ANNUAL INTEGRATED REPORT 2021

118 ANNUAL INTEGRATED REPORT 2021 | AXTEL = Phase 2 of the benchmark interest rate reform (IBOR- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS4 and IFRS 16) Interbank offered rates (IBORs) are interest reference rates, such as LIBOR, EURIBOR and TIBOR, that represent the cost of obtaining unsecured funding, have been questioned for their long-term viability as benchmarks. The Interest Rate Benchmark Reform on its phase 2, refers to the modification of financial assets, financial liabilities and lease liabilities, hedge accounting requirements and disclosure of financial instruments. Regarding the modification of financial assets, financial liabilities and lease liabilities, the IASB introduced a practical expedient which implies updating the effective interest rate at the moment in which a fallback reserve clause is activated for the substitution of the reference rate defined in the contract, without requiring the recognition of a modification in the valuation of the financial instrument. On the other hand, regarding the hedge accounting, the amendments to IFRS 9 allow accounting hedging relationships, where the hedged item is the LIBOR rate, not to be discontinued by the elimination of such reference rate; therefore, when the Company maintains a hedging derivative financial instrument, the reserve clause of the instrument will be activated when the clause of the hedged item is activated, for example, an interest-bearing debt at variable rate LIBOR. The company evaluated said modifications and determined that there are no significant impacts in the consolidated financial statements. The Company's debt contract includes a reserve clause and it does not have accounting hedge relationships where the LIBOR rate is part of the hedged items. ii. New and revised IFRS in issue but not yet effective As of the authorization date of these consolidated financial statements, the Company has not applied the following new and revised IFRS but not yet effective. The Company does not expect that the adoption of the following standards will have a material impact on the consolidated financial statements in future periods, considering they have no significant applicability: • • • • • Amendments to IAS 16, Property, Plant and Equipment Proceeds Before Intended Use (1) Amendment to IAS 37 - Cost of fulfilling Onerous contracts (1) Amendments to IFRS 9, Financial Instruments (1) Amendment to IAS 1 - Classification of Liabilities as Current or Non-current (2) • Amendment to IAS 1 - Disclosure of accounting policies (2) Amendment to IAS 8 - Definition of Accounting Estimates (2) Amendment to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (2) IFRS 17 Insurance contracts (2) (1) Effective for annual reporting periods beginning on January 1, 2022 (2) Effective for annual reporting periods beginning on January 1, 2023 c. Consolidation iii. Subsidiaries The subsidiaries are all the entities over which the Company has control. The Company controls an entity when it is exposed or has the right to variable returns from its interest in the entity and it is

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