5.3 CASH FLOW

The consolidated statement of cash flows was prepared in accordance with IAS 7. This Note provides an additional breakdown in this connection based on internal criteria established by the Company for business performance purposes, which in certain cases differ from the provisions of IAS 7. The main criteria applied are as follows:

• In order to provide a clearer explanation of the cash generated, the Group separates cash flows into “Cash Flows Excluding Infrastructure Projects”, where infrastructure project concession operators are treated as financial assets and the investments in the capital of these companies are therefore included in cash flows from investing activities and the yields from the investments (dividends and capital reimbursements) are included in cash flows from operating activities, and “Cash Flows of Infrastructure Projects”, consisting of cash flows from the operating and financing activities of infrastructure project concession operators.
• The treatment given to interest received on cash and cash equivalents differs from that in the statement of cash flows prepared in accordance with IAS 7, since this interest is included in cash flows from financing activities as a reduction of the amount recognised under "Interest Cash Flows".
• Lastly, the statement of cash flows endeavours to present the changes in the net cash position as the net amount of borrowings, cash and cash equivalents and restricted cash. This method also departs from that established in IAS 7, which explains the changes in cash and cash equivalents.

Change in working capital:

The change in working capital disclosed in the foregoing table is the measure that explains the difference between the Group’s EBITDA (Gross profit from operations) and its cash flows from operating activities before tax; it arises from the difference between the accrual of revenue and expenses for accounting purposes and the time when such revenue and expenses are transformed into cash, and relates mainly to changes in the balances of trade receivables and payables to suppliers or other items in the consolidated statement of financial position. Thus, a reduction in the balance of trade receivables will give rise to an improvement in working capital and a reduction in the balance of payables to suppliers will give rise to a worsening of working capital.

The changes in this item do not exactly coincide with the changes in working capital reported in Section 4 of the consolidated financial statements for the following reasons:

The positive impact of the changes in working capital in the consolidated statement of financial position (EUR +130 million) is explained by the increase in Trade receivables, due mainly to the collection of advances received in the Construction business (especially the I-66) and amounts received from infrastructure projects to which the financial asset model is applied, most noteworthy being Autema (see the detail in Section 4). This positive impact is offset by the changes in provisions (EUR -111 million), the most noteworthy of which is the net effect of the recognition/reversal of provisions with an impact on EBITDA (EUR 70 million), that do not give rise to cash outflows, in addition to the use of provisions with a balancing entry in working capital accounts (EUR -181 million), which do give rise to a cash outflow. Also, various items included in operating cash flows with an impact on other items in the consolidated statement of financial position must be borne in mind, such as pension plans and share-based remuneration schemes, as well as the effect of other financial results, (unrelated to financing) such as late-payment interest and guarantees. Taking into account all these changes, the working capital reported in cash flow amounts to EUR -53 million.

The differences mentioned above relate to the following items:

• Changes in working capital with an impact on other cash flow line items. The working capital accounts reported in Section 4, especially the payables to suppliers, can relate to transactions that do not affect cash flows from operating activities, such as non-current asset purchases.
• Changes in provisions with an impact on gross profit from operations or on working capital. These relate to the recognition/reversal of provisions with an impact on gross profit from operations, which does not have an impact on cash, or provisions used with a balancing entry in working capital accounts (see Note 6.3).
• Changes in other statement of financial position items with an impact on cash flows from operating activities. The changes in working capital reported in Section 4 reflect only movements in items included under "Current Trade and Other Receivables", “Current Trade and Other Payables” and "Inventories". In certain cases, operating income and expenses relate not only to items shown in working capital (current items) but also to certain items recognised as non-current assets and liabilities, such as non-current trade receivables and non-current payables to suppliers, or even to items in equity accounts such as transactions relating to share-based remuneration schemes. Also, this line item includes other financial result items not directly related to financing, such as late-payment interest and guarantee expenses.

The cash flows reported in 2016 were as follows: