6-K 1 d140341d6k.htm 6-K 6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of March, 2021

Commission File Number: 001-12102

 

 

YPF Sociedad Anónima

(Exact name of registrant as specified in its charter)

 

 

Macacha Güemes 515

C1106BKK Buenos Aires, Argentina

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐            No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐            No  ☒

 

 

 


Table of Contents
  

     LOGO

 

YPF SOCIEDAD ANONIMA

 

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

  


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

CONTENT

 

Note

  

Description

   Page  
   Glossary of terms      1  
   Legal Information      2  
   Consolidated statements of financial position      3  
   Consolidated statements of comprehensive income      4  
   Consolidated statements of changes in shareholders’ equity      5  
   Consolidated statements of cash flow      8  
   Notes to the consolidated financial statements:   

1

   General information, structure and organization of the business of the Group      9  

2

   Basis of preparation of the consolidated financial statements      10  

3

   Acquisitions and dispositions      41  

4

   Financial risk management      47  

5

   Segment information      52  

6

   Financial instruments by category      55  

7

   Intangible assets      59  

8

   Property, plant and equipment      61  

9

   Right-of-use assets      65  

10

   Investments in associates and joint ventures      65  

11

   Inventories      69  

12

   Other receivables      69  

13

   Trade receivables      69  

14

   Cash and cash equivalents      69  

15

   Provisions      70  

16

   Income Tax      79  

17

   Taxes payable      80  

18

   Salaries and social security      81  

19

   Lease liabilities      81  

20

   Loans      82  

21

   Other liabilities      84  

22

   Accounts payable      84  

23

   Revenues      84  

24

   Costs      88  

25

   Expenses by nature      88  

26

   Other net operating results      90  

27

   Net financial results      90  

28

   Investments in joint operations      90  

29

   Shareholders’ equity      92  

30

   Earnings per share      92  

31

   Issues related to Maxus Entities      93  

32

   Contingent assets and contingent liabilities      104  

33

   Contractual commitments      112  

34

   Main regulations and other      119  

35

   Balances and transactions with related parties      154  

36

   Employee benefit plans and similar obligations      157  

37

   Assets and liabilities in currencies other than the Peso      160  

38

   Subsequent events      161  


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

GLOSSARY OF TERMS

 

Term

  

Definition

ADR

   American Depositary Receipt

ADS

   American Depositary Share

AESA

   Subsidiary A-Evangelista S.A.

AFIP

   Argentine Tax Authority

ANSES

   National Administration of Social Security

ASC

   Accounting Standards Codification

Associate

   Company over which YPF has significant influence as provided for in IAS 28

BCRA

   Central Bank of the Argentine Republic

BNA

   Banco de la Nación Argentina

BO

   Official Gazette of the Argentine Republic

BONAR

   Argentine Treasury Bonds

CAMMESA

   Compañía Administradora del Mercado Mayorista Eléctrico S.A.

CDS

   Associate Central Dock Sud S.A.

CFO

   Chief Financial Officer

CGU

   Cash-Generating Units

CIMSA

   Subsidiary Compañía de Inversiones Mineras S.A.

CNDC

   Argentine Antitrust Authority

CNV

   Argentine Securities Commission

CPI

   Consumer price index

CSJN

   Argentine Supreme Court of Justice

CT Barragán

   Joint Venture CT Barragán S.A.

DOP

   Deliver or pay

Eleran

   Subsidiary Eleran Inversiones 2011 S.A.U.

ENARGAS

   Argentine Gas Regulator

FACPCE

   Argentine Federation of Professional Councils in Economic Sciences

FASB

   Financial Accounting Standards Board

FOB

   Free on Board

Group

   YPF and its subsidiaries

GPA

   Associate Gasoducto del Pacífico (Argentina) S.A.

IAS

   International Accounting Standard

IASB

   International Accounting Standards Board

IDS

   Associate Inversora Dock Sud S.A.

IEASA (former ENARSA)

   Integración Energética Argentina S.A. (former Energía Argentina S.A.)

IFRIC

   International Financial Reporting Interpretations Committee

IFRS

   International Financial Reporting Standard

IIBB

   Turnover tax

INDEC

   National Institute of Statistics and Census

IWPI

   Internal Wholesale Price Index

Joint venture

   Company jointly owned by YPF as provided for in IFRS 11

JO

   Joint operation

LGS

   Argentine General Corporations Law No. 19,550 (T.O. 1984), as amended

LNG

   Liquified natural gas

LPG

   Liquefied Petroleum Gas

MEGA

   Joint Venture Company Mega S.A.

MEGSA

   Mercado Electrónico del Gas S.A.

Metroenergía

   Subsidiary Metroenergía S.A.

Metrogas

   Subsidiary Metrogas S.A.

MINEM

   Former Ministry of Energy and Mining

MBtu

   Million British thermal units

NO

   Negotiable Obligations

Oiltanking

   Associate Oiltanking Ebytem S.A.

Oldelval

   Associate Oleoductos del Valle S.A.

OLCLP

   Joint Venture Oleoducto Loma Campana – Lago Pellegrini S.A.

OPESSA

   Subsidiary Operadora de Estaciones de Servicios S.A.

OTA

   Associate OleoductoTrasandino (Argentina) S.A.

OTC

   Associate OleoductoTrasandino (Chile) S.A.

PEN

   National Executive Power

Peso

   Argentine Peso

Profertil

   Joint Venture Profertil S.A.

Refinor

   Joint Venture Refinería del Norte S.A.

ROD

   Record of decision

RTI

   Integral Tariff Review

SE

   Secretariat of Energy

SEE

   Secretariat of Electric Energy

SEC

   U.S. Securities and Exchange Commission

SGE

   Government Secretariat of Energy

SRH

   Hydrocarbon Resources Secretariat

Subsidiary

   Company controlled by YPF in accordance with the provisions of IFRS 10.

Termap

   Associate Terminales Marítimas Patagónicas S.A.

TFN

   National Fiscal Tribunal

TSEP

   Transportation system entry point

UHaF

   Under-Secretariat of Hydrocarbons and Fuels

UNG

   Unaccounted Natural Gas

US$

   U.S. dollar

US$/Bbl

   Dollar per barrel

VAT

   Value Added Tax

Y-GEN I

   Joint venture Y-GEN Eléctrica S.A.U.

Y-GEN II

   Joint venture Y-GEN Eléctrica II S.A.U.

YPF Brasil

   Subsidiary YPF Brasil Comercio Derivado de Petróleo Ltda.

YPF Chile

   Subsidiary YPF Chile S.A.

YPF EE

   Joint venture YPF Energía Eléctrica S.A.

YPF Gas

   Associate YPF Gas S.A.

YPF Holdings

   Subsidiary YPF Holdings, Inc.

YPF International

   Subsidiary YPF International S.A.

YPF or the Company

   YPF Sociedad Anónima

YPF Ventures

   Subsidiary YPF Ventures S.A.U.

YTEC

   Subsidiary YPF Tecnología S.A.

WEM

   Wholesale Electricity Market

 

1


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

LEGAL INFORMATION

Legal address

Macacha Güemes 515 – Ciudad Autónoma de Buenos Aires, Argentina

Fiscal year number 44

Beginning on January 1, 2020

Principal business of the Company

The Company’s purpose shall be to perform, on its own, through third parties or in association with third parties, the study, exploration, development and production of oil, natural gas and other minerals and refining, marketing and distribution of oil and petroleum products and direct and indirect petroleum derivatives, including petrochemicals, chemicals, including those derived from hydrocarbons and non-fossil fuels, biofuels and their components, as well as production of electric power from hydrocarbons, through which it may manufacture, use, purchase, sell, exchange, import or export them. It shall also be the Company’s purpose to render, directly, through a subsidiary, or in association with third parties, telecommunications services in all forms and modalities authorized by the legislation in force after applying for the relevant licenses, as required by the regulatory framework, as well as the production, industrialization, processing, commercialization, conditioning, transportation and stockpiling of grains and products derived from grains, as well as any other activity complementary to its industrial and commercial business or any activity which may be necessary to attain its objective. In order to fulfill these objectives, the Company may set up, become associated with or have an interest in any public or private entity domiciled in Argentina or abroad, within the limits set forth in the Bylaws.

Filing with the Public Registry

Bylaws filed on February 5, 1991 under No. 404, Book 108, Volume A, Sociedades Anónimas, with the Public Registry of Buenos Aires City, in charge of the Argentine Registrar of Companies (Inspección General de Justicia); and Bylaws in substitution of previous Bylaws, filed on June 15, 1993, under No. 5,109, Book 113, Volume A, Sociedades Anónimas, with the above mentioned Registry.

Duration of the Company

Through June 15, 2093.

Last amendment to the Bylaws

April 29, 2016 registered with the Argentine Registrar of Companies (Inspección General de Justicia) on December 21, 2016 under No. 25,244, Book 82 of Corporations.

Capital structure

393,312,793 shares of common stock, Pesos 10 par value and 1 vote per share.

Subscribed, paid-in and authorized for stock exchange listing (in Pesos)

3,933,127,930

 

PABLO GERARDO GONZÁLEZ

President                    

 

2


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

(Amounts expressed in millions of Argentine Pesos)

 

     Notes    2020      2019      2018  

ASSETS

           

Noncurrent Assets

           

Intangible assets

   7      39,119        37,179        20,402  

Property, plant and equipment

   8      1,379,527        1,069,011        699,087  

Right-of-use assets

   9      44,081        61,391        —    

Investments in associates and joint ventures

   10      107,112        67,590        32,686  

Deferred income tax assets, net

   16      2,629        1,583        301  

Other receivables

   12      14,657        11,789        9,617  

Trade receivables

   13      8,531        15,325        23,508  
     

 

 

    

 

 

    

 

 

 

Total noncurrent assets

        1,595,656        1,263,868        785,601  
     

 

 

    

 

 

    

 

 

 

Current Assets

           

Assets held for disposal

   3      494        —          3,189  

Inventories

   11      100,137        80,479        53,324  

Contract assets

   23      871        203        420  

Other receivables

   12      34,369        36,192        21,867  

Trade receivables

   13      108,146        118,077        72,646  

Investment in financial assets

   6      28,934        8,370        10,941  

Cash and cash equivalents

   14      54,618        66,100        46,028  
     

 

 

    

 

 

    

 

 

 

Total current assets

        327,569        309,421        208,415  
     

 

 

    

 

 

    

 

 

 

TOTAL ASSETS

        1,923,225        1,573,289        994,016  
     

 

 

    

 

 

    

 

 

 

SHAREHOLDERS’ EQUITY

           

Shareholders’ contributions

        10,385        10,572        10,518  

Reserves, other comprehensive income and retained earnings

        666,845        531,977        348,682  
     

 

 

    

 

 

    

 

 

 

Shareholders’ equity attributable to shareholders of the parent company

        677,230        542,549        359,200  
     

 

 

    

 

 

    

 

 

 

Non-controlling interest

        6,165        5,550        3,157  
     

 

 

    

 

 

    

 

 

 

TOTAL SHAREHOLDERS’ EQUITY

        683,395        548,099        362,357  
     

 

 

    

 

 

    

 

 

 

LIABILITIES

           

Noncurrent Liabilities

           

Provisions

   15      186,488        144,768        83,388  

Deferred income tax liabilities, net

   16      119,609        97,231        91,125  

Contract liabilities

   23      —          294        1,828  

Income tax liability

   16      3,571        3,387        —    

Taxes payable

   17      215        1,428        2,175  

Salaries and social security

   18      3,860        —          —    

Lease liabilities

   19      24,172        40,391        —    

Loans

   20      527,575        419,651        270,252  

Other liabilities

   21      2,961        703        549  

Accounts payable

   22      710        2,465        3,373  
     

 

 

    

 

 

    

 

 

 

Total noncurrent liabilities

        869,161        710,318        452,690  
     

 

 

    

 

 

    

 

 

 

Current Liabilities

           

Liabilities associated with assets held for disposal

   3      —          —          3,133  

Provisions

   15      6,133        5,460        4,529  

Contract liabilities

   23      6,824        7,404        4,996  

Income tax liability

   16      740        1,964        357  

Taxes payable

   17      15,764        11,437        10,027  

Salaries and social security

   18      14,934        10,204        6,154  

Lease liabilities

   19      22,098        21,389        —    

Loans

   20      150,731        107,109        64,826  

Other liabilities

   21      9,062        1,310        722  

Accounts payable

   22      144,383        148,595        84,225  
     

 

 

    

 

 

    

 

 

 

Total current liabilities

        370,669        314,872        178,969  
     

 

 

    

 

 

    

 

 

 

TOTAL LIABILITIES

        1,239,830        1,025,190        631,659  
     

 

 

    

 

 

    

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

        1,923,225        1,573,289        994,016  
     

 

 

    

 

 

    

 

 

 

Accompanying notes are an integral part of consolidated financial statements

 

PABLO GERARDO GONZÁLEZ

President                    

 

3


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

   LOGO

(Amounts expressed in millions of Argentine Pesos except per share information, expressed in Argentine Pesos)

 

     Notes    2020     2019     2018  

Net income

         

Revenues

   23      669,186       678,595       435,820  

Costs

   24      (626,212     (575,608     (359,570
     

 

 

   

 

 

   

 

 

 

Gross profit

        42,974       102,987       76,250  
     

 

 

   

 

 

   

 

 

 

Selling expenses

   25      (71,835     (49,898     (27,927

Administrative expenses

   25      (34,490     (24,701     (13,922

Exploration expenses

   25      (5,846     (6,841     (5,466

Recovery / (Impairment) of property, plant and equipment and intangible assets, net

   2.c-7-8      6,851       (41,429     2,900  

Other net operating results

   26      3,949       (1,130     11,945  
     

 

 

   

 

 

   

 

 

 

Operating (loss) / profit

        (58,397     (21,012     43,780  
     

 

 

   

 

 

   

 

 

 

Income from equity interests in associates and joint ventures

   10      13,270       7,968       4,839  

Financial income

   27      107,603       93,405       100,083  

Financial loss

   27      (138,753     (91,533     (63,681

Other financial results

   27      19,849       4,162       5,123  
     

 

 

   

 

 

   

 

 

 

Net financial results

   27      (11,301     6,034       41,525  
     

 

 

   

 

 

   

 

 

 

Net (loss) / profit before income tax

        (56,428     (7,010     90,144  
     

 

 

   

 

 

   

 

 

 

Income tax

   16      (14,589     (26,369     (51,538
     

 

 

   

 

 

   

 

 

 

Net (loss) / profit for the year

        (71,017     (33,379     38,606  
     

 

 

   

 

 

   

 

 

 

Other comprehensive income

         

Items that may be reclassified subsequently to profit or loss:

         

Translation differences from subsidiaries, associates and joint ventures

        (9,001     (8,011     (18,307

Result from net monetary position in subsidiaries, associates and joint ventures (1)

        10,154       8,953       14,006  

Exchange differences reversed to profit for the period (2)

        —         —         1,572  

Items that may not be reclassified subsequently to profit or loss:

         

Translation differences from YPF

        205,347       220,425       175,329  
     

 

 

   

 

 

   

 

 

 

Other comprehensive income for the year

        206,500       221,367       172,600  
     

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

        135,483       187,988       211,206  
     

 

 

   

 

 

   

 

 

 

Net (loss) / profit for the year attributable to:

         

Shareholders of the parent company

        (69,649     (34,071     38,613  

Non-controlling interest

        (1,368     692       (7

Other comprehensive income for the year attributable to:

         

Shareholders of the parent company

        204,517       219,666       169,674  

Non-controlling interest

        1,983       1,701       2,926  

Total comprehensive income for the year attributable to:

         

Shareholders of the parent company

        134,868       185,595       208,287  

Non-controlling interest

        615       2,393       2,919  

Earnings per share attributable to shareholders of the parent company

         

Basic and Diluted

   30      (177.42     (86.85     98.43  

 

(1)

Result associated to subsidiaries, associates and joint ventures with the Peso as functional currency. See accounting policy in Note 2.b.1.

(2)

Corresponds to reversal to net profit for the year, for the partial disposal of the investment in YPF EE. See Note 3.

Accompanying notes are an integral part of consolidated financial statements

 

PABLO GERARDO GONZÁLEZ

President                    

 

4


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

   LOGO

(Amounts expressed in millions of Argentine Pesos)

 

     2020  
     Shareholders’ contributions  
     Subscribed
capital
    Adjustment
to
contributions
    Treasury
shares
    Adjustment
to treasury
shares
    Share-based
benefit plans
    Acquisition
cost of
treasury
shares
    Share trading
premium
    Issuance
premiums
     Total  

Balance at the beginning of the fiscal year

     3,924       6,085       9       16       117       177       (396     640        10,572  

Accrual of share-based benefit plans (4)

     —         —         —         —         541       —         —         —          541  

Repurchase of treasury shares

     (3     (5     3       5       —         (550     —         —          (550

Settlement of share-based benefit plans (2)

     5       8       (5     (8     (802     875       (251     —          (178

As decided by the Shareholders’ Meeting on April 30, 2020 (3)

     —         —         —         —         —         —         —         —          —    

Other comprehensive income

     —         —         —         —         —         —         —         —          —    

Net loss

     —         —         —         —         —         —         —         —          —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at the end of the fiscal year

     3,926       6,088       7       13       (144     502       (647     640        10,385  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

     2020  
     Reserves                  Equity attributable to        
     Legal      Future
dividends
     Investments     Purchase of
treasury
shares
     Other
comprehensive
income
    Retained
earnings
    Shareholders
of the parent
company
    Non-controlling
interest
    Total
shareholders’
equity
 

Balance at the beginning of the fiscal year

     2,007        2,500        44,255       500        516,786       (34,071     542,549       5,550       548,099  

Accrual of share-based benefit plans (4)

     —          —          —         —          —         —         541       —         541  

Repurchase of treasury shares

     —          —          —         —          —         —         (550     —         (550

Settlement of share-based benefit plans (2)

     —          —          —         —          —         —         (178     —         (178

As decided by the Shareholders’ Meeting on April 30, 2020 (3)

     —          1,200        (35,321     50        —         34,071       —         —         —    

Other comprehensive income

     —          —          —         —          204,517       —         204,517       1,983       206,500  

Net loss

     —          —          —         —          —         (69,649     (69,649     (1,368     (71,017
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at the end of the fiscal year

     2,007        3,700        8,934       550        721,303 (1)      (69,649     677,230       6,165       683,395  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Includes 733,492 corresponding to the effect of the translation of the financial statements of YPF, (38,692) corresponding to the effect of the translation of the financial statements of investments in subsidiaries, associates and joint ventures with functional currencies other than the dollar and 26,503 corresponding to the recognition of the result for the net monetary position of subsidiaries, associates and joint ventures with the Peso as functional currency, as detailed in Note 2.b.1.

(2)

Net of employees’ income tax withholdings related to the share-based benefit plans.

(3)

See Note 29.

(4)

See Note 36.

 

PABLO GERARDO GONZÁLEZ

President                    

 

5


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018 (Cont.)

   LOGO

(Amounts expressed in millions of Argentine Pesos)

 

     2019  
     Shareholders’ contributions  
     Subscribed
capital
    Adjustment
to
contributions
    Treasury
shares
    Adjustment
to treasury
shares
    Share-based
benefit plans
    Acquisition
cost of
treasury
shares
    Share trading
premium
    Issuance
premiums
     Total  

Balance at the beginning of the fiscal year

     3,923       6,084       10       17       115       11       (282     640        10,518  

Accrual of share-based benefit plans (3)

     —         —         —         —         493       —         —         —          493  

Repurchase of treasury shares

     (4     (6     4       6       —         (280     —         —          (280

Settlement of share-based benefit plans (2)

     5       7       (5     (7     (491     446       (114     —          (159

As decided by the Shareholders’ Meeting on April 26, 2019

     —         —         —         —         —         —         —         —          —    

As decided by the Board of Directors on June 27, 2019

     —         —         —         —         —         —         —         —          —    

Other comprehensive income

     —         —         —         —         —         —         —         —          —    

Net (loss) profit

     —         —         —         —         —         —         —         —          —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at the end of the fiscal year

     3,924       6,085       9       16       117       177       (396     640        10,572  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

     2019  
     Reserves                  Equity attributable to         
     Legal      Future
dividends
    Investments      Purchase of
treasury
shares
     Other
comprehensive
income
    Retained
earnings
    Shareholders
of the parent
company
    Non-controlling
interest
     Total
shareholders’
equity
 

Balance at the beginning of the fiscal year

     2,007        —         11,020        220        297,120       38,315       359,200       3,157        362,357  

Accrual of share-based benefit plans (3)

     —          —         —          —          —         —         493       —          493  

Repurchase of treasury shares

     —          —         —          —          —         —         (280     —          (280

Settlement of share-based benefit plans (2)

     —          —         —          —          —         —         (159     —          (159

As decided by the Shareholders’ Meeting on April 26, 2019

     —          4,800       33,235        280        —         (38,315     —         —          —    

As decided by the Board of Directors on June 27, 2019

     —          (2,300     —          —          —         —         (2,300     —          (2,300

Other comprehensive income

     —          —         —          —          219,666       —         219,666       1,701        221,367  

Net (loss) profit

     —          —         —          —          —         (34,071     (34,071     692        (33,379
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at the end of the fiscal year

     2,007        2,500       44,255        500        516,786 (1)      (34,071     542,549       5,550        548,099  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

(1)

Includes 528,145 corresponding to the effect of the translation of the financial statements of YPF, (29,691) corresponding to the effect of the translation of the financial statements of investments in subsidiaries, associates and joint ventures with functional currencies other than the dollar and 18,332 corresponding to the recognition of the result for the net monetary position of subsidiaries, associates and joint ventures with the Peso as functional currency, as detailed in Note 2.b.1.

(2)

Net of employees’ income tax withholdings related to the share-based benefit plans.

(3)

See Note 36.

 

PABLO GERARDO GONZÁLEZ

President                    

 

6


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018 (Cont.)

   LOGO

(Amounts expressed in millions of Argentine Pesos)

 

     2018  
     Shareholders’ contributions  
     Subscribed
capital
    Adjustment
to
contributions
    Treasury
shares
    Adjustment
to treasury
shares
    Share-based
benefit plans
    Acquisition
cost of
treasury
shares
    Share trading
premium
    Issuance
premiums
     Total  

Balance at the beginning of the fiscal year

     3,924       6,085       9       16       36       (91     (217     640        10,402  

Modification to the balance at the beginning of the fiscal year (4)

     —         —         —         —         —         —         —         —          —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at the beginning of the fiscal year modified

     3,924       6,085       9       16       36       (91     (217     640        10,402  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Accrual of share-based benefit plans (3)

     —         —         —         —         308       —         —         —          308  

Repurchase of treasury shares

     (3     (4     3       4       —         (120     —         —          (120

Settlement of share-based benefit plans (2)

     2       3       (2     (3     (229     222       (65     —          (72

As decided by the Shareholders’ Meeting on April 27, 2018

     —         —         —         —         —         —         —         —          —    

As decided by the Board of Directors on December 12, 2018

     —         —         —         —         —         —         —         —          —    

Other comprehensive income

     —         —         —         —         —         —         —         —          —    

Net profit (loss)

     —         —         —         —         —         —         —         —          —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at the end of the fiscal year

     3,923       6,084       10       17       115       11       (282     640        10,518  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

    2018  
    Reserves                 Equity attributable to        
    Legal     Future
dividends
    Investments     Purchase of
treasury
shares
    Other
comprehensive
income
    Retained
earnings
    Shareholders
of the parent
company
    Non-controlling
interest
    Total
shareholders’
equity
 

Balance at the beginning of the fiscal year

    2,007       —         —         100       127,446       12,340       152,295       238       152,533  

Modification to the balance at the beginning of the fiscal year (4)

    —         —         —         —         —         (298     (298     —         (298
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at the beginning of the fiscal year modified

    2,007       —         —         100       127,446       12,042       151,997       238       152,235  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accrual of share-based benefit plans (3)

    —         —         —         —         —         —         308       —         308  

Repurchase of treasury shares

    —         —         —         —         —         —         (120     —         (120

Settlement of share-based benefit plans (2)

    —         —         —         —         —         —         (72     —         (72

As decided by the Shareholders’ Meeting on April 27, 2018

    —         1,200       11,020       120       —         (12,340     —         —         —    

As decided by the Board of Directors on December 12, 2018

    —         (1,200     —         —         —         —         (1,200     —         (1,200

Other comprehensive income

    —         —         —         —         169,674       —         169,674       2,926       172,600  

Net profit (loss)

    —         —         —         —         —         38,613       38,613       (7     38,606  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at the end of the fiscal year

    2,007       —         11,020       220       297,120 (1)      38,315       359,200       3,157       362,357  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Includes 307,720 corresponding to the effect of the translation of the financial statements of YPF, (21,680) corresponding to the effect of the translation of the financial statements of investments in subsidiaries, associates and joint ventures with functional currencies other than the dollar and 11,080 corresponding to the recognition of the result for the net monetary position of subsidiaries, associates and joint ventures with the Peso as functional currency, as detailed in Note 2.b.1.

(2)

Net of employees’ income tax withholdings related to the share-based benefit plans.

(3)

See Note 36.

(4)

Corresponds to the change in the accounting policy described in Note 2.b.18.

Accompanying notes are an integral part of consolidated financial statements

 

PABLO GERARDO GONZÁLEZ

President                    

 

7


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

(Amounts expressed in millions of Argentine Pesos)

   LOGO

 

     2020     2019     2018  

Cash flows from operating activities

      

Net (loss) / income

     (71,017     (33,379     38,606  

Adjustments to reconcile net (loss) / income to cash flows provided by operating activities:

      

Income from equity interests in associates and joint ventures

     (13,270     (7,968     (4,839

Depreciation of property, plant and equipment

     171,452       145,894       87,569  

Depreciation of right-of-use assets

     17,873       10,509       —    

Amortization of intangible assets

     3,428       2,374       1,749  

Retirement of property, plant and equipment and intangible assets and consumption of materials .

     24,314       19,124       12,101  

Charge on income tax

     14,589       26,369       51,538  

Net increase in provisions

     28,179       13,090       (3,422

(Recovery) / Impairment of property, plant and equipment and intangible assets, net

     (6,851     41,429       (2,900

Exchange differences, interest and other

     3,143       (5,939     (28,611

Share-based benefit plans

     541       493       308  

Accrued insurance

     (3,643     (498     (417

Result of companies’ revaluation

     —         —         (11,980

Result from the assignment of areas

     (12,233     (778     —    

Result from debt exchange

     2,097       —         —    

Result from financial instruments exchange

     (1,330     —         —    

Changes in assets and liabilities:

      

Trade receivables

     35,073       (11,833     (25,912

Other receivables

     5,482       (13,076     (9,873

Inventories

     13,332       6,726       951  

Accounts payable

     (21,039     29,435       18,769  

Taxes payables

     862       (1,145     2,615  

Salaries and social security

     8,611       4,534       1,904  

Other liabilities

     8,988       803       (1,178

Decrease in provisions included in liabilities due to payment/use

     (2,803     (4,862     (2,652

Contract assets

     (754     445       (278

Contract liabilities

     526       776       2,179  

Dividends received

     2,616       811       583  

Proceeds from collection of lost profit insurance

     3,756       758       496  

Income tax payments

     (2,706     (6,955     (2,248
  

 

 

   

 

 

   

 

 

 

Net cash flows from operating activities (1) (2)

     209,216       217,137       125,058  
  

 

 

   

 

 

   

 

 

 

Investing activities: (3)

      

Acquisition of property, plant and equipment and intangible assets

     (114,616     (161,455     (88,293

Contributions and acquisitions of interests in associates and joint ventures

     —         (4,826     (280

Proceeds from sales of financial assets

     38,332       957       7,879  

Payments from purchase of financial assets

     (46,762     —         —    

Interests received from financial assets

     18       1,063       750  

Payments from business combinations

     —         —         (2,307

Sale of interest in areas

     13,867       382       —    
  

 

 

   

 

 

   

 

 

 

Net cash flows used in investing activities

     (109,161     (163,879     (82,251
  

 

 

   

 

 

   

 

 

 

Financing activities: (3)

      

Payments of loans

     (174,913     (93,456     (55,734

Payments of interests

     (60,681     (41,606     (26,275

Proceeds from loans

     139,018       97,351       39,673  

Repurchase of treasury shares

     (550     (280     (120

Payments of leases

     (23,290     (15,208     —    

Payments of interests in relation to income tax

     (696     (583     —    

Dividends paid

     —         (2,300     (1,200
  

 

 

   

 

 

   

 

 

 

Net cash flows used in financing activities

     (121,112     (56,082     (43,656
  

 

 

   

 

 

   

 

 

 

Translation differences provided by cash and cash equivalents

     9,575       22,896       18,139  
  

 

 

   

 

 

   

 

 

 

Reclassification to assets held for disposal

     —         —         —    
  

 

 

   

 

 

   

 

 

 

Net (Decrease) / Increase in cash and cash equivalents

     (11,482     20,072       17,290  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the fiscal year

     66,100       46,028       28,738  

Cash and cash equivalents at the end of the fiscal year

     54,618       66,100       46,028  
  

 

 

   

 

 

   

 

 

 

Net (Decrease) / Increase in cash and cash equivalents

     (11,482     20,072       17,290  
  

 

 

   

 

 

   

 

 

 

 

(1)

Does not include exchange differences generated by cash and cash equivalents, which is exposed separately in the statement.

(2)

Includes 11,101 and 11,184 for the fiscal year ended December 31, 2020 and 2019, respectively, for payment of short-term leases and payments of the variable charge of leases related to the underlying asset performance/use.

(3)

The main investing and financing transactions that have not affected cash and cash equivalents correspond to:

 

     2020     2019      2018  

Unpaid acquisitions of property, plant and equipment and concession extension liabilities

     17,691       24,909        11,561  

Hydrocarbon wells abandonment obligation costs’ recalculation

     (13,918     1,172        (11,710

Additions of right-of-use assets

     11,421       39,779        —    

Capitalization of depreciation of right-of-use assets

     3,789       2,021        —    

Capitalization of financial accretion for lease liabilities

     967       311        —    

Capitalization in joint ventures

     —         738        —    

Accompanying notes are an integral part of consolidated financial statements.

 

PABLO GERARDO GONZÁLEZ

President                    

 

8


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019, AND 2018

(Amounts expressed in millions of Argentine Pesos, except shares and per shares amounts expressed in Argentine Pesos, and as otherwise indicated)

  

 

1. GENERAL INFORMATION, STRUCTURE AND ORGANIZATION OF THE BUSINESS OF THE GROUP

General information

YPF S.A. is a stock corporation (sociedad anónima) incorporated under the laws of the Argentine Republic, with a registered office at Macacha Güemes 515, in the City of Buenos Aires.

YPF and its subsidiaries form the leading energy group in Argentina, which operates a fully integrated oil and gas chain with leading market positions across the domestic Upstream and Downstream segments.

Structure and organization of the economic Group

The following table shows the organizational structure, including the main companies of the Group, as of December 31, 2020:

 

 

LOGO

 

(1)

Held directly and indirectly.

(2)

See Note 3

(3)

See Note 34.h

 

9


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

1. GENERAL INFORMATION, STRUCTURE AND ORGANIZATION OF THE BUSINESS OF THE GROUP (Cont.)

 

Organization of the business

As of December 31, 2020, the Group carries out its operations in accordance with the following structure:

 

   

Upstream;

 

   

Gas and Power;

 

   

Downstream;

 

   

Central administration and others, which covers the remaining activities not included in the previous categories.

Activities covered by each business segment are detailed in Note 5.

Almost all operations, properties and clients are located in Argentina. However, the Group also holds participating interests in exploratory areas in Bolivia and production areas in Chile. The Group also sells lubricants and derivatives in Brazil and Chile.

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

2.a) Basis of preparation

Application of IFRS

The consolidated financial statements of the Group for the fiscal year ended December 31, 2020 are presented in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Moreover, some additional issues required by the LGS and/or CNV’s regulations have been included.

The amounts and other information corresponding to the years ended on December 31, 2019 and 2018 are an integral part of the consolidated financial statements mentioned above and are intended to be read only in relation to these financial statements.

These consolidated financial statements were approved by the Board of Directors’ meeting and authorized to be issued on March 4, 2021.

Current and Noncurrent classification

The presentation in the statement of financial position makes a distinction between current and noncurrent assets and liabilities, according to the activities operating cycle. Current assets and liabilities include assets and liabilities, which are realized or settled within the 12-month period from the end of the fiscal year.

All other assets and liabilities are classified as noncurrent. Current and deferred tax assets and liabilities (payable income tax) are presented separately from each other and from other assets and liabilities, as current and noncurrent, as applicable.

Fiscal year-end

The Company’s fiscal year begins on January 1 and ends on December 31, each year.

Accounting criteria

The consolidated financial statements have been prepared under historical cost criteria, except for financial assets measured at fair value through profit or loss.

Non-monetary assets and liabilities of subsidiaries having the Peso as functional currency, were adjusted for inflation. See Note 2.b.1.

 

10


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Use of estimates

The preparation of financial statements at a certain date requires the Management to make estimates and assessments affecting the amount of assets and liabilities recorded, contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the fiscal year. Future results might differ from the estimates and assessments made on the date of preparation of these consolidated financial statements.

The description of any significant estimates and accounting judgments made by Management in applying the accounting policies, as well as the key estimates and areas with greater degree of complexity which require more critical judgments, are disclosed in Note 2.c.

Consolidation policies

For purposes of presenting the consolidated financial statements, the full consolidation method was used with respect to all subsidiaries, which are those companies which the Group controls. The Group controls an entity when it is exposed, or is entitled to the variable results arising from its equity interest in the entity, and has the ability to affect those results through its power over the entity. This capacity is, in general but not solely, obtained by the direct or indirect ownership of more than 50% of the voting shares of a company.

Interest in JO and other agreements which gives the Group a contractually-established percentage over the rights of the assets and obligations that emerge from the contract, have been consolidated line by line on the basis of the mentioned participation over the assets, liabilities, income and expenses related to each contract. Assets, liabilities, income and expenses of JO are presented in the consolidated statement financial position and in the consolidated statement of comprehensive income, in accordance with their respective nature.

Note 10 details the fully consolidated controlled subsidiaries. Furthermore, Note 28 details the main JO, proportionally consolidated.

In the consolidation process, balances, transactions, profits and losses between consolidated companies and JO have been eliminated.

The Company’s consolidated financial statements are based on the most recent available financial statements of the companies which YPF controls, taking into consideration, where applicable, significant subsequent events and transactions, information available to the Management of the Company and transactions between YPF and such subsidiaries, which could have produced changes to their shareholders’ equity. The date of the financial statements of such subsidiaries used in the consolidation process may differ from the date of YPF’s financial statements due to administrative reasons. The accounting principles and procedures used by subsidiaries have been homogenized, where appropriate, with those used by YPF in order to present the consolidated financial statements based on uniform accounting and presentation policies. The financial statements of subsidiaries whose functional currency is different from the presentation currency are translated using the procedure set out in Note 2.b.1.

The Group holds 100% of capital of the consolidated companies, with the exception of the holdings in Metrogas and YTEC. The Group takes into account quantitative and qualitative aspects to determine which subsidiaries have significant non-controlling interests. In accordance with the previously mentioned, the Group concluded that there are no material non-controlling interests to be disclosed, as required by IFRS 12 “Disclosure of Interests in Other Entities”.

Financial information of subsidiaries, associates and joint ventures in hyperinflationary economies

Under IAS 29 “Financial Reporting in Hyperinflationary Economies” the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy shall be stated in terms of the measuring unit current at the end of the reporting period or fiscal year. The standard sets forth quantitative and qualitative factors to be contemplated in order to determine whether or not an economy is hyperinflationary.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

In recent years, inflation in Argentina has been high, with an accumulated inflation rate exceeding 100% over the last three years. In addition, certain recent qualitative and quantitative factors, such as the significant devaluation of the Peso, led to the conclusion that the restatement by inflation of annual or interim financial statements corresponding to annual or interim periods ending after July 1, 2018, should be applied.

Companies could not present their restated financial statements because Decree No. 664/2003 of the PEN prohibited regulatory agencies (including the CNV) from receiving financial statements adjusted for inflation.

Law No. 27,468, published on December 4, 2018 in the BO repealed Decree No. 1,269/2002 of the PEN as amended (including the aforementioned Decree No. 664/2003 of the PEN). The provisions of the aforementioned Law became in full force and effect as of December 28, 2018, the date of the publication of the CNV General Resolution No. 777/2018, which established that annual financial statements, interim and special periods closing from December 31, 2018 inclusive, must be submitted adjusted for inflation, as established by IAS 29. The FACPCE’s guidelines will be applied to those issues not specifically addressed in the aforementioned regulations.

Although the application of IAS 29 does not directly affect YPF because its functional currency is the U.S. dollar as mentioned in section b.1 of this Note, it does affect the investments that the Company has in its subsidiaries, associates and joint ventures whose functional currency is the Peso, all of which have adjusted their financial statements.

In compliance with IAS 29 guidelines, the adjustment was based on the last date on which subsidiaries, associates and joint ventures whose functional currency is the Peso restated their financial statements to reflect the effects of inflation. For this purpose, in general terms, the inflation from the date of acquisition or addition, or from the date of asset revaluation, as applicable, was computed in balances of non-monetary assets and liabilities. As a result of the adjustment for inflation in such financial statements, the value of non-monetary items increased, with the cap of their recoverable value, and with the consequent effect on deferred tax. Regarding income statement, in addition to the restatement of revenues, costs, expenses and other items, the net monetary position effect was included in a separate item in the Other financial results.

In accordance with the above, the initial application of IAS 29 as of December 31, 2018, generated an increase in equity, net income and other comprehensive income for the fiscal year of the Company.

2.b) Significant Accounting Policies

2.b.1) Functional and reporting currency and tax effect on Other comprehensive income

Functional currency

YPF, based on parameters set out in IAS 21 “The effects of change in foreign exchange rates”, has defined the U.S. dollar as its functional currency. Consequently, non-monetary cost-based measured assets and liabilities, as well as income or loss, are remeasured into functional currency by applying the exchange rate prevailing at the date of the transaction.

Transactions in currencies other than the functional currency of the Company are deemed to be foreign currency transactions and are remeasured into functional currency by applying the exchange rate prevailing at the date of the transaction (or, for practical reasons and when exchange rates do not fluctuate significantly, the average exchange rate for each month). At the end of each fiscal year or at the time of payment, the balances of monetary assets and liabilities in currencies other than the functional currency are measured at the exchange rate prevailing at such date and the exchange differences arising from such measurement are recognized as “Net financial results” in the consolidated statement of comprehensive income for the fiscal year in which they arise.

Assets, liabilities and results of subsidiaries, associates and joint ventures are shown in their respective functional currencies. The effects of the conversion into dollar of the financial information of those companies whose functional currency is other than the dollar are recorded as “Other comprehensive income” in the Consolidated Statement of Comprehensive Income.

 

12


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Presentation currency

According to CNV Resolution No. 562, the Company must present its financial statements in pesos. Therefore, the financial statements prepared in the Company’s functional currency are translated into the presentation currency, as per the following procedures:

 

   

Assets and liabilities of each of the balance sheets presented are translated using the exchange rate on the balance sheet closing date;

 

   

Items of the consolidated statement of comprehensive income are translated using the exchange rate at the time the transactions were generated (or, for practical reasons, and provided the exchange rate has not changed significantly, using each month’s average exchange rate);

 

   

All translation differences resulting from the foregoing are recognized under “Other Comprehensive Income” in the statement of comprehensive income.

Effects of the translation of investments in subsidiaries, associates and joint ventures with functional currency corresponding to a hyperinflationary economy

Under IAS 21, the financial statements of a subsidiary with the functional currency of a hyperinflationary economy have to be restated according to IAS 29 before they are included in the consolidated financial statements of its parent company with a functional currency of a non-hyperinflationary economy, except for their comparative figures.

Following the aforementioned guidelines, the results and financial position of subsidiaries with the Peso as functional currency were translated into dollar by the following procedures: all amounts (i.e., assets, liabilities, stockholders’ equity items, expenditures and revenues) were translated at the exchange rate effective at the closing date of the financial statements, except for comparative amounts, which were presented as current amounts in the financial statements of the previous fiscal year (i.e., these amounts were not be adjusted to reflect subsequent variations in price levels or exchange rates). Thus, the effect of the restatement of comparative amounts was recognized in other comprehensive income.

These criteria were also implemented by the Group for its investments in associates and joint ventures.

When an economy ceases to be hyperinflationary and an entity ceases to restate its financial statements in accordance with IAS 29, it will use the amounts restated according to the price level of the date on which the entity ceased to make such restatement as historical costs, in order to translate them into the presentation currency.

Tax effect on Other Comprehensive Income

Results included in Other Comprehensive Income in connection with translation differences and result from net monetary position generated by investments in subsidiaries, associates and joint ventures whose functional currency is other than dollar as well as conversion differences arising from the translation of YPF’s financial statements into its presentation currency (Pesos), have no effect on the income tax or in the deferred tax since at the time they were generated, the relevant transactions did not make any impact on net accounting result nor in taxable result.

2.b.2) Financial Assets

Classification

In accordance with IFRS 9 “Financial instruments”, the Group classifies its financial assets into two categories:

 

   

Financial assets at amortized cost

Financial assets are measured at amortized cost if both of the following criteria are met: (i) the objective of the Group’s business model is to hold the assets to collect the contractual cash flow, and (ii) the contractual terms only require specific dates for payments of principal and interest.

 

13


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

In addition, and for assets that meet the aforementioned conditions, IFRS 9 contemplates the option of designating, at the time of the initial recognition, an asset as measured at its fair value, if doing so would eliminate or significantly reduce the valuation or recognition inconsistency that could arise in the event that the valuation of the assets and liabilities or the recognition of profit or losses resulting therefrom be carried out on different bases. The Group has not designated a financial asset at fair value by using this option.

As of the closing date of these consolidated financial statements, the Group’s financial assets at amortized cost include certain elements of cash and cash equivalents, certain investments in financial assets, trade receivables and other receivables.

 

   

Financial assets at fair value through profit or loss

If either of the two criteria above are not met, the financial asset is classified as an asset measured at fair value through profit or loss.

As of the closing date of these consolidated financial statements, the Group’s financial assets at fair value through profit or loss include mutual funds and public securities.

Recognition and measurement

Purchases and sales of financial assets are recognized on the date on which the Group commits to purchase or sell the assets. Financial assets are derecognized when the rights to receive cash flows from the investments and the risks and rewards of ownership have expired or have been transferred.

Financial assets at amortized cost are initially recognized at fair value plus transaction costs. These assets accrue interest based on the effective interest rate method.

Financial assets at their fair value through profit or loss are initially recognized at fair value and transaction costs are recognized as an expense in the statement of comprehensive income. They are subsequently valued at fair value. Changes in fair values and results from sales of financial assets at fair value through profit or loss are recorded in “Net financial results” in the statement of comprehensive income.

In general, the Group uses the transaction price to ascertain the fair value of a financial instrument on initial recognition. In other cases, the Group records a profit or loss on initial recognition only if the fair value of the financial instrument can be supported by other comparable and observable market transactions for the same type of instrument or if it is based in a technical valuation that only inputs observable market information. Unrecognized profits or losses on initial recognition of a financial asset are recognized later on, only to the extent they arise from a change in the factors (including time) that market participants would consider upon setting the price.

Profit or loss on debt instruments measured at amortized cost and not included for hedging purposes are charged to income when the financial assets are derecognized or an impairment loss is recognized and during the amortization process using the effective interest rate method. The Group reclassifies all investments on debt instruments only when its business model for managing those assets changes.

Impairment of financial assets

The Group assesses the impairment of its financial assets according to the expected credit losses model. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach allowed by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables. See Note 2.b.18.

Offsetting financial instruments

Financial assets and liabilities are offset when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

2.b.3) Inventories

Inventories are valued at the lower value between their cost and their net realizable value. Cost includes acquisition costs (less trade discount, rebates and other similar items), transformation and other costs, which have been incurred when bringing the inventory to its present location and condition. The net realizable value is the estimated selling price in the ordinary course of business less selling expenses.

In the case of refined products, costs are allocated in proportion to the selling price of the related products (isomargen method) due to the difficulty for distributing the production costs to each product. Raw materials, packaging and other inventory are valued at their acquisition cost.

The Group assesses the net realizable value of the inventories at the end of each fiscal year and recognizes in profit or loss in the consolidated statement of comprehensive income the appropriate valuation adjustment if the inventories exceed their net realizable value. When the circumstances that previously caused impairment no longer exist or when there is clear evidence of an increase in the inventories’ net realizable value because of changes in economic circumstances, the amount of a write-down is reversed.

2.b.4) Intangible assets

The Group initially recognizes intangible assets at their acquisition or development cost. This cost is amortized on a straight-line basis over the useful lives of these assets. At the end of each year, such assets are measured at their acquisition or development cost, considering the criteria adopted by the Group in the transition to IFRS, less its respective accumulated amortization and, if applicable, impairment losses.

The main intangible assets of the Group are as follows:

 

i.

Service concessions arrangements

Includes transportation and storage concessions. These assets are valued at their acquisition cost, considering the criteria adopted by the Group in the transition to IFRS, net of accumulated amortization. They are depreciated using the straight-line method during the course of the concession period.

The Hydrocarbons Law allows the PEN to award concessions for the transportation of hydrocarbons for similar periods to the terms of the exploitation concessions granted (see Note 34.a). Pursuant to Law No. 26,197, provincial governments have the same powers. Holders of production concessions are entitled to receive a transportation concession for the oil, gas and petroleum products that they produce. The holder of a transportation concession has the right to:

 

   

Transport oil, gas and petroleum products;

 

   

Build and operate pipelines for oil, gas and their derivatives, storage facilities, pump stations, compressor plants, roads, railways and other facilities and equipment necessary for the efficient operation of a pipeline system.

In addition, a transportation concession holder is under an obligation to transport hydrocarbons to third parties, without discrimination, in exchange for a tariff. This obligation, however, is applicable to oil or gas producers only to the extent the concession holder has available additional capacity, and is expressly subject to the transportation requirements of the concession holder. Transportation tariffs are subject to approval by the SE for oil and petroleum derivatives pipelines, and by ENARGAS, for gas pipelines. Upon expiration of a transportation concession, oil pipelines and related facilities revert to the Argentine Government, without any payment to the concession holder.

In connection with the foregoing, the Privatization Law granted the Company 35-year transportation concessions for the transportation facilities operated by Yacimientos Petrolíferos Fiscales S.E. as of such date. The main pipelines related to said transportation concessions are the following:

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

   

La Plata / Dock Sud

 

   

Puerto Rosales / La Plata

 

   

Monte Cristo / San Lorenzo

 

   

Puesto Hernández / Luján de Cuyo

 

   

Luján de Cuyo / Villa Mercedes

Thus, assets meeting certain requirements set forth by the IFRIC 12, which the Company Management’s judgment are met in the facilities mentioned in the preceding paragraphs, are recognized as intangible assets.

 

ii.

Exploration rights

The Group classifies exploration rights as intangible assets, which are valued at their cost, considering the deemed cost criteria adopted by the Group in the transition to IFRS, net of the related impairment, if applicable.

Investments related to unproved oil reserves or fields under evaluation are not depreciated. These investments are reviewed for impairment at least once a year, or whenever there are indicators that the assets may have become impaired. Any impairment loss or reversal is recognized in the consolidated statement of comprehensive income. Exploration costs (geological and geophysical expenditures, expenditures associated with the maintenance of unproved reserves and other expenditures relating to exploration activities), excluding exploratory well drilling costs, are charged to expense in the consolidated statement of comprehensive income as incurred.

 

iii.

Other intangible assets

This section mainly includes costs relating to computer software development expenditures, as well as assets that represent the rights to use technology and knowledge (“know how”) for the manufacture and commercial exploitation of equipment related to oil extraction. These items are valued at their acquisition cost, considering the deemed cost criteria adopted by the Group in the transition to IFRS, net of the related depreciation and impairment, if applicable.

These assets are amortized on a straight-line basis over their useful lives, which range between 3 and 15 years. The Group reviews annually the mentioned estimated useful life.

The Group has no intangible assets with indefinite useful lives as of December 31, 2020, 2019 and 2018.

2.b.5) Investments in associates and joint ventures

Investments in associates and joint ventures are valued using the equity method.

According to this method, the investment is initially recognized at cost under “Investments in associates and joint ventures” in the statement of financial position, and the book value increases or decreases to recognize the investor’s interest in the income of the associate or joint venture after the acquisition date, which is reflected in the statement of comprehensive income under “Income from equity interests in associates and joint ventures”. The investment includes, if applicable, the goodwill identified in the acquisition.

Associates are considered those in respect of which the Group has significant influence, understood as the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control over those policies. Significant influence is presumed in companies in which a company has an interest of 20% or more and less than 50%.

 

16


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Joint arrangements are contractual agreements through which the Group and the other party or parties have joint control. Under the provisions of IFRS 11, “Joint arrangements”, and IAS 28, “Investments in Associates and Joint Ventures”, investments in which two or more parties have joint control (defined as a “joint arrangement”) will be classified as either a joint operation (when the parties that have joint control have rights to the assets and obligations for the liabilities relating to the joint arrangement) or a joint venture (when the parties that have joint control have rights to the net assets of the joint arrangement). Considering such classification, joint operations will be proportionally consolidated and joint ventures will be accounted for under the equity method.

Associates and joint ventures have been valued based upon the latest available financial statements of these companies as of the end of each year, taking into consideration, if applicable, significant subsequent events and transactions, available management information and transactions between the Group and the related company, which have produced changes on the latter’s shareholders’ equity. The dates of the financial statements of such related companies used in the consolidation process may differ from the date of the Company’s financial statements due to administrative reasons. The accounting principles and procedures used by associates and joint ventures have been homogenized, where appropriate, with those used by the Group in order to present the consolidated financial statements based on uniform accounting and presentation policies. The financial statements of associates and joint ventures whose functional currency is the currency of a hyperinflationary economy and/or different from the presentation currency are translated using the procedure set out in Note 2.b.1.

Investments in companies in which the Group has no significant influence or joint control, are valued at cost.

Investments in companies with negative shareholders’ equity are disclosed in the “Other Liabilities” account.

On each closing date or upon the existence of signs of impairment, it is determined whether there is any objective evidence of impairment in the value of the investment in associates and joint ventures. If this is the case, the Group calculates the amount of the impairment as the difference between the recoverable value of associates and joint ventures and their book value, and recognizes the difference under “Income from equity interests in associates and joint ventures” in the statement of comprehensive income. The recorded value of investments in associates and joint ventures does not exceed their recoverable value.

Note 10 details the investments in associates and joint ventures.

2.b.6) Property, plant and equipment

General criteria

Property, plant and equipment are valued at their acquisition cost, plus all the costs directly related to the location of such assets for their intended use, considering the deemed cost criteria adopted by the Group in the transition to IFRS.

Borrowing costs of assets that require a substantial period of time to be ready for their intended use are capitalized as part of the cost of these assets until they are ready for their intended use or sale.

Major inspections, necessary to restore the service capacity of the related asset are capitalized and depreciated on a straight-line basis over the period until the next overhaul is scheduled.

The costs of renewals, betterments and enhancements that extend the useful life of properties and/or improve their service capacity are capitalized. As property, plant and equipment are retired, the related cost and accumulated depreciation are derecognized.

Repair, conservation and ordinary maintenance expenses are recognized in the statement of comprehensive income as incurred.

These assets are reviewed for impairment at least once a year, or whenever there are indicators that the assets may have become impaired, as detailed in Note 2.b.8.

 

17


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Depreciation

Property, plant and equipment, other than those related to oil and gas production activities, are depreciated using the straight-line method, over the years of estimated useful life of the assets, as follows:

 

     Years of Estimated
Useful Life

Buildings and other constructions

   50

Refinery equipment and petrochemical plants

   20-25

Infrastructure for natural gas distribution

   20-50

Transportation equipment

   5-25

Furniture, fixtures and installations

   10

Selling equipment

   10

Other property

   10

Land is classified separately from the buildings or facilities that may be located on it and is deemed to have an indefinite useful life. Therefore, it is not depreciated.

The Group reviews annually the estimated useful life of each class of assets.

Oil and gas production activities

The Group recognizes oil and gas exploration and production transactions using the “successful-efforts” method. The costs incurred in the acquisition of new interests in areas with proved and unproved reserves are capitalized as incurred under Mining properties, wells and related equipment. Costs related to exploration permits are classified as intangible assets.

Exploration costs, excluding the costs associated with exploratory wells, are charged to expense as incurred. Costs of drilling exploratory wells, including stratigraphic test wells, are capitalized pending determination as to whether the wells have found proved reserves that justify commercial development. If such reserves are not found, the mentioned costs are charged to expense. Occasionally, an exploratory well may be determined to have found oil and gas reserves, but classification of those reserves as proved cannot be made. In those cases, the cost of drilling the exploratory well will continue to be capitalized if the well has found a sufficient quantity of reserves to justify its completion as a producing well, and the Group is making sufficient progress assessing the reserves as well as the economic and operating viability of the project. If any of the mentioned conditions are not met, the cost of drilling exploratory wells is charged to expense. In addition, the exploratory activity involves, in many cases, the drilling of multiple wells throughout several years in order to completely evaluate a project. As a consequence, some exploratory wells may be kept in evaluation for long periods, pending the completion of additional wells and exploratory activities needed to evaluate and quantify the reserves related to each project. The detail of the exploratory well costs in evaluation stage is described in Note 8.

Drilling costs applicable to productive wells and to developmental dry holes, as well as tangible equipment costs related to the development of oil and gas reserves, have been capitalized.

The capitalized costs described above are depreciated as follows:

 

   

The capitalized costs related to productive activities have been depreciated by field on a unit-of-production basis by applying the ratio of produced oil and gas to estimate proved developed oil, and gas reserves estimated to recover.

 

   

The capitalized costs related to the acquisition of property and the extension of concessions with proved reserves have been depreciated by field on a unit-of-production basis by applying the ratio of produced oil and gas to the proved oil and gas reserves.

Revisions in estimates of crude oil and gas proved reserves are considered prospectively in the calculation of depreciation. Revisions in estimates of reserves are performed at least once a year. Additionally, estimates of reserves are audited by external independent petroleum and gas engineers on a three-year rotation plan.

 

18


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Costs related to hydrocarbon well abandonment obligations

Costs related to hydrocarbon well abandonment obligations are capitalized at their discounted value along with the related assets, and are depreciated using the unit-of-production method. As compensation, a liability is recognized for this concept at the estimated value of the discounted payable amounts. Revisions of the payable amounts are performed upon the current costs incurred in abandonment obligations considering internal and external available information. Due to the number of wells in operation and/or not abandoned and as well as the complexity with respect to different geographic areas where the wells are located, current costs incurred in plugging activities, weighted by the complexity level of the wells, are used for estimating the plugging activities costs of the wells pending abandonment. Current costs incurred are the best source of information in order to make the best estimate of asset retirement obligations. Future changes in the costs mentioned above, the discount rate, the useful lifespan of the wells and their estimate of abandonment, as well as changes in regulations related to abandonment, which are not possible to be predicted at the date of issuance of these consolidated financial statements, could affect the value of the abandonment obligations and, consequently, the related asset, affecting the results of future operations. Such changes are recognized pursuant to IFRIC 1, which indicates that changes in liabilities will be added to or deducted from the asset cost corresponding to the current period, taking into account that if the decrease in liabilities exceeds the carrying amount of assets, the excess will be immediately recognized in the results of the fiscal year.

Environmental property, plant and equipment

The Group capitalizes the costs incurred in limiting, neutralizing or preventing environmental pollution only in those cases where at least one of the following conditions is met: (a) the expenditure improves the safety or efficiency of an operating plant (or other productive assets); (b) the expenditure prevents or limits environmental pollution at operating facilities; or (c) the expenditure is incurred to prepare assets for sale and does not raise the assets’ carrying value above their estimated recoverable value.

The environmental related property, plant and equipment and the corresponding accumulated depreciation are disclosed in the consolidated financial statements together with the other elements that are part of the corresponding property, plant and equipment which are classified according to their accounting nature.

2.b.7) Provisions and contingent liabilities

The Group makes a distinction between:

 

i.

Provisions

Represent legal or assumed obligations arising from past events, the settlement of which is expected to give rise to an outflow of resources and whose amount and timing are uncertain. Provisions are recognized when the liability or obligation-giving rise to an indemnity or payment arises, to the extent that its amount can be reliably estimated and that the obligation to settle is probable or certain. Provisions include both obligations whose occurrence does not depend on future events (such as provisions for environmental liabilities and provision for hydrocarbon wells abandonment obligations); as well as obligations that are probable and can be reasonably estimated whose realization depends on the occurrence of future events that are out of the control of the Group (such as provisions for contingencies). The amount recorded as provision corresponds to the best estimate of expenditures required to settle the obligation, taking into consideration the relevant risks and uncertainties. See Note 15.

 

ii.

Contingent liabilities

Represent possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more future events not wholly within the control of the Group, or present obligations arising from past events, the amount of which cannot be estimated reliably or whose settlement is not likely to give rise to an outflow of resources embodying future economic benefits. Contingent liabilities are not recognized in the consolidated financial statements, but rather are disclosed to the extent they are significant, as required by IAS 37, “Provisions, contingent liabilities and contingent assets”. See Note 32.

When a contract qualifies as onerous, the related unavoidable liabilities are recognized in the consolidated financial statements as provisions, net of the expected benefits.

 

19


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Except for provisions for hydrocarbon wells abandonment obligations, where the timing of settlement is estimated on the basis of the work plan of the Group, and considering the estimated production of each field (and therefore its abandonment), in relation to other noncurrent provisions, it is not possible to reasonably estimate a specific schedule of settlement of the provisions considering the characteristics of the concepts included.

In relation to certain provisions and contingent liabilities, the Group, in accordance with the established exemption contemplated in IAS 37, has decided not to set forth certain critical information that could seriously impair it in the claims made by third parties.

2.b.8) Impairment of property, plant and equipment and intangible assets

To evaluate the impairment of property, plant and equipment and intangible assets, the Group compares their carrying value with their recoverable amount at the end of each year, or more frequently, if there are indications that an asset may be impaired or recovered.

In order to assess impairment, assets are grouped into CGU, whereas the assets do not generate cash flows that are independent of those generated by other assets or CGU, considering regulatory, economic, operational and commercial conditions.

The main CGUs into which assets have been grouped are indicated below:

 

i.

Upstream Segment

The assets included in this segment have been grouped into CGU Oil, which groups the assets of YPF fields with crude oil reserves, and CGU Gas – Neuquina Basin; CGU Gas – Noroeste Basin and CGU Gas – Austral Basin which group the assets of fields with natural gas reserves, according to Argentina’s basins.

 

ii.

Gas and Power Segment

The assets of this segment have been grouped into CGU Gas and Power YPF, which mainly includes the transportation, commercialization and regasification of natural gas; and CGU Metrogas, which includes assets related to natural gas distribution activities.

Likewise, until March 31, 2018, there was the CGU YPF EE, which included the assets related to the generation and commercialization of electric energy. See Notes 3 and 5.

 

iii.

Downstream Segment

The assets of this segment have been grouped in the CGU Downstream YPF, which mainly comprises the assets involved in crude oil refining (or supplementing that activity), the petrochemical industry and the marketing of such products.

 

iv.

Central Administration and Others

It includes the CGU AESA, which primarily comprises the assets used for construction purposes related to the activities of the subsidiary.

This aggregation is the best reflection of how the Group currently makes its assets management decisions for the generation of independent cash flows.

The recoverable amount is the higher of the fair value less costs of disposal and the value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a rate that reflects the weighted average cost of capital employed for each CGU.

If the recoverable amount of a CGU is estimated to be less than its carrying amount, the carrying amount of the CGU is reduced to its recoverable amount, and an impairment loss is recognized in the consolidated statement of comprehensive income.

Any impairment loss is allocated to the assets comprising the CGU on a pro-rata basis based on their carrying amount. Consequently, the basis for future amortization will take into account the reduction in the value of the asset as a result of any accumulated impairment losses.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Upon the occurrence of new events or changes in existing circumstances, which prove that an impairment loss previously recognized could have disappeared or decreased, a new estimate of the recoverable amount of the corresponding asset is calculated to determine whether a reversal of the impairment losses recognized in previous fiscal years needs to be made. See Note 2.c.

In the event of a reversal, the carrying amount of the asset (or the CGU) is increased to the revised estimate of its recoverable amount so that the increased carrying amount does not exceed the carrying amount that would have been determined in case no impairment loss had been recognized for the asset (or the CGU) in the past.

2.b.9) Methodology used in the estimation of recoverable amounts

The methodology used to estimate the recoverable amount of property, plant and equipment and intangible assets consists of using the higher of: i) the calculation of the value in use, based on expected future cash flows from the use of such assets, discounted at a rate that reflects the weighted average cost of capital, and, if available, ii) the price that would be received in a regular transaction between market participants to sell the asset as of the date of these consolidated financial statements, less the disposal costs of such assets.

In the assessment of the value in use, cash flow forecasts based on the best estimate of income and expense available for each CGU using sector inputs, past results and future expectations of business evolution and market development are utilized. The most sensitive aspects included in the cash flows used in all the CGU are the purchase and sale prices of hydrocarbons (including applicable gas distribution fees), outstanding regulations, estimates of cost increases, personnel costs and investments.

The cash flows from Upstream assets are generally projected for a period that covers the economically productive useful lives of the oil and gas fields and is limited by the contractual expiration of the concession permits, agreements or exploitation contracts. The estimated cash flows are based on production levels, commodity prices and estimates of the future investments that will be necessary in relation to undeveloped oil and gas reserves, production costs, field decline rates, market supply and demand, contractual conditions and other factors. The unproved reserves are weighted with risk factors, based on the type of each one of the Upstream assets.

Downstream and Gas and Power cash flows are estimated on the basis of projected sales trends, contribution margins by unit, fixed costs and investment flows, in line with the expectations regarding the specific strategic plans of each business. However, cash inflows and outflows relating to planned restructurings or productivity enhancements are not considered. The projections’ evaluation horizon is 5 years, considering annual rent for the last period, based on the long useful life of these CGU assets.

The reference prices considered are based on a combination of projected prices available in those markets where the Group operates, also taking into consideration specific circumstances that could affect different products the Group commercializes and management’s estimations and judgments.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

2.b.10) Employee benefit plans and share-based payments

 

i.

Retirement plan

Effective March 1, 1995, the Group has established a defined contribution retirement plan that provides benefits for each employee who elects to join the plan. Each plan member will pay an amount between 3% and 10% of his monthly compensation, and the Group will pay an amount equal to that contributed by each member.

The plan members will receive from the Group the contributed funds before retirement only in the case of voluntary termination under certain circumstances or dismissal without cause and, additionally, in case of death or incapacity. The Group has the right to discontinue this plan at any time, without incurring termination costs.

 

ii.

Objective performance bonus programs and performance evaluation programs

These programs cover certain of the Group’s personnel. These bonuses are based on compliance with corporate objectives, business unit objectives and individual performance. They are calculated considering the annual compensation of each employee, certain key factors related to the fulfillment of these objectives and the performance evaluation of each employee, and are paid in cash.

 

iii.

Share-based benefit plan

From the fiscal year 2013, YPF has decided to implement a share-based benefit plan. This plan, organized in annual programs, covers certain executive and management positions and key personnel or personnel with critical technical knowledge. The above-mentioned plan is aimed at aligning the performance of these personnel with the objectives of the strategic plan of the Company.

This plan consists in giving participation, through shares of the Company, to each selected employee with the condition of remaining in it for the previously defined period (up to three years from the grant date, hereinafter “service period”), being this the only necessary condition to access the agreed final retribution.

For accounting purposes, YPF recognizes the effects of the plans in accordance with the guidelines of IFRS 2, “Share-based Payment”. In this order, the total cost of the plans granted is measured at the grant date, using the fair value or market price of the Company’s share in the United States market. The above-mentioned cost is accrued in the Company’s net income for the year, over the vesting period, with the corresponding increase in Shareholders’ equity in the “Share-based Benefit Plans” account.

2.b.11) Revenue recognition

Revenue from ordinary activities arising from contracts entered into with customers

In compliance with IFRS 15, the Group has classified the main contracts with customers, as follows:

 

   

Contracts for the sale of fuel in consignment;

 

   

Contracts for the direct sale of fuel;

 

   

Contracts for the sale of natural gas;

 

   

Contracts and agreements for the sale of other refined products;

 

   

Construction contracts.

In the first four types of contracts, related to the sale of goods, income is recognized when the control of the goods is transferred to the customer. Even in the case of consignment contracts, revenue is not recognized until the good is sold to the intermediarys customer. It is emphasized that in these contracts there are no performance obligations that are separate or different from the delivery of goods.

In the case of the construction contracts, revenue is recognized considering the estimated final margin for each project that arises from technical studies on sales and the estimated total costs of each of them, as well as their physical progress. In this type of contracts, performance obligations are satisfied over time.

 

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English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

In accordance with the requirements of IFRS 15, revenues have been broken down by (i) type of good or service; (ii) sales channels, and (iii) target market, according to the reported business segments.

Revenue recognition related to Government incentive programs

The following are the main revenues that fall within the scope of the IAS 20 “Accounting for Government grants and disclosure of government assistance”:

 

   

Benefits from Stimulus program for the additional injection of natural gas and Stimulus program for investments in the natural gas production development from unconventional reservoirs.

They consist of economic compensation for the companies committed to increase their respective production. These incentives have been included in “Revenues” in the consolidated statement of comprehensive income.

 

   

Compensation for providing diesel to public transport of passengers at a differential price.

They consist of economic compensations to hydrocarbon producing and refining companies committed to ensuring the supply of diesel in the necessary volumes to meet domestic needs. These incentives have been included in “Revenues” in the consolidated statement of comprehensive income.

 

   

Benefits for the recognition of the financial cost generated by payment deferral by providers of the distribution service of natural and undiluted propane gas through networks.

They consist of financial compensations to distributors, sub-distributors, transporters and producers by recognizing the interest generated by the payment deferral granted to residential users of natural gas and undiluted propane gas through networks of 22% of the invoices issued from July 1, 2019 to October 31, 2019, was recovered from regular invoices issued from December 1, 2019 and for 5 monthly, equal and consecutive periods. These incentives have been included under “Net Financial Results” in the statement of comprehensive income.

 

   

Procedure to compensate for the lower income that Natural Gas Distribution Service Licensed Companies receive from their users.

Compensations received as a result of the application of benefits and/or discounts to users under the regulations in force regarding social tariffs of the natural gas distribution service through networks. The aforementioned incentives have been included under “Revenues” in the statement of comprehensive income.

 

   

Payment of the accumulated daily differences on a monthly basis between the price of gas purchased by Distributors and the natural gas price included in the tariff schemes effective from April 1, 2018 to March 31, 2019.

Argentine Government assumed the payment of the differences exclusively arising from exchange rate variations and corresponding to natural gas volumes delivered in such term. These incentives recognized by Metrogas have been included as reversals in “Costs” in the consolidated statement of comprehensive income. See Note 34.f.

 

   

Incentive for investment in capital goods, computers and telecommunications for domestic manufacturers.

It takes place through a fiscal bond, provided that manufacturers have industrial establishments located in Argentina, a requirement that is satisfied by the controlled company AESA. The bond received may be computed as a tax credit for the payment of national taxes (i.e., income tax, tax on minimum presumed income, VAT and domestic taxes) and may be transferred to third parties only one time. The incentives have been included in the item “Other net operating results” in the consolidated statement of comprehensive income.

Recognition of these incomes are made at their fair value when there is a reasonable certainty that incentives will be received and that regulatory requirements related therewith have been fulfilled.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

2.b.12) Leases

As of fiscal year 2019, the Group registers its leases in accordance with IFRS 16.

The model introduced by this standard is based on the definition of lease, which is mainly related to the concept of control. IFRS 16 distinguishes between lease contracts and service contracts on the basis of whether an identified asset is under the customer’s control, which exists if the customer has the right to: i) obtain substantially all of the economic benefits from the use the asset; and ii) direct the use of the asset.

The Group recognized right-of-use assets and lease liabilities for 23,059 on January 1, 2019, date of initial application of IFRS 16, in the statement of financial position, measured at the present value of future payments.

The implementation of this standard had no effect on retained earnings as the Group applied the simplified model without restating any comparative figures, recognizing a right-of-use asset equal to the lease liability on the initial transition date.

The Group as lessee

Once the lease has been identified, the Group recognizes the following items:

 

   

Right-of-use assets, whose cost includes:

 

  (a)

the amount of the initial measurement of the lease liability;

 

  (b)

any rent paid to the lessor prior to the commencement date or on the same date, after discounting any incentive received for the lease;

 

  (c)

the initial direct costs incurred by the lessee; and

 

  (d)

an estimate of the costs to be incurred by the lessee in dismantling and eliminating the underlying asset, restoring the place where the underlying asset is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless such costs are incurred at the time of making of the inventories. The Group could incur in certain liabilities because of such costs either on the date of commencement of the term of the lease, or because of having used the underlying asset during a specified period.

Subsequently, the valuation of right-of-use of assets will be based on the cost model under IAS 16 “Property, Plant and Equipment” (recognizing therefore the depreciation in a straight-line during the extension of the lease, unless another systematic basis is more representative). Depreciation is estimated by the straight-line method based on the term of each lease contract, except where the useful life of the underlying asset is shorter.

In order to assess the impairment of right-of-use assets, the Group compares their carrying value with their recoverable amount at fiscal year end, or more frequently, if there are indicators that the amount of any given asset could have suffered an impairment, grouping assets into CGU and applying the guidelines under IAS 36, which are described in Notes 2.b.8 and 2.b.9.

Lease contracts in which the Group is the lessee mainly correspond to the lease of:

 

   

Exploitation equipment and facilities, which include equipment for installations and production equipment in reservoirs, such as drilling equipment, work-over and lifting pumps. The average term of these contracts is from 3 to 5 years, establishing minimum guaranteed payments based on the availability of these assets, and also variable payments estimated based on a rate per unit of use (Pesos per hour/day of use).

 

   

Machinery and equipment, which include:

 

  i.

equipment for natural gas compression and generation of energy. The average term of these contracts is 3 years, featuring minimum payments based on the available power. Variable payments are calculated on the basis of a rate per generation unit;

 

  ii.

regasification and gas liquefaction equipment. The average term of these contracts is 6 years, establishing a minimum guaranteed payment on the basis of the availability of these assets.

 

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English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

   

Transportation equipment, including:

 

  i.

vessels and crafts for hydrocarbon transportation, whose average contract term is 3 years, establishing monthly guaranteed payments associated to the Group’s availability over such assets;

 

  ii.

truck fleets with average contract terms of 3 years, for which variable payments are estimated based on a rate per unit of use (Pesos per kilometer travelled), featuring in some cases minimum payments associated to the availability of such assets.

 

   

Gas station lands and facilities, whose contracts include the lease of land and associated installations with average contract terms of 20 years and for which payments are determined based on a given quantity of fuel.

 

   

Land and buildings which include mainly:

 

  i.

An underground reservoir and the land necessary to mount the surface installations necessary for the underground storage of natural gas, whose contract lasts for 4 years, for which there are minimum guaranteed quotas;

 

  ii.

permits for the use of ports and land, for which there are minimum guaranteed quotas.

With regard to short-term leases and leases of low-value underlying assets, the Group continues recognizing them as expense for the fiscal year, in accordance with the option specified in the standard, except those that are capitalized. The Group did not identify any low-value leases other than those whose underlying asset corresponds to printers, cell phones, computers, photocopiers, among others, which are not material. Variable payments of leases related to the performance/use of the underlying asset are subject to the same accounting treatment. The total charges recorded in comprehensive income for the fiscal year and total capitalizations for short-term leases and leases of low-value and variable lease payments related to the underlying asset performance and/or use, amounts to 11,764 and 13,886 as of December 31, 2020 and 2019, respectively.

Payments of short-term leases, low-value leases and the variable charge related to the performances/use of the underlying assets are classified in the statement of cash flows in operating activities, except for those which are capitalized, which are classified as cash used in investing activities. Additionally, cash payments of principal and interest are disclosed as payments in cash flows used in financing activities.

 

   

Lease liabilities measured as the discounted aggregate amount of future lease payments. Considering the complexity of determining the implicit interest rate in the lease, the lessee’s incremental borrowing rate to the lease liabilities of the initial date of each contract is applied.

Lease liabilities include:

 

  (a)

fixed payments (including in substance fixed payments), less any lease incentive receivable;

 

  (b)

variable payments, which depend on an index or a rate, initially measured by using the index or rate on the effective date of the contract;

 

  (c)

amounts that the lessee expects to pay as residual value guarantees;

 

  (d)

the price for the exercise of a purchase option if the Group is reasonably certain to exercise that option; and

 

  (e)

payment of penalties for terminating the lease, if the lease period reflects that the Group will exercise an option to terminate it (i.e., because there is a reasonable certainty thereon).

Subsequently, the Group increases the lease liability to reflect the accrued interest (and recognized in the comprehensive income statement), deducts the installments that are being paid from such liability and recalculates the book value to reflect any review, amendment to the lease or review of the so-called “in-substance” fix payments, by applying a revised discount rate, if applicable.

 

25


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

The Group revises the lease liability in the following cases:

 

  (a)

when there is a change in the amount expected to be paid under a residual value guarantee;

 

  (b)

when there is a change in future rental payments to reflect the variation of an index or an interest rate used to determine such rental payments (including, for example, a market rent review);

 

  (c)

when there is a change in the term of duration of the lease as a result of a change in the non-cancellable period of the lease (for example, if the lessee does not exercise an option previously included in the determination of the lease period); or

 

  (d)

when there is a change in the evaluation of the purchase option of the underlying asset.

During the fiscal year 2018, the Group applied the guidelines of IAS 17. The leases were classified as operating or financial leases, taking into account the economic substance of the contracts.

 

   

Operating leases

A lease was classified as an operating lease when the lessor did not transfer substantially to the lessee the entire risks and rewards incidental to ownership of the asset.

Costs related to operating leases were recognized on a straight-line basis in “Rental of real estate and equipment” and “Operation services and other service contracts” of the consolidated statement of comprehensive income for the fiscal year in which they arise.

 

   

Financial Leases

Leases were classified as financial when the lessor transferred to the lessee substantially all the risks and benefits inherent in the leased property.

The Group had no significant financial leases as they were defined by IAS 17.

The Group as lessor

The Group does not have any significant assets leased to third parties.

2.b.13) Net income per share

Net income per share is calculated by dividing the net income for the fiscal year attributable to YPF’s shareholders by the weighted average of shares of YPF outstanding during the fiscal year net of repurchased shares as mentioned in Note 29.

Diluted net income per share is calculated by dividing the net income for the fiscal year by the weighted average of shares outstanding, and when dilutive, adjusted for the effect of all potentially dilutive shares, including share options, on an as if they had been converted.

In computing diluted net income per share, income available to ordinary shareholders, used in the basic earnings per share calculation, is adjusted by those results that would result of the potential conversion into ordinary stock. The weighted average number of ordinary shares outstanding is adjusted to include the number of additional ordinary shares that would have been outstanding if the dilutive potential ordinary shares had been issued. Diluted net income per share is based on the most advantageous conversion rate or exercise price over the entire term of the instrument from the standpoint of the security holder. The calculation of diluted net income per share excludes potential ordinary shares if their effect is anti-dilutive.

As of the date of the issuance of these consolidated financial statements, there are no YPF instruments outstanding that imply the existence of potential ordinary shares (taking into account the Company’s intent to cancel the share-based benefit plans through their repurchase in the market), thus the basic net income per share matches the diluted net income per share. See Note 30.

 

26


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

2.b.14) Financial liabilities

Financial liabilities are initially recognized at their fair value, net of the transaction costs incurred. Because the Group does not have financial liabilities whose characteristics require the recognition at their fair value, according to IFRS, after their initial recognition, financial liabilities are measured at amortized cost. Any difference between the financing received (net of transaction costs) and the repayment value is recognized in the consolidated statement of comprehensive income over the life of the related debt instrument, using the effective interest rate method.

The Group eliminates a financial liability (or a part thereof) from its statement of financial position when it has been extinguished, i.e., when the obligation specified in the corresponding contract has been paid or canceled, or has expired.

The Group will account for a swap of financial instruments with substantially different conditions by eliminating the original financial liability and registering a new financial liability. Similarly, the Group will account for a substantial change in the current conditions of an existing financial liability or part of it as a cancellation of the original financial liability and the recognition of a new financial liability.

At the closing of these consolidated financial statements, the Group’s financial liabilities at amortized cost include accounts payable, other liabilities, loans and lease liabilities.

2.b.15) Taxes, withholdings and royalties

Income tax and tax on minimum presumed income

The Group recognizes accounting charges for income tax by applying the deferred tax method, which considers the effect of temporary differences between the carrying amount of an asset or a liability and its tax base and the tax loss carryforwards and other tax credits, which may be used to offset future taxable income, at the statutory rate then in force, at the time of its use or reversion.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Tax expense for the fiscal year includes current and deferred income tax. Income tax is recognized in the consolidated statement of net income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

Tax expense is calculated on the basis of the tax laws enacted or substantially enacted at the date of the fiscal year end, in the countries where the Company and its subsidiaries operate and generate taxable income. The Group periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. The Group establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

According to the amendments introduced by the Argentine Tax Reform Law No. 27,430 published in the BO on December 29, 2017:

i) The general income tax rate was reduced from 35% for fiscal year 2017, to 30% for fiscal years 2018 and 2019, and to 25% for those fiscal years beginning January 1, 2020 onwards. On December 23, 2019, Law No. 27,541 on Social Solidarity and Recovery of the Productive Sector was published in the BO (see Note 34.j) which suspended the reduction in the income tax rate from 30% to 25% until fiscal years beginning on January 1, 2021, included. Accordingly, although the gradual changes of the income tax rate were not applicable to the measurement of the current tax, the main accounting impact of the new regulations ocurred in the measurement of deferred assets and tax liabilities. See Note 16.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

ii) The regulation establishes that, at the option of the companies, tax revaluation of assets is permitted for assets located in Argentina and that are affected to generation of taxable profits. The special tax on the amount of the revaluation depends on the asset, being 8% for real estate not classified as inventories, 15% for real estate classified as inventories, 5% for shares, quotas and equity interests owned by individuals and 10% for the rest of the assets. The gain generated by the revaluation is exempted according to article 291 of Law 27,430, and separately, the additional tax generated by the revaluation is not deductible.

On March 28, 2019, the Company adhered to the tax revaluation established in Law No. 27,430 for the “Mines, quarries, forests and analogue assets” category, establishing a special tax of 4,562. The adherence will allow a higher deduction of the depreciation of the assets revaluated in the income tax, and therefore will affect the recording of the deferred income tax. See Note 16.

Additionally, determining of taxable profit on minimum presumed income was calculated by applying the current 1% tax rate to taxable assets as of the end of each year. This tax supplemented income tax. The tax liability coincided with the higher of the determination of tax on minimum presumed income and the Group’s tax liability related to income tax, calculated applying the current income tax rate to taxable income for the year. However, if the tax on minimum presumed income exceeded income tax during one tax year, such excess could be computed as prepayment of any income tax excess over the tax on minimum presumed income that could be generated in the next 10 years. It is worth mentioning that it was overruled for the years beginning on January 1, 2019, as established by Law No. 27,260.

Personal assets tax – Substitute responsible

Individuals and foreign entities, as well as their undistributed estates, regardless of whether they are domiciled or located in Argentina or abroad, are subject to personal assets tax of 0.50% of the value of any shares or ADS issued by Argentine entities. The tax is levied on the Argentine issuers of such shares or ADS, such as YPF, which must pay this tax in substitution of the relevant shareholders, and is based on the equity value (following the equity method), or the book value of the shares derived from the latest financial statements at December 31 of each year. Pursuant to the Personal Assets Tax Law, the Group is entitled to seek reimbursement of such paid tax from the applicable shareholders, using the method the Group considers appropriate.

Royalties and withholding systems for hydrocarbon exports

A 12% (or 15%, if applicable) royalty is payable on the value at the wellhead of crude oil production and the commercialized natural gas volumes, on the wellhead value of such products, which is similar to the final sales price less transportation and storage costs.

Pursuant to the extension of the original terms of exploitation concessions, the Group has agreed to pay an extraordinary production royalty and in some cases a royalty of 10% is payable over the production of unconventional hydrocarbons.

Royalty expense and extraordinary production royalties are accounted for as a production cost.

Additionally, the Group is subject to the withholding regimes for hydrocarbon exports outlined in Note 34.d.

2.b.16) Shareholders’ equity accounts

Shareholders’ equity accounts have been valued in accordance with accounting principles in effect as of the transition date. The accounting transactions that affect shareholders’ equity accounts were accounted for in accordance with the decisions adopted in the Shareholders’ meetings and legal standards or regulations.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Subscribed capital stock and adjustments to contributions

Consists of the shareholders’ contributions represented by shares and includes the outstanding shares at face value net of treasury shares mentioned in the following paragraph “Treasury shares and adjustment to treasury shares”. The subscribed capital account has remained at its nominal value and the adjustment derived from said monetary restatement required by previous accounting principles (the Argentine Accounting Principles) is disclosed in the “Adjustments to contributions” account.

The adjustment to contributions cannot be distributed in cash or in kind, but is allowed its capitalization by issuing shares. In addition, this item may be used to compensate for accumulated losses.

Treasury shares and adjustments to treasury shares

Corresponds to the reclassification of the nominal value and the corresponding adjustment for inflation (Adjustment to Contributions) of shares issued and repurchased by YPF in market transactions, as is required by the CNV regulations in force.

Share-based benefit plans

Corresponds to the balance related to the share-based benefit plans as mentioned in Note 2.b.10.iii.

Acquisition cost of treasury shares

Corresponds to the cost incurred in the acquisition of the shares that YPF holds as treasury shares. Additionally, see Note 29. Considering CNV regulations RG No. 562, the balance of this account restricts the distribution of retained earnings.

Share trading premium

Corresponds to the difference between accrued amount in relation to the share-based benefit plans and acquisition cost of the shares settled during the fiscal year in relation with the mentioned plans.

Considering the debit balance of the premium, distribution of retained earnings is restricted by the balance of this premium.

Issuance premiums

Corresponds to the difference between the amount of subscription of the capital increase and the corresponding face value of the shares issued.

Legal reserve

In accordance with the provisions of LGS, YPF has to appropriate to the legal reserve no less than 5% of the algebraic sum of net income, prior year adjustments, and transfers from other comprehensive income to retained earnings and accumulated losses from previous years, until such reserve reaches 20% of the subscribed capital plus adjustment to contributions. As of December 31, 2020, the legal reserve has been fully integrated, amounting to 2,007.

Reserve for future dividends

Corresponds to the allocation made by the YPF’s Shareholders’ meeting, whereby a specific amount is transferred to the reserve for future dividends.

Reserve for investments and reserve for purchase of treasury shares

Corresponds to the allocation made by the YPF’s Shareholders’ meeting, whereby a specific amount is being assigned to be used in future investments and in the purchase of YPF’s shares to meet the obligations arising from share-based benefit plan described in Note 2.b.10.iii.

Other comprehensive income

Includes income and expenses recognized directly in equity accounts and the transfer of such items from equity accounts to the income statement of the fiscal year or to Retained earnings, as defined by IFRS.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Retained earnings

Includes accumulated profits or losses without a specific appropriation that being positive can be distributed upon the decision of the Shareholders’ meeting, while not subject to legal restrictions.

Additionally, it includes the net income of previous years that was not distributed, the amounts transferred from Other comprehensive income and adjustments to income of previous years produced by the application of accounting standards.

Additionally, pursuant to the regulations of the CNV, when the net balance of Other comprehensive income account is positive, it will not be distributed or capitalized nor used to compensate accumulated losses, but will be computed as part of retained earnings in order to make comparisons to determine the situation of the Company in relation to sections 31, 32 and 206 of the LGS, or other legal or regulatory rules making reference to limits or ratios with capital and reserves, not specifically and expressly provided for under CNV Rules. When the net balance of these results at the end of a fiscal year is negative, a restriction on the distribution of retained earnings for the same amount will be imposed.

Non-controlling interest

Corresponds to the interest in the net assets of Metrogas (30%) and YTEC (49%), representing the rights on shares that are not owned by YPF.

2.b.17) Derivative financial instruments and hedge transactions

Derivative financial instruments are recognized at fair value. The method of recognizing the resulting profit or loss depends on whether the derivative is designated as a hedge instrument, and, if so, the nature of the item being hedged.

The Group manages exposures to several risks using different financial instruments. The Group does not use derivative financial instruments for speculative purposes.

The Group’s policy is to apply hedge accounting to hedging relationships where it is both permissible and practical under IFRS 9, and its application reduces volatility. Transactions that may be effective hedges in economic terms may not always qualify for hedge accounting under IFRS 9.

 

   

During the fiscal year ended December 31, 2020, the Group entered into term purchase transactions for dollars and grains and has not applied hedge accounting.

 

   

During the fiscal year ended December 31, 2019, the Group conducted operations with forward dollars - Swiss francs contracts and entered into term purchase transactions for dollars and has not applied hedge accounting.

 

   

During the fiscal year ended December 31, 2018, the Group entered into term purchase transactions for dollars and has not applied hedge accounting.

Profit or losses from these derivative financial instruments are classified as “Other financial results”, in the statement of comprehensive income.

Fair values of derivative financial instruments that are traded in active markets are computed by reference to market prices. The fair value of derivative financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each fiscal year.

2.b.18) Trade receivables and other receivables

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method.

Under IFRS 9, a provision for bad debt is created by preparing a matrix per category and grouping the assets based on the type of customer: i) related parties, ii) public sector and iii) private sector. These groups were subsequently divided into sub-groups based on special characteristics indicative of the repayment capacity, such as i) payment arrears, ii) existence of guarantees and iii) existence of a legal proceeding already initiated or in process of initiation for collection purposes, among others. Once each group was defined, an expected bad-debt rate is assigned based on historical default rates adjusted to future economic conditions.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

The carrying amount of the assets is reduced through the use of the provision account, and the amount of the loss is recognized in the statement of comprehensive income within “Selling expenses”, as well as subsequent recoveries.

As IFRS 9 became effective, on January 1, 2018, the Group has retroactively applied the changes in the standard, without restating the comparative amounts. Therefore, the difference between the previous accounting amounts and the new initial amounts resulting from the initial application of the standard were recognized as an adjustment in the “Retained Earnings” as of such date. The implementation of the impairment method introduced by the standard generated a loss of 425 with the consequent effect on the deferred tax of 127. The net effect shown in the statement of changes in shareholders’ equity was 298, not being significant for the financial position and/or performance of the Group.

2.b.19) Cash and cash equivalents

In the statement of cash flow, cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquidity investments with original maturities of 3 months or less. They do not include bank overdrafts.

2.b.20) Dividends distribution

Dividends payable by the Group are recognized as liabilities in the fiscal year in which they are approved.

2.b.21) Business combinations

Business combinations are accounted for by applying the acquisition method when the Group takes effective control over the acquired company.

The Group recognizes in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest and goodwill, if any, in accordance with IFRS 3.

The acquisition cost is measured as the sum of the consideration transferred, measured at fair value at its acquisition date and the amount of any non-controlling interest in the acquired entity. The Group will measure the non-controlling interest in the acquired entity at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s identifiable net assets.

If the business combination is achieved in stages, the Group will remeasure its previously held equity interest in the acquired entity at its acquisition date fair value and recognize a profit or loss in the statement of comprehensive income.

The goodwill cost is measured as the excess of the consideration transferred over the identifiable assets acquired and liabilities assumed net by the Group. If this consideration is lower than the fair value of the assets identifiable and liabilities assumed, the difference is recognized in the statement of comprehensive income.

IFRS 3 authorizes a term of 12 months from the acquisition date to complete the measurement process of a business combination. When this is not recorded at the closing of the fiscal year in which the business combination takes place, the Group reports provisional amounts.

2.b.22) Total or partial disposal of foreign operation whose functional currency is other than the dollar

On the disposal of a foreign operation (a disposal of the Group’s entire interest, or a partial disposal involving loss of control over a subsidiary), all of the translation differences accumulated in equity in respect of that operation attributable to the equity holders of the Company are reclassified to profit or loss of that fiscal year.

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated translation differences is reclassified to non-controlling interest and are not recognized in profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated using the closing rate. Translation differences arising are recognized in Other comprehensive income.

2.b.23) Segment Information

Operating segments are reported in a manner consistent with the internal reporting provided to the top authority decision-maker, who is the person responsible for allocating resources and assessing the performance of the operating segments. Operating segments are described in Note 5.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

2.b.24) Assets held for disposal and related liabilities

An asset (or group of assets) is classified as held for disposal together with its related liabilities when the Group is expected to recover their value by means of a sale transaction (rather than through use) and where such sale is highly probable. In the event that the Group is engaged in a disposal plan, which involves the loss of control of a subsidiary, it will classify the assets and liabilities of such subsidiary as held for disposal provided that they comply with the criteria required by the IFRS 5 and its interpretations, regardless of whether the Group withholds a non-controlling interest in its former subsidiary after the transaction.

In order to apply the above classification, the asset (or group of assets) must be available for its immediate disposal or dilution in its current conditions, exclusively subject to the usual and habitual terms for the disposal or dilution of this asset (or group of assets).

For the transaction to be highly probable the appropriate level of Management or Board of Directors of the Company must be committed to a plan and an active program must have been actively initiated. In addition, the disposal of the asset (or groups of assets) must be actively negotiated at a reasonable price in relation to its or their current fair value. Moreover, the transaction must also be expected to meet the conditions for recognition as a completed disposal within one fiscal year after the classification date, with the exceptions permitted by IFRS 5, and the activities required to complete the plan should indicate that it is unlikely that significant changes are made to the plan or that it will be canceled.

Assets classified as held for disposal will be measured at the lower of their carrying amount or fair value less sale-related costs.

As of December 31, 2020, the Group classified certain assets of property, plant and equipment as assets held for disposal.

As of December 31, 2019, there were no assets held for disposal.

As of December 31, 2018, the Group classified certain areas as assets held for disposal. See Note 3.

2.b.25) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of suitable assets for which a prolonged period is required in order to place them in the conditions required for their use or sale, are capitalized as part of the cost of those assets until the assets are substantially ready for use or sale. Interests are capitalized according to the average debt rate of the Group. Foreign exchange differences for loans in foreign currency are capitalized if they are considered an adjustment to interest costs. The rest of the borrowing costs are recognized as expenses in the period in which they are incurred.

2.b.26) New standards issued

As required by IAS 8 “Accounting policies, changes in accounting estimates and errors”, below is a summary of the standards or interpretations issued by the IASB, whose application is mandatory as of the closing date of these consolidated financial statements, as well as of those whose application has not been mandatory as of the closing date of these consolidated financial statements and have, therefore, not been adopted by the Group.

Those standards or interpretations issued by the IASB, the application of which is mandatory as of the closing date of these consolidated financial statements, have been adopted by the Group, if applicable

 

 

Amendments to IFRS 3 – Business combinations

In October 2018, the IASB has issued Definition of a Business (Amendments to IFRS 3), aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020. Early application is allowed.

 

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Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

The amendments:

 

   

clarify that to be considered a business, an acquired set of activities and assets must include, at least, an input and a substantive process that together significantly contribute to the ability to create outputs;

 

   

remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs;

 

   

add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;

 

   

narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs; and

 

   

add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.

The adoption of this amendment has had no effect on the consolidated financial statements of the Group.

 

 

Amendments to IAS 1 “Presentation of financial statements” and IAS 8 “Accounting policies, changes in accounting estimates and errors” – Definition of material

In October 2018, the IASB issued amendments that are applicable to fiscal years beginning on or from January 1, 2020, allowing for its anticipated application.

The amendments to the definitions of “material” or “with relative importance” seek to unify the definition of such concepts to the definitions of Conceptual Framework, also amended in 2018.

The adoption of this amendment has had no effect on the consolidated financial statements of the Group.

 

 

Amendments to References to the Conceptual Framework for Financial Reporting

In March 2018, the IASB issued the revised Conceptual Framework applicable to annual periods beginning on or after January 1, 2020. This revision process did not imply a substantial change in the set of definitions, concepts and guidelines used as a basis for preparing financial information, therefore, there were no effects on the Group’s financial statements.

 

 

Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform Phase 1

In September 2019, the IASB issued amendments that are applicable to fiscal years beginning on or from January 1, 2020, allowing for its early application.

Given the uncertainty caused by the “Interest Rate Benchmark reform”, which suggests replacing interbank offer rates with alternative benchmark free-risk rates, the IASB considered the effects this may have on the specific hedging accounting requirements under IFRS 9 and IAS 39 which require an analysis with a forward-looking approach.

Thus, the amendments modify these requirements by applying hedge accounting, for entities to apply them assuming that the interest rate benchmark is not modified as a result of the aforementioned interest rate reform.

The adoption of this amendment has had no effect on the consolidated financial statements of the Group because it does not carry out this type of hedging.

Standards or interpretations issued by the IASB, the application of which is not mandatory as of the closing date of these consolidated financial statements and which, therefore, have not been adopted by the Group

 

 

IFRS 17 – Insurance contracts

The IFRS 17 issued in May 2017 is applicable to those fiscal years beginning on or after January 1, 2021, allowing its early application and replacing IFRS 4.

The Group anticipates that this standard will have no effects on its financial statements because it does not provide this type of services.

 

33


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

 

Amendments to IFRS 10 and IAS 28 – Sale or contribution of assets between an investor and its associate or joint venture

In September 2014, the IASB amended IFRS 10 and IAS 28 to clarify that in transactions involving a controlled company, the extent of the profit or loss to be recognized in the financial statements depends on whether the sold or contributed controlled company is considered a business in accordance with IFRS 3.

On August 10, 2015, the IASB issued a proposal to postpone the effective date of these changes indefinitely depending on the outcome of its research project on accounting by the equity method, which was approved on December 17, 2015.

 

 

Amendments to IAS 1 – Classification of liabilities

In January 2020, the IASB issued amendments to IAS 1 in relation to the classification of liabilities into current and non-current, which are retroactively applicable for fiscal years beginning on January 1, 2022, included, (date which was extended to January 1, 2023) and allow for their earlier application.

The amendments clarify that liabilities classification as current or non-current:

 

   

Must be based on existing rights at the end of the reporting period to defer settlement by at least twelve months and make explicit that only rights in place “at the end of the reporting period” should affect the classification of a liability.

 

   

Is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability.

It also clarifies that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

The Group anticipates that the implementation of these amendments will have no significant impact on its financial statements, though is currently evaluating the impact.

 

 

Amendments to IAS 16 – Proceeds before intended use

In May 2020, the IASB issued amendments that are applicable for fiscal years beginning on or after January 1, 2022, allowing their early application.

Following the amendment to IAS 16, an entity may not deduct from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating. The proceeds from selling any such items, and the production cost of those items, will be recognized in the comprehensive income for the corresponding period. Entities shall disclose separetely the amounts of proceeds and costs, that relate to items that do not proceed from the entity’s ordinary activities.

The amendment also clarifies that an item of property, plant and equipment is in said preparation and testing process when assesing the technical and physical performance of the asset. Therefore, an asset may be able to operate in the manner intended by Management and consequently be subject to depreciation before it has reached the level of operating performance expected by Management.

According to the variables present at the end of the reporting period, the Group expects that the implementation of these amendments will have no significant impact on its financial statements.

 

 

Amendments to IAS 37 – Onerous Contracts

In May 2020, the IASB issued amendments that are applicable for fiscal years beginning on or after January 1, 2022, allowing their early application.

 

34


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

The amendment clarifies the meaning of “cost of fulfilling a contract” for the purpose of assessing whether the contract is onerous. The direct cost of fulfilling a contract consists of both the incremental cost of fulfilling that contract (for example, direct labour and materials), as well as an allocation of other costs that relate directly to fulfilliment of contracts (for example, an allocation of the depreciation charge for an item of property, plant and equipment used to fulfill that contract).

The amendment also clarifies that an entity must recognize any impairment loss that has occurred in the assets used to fulfill the contract before recording an onerous loss and when determining such onerosity, the present obligation under an existing contract must be considered, and therofore, does not recognize future operating losses.

According to the variables present at the end of the reporting period, the Group expects that the implementation of these amendments will have no significant impact on its financial statements.

 

 

Amendments to IFRS 3 – Reference to the Conceptual Framework

In May 2020, the IASB issued amendments that are applicable for fiscal years beginning on or after January 1, 2022, allowing their early application.

After updating the reference that the Standard makes to the 2018 Conceptual Framework on the definition of the concepts of assets and liabilities in a business combination, its application could change which assets and liabilities that meet the requirements for recognition in a business combination. In some of these cases, the post-acquisition accounting required by other IFRS Standards could lead to immediate derecognition of assets or liabilities recognised in a business combination, resulting in so called “Day 2 gains or losses” that do not depict an economic gain or loss.

To remedy this situation, the new exception in IFRS 3 for liabilities and contingent liabilities specifies that, for some types of liabilities and contingent liabilities, an entity applying IFRS 3 should refer to IAS 37 “Provisions, contingent liabilities and contingent assets”, or IFRIC 21 “Levies”, instead of the 2018 Conceptual Framework. It has also been clarified that the acquirer must not recognize contingent assets on the acquisition date as defined in IAS 37.

The Group expects that the implementation of these amendments will have no significant impact on its financial statements.

 

 

Amendments to IFRS 16 –COVID-19 Related rent concessions

In May 2020, the IASB issued amendments that are applicable for fiscal years beginning on or after June 1, 2020, allowing their early application.

A lessee may elect to account for any change in lease payments as a consequence of the COVID-19 pandemic, arising from rent concession the same way it would account for the change applying IFRS 16 if the change were not a lease modification.

This option applies only to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met:

(a) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

(b) any reduction in lease payments affects only payments originally due or before June 30, 2021 (for example, a rent concession would meet this condition if it results in reduced lease payments on or before June 30, 2021, and increased lease payments that extend beyond June 30, 2021); and

(c) there is no substantive change to other terms and conditions of the lease.

The Group expects that the implementation of these amendments will have no significant impact on its financial statements.

 

35


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

 

 

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 17 and IFRS 16 – Interest Rate Benchmark Reform Phase 2.

On August 2020, the IASB issued amendments applicable to fiscal years beginning on or after January 1, 2021, allowing for their early application.

The purpose of these amendments is to provide entities with practical solutions to deal with the effects of the transition to alternative benchmark interest rates, when they generate changes in contractual cash flows or in the hedging relationships.

The amendments issued take place in the following key areas:

 

   

Financial assets, financial liabilities and lease liabilities: a practical solution was issued for financial assets and liabilities measured at amortized cost which are modified as a direct consequence of the interbank benchmark interest rate reform. As a practical solution, the IASB establishes that these amendments are not to be treated as specified under IFRS 9 for changes to contractual cash flows, but rather as established under such standard for assets and liabilities at variable rate. This accounting treatment comprises the prospective revaluation of these financial instruments at the revised effective interest rate. This only applies when the change is a direct consequence of the rate reform and the basis used to determine the cash flows is economically equivalent to the basis immediately preceding rate replacement. In the case of lease liabilities revalued based on an interest rate that is being replaced with an alternative interest rate, a similar treatment is proposed.

 

   

Hedges: The IASB issued further practical solutions in addition to those issued in Phase 1, seeking to prevent the benchmark rate reform from discontinuing hedge accounting or the designation of a new relationship of this type. The hedging relationships (and related documentation) must be amended to reflect the effects on i) the hedged item, ii) the hedging instrument and iii) the hedged risk. Any valuation adjustments resulting from the amendments are recognized as part of the inefficiency.

 

   

Disclosure: The information disclosed must allow the user to understand the nature and extent of the risks to which the entity is exposed and how those risks generated by the interbank benchmark rate reform will be managed. The progress and management of the transition to alternative benchmark rates is also required to be informed.

The Group expects that the implementation of these amendments will have no significant impact on its financial statements because it does not have significant financial instruments under this kind of interest rate at the end of the informed year.

 

 

Anual improvements to IFRS – Standards 2018-2020

In May 2020, the IASB issued the 2018-2020 cycle of annual improvements that are applicable for fiscal years beginning on or after January 1, 2022, allowing their early application.

A summary of the main modified standards and their purpose follows:

 

36


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Standard

  

Amended Subject

  

Detail

IFRS 1 “First-time adoption of IFRS”    Subsidiary as a First-time IFRS adopter   

When a subsidiary becomes a first-time adopter later than its parent company, it may elect to measure its assets and liabilities according to how their parent measured them in their consolidated financial statements, based on the parent´s date of transition to IFRSs (without considering consolidation adjustments and for the purposes of the business combination for which the parent company acquired the subsidiary). After the amendment, this exception is extended to accumulated translation differences.

 

A similar election is available to an associate or joint venture.

IFRS 9 “Financial Instruments”    Fees in the “10 per cent” Test for Derecognition of financial liabilities   

An entity must derecognise the original financial liability and recognise a new financial liability when, among other requirements, there is a substantial modification of the terms of an existing financial liability.

 

The terms are substantially different if the discounted present value of the cash flows under the new terms using the original effective interest rate is at least 10% different from the discounted present value remaining cash flows of the original financial liability, including any fees paid net of any fees received in the 10 per cent test. The amendment clarifies that when determining this value, only the items paid or received between the borrower and the lender are included, including those paid or received by one or the other on behalf of the other.

IFRS 16 “Leases”    Illustrative examples- Lease incentives    Reimbursement relating to leasehold improvements is removed from illustrative Example 13.
IAS 41 “Agriculture”    Taxation in fair value measurements    Paragraph 22 was amended to remove the requirement to exclude cash flows for taxation when measuring fair value, as to aline the requirements in IAS 41 on fair value measurements with those in IFRS 13 “Fair Value Measurement”.

The Group expects that the implementation of these amendments will have no material impact on its financial statements.

Additionally, amendments have been issued to IFRS 4 and IFRS 17 “Insurance contracts”, which were not included as they are not applicable to the Group since it does not carry out related activities.

2.c) Accounting Estimates and Judgments

The items in the financial statements and areas which require the highest degree of judgment and estimates in the preparation of these financial statements are:

Crude oil and natural gas reserves

Estimating crude oil and gas reserves is an integral part of the Group’s decision-making process. The volume of crude oil and gas reserves is used to calculate depreciation using the unit of production ratio and to assess the impairment of the capitalized costs related to the Upstream assets (see Notes 2.b.8 and 2.b.9 and the last paragraph of this Note).

The Group prepares its estimates of crude oil and gas reserves in accordance with the rules and regulations established for the crude oil and natural gas industry by Rule 4-10 (a) of Regulation S-X of the SEC.

Provision for litigation and other contingencies

The final costs arising from litigation and other contingencies, and the perspective given to each issue by the Management of the Company may vary from their estimates due to different interpretations of laws, contracts, opinions and final assessments of the amount of the claims. Changes in the facts or circumstances related to these types of contingencies and the strategy defined in each case can have, consequently, a significant effect on the amount of the provisions for litigation and other contingencies recorded or the perspective given by the Management of the Company.

 

37


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Provision for environmental costs and obligations for the abandonment of hydrocarbon wells

Given the nature of its operations, the Group is subject to various laws and regulations relating to the protection of the environment. These laws and regulations may, among other things, impose liability on companies for the cost of pollution cleanup and environmental damages resulting from operations. YPF management believes that the Group’s operations are in substantial compliance with laws and regulations of Argentina and the countries where the Group operates, relating to the protection of the environment as such laws have historically been interpreted and enforced.

The Group periodically conducts new studies to increase its knowledge of the environmental situation in certain geographic areas where it operates in order to establish the status, cause and necessary remediation of a given environmental issue and, depending on its years of existence, analyze the Argentine Government’s possible responsibility for any environmental liabilities existing prior to December 31, 1990. The Group cannot estimate what additional costs, if any, will be required until such studies are completed and evaluated; however, provisional remedial actions or other measures may be required.

In addition to the hydrocarbon wells abandonment legal obligation, provisions have been made for environmental liabilities whose evaluations and/or remediations are probable and can be reasonably estimated, based on the Group’s existing remediation program. Legislative changes, on individual costs and/or technologies may cause a re-evaluation of the estimates. The Group cannot predict what environmental legislation or regulation will be enacted in the future or how future laws or regulations will be administered. In the long-term, these potential changes and ongoing studies could materially affect the Group’s future results of operations.

The main guidelines on the provision for the obligations for the abandonment of hydrocarbon wells are set forth in detail in Note 2.b.6.

Income tax and deferred income tax

The proper assessment of income tax expenses depends on several factors, including interpretations related to tax treatment for transactions and/or events that are not expressly provided for by current tax law, options established by the law or its regulations, as well as estimates of the timing and realization of deferred income taxes. Also, the Group evaluates if the tax authority will accept an uncertain tax treatment. Additionally, the current collection and payment of income tax expenses may differ from these estimates due to, among others, changes in applicable tax regulations and/or their interpretations, as well as unanticipated future transactions affecting the Group’s tax balances. See Note 16.

Provision for impairment of property, plant and equipment

The methodology used in estimating the recoverable amount of property, plant and equipment is detailed in Notes 2.b.8 and 2.b.9.

The determination of whether an asset is impaired, and by how much, involves management’s estimates of highly uncertain matters such as the effects of inflation and deflation on operating expenses, discount rates, production profiles, reserves and future prices of the products, including the prospects of supply and demand conditions of the world or regional market for crude oil, natural gas and refined products, all of which affects the prices taken into account in the projection. Consequently, for oil and natural gas assets, the expected future cash flows are determined using management’s best estimate of future oil and natural gas prices and production volumes and reserves. The foregoing implies the use of estimates about future commodity prices, production and development costs, field decline rates, current tax regimes and other factors. These estimates and the management judgment on which the estimates of expected cash flows are based are subject to changes as new information becomes available. Changes in economic conditions may also affect the rate used to discount future cash flow estimates.

 

38


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

In general, the Group does not consider temporarily low (or high) prices or margins as an impairment indicator (or reversal of an impairment charge). The impairment assessment mainly reflects long-term oil and natural gas prices that are consistent with intermediate points between the maximum and minimum ranges observed in the market and that are in the range of price forecasts published by third-party experts of the industry and government agencies, within which are the long and short term projections of the US Energy Information Administration and the Brent crude forward curve. The assumptions of future prices used by the Management of the Company tend to be stable because it does not consider short-term increases or decreases in prices to be indicative of long-term levels, but they are subject to change. Additionally, oil prices do not rise above the historical oil prices observed in the past, applied to projected future production volumes. Gas prices correspond to the average weighted price per basin and channel, determined according to current contracts and regulations and the market’s supply and demand.

In relation to the gas market, incentive schemes were established in recent years in order to increase the total injection of natural gas. In particular, in 2018 and 2019, an excess in the supply from the increased production on unconventional fields with respect to the domestic demand was observed at specific times of the year, an unusual situation in the past, which affected natural gas production due to the temporary shutdown of wells, as well as to the reinjection of the hydrocarbon. This situation generated a reduction in natural gas sales price in the domestic market, which generated a drop in gas production due to the lack of incentives to develop projects. Consequently, on November 16, 2020, the National Government published in the BO the Plan for the Promotion of Argentine Natural Gas Production 2020-2024 (“GasAr Plan”) with the aim of making viable investments to increase the production of natural gas in all the country’s basins and satisfy the hydrocarbon needs of the domestic market. See Note 34.g.

For the fiscal year ended December 31, 2018, the Group recognized a reversal in the charge for impairment of the value of its assets for the CGU Oil of 39,837 and an impairment charge of property, plant and equipment, mainly for the CGU Gas – Neuquina Basin of 28,326 and CGU Gas – Austral Basin of 8,246.

The reversal of impairment charge of the CGU Oil assets is mainly due to the increase in oil reserves coupled with estimated cost improvements, all of which is mainly set off by: (i) the rise in the discount rate as a result of the higher country risk and cost of debt and (ii) larger investments associated to higher reserves contemplated in cash flow. All the foregoing taking into account the book value of assets as of December 31, 2018, affected by the deprecation charges for the fiscal year and the investments made, among others.

The impairment of the CGU Gas – Neuquina Basin and CGU Gas – Austral Basin assets arises from a combination of multiple factors, mainly from the anticipated reduction in gas market prices due to the lower sales price to distributors and power plants (see Note 34.f) and the higher discount rate due to higher country risk and cost of debt, all of which is partially set off by a reduction in operating costs.

The discount rate after taxes used as of December 31, 2018 was 10.94% for 2019 and 11.19% for 2020 and thereafter, the recoverable value after taxes as of such date of the CGU Oil, CGU Gas – Neuquina Basin and CGU Gas – Austral Basin are 254,549, 108,509 and 8,606, respectively.

For the fiscal year ended December 31, 2019, the Group recognized an impairment charge of property, plant and equipment, mainly for the CGU Gas – Neuquina Basin of 40,561 (30,421 net of the income tax effect), generated among others by the fall in gas prices (and liquids) due to the situation that the market was going through both globally and, by specific dynamics, at the local level. The aforementioned affected the investments and activity, generating the impairment of the related assets by the recorded charge.

The discount rate after taxes used as of December 31, 2019 was 12.14% for 2020 and 2021 and 12.39% for 2022 and thereafter, being the recoverable value after taxes of the CGU Gas – Neuquina Basin of 139,361 as of such date.

 

39


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

During the year 2020, the Group has continuously monitored business perspectives in the market it operates. Specifically, in the local market of natural gas a reduction in natural gas sales price in the domestic market is observed which deepened as of the second quarter of 2020, mainly due to lower sales prices to distributors and lower prices obtained on gas’s biddings on the power plants channel.

In the second quarter of 2020, based on the background and the method mentioned above, the Group recognized an impairment charge of property, plant and equipment, mainly for the CGU Gas – Neuquina Basin of 49,170 (36,877 net of the income tax effect) and for the CGU Gas – Austral Basin of 8,126 (6,095 net of the income tax effect), generated, mainly, by the expected fall in gas prices due to the situation the market was going through at global level, and also, to the specific dynamics mentioned above, at the domestic level.

Subsequently, during the fourth quarter of 2020, mainly from the previously mentioned launch of GasAr Plan, expectations related to the development of gas projects were modified. Consequently, in this quarter, the Group recognized a reversal of the impairment charge of property, plant and equipment, mainly for the CGU Gas – Neuquina Basin of 58,463 (43,848 net of the income tax effect) and for the CGU Gas – Austral Basin of 7,706 (5,780 net of the income tax effect). The reasons for the reversal are mainly due to the increase in the expected production of natural gas from the curves committed in the framework of the aforementioned Plan and, to a lesser extent due, to the reduction in production costs. The discount rate after taxes used as of December 31, 2020 was 12.85% for 2021 and 13.12% for 2022 and thereafter, being the recoverable value after taxes of the CGU Gas – Neuquina Basin and the CGU Gas – Austral Basin equal to 192,197 and 16,036, respectively.

Considerations concerning COVID-19 (coronavirus) and the current economic environment

Since the beginning of 2020, a virus outbreak has taken place, causing potentially deadly respiratory infections (COVID-19) outbroke, and adversely affecting the demand for refined products in geographical areas where the most relevant measures were implemented to control the virus’ spread. Particularly, since March, the lower global demand for refined products and the uncertainty in the supply of crude oil have caused an abnormally high volatility in this commodity.

On March 12, 2020, Decree No. 260/2020 was published in the BO, which extended for a period of one year the public health emergency established by Law No. 27,541 due to the pandemic.

Also, since March 20, 2020, the Argentine Government adopted certain measures to protect the general population and fight the disease. These measures imposed a general restriction on economic activity, with some exceptions, which included, among other actions, price controls, the prohibition of dismissals without cause as well as for reasons of lack or reduction of activity and force majeure, general restriction to the free circulation during certain periods in Argentina, general travel restrictions, visas suspension, nation-wide lockdowns, closing of public and private institutions, sporting events suspension, restrictions to the operation of museums and tourist attractions and extension of holidays. These measures include several exceptions applicable to people engaged in activities and services declared as essential in the emergency, minimum work shifts are contemplated ensuring the operation and maintenance of oil and gas fields, oil and gas treatment and/or refining plants, transportation and distribution of electric energy, liquid fuels, oil and gas, fuel service stations and electric power generators.

 

40


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

The implementation of these measures significantly affected the demand of gasoline, diesel and jet fuel, reaching declines during April 2020 of 70%, 40% and 90%, respectively, as a daily average compared to the demand in the days prior to these measures. As of the third quarter of 2020, the restrictions became more flexible, gradually recovering a certain normality in the social and economic functioning of the country. Consequently, there was a gradual recovery in the demand for fuels, and activities in our fields and refineries gradually resumed. On February 2021, the volume declines on recurring sales of fuels (gasoline and diesel) and jet fuel are in the order of 7% and 70%, respectively, compared to levels in the days prior to the pandemic. Although a significant recovery in sales is observed, current levels of activity continue to be below normal values, affecting the Group’s comprehensive results and cash flows.

As mentioned above, the valuation of certain assets and liabilities is subject to a higher level of uncertainty, which is why the current economic context was considered in the evaluation of estimates and accounting judgments described above.

As of the date of these consolidated financial statements, due to the uncertainties inherent to the scale and duration of these events and its direct and indirect effects, it is not reasonably possible to estimate the final impact this pandemic will have on the world’s economy and its financial markets, on Argentina’s economy, and consequently, on the Group’s comprehensive results, cash flows and financial position of the Group, nor its effect on access to debt markets, the contractual position with certain counterparties (including as a result of events of force majeure or other similar events under the Group’s contracts), the Group’s capacity to meet its commitments and future asset impairments, among other issues.

The Management of the Company has considered the impact of COVID-19 and the current economic environment when preparing these consolidated financial statements and continues to consider it appropriate to adopt the going-concern basis of accounting for their presentation and valuation.

2.d) Comparative Information

Balance items as of December 31, 2019 and 2018 presented in these financial statements for comparison purposes arise from the consolidated financial statements then ended. Likewise, certain additional disclosures of non-significant information have been made.

3. ACQUISITIONS AND DISPOSITIONS

 

 

Assignment agreement of CAN 100 exploration permit (offshore) –Block E-1 Reconversion

On October 8, 2019, YPF and Equinor Argentina BV Sucursal Argentina (“Equinor”) subscribed an agreement whereby Equinor would acquire a 50% interest in the “CAN 100” area, while YPF would maintain a 50% interest in such area. The agreement will become effective subject to certain conditions precedent, including the approval of the assignment by the SGE.

On April 16, 2020, having met the conditions established under the assignment agreement, among them, the approval by the SE of the assignment pursuant to section 72 of the Hydrocarbons Law, which was granted through Resolution No. 55/2020, the transaction was settled, efectivizing YPF’s assigment of its 50% interest in the area and the operation to Equinor Argentina B.V. Sucursal Argentina. On April 22, 2020, YPF received US$ 22 million. In light of the foregoing of the above, the Group recorded a profit of 1,457 included in “Other net operating results”.

On January 14, 2021, YPF and Shell Argentina S.A. (“Shell Argentina”) and Equinor and Shell Argentina executed two agreements under which YPF and Equinor will transfer to Shell Argentina a 15% interest in CAN 100 area, respectively. Therefore YPF will mantain a 35% interest in such area. The effectiveness of such agreements is subject to certain conditions precedent, including the approval of the assignments by the SE, which was pending at the date of issuance of these consolidated financial statements.

 

41


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

3. ACQUISITIONS AND DISPOSITIONS (Cont.)

 

 

Assignment agreement of Bandurria Sur Area

On January 2020, YPF was notified of the acquisition by Shell Argentina S.A. and Equinor Argentina AS (jointly, the “Consortium”) of the entire share package of Schlumberger Oilfield Eastern Ltd. (“SPM”), an affiliate of Schlumberger Argentina S.A. This assignment required payment by SPM of the outstanding price that amounted approximately to US$ 105 million, which has already been received by YPF. In light of the foregoing, the Group recorded a profit of 6,356 included in “Other net operating results”.

On January 30, 2020, YPF entered into an agreement entered into with the Consortium, through SPM, under which the main terms and conditions for the 11% additional sale of the Area was agreed upon.

On March 5, 2020, YPF executed an agreement assigning to Bandurria Sur Investments S.A. (“BSI”, formerly named SPM Argentina S.A.), an affiliate of Shell Argentina S.A. and Equinor Argentina AS (Argentina Branch), an 11% interest in the Bandurria Sur block. On April 29, 2020, Decree No. 512/2020 was issued, by which the Province of Neuquén approved the assignment in favor of BSI. On May 14, 2020, YPF and BSI entered into the final contracts for the joint exploitation of hydrocarbons in the Area, thereby complying with the precedent conditions for the entry into force of the agreement for the assignment of 11% of the unconventional exploitation concession of the Area to BSI. Consequently, YPF will continue to be the Operator of the Area, keeping a 40% interest in the concession, while BSI will have a 60% interest. In light of the foregoing, the Group recorded a profit of 4,420 included in “Other net operating results”.

 

 

Assignment agreement of Río Mayo and Sarmiento areas

On August 2, 2019, YPF and Capetrol Argentina S.A. (“Capetrol”) entered into an assignment agreement whereby YPF assigned to Capetrol 100% of the exploitation concessions over the Río Mayo and Sarmiento areas, located in the Province of Chubut. The agreement contemplates the assignment of the concession for a consideration of US$ 1.1 million.

On October 25, 2019, by means of Decree No. 1,185/2019, the Province of Chubut approved the abovementioned assignment. Additionally, on October 28, 2019 YPF and Capetrol subscribed the documents required to formally execute the assignment.

In light of the foregoing, the Group recorded as of December 31, 2019, a loss of 187 included in “Other net operating results”.

 

 

Assignment agreement of the Al Sur de la Dorsal, Anticlinal Campamento, Dos Hermanas and Ojo de Agua areas

On December 20, 2018, YPF and Oilstone Energía S.A. (“OESA”) entered into an assignment agreement whereby YPF assigned to OESA 100% of the exploitation concessions over the Al Sur del Dorsal, Anticlinal Campamento, Dos Hermanas and Ojo de Agua areas, located in the Province of Neuquén. The agreement sets forth the assignment of the concession for a consideration of US$ 12 million.

On July 24, 2019, by means of Decree No. 1,346/2019, the Province of Neuquén approved the abovementioned assignment of the areas. Additionally, on July 31, 2019 YPF and OESA subscribed the documents required to formally execute the assignment.

In light of the foregoing, the Group recorded as of December 31, 2019, a loss of 558 included in “Other net operating results”.

 

 

Acquisition of Aguada del Chañar area

On June 25, 2019, YPF received a notice from IEASA informing YPF that it was awarded the National and International Public Tender No. ADCH 01/2019, related to the assignment by IEASA of 100% of the conventional and unconventional exploitation, and transportation concession granted on the Aguada del Chañar area, located in the Province of Neuquén, together with all its assets and facilities. YPF won said Public Tender with a US$ 96 million bid.

On June 28, 2019, Decree No. 1,096/2019 was published in the BO of the Province of Neuquén, authorizing such assignment. On the same date, IEASA and YPF signed the final agreements and perfected the assignment.

In light of the foregoing, the Group as of December 31, 2019, has recorded the exploratory mining property for 4,055 in “Intangible Assets”.

 

42


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

3. ACQUISITIONS AND DISPOSITIONS (Cont.)

 

 

Acquisition of Ensenada de Barragán Thermal Power Plant

On May 29, 2019, the Company received a notice from IEASA informing that YPF and Pampa Cogeneración S.A., a company controlled by Pampa Energía S.A. (“Pampa”), were awarded of the National and International Public Tender No. CTEB 02/2019, pursuant to their joint offer, which was called by Resolution No. 160/2019 issued by the SGE (the “Tender Process”), in relation to the sale and transfer by IEASA of the goodwill of Ensenada de Barragán Thermal Power Plant (“CTEB”). The awarded companies decided to jointly acquire CTEB, through a company co-owned by them, each with a 50% share in the capital stock and votes, called CT Barragán.

CTEB is located in the petrochemical complex of Ensenada, Province of Buenos Aires, with an installed capacity of 567 MW as of today. As part of the transaction, the acquiring companies will have a term of 30 months to complete the works required for CTEB to operate on a combined cycle basis, which will increase its installed capacity to 840 MW.

Energy supply agreements with CAMMESA in respect of both the open and closed cycles have been entered into, pursuant to Resolution SE No. 220/2007. The first agreement was executed on March 26, 2009 (expiring in April 27, 2022), and the second on March 26, 2013 for a term of 10 years from the commercial operation of the combined cycle.

The joint investment for the acquisition of CTEB amounted to US$ 282 million, which includes the final amount offered (cash) in the Tender Process, and the purchase price of certain amount of debt securities (“VRD”) issued under the supplemental agreement to the global financial and administration trust program for the execution of energy infrastructure projects – Series 1 – ENARSA (Barragán) “Contrato suplementario del programa global de fideicomisos financieros y de administración para la ejecución de obras de infraestructura energética -Serie 1- ENARSA (Barragán)” (the “Trust Agreement”). The price is subject to certain adjustments provided for in the terms and conditions of the Tender Process.

The acquisition of the goodwill of CTEB also includes the assignment of the Trust Agreement to CT Barragán S.A., as trustor under the trust. The VDR debt under the Trust Agreement (excluding the VDR to be acquired by the CT Barragán S.A.) amounted to approximately US$ 229 million, which is expected to be repaid with cash flows from CTEB.

On June 26, 2019 the sale and transfer by IEASA of the goodwill of CTEB to CT Barragán S.A. was formally executed. Each shareholder made a capital contribution of US$ 100 million to CT Barragán S.A., which also received a loan for US$ 170 million from a bank syndicate and a new schedule of payments and conditions of the CTEB existing trust. In both cases, without recourse to shareholders, except in the event of default of certain conditions.

CT Barragán S.A. entered into an agreement with Pampa and YPF EE for the provision of administration and management services to CTEB, which will be provided alternately by Pampa and YPF EE for 4-year terms. CT Barragán S.A. also entered into an agreement with YPF EE for the provision of monitoring services of the works for CTEB’s cycle closing.

The following table shows in detail the transferred consideration and the fair values of the acquired assets and the liabilities assumed by CT Barragán S.A. as of June 26, 2019, after considering the price adjustment for US$10 million:

 

     Fair value as of the
acquisition date
 

Fair value of identifiable assets and assumed liabilities:

  

Financial assets at fair value

     682  

Property, plant and equipment

     20,330  

Inventories

     341  

VRD

     (9,760
  

 

 

 

Total identifiable net assets / Consideration

     11,593  
  

 

 

 

The fair value of property, plant and equipment and inventories was calculated mainly based on the depreciated replacement cost approach corresponding to the acquired assets. To such end, CT Barragán S.A. had the assistance of an external appraiser. Additionally, CT Barragán S.A. has estimated the value in use that expects to obtain from the assets to ascertain that the fair value is not higher than its recoverable value.

As a result of the process described above, CT Barragán S.A. has not identified separate intangible assets that must be recognized in relation to the business acquisition.

 

43


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

3. ACQUISITIONS AND DISPOSITIONS (Cont.)

 

 

Assignment agreement of the Bajo del Piche, Barranca de Los Loros, El Medanito and El Santiagueño areas

On June 11, 2018, YPF and Petróleos Sudamericanos S.A. (“PS”) entered into an agreement for the assignment of 100% of the exploitation concessions over the areas known as Bajo del Piche, Barranca de Los Loros, El Medanito and El Santiagueño, located in the provinces of Neuquén and Río Negro for an amount of US$ 22.3 million.

On December 2, 2018, by Decree No. 1,677/2018, the Province of Río Negro approved the assignment. Also, on December 20, 2018, YPF and PS signed the documents required to execute the assignment.

On January 2, 2019, YPF and PS signed a memorandum whereby from such date PS takes possession of the facilities located in such areas, taking responsibility for the same and releasing YPF from its role as operator of those exploitation concessions.

On February 11, 2019, the Executive Branch of the Province of Rio Negro published Decree No. 1,677/2018 authorizing the sale of 100% of the exploitation concession.

In light of the foregoing, the Group recorded as of December 31, 2019, a profit of 1,523 included in “Other net operating results”.

 

 

Agreement for the exploitation of the Aguada Pichana and Aguada de Castro

After the exchange on the interest mentioned on Note 33 b, the Group has recorded as of December 31, 2018, a profit of 1,167 included in the item “Other net operating results”.

 

 

Assignment of interest in Bajo del Toro area

After fulfilling the precedent conditions mentioned on Note 33.b, the Group has recorded as of December 31, 2018, a profit of 871 included in the item “Other net operating results”.

 

 

Agreement for YPF Energía Eléctrica S.A.’s capitalization

On December 14, 2017, the Board of Directors of the Company approved the terms of a memorandum of understanding signed with GE Energy Financial Services, Inc. (“GE EFS”) which established the framework conditions under which the parties would agree to the capitalization of YPF EE. This Agreement, the framework conditions of which were approved by the Board of Directors of the Company, established that GE EFS intended to contribute capital through a vehicle company and subscribe for shares of YPF EE in order to have a shareholding of 25% of its capital stock.

As of December 31, 2017, the Group had classified its investment in YPF EE as assets and liabilities held for disposal in separate lines from the rest of the assets and liabilities, given that as of that date they had met all the requirements for this classification (see Note 2.b.24). Given that, at the time of classification, the fair value excluding costs of the transaction was higher, the investment in YPF EE has been valued at its book value, therefore, no impairment has been recorded at the time of reclassification. Although YPF EE represented a component within YPF because it was an individual CGU within the Gas and Power segment, it did not qualify as a discontinued operation since it did not represent a significant line of business nor a geographical area.

On February 6, 2018, YPF entered into a definitive and binding agreement with EFS Global Energy B.V. (“GE”) and GE Capital Global Energy Investments B.V., companies indirectly controlled by GE EFS, which establishes the conditions for the capitalization of YPF EE (the “Share Subscription Agreement”).

The Share Subscription Agreement establishes that, subject to compliance with certain conditions precedent, GE will subscribe for shares of YPF EE in order to achieve a participation equal to 24.99% of its capital stock and jointly control this company with YPF.

On March 20, 2018, GE EFS Power Investments B.V., a subsidiary of EFS Global Energy B.V (both companies indirectly controlled by GE Energy Financial Services, Inc.; jointly “GE”), subscribed YPF EE shares representing 24.99% of its capital stock. Since then, GE EFS Power Investments and YPF jointly control YPF EE, undertaking to contribute as follows:

 

44


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

3. ACQUISITIONS AND DISPOSITIONS (Cont.)

 

   

Subscription price of US$ 275 million:

 

   

US$ 135 million on the closing date of the transaction; and

 

   

US$ 140 million 12 months after the closing date of the transaction.

 

   

Contingent price of up to the maximum sum of US$ 35 million subject to the evolution of the electric market prices (33.33% as of 24 months from the closing date of the transaction and 16.67% each subsequent year).

In this way, the capital structure of YPF EE after the issuance of shares is as follows:

 

Shareholder

   Number of
Shares
     Interest holding in
the capital stock
    Class of Shares  

YPF

     2,723,826,879        72.69218     A  

OPESSA

     86,476,112        2.30783     A  
  

 

 

    

 

 

   

 

 

 

Group

     2,810,302,991        75.00001     A  

GE

     936,767,364        24.99999     B  
  

 

 

    

 

 

   

 

 

 

Total

     3,747,070,355        100.00000  

The following table shows the main assets and liabilities held for disposal as of December 31, 2017:

 

 

Group of assets held for disposal:

 

     December 31,
2017
 

Property, plant and equipment

     4,982  

Investments in associates and joint ventures

     2,117  

Inventories

     1  

Other receivables

     914  

Trade receivables

     713  

Investments in financial assets

     78  

Cash and cash equivalents

     61  
  

 

 

 

Subtotal

     8,866  
  

 

 

 

Eliminations

     (43
  

 

 

 

Total

     8,823  
  

 

 

 

 

 

Liabilities associated to the group of assets held for disposal:

 

     December 31,
2017
 

Provisions

     96  

Deferred tax liabilities

     282  

Salaries and social security

     47  

Other liabilities

     1  

Loans

     4,072  

Accounts payable

     938  
  

 

 

 

Subtotal

     5,436  
  

 

 

 

Eliminations

     (1,243
  

 

 

 

Total

     4,193  
  

 

 

 

As a result of the implementation of IFRS 10 and the aforementioned capitalization process of YPF EE, the Group recorded as of December 31, 2018, a profit of 11,980 (11,879 through YPF and 101 through OPESSA) included in the item “Other net operating results”, which includes a profit of 13,552 (13,451 through YPF and 101 through OPESSA) due to the dilution of its interest in YPF EE with the consequent loss of control over it and the subsequent revaluation of its residual interest (3,438 y 10,114, respectively) and a loss of 1,572 (fully corresponding to YPF) for the reversal to net profit for the period of the accrued translation corresponding to the investment in this Company.

In order to determine the fair value of the investment in YPF EE, the Group has considered all the elements available as of the date of these financial statements, including the best estimation of the occurrence of the contingent payments provided in the operation. However, for the measurement of this fair value the Group had a term of one fiscal year to evaluate all the facts and circumstances existing as of the transaction date that may have affected the fair value measurement of the transaction, without identifying changes in such measurement.

Regarding the participation held after the aforementioned transaction, the Group has followed the guidelines of IFRS 10 “Consolidated financial statements” and has concluded that from the entry of GE in YPF EE, GE and YPF jointly control YPF EE. Consequently, the Group applied IFRS 11 “Joint Arrangements” defining such company as a joint venture, and measured it according to the equity method under the IAS 28 “Investments in associates and joint ventures”.

 

45


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

3. ACQUISITIONS AND DISPOSITIONS (Cont.)

 

Some of the main evaluated assumptions are described below:

 

(i)

Any decisions about the relevant activities of YPF EE thereof are to be taken jointly, there being no power of one shareholder over the other in relation to such activities, regardless of the different percentages of equity interests held in YPF EE by each of them. Although the Group owns a 75.00001% stake in YPF EE, according to the shareholders’ agreement, the following is required for decision-making purposes regarding the relevant activities: the approval of at least one Director appointed by each class of shares at the meeting of the Board of Directors and the approval of each class of shares for the adoption of such decisions at the Shareholders’ meeting;

 

(ii)

No shareholder has any power, as defined in IFRS 10, to the detriment of any other, independently of the number of Directors or personnel (key or not) appointed by each class of shares, in the management of the Company for its own benefit or to unilaterally modify the variable investment returns or ultimately, to unilaterally direct any of the decisions associated with the relevant activities.

 

 

Acquisition of strategic assets of Oil Combustibles S.A. (“Oil”)

On May 11, 2018, Oil’s bankruptcy was determined and, by means of a resolution dated June 1, 2018, the intervening judge decided to grant YPF and Destilería Argentina de Petróleo S.A. (“DAPSA”) the management of Oil in accordance with the terms of the offer presented by both companies, pursuant to which YPF and DAPSA were entitled for a 2 month period to use the logistic assets (docks and fuel storage tanks located in the Oil River Terminal on the Paraná River), to exclusively and directly supply fuel to the entire network of Oil gas stations by DAPSA, and to match the best purchase offer made by any third party, whether for the whole or a part of Oil’s facilities, and for the exclusive supply of Oil’s commercial network as part of the liquidation process of Oil’s assets.

On July 27, 2018, YPF and DAPSA filed a brief stating that they were able to continue the management for two additional months under certain conditions, which was accepted by the bankruptcy trustee and the judge.

The hearing for the opening of bids for the parties interested in acquiring Oil’s industrial assets, originally scheduled for September 14, 2018, was held on October 1, 2018.

On October 2, 2018, YPF received notice of the decision adopted by the judge in charge of Oil Combustibles S.A.’s bankruptcy proceedings, which awarded the industrial assets of the bankrupt company to YPF and DAPSA, pursuant to the local and international bidding process carried out in connection with the sale of Oil Combustibles S.A.’s assets.

The total price of the transaction amounted to US$ 85 million, which was paid on November 2, 2018. From such amount, US$ 63 million correspond to net assets acquired by YPF. These, especially the docks and fuel storage tanks located in the Paraná River fluvial terminal, will allow the expansion of YPF’s logistics capacity for actual and future business.

YPF requested the unavailability of the funds, which remained deposited in the judicial account at the order of the court until title and registration of the real estate was conveyed in favor of YPF, in year 2019. The real property composing the River Terminal was registered with the General Register of Rosario of the Ministry of Justice of the Province of Santa Fe.

Additionally, on November 6, 2018, Division D of the Argentine Court of Appeals rejected the appeal filed by some of the former Oil shareholders which challenged the award in favor of YPF and DAPSA under the bidding process described herein.

The acquisition of these assets qualified as a business combination under IFRS 3.

The following table resumes consideration and fair value of the acquired assets and the liabilities assumed on the acquisition date:

 

     Fair value at the
acquisition date
 

Fair value of identifiable assets and assumed liabilities:

  

Property, plant and equipment

     2,327  

Inventories

     445  

Provisions

     (465
  

 

 

 

Total net identifiable assets / consideration

     2,307  
  

 

 

 

 

46


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

3. ACQUISITIONS AND DISPOSITIONS (Cont.)

 

 

Assignment of interest in the Aguada de la Arena and Río Neuquén areas

As part of the acquisition by Pampa Energía S.A. (“PEPASA”) of the total shares of Petrobras Participaciones S.L., which held 67.2% of the capital and voting rights of Petrobras Argentina S.A. (“PESA”), YPF and PEPASA entered into an agreement subject to certain conditions precedent under which, once the acquisition by PEPASA of shareholding control of PESA had been completed, PESA transferred to YPF its interest in the operating concessions of two areas located in the Neuquén basin with production and high potential for gas development (of the tight and shale type), to be operated by YPF, in the percentages detailed below: (i) 33.33% participation in the Río Neuquén area, located in the Province of Neuquén and in the Province of Río Negro; and (ii) 80% participation in the Aguada de la Arena area, located in the Province of Neuquén.

In order to implement this agreement, PEPASA and YPF signed a Framework Agreement for the Financing and Acquisition of Units and a Loan Agreement under which YPF, on July 25, 2016, granted PEPASA a guaranteed loan for the Indirect acquisition of the aforementioned areas in the amount of US$ 140 million, equivalent to the acquisition price of the aforementioned units, which does not differ from the fair value of the participation in said areas.

On October 14, 2016, the assignment of the interest in the operating concessions between YPF and PESA was consummated, as follows: (i) an interest of 33.33% in the Río Neuquén area for the sum of US$ 72 million; and (ii) an interest of 80% in the Aguada de la Arena area, for the sum of US$ 68 million.

On February 23, 2017, YPF and Petrouruguay S.A. subscribed the definitive agreement for the assignment in favor of YPF of 20% of the interest in the Aguada de la Arena area for US$ 18 million. Thus, YPF increased its participation to 100% in the aforementioned area.

On March 31, 2017, YPF cancelled, 33.33% of its participation in the Río Neuquén area and 80% of its participation in the Aguada de la Arena area through a payment in kind pursuant to an assignment in favor of PESA of its contractual position under the loan contract with PEPASA.

On September 5, 2018 the Province of Neuquén issued Decree No. 1,401/2018 which authorized the assignment of 33.33% of the Rio Neuquén area in favor of YPF. Additionally, on December 17, 2018, by Decree No. 2,314/2018, the Province of Neuquén approved the assignment of 100% interest in the Aguada de la Arena area to YPF (together with the assignment to YPF of the 20% of the transportation concession of the area).

 

 

Assignment agreement of the Cerro Bandera area

YPF and Oilstone Energía S.A. (“OESA”) entered into an agreement for the assignment of 100% of the exploitation concession of the Cerro Bandera area in the province of Neuquén (the “Concession”) on November 22, 2017. It should be noted that OESA operates the block since 2011 under the respective operating Agreement subscribed with YPF.

The agreement considers the assignment of the Concession for US$14 million. Moreover, the agreement sets forth that YPF maintains rights, under certain terms and conditions, to (i) the Vaca Muerta and Molles formations, in which it may continue to carry out exploration and potential exploitation works; and (ii) an exploratory project in the northern region of the Concession, and its potential exploitation.

On April 27, 2018, the Executive Power of the Province of Neuquén issued Decree No. 525/2018 which authorized the assignment of 100% of the exploitation concession in respect of Cerro Bandera provided for in the assignment agreement.

Based on the above, the Group has recorded as of December 31, 2018, a profit of 284 included in the item “Other net operating results”.

 

4.

FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, interest rate risk, and price risks), credit risk and liquidity risk. Within the Group, risk management functions are conducted in relation to financial risks associated to financial instruments to which the Group is exposed during a certain period or as of a specific date.

 

47


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

4. FINANCIAL RISK MANAGMENT (Cont.)

 

This section provides a description of the principal risks that could have a material adverse effect on the Group’s strategy in each operations center, performance, results of operations and financial condition. The risks facing the businesses, set out below, do not appear in any particular order of potential materiality or probability of occurrence.

The sensitivity analysis of market risks included below are based on a change in one factor while holding all other factors constant. In practice this is unlikely to occur, and changes in some of the factors may be correlated, for example, changes in interest rate and changes in foreign currency rates.

This sensitivity analysis provides only a limited, point-in-time view. The actual impact on the Group’s financial instruments may differ significantly from the impact shown in the sensitivity analysis.

 

 

Market Risk management

The market risk to which the Group is exposed is the possibility that the valuation of the Group’s financial assets or financial liabilities as well as certain expected cash flows may be adversely affected by changes in interest rates, exchange rates or certain other price variables.

The following is a description of these risks as well as a detail of the extent to which the Group is exposed and a sensitivity analysis of possible changes in each of the relevant market variables.

Exchange Rate Risk

The value of financial assets and liabilities denominated in a currency different from the Company’s functional currency is subject to variations resulting from fluctuations in exchange rates. Since YPF’s functional currency is the U.S. dollar, the currency that generates the greatest exposure is the Peso (the Argentine legal currency).

Likewise, given the restrictions imposed by the BCRA for access to the exchange market, specifically since the publication of Communication No. 7,030 (see Note 34.k), the Group has been reducing its portion of cash and cash equivalents denominated in currencies other than the Argentine Peso, and, therefore it may be affected in case of exchange rate variations, which motivated the Group to operate with derivative financial instruments as a hedge following the accounting policy defined in Note 2.b.17.

The following table provides a breakdown of the effect a variation of 10% in the prevailing exchange rates on the Group’s net income, taking into consideration the exposure of financial assets and liabilities denominated in Pesos as of December 31, 2020:

 

     Appreciation (+) /
depreciation (-) of exchange
rate of Peso against dollar
    Income (loss) for fiscal year
ended December 31, 2020
 

Impact on net income before income tax corresponding to financial assets and liabilities

     +10     (1,770
     -10     1,770  

Interest Rate Risk

The Group is exposed to risks associated with fluctuations in interest rates on loans and investments. Changes in interest rates may affect the interest income or loss derived from financial assets and liabilities tied to a variable interest rate. Additionally, the fair value of financial assets and liabilities that accrue interests based on fixed interest rates may also be affected.

 

48


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

4. FINANCIAL RISK MANAGEMENT (Cont.)

 

The table below provides information about the financial assets and liabilities as of December 31, 2020 that accrue interest considering the applicable rate:

 

     Financial
Assets(1)
     Financial
Liabilities(2)
 

Fixed interest rate

     36,055        606,277  

Variable interest rate

     8,906        72,029  
  

 

 

    

 

 

 

Total (3)

     44,961        678,306  
  

 

 

    

 

 

 

 

(1)

Includes temporary investments, loans with related parties and trade receivables with interest-bearing payment agreements. It does not include the rest of the trade receivables that are mostly non-interest bearing.

(2)

Includes only financial loans. Does not include accounts payable, which mostly do not accrue interest, nor the leases liabilities.

(3)

Includes principal and interest.

The variable rate financial loans represent 10% of the total loans as of December 31, 2020, and include NO, pre-financing of exports, financing of imports and financial loans with local and international entities. The portion of the loan, which accrues variable interest, is mainly subject to the fluctuations in LIBOR and BADLAR. Approximately 24,298 accrues variable interest of BADLAR plus a spread between 0.10% and 9.85% and 44,836 accrues variable interest of LIBOR plus a spread between 0.88% and 8.50%.

Approximately 94% of the total of the financial loans of the Group is denominated in dollars and the remainder is mainly in Pesos, as of December 31, 2020.

Financial assets mainly include, in addition to trade receivables, which have low exposure to interest rate risk, bank deposits, fixed-interest deposits and investments in mutual funds such as money market or short-term fixed interest rate instruments, Argentine Republic Bonds and Treasury Bills.

The Group’s strategy to hedge interest rate risk is based on investing funds at a variable interest rate, which partially offset financial loans at a variable interest rate, as well as based on maintaining relatively low percentages of debt at a variable interest rate.

The Group does not usually use derivative financial instruments to hedge the risks associated with interest rates.

The table below shows the estimated impact on consolidated statement of comprehensive income that an increase or decrease of 100 basis points in the interest rate would have.

 

     Increase (+) / decrease (-) in
the interest rates (basis
points)
  Income (loss) for fiscal year
ended December 31, 2020

Impact on net income after income tax

   +100   (766)
   -100   766

Price Risks

The Group is exposed to the own price risk for investments in financial instruments classified as at fair value through profit or loss (public securities and mutual funds). The Group continuously monitors the change in these investments for significant movements, as of December 31, 2020, the Company was affected by the variation in the valuation of mutual funds and public securities. See Note 6.

As of December 31, 2020, the aggregate value of financial assets at fair value through profit or loss amounts to 44,468.

The following table shows the effect that a 10% variation in the prices of investments in financial instruments would have on the Group’s results as of December 31, 2020:

 

     Increase (+) / decrease (-) in
the prices of investments in
financial instruments
  Income (loss) for the fiscal
year ended December 31,
2020

Impact on net income before income tax

   +10%   4,447
   -10%   (4,447)

 

49


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

4. FINANCIAL RISK MANAGEMENT (Cont.)

 

The Group does not use derivative financial instruments to hedge the risks associated with the fluctuation of the price of commodities as well as the risk inherent to investments in public securities and mutual funds.

The Group’s pricing policy regarding the sale of fuels contemplates several factors such as international crude oil prices, refining differentials, processing and processing and distribution costs, the prices of biofuels, the exchange rate, local demand and supply, competition, inventories, export duties, local taxes and domestic margins for their products, among others.

Consequently, beyond the Group’s expectation of substantially maintaining domestic prices with reference to those in international markets, exposure to price risk will depend on other factors (including, but not limited to, abrupt changes in the exchange rate, or in international prices or potential legal or regulatory limitations) that are also considered in the Group’s pricing policy, and which may therefore lead the Group to not fully reflect international parity prices in domestic prices in the short term, situation that was evidenced during the year 2018 and 2019, as established according to the price stability agreement dated May 8, 2018, entered into among the MINEM and the refining companies (among them, YPF), and into Decree No. 566/2019 and its respective amendments. In 2020, the same situation was evidenced until August 2020, according to Decree No. 488/2020. Thereafter, producers and refiners began negotiating prices taking international oil prices as reference. See Notes 2.c and 34.e.

 

 

Liquidity Risk management

Liquidity risk is associated with the possibility of a mismatch between the need of funds to meet short, medium or long-term obligations.

As mentioned in previous paragraphs, the Group intends to align the maturity profile of its financial debt to be related to its ability to generate enough cash to finance the projected expenditures for each year. As of December 31, 2020, the availability of liquidity reached 54,618, considering cash of 14,843 and other liquid financial assets of 39,775. Additionally, the Group has its other investments to free disposition in Treasury Bills of 19,052 included in “Investment in financial assets” (see Note 6). Uncommitted bank credit lines together with the capital market constitute an important source of funding. Likewise, YPF has the ability to issue additional debt under the negotiable obligations global program and under the Frequent Issuer Program.

With regards to the restrictions established by the BCRA for access to the exchange market, specifically since the publication of Communication No. 7,106 that refers to maturities of principal amounts of offshore debts and the issuance of debt securities denominated in foreign currency scheduled between October 15, 2020 and March 31, 2021, all the provisions issued were fulfilled by the Group. See Notes 34.k and 38.

The following table sets forth the maturity dates of the Group’s financial liabilities as of December 2020:

 

     December 31, 2020  
     Maturity date         
     0 - 1 year      1 - 2 years      2 - 3 years      3 - 4 years      4 - 5 years      More than
5 years
     Total  

Financial liabilities

                    

Lease liabilities

     22,098        11,757        5,600        2,620        1,818        2,377        46,270  

Loans

     150,731        78,543        60,020        66,164        132,104        190,744        678,306  

Other liabilities

     9,062        2,284        34        642        —          1        12,023  

Accounts payable (1)

     138,537        41        1        —          —          640        139,219  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     320,428        92,625        65,655        69,426        133,922        193,762        875,818  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

The amounts disclosed are the contractual, undiscounted cash flows associated to the financial liabilities given that they do not differ significantly from their face values.

Most of the Group’s loans contain usual covenants for contracts of this nature, which include financial covenants in respect of the Group’s leverage ratio and debt service coverage ratio, and events of defaults triggered by materially adverse judgements, among others. See Notes 15, 31 and 32.

 

50


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

4. FINANCIAL RISK MANAGEMENT (Cont.)

 

Under the terms of the loan agreements and NO, if the Group breached a covenant or if it could not remedy it within the stipulated period, it would default, a situation that would limit its liquidity and, given that the majority of its loans contain cross default provisions, it could result in an early enforceability of its obligations.

As of December 31, 2020, the Group had exceeded the leverage ratio required under the covenants, and therefore, even though there is no acceleration of maturities of due amounts or restrictions to refinance existing loans, the Group has certain limitations in its capacity to incur further debt. However, there are certain exceptions that might allow the Group certain flexibility to manage its debt.

It should be noted that, under the terms and conditions of the loans that our subsidiary Metrogas has taken with Industrial and Commercial Bank of China Limited—Dubai Branch and Itaú Unibanco—Miami Branch, the debt service coverage ratio would not have been complied with, which could have accelerated the maturities of these financial liabilities. However, on December 31, 2020, the financial creditors formally accepted to waive Metrogas from complying with the contractual obligation related to such financial ratio, as of December 31, 2020.

 

 

Credit Risk management

Credit risk is defined as the possibility of a third party not complying with its contractual obligations, thus negatively affecting results of operations of the Group.

Credit risk in the Group is measured and controlled on an individual customer basis. The Group has its own systems to conduct a permanent evaluation of credit performance and the determination of risk limits of all of its debtors and to third parties, in line with best practices using for such end internal customer records and external data sources.

Financial instruments that potentially expose the Group to a credit concentration risk consist primarily of cash and cash equivalents, investment in financial assets, trade receivables and other receivables. The Group invests excess cash primarily in high liquid investments with financial institutions with a strong credit rating both in Argentina and abroad. In the normal course of business and based on ongoing credit evaluations to its customers, the Group provides credit to its customers and certain related parties.

Likewise, the Group accounts for doubtful trade losses in the statement of comprehensive income, based on specific information regarding its clients.

Provisions for doubtful accounts are measured by the criteria mentioned in Note 2.b.18.

Moreover, the Group has recorded an impairment charge of accounts receivables related to Decree No. 1,053/2018. See Note 34.f.

The maximum exposure to credit risk of the Group of December 31, 2020 based on the type of its financial instruments and without excluding the amounts covered by guarantees and other arrangements mentioned below is set forth below:

 

     Maximum exposure
as of December 31,
2020
 

Cash and cash equivalents

     54,618  

Other financial assets

     180,382  

Considering the maximum exposure to the risk of the Other financial assets based on the concentration of the counterparties, credit with the National Government, direct agencies and companies with government participation, accounts for approximately 33% (60,316), while the Group’s remaining debtors are diversified.

 

51


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

4. FINANCIAL RISK MANAGEMENT (Cont.)

 

Following is the breakdown of the financial assets past due as of December 31, 2020:

 

     Current trade
receivable
     Other current
receivables
 

Less than three months past due

     11,670        574  

Between three and six months past due

     3,532        255  

More than six months past due

     15,943        1,628  
  

 

 

    

 

 

 
     31,145        2,457  
  

 

 

    

 

 

 

At such date, the provision for doubtful trade receivables amounted to 19,380 and the provisions for other doubtful receivables amounted to 1,204. These provisions are the Group’s best estimate of the losses incurred in relation with accounts receivables.

Guarantee Policy

As collateral of the credit limits granted to customers, the Group receives several types of guarantees from its customers. In the gas stations and distributors market, where generally long-term relationships with customers are established, mortgages prevail. For foreign customers, joint and several bonds from their parent companies prevail. In the industrial and transport market, bank guarantees prevail. To a lesser extent, the Group has also obtained other guarantees such as credit insurances, surety bonds, guarantee customer – supplier, and car pledges, among others.

The Group has effective guarantees granted by third parties for a total amount of 38,302, 42,026 and 24,377 as of December 31, 2020, 2019 and 2018, respectively.

During the fiscal years ended December 31, 2020, 2019 and 2018, the Group did not execute guarantees.

5. SEGMENT INFORMATION

The different segments in which the Group is organized take into consideration the different activities from which the Group obtains income and incurs expenses. The aforementioned organizational structure is based on the way in which the highest decision-making authority analyzes the main financial and operating magnitudes for making decisions about resource allocation and performance assessment also considering the Group’s business strategy.

 

   

Upstream

The Upstream segment carries out all activities relating to the exploration, development and production of oil and natural gas.

Revenue is generated from (i) the sale of produced crude oil to the Downstream segment and, marginally, from its sale to third parties; (ii) the sale of produced gas to the Gas and Power segment.

 

   

Gas and Power

The Gas and Power segment generates its revenue from the development of activities relating to: (i) the natural gas transport and commercialization to third parties and the Downstream segment, (ii) the commercial and technical operation of LNG regasification terminals in Bahía Blanca (until October 31, 2018) and Escobar, by hiring regasification vessels, and (iii) the natural gas distribution.

Additionally, for the 3 months period as of March 31, 2018, it included revenues derived from the generation of conventional and renewable electricity corresponding to YPF EE. See Note 3.

In addition to the proceeds derived from the sale of natural gas to third parties and the intersegment, which is then recognized as a purchase to the Upstream segment, and including Stimulus Plan for Natural Gas production in force (see Note 34.g), Gas and Power segment accrues a fee in its favor with the Upstream segment to carry out such commercialization.

 

52


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

5. SEGMENT INFORMATION (Cont.)

 

   

Downstream

The Downstream segment develops activities relating to: (i) crude oil refining and petrochemical production, (ii) commercialization of refined and petrochemical products obtained from such processes, (iii) logistics related to the transportation of crude oil and gas to refineries and the transportation and distribution of refined and petrochemical products to be marketed in the different sales channels.

It obtains its income from the marketing mentioned in item (ii) above, which is developed through the Retail, Industry, Aviation, Agro, LPG, Chemicals and Lubricants and Specialties businesses.

It incurs in all expenses relating to the aforementioned activities, including the purchase of crude oil from the Upstream segment and third parties and the natural gas to be consumed in the refinery and petrochemical industrial complexes from the Gas and Power segment.

 

   

Central Administration and Others

It covers other activities, not falling into the aforementioned categories or constitues other reporting business segments, mainly including corporate administrative expenses and assets and construction activities.

Sales between business segments were made at internal transfer prices established by the Group, which generally seek to approximate market prices.

Operating profit and assets for each segment have been determined after consolidation adjustments.

 

53


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

(Amounts expressed in millions of Argentine Pesos, except shares and per shares amounts expressed in Argentine Pesos, and as otherwise indicated)

   LOGO

 

5. SEGMENT INFORMATION (Cont.)

 

 

     Upstream     Gas and Power     Downstream     Central
Administration
and Others
    Consolidation
Adjustments (1)
    Total  

For the year ended December 31, 2020

            

Revenues from sales

     2,419       122,254       536,714       14,108       (6,309     669,186  

Revenues from intersegment sales

     289,421       8,060       3,349       28,787       (329,617     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

     291,840       130,314       540,063       42,895       (335,926     669,186  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit / (loss)

     (25,878     (18,994     4,839       (22,305     3,941       (58,397

Income from equity interests in associates and joint ventures

     —         9,199       4,071       —         —         13,270  

Depreciation of property, plant and equipment

     128,132 (3)      1,858       34,295       7,167       —         171,452  

(Recovery) / Impairment of property, plant and equipment and intangible assets, net (2)

     (7,475     527       —         97       —         (6,851

Acquisition of property, plant and equipment

     63,071       4,905       23,420       4,882       —         96,278  

Assets

     914,257       209,225       646,589       152,816       338       1,923,225  

For the year ended December 31, 2019

            

Revenues from sales

     2,046       131,055       531,724       19,743       (5,973     678,595  

Revenues from intersegment sales

     286,585       8,697       3,447       27,502       (326,231     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

     288,631       139,752       535,171       47,245       (332,204     678,595  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit / (loss)

     (49,194     2,944 (4)      40,653       (15,866     451       (21,012

Income from equity interests in associates and joint ventures

     —         5,339       2,629       —         —         7,968  

Depreciation of property, plant and equipment

     119,821 (3)      1,378       20,805       3,890       —         145,894  

Impairment of property, plant and equipment (2)

     40,561       868       —         —         —         41,429  

Acquisition of property, plant and equipment

     (136,589     (6,170     (22,455     (7,630     —         (172,844

Assets

     742,850       199,357       508,026       129,331       (6,275     1,573,289  

For the year ended December 31, 2018

            

Revenues from sales

     3,108       91,176       338,042       8,363       (4,869     435,820  

Revenues from intersegment sales

     207,480       7,862       1,688       13,186       (230,216     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

     210,588       99,038       339,730       21,549       (235,085     435,820  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit / (loss)

     22,483       16,786       7,818       (6,055     2,748       43,780  

Income from equity interests in associates and joint ventures

     —         4,435       404       —         —         4,839  

Depreciation of property, plant and equipment

     72,052 (3)      928       12,285       2,304       —         87,569  

(Recovery) of property, plant and equipment (2)

     (2,900     —         —         —         —         (2,900

Acquisition of property, plant and equipment

     63,171       1,968       15,632       2,877       —         83,648  

Assets

     480,263       129,885       307,312       82,762       (6,206     994,016  

 

(1)

Corresponds to the elimination among segments of the YPF Group.

(2)

See Notes 2.c., 7 and 8.

(3)

Includes depreciation of charges for impairment of property, plant and equipment.

(4)

Includes the result for revaluation of the interest in YPF EE. See Note 3.

 

54


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

5. SEGMENT INFORMATION (Cont.)

 

The distribution of revenues by geographic area, according to the markets for which they are intended, for the years ended on December 31, 2020, 2019 and 2018, and property, plant and equipment by geographic area as of December 31, 2020, 2019 and 2018 are as follows:

 

     Revenues      Property, plant and equipment  
     2020      2019      2018      2020      2019      2018  

Argentina

     585,652        589,653        390,892        1,379,191        1,068,832        698,222  

Mercosur and associated countries

     26,834        36,154        20,056        336        179        865  

Rest of the world

     23,620        35,836        15,711        —          —          —    

Europe

     33,080        16,952        9,161        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     669,186        678,595        435,820        1,379,527        1,069,011        699,087  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Intangible assets are geographically located in Argentina.

As of December 31, 2020, no foreign client represents 10% or more of the Group’s revenue from its ordinary activities.

6. FINANCIAL INSTRUMENTS BY CATEGORY

The following tables show the financial assets and liabilities by category of financial instrument and a reconciliation to the corresponding line item in the statements of financial position, as appropriate. Since the line items “Other receivables”, “Accounts payable” and “Other liabilities” contain both financial instruments and non-financial assets and liabilities (such as tax receivables, and receivables and payables in kind, among other) reconciliation is presented in the columns headed “Non-financial assets” and “Non-financial Liabilities”.

Financial Assets

 

     2020  
     Financial Assets
at amortized
cost
     Financial
Assets at fair
value through
profit or loss
    Subtotal
Financial
Assets
     Non-financial
Assets
     Total  

Other receivables (1)

     15,391        —         15,391        35,029        50,420  

Trade receivables (2)

     136,057        —         136,057        —          136,057  

Investment in financial assets

     19,052        9,882 (3)      28,934        —          28,934  

Cash and cash equivalents

     20,032        34,586       54,618        —          54,618  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 
     190,532        44,468       235,000        35,029        270,029  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

     2019  
     Financial Assets
at amortized
cost
     Financial
Assets at fair
value through
profit or loss
     Subtotal
Financial
Assets
     Non-financial
Assets
     Total  

Other receivables (1)

     19,078        —          19,078        29,892        48,970  

Trade receivables (2)

     139,982        —          139,982        —          139,982  

Investment in financial assets

     —          8,370        8,370        —          8,370  

Cash and cash equivalents

     59,062        7,038        66,100        —          66,100  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     218,122        15,408        233,530        29,892        263,422  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     2018  
     Financial Assets
at amortized
cost
     Financial
Assets at fair
value through
profit or loss
     Subtotal
Financial
Assets
     Non-financial
Assets
     Total  

Other receivables (1)

     14,860        —          14,860        17,250        32,110  

Trade receivables (2)

     98,930        —          98,930        —          98,930  

Investment in financial assets

     —          10,941        10,941        —          10,941  

Cash and cash equivalents

     38,236        7,792        46,028        —          46,028  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     152,026        18,733        170,759        17,250        188,009  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Does not include the provision for other doubtful receivables.

(2)

Does not include the provision for doubtful trade receivables.

(3)

Granted guarantees for contractual commitments with Exmar. See Note 33.e and 33.f.

 

55


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

6. FINANCIAL INSTRUMENTS BY CATEGORY (Cont.)

 

Financial Liabilities

 

     2020  
     Financial
liabilities at
amortized cost
     Financial
liabilities at fair
value through
profit or loss
     Subtotal
financial
liabilities
     Non-financial
liabilities
     Total  

Lease liabilities

     46,270        —          46,270        —          46,270  

Loans

     678,306        —          678,306        —          678,306  

Other liabilities

     12,023        —          12,023        —          12,023  

Accounts payable

     139,219        —          139,219        5,874        145,093  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     875,818        —          875,818        5,874        881,692  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2019  
     Financial
liabilities at
amortized cost
     Financial
liabilities at fair
value through
profit or loss
     Subtotal
financial
liabilities
     Non-financial
liabilities
     Total  

Lease liabilities

     61,780        —          61,780        —          61,780  

Loans

     526,760        —          526,760        —          526,760  

Other liabilities

     2,013        —          2,013        —          2,013  

Accounts payable

     149,880        —          149,880        1,180        151,060  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     740,433        —          740,433        1,180        741,613  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2018  
     Financial
liabilities at
amortized cost
     Financial
liabilities at fair
value through
profit or loss
     Subtotal
financial
liabilities
     Non-financial
liabilities
     Total  

Lease liabilities

     —          —          —          —          —    

Loans

     335,078        —          335,078        —          335,078  

Other liabilities

     1,271        —          1,271        —          1,271  

Accounts payable

     87,087        —          87,087        511        87,598  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     423,436        —          423,436        511        423,947  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gains and losses on financial and non-financial instruments are allocated to the following categories:

 

     2020  
     Financial and
non-financial Assets /
Liabilities at amortized
cost
     Financial Assets /
Liabilities at fair value
through profit or loss
     Total  

Interest income

     7,363        —          7,363  

Interest loss

     (65,821      —          (65,821

Net financial accretion

     (8,794      —          (8,794

Net exchange differences

     36,102        —          36,102  

Fair value loss on financial assets at fair value through profit or loss

     —          3,862        3,862  

Result from derivative financial instruments

     —          (860      (860

Results from transactions with financial assets

     —          9,786        9,786  

Result from financial instruments exchange (1)

     —          1,330        1,330  

Result from debt exchange (2)

     (2,097      —          (2,097

Result from net monetary position

     7,828        —          7,828  
  

 

 

    

 

 

    

 

 

 
     (25,419      14,118        (11,301
  

 

 

    

 

 

    

 

 

 

 

(1)

See Note 6 “Public securities and public debt restructuring”.

(2)

See Note 20.

 

56


Table of Contents

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”).

In case of discrepancy, the financial statements filed with the CNV prevail over this translation.

 

YPF SOCIEDAD ANONIMA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, 2019 AND 2018

   LOGO

 

6. FINANCIAL INSTRUMENTS BY CATEGORY (Cont.)

 

     2019  
     Financial and
non-financial Assets /
Liabilities at amortized
cost
     Financial Assets /
Liabilities at fair value
through profit or loss
     Total  

Interest income

     7,665        —          7,665  

Interest loss

     (48,136      —          (48,136

Net financial accretion

     (5,592      —          (5,592

Net exchange differences

     47,935        —          47,935  

Fair value gains on financial assets at fair value through profit or loss

     —          (1,449      (1,449

Result from derivative financial instruments

     —          (293      (293

Result from net monetary position

     5,904        —          5,904  
  

 

 

    

 

 

    

 

 

 
     7,776        (1,742      6,034  
  

 

 

    

 

 

    

 

 

 

 

     2018  
     Financial and
non-financial Assets /
Liabilities at amortized
cost
     Financial Assets /
Liabilities at fair value
through profit or loss
     Total  

Interest income

     3,033        —          3,033  

Interest loss

     (28,717      —          (28,717

Net financial accretion

     7,627        —          7,627  

Net exchange differences

     54,459        —          54,459  

Fair value gains on financial assets at fair value through profit or loss

     —          2,596        2,596  

Result from derivative financial instruments

     —          933        933  

Result from net monetary position

     1,594        —          1,594  
  

 

 

    

 

 

    

 

 

 
     37,996