$ M$

99.520.000-7Compañía de Petróleos de

Chile COPEC S.A.Chile Parent Empresas Copec S.A. 110.899 181.093 8.708

20521921618 PGN Gasnorte S.A.C. Perú Joint Business - 173.570 628.529 -

8908020209 Terpel del Centro S.A. Colombia Subsidiary Organización Terpel S.A. - - 4.931

8300807182Sociedad de Inversiones de

Energia S.A.Colombia Parent

Compañía de Petróleos

de Chile COPEC S.A.- - 19.723

9003015197Proenergia Internacional S.A.

Colombia ParentCompañía de Petróleos

de Chile COPEC S.A.- - 19.723

20521921880 PGN Gasur S.A.C. Perú Joint Business - - 161.289 -

Totales 284.469 970.911 53.085



51

f) Board of directors and manager's office key personnel

i. remuneration received by Key Personnel of the general manager's office and the

company's administration

i. Loans for administrative personnel

The following is a description of the contractual conditions that there are with loans made to be at the

administrative personnel:

Terms

Maximum term: 7 years with a reference Market capture reference rate, minus 200 basic points*, with a

4% minimum basic points*, with a 4% minimum.

* this rate is applied while the officer is hired to work with the group. Repayment of capital with fixed

Creditor

31/12/15 31/12/14 1/01/14

Taxpayer

Identification

Number Company Country

Nature of the

relation Controller M$ M$ M$

8908020209 Terpel del Centro S.A. Colombia Parent Organización Terpel S.A - - 1.185.054

8300807182Sociedad de Inversiones de

Energia S.A.Colombia Parent

Compañía de Petróleos

de Chile COPEC S.A.- - 4.735.038

Totales - - 5.920.092

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Remuneration and Bonuses 9.549.213 8.127.301 4.089.833

Other remuneration 361.957 511.289 332.245

Total 9.911.170 8.638.590 4.422.078

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Opening Balance 580.951 689.356 859.109

Reduction (135.931) (108.405) (169.753)

Ending Balance 445.020 580.951 689.356



52

monthly installments.

Note 12 Inventories

Inventory costs recognized in the sales costs on December 31, 2015 reach M$13,024,104,540

(M$13,887,904,229 on December 31, 2014).

On December 31, 2015 and 2014, an obsolescence provision was recorded for M$265,220 and

M$1,139,053, respectively.

Note 13. Assets and liabilities by current Texas

Current taxes are compensated in assets and liabilities, only and only if they refer to the same legal

entity and regarding the same jurisdiction.

Assets for current taxes on December 31, 2015 and 2014 include the following:

Current tax liabilities on December 31, 2015 and 2014 included the following:

Note 14. Investment accounted for using the equity method

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Raw material 16.035.874 10.944.052 19.351.307

Merchandise 466.534.418 441.063.221 475.571.452

Work in progress 996.652 3.598.966 1.255.886

Finished goods 15.168.719 6.862.561 5.316.579

Other inventories 12.449.251 9.078.462 14.336.911

Totals 511.184.914 471.547.262 515.832.135

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Industry and commerce tax 4.917.973 4.487.077 159.011

Real estate taxes in advance 104.427 84.536 3.585.667

Withholding taxes and other taxes in advance (Colombia) - - 2.402.538

Other refundable taxes 21.310.775 22.540.062 519.240

Totals 26.333.175 27.111.675 6.666.456

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Provision of first category tax 1.096.641 20.642.863 23.359.725

Contribution Credit 605 639 -

Tax On Fuel Surcharge (Colombia) 90.034.303 79.892.956 76.253.885

Other taxes 11.925.617 7.510.120 27.126.107

Industry and commerce tax 10.244.622 10.616.931 6.861.484

Totals 113.301.788 118.663.509 133.601.201



53

Interest in joint businesses art integrated by the patrimonial value method.

There was a detail of the companies the group participates in accounted for by the equity method, and

movements in the companies for the years ending on December 31, 2015 and 2014:

a) Movement of investments in joint businesses and associates

The amount of other increases corresponds to the conversion difference.

Note 15. Intangible assets not capital gain

b) Detail and movement of the main types of intangible assets

Country of

origin

Operating

Currency

Percentage

Of

Participatio

Balance at

01-01-2015

Participation

in Gain

(Losses)

Dividends

declared

Translation

differences

Balance at

12-31-2015

% M$ M$ M$ M$ M$

PGN Gasnorte S.A.C. Perú PEN$ 50,00 2.580.052 858.578 (339.766) 440.880 3.539.744

PGN Gasur S.A.C. Perú PEN$ 50,00 2.069.847 717.132 (390.782) 308.149 2.704.346

Totales 4.649.899 1.575.710 (730.548) 749.029 6.244.090

Country of

origin

Operating

Currency

Percentage

Of

Participatio

Balance at

01-01-2014

Participation

in Gain

(Losses)

Dividends

declared

Translation

differences

and others

Balance at

12-31-2014

% M$ M$ M$ M$ M$

PGN Gasnorte S.A.C. Perú PEN$ 50,00 1.868.656 393.911 - 317.485 2.580.052

PGN Gasur S.A.C. Perú PEN$ 50,00 1.548.333 600.162 (318.491) 239.843 2.069.847

Terpel del Centro S.A. Colombia COP$ 34,61 32.323.256 - - (32.323.256) -

Totales 35.740.245 994.073 (318.491) (31.765.928) 4.649.899

Joint business

Saldo al 31/12/2014

Joint business

Balance at December 31, 2015

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Other Investments accounted using the equity method

Opening Balance 4.649.899 35.740.245 35.740.245

Chances in Joint Business Investments

Participation in Gain 1.575.710 994.073 -

Dividends declared (730.548) (318.491) -

Other increases (decrease) 749.029 (31.765.928) -

Total Joint Business Investments 1.594.191 (31.090.346) -

Ending Balance 6.244.090 4.649.899 35.740.245



54

Of the total amortization charge of the period from January 1 to December 31, 2015 for M$130,666,689

(M$136,761,384 during the same period in 2014), the company has accounted for M$107,803,461

(M$115,334,408 in 2014) in the distribution costs and M$22,863,228 (M$21,426,976 in 2014) in

management expenses.

Note 16. Capital gain

As of December 31, 2015

M$ M$ M$ M$ M$

Opening balance at 2015 150.818.447 9.989.468 345.250.624 3.072.838 509.131.377

Additions - 1.092.412 75.642.060 - 76.734.472

Discharge - - (647.305) - (647.305)

Amortization (16.908.408) (5.090.852) (107.189.803) (1.477.626) (130.666.689)

Other increases (decreases) - 2.119.257 2.385.699 - 4.504.956

Translation differences effects - 1.016.257 2.710.482 384.711 4.111.450

Total Changes (16.908.408) (862.926) (27.098.867) (1.092.915) (45.963.116)

Ending Balance December 31, 2015 133.910.039 9.126.542 318.151.757 1.979.923 463.168.261

Al 31 diciembre de 2014

M$ M$ M$ M$ M$

Opening balance at 2014 203.902.896 6.591.165 375.592.906 3.677.325 589.764.292

Additions - 577.913 79.680.609 6.194 80.264.716

Discharge - - (2.915.686) - (2.915.686)

Amortization (16.908.408) (4.965.218) (113.897.383) (990.375) (136.761.384)

Other increases (decreases) (36.176.041) 7.277.216 4.607.219 11.261 (24.280.345)

Translation differences effects 508.392 2.182.959 368.433 3.059.784

Total Changes (53.084.449) 3.398.303 (30.342.282) (604.487) (80.632.915)

Ending Balance December 31, 2014 150.818.447 9.989.468 345.250.624 3.072.838 509.131.377

Total

Identifiable

Intangible

assets

, net

Movements of Identifiable

Intangible assets

Trademarks,

Patents and

others

Software, net Right flag

Other

Identifiable

Intangible assets

, net

Total

Identifiable

Intangible

assets

, net

Movements of Identifiable

Intangible assets

Trademarks,

Patents and

others

Software, net Right flag

Other

Identifiable

Intangible assets

, net



55

The following is the movement of capital gain generated in the acquisition of the company, Gazel S.A.S.

and the acquisition of service stations(SS) for the fiscal years closing on December 31, 2015 and 2014:

Impairment test for cash generating units that include capital gain

Total carrying value of the capital gain assigned to the CGUs are as follows:

a) CGU- Gas Natural Vehicular

On December 31, 2015 and 2014, to test capital gain generated by acquiring Gazel S.A.S., the

fair value was determined minus sales costs, using the value of methodology found in free cash

flow (FCL), for which, the cash flow associated with the CNG business, and the flows were

discounted at a weighted average capital cost (WACC), bearing in mind the capital structure that

Gazel had at the time of the merger. In these valuations, a terminal value of the capital gain is

considered in the last period a terminal value of Capital gain. Considering that the impairment

test must be applied on Capital gain. When there is no capital gain, all the balance is valuated

along with the respective carrying value of property, plant and equipment, closing on September

2015 and 2014. This is why a terminal value is projected to reflect the perpetuity of business cash

flows. Cash flows corresponding to the period after these five years, extrapolate using a rate that

does not surpass the average growth of the Colombian economy.

The projections comprise of horizon of a 5-year evaluation in accordance with IAS 36 asset value

Impairment. The hypotheses on which the financial budgets are based 4 2015 have consisted of a 0.5%

average of CNG volume growths, with a gross margin of around 37% and an average 19% EBITDA

margin.

Note 16. Capital gain, continued

a) CGU for Natural Compacted Gas for Vehicles, continued

For 2014, the hypotheses used were at the level of a 3.9% average CNG volume growth with a gross

margin of 38.7% and an EBITDA margin of 18 and 19% (a $196/m³ average). In no case and

Added value Movements 31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Opening balance 344.675.854 306.031.991 306.031.991

Additions 5.632.618 38.026.272 -

Translation differences 1.004.065 617.591 -

Ending Balance 351.312.537 344.675.854 306.031.991

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Natural gas vehicle (Gazel) 306.031.991 306.031.991 306.031.991

Service Station (Liquids) 45.280.546 38.643.863 -

Total 351.312.537 344.675.854 306.031.991



56

considering high-sensitivity and according to the values of the key hypotheses, there would be hints

of capital gain impairment.

The administration determined the gross margins budgeted based on the expectations of Market

development and the projections of the cost of gas.

Because of the above, a financial evaluation confirms that they are no traces of impairment of the

assets of the CNG business.

b) CGU service stations (Líquid SS)

On December 31, 2015 and 2014 Determining recoverable capital gain value was conducted using

the value methodology in free cash flow (FCF), and for this the company couch the cash flow

associated with each service station, which are discounted from the average Capital cost of the

company. This valuation considered a terminal value in the last period.

All the balance of the capital gain is evaluated along with its respective carrying value of property,

plant and equipment with a cutoff date of September 2015 and 2014. This is why a terminal value is

projected to reflect the perpetuity of the business' cash flows.

A 5-year horizon was used to project the flows associated with each station in accordance with IAS

36 Impairment of asset values.

A 5-year horizon was used to project flows associated with each station in accordance with IAS 36

Impairment of asset value. The hypotheses on which the financial budgets for the 2015 growth in

volumes of liquid combustibles of 6,2% in average, gross margin of about 10% and the average

EBITDA margin of 7%.

The value resulting from the assessment of the evaluation of each service station results in the

attention of free discounted cash flows, which must be compared with the carrying value, supporting

that there is no value impairments of acquiring a service station.

31/12/2015 31/12/2014 01/01/2014

Discount rate 9,86% 9,76% 10,01%

Growth rate of terminal value 1,00% 1,00% 1,00%

31/12/2015 31/12/2014 01/01/2014

Discount rate 9,89% 10,25% 10,11%

Growth rate of terminal value 1,00% 1,00% 1,00%



57

Note 17. Properties, plant and equipment

The details and the movements of the different categories of properties, plant and equipment presented below:

Note 17. Properties, plant and equipment, continued

The details and the movements of the different categories of properties, plant and equipment presented below:

Construction Plants and

Informatics

technology

Fixed

Installations Motor Improvement of

Total

properties,

As of December 31, 2015 Construction in And Buildings, equipment, equipment, accessories, Vehicles leased

plant and

equipment,

progress Land net net net net net assets net

M$ M$ M$ M$ M$ M$ M$ M$ M$

Opening balance at January 1, 2015 283.147.028 341.140.930 279.119.662 345.364.004 11.962.008 13.985.991 23.627.286 16.914.497 1.315.261.406

Movements

Additions 322.220.705 - 1.744.890 3.210.041 535.852 396.220 305.402 3.869.472 332.282.582

Transferences to (from) construction in

progress (170.813.881) 72.373.730 47.015.308 47.847.164 1.555.920 2.166.058 3.188.176 568.961 3.901.436

Discharge - (3.898.882) (568.395) (1.304.299) (34.726) (1.133) (85.110) (606.333) (6.498.878)

Depreciation expense - - (15.313.824) (39.643.983) (4.674.949) (3.677.935) (7.378.783) (1.719.061) (72.408.535)

Increases (decrease) in foreign

currency exchange 39.567.489 29.837.270 13.019.901 19.298.614 1.000.909 242.627 3.064.838 3.420.818 109.452.466

Other increases (decrease) (5.176.457) - (13.027) 29.426 (4.689) (1.345) 2.844 (1.643) (5.164.891)

Total movements 185.797.856 98.312.118 45.884.853 29.436.963 (1.621.683) (875.508) (902.633) 5.532.214 361.564.180

Ending balance at December 31, 2015 468.944.884 439.453.048 325.004.515 374.800.967 10.340.325 13.110.483 22.724.653 22.446.711 1.676.825.586



58

Of the total charge for depreciation of the fiscal year ending on December 31, 2015 for M$72,408,535 (M$62,064,043 for the fiscal year finished

on December 31, 2014), M$64.405.337 have been accounted (M$54.300.057 en 2014) in the distribution cost, and M$7,502,678 (M$7,171,705 in

2014) in administration expenses and M$500,520 (M$592,281 in 2014) in the sales costs.

As part of the cost of properties, plant and equipment, the company includes capitalized borrowing costs , related to the adquisition and

construction of service stations which on December 31, 2015 rose to M$14,284,740 (M$4,830,635 in 2014), with a weighted average

capitalization rate of 0.36% in 2015 (0.42% in 2014).

Construction Plants and

Informatics

technology

Fixed

Installations Motor Improvement of

Total

properties,

As of December 31, 2014 Construction in And Buildings, equipment, equipment, accessories, Vehicles leased plant and

progress Land net net net net net assets net

M$ M$ M$ M$ M$ M$ M$ M$ M$

Opening balance at January 1, 2014 137.972.165 317.546.129 257.025.909 330.340.995 8.233.785 14.211.598 34.601.993 12.762.867 1.112.695.441

Movements

Additions 223.905.778 6.633.427 1.120.145 10.279.488 1.808.644 237.659 537.830 2.013.167 246.536.138

Transferences to (from) construction in

progress (86.068.953) 875.937 25.272.869 31.167.480 6.451.303 2.307.233 2.155.204 8.137 (17.830.790)

Discharge - (1.058.577) (167.193) (4.872.520) (13.415) (36.250) (7.746.503) 723.760 (13.170.698)

Depreciation expense - - (12.748.038) (33.739.125) (4.876.569) (2.882.833) (6.908.201) (909.277) (62.064.043)

Increases (decrease) in foreign

currency exchange 7.338.038 17.144.014 8.503.314 12.189.213 358.260 148.584 986.963 1.586.365 48.254.751

Other increases (decrease) - - 112.656 (1.527) - - - 729.478 840.607

Total movements 145.174.863 23.594.801 22.093.753 15.023.009 3.728.223 (225.607) (10.974.707) 4.151.630 202.565.965

Ending balance at December 31, 2014 283.147.028 341.140.930 279.119.662 345.364.004 11.962.008 13.985.991 23.627.286 16.914.497 1.315.261.406



59

Note 17. Properties, plant and equipment, continued

a) Properties, plant and equipment in financial leasing

The value found in future payments derived from said contracts are as follows:

The difference between minimum future payments and the present value correspond to the interest

generated by the obligations: Interests were calculated based on the interest rate of each contract

which coincides with the discount rate.

Note 18. Investment properties

Investment properties on December 31, 2015 and 2014 consist of the following:

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Leasing of Properties, plant and equipment, net

Leasing of lands 21.011.504 22.116.263 24.666.263

Leasing of buildings 26.659.100 28.111.473 28.523.232

Machinery and equipment 7.332.530 10.182.371 10.196.447

Motor Vehicles 63.005 473.833 450.743

Fixed installations and accessories 3.961.716 4.716.328 5.470.940 -

59.027.855 65.600.268 69.307.625

Future

minimum

payment

Present

Value

Future

minimum

payment

Present

Value

Future

minimum

payment

Present

Value

M$ M$ M$ M$ M$ M$

Less than one year 9.323.078 5.344.680 9.465.516 5.378.198 9.617.115 5.193.708

Between one to five years 36.449.289 25.944.207 35.547.321 23.745.106 41.900.888 26.336.799

More than 5 years 14.149.065 12.810.959 22.129.145 19.262.200 21.977.422 19.259.235

Total 59.921.432 44.099.846 67.141.982 48.385.504 73.495.425 50.789.742

31/12/2015 31/12/2014 01/01/2014

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Opening balance 6.072.057 5.982.135 6.019.717

Additions - 125.532 4.788

Discharge - - (4.788)

Depreciation (35.847) (35.610) (37.582)

Total changes in Investments properties (35.847) 89.922 (37.582)

Ending balance 6.036.210 6.072.057 5.982.135



60

Note 18. Investment properties, continued

Organización Terpel S.A., and correspond to the terrains, lots and constructions which the company holds

for an undetermined future use. They are not being used in the operation, nor does the company have the

intention to sell in the short term.

On the date of the presentation of consolidated financial statements, the group had not identified traces of

impairment that effect the value of investment properties. On December 31, 2015 and 2014, the fair value

of the investment properties is M$6,311,775 and M$6,044,476 respectively.

Note 19. Operational Leasing

At the end of the period being reported, future minimal lease payments derived from non-cancelable

operational leases are as follows:

The group leases tanks at the puente aranda plant (Exxon Mobil) to receive the group's

products and store them. The term of the contract is 9 years. Payments for this leasing increase

every year in accordance with the changes of the Consumer Price Index (CPI).

The group leases a large number of integrated printers for all its installations. The term of the

contract is 3 years with a renewal option after that date. Lease payments increase every year din

accordance with the changes of the Consumer Price Index (CPI).

Note 20. Deferred taxes

a) deferred tax assets and liabilities

deferred tax assets and liabilities are compensated if the company has legally recognized the

right to compensate current tax and deferred tax assets and liabilities. They refer to the same

fiscal Authority. The amounts already compensated are as follows:

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Less than one year 7.078.702 7.421.283 1.226.781

Between one to three years 565.933 1.166.901 -

7.644.635 8.588.184 1.226.781



61

Note 20. Deferred taxes

a) deferred tax assets and liabilities

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Deferred taxes assets:

Depreciation 1.510.479 1.478.731 663.991

Inventories 39.245 - -

Provision of uncollectable accounts 1.451.150 1.328.615 731.381

Vacations - - 42.003

Prepaid income - - 71.430

Obligations of employee benefits 28.343 - 161.342

Valuation of financial instruments 4.219 42.629 -

Tax losses 3.011.874 3.759.650 5.419.311

Provisions 12.509.859 13.203.173 16.033.138

Others - 66.697 8.498

Total deferred taxes assets 18.555.169 19.879.495 23.131.094

Deferred taxes liability:

Depreciation of properties, plant and equipment 81.049.398 74.912.760 73.086.878

Provisions 357.124 195.320 93.698

Post-employment benefits obligations 53.569 138.004 -

Intangible assets 134.839.018 117.490.926 108.768.431

Others 8.766.016 7.387.834 4.747.536

Total Deferred taxes liability 225.065.125 200.124.844 186.696.543



62

Note 20. Deferred taxes, continued

b) Deferred tax movements

Concept

Balance at

January 1,

2014

Recognized in

incomes

Recognized

directly in

equity

Recognized in

other

comprehensive

income

Balance at

December 31,

2014

Recognized in

incomes

Recognized

directly in

equity

Recognized in

other

comprehensive

income

Balance at

December 31,

2015

Deferred taxes assets:

Depreciations 663.991 532.455 - 282.285 1.478.731 53.536 - (21.788) 1.510.479

Inventories - - - - - 66.179 - (26.934) 39.245

Provision of uncollectable accounts 731.381 666.344 - (69.110) 1.328.615 122.535 - - 1.451.150

Vacations 42.003 (27.451) - (14.552) - - - - -

Prepaid Income 71.430 (46.681) - (24.749) - - - - -

Obligations of employee benefits 161.342 (105.441) - (55.901) - 47.795 - (19.452) 28.343

Valuation of financial instruments - 27.859 - 14.770 42.629 (64.770) - 26.360 4.219

Tax losses 5.419.311 (1.694.712) - 35.051 3.759.650 (2.164.100) - 1.416.324 3.011.874

Provisions 16.033.138 (5.099.701) 1.931.182 338.554 13.203.173 (617.898) - (75.416) 12.509.859

Others 8.498 37.778 - 20.421 66.697 (112.469) - 45.772 -

Total Deferred taxes assets 23.131.094 (5.709.550) 1.931.182 526.769 19.879.495 (2.669.192) - 1.344.866 18.555.169

Deferred taxes liability:

Depreciation of properties, plant and equipment(73.086.878) (2.574.234) - 748.352 (74.912.760) (5.713.457) - (423.181) (81.049.398)

Provisions (93.698) (66.235) - (35.387) (195.320) (86.824) - (74.980) (357.124)

Post-employment benefits obligations - 46.815 - (184.819) (138.004) 120.673 - (36.238) (53.569)

Intangible assets (108.768.431) (6.239.050) - (2.483.445) (117.490.926) (14.339.960) (319.906) (2.688.226) (134.839.018)

Others (4.747.536) (2.048.356) - (591.942) (7.387.834) (340.052) - (1.038.130) (8.766.016)

Total Deferred taxes liability (186.696.543) (10.881.060) - (2.547.241) (200.124.844) (20.359.620) (319.906) (4.260.755) (225.065.125)

Deferred taxes, net (163.565.449) (16.590.610) 1.931.182 (2.020.472) (180.245.349) (23.028.812) (319.906) (2.915.889) (206.509.956)



63

Note 21. Other current and non-current financial liabilities

On the date of the closing of consolidated financial statements, obligations with banks and financial

institutions and obligations with the public via bonds issued in Colombian pesos. They are detailed as

follows:

Loans with credit entities and bonds

The carrying value of financial obligations are as follows:

(1) The fair value of the bonds on December 31, 2015 was M$1,044,510,673, (M$672,972,674 for

2014) which is an estimate in accordance with the market information provided by Bancolombia bank;

the amount is less and the rates they offer are higher than those that Organización Terpel S.A. has as

a compensation for the interests that the holder has received.

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Current:

Loan with credit institutions 90.513.522 475.882.946 266.029.582

Bonus 9.653.554 3.948.262 3.337.181

Leasing 5.344.680 5.378.199 5.193.708

Total 105.511.756 485.209.407 274.560.471

Non-current:

Loan with credit institutions 206.364.329 108.289.769 91.218.933

Bonus 1.098.014.883 698.810.730 698.650.589

Leasing 38.755.166 43.007.305 45.596.034

Totals 1.343.134.378 850.107.804 835.465.556

Total obligations with financial institutions 1.448.646.134 1.335.317.211 1.110.026.027

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Liability of Depreciable cost

Bonus (1) 1.107.668.437 702.758.992 701.987.773

Bank Loan 296.877.851 584.172.715 357.248.512

Leasing 44.099.846 48.385.504 50.789.742

Total 1.448.646.134 1.335.317.211 1.110.026.027



64

Note 21. Other current and non-current financial liabilities, continued

Loans with credit entities and bonds, continued

The following is a detailed description of ordinary bonds on December 31, 2015 and 2014

Through resolutions 0319 of February 19, 2013 and 0009 of January 7, 2015, the Colombian

superintendence of finances authorized the registration of ordinary bonds issued by the company in

the National Register of Securities and issuers (In Spanish, RNVE).

Outstanding bonds of 2015 were issued with a M$400,000 par value, (M$700,000 in 2013), the amount

authorized was M$700,000 for 2015 and 2013 and the total amount issued was M$400,000,

(M$700,000 in 2013), the issue did not have a discount premium, and the resources of the issue at

100% were destined for the substitution of liabilities with local banks.

The carrying value of the Group's loans with credit entities is denominated in the following

currencies:

31/12/2015 31/12/2014 01/01/2014

Type of Bonus

Effective

Annual Interest

Rate M$ M$ M$

Series 7 years fixed rate 5,65% 240.697.345 240.631.314 240.567.276

Series 5 years CPI E.A. IPC + 2,86% 114.994.170 114.944.462 114.898.677

Series 10 years CPI E.A IPC + 3,09% 246.893.458 246.848.344 246.805.454

Series 18 years CPI E.A. IPC + 3,38% 96.394.431 96.386.610 96.379.182

Series 7 years CPI E.A. IPC + 3,04% 150.577.740 - -

Series 15 years CPI E.A. IPC + 4,06% 248.457.739 - -

1.098.014.883 698.810.730 698.650.589

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Currency:

American Dollar 215.837.765 702.758.991 79.521.357

Colombian Pesos 1.148.205.779 584.172.715 981.604.747

Other currency 84.602.590 48.385.505 48.899.923

Totals 1.448.646.134 1.335.317.211 1.110.026.027



65

Note 22. Trade accounts payable and other accounts payable

Trade accounts payable and other accounts payable at the closing, are detailed as follows:

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Cuentas por pagar comerciales 502.668.317 472.460.437 462.401.629

Otras cuentas por pagar 135.844.945 87.675.254 84.179.258

Total 638.513.262 560.135.691 546.580.887

The detail of commercial creditors and other accounts payable on December 31, 2015 and 2014 is as

follows:

Note 23. Current and not current accounting provisions for employee benefits

The Group on December 31, 2015, compared with December 31, 2014 had obligations for employee

benefits as follows:

a) employee labor benefits

El movimiento de la provisión para employee benefits ha sido el siguiente:

Note 23. Currrent and not current accounting provisions for employee benefits, continued

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Trade accounts payable 502.668.317 472.460.437 462.401.629

Other Accounts payable 135.844.945 87.675.254 84.179.258

Total 638.513.262 560.135.691 546.580.887

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Current

employee benefits 2.060.139 461.156 406.185

Total 2.060.139 461.156 406.185

No Current

employee benefits 873.478 834.868 956.788

Total 873.478 834.868 956.788



66

The following are the main actuarial hypotheses:

Note 24. Other current and not current accounting provisions

The breaking down of this item on December 31, 2015 and 2014 is as follows:

a) Current accounting provisions

(1) The balance of current accounting provisions corresponds to a claim on the part of ACODECO to

the subordinate company Petrolera Nacional S.A. (Panama) for alleged monopolistic practices .

Note 24. Other current and not current accounting provisions, continued

b) Movements in accounting provisions

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Opening balance 1.296.024 1.362.973 989.431

Current Service Cost 2.060.140 461.156 406.185

Benefits paid (851.711) (207.197) (112.427)

Increases (decrease) in foreign currency exchange 429.164 (320.908) 79.784

Ending balance 2.933.617 1.296.024 1.362.973

31/12/2015 31/12/2014 01/01/2014

% % %

Annual Interest Rate 4,80 4,00 4,00

Inflation 2,88 3,66 3,17

Wage increas 7,00 4,60 4,51

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Provision of legal claims (1) 341.289 243.963 1.466.286

Total Current 341.289 243.963 1.466.286



67

Note 25. Equity

a) Corporate Capital

On December 31, 2015 and 2014 the corporate capital is represented by 195,999,466 shares with a

par value of COP$1.000 each, totally subscribed and paid.

the corporate capital of Organización Terpel S.A. is a s follows:

b) Cumulate Earnings

Note 25. Equity, continued

c) Reserves


Other

Provisions movements By legal claims provisions Total

M$ M$ M$

Opening balance at January 1, 2015 243.963 - 243.963

Increase in existing provisions 70.985 26.341 97.326

Ending balance at December 31, 2015 314.948 26.341 341.289


Other

Provisions movements By legal claims provisions Total

M$ M$ M$

Opening balance at January 1, 2014 192.683 1.273.603 1.466.286

Increase(decrease) in existing provisions 51.280 (1.273.603) (1.222.323)

Ending balance at December 31, 2014 243.963 - 243.963

2015 2014 01/01/2014

N° of Shares 200.000.000 200.000.000 200.000.000

Subscribed an paid-in capital 195.999.466 195.999.466 191.915.421

Nominal value (COP$) 1.000 1.000 1.000

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Opening balance 816.418.412 516.905.461 516.905.461

profit and loss 105.958.219 126.896.560 -

Dividends paid (62.711.194) (100.000.000) -

Fusion effect (note 1) - 272.616.391 -

Other increases 5.841.809 -

Ending balance 865.507.246 816.418.412 516.905.461



68

Nature and purpose of the reserves

Surplus equity method

It includes all the differences in foreign currency that arise from the conversion of the financial

statements of joint operations abroad and the effective portion if there is any difference in foreign currency

arising from a net investment in a business abroad.

Legal statutory Reserves

Legal reserves: It is a reserve created obligated by law to protect company equity in case of losses.

The reserve must equal 50% of the prescribed capital, and it will be formed by 10% of the profits of

each period.

Statutory Reserve: It is a reserve the shareholders have agreed on in the company bylaws, and once

they are approved by the maximum corporate body, and their enforcement is therefore obligatory as

long as the bylaws are not amended, and they are eliminated, or until they reach the amount

established in the bylaws.

Note 25. Equity, continued

d) Dividends decreed

On March 24, 2015, The general shareholders’' assembly of Organización Terpel S.A. agreed to

distribute an ordinary unencumbered dividend on 181,424,505 outstanding shares, at a rate of

COP$345,66 per share. In total the dividends decreed in 2015 were M$62,711,194.

At December 31, 2015 Legal and

statutory reserves

M$ M$ M$

At January 1,2015 161.450.873 (54.680.378) -

Release of reserves (5.875.545) - -

translation adjustment - 79.956.519 -

Equity method - 1.784.901 5.656

Balance at December 31, 2015 155.575.328 27.061.042 5.656

Legal and

At December 31, 2014 statutory reserves

M$ M$

At January 1,2014 179.920.314 (108.320.792)

Fusion effect (18.469.441) 9.528.599

translation adjustment - 44.234.427

Equity method - (122.612)

Balance at December 31, 2014 161.450.873 (54.680.378)

Surplus equity

method

Surplus equity

method

Reserves of

employees

benefit



69

On March 20, 2014, the general shareholders' assembly of Organización Terpel S.A. Agreed to deliver

an ordinary unencumbered dividend on 191,876,941 outstanding shares, a rate of COP$521,16737

per share. In total, the dividends decreed in 2014 were M$100.000.000.

Note 26. Earnings per share

The estimate of basic earnings per share on December 31, 2015 and 2014, was adjusted by the effect

of transactions, which even if they modified the number of outstanding shares, they did not represent

a change in resources. The number of outstanding shares on December 31, 2015 and 2014 for

calculation purposes was 181,424,505.

On December 31, 2015 and 2014, the company has its own shares reacquired by 14,574,961, l which

reduces the number of outstanding shares to 181,424,505.

Note 27. Income from ordinary activities

Income from ordinary activities on December 31, 2015 and 2014, are detailed as follows:

Note 28. Sales cost

Below is a detailed list of the company’s sales costs:

Note 29. Geographic segments

Geographic segments are represented by the joint operations that the group has in Colombia, Panama,

31/12/2015 31/12/2014

M$ M$

Sales of good 14.027.804.127 14.841.131.827

and services 207.698.073 162.876.223

Total 14.235.502.200 15.004.008.050

For the year ended

31/12/2015 31/12/2014

M$ M$

Fuel cost 12.843.319.627 13.742.106.559

Lubricants cost 180.784.913 126.463.629

Other direct costs - 19.334.041

Total 13.024.104.540 13.887.904.229

For the year ended



70

Ecuador, Peru, Mexico, the Dominican Republic and Chile.

Most important customers

Income obtained from the main customers belonging to Industry, aviation, service stations and

lubricants of the group's segments, represent M$111,881,901 in 2015, (M$107,954,735 in 2014).

Customers 31/12/2015 31/12/2014

M$ M$

Aerovias del Continente Americano S.A. 82.337.843 82.189.091

Cencosud Colombia S.A. 19.622.269 20.279.919

Consorcio Express SAS. 5.864.679 5.309.858

Carbones del Cerrejon Limited 4.057.110 175.867

Total 111.881.901 107.954.735



71

Note 29. Geographic segments, continued

Information related to the results of each segment which has to be reported is included further on. Performance is measured

on the base of the profit by the segment before income taxes, depending how it is included in internal Administration reports

reviewed by the vice presidents and general managers of each segment. Profit per segment is used to measure performance

because the administration thinks that this information per segment is the most relevant to measure the results of certain

segments related with other entities that operate in these industries.

Geographic information segments.

(*) Ordinary activity income comes principally the commercial is of fuels in service stations, industry, aviation and lubricants.

Colombia Panamá Otros países Total Segmentos Colombia Panamá Other countries Total Segments

income from ordinary activities (*) 12.106.280.860 1.239.824.951 889.396.389 14.235.502.200 12.497.093.158 1.640.146.318 866.768.574 15.004.008.050

Cost of sales (11.155.768.575) (1.098.403.038) (769.932.927) (13.024.104.540) (11.583.649.006) (1.519.871.781) (784.383.442) (13.887.904.229)

Gross earning 950.512.285 141.421.913 119.463.462 1.211.397.660 913.444.152 120.274.537 82.385.132 1.116.103.821

Distribution Cost (546.295.128) (108.501.249) (41.051.606) (695.847.983) (517.799.313) (83.992.548) (21.462.487) (623.254.348)

Administrative expenses (124.700.463) (19.173.889) (58.022.910) (201.897.262) (109.450.489) (15.156.301) (49.302.970) (173.909.760)

Depreciation and amortizations 168.092.461 20.902.391 13.579.851 202.574.703 174.149.250 13.411.711 10.672.185 198.233.146

EBITDA 447.609.155 34.649.166 33.968.797 516.227.118 460.343.600 34.537.399 22.291.860 517.172.859

Total Assets 3.044.237.698 562.061.561 286.548.649 3.892.847.908 3.333.789.136 125.436.252 95.518.000 3.554.743.388

Total Liabilities 1.947.501.920 318.954.910 162.344.385 2.428.801.215 1.895.148.874 210.296.956 110.335.412 2.215.781.242

31/12/2015 31/12/2014



72

Note 30. Expenses by Nature

a) administration expenses

(*) Law 1739 of December 23, 2014 in its first article creates as of January 1, 2015 an extraordinary

tax named wealth tax, which will be temporary for the taxable years of 2015, 2016 and 2017. This

tax will be charged yearly on January 1st every year.

Organización Terpel recorded the wealth tax in the results of the fiscal year, the value for 2015 was

M$10,680,085 which was paid in two payments; the first payment was paid in May 2015 for an

amount of M$5,336,671 and the second payment was made in September 2015 for an amount of

M$5.343.414.

31/12/2015 31/12/2014

M$ M$

Staff Costs

Salaries and wages 44.445.223 41.003.634

Social security and other charges 6.708.132 7.575.315

Other staff costs 10.441.857 8.517.632

Total 61.595.212 57.096.581

Depreciation, amortizations

Depreciation 7.502.678 7.171.705

amortizations 22.863.228 21.426.976

Total 30.365.906 28.598.681

Other Administrative expenses

Publicity 458.440 1.056.109

Rent 8.131.279 7.106.012

Fees 18.769.064 20.659.725

Taxes 15.917.827 6.589.474

Insurance 9.369.938 9.137.809

Public Service 14.545.246 14.513.905

Maintenance 6.889.753 4.624.422

Travel expenses 2.108.454 2.495.096

Miscellaneous expenses (*) 33.746.143 22.031.946

Total 109.936.144 88.214.498

Total Administrative expenses 201.897.262 173.909.760

For the year ended



73

Note 30. Expenses by Nature, continued

Distribution costs

Note 31 Otros expenses by function

31/12/2015 31/12/2014

M$ M$

Staff cost

Salaries and wages 71.517.145 59.674.129

Social security and other charges 11.234.565 10.640.927

Other staff costs 6.755.482 4.603.745

Total 89.507.192 74.918.801

Depreciation, amortizations

Depreciation 64.405.337 54.300.057

Amortization 107.803.461 115.334.408

Total 172.208.798 169.634.465

Other Distribution Cost

Publicity 39.082.374 41.084.826

Rent 60.647.066 53.882.953

Taxes 45.833.658 41.783.935

Public Service 140.507.551 132.820.740

Maintenance and Repairs 60.445.413 48.624.997

Oher Distribution Cost 87.615.931 60.503.631

Total 434.131.993 378.701.082

Total Distribution Cost 695.847.983 623.254.348

For the year ended

31/12/2015 31/12/2014

M$ M$

Other expenses by function

Losses in sales of goods 2.139.152 2.191.834

Extraordinary expenses 50.749.882 51.011.607

Miscellaneous expenses 7.131.755 7.907.271

Total 60.020.789 61.110.712

For the year ended



74

Note 32. Financial result

a) Income and financial costs

b) Difference in exchange

31/12/2015 31/12/2014

M$ M$

Financial Income

Interests of loans and accounts payable 7.682.149 6.361.147

Other incomes 2.253.749 626.635

Total Financial Income 9.935.898 6.987.782

Costos financieros

Interests of loans and other financial obligations 77.859.840 67.953.635

Other Financial expenses 9.269.286 9.107.563

Total Financial expenses 87.129.126 77.061.198

For the year ended

31/12/2015 31/12/2014M$ M$

Generated by assets

Cash and cash equivalents (157.940) (173.320)

Trade debtor - other accounts payable 8.819.020 4.575.620

Accounts payable from related parties 2.964.302 4.480.407

Other Assets - 7.691

Total 11.625.382 8.890.398

Generated by liabilities

Trade creditor y other accounts payable (4.297.769) (315.952)

Accounts payable from related parties - (152.050)

Loan with credit institutions including bonus (1.132.450) (296.209)

Total (5.430.219) (764.211)

Translation differences, neto 6.195.163 8.126.187

For the year ended



75

Note 33. Income tax

a) expenses for income taxes by current and deferred parts

b) expense on income tax for foreign and National parts

31/12/2015 31/12/2014

M$ M$

Current tax expenses 78.715.861 80.695.103

Current tax expenses, net, total 78.715.861 80.695.103

Deferred tax expenses related to the creation and reversal of

of temporary differences 23.028.812 16.590.610

Deferred tax expenses, net, total 23.028.812 16.590.610

Total income tax expenses 101.744.673 97.285.713

For the year ended

31/12/2015 31/12/2014

M$ M$

National current tax 11.422.974 73.917.287

Foreign current tax 67.292.887 6.777.816

Total current tax 78.715.861 80.695.103

Foreign Deferred tax 2.246.425 (119.769)

National Deferred tax 20.782.387 16.710.379

Total Deferred tax expenses, net 23.028.812 16.590.610

current tax expenses 101.744.673 97.285.713

For the year ended



76

Note 33. Income tax, continued

Conciliation of expenses for taxes using the legal rate with the expense for taxes using the effective

rate

Organización Terpel has decided based on article 66 of law 1739 of 2014 not to take as a fiscal base

the difference in the exchange in foreign investment, and therefore not apply any effect on the 2014

financial statements via and expense for income tax; this is based on the favorability principle which

in accordance with statements and our review made by the Consultants would apply to this case.

Note 34. Contingencies

Estimates and judgments are continuously evaluated, and they are based on historical experience and

other factors including expectations of future events considered reasonable under the circumstances.

At the closing of Consolidated financial statements, the following contingencies exist for

Organización Terpel and its subsidiaries:

a) Plaintiff: PGN Gasnorte S.A.C.

Defendant: Municipalidad metropolitana de Lima and Protransporte

Concept of the contingency: Breach of Transfer Contract by Gasocentro Norte

Current stage: Being qualified

Estimated date of final verdict: At end of the first semester of 2016

Total M$ 10.494.175

Probability of success: Remote

Note 34. Contingencies, continued

On June 1, 2015, the court order as the term to submit the expertise offered. In accordance with what the

31/12/2015 31/12/2014

% M$ % M$

Profit before taxes 207.765.421 224.193.725

Taxes expenses using legal rates 41,88% 87.015.952 36,51% 81.850.843

Tax effect of ordinary income not taxable -5,47% (11.369.272) -0,97% (2.174.760)

Tax effect of non-deductible expenses 10,83% 22.497.058 8,23% 18.443.027

Tax effect of used tax losses not recognized previously 0,00% - 0,14% 310.332

Tax effect of assets new evaluation of deferred taxes not recognized -0,31% (638.481) -0,13% (301.613)

Tax effect of taxes provides in excess of previous year 1,01% 2.106.232 3,73% 8.357.115

Taxation calculates with the rate applicable 0,00% - -2,94% (6.600.177)

Other increases(decreases) charged by taxes 1,03% 2.133.184 -1,16% (2.599.054)

Total Adjustment of Taxes expenses using legal rates 7,09% 14.728.721 6,88% 15.434.870

Total income tax expenses, net 48,97% 101.744.673 43,39% 97.285.713

For the year ended



77

court establishes: a) July 14, 2016 the term to present expertise which an engineer specialist in public

transportation will present regarding the existence from August 2010 up to the date an arbitrary Court

lawsuit is filed, for public transportation routes authorized to operate infections that affect the sense and

the effect of the rule of intangibility 14 in the transfer contract and an ordinance N° 682. b) on July 3,

2016 the term to submit expertise on loss of profit expires (gross margin not perceive by the grantor's

non-compliance of the concession agreement) and emerging damage (higher interest than Gasnorte which

is obligated to pay interbank and less earnings that Gasnorte made as a result of constant non-

compliances).

Note 35. Commitments

During the fiscal year ending on December 31, 2015 and 2014, the group closed contracts for the

construction of service stations and complementary businesses which the company expects will be

liquidated in the following Financial year.

Note 36. Subsequent events

From December 31, 2015 and the date on which these Consolidated financial statements were issued,

there has been no significant subsequent effects which could affect them.

Note 37. Explanation of the transition to IFRS

1. Relevant matters regarding the financial statements on December 31, 2015

As Note 2 indicates, these are the group's first Consolidated financial statements prepared in accordance

with standards approved in Colombia. According to what IFRS 1 indicates, when adopting for the first

time the International Financial Reporting Standards, the main adjustments made are presented like the

considerations and transition-related conciliations:

a) in equity in accordance with previous GAAP on January 1,2014 (transition date) and on

December 31, 2014, the last period presented applying the previous GAAP.

b) between the results under the previous GAAP and the comprehensive total result under

IFRS.

When preparing these considerations, the group has considered the standards currently approved

and which are applicable to the company, like also the exceptions and exemptions foreseen in

the

Note 37. Explanation of the transition to IFRS

1. Relevant matters regarding financial statements on December 31, 2015

Prevailing laws which include decree 2420 of December 2015, modified by decree 2496 of

December 2015.

the accounting policies established in Note 3 have been implemented in the preparation of these

consolidated financial statements fiscal year ending on December 31, 2015. Of the comparative

31/12/2015 31/12/2014 01/01/2014

M$ M$ M$

Service station 40.601.000 51.797.000 27.225.000

Complimentary business 6.504.000 6.158.000 6.345.000

47.105.000 57.955.000 33.570.000



78

information presented in these consolidated financial statements for the fiscal year ending on

December 31, 2014 and in the preparation of consolidated statement of the initial financial

situation adapted to IFRS on January 1, 2014 (the group's transition date).

2. Obligatory exceptions to the application of the new technical accounting standards

framework

2.1. Estimates

Estimates are conducted in accordance with IFRS on December 31, 2014, they are coherent with

estimates on the same date in accordance with previous GAAP. Changes in estimates because of

Correction of errors or accounting policies which are not uniform are presented as follows.

On December 31, 2014, the group conducted an estimate of the depreciation of its properties, plant

and equipment based on the physical standards using useful lives different from the ones applicable

under IFRS. The effect of the change in the estimate of useful life was M$289,774,919.

3. exemptions

3.1. Business combinations

In accordance with IFRS 1, an entity can use the following exceptions referred for business

combinations:

• do not apply IFRS 3 retroactively to business combinations conducted in the past (before

the date of the transition to IFRS), and will conserve the amount it had on the financial statements

drawing up in accordance with previous GAAP.

• exclude the opening statement of financial position as items recognized in accordance

with previous GAAP which do not fulfill all the conditions to be recognized as IFRS.

• apply prospectively IFRS 3 do business combinations from a specific date

Based on the above and to draw up the opening balance on January 1, 2014, the group decided to

apply prospectively IFRS 3 to business combination from a specific date and cost the identification

of new intangible assets as relationships with dealers for M$236,717,706and the Gazel brand for

M$32,459,594.

Note 37. Explanation of the transition to IFRS, continued

3. exemptions, continued

3.2. Attributed Cost

In accordance with IFRS 1 an entity can choose on the date of transition to IFRS the measurement

of an item of properties, plant and equipment for its fair values, and use these fair value as the

attributed cost on that date.



79

An entity that adopts for the first time IFRS can choose to use a revaluation according to previous

GAAP of an item of properties, plant and equipment, and it can be either on the date of transition

or before as an attributed cost on the date of the revaluation if it was substantially comparable

on that date:

(a) fair value; or

(b) at cost, or a depreciated cost in accordance with IFRS, adjusted to reflect for instance on

changes in a general or specific price Index.

To apply IFRS, the group shows paragraph b and determine the attributed cost using the last

appraisal done on the property, plant and equipment, in addition useful lives were established

under IFRS.

The group can choose to determine if an agreement contains a lease agreement using previous

GAAP as required by the IFRIC 4.

Under the previous GAAP, some leases were designated as operating leases based on the fact that

the legal title was not transferred at the end of the lease. Under the IFRS, those leases were

designated as financial leases and related assets. They were recognized in the group's statement

of financial position.

The effects are an increase in properties, plant and equipment, loans and obligations, and a charge

for a related depreciation (M$16,710,145 for the year ending on December 31, 2014) and in

Financial costs, and then Financial costs, and the decrease of spending for leasing M$3,947,841

for the year ending on December 31, 2014).

3.3. Investments insubordinates, joint businesses and Associates

Although starting on the date of the application of IFRS, the company must bear in mind what is

established in the technical standards framework of Decree 2784 of 2012 and its modifications,

because of regulative hierarchy, the company must also consider that article 35 of law 222 of

1995 stays in effect as long as it is not modified, and this requires that “ investments in

subordinates be accounted for in the parent company's ledgers or in the controlling company's

ledger using the "equity participation method” and investments in Associates and in joint

businesses must be accounted for at cost in separate financial statements.


4. Explanation of the transition to IFRS

When preparing the first consolidated statement of financial position under IFRS, the group has

adjusted the amounts reported in financial statements prepared in accordance with previous

GAAP. An explanation on how the transition from previous GAAP to IFRS has affected its

financial position and results, in relation with the comparison of accounting policies applied, the

group in relation with the comparison of the applied accounting policies submimts it in the

following tables and the attached notes.



80



81


4.1. equity conciliation consolidated on January 01, 2014 (date of transition) and on December 31, 2014 (final date of the last period applying

the previous GAAP)

PCGA anterioresEfecto de

transiciónNCIF PCGA anteriores

Efecto de

transiciónNCIF

M$ M$ M$ M$ M$ M$

Assets

Current Assets: 1.389.112.349 (41.048.457) 1.348.063.892 1.389.954.822 (70.992.586) 1.318.962.236

Non-Current Assets: 2.395.012.550 (312.027.705) 2.082.984.845 2.383.280.552 (147.499.400) 2.235.781.152

Total Assets 3.784.124.899 (353.076.162) 3.431.048.737 3.773.235.374 (218.491.986) 3.554.743.388

Liability

Current Liability 1.014.284.274 (51.749.152) 962.535.122 1.163.495.122 1.218.604 1.164.713.726

Non-Current Liability 870.177.194 152.941.693 1.023.118.887 971.590.667 79.476.849 1.051.067.516

Total Liability 1.884.461.468 101.192.541 1.985.654.009 2.135.085.789 80.695.453 2.215.781.242

Equity

Equity attributable to owners 1.899.663.431 (454.708.081) 1.444.955.350 1.638.149.585 (299.595.481) 1.338.554.104

Non-controlling interest - 439.378 439.378 - 408.042 408.042

Total Equity 1.899.663.431 (454.268.703) 1.445.394.728 1.638.149.585 (299.187.439) 1.338.962.146

Total Liability and Equity 3.784.124.899 (353.076.162) 3.431.048.737 3.773.235.374 (218.491.986) 3.554.743.388

01/01/2014 31/12/2014



82


4.1. equity conciliation consolidated on January 01, 2014 (date of transition) and on December 31,

2014 (final date of the last period applying the previous GAAP), continued

4.2. conciliation between the total comprehensive result consolidated under previous GAAP and the

total comprehensive result consolidated under IFRS

At January 1 At December 31,

2014 de 2014

Equity according to previous GAAP 1.899.663.430 1.638.149.585

Reference Adjustment transaction:

(a) Prepaid expenses (2.279.257) (1.763.645)

(b) Attributable costs of properties, plant and equipment 308.408.244 319.351.782

(c) Leasing (17.366.797) (15.146.004)

(d) Business credit (612.485.124) (597.606.516)

(d) Business credit of Gazel 306.031.991 306.031.991

(d) Intangible assets different than added value (Brand- relation with dealers) 167.726.855 150.818.447

(e) Differed charges (23.349.042) (23.955.590)

(f) Investment on subordinate, joint business and associates (158.680.782) (1.415.516)

(g) Deferred taxes (72.158.099) (70.074.147)

(h) Capitalization of transaction costs , bonus issue 1.349.412 1.189.267

(i) Provisions (1.273.604) -

(j) Valorization of properties, plant and equipment (348.012.811) (364.406.484)

(j) Valorization of investments (2.619.067) (2.619.067)

(k) minority interest 439.378 408.042

Equity under NCIF 1.445.394.727 1.338.962.145

At December 31,

de 2014

Total comprehensive income according to previous PCGA 126.427.758

Adjustment of transition:

PGNT and PGNS incomes (8.686.998)

PGNT and PGNS costs and expenses 6.698.859

Amortization of Deferred Charge 3.737.151

Amortization of intangibles (13.966.838)

Provisions 3.645

Operating leases 3.947.841

Depreciation of properties, plant and equipment previous PCGA 11.068.946

Amortization of right flag 1.815.321

Adjustment of consolidated expenses previous GAAP (136.114)

Costs of transaction costs , bonus issue (160.144)

Profit of properties, plant and equipment sales (7.141.536)

Return on investments (2.255)

Return on provison of final income statement (Gazel) 1.273.604

Deferred tax adjustment NIIF 14.986.773

Equity method, joint business PGNT and PGNS 994.073

Translation foreign companies 44.290.688

Total comprehensive income under NCIF 185.150.774 171.198.700



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4.3. Notes explaining the adjustment done in the transition process to IFRS

a) expenses paid in advance

In accordance with previous GAAP, the group recorded advanced payments as subscriptions, equipment

maintenance, property taxes, and other expenses these Concepts do meet the recognition criteria under

IFRS. These have been derecognized and charged to accumulated profits as an amount in the ledgers of

M$2,279,257 on January 01,2014 (M$41,763,646 on December 31, 2014)

b) attributed cost to properties, plant and equipment

In accordance with previous GAAP properties, plant and equipment are recorded at cost (adjusted for

inflation until December 31, 2006) and they depreciate based on the straight-line method on estimated

useful lives accepted in Colombia. In accordance with the adoption of IFRS for the first time, the company

usually attributed cost which is an amount use as a substitute of the cost all the depreciated cost on a

determinate date. He attributed cost was determined using the last appraisal conducted by the group in

December 2010, in addition in agreement with the knowledge of a technical field regarding the economic

life of the assets. Useful lives were established under IFRS. The amount that affected the accumulated

profits is M$308,408,244 on January 01,2014 (M$319.351.783 on December 31, 2014).

c) financial leases

under the previous GAAP some Financial leases are recorded in accordance with the legal form of the

contract and they are recognized as operations depending on the legal form of the contract, recognizing

lease expenses and recognizing in each of the four periods and in recognizing lease expense. In accordance

with the rent lease, they are recognized as operating expenses. In accordance with the analysis carried out

under IFRS, the contracts fulfill all conditions to be recognized as Financial leases. The amount in the

ledgers that affected the accumulated profits is M$17,366,797 on January 01,2014 (M$15,146,004 on

December 31, 2014), these amounts include the recognition of property, plant and equipment with

depreciation and a financial obligation.

d) mercantile credits

Under GAAP, the group has recognized in its consolidated statement of financial position

mercantile credits generated by the purchase of companies that belong to the same group. In

accordance with the analysis conducted under IFRS, they do not meet the recognition criteria and

they are eliminated affecting accumulated profits for an amount of M$101,174,476 on January

01, 2014. In addition, the company based on the exemption of a business combination decided to

apply prospectively IFRS 3 in relation to Gazel's mercantile credit for M$511,310,618. It was



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reassigned and identified as intangible assets bearing the Gazel brand and then relations with

dealers for an amount of M$167,726,855 on January 01, 2014 (M$150,818,447 on December 31,

2014) and a new Mercantile credit the value of M$303,031,991 on January 01, 2014 and on

December 31, 2014.


4.3. Notes explaining the adjustment done in the transition process to IFRS, continued

e) deferred charges

Some charges deferred under GAAP to not meet the recognition criteria as assets because they correspond

to expenses which are being amortized, but since the goods and services have already been consumed, the

company proceeds to derecognize this concept affecting the accumulated profits with an amount in the

Ledger of M$23,349,043 on January 01, 2014 (M$23,955,590 on December 31, 2014).

f) investments insubordinate, joint businesses and Associates

Under previous GAAP, it is recorded in the investment account as adjustments for inflation, accounting

provisions and rights in Social Clubs. These are concepts which under IFRS do not meet the recognition

criteria. Therefore, the company proceeds to derecognize the account in accordance with IFRS 1 –

adopting for the first time, in addition the company had an investment in an associate which presented

differences in its Financial statement under previous GAAP and under IFRS. This associate merged with

Organización Terpel in August 2014. The amount in the ledgers of this adjustment with an effect on

accumulated profits is M$158,680,782 on January 01, 2014 (M$1,415,516 on December 31, 2014).

g) deferred tax

Adjustments for deferred taxes originated as a result of the application of IFRS because of changes in

assets and liabilities. A deferred tax has an effect on accumulated profits, and the amount in the ledgers

is M$72,158,099 on January 01, 2014 (M$70,074,147 on December 31, 2014).

h) capitalization cost transactional issuing of bonds

In March 2013, Organización Terpel S.A. Issued bonds (debt), in which the company incurred in some

costs to issue them. Costs which under previous GAAP are directly recorded in the expense and under

International standards these can be capitalized in accordance with IFRS 9.5.1.1, “a financial liability will

be recognized for its fair value more or less transaction costs which are directly attributable to the

acquisition or the issuing of a financial liability”. “transaction costs include fees, commissions and taxes".



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The recognition of transactional cost has an effect on accumulated profits for an amount in the ledgers of

M$1,349,411 on January 01, 2014 (M$1,189,267 on December 31, 2014).

i) recognizing accounting provisions

A provision is recognized because of the deductions on the income tax return in 2010, based on the

USGAAP Fin 48 standard which is not recognized under previous GAAP. The amount recognized against

accumulated utilities is M$1,273,604 on January 01, 2014


4.3. Notes explaining the adjustment done in the transition process to IFRS, continued

j) valuation of Investments and properties, plant and equipment

Under Previous GAAP, the valuations of Investments and properties, plant and equipment are recorded

in evaluation account of the asset against an equity account in the application process of IFRS. These

concepts are eliminated against accumulated profits, and the amount in the Ledger is M$350,631,878 on

January 01, 2014 (M$367,025,549 on December 31, 2014).

ORGANIZACIÓN TERPEL S.A. Y SUBORDINADAS (TERPEL S.A ...

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