Summary Of Significant Accounting Policies

Schedule of impacts of the adoption of IFRS

The impacts of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from ordinary contracts with customers are as follows:

Consolidated statement of financial position (extract)

		As of		Adoption						As of
		December 31,		effect						January 1
	Note	2017		IFRS 9			IFRS 15			2018
		ThUS$		ThUS$			ThUS$			ThUS$
Current assets
Other non-financial assets, current	7 - 12		221,188		-			54,361	(4)		275,549
Trade debtors and other accounts receivable, current	7 - 8		1,214,050		(11,105	)(1)		-			1,202,945

Non-current assets
Deferred tax assets			364,021		89	(2)		6,005	(7)		370,115

Current liabilities
Accounts payable commercial and other Debts to pay	7 - 20		1,695,202		-			(22,192	)(5)		1,673,010
Other non-financial liabilities, current	22		2,823,963		-			77,640	(6)		2,901,603

Non-current liabilities
Deferred tax liability	18		949,697		(1,021	)(2)		4,472	(5)		953,148

Equity
Accumulated earnings	25		475,118		(9,995	)(3)		446	(8)		465,569

- Effects of adopting IFRS 9

(1)

Expected credit losses: The Company modified the calculation of the impairment provision to comply with the expected credit loss model, established in IFRS 9 Financial Instruments, which replaces the current loss impairment model incurred. To the calculate porcentage of credit losses, a risk matrix was used, grouping the portfolio, according to similar characteristics of risk and maturity. This change resulted in the recognition of an increase in the provision for impairment losses of US $ (11.1) million.

(2) Deferred tax adjustments originated by the application of IFRS 9.

(3) Net effect on accumulated results of the adjustments indicated above.

(4) Contract costs: The Company has capitalized the costs related to the revenues from air transport of passengers, corresponding to: the commissions charged by the credit card administrators for US$ 22.0 million and the air ticket booking services through the system general distribution (GDS) for US$ 15.6 million. Additionally, there is a reclassification of commissions from travel agencies for US$ 16.8 million, which previously were presented, according IAS 18, net of the liability to fly in other non-financial liabilities.

(5) Contract liabilities: The Company has adjusted certain concepts that were recorded as obligations with suppliers and customers, which must now be treated as contract liabilities; therefore they must be deferred until the benefit of the service have been rendered. These concepts are mainly related to the ground transportation service for US $ 15.6 million and traveler's checks for US $ 6.6 million.

(6) Performance Obligations: The Company analyzed the moment in which the performance obligations identified in the contracts with customers must be recognized in the consolidated result. During this analysis, some concepts were identified which must be deferred until the moment of service provision, mainly related to land transportation services, charges for modifications to the initial contract in the sale of tickets and redeem of some products associated with loyalty programs for US$ 60.8 million. Additionally, there is the reclassification detailed in numeral (4) for US$ 16.8 million.

(7) Deferred tax adjustments originated by the application of IFRS 15.

(8) Net effect on accumulated results of the adjustments indicated above.

Schedule of analyzed business models and classified financial assets and liabilities

The Company analyzed the business models and classified its financial assets and liabilities according to the following:

	Classification IAS 39											Classification IFRS 9
	Loans			Hedge		Held			Initial as fair value					At fair value
	and			and		for			through profit			Cost		with changes
Assets	receivables			derivatives		traiding			and loss			amortized		in results		Total
	ThUS$			ThUS$		ThUS$			ThUS$			ThUS$		ThUS$		ThUS$
Balance as of December 31, 2017		2,446,864			62,867		1,915			501,890			-		-		3,013,536

Cash and cash equivalents		(1,112,346	)		-		-			(29,658	)		1,112,346		29,658		-
Other financial assets, current		(23,918	)		-		(1,421	)		(472,232	)		23,918		473,653		-
Trade debtors and other accounts receivable, current		(1,214,050	)		-		-			-			1,214,050		-		-
Accounts receivable from entities related, current		(2,582	)		-		-			-			2,582		-		-
Other financial assets, non-current		(87,077	)		-		(494	)		-			87,077		494		-
Accounts receivable, non-current		(6,891	)		-		-			-			6,891		-		-

Balance as of January 1, 2018		-			62,867		-			-			2,446,864		503,805		3,013,536

	Classification IAS 39					Classification IFRS 9
	Others			Held
	financial			hedge		Cost
Liabilities	liabilities			derivatives		amortized		Total
	ThUS$			ThUS$		ThUS$		ThUS$

Balance as of December 31, 2017		10,086,434			14,817		-		10,101,251

Other current financial liabilities		(1,288,749	)		-		1,288,749		-
Trade accounts payable and other accounts payable, current		(1,695,202	)		-		1,695,202		-
Accounts payable to related entities, current		(760	)		-		760		-
Other financial liabilities, not current		(6,602,891	)		-		6,602,891		-
Accounts payable, not current		(498,832	)		-		498,832		-
Balance as of January 1, 2018		-			14,817		10,086,434		10,101,251