EX-99.1 2 ex99_1.htm EXHIBIT 99.1
Exhibit 99.1
 
Adecoagro S.A.
 
Consolidated Financial Statements as of December 31,
2015 and 2014 and for the years ended December 31,
2015, 2014 and 2013
 
Report of Independent Registered Public Accounting Firm

To the Shareholders of
Adecoagro S.A.

We have audited the accompanying consolidated statements of financial position of Adecoagro S.A. and its subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income and comprehensive income, of changes in shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2015.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Adecoagro S.A. and its subsidiaries at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Buenos Aires, Argentina
March 15, 2016
 
PRICE WATERHOUSE & CO. S.R.L.
 
by /s/ Marcelo de Nicola (Partner)
 
Marcelo de Nicola
 
Legal information
 
Denomination: Adecoagro S.A.

Legal address: Vertigo Naos Building, 6, Rue Eugène Ruppert, L-2453, Luxembourg

Company activity: Agricultural and agro-industrial
Date of registration: June 11, 2010
Expiration of company charter: No term defined
Number of register (RCS Luxembourg): B153.681
Capital stock: 122,381,815 common shares (of which 1,289,803 are treasury shares)
 
F - 3
Adecoagro S.A.
Consolidated Statements of Financial Position
as of  December 31, 2015 and 2014
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
 
   
Note
    
2015
    
2014
  
                   
ASSETS
                  
Non-Current Assets
                  
Property, plant and equipment, net
    
6
      
540,218
      
776,905
  
Investment property
    
7
      
4,796
      
6,675
  
Intangible assets, net
    
8
      
16,661
      
23,778
  
Biological assets
    
9
      
253,005
      
286,044
  
Investments in joint ventures
    
10
      
-
      
2,752
  
Deferred income tax assets
    
22
      
60,857
      
45,597
  
Trade and other receivables, net
    
13
      
21,795
      
50,590
  
Other assets
            
651
      
587
  
Total Non-Current Assets
            
897,983
      
1,192,928
  
Current Assets
                        
Biological assets
    
9
      
46,265
      
55,188
  
Inventories
    
14
      
77,703
      
104,919
  
Trade and other receivables, net
    
13
      
145,011
      
164,526
  
Derivative financial instruments
    
12
      
4,849
      
7,966
  
Cash and cash equivalents
    
15
      
198,894
      
113,795
  
Total Current Assets
            
472,722
      
446,394
  
TOTAL ASSETS
            
1,370,705
      
1,639,322
  
SHAREHOLDERS EQUITY
                        
Capital and reserves attributable to equity holders of the parent
                        
Share capital
    
17
      
183,573
      
183,573
  
Share premium
    
17
      
937,674
      
933,044
  
Cumulative translation adjustment
            
(567,133
)
    
(395,804
)
Equity-settled compensation
            
16,631
      
16,735
  
Cash flow hedge
      3      
(137,911
)
    
(43,064
)
Treasury shares
            
(1,936
)
    
(2,840
)
Reserve from the sale of non-controlling interests in subsidiaries
    
16
      
41,574
      
25,508
  
Retained earnings
            
62,923
      
45,644
  
Equity attributable to equity holders of the parent
            
535,395
      
762,796
  
Non-controlling interest
            
7,335
      
7,589
  
TOTAL SHAREHOLDERS EQUITY
            
542,730
      
770,385
  
LIABILITIES
                        
Non-Current Liabilities
                        
Trade and other payables
    
20
      
1,911
      
2,391
  
Borrowings
    
21
      
483,651
      
491,324
  
Deferred income tax liabilities
    
22
      
15,636
      
39,635
  
Payroll and social liabilities
    
23
      
1,236
      
1,278
  
Derivatives financial instruments
    
12
      
119
      
39
  
Provisions for other liabilities
    
24
      
1,653
      
2,013
  
Total Non-Current Liabilities
            
504,206
      
536,680
  
Current Liabilities
                        
Trade and other payables
    
20
      
53,731
      
83,100
  
Current income tax liabilities
            
962
      
76
  
Payroll and social liabilities
    
23
      
22,153
      
27,315
  
Borrowings
    
21
      
239,688
      
207,182
  
Derivative financial instruments
    
12
      
6,575
      
13,860
  
Provisions for other liabilities
    
24
      
660
      
724
  
Total Current Liabilities
            
323,769
      
332,257
  
TOTAL LIABILITIES
            
827,975
      
868,937
  
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES
            
1,370,705
      
1,639,322
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 4
Adecoagro S.A.
Consolidated Statements of Income
for the years ended December 31, 2015, 2014 and 2013
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

   
Note
    
2015
    
2014
    
2013
  
                         
Sales of manufactured products and services rendered
    
25
      
490,619
      
513,127
      
425,307
  
Cost of manufactured products sold and services rendered
    
26
      
(321,998
)
    
(335,442
)
    
(272,261
)
Gross Profit from Manufacturing Activities
            
168,621
      
177,685
      
153,046
  
Sales of agricultural produce and biological assets
    
25
      
183,695
      
209,839
      
219,317
  
Cost of agricultural produce sold and direct agricultural selling expenses
    
26
      
(183,695
)
    
(209,839
)
    
(219,317
)
Initial recognition and changes in fair value of biological assets and agricultural produce
            
36,869
      
27,145
      
(39,123
)
Changes in net realizable value of agricultural produce after harvest
            
14,691
      
3,401
      
12,875
  
Gross Profit / (Loss) from Agricultural Activities
            
51,560
      
30,546
      
(26,248
)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
            
220,181
      
208,231
      
126,798
  
General and administrative expenses
    
26
      
(48,425
)
    
(52,695
)
    
(53,352
)
Selling expenses
    
26
      
(70,268
)
    
(78,864
)
    
(68,069
)
Other operating income, net
    
28
      
31,066
      
11,977
      
49,650
  
Share of loss of joint venture
    
10
      
(2,685
)
    
(924
)
    
(219
)
Profit from Operations Before Financing and Taxation
            
129,869
      
87,725
      
54,808
  
Finance income
    
29
      
9,150
      
7,291
      
7,234
  
Finance costs
    
29
      
(116,890
)
    
(86,472
)
    
(98,916
)
Financial results, net
    
29
      
(107,740
)
    
(79,181
)
    
(91,682
)
Profit / (Loss) Before Income Tax
            
22,129
      
8,544
      
(36,874
)
Income tax (expense) / benefit
    
22
      
(3,754
)
    
(6,106
)
    
9,277
  
Profit / (Loss) for the Year from Continuing Operations
            
18,375
      
2,438
      
(27,597
)
Profit for the Year from discontinued operations
            
-
      
-
      
1,767
  
Profit / (Loss) for the Year
            
18,375
      
2,438
      
(25,830
)
                                 
Attributable to:
                                
Equity holders of the parent
            
17,133
      
2,518
      
(25,828
)
Non-controlling interest
            
1,242
      
(80
)
    
(2
)
                                 
Earnings / (Loss) per share from continuing and discontinued operations attributable to the equity holders of the parent during the year:
                                
Basic earnings per share
    
30
                          
From continuing operations
            
0.142
      
0.021
      
(0.226
)
From discontinued operations
            
-
      
-
      
0.014
  
Diluted earnings per share
    
30
                          
From continuing operations
            
0.140
      
0.021
      
(0.226
)
From discontinued operations
            
-
      
-
      
0.014
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 5
Adecoagro S.A.
Consolidated Statements of Comprehensive Income
for the years ended December 31, 2015, 2014 and 2013
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
 
   
2015
    
2014
    
2013
  
                   
Profit / (Loss) for the year
    
18,375
      
2,438
      
(25,830
)
Other comprehensive income:
                        
-  Items that may be reclassified subsequently to profit or loss:
                        
Exchange differences on translating foreign operations
    
(178,719
)
    
(100,203
)
    
(129,575
)
Cash flow hedge (Note 3.)
    
(94,851
)
    
(27,287
)
    
(15,787
)
Other comprehensive (loss) for the year
    
(273,570
)
    
(127,490
)
    
(145,362
)
Total comprehensive (loss) for the year
    
(255,195
)
    
(125,052
)
    
(171,192
)
                         
Attributable to:
                        
Equity holders of the parent
    
(252,924
)
    
(124,586
)
    
(171,172
)
Non-controlling interest
    
(2,271
)
    
(466
)
    
(20
)
                         
Total comprehensive income attributable to owners of the parent arising from:
                        
Continuing operations
    
(252,924
)
    
(124,586
)
    
(172,939
)
Discontinued operations
    
-
      
-
      
1,767
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 6
Adecoagro S.A.
Consolidated Statements of Changes in Shareholders’ Equity
for the years ended December 31, 2015, 2014 and 2013
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

   
Attributable to equity holders of the parent
        
   
Share Capital
(Note 17)
    
Share
Premium
(Note 17)
    
Cumulative
Translation
Adjustment
    
Equity-settled
Compensation
    
Cash flow
hedge
    
Other
reserves
    
Treasury
shares
(Note 18 )
    
Retained
Earnings
    
Subtotal
    
Non-
controlling
Interest
    
Total
Shareholders’
Equity
  
Balance at December 31,  2012
    
183,331
      
940,332
      
(182,929
)
    
17,952
      
-
      
(349
)
    
(6
)
    
67,647
      
1,025,978
      
65
      
1,026,043
  
Loss for the year
    
-
      
-
      
-
      
-
              
-
      
-
      
(25,828
)
    
(25,828
)
    
(2
)
    
(25,830
)
Other comprehensive income:
                                                                                        
-  Items that may be reclassified subsequently to profit or loss:
                                                                                        
Exchange differences on translating foreign operations
    
-
      
-
      
(129,562
)
    
-
      
-
      
-
      
-
      
-
      
(129,562
)
    
(13
)
    
(129,575
)
Cash flow hedge (1)
    
-
      
-
      
-
      
-
      
(15,782
)
    
-
      
-
      
-
      
(15,782
)
    
(5
)
    
(15,787
)
Total comprehensive loss for the year
    
-
      
-
      
(129,562
)
    
-
      
(15,782
)
    
-
      
-
      
(25,828
)
    
(171,172
)
    
(20
)
    
(171,192
)
Employee share options (Note 18):
                                                                                        
- Value of employee services
    
-
      
-
      
-
      
61
      
-
      
-
      
-
      
-
      
61
      
-
      
61
  
- Exercised
    
-
      
126
      
-
      
(52
)
    
-
      
-
      
26
      
-
      
100
      
-
      
100
  
- Forfeited
    
-
      
-
      
-
      
(1,199
)
    
-
      
-
      
-
      
1,199
      
-
      
-
      
-
  
Restricted shares (Note 18):
                                                                                        
- Value of employee services
    
-
      
-
      
-
      
3,742
      
-
      
-
      
-
      
-
      
3,742
      
-
      
3,742
  
- Vested
    
242
      
2,721
      
-
      
(3,152
)
    
-
      
179
      
10
      
-
      
-
      
-
      
-
  
- Forfeited
    
-
      
-
      
-
      
-
      
-
      
9
      
(9
)
    
-
      
-
      
-
      
-
  
Purchase of own shares (Note 17)
    
-
      
(4,107
)
    
-
      
-
      
-
      
-
      
(982
)
    
-
      
(5,089
)
    
-
      
(5,089
)
Disposal of interest in joint ventures (Note 11)
    
-
      
-
      
684
      
-
      
-
      
-
      
-
      
-
      
684
      
-
      
684
  
Balance at December 31,  2013
    
183,573
      
939,072
      
(311,807
)
    
17,352
      
(15,782
)
    
(161
)
    
(961
)
    
43,018
      
854,304
      
45
      
854,349
  

(1) Net of US$ 8,347 of income tax.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 7
Adecoagro S.A.
Consolidated Statements of Changes in Shareholders’ Equity
for the years ended December 31, 2015, 2014 and 2013
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
 
   
Attributable to equity holders of the parent
              
   
Share Capital
(Note 17)
    
Share
Premium
    
Cumulative
Translation
Adjustment
    
Equity-settled
Compensation
    
Cash flow
hedge
(*)
    
Other
reserves
    
Treasury
shares
    
Reserve
from the
sale of non-
controlling
interests in
subsidiaries
    
Retained
Earnings
    
Subtotal
    
Non-
controlling
Interest
    
Total
Shareholders’
Equity
  
                                                                         
Balance at January 1, 2014
    
183,573
      
939,072
      
(311,807
)
    
17,352
      
(15,782
)
    
(161
)
    
(961
)
    
-
      
43,018
      
854,304
      
45
      
854,349
  
Profit for the year
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
2,518
      
2,518
      
(80
)
    
2,438
  
Other comprehensive income:
                                                                                                
-  Items that may be reclassified subsequently to profit or loss:
                                                                                                
Exchange differences on translating foreign operations
    
-
      
-
      
(99,822
)
    
-
      
-
      
-
      
-
      
-
      
-
      
(99,822
)
    
(381
)
    
(100,203
)
Cash flow hedge
    
-
      
-
      
-
      
-
      
(27,282
)
    
-
      
-
      
-
      
-
      
(27,282
)
    
(5
)
    
(27,287
)
Total comprehensive income for the year
    
-
      
-
      
(99,822
)
    
-
      
(27,282
)
    
-
      
-
      
-
      
2,518
      
(124,586
)
    
(466
)
    
(125,052
)
                                                                                                 
Employee share options (Note 18)
                                                                                                
- Value of employee services
    
-
      
-
      
-
      
308
      
-
      
-
      
-
      
-
      
-
      
308
      
-
      
308
  
- Exercised
    
-
      
955
      
-
      
(326
)
    
-
      
-
      
210
      
-
      
-
      
839
      
-
      
839
  
- Forfeited
    
-
      
-
      
-
      
(108
)
    
-
      
-
      
-
      
-
      
108
      
-
      
-
      
-
  
Restricted shares (Note 18):
                                                                            
-
              
-
  
- Value of employee services
    
-
      
-
      
-
      
3,559
      
-
      
-
      
-
      
-
      
-
      
3,559
      
-
      
3,559
  
- Vested
    
-
      
3,444
      
-
      
(4,050
)
    
-
      
160
      
446
      
-
      
-
      
-
      
-
      
-
  
- Forfeited
    
-
      
-
      
-
      
-
      
-
      
1
      
(1
)
    
-
      
-
      
-
      
-
      
-
  
Purchase of own shares  (Note 17)
    
-
      
(10,427
)
    
-
      
-
      
-
      
-
      
(2,534
)
    
-
      
-
      
(12,961
)
    
-
      
(12,961
)
Sale of non-controlling interests in subsidiaries (Note 16)
    
-
      
-
      
15,825
      
-
      
-
      
-
      
-
      
25,508
      
-
      
41,333
      
8,010
      
49,343
  
Balance at December 31, 2014
    
183,573
      
933,044
      
(395,804
)
    
16,735
      
(43,064
)
    
-
      
(2,840
)
    
25,508
      
45,644
      
762,796
      
7,589
      
770,385
  

(*) Net of 14,149 of Income Tax.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 8
Adecoagro S.A.
Consolidated Statements of Changes in Shareholders’ Equity
for the years ended December 31, 2015, 2014 and 2013
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

   
Attributable to equity holders of the parent
              
   
Share Capital
(Note 15)
    
Share
Premium
    
Cumulative
Translation
Adjustment
    
Equity-settled
Compensation
    
Cash flow
hedge
(*)
    
Treasury
shares
    
Reserve from
the sale of non-
controlling
interests in
subsidiaries
    
Retained
Earnings
    
Subtotal
    
Non-
Controlling
Interest
    
Total Shareholders’
Equity
  
                                                                   
Balance at January 1, 2015 
    
183,573
      
933,044
      
(395,804
)
    
16,735
      
(43,064
)
    
(2,840
)
    
25,508
      
45,644
      
762,796
      
7,589
      
770,385
  
Profit for the period 
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
17,133
      
17,133
      
1,242
      
18,375
  
Other comprehensive income:
                                                                                        
-  Items that may be reclassified subsequently to profit or loss:
                                                                                        
Exchange differences on translating foreign operations
    
-
      
-
      
(175,210
)
    
-
      
-
      
-
      
-
      
-
      
(175,210
)
    
(3,509
)
    
(178,719
)
Cash flow hedge (*) 
    
-
      
-
      
-
      
-
      
(94,847
)
    
-
      
-
      
-
      
(94,847
)
    
(4
)
    
(94,851
)
Other comprehensive income for the year
    
-
      
-
      
(175,210
)
    
-
      
(94,847
)
    
-
      
-
      
-
      
(270,057
)
    
(3,513
)
    
(273,570
)
Total comprehensive income for the year
    
-
      
-
      
(175,210
)
    
-
      
(94,847
)
    
-
      
-
      
17,133
      
(252,924
)
    
(2,271
)
    
(255,195
)
                                                                                         
Employee share options (Note 18):
                                                                                        
 - Value of employee services
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
 - Exercised
    
-
      
1,786
      
-
      
(603
)
    
-
      
316
      
-
      
-
      
1,499
      
-
      
1,499
  
 - Forfeited
    
-
      
-
      
-
      
(146
)
    
-
      
-
      
-
      
146
      
-
      
-
      
-
  
Restricted shares (Note 18):
                                                                                        
- Value of employee services 
    
-
      
-
      
-
      
4,396
      
-
      
-
      
-
      
-
      
4,396
      
-
      
4,396
  
- Vested
    
-
      
3,103
      
-
      
(3,751
)
    
-
      
648
      
-
      
-
      
-
      
-
      
-
  
- Forfeited 
    
-
              
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Purchase of own shares  (Note 17) 
    
-
      
(259
)
    
-
      
-
      
-
      
(60
)
    
-
      
-
      
(319
)
    
-
      
(319
)
Sale of non-controlling interests in subsidiaries (Note 16)
    
-
      
-
      
3,881
      
-
      
-
      
-
      
16,066
      
-
      
19,947
      
2,017
      
21,964
  
Balance at December 31, 2015 
    
183,573
      
937,674
      
(567,133
)
    
16,631
      
(137,911
)
    
(1,936
)
    
41,574
      
62,923
      
535,395
      
7,335
      
542,730
  
 
(*) Net of 49,106 of Income Tax.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 9
Adecoagro S.A.
Consolidated Statements of Cash Flows
for the years ended December 31, 2015, 2014 and 2013
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)


   
Note
    
2015
    
2014
    
2013
  
Cash flows from operating activities:
                        
Profit / (Loss) for the year
          
18,375
      
2,438
      
(25,830
)
Adjustments for:
                              
Income tax expense / (benefit)
          
3,754
      
6,106
      
(9,277
)
Depreciation
    
6
      
70,682
      
89,147
      
68,934
  
Amortization
    
8
      
585
      
509
      
468
  
Gain from disposal of  farmlands and other assets
    
28
      
(7,914
)
    
-
      
(26,434
)
Gain from the disposal of other property items
    
28
      
(721
)
    
(985
)
    
(670
)
Gain from the sale of subsidiaries
    
28
      
-
      
-
      
(1,967
)
Equity settled share-based compensation granted
    
27
      
4,396
      
3,867
      
3,803
  
Gain from derivative financial instruments and forwards
    
28,29
      
(17,686
)
    
(6,548
)
    
(266
)
Interest  and other financial expense, net
    
29
      
43,822
      
50,941
      
45,192
  
Initial recognition and changes in fair value of non harvested biological assets (unrealized)
    
5
      
(16,850
)
    
15,783
      
53,456
  
Changes in net realizable value of agricultural produce after harvest (unrealized)
    
5
      
(4,406
)
    
(1,134
)
    
292
  
Provision and allowances
            
(79
)
    
355
      
768
  
Share of loss from joint venture
    
10
      
2,685
      
924
      
(219
)
Foreign exchange losses, net
    
29
      
23,423
      
9,246
      
21,087
  
Cash flow hedge – transfer from equity
    
29
      
32,700
      
12,031
      
2,560
  
Discontinued operations
    
11
      
-
      
-
      
(1,767
)
Subtotal
            
152,766
      
182,680
      
130,130
  
Changes in operating assets and liabilities:
                                
Decrease / (Increase) in trade and other receivables
            
1,590
      
(38,622
)
    
(35,464
)
Increase in inventories
            
(10,025
)
    
(22,027
)
    
(27,624
)
Increase in biological assets
            
(10,342
)
    
(5,418
)
    
(347
)
(Increase) / Decrease in other assets
            
(871
)
    
21
      
690
  
Increase in derivative financial instruments
            
25,880
      
4,493
      
8,123
  
(Decrease) / Increase in trade and other payables
            
(9,871
)
    
6,390
      
23,718
  
Increase in payroll and social security liabilities
            
4,996
      
6,253
      
3,504
  
Increase / (Decrease)  in provisions for other liabilities
            
21
      
(179
)
    
(233
)
Net cash generated from operating activities before taxes paid
            
154,144
      
133,591
      
102,497
  
Income tax paid
            
(230
)
    
(458
)
    
(417
)
Net cash generated from operating activities
            
153,914
      
133,133
      
102,080
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 10
Adecoagro S.A.
Consolidated Statements of Cash Flows (Continued)
for the years ended December 31, 2015, 2014 and 2013
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

   
Note
    
2015
    
2014
    
2013
  
Cash flows from investing activities:
                        
Purchases of property, plant and equipment
          
(97,752
)
    
(207,712
)
    
(128,726
)
Purchases of intangible assets
    
8
      
(1,203
)
    
(2,098
)
    
(1,376
)
Purchase of cattle and planting cost of non-current biological assets
            
(48,856
)
    
(110,998
)
    
(96,487
)
Interest received
    
29
      
8,201
      
7,068
      
6,882
  
Proceeds from sale of property, plant and equipment
            
1,303
      
1,024
      
2,594
  
Proceeds from sale of farmland and other assets
    
16
      
12,610
      
-
      
31,052
  
Proceeds from disposal of subsidiaries
    
16
      
-
      
1,318
      
12,078
  
Investment in joint ventures
    
10
      
-
      
(1,372
)
    
(4,164
)
Payment of seller financing arising on subsidiaries acquired
            
-
      
(684
)
    
(1,555
)
Proceeds from sales of financial assets
    
16
      
-
      
-
      
13,066
  
Discontinued operations
    
11
      
-
      
-
      
5,100
  
Loans to joint venture
            
(8,082
)
    
-
      
-
  
Net cash used in investing activities
            
(133,779
)
    
(313,454
)
    
(161,536
)
                                 
Cash flows from financing activities:
                                
Net proceeds from the sale of non-controlling interest in subsidiaries
    
16
      
21,964
      
49,343
      
-
  
Proceeds from equity settled shared-based compensation exercised
            
1,259
      
839
      
100
  
Proceeds from long-term borrowings
    
21
      
299,343
      
180,048
      
322,763
  
Payments of long-term borrowings
    
21
      
(165,455
)
    
(177,027
)
    
(113,750
)
Interest paid
            
(48,438
)
    
(48,899
)
    
(45,972
)
Proceeds from short-term borrowings
    
21
      
211,045
      
152,216
      
42,188
  
Payments of short-term borrowings
    
21
      
(208,309
)
    
(70,239
)
    
(95,556
)
Payment of derivatives financial instruments
            
(18,676
)
    
-
      
-
  
Purchase of own shares
    
17
      
(320
)
    
(12,992
)
    
(5,102
)
Net cash generated from financing activities
            
92,413
      
73,289
      
104,671
  
Net increase / (decrease) in cash and cash equivalents
            
112,548
      
(107,032
)
    
45,215
  
Cash and cash equivalents at beginning of year
            
113,795
      
232,147
      
218,809
  
Effect of exchange rate changes on cash and cash equivalents
            
(27,449
)
    
(11,320
)
    
(31,877
)
Cash and cash equivalents at end of year
            
198,894
      
113,795
      
232,147
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 11
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
1. General information

Adecoagro S.A. (the "Company" or "Adecoagro") is the Group’s ultimate parent company and is a société anonyme (stock corporation) organized under the laws of the Grand Duchy of Luxembourg. Adecoagro is a holding company primarily engaged through its operating subsidiaries in agricultural and agro-industrial activities. The Company and its operating subsidiaries are collectively referred to hereinafter as the "Group". These activities are carried out through three major lines of business, namely, Farming; Sugar, Ethanol and Energy and Land Transformation. Farming is further comprised of three reportable segments, which are described in detail in Note 5 to these consolidated financial statements.

Adecoagro is a Public Company listed in the New York Stock Exchange as a foreign registered company under the symbol of AGRO.

These consolidated financial statements have been approved for issue by the Board of Directors on March 15, 2016.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1. Basis of preparation and presentation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the Interpretations of the International Financial Reporting Interpretations Committee (IFRIC). All IFRS issued by the IASB, effective at the time of preparing these consolidated financial statements have been applied.

The consolidated financial statements have been prepared under the historical cost convention as modified by financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss and biological assets and agricultural produce at the point of harvest measured at fair value.

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

(a) Standards, amendments and interpretations to existing standards effective and adopted by the Group in 2015

The following standards, amendments and interpretations to existing standards have been published and were mandatory for the Group as of January 1, 2015:

All the amendments to the standards IAS 32, ‘Financial instruments: Presentation’ – Offsetting financial assets and financial liabilities, IAS 36, ‘Impairment of assets’ – Recoverable amount disclosures for non-financial assets and IAS 39, ‘Financial instruments: Recognition and measurement’ – Novation of derivatives and continuation of hedge accounting have been analyzed by the Company. The application of these standards did not materially affect the Group’s financial position or results of operations.

Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2015 are not material to the Group.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 12
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.1.
Basis of preparation and presentation (continued)

(b) Standards, amendments and interpretations to existing standards that are not yet effective

Below is a description of the standards, amendments and interpretations issued by the IASB to existing standards that have been issued and are mandatory for the Group’s fiscal periods beginning after January 1, 2015 and which have not been early adopted by the Group:

In May 2014, the IASB issued IFRS 15, "Revenue from contracts with customers", which deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after January 1, 2018 and earlier application is permitted. The Group has not yet assessed the potential impact IFRS 15 may have on the financial position and results of operations of the Group.

In June 2014, the IASB made amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture which distinguish bearer plants from other biological assets. Bearer plants are solely used to grow produce over their productive lives and are seen to be similar to an item of machinery. They will therefore now be accounted for under IAS 16. However, agricultural produce growing on bearer plants will remain within the scope of IAS 41 and continue to be measured at fair value less cost to sell. The amendments shall be applied for annual periods beginning on or after January 1, 2016, with earlier application permitted.

The Group’s sugarcane and coffee plantations qualify as bearer plants under the new definition in IAS 41. As required under IAS 8, the change in accounting policy will be applied retrospectively. As a consequence, the sugarcane planting and coffee plantations will be reclassified to property, plant and equipment and measured at amortized cost and depreciated over their useful life on straight-line basis,  effective January 1, 2016 and comparative figures will be retrospectively revised accordingly. The Group will adopt the transitional rule which allows companies to apply fair value of bearer plants as their deemed cost as of January 1, 2014.

However, agricultural produce growing on sugarcane and coffee plantations will remain under the line biological asset and continue to be measured at fair value less cost to sell.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 13
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
These amendments will result in changes in accounting policies and adjustments to the amounts and the results of the operations recognized in the financial statements as of and for the years ended December 31, 2015 and 2014, as follows:
 
2.1. Basis of preparation and presentation (continued)

Statements of Income (extracts)
  
   
   
2015
(Previously
stated)
    
Increase/
(Decrease)
    
2015
(Revised)
    
2014
(Previously
stated)
    
Increase/
(Decrease)
    
2014
(Revised)
  
Cost of manufactured products sold and services rendered
    
(321,998
)
    
(52,093
)
    
(374,091
)
    
(335,442
)
    
(60,044
)
    
(395,486
)
Change in fair value of biological assets
    
36,869
      
18,630
      
55,499
      
27,145
      
75,016
      
102,161
  
Profit / (Loss) before income tax
    
22,129
      
(33,463
)
    
(11,334
)
    
8,544
      
14,972
      
23,516
  
Income tax (expense) / benefit
    
(3,754
)
    
11,377
      
7,623
      
(6,106
)
    
(5,090
)
    
(11,196
)
Profit / (Loss)  for the period
    
18,375
      
(22,086
)
    
(3,711
)
    
2,438
      
9,882
      
12,320
  
Attributable to:
                                                
Equity holders of the parent
    
17,133
      
(22,086
)
    
(4,953
)
    
2,518
      
9,882
      
12,400
  
Non-controlling interests
    
1,242
      
-
      
1,242
      
(80
)
    
-
      
(80
)
     
18,375
      
(22,086
)
    
(3,711
)
    
2,438
      
9,882
      
12,320
  
Basic earnings per share
    
0.142
      
(0.183
)
    
(0.041
)
    
0.021
      
0.082
      
0.104
  
Diluted earnings per share
    
0.140
      
(0.181
)
    
(0.040
)
    
0.021
      
0.081
      
0.102
  

Balance sheet (extracts)
  
   
   
31
December
2015 (Prev.
stated)
    
Increase/
(Decrease)
    
31 December
2015 (Revised)
    
1 January 2015
(Prev. stated)
    
Increase/
(Decrease)
    
1 January 2015
(Revised)
  
Biological assets
    
299,270
      
(183,861
)
    
115,409
      
341,232
      
(213,478
)
    
127,754
  
Property, plant and equipment
    
540,218
      
155,940
      
696,158
      
776,905
      
213,602
      
990,507
  
Deferred tax assets
    
60,857
      
6,915
      
67,772
      
45,597
      
(4,186
)
    
41,411
  
Inventories
    
77,703
      
7,583
      
85,286
      
104,919
      
12,187
      
117,106
  
Total assets
    
978,048
      
(13,423
)
    
964,625
      
1,268,653
      
8,125
      
1,276,778
  
                                                 
Retained earnings
    
62,923
      
(12,204
)
    
50,719
      
45,644
      
9,882
      
55,526
  
Cumulative Translation Adjustment
    
(567,133
)
    
(1,219
)
    
(568,352
)
    
(395,804
)
    
(1,757
)
    
(397,561
)
Total equity
    
542,730
      
(13,423
)
    
529,307
      
770,385
      
8,125
      
778,510
  

In July 2014 the IASB published the final version of IFRS 9 Financial Instrument which replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. It includes requirements on the classification and measurement of financial assets and liabilities, as well as an expected credit losses model that replaces the current incurred loss impairment model.  The standard is effective for accounting periods beginning on or after January 1, 2018. Early adoption is permitted. The Group has not yet assessed IFRS 9’s full impact on the financial position and results of operations of the Group.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 14
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.1. Basis of preparation and presentation (continued)

In September 2014, the IASB issued the amendments to IFRS 10, “Consolidated financial statements” and IAS 28, “Investments in associates and joint ventures”, which addresses an acknowledged inconsistency between the requirements of both standards in dealing with the sale or contribution of assets between an investor and its associate or joint venture. These amendments must be applied on annual periods beginning on or after January 1, 2016. The Group is currently assessing the impact these amendments may have on the financial position and results of operations of the Group.

In January 2016, the IASB finished its long-standing project on lease accounting and published IFRS 16, ‘Leases’, which replaces the current guidance in IAS 17. This will require far-reaching changes in accounting by lessees in particular. The standard applies to annual periods beginning on or after 1 January 2019, with earlier application permitted if IFRS 15, ‘Revenue from Contracts with Customers’, is also applied. The Group has not yet assessed the potential impact IFRS 16 may have on the financial position and results of operations of the Group.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

2.2. Scope of consolidation

The consolidated financial statements include the results of the Company and all of its subsidiaries from the date that control commences to the date that control ceases. They also include the Group’s share of the net income of its jointly-controlled entities on an equity-accounted basis from the point at which joint control commences, to the date that it ceases.

(a) Subsidiaries

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date that control commences and deconsolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 15
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.2. Scope of consolidation (continued)

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Disposal of subsidiaries

When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amount previously recognized in other comprehensive income in respect of that entity is accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

(d) Joint arrangements

Joint arrangements are arrangements of which the Group and other party or parties have joint control bound by a contractual arrangement. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has rather than the legal structure of the joint arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

The Group has assessed the nature of its joint arrangements and determined them to be joint ventures.

Under the equity method of accounting, interests in joint ventures are initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Group’s share of the post-acquisition of profits or losses and movements in other comprehensive income, respectively. When the share of losses of an investee equals or exceeds the carrying amount of an investment the Group discontinue applying the equity method, the investment is reduced to zero and does not record additional losses. If the investee subsequently reports net income, the Group would resume applying the equity method only after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended.

Unrealized gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

2.3. Segment reporting

According to IFRS 8, operating segments are identified based on the ‘management approach’. This approach stipulates external segment reporting based on the Group’s internal organizational and management structure and on internal financial reporting to the chief operating decision maker. The Management Committee of the Group is responsible for measuring and steering the business success of the segments and is considered the chief operating decision maker within the meaning of IFRS 8.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 16
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.4. Foreign currency translation
 
(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in US dollars, which is the Group’s presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income, in the line Item “Finance income” or “Finance cost”, as appropriate.

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

· assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

· income and expenses for each statement of income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

· all resulting exchange differences are recognized as a separate component of equity.

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the statement of income as part of the gain or loss on sale.

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 at the closing rate.

2.5. Property, plant and equipment

Property, plant and equipment is recorded at cost, less accumulated depreciation and impairment losses, if any. Historical cost comprises the purchase price and any costs directly attributable to the acquisition.

Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items, which are depreciated separately.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of income when they are incurred.

The accompanying notes are an integral part of these consolidated financial statements.
 
F - 17
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Farmland is not depreciated. Depreciation on other assets is calculated using the straight-line method, to allocate their cost to their residual values over their estimated useful lives, as follows:
 
2.5. Property, plant and equipment (continued)

Farmland improvements
5-25 years
Buildings and facilities
20 years
Furniture and fittings
10 years
Computer equipment
3-5 years
Machinery and equipment
4-10 years
Vehicles
4-5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (see Note 2.10).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within “Other operating income, net” in the statement of income.

2.6. Investment property

Investment property consists of farmland for rental or for capital appreciation and not used in production or for sale in the ordinary course of business. Investment property is measured at cost less accumulated depreciation and any impairment losses if any. Rental income from investment property is recognized in the income statement on a straight line basis over the lease term.

2.7. Leases

The Group classifies its leases at the inception as finance or operating leases. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases and charged to the statements of income in a straight-line basis over the period of the lease. Finance leases are capitalized at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included as “Borrowings” in the statement of financial position. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term.

2.8. Goodwill

Goodwill represents future economic benefits arising from assets that are not capable of being individually identified and separately recognized by the Group on an acquisition. Goodwill is computed as the excess of the consideration over the fair value of the Group’s share of net assets of the acquired subsidiary undertaking at the acquisition date and is allocated to those cash generating units expected to benefit from the acquisition for the purpose of impairment testing. Goodwill arising on the acquisition of subsidiaries is included within “Intangible assets” on the statement of financial position.

Goodwill arising on the acquisition of foreign entities is treated as an asset of the foreign entity denominated in the local currency and translated at the closing rate.

Goodwill is not amortized but tested for impairment on an annual basis, or more frequently if there is an indication of impairment. Gains and losses on the disposal of a Group entity include any goodwill relating to the entity sold (see Note 2.10).
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 18
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.9. Other intangible assets

Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortization and impairment losses, if any.  These intangible assets comprise trademarks and computer software and are amortized in the statement of income on a straight-line basis over their estimated useful lives estimated to be 10 to 20 years and 3 to 5 years, respectively.

2.10. Impairment of assets

Goodwill

For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Impairment losses recognized for goodwill cannot be reversed in a subsequent period. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted (see Note 4 (a) for details).

Property, plant and equipment and finite lived intangible assets

At each statement of financial position date, the Group reviews the carrying amounts of its property, plant and equipment and finite lived intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of income.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in the statement of income.

2.11. Biological assets

Biological assets comprise growing crops (mainly corn, wheat, soybeans, sunflower and rice), sugarcane, coffee and livestock (growing herd and cattle for dairy production).

The Group distinguishes between consumable and bearer biological assets, and between mature and immature biological assets. “Consumable” biological assets are those assets that may be harvested as agriculture produce or sold as biological assets, for example livestock intended for dairy production. “Bearer” biological assets are those assets capable of producing more than one harvest, for example sugarcane or livestock from which raw milk is produced. “Mature” biological assets are those that have attained harvestable specifications (for consumable biological assets) or are able to sustain regular harvests (for bearer biological assets). “Immature” biological assets are those assets other than mature biological assets.

The Group presents long-term biological assets (sugarcane and coffee plantations) as non-current assets based on their nature, as capable of sustaining regular harvests in the long-term.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 19
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.11. Biological assets (continued)

Costs are capitalized as biological assets if, and only if, (a) it is probable that future economic benefits will flow to the entity, and (b) the cost can be measured reliably. The Group capitalizes costs such as: planting, harvesting, weeding, seedlings, irrigation, agrochemicals, fertilizers and a systematic allocation of fixed and variable production overheads that are directly attributable to the management of biological assets, among others. Costs that are expensed as incurred include administration and other general overhead and unallocated production overhead, among others.

Biological assets, both at initial recognition and at each subsequent reporting date, are measured at fair value less costs to sell, except where fair value cannot be reliably measured. Cost approximates fair value when little biological transformation has taken place since the costs were originally incurred or the impact of biological transformation on price is not expected to be material.

Gains and losses that arise on measuring biological assets at fair value less costs to sell and measuring agricultural produce at the point of harvest at fair value less costs to sell are recognized in the statement of income in the period in which they arise in the line item “Initial recognition and changes in fair value of biological assets and agricultural produce”.

Where there is an active market for a biological asset or agricultural produce, quoted market prices in the most relevant market are used as a basis to determine the fair value. Otherwise, when there is no active market or market-determined prices are not available, fair value of biological assets is determined through the use of valuation techniques.

Therefore, the fair value of biological assets is generally derived from the expected discounted cash flows of the related agricultural produce. The fair value of the agricultural produce at the point of harvest is generally derived from market determined prices. A general description of the determination of fair values based on the Company’s business segments follow:

· Growing crops:

Growing crops, for which biological transformation is not significant, are measured at cost, which approximates fair value. Expenditure on growing crops includes land preparation expenses and other direct expenses incurred during the sowing period including labor, seedlings, agrochemicals and fertilizers among others.

Otherwise, biological assets are measured at fair value less estimated point-of-sale costs at initial recognition and at any subsequent period. Point-of-sale costs include all costs that would be necessary to sell the assets

The fair value of growing crops excluding sugarcane and coffee is measured based on a formula, which takes into consideration the estimated crop yields, estimated market prices and costs, and discount rates. Yields are determined based on several factors including location of farmland, environmental conditions and other restrictions and growth at the time of measurement. Yields are multiplied by sown hectares to determine the estimated tons of crops to be obtained. The tons are then multiplied by a net cash flow determined at the future crop prices less the direct costs to be incurred. This amount is discounted at a discount rate, which reflects current market assessments of the assets involved and the time value of money.

· Growing herd and cattle:

Livestock are measured at fair value less estimated point-of-sale costs, with any changes therein recognized in the statement of income, on initial recognition as well as subsequently at each reporting period. The fair value of livestock is determined based on the actual selling prices less estimated point-of-sale costs in the markets where the Group operates.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 20
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.11. Biological assets (continued)

· Coffee:

The coffee trees are accounted for as plantations and are generally felled after their optimum economic age for use has expired, generally 18 years.

Coffee trees, for which biological growth is not significant, are valued at cost, which approximates fair value. Expenditure on coffee trees planting includes land preparation expenses and other direct expenses incurred during the sowing period including labor, seedlings, agrochemicals and fertilizers among others. When they have attained  significant biological growth, they are valued at fair value through a discounted cash flow model. Revenues are based on estimated yearly coffee production volumes and the price is calculated as the average of daily prices for coffee future contracts (Coffee ICE-NY contracts) for a six months period. Projected costs include maintenance, pruning, land leasing, harvesting and coffee treatment. These estimates are discounted at an appropriate discount rate.

· Sugarcane:

The fair value of sugarcane depends on the variety, location and maturity of the plantation. The sugarcanes are accounted for as plantations and are felled after their optimum economic age for use has expired, generally five years.

Sugarcane, for which biological growth is not significant, is valued at cost, which approximates fair value. Expenditure on sugarcane consists mainly of land preparation expenses and other direct expenses incurred during the sowing period including labor, seedlings, agrochemicals and fertilizers among others.  When it has attained significant biological growth, it is measured at fair value through a discounted cash flow model. Revenues are based on estimated yearly production volume (which will be destined to sugar, ethanol, energy and raw cane production) and the price is calculated as the average of daily prices for sugar future contracts (Sugar #11 ICE-NY contracts) for a six months period. Projected costs include maintenance, land leasing, harvesting and transportation. These estimates are discounted at an appropriate discount rate.

2.12. Inventories

Inventories comprise of raw materials, finished goods (including harvested agricultural produce and manufactured goods) and others.

Harvested agricultural produce (except for rice and milk) are measured at net realizable value until the point of sale because there is an active market in the produce, there is a negligible risk that the produce will not be sold and there is a well-established practice in the industry carrying the inventories at net realizable value. Changes in net realizable value are recognized in the statement of income in the period in which they arise under the line item “Changes in net realizable value of agricultural produce after harvest”.

All other inventories (including rice and milk) are measured at the lower of cost and net realizable value. Cost is determined using the weighted average method.

2.13. Financial assets

Financial assets are classified in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition (see Note 12).
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 21
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.13. Financial assets (continued)

(a) Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the Group commits to purchase or sell the asset. Financial assets not carried at fair value through profit or loss are initially recognized at fair value plus transaction costs. Financial assets carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the statement of income. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are presented in the statement of income within “Other operating income, net” in the period in which they arise.

If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or a group of financial assets is impaired. Impairment testing of trade receivables is described in Note 2.15.
 
(b) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position 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. This right must not be contingent on future events and must be enforceable in any case.

2.14. Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Commodity future contract fair values are computed with reference to quoted market prices on future exchanges markets. The fair values of commodity options are calculated using year-end market rates together with common option pricing models. The fair value of interest rate swaps has been calculated using a discounted cash flow analysis.

The Group manages exposures to financial and commodity risks using hedging instruments that provide the appropriate economic outcome. The principal hedging instruments used may include commodity future contracts, put and call options, foreign exchange forward contracts and interest rate swaps. 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 under IAS 39, practical to do so and its application reduces volatility, but transactions that may be effective hedges in economic terms may not always qualify for hedge accounting under IAS 39. Any derivatives that the Group holds to hedge these exposures are classified as “held for trading” and are shown in a separate line on the face of the statement of financial position. The method of recognizing gains or losses on derivatives depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Gains and losses on commodity derivatives are classified within “Other operating income, net”. Gains and losses on interest rate and foreign exchange rate derivatives are classified within ‘Financial results, net’. The Group designates certain derivatives as hedges of the foreign currency risk associated with highly probable forecast transactions (cash flow hedge).
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 22
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.14. Derivative financial instruments and hedging activities (continued)

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the instruments that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of hedged items.

Cash flow hedge

The effective portion of the gain or loss on the instruments that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the statement of income within "Finance income” or “Finance cost”, as appropriate.

Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion is recognized in the statement of income within "Finance income” or “Finance cost”, as appropriate.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the statement of income.

2.15. Trade and other receivables

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less allowance for trade receivables.

An allowance for trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Such evidence includes significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against selling expenses in the statement of income.

2.16. Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. In the statements of cash flows, interest paid is presented within financing cash flows and interest received is presented within investing activities.

2.17. Trade and other payables

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

2.18. Borrowings

Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost using the effective interest method. Borrowing costs are capitalized during the period of time that is required to complete and prepare the asset for its intended use.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 23
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.19. Provisions

Provisions are recognized when (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) a reliable estimate of the amount of the obligation can be made. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

2.20. Onerous contracts

The Group enters into contracts, which require the Group to sell commodities in accordance with the Group's expected sales. These contracts do not qualify as derivatives. These contracts are not recognized until at least one of the parties has performed under the agreement. However, when the contracts are onerous, the Group recognizes the present obligation under the contracts as a provision included within “Provision and other liabilities” in the statement of financial position. Losses under these onerous contracts are recognized within “Other operating income, net” in the statement of income.

2.21. Current and deferred income tax

The Group’s tax benefit or expense for each year comprises the charge for current tax payable and deferred taxation attributable to the Group’s operating subsidiaries. Tax is recognized in the statement of income, except to the extent that it relates to items recognized directly in equity. In this case, the tax is also recognized in equity.

The current income tax charge is calculated on the basis of the tax laws enacted at the date of the statement of financial position in the countries where the Group’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) effective in the countries where the Group’s subsidiaries operate and generate taxable income.

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.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

The Group is able to control the timing of dividends from its subsidiaries and hence does not expect to remit overseas earnings in the foreseeable future in a way that would result in a charge to taxable profit. Hence deferred tax is recognized in respect of the retained earnings of overseas subsidiaries only to the extent that, at the date of the statement of financial position, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future has been entered into by the subsidiary.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 24
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.22. Revenue recognition

The Group’s primary activities comprise agricultural and agro-industrial activities.

The Group’s agricultural activities comprise growing and selling agricultural produce. In accordance with IAS 41 “Agriculture”, cattle are measured at fair value with changes therein recognized in the statement of income as they arise. Agricultural produce is measured at net realizable value with changes therein recognized in the statement of income as they arise. Therefore, sales of agricultural produce and cattle generally do not generate any separate gains or losses in the statement of income. See Notes 2.11 and 2.12 for additional details.

The Group’s agro-industrial activities comprise the selling of manufactured products (i.e. industrialized rice, milk-related products, ethanol, sugar, energy, among others). These sales are measured at the fair value of the consideration received or receivable, net of returns and allowances, trade and other discounts, and sales taxes, as applicable.  Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.  Transfers of risks and rewards vary depending on the individual terms of the contract of sale.

The Group also provides certain agricultural-related services such as grain warehousing/conditioning and other services, e.g. handling and drying services. Revenue from services is recognized as services are provided.

The Group leases owned farmland property to third parties under operating lease agreements. Rental income is recognized on a straight-line basis over the period of the lease.

The Group is a party to a 10-year power agreement for the sale of electricity which expires in 2018. The delivery period starts in May and ends in November of each year. The Group is also a party to two 15-year power agreements which delivery period starts in March and ends in December of each year, these two agreements will expire in 2024 and 2025, respectively. Prices under all the agreements are adjusted annually for inflation.  Revenue related to the sale of electricity under these two agreements is recorded based upon output delivered.

2.23. Farmlands sales

The Group’s strategy is to profit from land appreciation value generated through the transformation of its productive capabilities. Therefore, the Group may seek to realize value from the sale of farmland assets and businesses.

Farmland sales are not recognized until (i) the sale is completed, (ii) the Group has determined that it is probable the buyer will pay, (iii) the amount of revenue can be measured reliably, and (iv) the Group has transferred to the buyer the risk of ownership, and does not have a continuing involvement. Gains from “farmland sales” are included in the statement of income under the line item “Other operating income, net”.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 25
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.24. Assets held for sale and discontinued operations

When the Group intends to dispose of, or classify as held for sale, a business component that represents a separate major line of business or geographical area of operations, or a subsidiary acquired exclusively with a view to resale, it classifies such operations as discontinued. The post tax profit or loss of the discontinued operations is shown as a single amount on the face of the statement of income, separate from the other results of the Group.  Assets and liabilities classified as held for sale are measured at the lower of carrying value and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a disposal rather than through continuing use. This condition is regarded as met only when management is committed to the sale (disposal), the sale (disposal) is highly probable and expected to be completed within one year from classification and the asset is available for immediate sale (disposal) in its present condition. The statements of income for the comparative periods are represented to show the discontinued operations separate from the continuing operations.

2.25. Earnings per share
 
Basic earnings per share is calculated by dividing the net income for the year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted net earnings per share is computed by dividing the net income for the period by the weighted average number of ordinary shares outstanding, and when dilutive, adjusted for the effect of all potentially dilutive shares, including share options, on an as-if converted basis.

2.26. Equity-settled share-based payments

The Group issues equity settled share-based payments to certain directors, senior management and employees. Options under the awards are measured at fair value at the date of grant. Management measures the fair value using the valuation technique that they consider to be the most appropriate to value each class of award. Methods used may include Black-Scholes calculations or other models as appropriate. The valuations take into account factors such as non-transferability, exercise restrictions and behavioral considerations.  An expense is recognized to spread the fair value of each award over the vesting period on a straight-line basis, after allowing for an estimate of the awards that will eventually vest. The estimate of the level of vesting is reviewed at least annually, with any impact on the cumulative charge being recognized immediately.

2.27. Research and development

Research phase expenditure is expensed as incurred. Development expenditure is capitalized as an internally generated intangible asset only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits. Research expenses have been immaterial to date. The Group has not capitalized any development expenses to date.

3. Financial risk management

Risk management principles and processes

The Group’s activities are exposed to a variety of financial risks. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize the Group’s capital costs by using suitable means of financing and to manage and control the Group’s financial risks effectively. The Group uses financial instruments to hedge certain risk exposures.

The Group’s approach to the identification, assessment and mitigation of risk is carried out by a Risk and Commercial Committee, which focuses on timely and appropriate management of risk. This Committee has overall accountability for the identification and management of risk across the Group.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 26
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)

The principal financial risks arising from financial instruments are raw material price risk, end-product price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk. This section provides a description of the principal risks and uncertainties that could have a material adverse effect on the Group’s strategy, performance, results of operations and financial condition. The principal risks and uncertainties facing the business, set out below, do not appear in any particular order of potential materiality or probability of occurrence.

· Exchange rate risk

The Group’s cash flows, statement of income and statement of financial position are presented in US dollars and may be affected by fluctuations in exchange rates. Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being denominated in a currency that is not the functional currency.

A significant majority of the Group’s business activities is conducted in the respective functional currencies of the subsidiaries (primarily the Brazilian Reais and the Argentine Peso). However, the Group may transact in currencies other than the respective functional currencies of its subsidiaries mainly the US dollars. As such, these subsidiaries may hold US dollar denominated monetary balances at each year-end as indicated in the tables below.

The Group’s net financial position exposure to the US dollar is managed on a case-by-case basis, partly by hedging certain expected cash flows with foreign exchange derivative contracts.

The following tables show the net monetary position of the respective subsidiaries within the Group categorized by functional currency. Non-US dollar amounts are presented in US dollars for purpose of these tables.

   
2015
  
   
Subsidiaries’ functional currency
  
Net monetary position
(Liability)/ Asset
  
Argentine
Peso
    
Brazilian
Reais
    
Uruguayan
Peso
    
US Dollar
    
Total
  
Argentine Peso
    
(7,513
)
    
-
      
-
      
-
      
(7,513
)
Brazilian Reais
    
-
      
(174,145
)
    
-
      
-
      
(174,145
)
US Dollar
    
(61,256
)
    
(376,757
)
    
32,560
      
95,251
      
(310,202
)
Uruguayan Peso
    
-
      
-
      
(1,083
)
    
-
      
(1,083
)
Total
    
(68,769
)
    
(550,902
)
    
31,477
      
95,251
      
(492,943
)

   
2014
  
   
Subsidiaries’ functional currency
  
Net monetary position
(Liability)/ Asset
  
Argentine
Peso
    
Brazilian
Reais
    
Uruguayan
Peso
    
US Dollar
    
Total
  
Argentine Peso
    
(24,585
)
    
-
      
-
      
-
      
(24,585
)
Brazilian Reais
    
-
      
(348,760
)
    
-
      
-
      
(348,760
)
US Dollar
    
(55,098
)
    
(241,033
)
    
28,603
      
85,165
      
(182,363
)
Uruguayan Peso
    
-
      
-
      
(753
)
    
-
      
(753
)
Total
    
(79,683
)
    
(589,793
)
    
27,850
      
85,165
      
(556,461
)

The Group’s analysis shown on the tables below is carried out based on the exposure of each functional currency subsidiary against the US dollar. The Group estimated that, other factors being constant, a hypothetical 10% appreciation of the US dollar against the respective functional currencies for the years ended December 31, 2015 and 2014 would have decreased the Group’s Profit Before Income Tax for the year. A 10% depreciation of the US dollar against the functional currencies would have an equal and opposite effect on the income statement. A portion of this effect would have been recognized as other comprehensive income since a portion of the Company’s borrowings was used as cash flow hedge of the foreign exchange rate risk of a portion of its highly probable future sales in US dollars (see Hedge Accounting - Cash Flow Hedge below for details).
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 27
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)

 
Functional currency
  
Net monetary position
  
Argentine
Peso
    
Brazilian
Reais
    
Uruguayan
Peso
    
US Dollar
    
Total
  
2015
US Dollar
    
(6,126
)
    
(37,676
)
    
3,256
      
-
      
(40,546
)
2014
US Dollar
    
(5,510
)
    
(24,103
)
    
2,860
      
-
      
(26,753
)

The tables above only consider the effect of a hypothetical appreciation / depreciation of the US dollars on the Group’s net financial position. A hypothetical appreciation / depreciation of the US dollar against the functional currencies of the Group’s subsidiaries has historically had a positive / negative effect, respectively, on the fair value of the Group’s biological assets and the end prices of the Group’s agriculture produce, both of which are generally linked to the US dollar.

Hedge Accounting - Cash Flow Hedge

Effective July 1, 2013,  the Group formally documented and designated cash flow hedging relationships to hedge the foreign exchange rate risk of a portion of its highly probable future sales in US dollars using a portion of its borrowings denominated in US dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps.

Principal amounts of long-term borrowings (non-derivative financial instruments) and notional values of foreign currency forward contracts (derivative financial instruments) were designated as hedging instruments. These instruments are exposed to Brazilian Reais/ US dollar foreign currency risks related to the operations in Brazil and to Argentine Peso/ US dollar foreign currency risks related to the operations in Argentina. As of December 31, 2015 and 2014, approximately 28,4% and 20.3%, respectively, of projected sales qualify as highly probable forecast transactions for hedge accounting purposes and were designated as hedged items.

The Group has prepared formal documentation in order to support the designation above, including an explanation of how the designation of the hedging relationship is aligned with the Group’s Risk Management Policy objective and strategy, identification of the hedging instrument, the hedged transactions, the nature of the risk being hedged and an analysis which demonstrates that the hedge is expected to be highly effective. The Group reassesses the prospective and retrospective effectiveness of the hedge on an ongoing basis comparing the foreign currency component of the carrying amount of the hedging instruments and of the highly probable future sales.

Cash flow hedge accounting permits that gains and losses arising from the effect of changes in foreign currency exchange rates on derivative and non-derivative hedging instruments not be immediately recognized in profit or loss, but be reclassified from equity to profit or loss in the same periods during which the future sales occur, thus allowing for a more appropriate presentation of the results for the period reflecting the strategy in the Group’s Risk Management Policy.

The Company expects that the cash flows will occur and affect profit or loss between 2016 and 2020.

For the year ended December 31, 2015, a total amount before income tax of US$ 176,657 was recognized in other comprehensive income and an amount of US$ (32,700) loss was reclassified from equity to profit or loss within “Financial results, net”.

· Raw material price risk

Inflation in the costs of raw materials and goods and services from industry suppliers and manufacturers presents risks to project economics. A significant portion of the Group’s cost structure includes the cost of raw materials primarily seeds, fertilizers and agrochemicals, among others. Prices for these raw materials may vary significantly.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 28
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)

· End-product price risk

Prices for commodities products have historically been cyclical, reflecting overall economic conditions and changes in capacity within the industry, which affect the profitability of entities engaged in the agribusiness industry. The Group’s commercial team combines different actions to minimize price risk. A percentage of crops are to be sold during and post harvest period. The Group manages minimum and maximum prices for each commodity as well as gross margin per each crop as to decide when and how to sell. End-product price risks are hedged if economically viable and possible by entering into forward contracts with major trading houses or by using derivative financial instruments, consisting mainly of crops, sugar and coffee future contracts, but also includes occasionally put and call options. A movement in end-product futures prices would result in a change in the fair value of the end product hedging contracts. These fair value changes, after taxes, are recorded in the statement of income.

Contract positions are designed to ensure that the Group would receive a defined minimum price for certain quantities of its production. The counterparties to these instruments generally are major financial institutions. In entering into these contracts, the Group has assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The Group does not expect any material losses as a result of counterparty defaults. The Group is also obliged to pay margin deposits and premiums for these instruments. These estimates represent only the sensitivity of the financial instruments to market risk and not the Group exposure to end product price risks as a whole, since the crops and cattle products sales are not financial instruments within the scope of IFRS 7 disclosure requirements.

· Liquidity risk

The Group is exposed to liquidity risks, including risks associated with refinancing borrowings as they mature, the risk that borrowing facilities are not available to meet cash requirements and the risk that financial assets cannot readily be converted to cash without loss of value. Failure to manage financing risks could have a material impact on the Group’s cash flow and statement of financial position.

Prudent liquidity risk management includes managing the profile of debt maturities and funding sources close oversight of cash flows projections, maintaining sufficient cash, and ensuring the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions.  The Group's ability to fund its existing and prospective debt requirements is managed by maintaining diversified funding sources with adequate available funding lines from high quality lenders; and reaching to have long-term financial facilities.

As of December 31, 2015, cash and cash equivalents of the Group totaled U$S 198.9 million, which could be used for managing liquidity risk.

The tables below analyzes the Group’s non-derivative financial liabilities and derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and as a result they do not reconcile to the amounts disclosed on the statement of financial position except for short-term payables when discounting is not applied.

At 31 December 2015
  
Less than
1 year
    
Between
1 and 2 years
    
Between 2
and 5 years
    
Over
5 Years
    
Total
  
Trade and other payables
    
48,177
      
566
      
1,062
      
283
      
50,088
  
Borrowings (excluding finance lease liabilities)
    
275,690
      
176,673
      
372,656
      
66,689
      
891,708
  
Finance leases
    
224
      
39
      
16
      
-
      
279
  
Derivative financial instruments
    
6,575
      
119
      
-
      
-
      
6,694
  
Total
    
330,666
      
177,397
      
373,734
      
66,972
      
948,769
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 29
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)

At 31 December 2014
  
Less than
1 year
    
Between
1 and 2 years
    
Between 2
and 5 years
    
Over
5 Years
    
Total
  
Trade and other payables
    
73,247
      
583
      
1,582
      
226
      
75,638
  
Borrowings (excluding finance lease liabilities)
    
243,811
      
200,364
      
249,912
      
113,446
      
807,533
  
Finance leases
    
373
      
291
      
48
      
-
      
712
  
Derivative financial instruments
    
13,860
      
39
      
-
      
-
      
13,899
  
Total
    
331,291
      
201,277
      
251,542
      
113,672
      
897,782
  

· Interest rate risk

The Group’s financing costs may be significantly affected by interest rate volatility. Borrowings under the Group’s interest rate management policy may be fixed or floating rate. The Group maintains adequate committed borrowing facilities and holds most of its financial assets primarily in short-term, highly liquid investments that are readily convertible to known amounts of cash.

The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at floating rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The interest rate profile of the Group's borrowings is set out in Note 21.

The Group occasionally manages its cash flow interest rate risk exposure by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.

The following tables show a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans (excluding finance leases). These analyses are performed after giving effect to interest rate swaps.

The analysis for the year ended December 31, 2015 and 2014 is as follows:

   
2015
  
   
Subsidiaries’ functional currency
  
Rate per currency denomination
  
Argentine
Peso
    
Brazilian
Reais
    
Uruguayan
Peso
    
Total
  
Fixed rate:
                        
Argentine Peso
    
3,125
      
-
      
-
      
3,125
  
Brazilian Reais
    
-
      
145,114
      
-
      
145,114
  
US Dollar
    
58,378
      
20,362
      
-
      
78,740
  
Subtotal Fixed-rate borrowings
    
61,503
      
165,476
      
-
      
226,979
  
Variable rate:
                                
Brazilian Reais
    
-
      
48,231
      
-
      
48,231
  
US Dollar
    
13,180
      
434,670
      
-
      
447,850
  
Subtotal Variable-rate borrowings
    
13,180
      
482,901
      
-
      
496,081
  
Total borrowings as per analysis
    
74,683
      
648,377
      
-
      
723,060
  
Finance leases
    
279
      
-
      
-
      
279
  
Total borrowings as per statement of financial position
    
74,962
      
648,377
      
-
      
723,339
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 30
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)

   
2014
  
   
Subsidiaries’ functional currency
  
Rate per currency denomination
  
Argentine
Peso
    
Brazilian
Reais
    
Uruguayan
Peso
    
Total
  
Fixed rate:
                        
Argentine Peso
    
14,799
      
-
      
-
      
14,799
  
Brazilian Reais
    
-
      
233,315
      
-
      
233,315
  
US Dollar
    
27,625
      
48,003
      
12,005
      
87,633
  
Subtotal Fixed-rate borrowings
    
42,424
      
281,318
      
12,005
      
335,747
  
Variable rate:
                                
Brazilian Reais
    
-
      
129,418
      
-
      
129,418
  
US Dollar
    
26,226
      
206,535
      
-
      
232,761
  
Subtotal Variable-rate borrowings
    
26,226
      
335,953
      
-
      
362,179
  
Total borrowings as per analysis
    
68,650
      
617,271
      
12,005
      
697,926
  
Finance leases
    
580
      
-
      
-
      
580
  
Total borrowings as per statement of financial position
    
69,230
      
617,271
      
12,005
      
698,506
  

For the years ended December 31, 2015 and 2014, if interest rates on floating-rate borrowings had been 1% higher with all other variables held constant, the Group’s Profit Before Income Tax for the years would have decreased as shown below. A 1% decrease in interest rates would have an equal and opposite effect on the income statement.

   
2015
  
   
Subsidiaries’ functional currency
  
Rate per currency denomination
  
Argentine
Peso
    
Brazilian
Reais
    
Uruguayan
Peso
    
Total
  
Variable rate:
                        
Brazilian Reais
    
-
      
(482
)
    
-
      
(482
)
US Dollar
    
(132
)
    
(4,347
)
            
(4,479
)
Total effects on Profit Before Income Tax
    
(132
)
    
(4,829
)
    
-
      
(4,961
)

   
2014
  
   
Subsidiaries’ functional currency
  
Rate per currency denomination
  
Argentine
Peso
    
Brazilian
Reais
    
Uruguayan
Peso
    
Total
  
Variable rate:
                        
Brazilian Reais
    
-
      
(1,294
)
    
-
      
(1,294
)
US Dollar
    
(262
)
    
(2,066
)
    
-
      
(2,328
)
Total effects on Profit Before Income Tax
    
(262
)
    
(3,360
)
    
-
      
(3,622
)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 31
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)
 
The sensitivity analysis has been determined assuming that the change in interest rates had occurred at the date of the statement of financial position and had been applied to the exposure to interest rate risk for financial instruments in existence at that date. The 100 basis point increase or decrease represents management's assessment of a reasonable possible change in those interest rates, which have the most impact on the Group, specifically the United States and Brazilian rates over the period until the next annual statement of financial position date.

· Credit risk

The Group’s exposures to credit risk takes the form of a loss that would be recognized if counterparties failed to, or were unable to, meet their payment obligations. These risks may arise in certain agreements in relation to amounts owed for physical product sales, the use of derivative instruments, and the investment of surplus cash balances. The Group is also exposed to political and economic risk events, which may cause non-payment of foreign currency obligations to the Group.

The Group’s policy is to manage credit exposure to trading counterparties within defined trading limits. All of the Group’s significant counterparties are assigned internal credit limits.

The Group sells manufactured products, agricultural products and offers services to a large base of customers. Type and class of customers may differ depending on the Group’s business segments. For the years ended December 31, 2015 and 2014, more than 95% and 94%, respectively, of the Group’s sales of crops were sold to 95 and 41 well-known customers (both multinational and local) with good credit history with the Group.  In the Sugar, Ethanol and Energy segment, sales of ethanol were concentrated in 25 and 15 customers, which represented 96% and 79% of total sales of ethanol for the years ended December 31, 2015 and 2014, respectively. Approximately 82% and 96% of the Group’s sales of sugar were concentrated in 13 and 6 well-known traders for the years ended December 31, 2015 and 2014, respectively. The remaining 18% and 25%, which mainly relates to “crystal sugar”, were dispersed among several customers. In 2015 and 2014, energy sales are 96% and 86% concentrated in 5 major customers. In the dairy segment, 92% and 72% of the sales were concentrated in 14 and 9 well-known customers in 2015 and 2014, respectively.

No credit limits were exceeded during the reporting periods and management does not expect any losses from non-performance by these counterparties. If any of the Group’s customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, the Group assesses the credit quality of the customer taking into account its financial position, past experience and other factors (see Note 13 for details). The Group may seek cash collateral, letter of credit or parent company guarantees, as considered appropriate. Sales to customers are primarily made by credit with customary payment terms. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position after deducting any impairment allowance. The Group’s exposure of credit risk arising from trade receivables is set out in Note 13.

The Group is exposed to counterparty credit risk on cash and cash equivalent balances. The Group holds cash on deposit with a number of financial institutions. The Group manages its credit risk exposure by limiting individual deposits to clearly defined limits. The Group only deposits with high quality banks and financial institutions. The maximum exposure to credit risk is represented by the carrying amount of cash and cash equivalents in the statement of financial position. As of December 31, 2015 and 2014, the total amount of cash and cash equivalents mainly comprise cash in banks and short-term bank deposits. The Group is authorized to transact with banks rated “BBB+” or higher. As of December 31, 2015 and 2014, 3 and 2 banks (primarily HSBC, Rabobank and ING) accounted for more than 86% and 87%, respectively, of the total cash deposited. The remaining amount of cash and cash equivalents relates to cash in hand. Additionally, during the year ended December 31, 2015, the Group invested in fixed-term bank deposits with mainly two banks (Banco do Brasil and HSBC) and also entered into derivative contracts (currency forward).The Group does not have investment in securities or other financial instruments for which risk may have increased due to the financial credit crisis. The Group’s exposure of credit risk arising from cash and cash equivalents is set out in Note 15.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 32
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)

The Group’s primary objective for holding derivative financial instruments is to manage currency exchange rate risk, interest rate risk and commodity price risk. The Group generally enters into derivative transactions with high-credit-quality counterparties and, by policy, limits the amount of credit exposure to any one counterparty based on an analysis of that counterparty's relative credit standing. The amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which counterparty's obligations exceed the obligations with that counterparty.

Similarly, transactions involving derivative financial instruments are with counterparties with high credit ratings (see Note 12 for details). The Group arranged interest rate swaps with Rabobank, BGT Pactual, HSBC and Votorantim in Brazil and Rabobank in Argentina. The Group also entered into crop commodity futures traded in the established trading markets of Argentina and Brazil through well-rated brokers. Management does not expect any counterparty to fail to meet its obligations.

· Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, it may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt (including current and non-current borrowings as shown in the consolidated statement of financial position, if applicable) divided by total capital. Total capital is calculated as equity, as shown in the consolidated statement of financial position, plus total debt. During the year ended December 31, 2015, the strategy was to maintain the gearing ratio within 0.45 to 0.60, as follows:

   
2015
    
2014
  
Total Debt
    
723,339
      
698,506
  
Total Equity
    
542,730
      
770,385
  
Total Capital
    
1,266,069
      
1,468,891
  
Gearing Ratio
    
0.57
      
0.48
  

· Derivative financial instruments

As part of its business operations, the Group uses a variety of derivative financial instruments to manage its exposure to the financial risks discussed above. The primary objective for holding derivative financial instruments is to manage currency exchange rate risk, interest rate risk and commodity price risk. As part of this strategy, the Group may enter into (i) interest rate derivatives to manage the composition of floating and fixed rate debt; (ii) currency derivatives to manage the currency composition of its cash and cash equivalents; and (iii) crop future contracts and put and call options to manage its exposure to price volatility stemming from its integrated crop production activities. The Group’s policy is not to use derivatives for speculative purposes.

Derivative financial instruments involve, to a varying degree, elements of market and credit risk not recognized in the financial statements. The market risk associated with these instruments resulting from price movements is expected to offset the market risk of the underlying transactions, assets and liabilities, being hedged. The counterparties to the agreements relating to the Group’s contracts generally are large institutions with credit ratings equal to or higher than BBB+. The Group continually monitors the credit rating of such counterparties and seeks to limit its financial exposure to any one financial institution. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Group’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the Group’s obligations to the counterparties.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 33
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)

The following tables show the outstanding positions for each type of derivative contract as of the date of each statement of financial position:

§ Futures/ options

As of December 31, 2015:

   
2015
  
Type of
derivative contract
  
Quantities
(thousands)
(**)
    
Notional
amount
    
Fair
Value Asset/
(Liability)
    
(Loss)/Gain
(*)
  
Futures:
                        
Sale
                        
Corn
    
115
      
18,870
      
2,089
      
2,090
  
Soybean
    
183
      
49,721
      
1,546
      
1,546
  
Sugar
    
103,592
      
34,353
      
(2,685
)
    
5,910
  
Ethanol
    
2,400
      
885
      
(10
)
    
10
  
OTC:
                                
Sugar
    
24,892
      
9,241
      
(2,041
)
    
2,021
  
Options:
                                
Buy put
                                
Soybean
    
12
      
210
      
228
      
18
  
Sugar
    
25,146
      
1,704
      
837
      
819
  
Sell call
                                
Sugar
    
25,095
      
736
      
(1,300
)
    
570
  
Sell put
                                
Sugar
    
9,601
      
372
      
(182
)
    
(188
)
Total
    
191,036
      
116,092
      
(1,518
)
    
12,796
  

As of December 31, 2014:

   
2014
  
Type of
derivative contract
  
Quantities
(thousands)
(**)
    
Notional
amount
    
Fair
Value Asset/
(Liability)
    
(Loss)/Gain
(*)
  
Futures:
                        
Sale
                        
Corn
    
192
      
28,269
      
(2,556
)
    
(2,556
)
Soybean
    
231
      
71,207
      
(439
)
    
(439
)
Wheat
    
20
      
3,879
      
(244
)
    
(244
)
Sugar
    
155,103
      
58,965
      
5,691
      
(3,814
)
Options:
                                
Buy put
                                
Corn
    
16
      
780
      
437
      
(343
)
Sugar
    
50,803
      
18,028
      
681
      
(693
)
Sell call
                                
Corn
    
13
      
(360
)
    
(289
)
    
71
  
Total
    
206,378
      
180,768
      
3,281
      
(8,018
)
(*) Included in the line item “Gain from commodity derivative financial instruments” of Note 28.
(**) All quantities expressed in tons except otherwise indicated.

Commodity future contract fair values are computed with reference to quoted market prices on future exchanges.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 34
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)

§ Floating-to-fixed interest rate swaps

In May 2012, the Group entered into a US$ 60 million floating-to-fixed interest rate forward swap expiring November 15, 2016 expecting to hedge against the variability of the cash flows of the new IDB Tranche B facility (see Note 21). The redefined facility comprises a five-year US$ 60 million loan bearing interest at 180-day LIBOR plus 4.45% per annum (fixed interest rate: 5.70%).

The Group did not apply hedge accounting to any of these agreements. As of December 31, 2015 and 2014, the Group recorded a liability of US$ 0.01million and US$ 0.07 million, respectively, the estimated fair value of the outstanding swaps at those dates.

§ Foreign currency floating-to-fixed interest rate swap

In June 2012 the Group's subsidiary in Brazil, Adecoagro Vale do Ivinhema entered into a Reais 230 million syndicated loan with Rabobank International Brasil, BGT Pactual, HSBC and Votorantim. The loan bears interest at a variable rate of CDI plus 3.60% per annum. At same moment and with same banks, the Company entered into a swap operation, which intention is to effectively convert the principal amount and interest rate denominated in Reais, to a principal amount an interest rate denominated in US$, plus a fixed rate of 7.70% per annum. The swap expired according to the due dates of the loan, until December 2015. As of December 31, 2014, the Group recorded a liability of US$ 9.44 million representing the estimated fair value of the swap as of that date.

In June 2015 the Group's subsidiary in Brazil, Adeco Agropecuária Brasil Ltda entered into an interest rate swap operation with Itaú Unibanco in an aggregate amount of US$ 2.6 million. In this operation Adeco Agropecuária Brasil Ltda receives 16.2% per year, and pays CDI (an interbank floating interest rate in UDS) plus 2.3% per year. The swap expires according to the due dates of the loan, until April 29, 2016. As of December 31, 2015, the Group recorded a liability of US$ 0.01 representing the estimated fair value of the swap as of that date.

In November 2015 the Group's subsidiary in Brazil, Usina Monte Alegre Ltda entered into an interest rate swap operation with Itaú Unibanco in an aggregate amount of US$ 7.7 million. In this operation Usina Monte Alegre Ltda receives 18.8% per year, and pays CDI (an interbank floating interest rate in Reais) plus 2.8% per year. The swap expires according to the due dates of the loan, until November 1, 2018. As of December 31, 2015, the Group recorded a liability of US$ 0.12 representing the estimated fair value of the swap as of that date.

§ Currency forward

During the years ended December 31, 2014 and 2013, the Group entered into several currency forward contracts with Brazilian banks in order to hedge the fluctuation of the Brazilian Reais against the US Dollar for a total aggregate amount of US$ 25.5 million, and US$ 12.5 million, respectively. The currency forward contract entered in 2014 and outstanding as of December 31, 2014 has maturity date in January 2015. The outstanding contracts as of December 31, 2014 resulted in recognition of a gain of US$ 0.3 million in 2015 and of a gain of US$ 0.2 million in 2014. Gains and losses on currency forward contracts are included within “Financial results, net” in the statement of income. During 2015, the Group had not entered into currency forward contracts.

During the year ended on December 2015, the Group entered into several currency forward contracts with Argentinian banks in order to hedge the fluctuation of the Argentinean peso against US Dollar for a total notional amount of US$ 8.9 million. The currency forward contracts maturity date were in November 2015. The outstanding contracts resulted in the recognition of a loss amounting to US$ 0.12 million in 2015. Gain and losses on currency forward contracts are included within “Financial results, net” in the statement of income.

During the year ended on December 2015, the Group entered into several currency forward contracts in order to hedge the fluctuation of the US Dollar against Euro for a total notional amount of US$ 22.02 million. The currency forward contracts maturity date is between March 2016 and June 2016. The outstanding contracts resulted in the recognition of a loss amounting to US$ 0.2 million in 2015. Gain and losses on currency forward contracts are included within “Financial results, net” in the statement of income.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 35
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. Critical accounting estimates and judgments

Critical accounting policies are those that are most important to the portrayal of the Group’s financial condition, results of operations and cash flows, and require management to make difficult, subjective or complex judgments and estimates about matters that are inherently uncertain. Management bases its estimates on historical experience and other assumptions that it believes are reasonable. The Group’s critical accounting policies are discussed below.

Actual results could differ from estimates used in employing the critical accounting policies and these could have a material impact on the Group’s results of operations. The Group also has other policies that are considered key accounting policies, such as the policy for revenue recognition. However, these other policies, which are discussed in the notes to the Group’s financial statements, do not meet the definition of critical accounting estimates, because they do not generally require estimates to be made or judgments that are difficult or subjective.

(a)  Impairment testing

At the date of each statement of financial position, the Group reviews the carrying amounts of its property, plant and equipment and finite lived intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The Group’s property, plant and equipment items generally do not generate independent cash flows.

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. As of the acquisition date, any goodwill acquired is allocated to the cash-generating unit (‘CGU’) expected to benefit from the business combination.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses, Goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired. The impairment review requires management to undertake certain judgments, including estimating the recoverable value of the CGU to which the goodwill relates, based on either fair value less costs-to-sell or the value-in-use, as appropriate, in order to reach a conclusion on whether it deems the goodwill is impaired or not.

For purposes of the impairment testing, each CGU represents the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or group of assets.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 36
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. Critical accounting estimates and judgments (continued)

Farmlands may be used for different activities that may generate independent cash flows. When farmlands are used for single activities (i.e. crops), these are considered as one CGU. Generally, each separate farmland business within Argentina and Uruguay are treated as single CGUs. Otherwise, when farmland businesses are used for more than one segment activity (i.e. crops and cattle or rental income), the farmland is further subdivided into two or more CGUs, as appropriate, for purposes of impairment testing. For its properties in Brazil, management identified a farmland together with its related mill as separate CGUs.

Based on these criteria, management identified a total amount of forty CGUs as of September 30, 2015 and thirty-eight CGUs as of September 30, 2014.

As of September 30, 2015 and 2014, there were no impairment indicators on the Company’s long lived assets. Therefore, the Group only tested those CGUs with allocated goodwill in Argentina, Brazil and Uruguay.

CGUs tested based on a fair-value-less-costs-to-sell model at September 30, 2015 and 2014:

As of September 30, 2015, the Group identified 11 CGUs in Argentina and Uruguay (2014: 11 CGUs) to be tested based on this model (all CGUs with allocated goodwill). Estimating the fair value less costs-to-sell is based on the best information available, and refers to the amount at which the CGU could be bought or sold in a current transaction between willing parties. In calculating the fair value less costs-to-sell, management may be assisted by the work of external advisors. When using this model, the Group applies the “sales comparison approach” as its method of valuing most properties. This method relies on results of sales of similar agricultural properties to estimate the value of the CGU. This approach is based on the theory that the fair value of a property is directly related to the selling prices of similar properties.

Fair values are determined by extensive analysis which includes current and potential soil productivity of the land (the ability to produce crops and maintain livestock) projected margins derived from soil use, rental value obtained for soil use, if applicable, and other factors such as climate and location. Farmland ratings are established by considering such factors as soil texture and quality, yields, topography, drainage and rain levels. Farmland may contain farm outbuildings. A farm outbuilding is any improvement or structure that is used for farming operations.  Outbuildings are valued based on their size, age and design.

Based on the factors described above, each farm property is assigned different soil classifications for the purposes of establishing a value, Soil classifications quantify the factors that contribute to the agricultural capability of the soil.  Soil classifications range from the most productive to the least productive.

The first step to establishing an assessment for a farm property is a sales investigation that identifies the valid farm sales in the area where the farm is located.

A price per hectare is assigned for each soil class within each farm property. This price per hectare is determined based on the quantitative and qualitative analysis mainly described above.

The results are then tested against actual sales, if any, and current market conditions to ensure the values produced are accurate, consistent and fair.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 37
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. Critical accounting estimates and judgments (continued)

The following table shows only the 11 CGUs (2014: 11 CGUs) where goodwill was allocated at each period end and the corresponding amount of goodwill allocated to each one:

CGU / Operating segment / Country
  
September 30,
2015
    
September 30,
2014
  
La Carolina / Crops / Argentina
    
64
      
20
  
La Carolina / Cattle / Argentina
    
22
      
76
  
El Orden  / Crops / Argentina
    
97
      
75
  
El Orden  / Cattle / Argentina
    
8
      
43
  
La Guarida / Crops / Argentina
    
658
      
1,152
  
La Guarida / Cattle / Argentina
    
536
      
182
  
Los Guayacanes / Crops / Argentina
    
830
      
929
  
Doña Marina / Rice / Argentina
    
2,930
      
3,275
  
Huelen / Crops / Argentina
    
3,283
      
3,669
  
El Colorado / Crops / Argentina
    
1,446
      
1,616
  
El Colorado / Cattle / Argentina
    
211
      
236
  
Closing net book value of goodwill allocated to CGUs tested (Note 8)
    
10,085
      
11,273
  
Closing net book value of PPE items and other assets allocated to CGUs tested
    
54,272
      
55,014
  
Total assets allocated to CGUs tested
    
64,357
      
66,287
  

Based on the testing above, the Group determined that none of the CGUs, with allocated goodwill, were impaired at September 30, 2015 and 2014.

CGUs tested based on a value-in-use model at September 30, 2015 and 2014:

As of September 30, 2015, the Group identified 3 CGUs (2014: 3 CGUs) in Brazil to be tested base on this model (all CGUs with allocated goodwill). In performing the value-in-use calculation, the Group applied pre-tax rates to discount the future pre-tax cash flows. In each case, these key assumptions have been made by management reflecting past experience and are consistent with relevant external sources of information, such as appropriate market data. In calculating value-in-use, management may be assisted by the work of external advisors.

The key assumptions used by management in the value-in-use calculations which are considered to be most sensitive to the calculation are:

Key Assumptions
  
September 30, 2015
  
September 30, 2014
Financial projections
  
Covers 4 years for Usina Monte Alegre (“UMA”)
  
Covers 4 years for UMA
   
Cover 7 years for Adecoagro Vale do Ivinhema (“AVI”)
  
Cover 8 years for AVI
Yield average growth rates
  
0-1%
  
0-3%
Future pricing increases
  
3% per annum
  
3% per annum
Future cost increases
  
3% per annum
  
3% per annum
Discount rates
  
6.5%
  
7%
Perpetuity growth rate
  
2%
  
4.5%

Discount rates are based on the risk-free rate for U. S. government bonds, adjusted for a risk premium to reflect the increased risk of investing in South America and Brazil in particular. The risk premium adjustment is assessed for factors specific to the respective CGUs and reflects the countries that the CGUs operate in.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 38
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. Critical accounting estimates and judgments (continued)

The following table shows only the 3 CGUs where goodwill was allocated at each period end and the corresponding amount of goodwill allocated to each one:

CGU/ Operating segment
  
September 30,
2015
    
September 30,
2014
  
AVI / Sugar, Ethanol and Energy
    
3,997
      
6,479
  
UMA / Sugar, Ethanol and Energy
    
1,499
      
2,430
  
UMA (f.k.a. Alfenas Café Ltda.) / Coffee
    
623
      
913
  
Closing net book value of goodwill allocated to CGUs tested (Note 8)
    
6,119
      
9,822
  
Closing net book value of PPE items and other assets allocated to CGUs tested
    
402,116
      
609,266
  
Total assets allocated to 3 CGUs tested
    
408,235
      
619,088
  

Based on the testing above, the Group determined that none of the CGUs, with allocated goodwill, were impaired at September 30, 2015 and 2014.

Management views these assumptions as conservative and does not believe that any reasonable change in the assumptions would cause the carrying value of these CGU’s to exceed the recoverable amount.

(b) Biological assets

The nature of the Group’s biological assets and the basis of determination of their fair value are explained under Note 2.11. The discounted cash flow model requires the input of highly subjective assumptions including observable and unobservable data. Generally the estimation of the fair value of biological assets is based on models or inputs that are not observable in the market and the use of unobservable inputs is significant to the overall valuation of the assets. Unobservable inputs are determined based on the best information available, for example by reference to historical information of past practices and results, statistical and agronomical information, and other analytical techniques. Key assumptions include future market prices, estimated yields at the point of harvest, estimated production cycle, future cash flows, future costs of harvesting and other costs, and estimated discount rate.

Market prices are generally determined by reference to observable data in the principal market for the agricultural produce. Harvesting costs and other costs are estimated based on historical and statistical data. Yields are estimated based on several factors including the location of the farmland and soil type, environmental conditions, infrastructure and other restrictions and growth at the time of measurement. Yields are subject to a high degree of uncertainty and may be affected by several factors out of the Group’s control including but not limited to extreme or unusual weather conditions, plagues and other crop diseases, among other factors.

The key assumptions discussed above are highly sensitive. Reasonable shifts in assumptions including but not limited to increases or decreases in prices, costs and discount factors used would result in a significant increase or decrease to the fair value of biological assets. In addition, cash flows are projected over a number of years and based on estimated production. Estimates of production in themselves are dependent on various assumptions, in addition to those described above, including but not limited to several factors such as location, environmental conditions and other restrictions. Changes in these estimates could materially impact on estimated production, and could therefore affect estimates of future cash flows used in the assessment of fair value (see Note 9).

(c) Fair value of derivatives and other financial instruments

Fair values of derivative financial instruments are computed with reference to quoted market prices on trade exchanges, when available. The fair values of commodity options are calculated using year-end market rates together with common option pricing models. The fair value of interest rate swaps has been calculated using a discounted cash flow analysis.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 39
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. Critical accounting estimates and judgments (continued)

(d) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Deferred tax assets are reviewed each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be settled. Deferred tax assets and liabilities are not discounted. In assessing the recoverability of deferred tax assets, management considers whether it is probable that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment (see Note 22 for details).
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 40
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information

IFRS 8 “Operating Segments” requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of operating segments that meet specified criteria.  Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM evaluates the business based on the differences in the nature of its operations, products and services.  The amount reported for each segment item is the measure reported to the CODM for these purposes.
 
The Group operates in three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation. As from January 1, 2014 the Group’s management does not consider its Coffee and Cattle businesses to be of continuing significance and they do not meet the quantitative threshold for disclosure.  The Coffee and Cattle businesses are now presented within “Farming – All Other Segments” and prior year disclosures have been recast to conform to this presentation.

The Group operates in three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation.

· The Group’s ‘Farming’ is further comprised of five reportable segments:

§ The Group’s ‘Crops’ Segment consists of planting, harvesting and sale of grains, oilseeds and fibers (including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain warehousing/conditioning and handling and drying services to third parties. Each underlying crop in this segment does not represent a separate operating segment. Management seeks to maximize the use of the land through the cultivation of one or more type of crops. Types and surface amount of crops cultivated may vary from harvest year to harvest year depending on several factors, some of them out of the Group´s control. Management is focused on the long-term performance of the productive land, and to that extent, the performance is assessed considering the aggregated combination, if any, of crops planted in the land. A single manager is responsible for the management of operating activity of all crops rather than for each individual crop.

§ The Group’s ‘Rice’ Segment consists of planting, harvesting, processing and marketing of rice;

§ The Group’s ‘Dairy’ Segment consists of the production and sale of raw milk´and other dairy products,

§ The Group’s ‘All Other Segments’ consists of the aggregation of the remaining non-reportable operating segments, which do not meet the quantitative thresholds for disclosure and for which the Group's management does not consider them  to be of continuing significance as from January 1, 2014, namely, Coffee and Cattle.

· The Group’s ‘Sugar, Ethanol and Energy’ Segment consists of cultivating sugarcane which is processed in owned sugar mills, transformed into ethanol, sugar and electricity and marketed;

· The Group’s ‘Land Transformation’ Segment comprises the (i) identification and acquisition of underdeveloped and undermanaged farmland businesses; and (ii) realization of value through the strategic disposition of assets (generating profits).

The measurement principles for the Group’s segment reporting structure are based on the IFRS principles adopted in the consolidated financial statements. .

The following table presents information with respect to the Group’s reportable segments. Certain other activities of a holding function nature not allocable to the segments are disclosed in the column ‘Corporate’.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 41
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5.
Segment information (continued)
 
Segment analysis for the year ended December 31, 2015
 
   
Farming
    
Sugar,
Ethanol and
Energy
    
Land
Transformation
    
Corporate
    
Total
  
   
Crops
    
Rice
    
Dairy
    
All other
segments
    
Farming
subtotal
                          
Sales of manufactured products and services rendered
    
3,089
      
84,187
      
1,419
      
1,302
      
89,997
      
400,622
      
-
      
-
      
490,619
  
Cost of manufactured products sold and services rendered
    
(2,635
)
    
(68,594
)
    
(1,468
)
    
(603
)
    
(73,300
)
    
(248,698
)
    
-
      
-
      
(321,998
)
Gross Profit from Manufacturing Activities
    
454
      
15,593
      
(49
)
    
699
      
16,697
      
151,924
      
-
      
-
      
168,621
  
Sales of agricultural produce and biological assets
    
151,652
      
481
      
31,562
      
-
      
183,695
      
-
      
-
      
-
      
183,695
  
Cost of agricultural produce sold and direct agricultural selling expenses
    
(151,652
)
    
(481
)
    
(31,562
)
    
-
      
(183,695
)
    
-
      
-
      
-
      
(183,695
)
Initial recognition and changes in fair value of biological assets and agricultural produce
    
11,561
      
2,822
      
7,542
      
1,135
      
23,060
      
13,809
      
-
      
-
      
36,869
  
Changes in net realizable value of agricultural produce after harvest
    
14,691
      
-
      
-
      
-
      
14,691
      
-
      
-
      
-
      
14,691
  
Gross Profit from Agricultural Activities
    
26,252
      
2,822
      
7,542
      
1,135
      
37,751
      
13,809
      
-
      
-
      
51,560
  
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
    
26,706
      
18,415
      
7,493
      
1,834
      
54,448
      
165,733
      
-
      
-
      
220,181
  
General and administrative expenses
    
(3,987
)
    
(3,136
)
    
(1,451
)
    
(74
)
    
(8,648
)
    
(18,301
)
    
-
      
(21,476
)
    
(48,425
)
Selling expenses
    
(5,672
)
    
(12,592
)
    
(663
)
    
(49
)
    
(18,976
)
    
(50,729
)
    
-
      
(563
)
    
(70,268
)
Other operating income, net
    
16,422
      
600
      
(479
)
    
6
      
16,549
      
6,340
      
7,914
      
263
      
31,066
  
Share of loss of joint ventures
    
(2,685
)
    
-
      
-
      
-
      
(2,685
)
    
-
      
-
      
-
      
(2,685
)
Profit / (loss) from Operations Before Financing and Taxation
    
30,784
      
3,287
      
4,900
      
1,717
      
40,688
      
103,043
      
7,914
      
(21,776
)
    
129,869
  
                                                                         
Reserve from the sale of non-controlling interests in subsidiaries (see Note 16)
    
-
      
-
      
-
      
-
      
-
      
-
      
16,066
      
-
      
16,066
  
Depreciation and amortization
    
(2,427
)
    
(2,987
)
    
(1,456
)
    
(276
)
    
(7,146
)
    
(64,121
)
    
-
      
-
      
(71,267
)
Initial recognition and changes in fair value of biological assets (unrealized)
    
1,090
      
160
      
-
      
1,532
      
2,782
      
12,599
      
-
      
-
      
15,381
  
Initial recognition and changes in fair value of agricultural produce (unrealized)
    
1,144
      
427
      
-
      
(219
)
    
1,352
      
117
      
-
      
-
      
1,469
  
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)
    
9,327
      
2,235
      
7,542
      
(178
)
    
18,926
      
1,093
      
-
      
-
      
20,019
  
Changes in net realizable value of agricultural produce after harvest (unrealized)
    
4,406
      
-
      
-
      
-
      
4,406
      
-
      
-
      
-
      
4,406
  
Changes in net realizable value of agricultural produce after harvest (realized)
    
10,285
      
-
      
-
      
-
      
10,285
      
-
      
-
      
-
      
10,285
  
                                                                         
Farmlands and farmland improvements, net
    
75,702
      
16,053
      
289
      
5,265
      
97,309
      
22,359
      
-
      
-
      
119,668
  
Machinery, equipment and other fixed assets, net
    
3,853
      
14,367
      
9,422
      
611
      
28,253
      
369,184
      
-
      
-
      
397,437
  
Work in progress
    
935
      
5,604
      
495
      
-
      
7,034
      
16,079
      
-
      
-
      
23,113
  
Investment property
    
-
      
-
      
-
      
4,796
      
4,796
      
-
      
-
      
-
      
4,796
  
Goodwill
    
4,609
      
2,117
      
-
      
1,192
      
7,918
      
5,592
      
-
      
-
      
13,510
  
Biological assets
    
22,536
      
23,131
      
6,786
      
3,268
      
55,721
      
243,549
      
-
      
-
      
299,270
  
Investment in joint ventures
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Inventories
    
27,770
      
13,584
      
1,741
      
-
      
43,095
      
34,608
      
-
      
-
      
77,703
  
Total segment assets
    
135,405
      
74,856
      
18,733
      
15,132
      
244,126
      
691,371
      
-
      
-
      
935,497
  
Borrowings
    
54,321
      
24,932
      
5,318
      
1,273
      
85,844
      
637,495
      
-
      
-
      
723,339
  
Total segment liabilities
    
54,321
      
24,932
      
5,318
      
1,273
      
85,844
      
637,495
      
-
      
-
      
723,339
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 42
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information (continued)
 
Segment analysis for the year ended December 31, 2014

   
Farming            
    
Sugar,
Ethanol and
Energy
    
Land
Transformation
    
Corporate
    
Total
  
   
Crops
    
Rice
    
Dairy
    
All other
segments
    
Farming
subtotal
                          
Sales of manufactured products and services rendered
    
189
      
101,336
      
2,948
      
1,525
      
105,998
      
407,129
      
-
      
-
      
513,127
  
Cost of manufactured products sold and services rendered
    
-
      
(81,853
)
    
(3,014
)
    
(842
)
    
(85,709
)
    
(249,733
)
    
-
      
-
      
(335,442
)
Gross Profit from Manufacturing Activities
    
189
      
19,483
      
(66
)
    
683
      
20,289
      
157,396
      
-
      
-
      
177,685
  
Sales of agricultural produce and biological assets
    
177,473
      
2,346
      
30,020
      
-
      
209,839
      
-
      
-
      
-
      
209,839
  
Cost of agricultural produce sold and direct agricultural selling expenses
    
(177,473
)
    
(2,346
)
    
(30,020
)
    
-
      
(209,839
)
    
-
      
-
      
-
      
(209,839
)
Initial recognition and changes in fair value of biological assets and agricultural produce
    
40,267
      
8,559
      
9,891
      
179
      
58,896
      
(31,751
)
    
-
      
-
      
27,145
  
Changes in net realizable value of agricultural produce after harvest
    
3,401
      
-
      
-
      
-
      
3,401
      
-
      
-
      
-
      
3,401
  
Gross Profit / (loss) from Agricultural Activities
    
43,668
      
8,559
      
9,891
      
179
      
62,297
      
(31,751
)
    
-
      
-
      
30,546
  
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
    
43,857
      
28,042
      
9,825
      
862
      
82,586
      
125,645
      
-
      
-
      
208,231
  
General and administrative expenses
    
(4,343
)
    
(3,218
)
    
(1,554
)
    
(166
)
    
(9,281
)
    
(22,054
)
    
-
      
(21,360
)
    
(52,695
)
Selling expenses
    
(4,201
)
    
(14,367
)
    
(596
)
    
(29
)
    
(19,193
)
    
(57,815
)
    
-
      
(1,856
)
    
(78,864
)
Other operating income, net
    
356
      
480
      
437
      
(190
)
    
1,083
      
10,911
      
-
      
(17
)
    
11,977
  
Share of loss of joint ventures
    
(924
)
    
-
      
-
      
-
      
(924
)
    
-
      
-
      
-
      
(924
)
Profit / (loss) from Operations Before Financing and Taxation
    
34,745
      
10,937
      
8,112
      
477
      
54,271
      
56,687
      
-
      
(23,233
)
    
87,725
  
Reserve from the sale of non-controlling interests in subsidiaries (see Note 16)
    
-
      
-
      
-
      
-
      
-
      
-
      
25,508
      
-
      
25,508
  
Depreciation and amortization
    
(1,926
)
    
(3,261
)
    
(1,551
)
    
(398
)
    
(7,136
)
    
(82,520
)
    
-
      
-
      
(89,656
)
Initial recognition and changes in fair value of biological assets (unrealized)
    
(912
)
    
(3,571
)
    
1,127
      
542
      
(2,814
)
    
(14,325
)
    
-
      
-
      
(17,139
)
Initial recognition and changes in fair value of agricultural produce (unrealized)
    
3,737
      
1,231
      
-
      
(363
)
    
4,605
      
(3,249
)
    
-
      
-
      
1,356
  
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)
    
37,442
      
10,899
      
8,764
      
-
      
57,105
      
(14,177
)
    
-
      
-
      
42,928
  
Changes in net realizable value of agricultural produce after harvest (unrealized)
    
1,134
      
-
      
-
      
-
      
1,134
      
-
      
-
      
-
      
1,134
  
Changes in net realizable value of agricultural produce after harvest (realized)
    
2,267
      
-
      
-
      
-
      
2,267
      
-
      
-
      
-
      
2,267
  
                                                                         
Farmlands and farmland improvements, net
    
116,627
      
22,066
      
396
      
8,619
      
147,708
      
32,113
      
-
      
-
      
179,821
  
Machinery, equipment and other fixed assets, net
    
5,478
      
20,339
      
14,599
      
1,169
      
41,585
      
435,323
      
-
      
-
      
476,908
  
Work in progress
    
1,692
      
3,859
      
652
      
-
      
6,203
      
113,973
      
-
      
-
      
120,176
  
Investment property
    
-
      
-
      
-
      
6,675
      
6,675
      
-
      
-
      
-
      
6,675
  
Goodwill
    
7,241
      
3,228
      
-
      
1,482
      
11,951
      
8,221
      
-
      
-
      
20,172
  
Biological assets
    
31,012
      
23,875
      
9,182
      
2,193
      
66,262
      
274,970
      
-
      
-
      
341,232
  
Investment in joint ventures
    
2,752
      
-
      
-
      
-
      
2,752
      
-
      
-
      
-
      
2,752
  
Inventories
    
37,056
      
11,077
      
2,619
      
-
      
50,752
      
54,167
      
-
      
-
      
104,919
  
Total segment assets
    
201,858
      
84,444
      
27,448
      
20,138
      
333,888
      
918,767
      
-
      
-
      
1,252,655
  
Borrowings
    
68,460
      
13,215
      
3,647
      
1,805
      
87,127
      
611,379
      
-
      
-
      
698,506
  
Total segment liabilities
    
68,460
      
13,215
      
3,647
      
1,805
      
87,127
      
611,379
      
-
      
-
      
698,506
  
 

The accompanying notes are an integral part of these consolidated financial statements.
 
F - 43
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information (continued)
 
Segment analysis for the year ended December 31, 2013
 
   
Farming
    
Sugar,
Ethanol and
Energy
    
Land
Transformation
    
Corporate
    
Total
  
   
Crops
    
Rice
    
Dairy
    
All other
segments
    
Farming
subtotal
                          
Sales of manufactured products and services rendered
    
510
      
104,576
      
-
      
3,237
      
108,323
      
316,984
      
-
      
-
      
425,307
  
Cost of manufactured products sold and services rendered
    
-
      
(84,654
)
    
-
      
(89
)
    
(84,743
)
    
(187,518
)
    
-
      
-
      
(272,261
)
Gross Profit from Manufacturing Activities
    
510
      
19,922
      
-
      
3,148
      
23,580
      
129,466
      
-
      
-
      
153,046
  
Sales of agricultural produce and biological assets
    
184,607
      
2,517
      
30,661
      
1,055
      
218,840
      
477
      
-
      
-
      
219,317
  
Cost of agricultural produce sold and direct agricultural selling expenses
    
(184,607
)
    
(2,517
)
    
(30,661
)
    
(1,055
)
    
(218,840
)
    
(477
)
    
-
      
-
      
(219,317
)
Initial recognition and changes in fair value of biological assets and agricultural produce
    
24,356
      
8,339
      
7,761
      
(8,599
)
    
31,857
      
(70,980
)
    
-
      
-
      
(39,123
)
Changes in net realizable value of agricultural produce after harvest
    
12,607
      
-
      
-
      
121
      
12,728
      
147
      
-
      
-
      
12,875
  
Gross Profit / (loss) from Agricultural Activities
    
36,963
      
8,339
      
7,761
      
(8,478
)
    
44,585
      
(70,833
)
    
-
      
-
      
(26,248
)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
    
37,473
      
28,261
      
7,761
      
(5,330
)
    
68,165
      
58,633
      
-
      
-
      
126,798
  
General and administrative expenses
    
(4,101
)
    
(4,424
)
    
(1,087
)
    
(1,119
)
    
(10,731
)
    
(19,434
)
    
-
      
(23,187
)
    
(53,352
)
Selling expenses
    
(6,236
)
    
(16,104
)
    
(454
)
    
(497
)
    
(23,291
)
    
(44,571
)
    
-
      
(207
)
    
(68,069
)
Other operating income, net
    
7,632
      
438
      
494
      
(292
)
    
8,272
      
13,290
      
28,172
      
(84
)
    
49,650
  
Share of loss of joint ventures
    
(219
)
    
-
      
-
      
-
      
(219
)
    
-
      
-
      
-
      
(219
)
Profit / (loss) from Operations Before Financing and Taxation
    
34,549
      
8,171
      
6,714
      
(7,238
)
    
42,196
      
7,918
      
28,172
      
(23,478
)
    
54,808
  
                                                                         
Profit from discontinued operations
    
-
      
-
      
1,767
      
-
      
1,767
      
-
      
-
      
-
      
1,767
  
Depreciation and amortization
    
(2,171
)
    
(4,731
)
    
(1,086
)
    
(464
)
    
(8,452
)
    
(59,980
)
    
-
      
-
      
(68,432
)
Initial recognition and changes in fair value of biological assets (unrealized)
    
894
      
2,211
      
(234
)
    
(8,121
)
    
(5,250
)
    
(47,341
)
    
-
      
-
      
(52,591
)
Initial recognition and changes in fair value of agricultural produce (unrealized)
    
3,956
      
669
      
-
      
(211
)
    
4,414
      
(5,279
)
    
-
      
-
      
(865
)
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)
    
19,506
      
5,459
      
7,995
      
(267
)
    
32,693
      
(18,360
)
    
-
      
-
      
14,333
  
Changes in net realizable value of agricultural produce after harvest (unrealized)
    
(292
)
    
-
      
-
      
-
      
(292
)
    
-
      
-
      
-
      
(292
)
Changes in net realizable value of agricultural produce after harvest (realized)
    
12,899
      
-
      
-
      
121
      
13,020
      
147
      
-
      
-
      
13,167
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 44
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information (continued)

Total segment assets are measured in a manner consistent with that of the consolidated financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. The Group’s investment in CHS Agro S.A. is allocated to the ‘Crops’ segment. Therefore, the Group’s share of profit or loss after income taxes and its carrying amount are reported in this segment.

Total reportable segments’ assets are reconciled to total assets as per the statement of financial position as follows:

   
2015
    
2014
  
Total reportable assets as per Segment Information
    
935,497
      
1,252,655
  
Intangible assets (excluding goodwill)
    
3,151
      
3,606
  
Deferred income tax assets
    
60,857
      
45,597
  
Trade and other receivables
    
166,806
      
215,116
  
Other assets
    
651
      
587
  
Derivative financial instruments
    
4,849
      
7,966
  
Cash and cash equivalents
    
198,894
      
113,795
  
Total assets as per the Statement of Financial Position
    
1,370,705
      
1,639,322
  

Total segment liabilities are measured in a manner consistent with that of the consolidated financial statements. These liabilities are allocated based on the operations of the segment.

Total reportable segments’ liabilities are reconciled to total liabilities as per the statement of financial position as follows:

   
2015
    
2014
  
Total reportable liabilities as per Segment Information
    
723,339
      
698,506
  
Trade and other payables
    
55,642
      
85,491
  
Deferred income tax liabilities
    
15,636
      
39,635
  
Payroll and social liabilities
    
23,389
      
28,593
  
Provisions for other liabilities
    
2,313
      
2,737
  
Current income tax liabilities
    
962
      
76
  
Derivative financial instruments
    
6,694
      
13,899
  
Total liabilities as per the Statement of Financial Position
    
827,975
      
868,937
  

Non-current assets and net revenue and fair value gains and losses are shown by geographic region. These are the regions in which the Group is active: Argentina, Brazil and Uruguay. Non-current assets are allocated to the regions according to the location of the assets in question. Non-current assets encompass intangible assets; property, plant and equipment; investments accounted for using the equity method as well as other non-current assets. Net revenue and fair value gains and losses are allocated according to the location of the respective operations.
 

The accompanying notes are an integral part of these consolidated financial statements.
 
F - 45
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information (continued)

As of and for the year ended December 31, 2015:

   
Argentina
    
Brazil
    
Uruguay
    
Total
  
Property, plant and equipment
    
110,218
      
423,023
      
6,977
      
540,218
  
Investment property
    
4,796
      
-
      
-
      
4,796
  
Goodwill
    
7,287
      
6,223
      
-
      
13,510
  
Investment in joint ventures
    
-
      
-
      
-
      
-
  
Non-current portion of biological assets
    
6,476
      
246,529
      
-
      
253,005
  
                                 
Initial recognition and changes in fair value of biological assets and agricultural produce
    
16,637
      
19,438
      
794
      
36,869
  
Gain / (Loss) from changes in net realizable value of agricultural produce after harvest
    
16,139
      
(32
)
    
(1,416
)
    
14,691
  
Sales of manufactured products sold and services rendered
    
52,566
      
277,949
      
160,104
      
490,619
  
Sales of agricultural produce and biological assets
    
113,881
      
17,507
      
52,307
      
183,695
  

As of and for the year ended December 31, 2014:

   
Argentina
    
Brazil
    
Uruguay
    
Total
  
Property, plant and equipment
    
163,382
      
604,791
      
8,732
      
776,905
  
Investment property
    
6,675
      
-
      
-
      
6,675
  
Goodwill
    
11,096
      
9,076
      
-
      
20,172
  
Investment in joint ventures
    
2,752
      
-
      
-
      
2,752
  
Non-current portion of biological assets
    
8,881
      
277,163
      
-
      
286,044
  
                                 
Initial recognition and changes in fair value of biological assets and agricultural produce
    
57,368
      
(31,028
)
    
805
      
27,145
  
Gain / (Loss) from changes in net realizable value of agricultural produce after harvest
    
1,629
      
(345
)
    
2,117
      
3,401
  
Sales of manufactured products sold and services rendered
    
59,499
      
310,370
      
143,258
      
513,127
  
Sales of agricultural produce and biological assets
    
133,373
      
18,199
      
58,267
      
209,839
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 46
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information (continued)

As of and for the year ended December 31, 2013:

   
Argentina
    
Brazil
    
Uruguay
    
Total
  
Initial recognition and changes in fair value of biological assets and agricultural produce
    
33,640
      
(76,511
)
    
3,748
      
(39,123
)
Gain / (Loss) from changes in net realizable value of agricultural produce after harvest
    
12,850
      
(40
)
    
65
      
12,875
  
Sales of manufactured products sold and services rendered
    
108,281
      
312,607
      
4,419
      
425,307
  
Sales of agricultural produce and biological assets
    
190,391
      
16,459
      
12,467
      
219,317
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 47
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
6.
Property, plant and equipment

Changes in the Group’s property, plant and equipment in 2015 and 2014 were as follows:
 
   
Farmlands
    
Farmland
improvements
    
Buildings and
facilities
    
Machinery,
equipment,
furniture and
fittings
    
Computer
equipment
    
Vehicles
    
Work in
progress
    
Total
  
At January  1, 2014
                                                
Cost
    
216,843
      
15,746
      
274,492
      
498,647
      
5,374
      
4,345
      
57,579
      
1,073,026
  
Accumulated depreciation
    
-
      
(6,894
)
    
(68,030
)
    
(200,737
)
    
(3,684
)
    
(3,161
)
    
-
      
(282,506
)
Net book amount
    
216,843
      
8,852
      
206,462
      
297,910
      
1,690
      
1,184
      
57,579
      
790,520
  
Year ended December  31, 2014
                                                                
Opening net book amount
    
216,843
      
8,852
      
206,462
      
297,910
      
1,690
      
1,184
      
57,579
      
790,520
  
Exchange differences
    
(43,494
)
    
(1,981
)
    
(28,610
)
    
(38,016
)
    
(271
)
    
(251
)
    
(18,099
)
    
(130,722
)
Additions
    
-
      
-
      
20,296
      
70,632
      
1,650
      
618
      
116,366
      
209,562
  
Transfers from investment property (Note 7)
    
1,071
      
-
      
-
      
-
      
-
      
-
      
-
      
1,071
  
Transfers
    
-
      
90
      
19,129
      
12,103
      
1,333
      
-
      
(32,655
)
    
-
  
Disposals
    
-
      
-
      
(11
)
    
(769
)
    
(26
)
    
(29
)
    
-
      
(835
)
Reclassification to non-income  tax credits (*)
    
-
      
-
      
(302
)
    
(1,197
)
    
-
      
-
      
(3,015
)
    
(4,514
)
Depreciation (Note 26)
    
-
      
(1,560
)
    
(22,193
)
    
(63,077
)
    
(1,005
)
    
(342
)
    
-
      
(88,177
)
Closing net book amount
    
174,420
      
5,401
      
194,771
      
277,586
      
3,371
      
1,180
      
120,176
      
776,905
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 48
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
6. Property, plant and equipment (continued)

   
Farmlands
    
Farmland
improvements
    
Buildings and
facilities
    
Machinery,
equipment,
furniture and
fittings
    
Computer
equipment
    
Vehicles
    
Work in
progress
    
Total
  
At December  31, 2014
                                                
Cost
    
174,420
      
13,855
      
284,994
      
541,400
      
8,060
      
4,683
      
120,176
      
1,147,588
  
Accumulated depreciation
    
-
      
(8,454
)
    
(90,223
)
    
(263,814
)
    
(4,689
)
    
(3,503
)
    
-
      
(370,683
)
Net book amount
    
174,420
      
5,401
      
194,771
      
277,586
      
3,371
      
1,180
      
120,176
      
776,905
  
Year ended December  31, 2015
                                                                
Opening net book amount
    
174,420
      
5,401
      
194,771
      
277,586
      
3,371
      
1,180
      
120,176
      
776,905
  
Exchange differences
    
(56,498
)
    
(1,588
)
    
(70,454
)
    
(106,957
)
    
(1,184
)
    
(645
)
    
(22,824
)
    
(260,150
)
Additions
    
-
      
48
      
11,666
      
47,926
      
809
      
1,493
      
45,513
      
107,455
  
Transfers to  investment property (Note 7)
    
(580
)
    
-
      
-
      
-
      
-
      
-
      
-
      
(580
)
Transfers
    
430
      
2,574
      
43,879
      
68,136
      
392
      
-
      
(115,411
)
    
-
  
Disposals
    
(3,245
)
    
-
      
(1,564
)
    
(1,728
)
    
(17
)
    
(47
)
    
-
      
(6,601
)
Reclassification to non-income  tax credits (*)
    
-
      
-
      
(1,048
)
    
(740
)
    
-
      
-
      
(4,341
)
    
(6,129
)
Depreciation (Note 26)
    
-
      
(1,294
)
    
(9,782
)
    
(58,174
)
    
(909
)
    
(523
)
    
-
      
(70,682
)
Closing net book amount
    
114,527
      
5,141
      
167,468
      
226,049
      
2,462
      
1,458
      
23,113
      
540,218
  
At December  31, 2015
                                                                
Cost
    
114,527
      
14,889
      
267,473
      
548,037
      
8,060
      
5,484
      
23,113
      
981,583
  
Accumulated depreciation
    
-
      
(9,748
)
    
(100,005
)
    
(321,988
)
    
(5,598
)
    
(4,026
)
    
-
      
(441,365
)
Net book amount
    
114,527
      
5,141
      
167,468
      
226,049
      
2,462
      
1,458
      
23,113
      
540,218
  

(*) Brazilian federal tax law allows entities to take a percentage of the total cost of the assets purchased as a tax credit. As of December 31, 2015 and 2014, ICMS tax credits were reclassified to trade and other receivables.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 49
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
6. Property, plant and equipment (continued)

An amount of US$ 64,536; US$ 85,875 and US$ 61,109 of depreciation charges are included in “Cost of manufactured products sold and services rendered” for the years ended December 31, 2015, 2014 and 2013, respectively. An amount of US$ 5,977; US$ 2,693 and; US$ 6,352 of depreciation charges are included in “General and administrative expenses” for the years ended December 31, 2015, 2014 and 2013, respectively.  An amount of US$ 754; US$ 1,088 and US$ 503 of depreciation charges are included in “Selling expenses” for the years ended December 31, 2015, 2014 and 2013, respectively. An amount of US$ nill; US$ nil and US$ 970 of depreciation charges were not charged to the statement of income and were capitalized in “Inventories” for the years ended December 31, 2015, 2014 and 2013, respectively.

During the year ended December 31, 2015, borrowing costs of US$ 7,684 (2014: US$ 6,864) were capitalized as components of the cost of acquisition or construction for qualifying assets.

Certain of the Group’s assets have been pledged as collateral to secure the Group’s borrowings and other payables. The net book value of the pledged assets amounts to US$ 416,393 as of December 31, 2015 (2014:
US$ 565,500).

Where assets are financed by leasing agreements and substantially all the risks and rewards of ownership are substantially transferred to the Group (“finance leases”) the assets are treated as if they had been purchased outright and the corresponding liability to the leasing company is included as an obligation under finance leases.

7. Investment property

Changes in the Group’s investment property in 2015 and 2014 were as follows:

   
2015
    
2014
  
Beginning of the year
    
6,675
      
10,147
  
Transfers (i)
    
580
      
(1,071
)
Exchange difference
    
(2,459
)
    
(2,401
)
End of the year
    
4,796
      
6,675
  
Cost
    
4,796
      
6,675
  
Accumulated depreciation
    
-
      
-
  
Net book amount
    
4,796
      
6,675
  

The following amounts have been recognized in the statement of income in the line “Sales of manufactured products and services rendered”:

   
2015
    
2014
    
2013
  
Rental income
    
1,302
      
1,523
      
3,446
  

(i) Transferred from/(to) property, plant and equipment in 2015 and 2014. Relates to new/(finalization) of contracts with third parties.

As of December 31, 2015, the fair value (level 3) of investment property was US$ 55 million (2014: US$ 48 million).
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 50
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
8. Intangible assets

Changes in the Group’s intangible assets in 2015 and 2014 were as follows:

   
Goodwill
    
Trademarks
    
Software
    
Others
    
Total
  
At January 1,  2014
                              
Cost
    
24,869
      
2,526
      
2,252
      
129
      
29,776
  
Accumulated amortization
    
-
      
(1,397
)
    
(909
)
    
(129
)
    
(2,435
)
Net book amount
    
24,869
      
1,129
      
1,343
      
-
      
27,341
  
Year ended December 31, 2014
                                        
Opening net book amount
    
24,869
      
1,129
      
1,343
      
-
      
27,341
  
Exchange differences
    
(4,697
)
    
(28
)
    
(422
)
    
(5
)
    
(5,152
)
Additions
    
-
      
-
      
2,080
      
18
      
2,098
  
Amortization charge (i) (Note 26)
    
-
      
(142
)
    
(367
)
    
-
      
(509
)
Closing net book amount
    
20,172
      
959
      
2,634
      
13
      
23,778
  
At December 31, 2014
                                        
Cost
    
20,172
      
2,498
      
3,910
      
142
      
26,722
  
Accumulated amortization
    
-
      
(1,539
)
    
(1,276
)
    
(129
)
    
(2,944
)
Net book amount
    
20,172
      
959
      
2,634
      
13
      
23,778
  
Year ended December 31, 2015
                                        
Opening net book amount
    
20,172
      
959
      
2,634
      
13
      
23,778
  
Exchange differences
    
(6,662
)
    
(29
)
    
(1,026
)
    
(18
)
    
(7,735
)
Additions
    
-
      
-
      
1,160
      
43
      
1,203
  
Amortization charge (i) (Note 26)
    
-
      
-
      
(568
)
    
(17
)
    
(585
)
Closing net book amount
    
13,510
      
930
      
2,200
      
21
      
16,661
  
At December 31, 2015
                                        
Cost
    
13,510
      
2,469
      
4,044
      
167
      
20,190
  
Accumulated amortization
    
-
      
(1,539
)
    
(1,844
)
    
(146
)
    
(3,529
)
Net book amount
    
13,510
      
930
      
2,200
      
21
      
16,661
  
 
(i) An amount of US$ 568 and US$ 367 of amortization charges are included in “General and administrative expenses” for the years ended December 31, 2015 and 2014, respectively. An amount of US$ 17 and US$ 142 of amortization charges are included in “Selling expenses” for the years ended December 31, 2015 and 2014, respectively. There were no impairment charges for any of the years presented (see Note 4 (a)).

 Biological assets
 
Changes in the Group’s biological assets in 2015 and 2014 were as follows:

   
2015
    
2014
  
Beginning of the year
    
341,232
      
292,144
  
Increase due to purchases
    
306
      
526
  
Initial recognition and changes in fair value of biological assets (i)
    
36,869
      
27,145
  
Decrease due to harvest
    
(288,159
)
    
(363,225
)
Decrease due to disposals
    
(3,656
)
    
(2,553
)
Decrease due to sales of agricultural produce
    
(27,907
)
    
(27,467
)
Costs incurred during the year
    
354,123
      
466,233
  
Exchange differences
    
(113,538
)
    
(51,571
)
End of the year
    
299,270
      
341,232
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 51
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. Biological assets (continued)

(i) Biological asset with a production cycle of more than one year (that is, sugarcane, coffee, dairy and cattle) generated “Initial recognition and changes in fair value of biological assets” amounting to US$ 22,486 for the year ended December 31, 2015 (2014: US$ (21,681); 2013: US$ (71,818)). In 2015, an amount of US$ 45,549 (2014: US$ 32,394; 2013: US$ (29,781)) was attributable to price changes, and an amount of US$ (23,063) (2014: US$ (54,075); 2013: US$ (42,037)) was attributable to physical changes.

Biological assets in 2015 and 2014 were as follows:
 
   
2015
    
2014
  
Non-current
            
Cattle for dairy production (i)
    
6,459
      
8,856
  
Other cattle (ii)
    
17
      
25
  
Sown land – coffee (iii) (iv)
    
2,980
      
2,193
  
Sown land – sugarcane (iii) (iv)
    
243,549
      
274,970
  
     
253,005
      
286,044
  
Current
                
Other cattle (iv)
    
598
      
301
  
Sown land – crops (ii)
    
22,536
      
31,012
  
Sown land – rice (ii)
    
23,131
      
23,875
  
     
46,265
      
55,188
  
Total biological assets
    
299,270
      
341,232
  

(i) Classified as bearer and mature biological assets.
(ii) Classified as consumable and immature biological assets.
(iii) Classified as bearer and immature biological assets.
(iv)
As of December 31, 2015, and amount of US$ 598 (2014: US$ 301) was classified as consumable and mature biological assets, and an amount of US$ 246,529 (2014: US$ 277,163) was classified as consumable and immature biological assets.

The fair value less estimated point of sale costs of agricultural produce at the point of harvest amounted to US$ 167,333 for the year ended December 31, 2015 (2014: US$ 197,590; 2013: US$ 169,614).

The following table presents the Group´s biological assets that are measured at fair value at December 31, 2015:
 
   
2015
  
   
Level 2
    
Level 3
    
Total
  
                   
Cattle for dairy production
    
6,459
      
-
      
6,459
  
Other cattle
    
615
      
-
      
615
  
Sown land – coffee
    
-
      
2,980
      
2,980
  
Sown land – sugarcane
    
-
      
243,549
      
243,549
  
Sown land – crops
    
-
      
22,536
      
22,536
  
Sown land – rice
    
-
      
23,131
      
23,131
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 52
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. Biological assets (continued)

   
2014
  
   
Level 2
    
Level 3
    
Total
  
                   
Cattle for dairy production
    
8,856
      
-
      
8,856
  
Other cattle
    
326
      
-
      
326
  
Sown land – coffee
    
-
      
2,193
      
2,193
  
Sown land – sugarcane
    
-
      
274,970
      
274,970
  
Sown land – crops
    
-
      
31,012
      
31,012
  
Sown land – rice
    
-
      
23,875
      
23,875
  

There were no transfers between any levels during the year. There were no Biological assets valued under Level 1.
 
The movement in the fair value of the assets within level 3 of the hierarchy is as follows for the years ended December 31, 2015 and 2014:

   
2015
  
   
Sown land –
crops
    
Sown land –
rice
    
Sown land –
coffee
    
Sown land –
sugarcane
  
Beginning of the year
    
31,012
      
23,875
      
2,193
      
274,970
  
Initial recognition and changes in fair value of biological assets (i)
    
11,561
      
2,822
      
1,313
      
13,809
  
Decrease due to harvest
    
(93,536
)
    
(39,488
)
    
-
      
(155,135
)
Costs incurred during the year
    
81,724
      
44,025
      
217
      
202,784
  
Exchange differences
    
(8,225
)
    
(8,103
)
    
(743
)
    
(92,879
)
End of the year
    
22,536
      
23,131
      
2,980
      
243,549
  
 
   
2014
  
   
Sown land –
crops
    
Sown land –
rice
    
Sown land –
coffee
    
Sown land –
sugarcane
  
Beginning of the year
    
35,982
      
30,596
      
1,944
      
213,776
  
Initial recognition and changes in fair value of biological assets (i)
    
40,267
      
8,559
      
179
      
(31,751
)
Decrease due to harvest
    
(132,216
)
    
(50,313
)
    
-
      
(180,697
)
Costs incurred during the year
    
93,802
      
40,301
      
363
      
310,484
  
Exchange differences
    
(6,823
)
    
(5,268
)
    
(293
)
    
(36,842
)
End of the year
    
31,012
      
23,875
      
2,193
      
274,970
  

(i) Change in unrealized gains or losses for the year included in profit or loss for assets held at the end of the reporting period, under “Initial recognition and changes in fair value of biological assets” amounted to US$ 16,850 loss and  US$ 16,910 loss in 2015 and 2014, respectively (see Note 5).
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 53
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. Biological assets (continued)

The following significant unobservable inputs were used to measure the Group´s biological assets using the discounted cash flow valuation technique:

Description
  
Unobservable
inputs
  
Range of unobservable inputs
  
Relationship of unobservable inputs
to fair value
       
2015
2014
    
Sown land – coffee
 
  
Coffee yield – tonnes per hectare; Production Costs – US$ per hectare.
 
  
Coffee yield: 1.8.-2.7 tn/ha
Production costs: 5,000-6,200 US$/ha
-Coffee yield: 1.8-3.0 tn/ha
-Production Costs: 6,000-7,000 USS/ha
 
  
The higher the coffee yield, the higher the fair value. The higher the costs per hectare, the lower the fair value.
 
Sown land – sugarcane
 
  
Sugarcane yield – tonnes per hectare; Sugarcane TRS (kg of sugar per ton of cane) Production Costs – US$ per hectare. (Include maintenance, harvest and leasing costs)
 
  
-Sugarcane yield: 60-90 tn/ha
-Sugarcane TRS: 130-140 kg of sugar/ton of cane
-Maintenance costs: 440-530 US$/ha
-Harvest costs: 7.0 -10.0 US$/ton of cane
-Leasing costs: 12.0-14.4 tn/ha
-Sugarcane yield: 60-90 tn/ha
-Sugarcane TRS: 120-147 kg of sugar/ton of cane
-Maintenance costs: 402-603 US$/ha
-Harvest costs: 10.2-15.4 US$/ton of cane
-Leasing costs: 11.5-17.3 tn/ha
 
  
The higher the sugarcane yield, the higher the fair value. The higher the maintenance, harvest and leasing costs per hectare, the lower the fair value. The higher the TRS of sugarcane, the higher the fair value.
 
Sown land – crops
 
  
Crops yield – tonnes per hectare; Commercial Costs – usd per hectare;
Production Costs – US$ per hectare.
 
  
- Crops yield: 1.8 - 2.5 tn/ha for Wheat, 5.0 - 8.0 tn/ha for Corn, 2.0 - 3.2 tn/ha for Soybean and 1.6-2.3 for Sunflower
- Commercial Costs: 60-95 US$/ha for Wheat, 175-265 US$/ha for Corn, 75-110 US$/ha for Soybean and 65-90 US$/ha for Sunflower
- Production Costs: 170-250 US$/ha for Wheat, 340-500 US$/ha for Corn, 270-430 US$/ha for Soybean and 250-350 US$/ha for Sunflower
 
- Crops yield: 1.8 - 3.0 tn/ha for Wheat, 4.50-7.50 tn/ha for Corn, 1.8 - 3.0 tn/ha for Soybean and 1.7-2.5 for Sunflower
- Commercial Costs: 75-110 US$/ha for Wheat, 175-265 US$/ha for Corn, 65-100 US$/ha for Soybean and 45-70 US$/ha for Sunflower
- Production Costs: 220-325 US$/ha for Wheat, 380-560 US$/ha for Corn, 285-440 US$/ha for Soybean and 330-500 US$/ha for Sunflower
 
  
The higher the crops yield, the higher the fair value. The higher the commercial and direct costs per hectare, the lower the fair value.
 
Sown land – rice
 
  
Rice yield – tonnes per hectare;
Commercial Costs – usd per hectare;
Production Costs – US$ per hectare.
  
-Rice yield: 4.4 -6.8 tn/ha
-Commercial Costs: 6-15 US$/ha
-Production Costs: 705-1,150 US$/ha
 
-Rice yield: 4.4 -6.8 tn/ha
-Commercial Costs: 8-16 US$/ha
-Production Costs: 705-1,150 US$/ha
 
  
The higher the rice yield, the higher the fair value. The higher the commercial and direct costs per hectare, the lower the fair value.
 

As of December 31, 2015, the impact of a reasonable 10% increase (decrease) in estimated costs, with all other variables held constant, would result in a decrease (increase) in the fair value of the Group’s plantations less cost to sell of US$ 45.5 million (2014: US$ 73.2 million) for sugarcane, US$ 2.5 million (2014: US$ 3.1 million) for coffee, US$ 1.1 million (2014: US$1.5 million) for crops and US$ 2.8 million (2014: US$ 2.9 million) for rice.
 

The accompanying notes are an integral part of these consolidated financial statements.
 
F - 54
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. Biological assets (continued)

As of December 31, 2015, the impact of a reasonable 5% increase (decrease) in estimated yields, with all other variables held constant, would result in an increase (decrease) in the fair value of the Group’s plantations less cost to sell of US$ 25.6 million (2014: US$ 29.9 million) for sugarcane and U$S 1.3 million (2104: US$ 1.4 million) for coffee. As of December 31, 2015, the impact of a reasonable 20% increase (decrease) in estimated yields, with all other variables held constant, would result in an increase (decrease) in the fair value of the Group’s plantations less cost to sell of US$ 2.73 million (2014: US$ 3.1 million) for crops and US$ 6.9 million (2014: US$ 6.3 million) for rice.
 
10. Investments in joint ventures

The table below lists the Group’s investment in joint ventures for the years ended December 31, 2015, 2014 and 2013:

      
% of ownership interest held
  
Name of the entity
Country of
incorporation and
operation
  
December 31,
2015
    
December 31,
2014
    
December 31,
2013
  
CHS AGRO S.A.
Argentina
    
50
%
    
50
%
    
50
%

On February 26, 2013, the Group formed CHS AGRO, a joint venture with CHS Inc. CHS Inc. is a leading farmer-owned energy, grains and foods company based in the United States. The Group holds a 50% interest in CHS AGRO. On October 2014, CHS AGRO finished its sunflower processing plant in the city of Pehuajo, Province of Buenos Aires, Argentina. The facility processes black oil and confectionary sunflower into specialty products such as kernel in-shell seeds and oil seeds, which will be entirely exported to markets in Europe and the Middle East. The joint venture grows confectionary sunflower on leased farms, while black oil sunflower is originated from third parties. The Group and CHS Inc made capital contribution of approximately nil and US$ 1.4 million during 2015 and 2014, respectively, for the construction of the facility.
 
   
2015
    
2014
  
At the beginning of the year
    
2,752
      
3,179
  
Share of loss
    
(2,685
)
    
(924
)
Exchange differences
    
(67
)
    
(869
)
Capital contribution
    
-
      
1,366
  
At the end of the year
    
-
      
2,752
  
 
The following amounts represent the assets (including goodwill) and liabilities, and income and expenses of the joint ventures:

   
2015
    
2014
  
Assets:
            
Non-current assets
    
17,592
      
20,274
  
Current assets
    
11,179
      
8,572
  
     
28,771
      
28,846
  
Liabilities:
                
Non-current liabilities
    
22,207
      
3,721
  
Current liabilities
    
14,341
      
19,621
  
     
36,548
      
23,342
  
Net assets of joint venture
    
(7,777
)
    
5,504
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 55
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
10. Investments in joint ventures (continued)

   
2015
    
2014
    
2013
  
Income
    
17,507
      
964
      
18,472
  
Expenses
    
(26,240
)
    
(2,812
)
    
(21,112
)
Loss after income tax (i)
    
(8,733
)
    
(1,848
)
    
(2,640
)

(i) For the year ended December 31, 2013 an amount of U$S (1,101) was presented within “Profit/(loss) for the year from discontinued operations” See Note 11.

The shares in the joint ventures were not publicly traded for any of the years presented, so they were not listed market prices available.

There are no contingent liabilities relating to the Group’s interest in the joint ventures, and no contingent liabilities of the ventures themselves.

According to the laws of certain of the countries in which the Group operates, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution and can only be released to absorb losses. The Group’s joint ventures have not reached the legal capped amounts.

11. Net assets held for sale and discontinued operations

On June 6, 2013, the Group acquired the remaining 50% interest in its joint venture La Lacteo S.A. (“La Lacteo”) for US$ 1, and collected US$ 5.1 million associated with the acquisition.

The acquisition of the remaining 50% in La Lacteo was done exclusively with the view to resale and met the definition of discontinued operation. The Group elected to account for the acquisition applying the short-cut method under IFRS 5. As of the transaction date, it was determined that the fair value less costs to sell of La Lacteo was not significant. The Group’s previously held interest in La Lacteo was remeasured to fair value and the cumulative exchange differences recognized in equity were reclassified to the income statement. At the acquisition date La Lacteo was valued at fair value less costs to sell.

On July 31, 2013, the Group sold its 100% interest in La Lacteo for Argentine Pesos 1. In addition, the Milk Supply Offer Agreement between La Lacteo and Adeco Agropecuaria S.A. (a Group subsidiary) was terminated without penalties.

The net effects of the described transactions resulted in a gain of US$ 2.9 million, recorded in the statement of income within "Profit / (Loss) of the year from discontinued operations".
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 56
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
12. Financial instruments by category

The Group classified its financial assets in the following categories:

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as held for trading unless they are designated as hedges. Financial assets are classified as current if realization within 12 months is expected. Otherwise, they are classified as non-current. For all years presented, the Group’s financial assets at fair value through profit or loss comprise mainly derivative financial instruments.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the date of the statement of financial position. Loans and receivables comprise “trade and other receivables” and “cash and cash equivalents” in the statement of financial position.

The following tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument and reconciliation to the corresponding line item in the statements of financial position, as appropriate. Since the line items “Trade and other receivables, net” and “Trade and other payables” contain both financial instruments and non-financial assets or liabilities (such as other tax receivables or advance payments for services to be received in the future), the reconciliation is shown in the columns headed “Non-financial assets” and “Non-financial liabilities.”

   
Loans and
receivables
    
Assets at fair
value through
profit or loss
    
Subtotal
financial
assets
    
Non-
financial
assets
    
Total
  
                               
December 31,  2015
                              
Assets as per statement of financial position
                              
Trade and other receivables
    
83,435
      
-
      
83,435
      
83,371
      
166,806
  
Derivative financial instruments
    
-
      
4,849
      
4,849
      
-
      
4,849
  
Cash and cash equivalents
    
198,894
      
-
      
198,894
      
-
      
198,894
  
Total
    
282,329
      
4,849
      
287,178
      
83,371
      
370,549
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 57
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
12.
Financial instruments by category (continued)
 
   
Liabilities at
fair value
through profit
or loss
    
Other
financial
liabilities at
amortized
cost
    
Subtotal
financial
liabilities
    
Non-
financial
liabilities
    
Total
  
Liabilities as per statement of financial position
                              
Trade and other payables
    
19,734
      
30,354
      
50,088
      
5,554
      
55,642
  
Borrowings (excluding finance lease liabilities)(i)
    
-
      
723,060
      
723,060
      
-
      
723,060
  
Finance leases
    
-
      
279
      
279
      
-
      
279
  
Derivative financial instruments (i)
    
6,694
      
-
      
6,694
      
-
      
6,694
  
Total
    
26,428
      
753,693
      
780,121
      
5,554
      
785,675
  

   
Loans and
receivables
    
Assets at fair
value through
profit or loss
    
Subtotal
financial assets
    
Non-
financial
assets
    
Total
  
                               
December 31,  2014
                              
Assets as per statement of financial position
                              
Trade and other receivables
    
109,821
      
-
      
109,821
      
105,295
      
215,116
  
Derivative financial instruments
    
-
      
7,966
      
7,966
      
-
      
7,966
  
Cash and cash equivalents
    
113,795
      
-
      
113,795
      
-
      
113,795
  
Total
    
223,616
      
7,966
      
231,582
      
105,295
      
336,877
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 58
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
12.
Financial instruments by category (continued)

   
Liabilities at
fair value
through profit
or loss
    
Other
financial
liabilities at
amortized
cost
    
Subtotal
financial
liabilities
    
Non-
financial
liabilities
    
Total
  
Liabilities as per statement of financial position
                              
Trade and other payables
    
1,392
      
74,246
      
75,638
      
9,853
      
85,491
  
Borrowings (excluding finance lease liabilities)(i)
    
-
      
697,926
      
697,926
      
-
      
697,926
  
Finance leases
    
-
      
580
      
580
      
-
      
580
  
Derivative financial instruments (i)
    
13,899
      
-
      
13,899
      
-
      
13,899
  
Total
    
15,291
      
772,752
      
788,043
      
9,853
      
797,896
  

(i) Effective July 1, 2013,  the Group formally documented and designated cash flow hedging relationships to hedge the foreign exchange rate risk of a portion of its highly probable future sales in US dollars using a portion of its borrowings denominated in US dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps (see Note 3).
 
Liabilities carried at amortized cost also included liabilities under finance leases where the Group is the lessee and which therefore have to be measured in accordance with IAS 17. The categories disclosed are determined by reference to IAS 39. Finance leases are excluded from the scope of IFRS 7. Therefore, finance leases have been shown separately.

Because of the short maturities of most trade accounts receivable and payable, other receivables and liabilities, and cash and cash equivalents, their carrying amounts at the closing date do not differ significantly from their respective fair values. The fair value of long-term borrowings is disclosed in Note 21.

Income, expense, gains and losses on financial instruments can be assigned to the following categories:
 
   
Loans and
receivables
    
Assets/ liabilities
at fair value
through profit or
loss
    
Other financial
liabilities at
amortized cost
    
Total
  
                         
December 31, 2015
                        
Interest income (i)
    
8,201
      
-
      
-
      
8,201
  
Interest expense (i)
    
(42,615
)
    
-
      
(6,876
)
    
(49,491
)
Foreign exchange gains/ (losses) (ii)
    
1,499
      
(27,526
)
    
2,604
      
(23,423
)
Gain from derivative financial instruments(iii)
    
-
      
17,686
      
-
      
17,686
  
Net result
    
(32,915
)
    
(9,840
)
    
(4,272
)
    
(47,027
)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 59
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
12.
Financial instruments by category (continued)

   
Loans and
receivables
    
Assets/ liabilities
at fair value
through profit
or loss
    
Other financial
liabilities at
amortized cost
    
Total
  
                         
December 31, 2014
                        
Interest income (i)
    
7,068
      
-
      
-
      
7,068
  
Interest expense (i)
    
(44,425
)
    
-
      
(10,490
)
    
(54,915
)
Foreign exchange gains/ (losses) (ii)
    
(15,733
)
    
(9,300
)
    
15,787
      
(9,246
)
Gain from derivative financial instruments(iii)
    
-
      
6,548
      
-
      
6,548
  
Net result
    
(53,090
)
    
(2,752
)
    
5,297
      
(50,545
)

   
Loans and
receivables
    
Assets/ liabilities
at fair value
through profit or
loss
    
Other financial
liabilities at
amortized cost
    
Total
  
                         
December 31, 2013
                        
Interest income (i)
    
6,882
      
-
      
-
      
6,882
  
Interest expense (i)
    
(32,162
)
    
-
      
(17,087
)
    
(49,249
)
Foreign exchange gains/ (losses) (ii)
    
12,550
      
-
      
(33,637
)
    
(21,087
)
Loss from derivative financial instruments(iii)
    
-
      
266
      
-
      
266
  
Net result
    
(12,730
)
    
266
      
(50,724
)
    
(63,188
)

(i)
Included in “Financial results, net” in the statement of income.
(ii)
Included in “Financial results, net” in the statement of income.
(iii)
Included in “Other operating income, net” and “Financial results, net” in the statement of income.

Determining fair values

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All financial instruments recognized at fair value are allocated to one of the valuation hierarchy levels of IFRS 13. This valuation hierarchy provides for three levels. The allocation reflects which of the fair values derive from transactions in the market and where valuation is based on models because market transactions are lacking. The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

As of December 31, 2015 and 2014, the financial instruments recognized at fair value on the statement of financial position comprise derivative financial instruments.
 

The accompanying notes are an integral part of these consolidated financial statements.
 
F - 60
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
12. Financial instruments by category  (continued)

In the case of Level 1, valuation is based on unadjusted quoted prices in active markets for identical financial assets that the Group can refer to at the date of the statement of financial position. The financial instruments the Group has allocated to this level mainly comprise crop futures and options traded on the stock market.

Derivatives not traded on the stock market allocated to Level 2 are valued using models based on observable market data. The financial instruments the Group has allocated to this level mainly comprise interest-rate swaps and foreign-currency interest-rate swaps.

In the case of Level 3, the Group uses valuation techniques not based on inputs observable in the market. This is only permissible insofar as no observable market data are available. The Group does not have financial instruments allocated to this level for any of the years presented.

The following tables present the Group’s financial assets and financial liabilities that are measured at fair value as of December 31, 2015 and 2014 and their allocation to the fair value hierarchy:

      
Level 1
    
Level 2
    
Level 3
    
Total
  
Assets
                          
Derivative financial instruments
2015
    
4,849
      
-
      
-
      
4,849
  
Derivative financial instruments
2014
    
7,026
      
940
      
-
      
7,966
  
                                   
Liabilities
                                  
Derivative financial instruments
2015
    
(4,326
)
    
(2,368
)
    
-
      
(6,694
)
Derivative financial instruments
2014
    
(4,224
)
    
(9,675
)
    
-
      
(13,899
)

There were no transfers within level 1 and 2 during the years ended December 31, 2015 and 2014.

When no quoted prices in an active market are available, fair values (particularly with derivatives) are based on recognized valuation methods. The Group uses a range of valuation models for this purpose, details of which may be obtained from the following table:
 
Class
  
Pricing Method
  
Parameters
    
Pricing Model
    
Level
    
Total
  
Futures
  
Quoted price
    
-
      
-
      
1
      
940
  
                                     
Options
  
Quoted price
    
-
      
-
      
1
      
(417
)
                                     
Options/ OTC
  
Quoted price
    
-
    
Black & Scholes
      
2
      
(2,041
)
                                     
Foreign-currency interest-rate swaps
  
Theoretical price
  
Swap curve;
Money market interest-rate curve;
Foreign-exchange curve.
    
Present value method
      
2
      
(327
)
                                 
-
  
Interest-rate swaps
  
Theoretical price
  
Swap curve;
Money market interest-rate curve
    
Present value method
      
2
          
                                 
(1,845
)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 61
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. Trade and other receivables, net

   
2015
    
2014
  
Non current
            
Trade receivables
    
1,764
      
3,528
  
Trade receivables
    
1,764
      
3,528
  
Advances to suppliers
    
8,476
      
12,149
  
Income tax credits
    
6,428
      
6,759
  
Non-income tax credits (i)
    
1,914
      
18,609
  
Judicial deposits
    
2,105
      
2,545
  
Receivable from disposal of subsidiary (Note 16)
    
-
      
3,997
  
Other receivables
    
1,108
      
3,003
  
Non current portion
    
21,795
      
50,590
  
Current
                
Trade receivables
    
55,846
      
65,059
  
Receivables from related parties (Note 33)
    
8,204
      
258
  
Less: Allowance for trade receivables
    
(481
)
    
(527
)
Trade receivables – net
    
63,569
      
64,790
  
Prepaid expenses
    
3,914
      
6,884
  
Advances to suppliers
    
12,182
      
11,717
  
Income tax credits
    
5,438
      
6,492
  
Non-income tax credits (i)
    
42,914
      
42,685
  
Cash collateral
    
6
      
6,329
  
Receivables from related parties (Note 33)
    
300
      
-
  
Receivable from disposal of subsidiaries (Note 16)
    
2,997
      
4,451
  
Other receivables
    
13,691
      
21,178
  
Subtotal
    
81,442
      
99,736
  
Current portion
    
145,011
      
164,526
  
Total trade and other receivables, net
    
166,806
      
215,116
  

(i)
Includes US$ 6,129 reclassified from property, plant and equipment.

The fair values of current trade and other receivables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other receivables approximate their carrying amount, as the impact of discounting is not significant.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 62
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. Trade and other receivables, net (continued)

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies (expressed in US dollars):

   
2015
    
2014
  
Currency
            
US Dollar
    
30,191
      
45,341
  
Argentine Peso
    
36,210
      
49,876
  
Uruguayan Peso
    
566
      
8,385
  
Brazilian Reais
    
99,839
      
111,514
  
     
166,806
      
215,116
  

As of December 31, 2015 trade receivables of US$ 7,542 (2014: US$ 4,224) were past due but not impaired. The ageing analysis of these receivables indicates that 549 and 1,269 are over 6 months in 2015 and 2014, respectively.

The Group recognizes an allowance for trade receivables when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

Delinquency in payments is an indicator that a receivable may be impaired. However, management considers all available evidence in determining when a receivable is impaired. Generally, trade receivables, which are more than 180 days past due are fully provided for. However, certain receivables 180+ days overdue are not provided for based on a case-by-case analysis of credit quality analysis. Furthermore, receivables, which are not 180+ days overdue, may be provided for if specific analysis indicates a potential impairment.

Movements on the Group’s allowance for trade receivables are as follows:

   
2015
    
2014
    
2013
  
At January 1
    
527
      
545
      
588
  
Charge of the year
    
152
      
192
      
591
  
Unused amounts reversed
    
(27
)
    
(83
)
    
(255
)
Used during the year
    
(7
)
    
-
      
(220
)
Exchange differences
    
(164
)
    
(127
)
    
(159
)
At December 31
    
481
      
527
      
545
  

The creation and release of allowance for trade receivables have been included in “Selling expenses” in the statement of income. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.

The other classes within other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.

As of December 31, 2015, approximately 73% (2014: 65%) of the outstanding unimpaired trade receivables (neither past due nor impaired) relate to sales to 9 well-known multinational companies with good credit quality standing, including but not limited to Camara de Comercializacao de Energia Electrica CCEE, Taurus Distribuidora de petroleo Ltda, Raizen combustiveis S.A., Ipiranga Produtos de Petroleo S.A., Alesat Combustivies S.A. and Potencial Petroleo Ltda., among others. Most of these entities or their parent companies are externally credit-rated. The Group reviews these external ratings from credit agencies.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 63
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. Trade and other receivables, net (continued)

The remaining percentage as of December 31, 2015 and 2014 of the outstanding unimpaired trade receivables (neither past due nor impaired) relate to sales to a dispersed large quantity of customers for which external credit ratings may not be available. However, the total base of customers without an external credit rating is relatively stable.

 New customers with less than six months of history with the Group are closely monitored. The Group has not experienced credit problems with these new customers to date. The majority of the customers for which an external credit rating is not available are existing customers with more than six months of history with the Group and with no defaults in the past. A minor percentage of customers may have experienced some non-significant defaults in the past but fully recovered.

14. Inventories

   
2015
    
2014
  
Raw materials
    
31,833
      
35,662
  
Finished goods.
    
41,874
      
65,562
  
Stocks held by third parties
    
3,717
      
3,395
  
Others
    
279
      
300
  
     
77,703
      
104,919
  

The cost of inventories recognized as expense and included in “Cost of manufactured products sold and services rendered” amounted to US$ 321,998 for the year ended December 31, 2015 (2014: US$ 335,442 and 2013: US$ 272,261). The cost of inventories recognized as expense and included in “Cost of agricultural produce sold and direct agricultural selling expenses” amounted to US$ 123,017 for the year ended December 31, 2015 (2014: US$ 155,358 and 2013: US$ 159,936).

15. Cash and cash equivalents

   
2015
    
2014
  
Cash at bank and on hand
    
185,864
      
104,132
  
Short-term bank deposits
    
13,030
      
9,663
  
     
198,894
      
113,795
  

16. Disposals

Year ended December 31, 2013

In December 2013, the Group completed the sale of “San Agustín”, a 5,066 hectare farm located in the province of Corrientes, Argentina, for a total consideration of US$17.5 million collected in full as of year-end. This transaction resulted in a gain of US$ 15 million included within “Other operating income, net”.

In October 2013, the Group completed the sale of the San Martin farm for a total price of US$ 8.0 million, equivalent to US$ 2,294 per hectare which was collected in full as of year-end. San Martin is a 3,502 hectare farm located in the province of Corrientes, Argentina. The farm was used for cattle grazing activities and is a subdivision of the Ita Caabo farm acquired by the Group in 2007. This transaction resulted in a gain of US$ 6.5 million included within “Other operating income, net”.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 64
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
16. Disposals  (continued)

In May 2013, the Group completed the sale of the Mimoso farm (through the sale of the Brazilian subsidiary Fazenda Mimoso Ltda.) and Lagoa do Oeste farm located in Luis Eduardo Magalhaes, Bahia, Brazil. The farms have a total area of 3,834 hectares of which 904 hectares are planted with coffee trees. In addition, the Group entered into an agreement whereby the buyer will operate and make use of 728 hectares of existing coffee trees in Adecoagro’s Rio de Janeiro farm during an 8-year period. Pursuant to the terms of the agreement, we will retain property to these coffee trees, which will still have an estimate useful life of 10 years upon the expiration of the agreement. The total consideration of this operation was a nominal amount of Brazilian Reais 49 million (US$ 24 million), from which Brazilian Reais 24,735 (US$ 9.9 million) were collected as of December 31, 2015. The remaining amount will be collected in 2016. This transaction resulted in a gain of US$ 5.7 million recorded in other operating income in the statement of income.

In June 2013, the Group completed the sale of the remaining 49% interest in Santa Regina S.A., a company whose main underlying asset is the Santa Regina farm. This transaction resulted in a gain of US$ 1.2 million recorded in other operating income in the statement of income.

Year ended December 31, 2014

Sale of 49% of interest in Global Anceo S.L.U. and Global Hisingen S.L.U.

In June, 2014, the Group completed the sale of a 49% interest in both Global Anceo S.L.U. and Global Hisingen S.L.U., companies which main underlying assets are the Guayacanes and La Guarida farms, for an aggregate sale price of US$ 50.5 million. The net proceeds received as of the transaction´s day amounted to US$ 49.3 million.

The sale of the respective equity interests did not result in the loss of control of these companies and therefore the transactions were treated as equity transactions for accounting purposes.  The difference between the net proceeds received and the recognition of the non-controlling interest was registered in Statement of Changes in Shareholders’ Equity under the line item “Reserve from the sale of non-controlling interests in subsidiaries” for an amount of US$ 41.3 million (US$ 25.5 million in the column item “Reserve from the sale of non-controlling interests in subsidiaries” and US$ 15.8 million in the column item “Cumulative Translation Adjustment”) and also an increase in non-controlling interest of US$ 8.0 million.

Year ended December 31, 2015

Sale of La Cañada Farm.

In November 2015, the Group completed the sale of “La Cañada”, a 3,399 hectare farm located in the province of San Luis, Argentina, for a total consideration of US$ 12.6 million fully collected as of year-end. This transaction resulted in a gain of US$ 7.9 million included within “Other operating income, net”.

Sale of 49% of interest in Global Acamante S.L.U.,  Global Calidon S.L.U., Global Carelio S.L.U. and Global Mirabilis S.L.U.

In December, 2015, the Group completed the sale of a 49% interest in Global Acamante S.L.U., Global Calidon S.L.U., Global Carelio S.L.U. and Global Mirabilis S.L.U., companies which main underlying assets are El Orden and La Carolina farms, for an aggregate sale price of US$ 22.0 million, which were fully collected at the time of the transaction.
 

The accompanying notes are an integral part of these consolidated financial statements.
 
F - 65
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
16. Disposals  (continued)

The sale of the respective equity interests did not result in the loss of control of these companies and therefore the transactions were treated as equity transactions for accounting purposes.  The difference between the net proceeds received and the recognition of the non-controlling interest was registered in Statement of Changes in Shareholders’ Equity under the line item “Reserve from the sale of non-controlling interests in subsidiaries” for an amount of US$ 19.9 million (US$ 16.1 million in the column item “Reserve from the sale of non-controlling interests in subsidiaries” and US$ 3.9 million in the column item “Cumulative Translation Adjustment”) and also an increase in non-controlling interest of US$ 2.0 million.

17. Shareholders’ contributions

The share capital of the Group is represented by common shares with a nominal value of US$ 1.5 per share and one vote each.

   
Number of shares
    
Share capital and
share premium
  
At January 1 2013
    
122,220
      
1,123,663
  
Employee share options exercised (Note 18) (1)
    
-
      
126
  
Restricted shares and units vested (Note 18)
    
162
      
2,963
  
Purchase of own shares
    
-
      
(4,107
)
At 31 December 2013
    
122,382
      
1,122,645
  
Employee share options exercised (Note 18) (1)
    
-
      
955
  
Restricted shares and units vested (Note 18)
    
-
      
3,444
  
Purchase of own shares
    
-
      
(10,427
)
At 31 December 2014
    
122,382
      
1,116,617
  
Employee share options exercised (Note 18) (1)
    
-
      
1,786
  
Restricted shares units vested (Note 18)
    
-
      
3,103
  
Purchase of own shares
    
-
      
(259
)
At 31 December 2015
    
122,382
      
1,121,247
  

(1) Treasury shares were used to settle these options and units.

Share Repurchase Program

On September 24, 2013, the Board of Directors of the Company has authorized a share repurchase program for up to 5% of its outstanding shares. The repurchase program has commenced on September 24, 2013 and is reviewed by the Board of Directors after each 12-month period: repurchases of shares under the program aremade from time to time in open market transactions in compliance with the trading conditions of Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, and applicable rules and regulations. The share repurchase program does not require Adecoagro to acquire any specific number or amount of shares and may be modified, suspended, reinstated or terminated at any time in the Company’s discretion and without prior notice. The size and the timing of repurchases will depend upon market conditions, applicable legal requirements and other factors. On August 12, 2014 the Board of Directors decided to extend the program for a 12 month-period. Also, on August 15, 2015 the Board of directors decided to extend the program for another 12 months period.

As of December 31, 2015, the Company repurchased 2,384,093 shares under this program, of which 1,097,280 have been applied to some exercise of the Company’s stock option plan and restricted stock units plan.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 66
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
18. Equity-settled share-based payments

The Group has set a “2004 Incentive Option Plan” and a “2007/2008 Equity Incentive Plan” (collectively referred to as “Option Schemes”) under which the Group granted equity-settled options to senior managers and selected employees of the Group´s subsidiaries. Additionally, in 2010 the Group has set a “Adecoagro Restricted Share and Restricted Stock Unit Plan” (referred to as “Restricted Share Plan”) under which the Group grants restricted shares to senior and medium management and key employees of the Group’s subsidiaries.

(a) Option Schemes

The Group recognized aggregate compensation expense of US$ nil for the year ended December 31, 2015 (2014: US$ 0.3 million; 2013: US$ 0.1 million) related to the options granted under the Option Schemes.

The fair value of the options under the Option Schemes was measured at the date of grant using the Black-Scholes valuation technique.

As of the date of these financial statements all options has already been expensed.

Details of each plan are as follow:

The Adecoagro/ IFH 2004 Stock Incentive Option Plan

This scheme was effectively established in 2004 and is administered by the Compensation Committee of the Company. Options under the Adecoagro/ IFH 2004 Stock Incentive Option Plan are fully vested. Options are exercisable over a ten-year period. In May 2014 this period was extended for another ten year-period.

Movements in the number of equity-settled options outstanding and their related weighted average exercise prices under the Adecoagro/ IFH 2004 Stock Incentive Option Plan are as follows:

   
2015
    
2014
    
2013
  
   
Average
exercise
price per
share
    
Options
(thousands)
    
Average
exercise
price per
Share
    
Options
(thousands)
    
Average
exercise
price per
Share
    
Options
(thousands)
  
                                     
At January 1
    
6.71
      
1,916
      
6.67
      
2,061
      
6.68
      
2,100
  
Forfeited
    
5.83
      
(9
)
    
8.62
      
(5
)
    
8.62
      
(21
)
Exercised
    
7.11
      
(211
)
    
5.83
      
(140
)
    
5.83
      
(17
)
At December 31
    
6.67
      
1,696
      
6.71
      
1,916
      
6.67
      
2,062
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 67
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
18. Equity-settled unit-based payments (continued)

Options outstanding at year end under the Adecoagro/ IFH 2004 Incentive Option Plan have the following expiry date and exercise prices:

   
Exercise
price per
   
Shares (in thousands)   
  
Expiry date (i):
  
share
    
2015
    
2014
    
2013
  
May 1, 2024
    
5.83
      
570
      
570
      
674
  
May 1, 2025
    
5.83
      
508
      
543
      
553
  
May 1, 2026
    
5.83
      
50
      
136
      
156
  
February 16, 2026
    
7.11
      
103
      
110
      
110
  
October 1, 2026
    
8.62
      
465
      
557
      
569
  

(i) On May 2014, the Board of directors decided to extend the expired date of the Plan.

The Adecoagro/ IFH 2007/ 2008 Equity Incentive Plan

This scheme was effectively established in late 2007 and is administered by the Compensation Committee of the Company. Options under the Adecoagro/ IFH 2007/2008 Equity Incentive Plan vest over a 4-year period from the date of grant at 25% on each anniversary of the grant date. Options are exercisable over a ten-year period. The exercise price of the options is determined by the Compensation Committee but under no circumstances the price may be less than 100% of the fair market value of the shares at the date of grant.

Movements in the number of equity-settled options outstanding and their related weighted average exercise prices under the Adecoagro/ IFH 2007/2008 Equity Incentive Plan are as follows:

   
2015
    
2014
    
2013
  
   
Average
exercise
price per
share
    
Options
(thousands)
    
Average
exercise
price per
share
    
Options
(thousands)
    
Average
exercise
price per
share
    
Options
(thousands)
  
                                     
At January 1
    
13.07
      
1,729
      
13.07
      
1,751
      
13.06
      
2,013
  
Granted
    
-
      
-
      
-
      
-
      
-
      
-
  
Forfeited
    
13.01
      
(28
)
    
13.40
      
(22
)
    
13.01
      
(262
)
At December 31
    
13.07
      
1,701
      
13.07
      
1,729
      
13.07
      
1,751
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 68
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
18. Equity-settled unit-based payments (continued)

Options outstanding at year-end under the Adecoagro/ IFH 2007/2008 Equity Incentive Plan have the following expiry date and exercise prices:

   
Exercise
price per
    
Shares (in thousands)
  
Expiry date:
  
share
    
2015
    
2014
    
2013
  
Dec 1, 2017
    
12.82
      
929
      
950
      
963
  
Jan 30, 2019
    
13.40
      
596
      
599
      
608
  
Nov 1, 2019
    
13.40
      
8
      
8
      
8
  
Jan 30, 2020
    
12.82
      
26
      
26
      
26
  
Jan 30, 2020
    
13.40
      
60
      
65
      
65
  
Jun 30, 2020
    
13.40
      
22
      
22
      
22
  
Sep 1, 2020
    
13.40
      
44
      
44
      
44
  
Sep 1, 2020
    
12.82
      
15
      
15
      
15
  

The following table shows the exercisable shares at year end under both the Adecoagro/ IFH 2004 Incentive Option Plan and the Adecoagro/ IFH 2007/ 2008 Equity Incentive Plan:

   
Exercisable shares
in thousands
  
2015
    
3,397
  
2014
    
3,645
  
2013
    
3,769
  

During 2015 and 2014, 210,911 options and 139,870 options were exercised under the 2004 Incentive Option Plan, respectively. Accordingly, the Group issued and registered these shares with a nominal value of US$ 1.5.

(b) Restricted Share and Restricted Stock Unit Plan

The Restricted Share and Restricted Stock Unit Plan was effectively established in 2010 and amended in November 2011. It is administered by the Compensation Committee of the Company. Restricted shares under the Restricted Share or Restricted Stock Units Plan vested over a 3-year period from the date of grant at 33% on each anniversary of the grant date. Participants are entitled to receive one common share of the Company for each restricted share or restricted unit issued. For this plan, there are no performance requirements for the delivery of common shares, except that a participant’s employment with the Group must not have been terminated prior to the relevant vesting date. If the participant ceases to be an employee for any reason, any unvested restricted unit shall not be converted into common shares and the participant shall cease for all purposes to be a shareholder with respect to such shares.  The maximum number of ordinary shares with respect to which awards may be made under the Plan is 2,474,701 that includes the amount in 673,663 of shares that the Board of Director authorized to increase on March 17, 2015.

On July 18, 2011, the Group issued and registered 427,293 restricted shares with a nominal value of US$ 1.5, which were granted under the Restricted Share Plan. All restricted shares has already vested.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 69
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
18. Equity-settled unit-based payments (continued)

At December 31, 2015, the Group recognized compensation expense US$ 4.4 million related to the restricted shares granted under the Restricted Share Plan (2014: US$ 3.6 million).

The restricted shares under the Restricted Share Plan were measured at fair value at the date of grant.

Key grant-date fair value and other assumptions under the Restricted Share Plan are detailed below:

Grant Date
  
Apr 1,
2012
    
May 15,
2012
    
Apr 1,
2013
    
May 15,
2013
    
Apr 1,
2014
    
May 15,
2014
  
                                     
Fair value
    
9.81
      
9.33
      
8.08
      
7.48
      
7.92
      
8.72
  
Possibility of ceasing employment before vesting
    
3
%
    
0
%
    
5
%
    
0
%
    
5
%
    
0
%

Movements in the number of restricted shares outstanding under the Restricted Share Plan are as follows:

   
Restricted
shares
(thousands)
    
Restricted
stock units
(thousands)
    
Restricted
shares
(thousands)
    
Restricted
stock units
(thousands)
    
Restricted
shares
(thousands)
    
Restricted
stock units
(thousands)
  
   
2015
    
2015
    
2014
    
2014
    
2013
    
2013
  
At January 1
    
-
      
861
      
109
      
699
      
234
      
515
  
Granted (1)
    
-
      
626
      
-
      
480
      
-
      
362
  
Forfeited
    
-
      
(37
)
    
(3
)
    
(21
)
    
(6
)
    
(10
)
Vested
    
-
      
(432
)
    
(106
)
    
(297
)
    
(119
)
    
(169
)
At December 31
    
-
      
1,017
      
-
      
861
      
109
      
699
  

(1) Approved by the Board of Directors of March 17, 2015 and the Shareholders Meeting of April 15, 2015

During 2015 and 2014, nil and 1,676 restricted shares became forfeited, respectively, and were returned to the Group. These restricted shares are held by the Group as treasury shares and presented within “Treasury shares” in the statement of changes in shareholders’ equity.

19.
Legal and other reserves

According to the laws of certain of the countries in which the Group operates, a portion of the profit of the year (5%) is separated to constitute legal reserves until they reach legal capped amounts. These legal reserves are not available for dividend distribution and can only be released to absorb losses. The legal limit of these reserves has not been met.

In addition, from time to time, the subsidiaries of the Group may separate portions of their profits of the year to constitute voluntary reserves according to company law and practice. These voluntary reserves may be released for dividend distribution.

Legal and other reserves amount to US$ 42,082 as of December 31, 2015 (2014: US$ 44,788) and are included within the balance of retained earnings in the statement of changes in shareholders’ equity.

The Company may make distributions in the form of dividends or otherwise to the extent that it has distributable retained earnings or available distributable reserves (including share premium) that result from the Stand Alone Financial Statements prepared in accordance with Luxembourg GAAP.  No distributable retained earning result from the Stand Alone Financial Statements of the Company as of December 31, 2015, but the Company has distributable reserves in excess of US$ 922,115.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 70
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
20. Trade and other payables

   
2015
    
2014
  
Non-current
            
Payable from acquisition of property, plant and equipment (i)
    
1,563
      
2,084
  
Other payables
    
348
      
307
  
     
1,911
      
2,391
  
Current
                
Trade payables
    
47,035
      
70,269
  
Advances from customers
    
2,838
      
5,636
  
Amounts due to related parties (Note 33)
    
465
      
-
  
Taxes payable
    
2,716
      
4,217
  
Escrows arising on business combinations
    
-
      
316
  
Other payables
    
677
      
2,662
  
     
53,731
      
83,100
  
Total trade and other payables
    
55,642
      
85,491
  

(i) These trades payable are mainly collateralized by property, plant and equipment of the Group.

The fair values of current trade and other payables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other payables approximate their carrying amounts, as the impact of discounting is not significant.

21.
Borrowings

   
2015
    
2014
  
Non-current
            
Bank borrowings
    
483,583
      
491,031
  
Obligations under finance leases
    
68
      
293
  
     
483,651
      
491,324
  
Current
                
Bank overdrafts
    
9
      
7,789
  
Bank borrowings
    
239,468
      
199,106
  
Obligations under finance leases
    
211
      
287
  
     
239,688
      
207,182
  
Total borrowings
    
723,339
      
698,506
  

As of December 31, 2015, total bank borrowings include collateralized liabilities of US$ 669,109 (2014: US$ 640,034). These loans are mainly collateralized by property, plant and equipment, sugarcane plantations, sugar export contracts and shares of certain subsidiaries of the Group.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 71
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
21. Borrowings (continued)

The maturity of the Group's borrowings (excluding obligations under finance leases) and the Group's exposure to fixed and variable interest rates is as follows:

   
2015
    
2014
  
Fixed rate:
            
Less than 1 year
    
89,918
      
95,524
  
Between 1 and 2 years
    
31,096
      
45,518
  
Between 2 and 3 years
    
30,197
      
41,685
  
Between 3 and 4 years
    
22,497
      
25,809
  
Between 4 and 5 years
    
18,779
      
39,992
  
More than 5 years
    
34,492
      
87,219
  
     
226,979
      
335,747
  
Variable rate:
                
Less than 1 year
    
149,559
      
111,371
  
Between 1 and 2 years
    
109,488
      
130,426
  
Between 2 and 3 years
    
102,351
      
80,199
  
Between 3 and 4 years
    
79,341
      
13,154
  
Between 4 and 5 years
    
44,233
      
7,346
  
More than 5 years
    
11,109
      
19,683
  
     
496,081
      
362,179
  
     
723,060
      
697,926
  

Borrowings incurred by the Group’s subsidiaries in Brazil are repayable at various dates between January 2016 and April 2024 and bear either fixed interest rates ranging from 2.13% to 18.76% per annum or variable rates based on LIBOR or other specific base-rates plus spreads ranging from 4.81% to 17.79% per annum. At December 31, 2015 LIBOR (six months) was 0.85% (2014: 0.37%).

Borrowings incurred by the Group´s subsidiaries in Argentina are repayable at various dates between January 2016 and November 2019 and bear either fixed interest rates ranging from 0.10% and 7.00% per annum for those borrowings denominated in US dollar, and a fixed interest rate of 9.90% per annum for those borrowings denominated in argentine pesos.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 72
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
21. Borrowings (continued)

Brazilian Subsidiaries
The main loans of the Group’s Brazilian Subsidiaries are:
 
Bank
Grant Date
Nominal
amount
Capital outstanding as of December 31
Maturity date
Annual Interest Rate
2015
2014
(In millions)
Millions of
Reais
Millions of
equivalent
Dollars
Millions of
equivalent
Dollars
Rabobank / Itaú BBA / Santander / Itaú Unibanco / Bradesco / HSBC (Finem ANG) (1)
March 2008
R$ 151.0
R$ 45.6
11.7
23.6
April 2018
Partially Long-Term Interest Rate (TJLP), as disclosed by the Brazilian Central Bank + 4.05% and partially Interest Rate Resolution 635/87 (average BNDES external funding rate) + 4.05%
Banco Do Brasil (2)
July  2010
R$ 70.0
R$ 40.1
10.3
18.1
July 2020
10% with 15% of bonus performance
Banco Do Brasil (3)
October 2012
R$ 130.0
R$ 128.5
32.9
48.9
November 2022
2.94% with 15% of bonus performance
Itau BBA FINAME Loan (4)
December 2012
R$ 45.9
R$ 36.4
9.3
15.7
December 2022
2.50%
Itau BBA (5)
March 2013
R$ 75.0
R$ 36.3
9.3
13.7
March 2019
CDI + 3.2%
Rabobank / Bradesco / HSBC / PGGM / Hinduja Bank (6)
September 2013
US$ 90
-
63.0
72.0
July 2017
LIBOR 3M plus 4.75%
Banco do Brasil / Itaú BBA Finem Loan (7)
September 2013
R$ 273.0
R$ 260.3
66.7
95.5
January 2023
6,62%
BNDES Finem Loan (8)
November 2013
R$ 215.0
R$ 191.0
48.9
78.3
January 2023
3,73%
ING / Bradesco / HSBC / BES / ICBC / Hinduja Bank / Monte Dei Paschi / Banco da China / Bladex (9)
March 2014
US$ 100
-
66.7
100.0
December 2017
LIBOR 3M plus 4.20%
ING / Rabobank / ABN / HSBC / Credit Agricole / Caixa Geral / Galena (10)
January 2015
US$ 160
-
160.0
-
December 2018
LIBOR 3M plus 4.40%
ING / Rabobank / Bladex / Credit Agricole / Votorantim / ABN (11)
August 2015
US$ 110
-
110.0
-
December 2019
LIBOR 3M plus 4.65%
Bradesco (12)
May 2012
US$ 11.7
-
3.9
7.8
December 2016
7.20%

(1) Collateralized by (i) a first degree mortgage of the Takuare farm; (ii) a pledge on the capital stock (“quotas”) of Adecoagro Brasil Participações S.A.; and (iii) liens over the Angélica mill and equipment.
 
(2) Collateralized by (i) a first degree mortgage of the Sapálio farm; and (ii) liens over the Angélica mill and equipment.
 
(3) Collateralized by (i) a first degree mortgage of the Carmen (Santa Agua) farm; (ii) a second degree mortgage of the Sapálio farm; and (iii) liens over the Ivinhema mill and equipment.
 
(4) Collateralized by (i) a first degree mortgage of the Carmen (Santa Agua) farm; (ii) a second degree mortgage of the Sapálio farm; (iii) a second degree mortgage of the Takuare farm; (iv) liens over the Ivinhema mill and equipment; and (v) power sales contract.
 
(5) Collateralized by power sales contract.
 
(6) Collateralized by (i) pledge of sugarcane and (ii) sales contracts.
 
(7) Collateralized by (i) a first degree mortgage of the Carmen (Santa Agua) farm; (ii) a second degree mortgage of the Sapálio farm; (iii) a second degree mortgage of the Takuare farm; (iv) liens over the Ivinhema mill and equipment; and (v) power sales contract.
 
(8) Collateralized by (i) liens over the Ivinhema mill and equipment; and (ii) power sales contracts.
 
(9) Collateralized by (i) pledge of sugarcane and (ii) sales contracts.
 
(10) Collateralized by (i) a first-degree mortgage of the Conquista, Alto Alegre, Dom Fabrício, Nossa Senhora Aparecida, Água Branca, Ouro Verde and Bela Manhã farms, (ii) pledge of sugarcane and ethanol, and (iii) sales contracts.
 
(11) Collateralized by (i) a first-degree mortgage of the Rio de Janeiro farm.
 
(12) Collateralized by (i) liens over the Monte Alegre mill and equipment.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 73
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
21. Borrowings (continued)

The abovementioned loans contain certain customary financial covenants and restrictions which require us to meet pre-defined financial ratios, among other restrictions, as well as restrictions on the payment of dividends. These financial ratios are measured considering the statutory financial statements of the Brazilian Subsidiaries.

During 2015 and 2014 the Group was in compliance with all financial covenants.

Argentinian Subsidiaries

· IDB Facility

The amended IDB Facility is divided into a seven-year US$ 20 million tranche (“Tranche A”) and a five-year US$ 60 million tranche (“Tranche B”) with a final maturity in November 2018 and 2016, respectively.  Tranche A bore interest at fixed rate of 6.11% per annum. Tranche B bears interest at 180-day LIBOR plus 5.70% per annum. The Group entered into a floating to fix interest rate forward swap, fixing LIBOR at 1.25%, effective May 2012.

Payment of principal plus interest of both tranches are made on a bi-annual basis. The IDB Facility is collateralized by property, plant and equipment with a net book value of US$ 24.77 million, by a mortgage over (i) Carmen and La Rosa farms which are property of Adeco Agropecuaria S.A.; and (ii) El Meridiano farm which is the property of Pilagá S.A.

Defaults by either Adeco Agropecuaria S.A. or Pilagá S.A. on any indebtedness with an aggregate principal amount over US$ 3.0 million can result in acceleration of the full outstanding loan amount due to the IDB. The IDB Facility also contains certain customary financial covenants and restrictions which require us to meet pre-defined financial ratios, among other restrictions, as well as restrictions on the payment of dividends. The financial covenants are measured in accordance with generally accepted accounting principles in Argentina.

In addition, the IDB Facility contains a change of control provision requiring acceleration of amounts due under the facility.

During 2015 and 2014 the Group was in compliance with all financial covenants.

The carrying amounts of the Group’s borrowings are denominated in the following currencies (expressed in US dollars):

   
2015
    
2014
  
Currency
            
US Dollar
    
526,710
      
320,638
  
Brazilian Reais
    
193,345
      
362,733
  
Argentine Peso
    
3,284
      
15,135
  
     
723,339
      
698,506
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 74
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
22. Taxation

Adecoagro is subject to the applicable general tax regulations in Luxembourg.

The Group’s income tax has been calculated on the estimated assessable taxable profit for the year at the rates prevailing in the respective foreign tax jurisdictions. The subsidiaries of the Group are required to calculate their income taxes on a separate basis according to the rules and regulations of the jurisdictions where they operate. Therefore, the Group is not legally permitted to compensate subsidiaries’ losses against subsidiaries’ income. The details of the provision for the Group’s consolidated income tax are as follows:

   
2015
    
2014
    
2013
  
Current income tax
    
(2,164
)
    
(124
)
    
(979
)
Deferred income tax
    
(1,590
)
    
(5,982
)
    
10,256
  
Income tax (expense) / benefit
    
(3,754
)
    
(6,106
)
    
9,277
  

The statutory tax rate in the countries where the Group operates for all of the years presented are:

Tax Jurisdiction
  
Income Tax Rate
  
Argentina
    
35
%
Brazil
    
34
%
Uruguay
    
25
%

Argentine income tax law includes a 10% withholding tax on dividend distributions made by Argentine companies to individuals and foreign beneficiaries. As of December 31, 2015, the Company did not record any liability on retained earnings at their Argentine subsidiaries due to its dividend policy which defines that the Company intends to retain any future earnings to finance operations and the expansion of their business and does not intend to distribute or pay any cash dividends on the Group’s common shares in the foreseeable future.

Deferred income tax liabilities of US$ 0.7 million have not been recognized for the withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested. As of December 31, 2015 the unremitted earnings totaled US$ 9.9 million.

Deferred tax assets and liabilities of the Group as of December 31, 2015 and 2014, without taking into consideration the offsetting of balances within the same tax jurisdiction, will be recovered or settled as follows:
 
   
2015
    
2014
  
Deferred income tax asset to be recovered after more than 12 months
    
85,562
      
75,635
  
Deferred income tax asset to be recovered within 12 months
    
35,571
      
10,110
  
Deferred income tax assets
    
121,133
      
85,745
  
Deferred income tax liability to be settled after more than 12 months
    
(73,087
)
    
(77,305
)
Deferred income tax liability to be settled within 12 months
    
(2,825
)
    
(2,478
)
Deferred income tax liability
    
(75,912
)
    
(79,783
)
Deferred income tax assets, net
    
45,221
      
5,962
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 75
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
22. Taxation (continued)

The gross movement on the deferred income tax account is as follows:

   
2015
    
2014
    
2013
  
Beginning of year
    
5,962
      
(9,255
)
    
(39,997
)
Exchange differences
    
(8,257
)
    
7,050
      
11,938
  
Disposal of subsidiary (Note 16)
    
-
      
-
      
201
  
Tax charge relating to cash flow hedge (i)
    
49,106
      
14,149
      
8,347
  
Income tax (expense) / benefit
    
(1,590
)
    
(5,982
)
    
10,256
  
End of year
    
45,221
      
5,962
      
(9,255
)

(i) Relates to the gain or loss before income tax of cash flow hedge recognized in other comprehensive income amounting to US$ 176,657 for the year ended December 31, 2015 (2014: US$ 53,584; 2013: US$ 6,167).
 
The movement in the deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred income tax liabilities
  
Property,
plant and
equipment
    
Biological
assets
    
Others
    
Total
  
At January 1, 2013
    
83,409
      
18,793
      
14,353
      
116,555
  
Charged/(credited) to the statement of income
    
12,590
      
(4,394
)
    
2,864
      
11,060
  
Disposal of subsidiary
    
(622
)
    
-
      
-
      
(622
)
Exchange differences
    
(18,339
)
    
(3,247
)
    
(2,792
)
    
(24,378
)
At December 31, 2013
    
77,038
      
11,152
      
14,425
      
102,615
  
(Credited)/charged to the statement of income
    
(6,446
)
    
(960
)
    
6,014
      
(1,392
)
Exchange differences
    
(16,367
)
    
(2,137
)
    
(2,936
)
    
(21,440
)
At December 31, 2014
    
54,225
      
8,055
      
17,503
      
79,783
  
(Credited) /charged to the statement of income
    
22,310
      
19,674
      
(15,458
)
    
26,526
  
Exchange differences
    
(20,571
)
    
(4,781
)
    
(5,045
)
    
(30,397
)
At December 31, 2015
    
55,964
      
22,948
      
(3,000
)
    
75,912
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 76
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
22. Taxation (continued)
 
Deferred income tax
assets
  
Provisions
    
Tax loss
Carry
forwards
    
Equity-settled
share-based
compensation
    
Biological
Assets
    
Others
    
Total
  
At January 1, 2013
    
5,571
      
58,417
      
6,716
      
2,501
      
3,353
      
76,558
  
Charged/(credited) to the statement of income
    
1,161
      
13,200
      
(299
)
    
2,922
      
4,332
      
21,316
  
Disposal of subsidiary
    
-
      
(421
)
    
-
      
-
      
-
      
(421
)
Tax charge relating to cash flow hedge
    
-
      
8,347
      
-
      
-
      
-
      
8,347
  
Exchange differences
    
(905
)
    
(9,923
)
    
-
      
(549
)
    
(1,063
)
    
(12,440
)
At December 31, 2014
    
5,827
      
69,620
      
6,417
      
4,874
      
6,622
      
93,360
  
Charged/(credited) to the statement of income
    
(3,745
)
    
(2,636
)
    
(522
)
    
(1,568
)
    
1,097
      
(7,374
)
Tax charge relating to cash flow hedge
    
-
      
14,149
      
-
      
-
      
-
      
14,149
  
Exchange differences
    
(313
)
    
(12,780
)
    
-
      
(397
)
    
(900
)
    
(14,390
)
At December 31, 2014
    
1,769
      
68,353
      
5,895
      
2,909
      
6,819
      
85,745
  
Charged/(credited) to the statement of income
    
770
      
24,248
      
(275
)
    
(1,293
)
    
1,486
      
24,936
  
Tax charge relating to cash flow hedge
    
-
      
49,106
      
-
      
-
      
-
      
49,106
  
Exchange differences
    
(750
)
    
(34,513
)
    
-
      
(793
)
    
(2,598
)
    
(38,654
)
At December 31, 2015
    
1,789
      
107,194
      
5,620
      
823
      
5,707
      
121,133
  

Tax loss carry forwards in Argentina and Uruguay generally expire within 5 years. Tax loss carry forwards in Brazil do not expire. However, in Brazil, the taxable profit for each year can only be reduced by tax losses up to a maximum of 30%.

In order to fully realize the deferred tax asset, the Group will need to generate future taxable income in the countries where the tax loss carry forward were incurred. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes that as at December 31, 2015, it is probable that the Group will realize all of the deferred tax assets in Argentina and some portion of the deferred tax assets in Brazil.

As of December 31, 2015, the Group’s tax loss carry forwards and their corresponding jurisdictions are as follows:

Jurisdiction
  
Tax loss carry forward
  
Expiration Period
Argentina
    
75,398
  
5 years
Brazil
    
236,471
  
No expiration date

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The Group did not recognize deferred income tax assets of US$ 3.8 million in respect of losses amounting to US$ 11.5 million that can be carried forward against future taxable income. From these US$ 3.8 million tax loss carry-forwards US$ 3.5 do not expire and the rest will expire in 2017.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 77
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
22. Taxation (continued)

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

   
2015
    
2014
    
2013
  
Tax calculated at the tax rates applicable to profits in the respective countries
    
(7,703
)
    
(3,374
)
    
13,094
  
Non-deductible items
    
(241
)
    
(441
)
    
(2,398
)
Tax losses where no deferred tax asset was recognized
    
(428
)
    
(2,383
)
    
(3,811
)
Non-taxable income
    
4,625
      
199
      
2,319
  
Others
    
(7
)
    
(107
)
    
73
  
Income tax (expense) / benefit
    
(3,754
)
    
(6,106
)
    
9,277
  

23. Payroll and social security liabilities

   
2015
    
2014
  
Non-current
            
Social security payable
    
1,236
      
1,278
  
     
1,236
      
1,278
  
Current
                
Salaries payable
    
4,755
      
6,322
  
Social security payable
    
2,766
      
3,898
  
Provision for vacations
    
9,877
      
12,364
  
Provision for bonuses
    
4,755
      
4,731
  
     
22,153
      
27,315
  
Total payroll and social security liabilities
    
23,389
      
28,593
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 78
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
24.
Provisions for other liabilities

The Group is subject to several laws, regulations and business practices of the countries where it operates. In the ordinary course of business, the Group is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving tax, labor and social security, administrative and civil and other matters. The Group accrues liabilities when it is probable that future costs will be incurred and it can reasonably estimate them. The Group bases its accruals on up-to-date developments, estimates of the outcomes of the matters and legal counsel experience in contesting, litigating and settling matters. As the scope of the liabilities becomes better defined or more information is available, the Group may be required to change its estimates of future costs, which could have a material effect on its results of operations and financial condition or liquidity.

The table below shows the movements in the Group's provisions for other liabilities categorized by type of provision:

   
Labor, legal and
other claims
    
Onerous contracts
    
Total
  
At January 1, 2014
    
2,832
      
118
      
2,950
  
Additions
    
1,283
      
3,779
      
5,062
  
Used during year
    
(899
)
    
(3,841
)
    
(4,740
)
Exchange differences
    
(487
)
    
(48
)
    
(535
)
At December 31, 2014
    
2,729
      
8
      
2,737
  
Additions
    
1,483
      
17
      
1,500
  
Used during year
    
(921
)
    
(1
)
    
(922
)
Exchange differences
    
(998
)
    
(4
)
    
(1,002
)
At December 31, 2015
    
2,293
      
20
      
2,313
  

Analysis of total provisions:

   
2015
    
2014
  
Non current
    
1,653
      
2,013
  
Current
    
660
      
724
  
     
2,313
      
2,737
  

The Group is engaged in several legal proceedings, including tax, labor, civil, administrative and other proceedings in Brazil, which qualified as contingent liabilities for an aggregate claimed nominal amount of US$ 30.05 million and US$ 24.07 million as of December 31, 2015 and 2014, respectively.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 79
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
25.
Sales

   
2015
    
2014
    
2013
  
Sales of manufactured products and services rendered:
                  
Rice
    
82,797
      
99,339
      
101,906
  
Ethanol
    
176,150
      
165,870
      
150,382
  
Sugar
    
177,801
      
174,459
      
133,597
  
Soybean oil and meal
    
2,071
      
-
      
-
  
Energy
    
46,671
      
66,800
      
32,463
  
Powder milk
    
1,042
      
2,948
      
-
  
Services
    
1,545
      
2,093
      
2,929
  
Operating Leases
    
1,309
      
1,593
      
3,446
  
Others
    
1,233
      
25
      
584
  
     
490,619
      
513,127
      
425,307
  
Sales of agricultural produce and biological assets:
                        
Soybean
    
75,361
      
79,515
      
68,850
  
Cattle for dairy
    
3,656
      
2,553
      
2,244
  
Other cattle
    
-
      
-
      
616
  
Corn
    
41,813
      
69,636
      
79,277
  
Cotton
    
3,317
      
9,081
      
6,119
  
Milk
    
27,906
      
27,467
      
28,417
  
Wheat
    
16,116
      
7,669
      
20,379
  
Sunflower
    
12,659
      
10,016
      
8,030
  
Sorghum
    
111
      
84
      
146
  
Rice
    
-
      
1,117
      
-
  
Barley
    
634
      
1,150
      
1,419
  
Seeds
    
648
      
1,244
      
2,617
  
Others
    
1,474
      
307
      
1,203
  
     
183,695
      
209,839
      
219,317
  
Total sales
    
674,314
      
722,966
      
644,624
  
 
Commitments to sell commodities at a future date

The Group entered into contracts to sell non-financial instruments, mainly, sugar, soybean and corn through sales forward contracts. Those contracts are held for purposes of delivery the non-financial instrument in accordance with the Group’s expected sales. Accordingly, as the own use exception criteria are met, those contracts are not recorded as derivatives.

The notional amount of these contracts is US$--- 62.4 million as of December 31, 2015 (2014: US$ 31.5 million; 2013: US$ 49.7 million) comprised primarily of 58,865 tons of sugar (US$ 18.4 million), 4,556 m3 of ethanol (US$ 2.1 million), 506,250 mwh of energy (US$ 29.1 million) 29.8 tons of soybean (U$S 7.4 million), 102 tons of cotton (US$ 0.1 million), 4,977 tons of wheat (US$ 1.4 million), 5,979 tons of corn (US$ 0.8 million) and 16,260 tons of sunflower (US$ 4.8) which expire between January 2016 and December 2016.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 80
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
26. Expenses by nature

The Group presented the statement of income under the function of expense method. Under this method, expenses are classified according to their function as part of the line items “cost of manufactured products sold and services rendered”, “cost of agricultural produce sold and direct agricultural selling expenses”, “general and administrative expenses” and “selling expenses”.

The following table provides the additional disclosure required on the nature of expenses and their relationship to the function within the Group:

   
2015
    
2014
    
2013
  
Cost of agricultural produce and biological assets sold
    
154,579
      
185,378
      
191,213
  
Raw materials and consumables used in manufacturing activities
    
199,028
      
191,827
      
158,352
  
Services
    
11,420
      
14,046
      
14,201
  
Salaries and social security expenses (Note 27)
    
63,147
      
66,775
      
61,019
  
Depreciation and amortization
    
71,267
      
89,656
      
68,432
  
Taxes (*)
    
3,702
      
3,689
      
4,836
  
Maintenance and repairs
    
11,721
      
12,722
      
10,085
  
Freights
    
44,553
      
46,499
      
37,909
  
Export taxes / selling taxes
    
33,430
      
34,550
      
34,410
  
Fuel and lubricants
    
9,444
      
10,225
      
8,603
  
Lease expense and similar arrangements (**)
    
1,741
      
2,473
      
2,610
  
Others
    
20,354
      
19,000
      
21,329
  
Total expenses by nature
    
624,386
      
676,840
      
612,999
  
(*) Excludes export taxes and selling taxes.
(**) Relates to various cancellable operating lease agreements for office and machinery equipment.

For the year ended December 31, 2015, an amount of US$ 321,998 is included as “cost of manufactured products sold and services rendered” (2014: US$ 335,442; 2013: US$ 272,261); an amount of US$ 183,695 is included as “cost of agricultural produce sold and direct agricultural selling expenses” (2014: US$209,839; 2013: US$219,317); an amount of US$ 48,425 is included in “general and administrative expenses” (2014: US$ 52,695; 2013: US$ 53,352); and an amount of US$ 70,268 is included in “selling expenses” as described above (2014: US$78,864; 2013: US$68,069).

27.
Salaries and social security expenses

   
2015
    
2014
    
2013
  
Wages and salaries
    
44,585
      
48,287
      
42,291
  
Social security costs
    
14,166
      
14,621
      
14,925
  
Equity-settled share-based compensation
    
4,396
      
3,867
      
3,803
  
     
63,147
      
66,775
      
61,019
  
Number of employees
    
8,089
      
8,109
      
7,494
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 81
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
28.
Other operating income, net

   
2015
    
2014
    
2013
  
Gain from disposal of  farmland and other assets (Note 16)
    
7,914
      
-
      
26,434
  
Gain from commodity derivative financial instruments
    
22,148
      
9,937
      
19,586
  
Loss from onerous contracts – forwards
    
(25
)
    
(157
)
    
(292
)
Gain from disposal of  other property items
    
721
      
985
      
670
  
Gain from disposal of financial assets(Note 16)
    
-
      
-
      
1,188
  
Gain from the sale of subsidiaries (Note 16)
    
-
      
-
      
779
  
Others
    
308
      
1,212
      
1,285
  
     
31,066
      
11,977
      
49,650
  

29.
Financial results, net

   
2015
    
2014
    
2013
  
Finance income:
                  
- Interest income
    
8,201
      
7,068
      
6,882
  
- Other income
    
949
      
223
      
352
  
Finance income
    
9,150
      
7,291
      
7,234
  
                         
Finance costs:
                        
- Interest expense
    
(49,491
)
    
(54,915
)
    
(49,249
)
- Cash flow hedge – transfer from equity (Note 3.)
    
(32,700
)
    
(12,031
)
    
(2,560
)
- Foreign exchange losses, net
    
(23,423
)
    
(9,246
)
    
(21,087
)
- Taxes
    
(3,358
)
    
(3,731
)
    
(3,815
)
- Loss from interest rate/foreign exchange rate derivative financial instruments
    
(4,437
)
    
(3,232
)
    
(19,028
)
- Other expenses
    
(3,481
)
    
(3,317
)
    
(3,177
)
Finance costs
    
(116,890
)
    
(86,472
)
    
(98,916
)
Total financial results, net
    
(107,740
)
    
(79,181
)
    
(91,682
)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 82
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
30. Earnings per share

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of shares in issue during the period excluding ordinary shares held as treasury shares (Note 16).

   
2015
    
2014
    
2013
  
                   
Profit / (Loss) from continuing operations attributable to equity holders of the Group
    
17,133
      
2,518
      
(27,597
)
Profit/(Loss) from discontinued operations attributable to equity holders of the Group
    
-
      
-
      
1,767
  
Weighted average number of shares in issue (thousands)
    
120,901
      
120,562
      
122,302
  
Basic earnings / (loss) per share from continuing operations
    
0.142
      
0.021
      
(0.226
)
Basic earnings / (loss) per share from discontinued operations
    
-
      
-
      
0.014
  

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all dilutive potential shares. The Group has two categories of dilutive potential shares: equity-settled share options and restricted units. For these instruments, a calculation is done to determine the number of shares that could have been acquired at fair value, based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the equity-settled share options.  As of December 31, 2015, there were 1,701 thousands (2014: 1,729 thousands; 2013: 2,431 thousands) share options/restricted units outstanding that could potentially have a dilutive impact in the future but were antidilutive for the periods presented.

   
2015
    
2014
    
2013
  
                   
Profit / (Loss) from continuing operations attributable to equity holders of the Group
    
17,133
      
2,518
      
(27,597
)
Profit /(Loss) from discontinued operations attributable to equity holders of the Group
    
-
      
-
      
1,767
  
Weighted average number of shares in issue (thousands)
    
120,901
      
120,562
      
122,302
  
Adjustments for:
                        
- Employee share options and restricted units (thousands)
    
1,445
      
1,055
      
807
  
Weighted average number of shares for diluted earnings per share (thousands)
    
122,346
      
121,617
      
123,109
  
Diluted earnings / (loss) per share from continuing operations
    
0.140
      
0.021
      
(0.226
)
Diluted earnings / (loss) per share from discontinued operations
    
-
      
-
      
0.014
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 83
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
31.
Disclosure of leases and similar arrangements

The Group as lessee

Operating leases:

The Group leases various offices and machinery under cancellable operating lease agreements which involve no significant amount.
 
The Group leases land for crop cultivation in Argentina. The leases have an average term of a crop year and are renewable at the option of the lessee for additional periods. Under the lease agreements, rent accrues generally at the time of harvest. Rent is payable at several times during the crop year. Lease expense was US$ 10.75 million for the year ended December 31, 2015 (2014: US$ 12.8 million; 2013: US$ 17.9 million). Lease expense is capitalized as part of biological assets, affecting the periodically re-measurement of the biological assets at fair value. Based on this accounting policy, the line item ‘Initial recognition and changes in fair value of biological assets and agricultural produce’ in the consolidated income statement is directly affected by the lease expense that has been capitalized.

The future aggregate minimum lease payments under cancellable operating leases are as follows:

   
2015
    
2014
  
No later than 1 year
    
5,370
      
5,180
  
Later than 1 year and no later than 5 years
    
141
      
105
  
     
5,511
      
5,285
  

Agriculture “partnerships” (parceria by its exact term in Portuguese):

The Group enters into contracts with landowners to cultivate sugarcane on their land. These contracts have an average term of 5 years.

Under these contracts, the Group makes payments based on the market value of sugarcane per hectare (in tons) used by the Group in each harvest, with the market value based on the price of sugarcane published by CONSECANA and a fixed amount of total recoverable sugar per ton. Lease expense was US$ 53.41 million for the year ended December 31, 2015 (2014: US$ 65.0 million; 2013: US$ 150.0 million). Lease expense is included in “Initial recognition and changes in fair value of biological assets and agricultural produce” in the statement of income.

Finance leases:

Most of the leased assets carried in the consolidated statement of financial position as part of a finance lease relate to long-term rental and lease agreements for vehicles, machinery and equipment.

Obligations under finance leases

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

Gross finance lease liabilities – minimum lease payments:

   
2015
    
2014
  
Not later than one year
    
218
      
299
  
Later than one year and not later than five years
    
77
      
342
  
     
295
      
641
  
Future finance charges on finance leases
    
(16
)
    
(61
)
Present value of finance lease liabilities
    
279
      
580
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 84
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
31.
Disclosure of leases and similar arrangements (continued)

The present value of finance lease liabilities is as follows:

   
2015
    
2014
  
Not later than one year
    
211
      
287
  
Later than one year and not later than five years
    
68
      
293
  
     
279
      
580
  

Under the terms of the lease agreements, no contingent rents are payable. The interest rate inherent in these finance leases is fixed at the contract date for all of the lease term. The average interest rate on finance lease payables at December 31, 2015 was 14.20% (2014: 8.77%).

The Group as lessor

Operating leases:

The Group acts as a lessor in connection with an operating lease related to leased farmland. The lease payments received are recognized in profit or loss. The lease has a term of ten years.

The following amounts have been recognized in the statement of income in the line “Sales of manufactured products and services rendered”:

   
2015
    
2014
    
2013
  
Rental income
    
1,302
      
1,523
      
3,446
  

The future minimum rental payments receivable under cancellable leases are as follows:

   
2015
    
2014
  
No later than 1 year
    
940
      
1,486
  
Later than 1 year and no later than 5 years
    
1,185
      
2,626
  
     
2,125
      
4,112
  
 
In September 2013, Marfrig Argentina S.A., (“Marfrig Argentina”), an argentine subsidiary of Marfrig Alimentos S.A. (“Marfrig Alimentos") a Brazilian Company, notified the Group of their intention to early terminate the lease agreement entered into with the Group on December 2009 for grazing land. The termination of the lease agreement was effective in the fourth quarter of 2013. The Group filed an arbitration proceeding against Marfrig Argentina and Marfrig Alimentos in 2014 claiming unpaid invoices and indemnification for early termination for US$ 23,000,000.

Finance leases:

The Group does not act as a lessor in connection with finance leases.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 85
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
32. Group companies

The following table details the subsidiaries that comprised the Group as of December 31, 2015 and 2014:
 
           
2015
    
2014
  
   
Activities
  
Country of
incorporation
and operation
  
Ownership
percentage
held if not
100%
    
Ownership
percentage
held if not
100%
  
Details of principal subsidiary undertakings:
                    
Operating companies (unless otherwise stated):
                    
Adeco Agropecuaria S.A.
  
(a)
  
Argentina
    
-
      
-
  
Pilagá S.A.
  
(a)
  
Argentina
    
99.84
%
    
99.84
%
Cavok S.A.
  
(a)
  
Argentina
    
51
%
    
-
  
Establecimientos El Orden S.A.
  
(a)
  
Argentina
    
51
%
    
-
  
Bañado del Salado S.A.
  
(a)
  
Argentina
    
-
      
-
  
Agro Invest S.A.
  
(a)
  
Argentina
    
51
%
    
51
%
Forsalta S.A.
  
(a)
  
Argentina
    
51
%
    
51
%
Dinaluca S.A.
  
(a)
  
Argentina
    
-
      
-
  
Simoneta S.A.
  
(a)
  
Argentina
    
-
      
-
  
Compañía Agroforestal S.M.S.A.
  
(a)
  
Argentina
    
-
      
-
  
Adeco Agropecuaria Brasil Ltda.
  
(b)
  
Brazil
    
-
      
-
  
Adecoagro Vale do Ivinhema Ltda.
  
(b)
  
Brazil
    
-
      
-
  
Adecoagro Commodities Ltda.
  
(b)
  
Brazil
    
-
      
-
  
Usina Monte Alegre Ltda.
  
(b)
  
Brazil
    
-
      
-
  
Kelizer S.A.
  
(a)
  
Uruguay
    
-
      
-
  
Agroglobal S.A. (f.k.a. Adecoagro Uruguay S.A.)
  
(a)
  
Uruguay
    
-
      
-
  
Holdings companies:
                        
Adeco Brasil Participações S.A.
    
-
  
Brazil
    
-
      
-
  
International Farmland Holdings LP
  
(d)
  
United States
    
-
      
-
  
Adecoagro LP
  
(d)
  
United States
    
-
      
-
  
Adecoagro LP S.C.S.
  
(f)
  
Luxembourg
    
-
      
-
  
Adecoagro GP S.a.r.l.
    
-
  
Luxembourg
    
-
      
-
  
Ladelux S.C.A.
    
-
  
Uruguay
    
-
      
-
  
Spain Holding Companies (c)
    
-
  
Spain
    
-
      
-
  
Ona Ltd.
    
-
  
Malta
  
(e)
    
(e)
  
Toba Ltd.
    
-
  
Malta
  
(e)
    
(e)
  

 
(a)
Mainly crops, rice, cattle and others
(b)
Mainly sugarcane, ethanol and energy
(c)
Comprised by (1) wholly owned subsidiaries: Kadesh España S.L.U.; Leterton España S.L.U.; Global Asterion S.L.U.; Global Acasto S.L.U.; Global Laertes S.L.U.; Global Seward S.L.U.; Global Pindaro S.L.U.; Global Pileo S.L.U.; Peak Texas S.L.U.; Peak City S.L.U. and 51% controlled subsidiaries (see note 16): Global Acamante S.L.U.; Global Carelio S.L.U.; Global Calidon S.L.U.; Global Mirabilis S.L.U. Global Anceo S.L.U.  Global Hisingen S.L.U.
(d)
Merge without liquidation with Adecoagro L.P. in April 2015.
(e)
These companies are in liquidation.
(f)
The continuer from the merger between Adecoagro LP and International Farmland Holdings LP.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F - 86
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
32. Group companies (continued)
 
The percentage voting right for each principal subsidiary is the same as the percentage of capital stock held. Issued share capital represents only ordinary shares/ quotas, units or their equivalent. There are no preference shares or units issued in any subsidiary undertaking.

According to the laws of certain of the countries in which the Group operates, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution and can only be released to absorb losses. The Group’s joint ventures have not reached the legal capped amounts.

33. Related-party transactions

The following is a summary of the balances and transactions with related parties:
 
        Description of  
Income (loss) included in the
statement of income
    
Balance receivable
(payable)/(equity)
  
Related party
  
Relationship
  
transaction
  
2015
    
2014
    
2013
    
2015
    
2014
  
                                     
   
Sales of goods 
    
-
      
-
      
7.432
      
-
      
-
  
Grupo La Lácteo
  
Joint venture
  
Purchases of goods 
    
-
      
-
      
(25
)
    
-
      
-
  
     
Interest income 
    
-
      
-
      
33
      
-
      
-
  
Mario Jorge de Lemos Vieira/ Cia Agropecuaria Monte Alegre/ Alfenas Agricola Ltda/ Marcelo Weyland Barbosa Vieira/ Paulo Albert Weyland Vieira
  
(i)
  
Cost of manufactured products sold and services rendered (ii)
    
(2,304
)
    
(2,854
)
    
(2,650
)
    
-
      
-
  
     
Receivables from related parties (Note 13)
    
-
      
-
      
-
      
300
      
258
  
     
Payables (Note 20) 
    
-
      
-
      
-
      
(465
)
    
-
  
Directors and senior management
  
Employment
  
Compensation selected employess
    
(7,528
)
    
(7,439
)
    
(7,367
)
    
(16,836
)
    
(16,876
)
                                               
CHS Agro  
Joint venture
  
Purchases of goods 
    
-
      
-
      
402
      
-
      
-
  
Receivables from related parties (Note 13)
    
-
      
-
      
-
      
8,204
      
-
  
Sales of goods
    
2,201
      
2,824
      
-
      
-
      
-
  
Services
    
110
      
70
      
-
      
-
      
-
  
Interest income
    
74
      
49
      
-
      
-
      
-
  
 
(i)
Shareholders of the Company.
(ii)
Relates to agriculture partnership agreements (“parceria”).
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F - 87