Grupo Aval Acciones y Valores S A : Consolidated Financial Statements 2025

About this update from Grupo Aval Acciones Y Valores Sa

KPMG S.A.S. Calle 90 No. 19c - 74 Bogotá D.C. - Colombia Phone: +57 (601) 618 8000 +57 (601) 618 8100 https://www.kpmg.com/co (FREE TRANSLATION OF THE REPORT ISSUED IN SPANISH) INDEPENDENT AUDITORS' REPORT To the Shareholders Grupo Aval Acciones y Valores S.A.: Opinion I have audited the consolidated financial statements of Grupo Aval Acciones y Valores S.A. and Subsidiaries (the Group), which comprise the consolidated statement of financial position as of December 31, 2025, the consolidated statements of income and of comprehensive income, changes in equity, and cash flows for the year then ended, and notes that include material accounting policies and other explanatory information. In my opinion, the consolidated financial statements referred to, and annexed to this report, present fairly, in all material respects, the Group's consolidated financial position as of December 31, 2025, its consolidated operating income, and its consolidated cash flows for the year then ended in accordance with the Accounting and Financial Reporting Standards accepted in Colombia (IFRS Standards), applied uniformly with the previous year. Basis for opinion I conducted the audit in accordance with the International Standards on Auditing accepted in Colombia (ISAs). My responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Consolidated Financial Statements" section of the report. I am independent of the Group, in accordance with the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants (IESBA Code), included in the Information Assurance Standards accepted in Colombia, together with the ethical requirements that are relevant to the audit of the consolidated financial statements in Colombia. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code mentioned. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Key audit matters Key audit matters are those matters that, in my professional judgment, were of most significance in the audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming my opinion thereon, I do not provide a separate opinion on these matters. © 2026 KPMG S.A.S., a Colombian simplified joint-stock company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. KPMG Confidential KPMG S.A.S. Tax ID.: 860.000.846-4 Impairment Assessment of the Loan Portfolio under IFRS 9 (See Notes 4.1.5 and 11 to the consolidated financial statements) Key audit matter How it was addressed in the audit As indicated in Notes 4.1.5 and 11 to the consolidated financial statements, the impairment of the Group's loan portfolio amounted to $8,429,970 million Colombian pesos as of December 31, 2025. The Group measures the impairment of its loan portfolio in an amount equal to the Expected Credit Losses (ECL) for the life of each loan, except for those loans that have not experienced a significant increase in credit risk since their initial recognition; for which, the Group calculates a twelve-month ECL. The provision for impairment of the loan portfolio reflects a probability-weighted result that considers multiple economic scenarios based on forecasts of future economic conditions and is determined based on the Group's assessment of the Probability of Default (PD), the Loss Given Default (LGD) and Exposure at Default (EAD) associated with each loan. In accordance with IFRS 9 requirements and following market practices, the Group uses complex models that incorporate data and assumptions requiring significant judgment to estimate the impairment loss of the loan portfolio. I identified the assessment of loan portfolio's impairment as a key audit matter, because there is a high degree of estimation inherent in determining the expected loss of the loan portfolio impairment as a result of the judgment required for the prospective assumptions and models involved. The assessment of the impairment of the loan portfolio required significant auditor attention, the involvement of a judgement, and the involvement of professionals with knowledge and experience in the industry. My main audit procedures for assessing the impairment of the loan portfolio included: Evaluation of the design, implementation, and effectiveness of certain internal controls related to the Group's process for determining the impairment of the loan portfolio. This included controls related to (i) the validation of the models that determine the probability of loss, severity, and exposure at the time of default, (ii) the Group's monitoring of the provision in general for impairment losses of the credit portfolio; and (iii) controls over the input data to the models that determine the impairment of the loans, as well as the related calculations. Evaluation of the key models and inputs used to determine the parameters of the Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD); evaluation of macroeconomic projections and the probability weighting of scenarios; and recalculation of impairment for a sample of collectively assessed credits and for a sample of individually significantly assessed credits. Fair value assessment of financial assets related to concession contracts (See notes 2.20; 5 and 16 to the consolidated financial statements) Key audit matter How it was addressed in the audit As indicated in Notes 2.20; 5 and 16 to the consolidated financial statements, the Group and its Subsidiaries have designated some of the financial assets related to concession agreements to be measured at fair value through profit or loss after initial recognition. As of December 31, 2025, the Group and its Subsidiaries have financial assets arising from concession agreements of $2,635,437 million Colombian pesos which are measured at fair value and classified at level 3 of the fair value hierarchy. I identified the fair value assessment of related financial assets as a key audit matter because it involves significant audit effort and judgment, including the participation of valuation professionals with specific skills and industry knowledge. For financial assets related to concession agreements subsequently measured at fair value through profit or loss, the auditor's judgment was required to evaluate the models developed by the Group and its Subsidiaries to estimate their fair value, as well as the significant unobservable inputs and assumptions of these models. The significant unobservable inputs and assumptions of the models include the weighted average cost of capital. My audit procedures for evaluating the fair value of related financial assets included, among others: Evaluation of the design, implementation, and effectiveness of certain internal controls established by the Group and its Subsidiaries to determine the fair value of financial assets arising from concession agreements. These controls included those related to: (i) the review of inputs and assumptions used; and (ii) the review and approval of the fair value of the assets. Involvement of valuation professionals with specific skills and industry knowledge who assisted me in: (i) assessing whether the internally developed models are consistent with valuation practices generally used for that purpose and with IFRS; (ii) comparing the WACC discount rate with a given range using macroeconomic assumptions verified by the market; and (iii) assessing future inflation rates by comparing them with available market data. Other matters The consolidated financial statements as of and for the year ended December 31, 2024 are presented exclusively for comparison purposes, they were audited by me and in my report dated March 3, 2025, I expressed an unqualified opinion on them. Responsibility of the Group's Management and those charged with corporate governance in connection with the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Accounting and Financial Reporting Standards accepted in Colombia. This responsibility includes designing, implementing, and maintaining such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. It also includes selecting and implementing the appropriate accounting policies, as well as establishing fair accounting estimates under the circumstances. In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with corporate governance are responsible for overseeing the Group's financial reporting process. Auditors' responsibilities for the audit in connection with the consolidated financial statements My objectives are to obtain reasonable assurance about whether the consolidated financial statements, taken as a whole, are free from material misstatement whether due to fraud or error, and to issue an auditors' report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the users' economic decisions, which are taken based on these consolidated financial statements. As part of an audit in accordance with the ISAs, I exercise my professional judgment and maintain professional skepticism throughout the audit. I also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of the internal control relevant to the audit to design audit procedures that are appropriate in the circumstances. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If I conclude that a material uncertainty exists, I must draw attention in the auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, I must modify my opinion. My conclusions are based on the audit evidence obtained up to the date of the auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the Group's consolidated financial statements. I am responsible for the direction, supervision, and performance of the Group's audit. I remain solely responsible for the audit opinion. I communicate to those charged with the Group's governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I might identify during the audit. I also provide those charged with corporate governance with a statement that I have complied with relevant ethical requirements of independence and communicate to them of all relationships and other matters that may reasonably be considered to influence my independence and, where applicable, safeguards applied. From the matters communicated to those charged with governance, I determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. I describe these matters in my auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter must not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. March 3, 2026 (Original signed in Spanish) Diana Alexandra Rozo Muñoz Statutory Auditor of Grupo Aval Acciones y Valores S.A. Registration No. 120741 - T Member of KPMG S.A.S. Consolidated Statements of Financial Position As of December 31, 2025 and 2024 (Amounts expressed in millions of Colombian pesos) Notes 2025 (1) 2024 Assets Cash and cash equivalents 6, 7 Ps. 19,354,710 Ps. 16,998,859 Trading assets 6, 8 29,097,591 20,163,214 Investment securities 6, 9 39,252,615 39,162,618 Hedging derivative assets 6, 10 236,558 54,019 Loans 4.1, 6, 11 Commercial 108,308,984 115,414,643 Interbank and overnight funds 1,777,516 705,055 Commercial, interbank and overnight funds 110,086,500 116,119,698 Consumer 60,456,213 61,976,325 Mortgages 22,111,710 22,035,727 Microcredit 1,520 4,375 192,655,943 200,136,125 Loss allowance 4.1.5 (8,429,970) (10,006,639) Total loans, net 184,225,973 190,129,486 Other accounts receivable, net 6, 12 24,458,906 27,958,402 Non-current assets held for sale 13 18,256,613 105,214 Investments in associates and joint ventures 14 1,314,429 1,430,596 Tangible assets 15 Property, plant and equipment for own-use and given in operating lease, net 7,007,876 4,680,543 Right-of-use assets 1,482,036 1,351,624 Investment properties 882,979 972,935 Biological assets 235,409 238,339 9,608,300 7,243,441 Intangibles Concession arrangement rights 16 13,495,108 14,314,560 Goodwill 17 2,057,116 2,223,608 Other intangible assets 18 2,954,167 2,758,318 18,506,391 19,296,486 Income tax assets 19 Current 2,871,411 3,149,902 Deferred 1,366,820 1,628,201 4,238,231 4,778,103 Other assets 386,360 538,945 Total assets Ps. 348,936,677 Ps. 327,859,383 (1) As of December, 2025 the assets corresponding to Multi Financial Group (MFG) were reclassified as non-current assets held for sale, see note 13.A. The accompanying notes are an integral part of these Consolidated Financial Statements. Consolidated Statements of Financial Position, continued As of December 31, 2025 and 2024 (Amounts expressed in millions of Colombian pesos) Notes 2025 (1) 2024 Liabilities and equity Liabilities Trading liabilities 6, 8 Ps. 1,951,439 Ps. 1,011,934 Hedging derivative liabilities 6, 10 34,842 21,658 Customer deposits 20 Checking accounts 23,598,235 24,579,536 Savings accounts 88,238,541 79,614,904 Time deposits 95,105,917 96,329,827 Other deposits 462,545 347,910 207,405,238 200,872,177 Financial obligations 21 Interbank borrowings and overnight funds 22,655,425 18,509,769 Borrowings from banks and others 24,559,175 28,098,159 Bonds issued 21,456,986 26,215,847 68,671,586 72,823,775 Provisions 22 Legal related 155,378 192,526 Non legal related 834,219 910,145 989,597 1,102,671 Income tax liabilities 19 Current 203,908 247,502 Deferred 5,958,848 5,616,464 6,162,756 5,863,966 Employee benefits 23 987,752 1,003,303 Liabilities directly associated with non-current assets classified as held for sale 13.A. 16,459,367 - Other liabilities 24 11,531,259 11,996,981 Total liabilities 314,193,836 294,696,465 Equity Owners of the parent 25 Subscribed and paid-in capital 23,744 23,744 Additional paid-in capital 9,502,957 9,508,062 Retained earnings 9,241,357 8,163,434 Other comprehensive income (322,153) (243,983) Equity attributable to owners of the parent 18,445,905 17,451,257 Non-controlling interests 26 16,296,936 15,711,661 Total equity 34,742,841 33,162,918 Total liabilities and equity Ps. 348,936,677 Ps. 327,859,383 (1) As of December, 2025 the liabilities corresponding to Multi Financial Group (MFG) were reclassified as liabilities directly associated with non-current assets held for sale, see note 13.A. The accompanying notes are an integral part of these Consolidated Financial Statements. Consolidated Statements of Income For the years ended December 31, 2025 and 2024 (Amounts expressed in millions of Colombian pesos) Continuing operations Notes 2025 2024 (1) Interest income calculated using the effective interest method Loan portfolio Ps. 22,463,395 Ps. 23,740,386 Cash and cash equivalents and other accounts receivable 505,965 626,827 Investments in debt securities 2,709,159 2,604,689 Total interest income 6.2 25,678,519 26,971,902 Interest expense Deposits (13,089,554) (14,613,237) Financial obligations (4,958,313) (5,431,254) Total interest expense 6.3 (18,047,867) (20,044,491) Net interest income 7,630,652 6,927,411 Impairment recoveries on financial assets, net Loans and other accounts receivable (4,268,227) (4,615,595) Other financial assets (6,928) (4,988) Recovery of charged-off financial assets 736,255 574,260 Net impairment loss on financial assets (3,538,900) (4,046,323) Net interest income, after impairment losses 4,091,752 2,881,088 Income from commissions and fees 4,784,225 4,477,604 Expenses from commissions and fees (1,124,180) (1,001,625) Net income from commissions and fees 28.1 3,660,045 3,475,979 Income from sales of goods and services 10,396,794 11,048,600 Costs and expenses of sales goods and services (8,309,074) (8,571,245) Gross profit from sales of goods and services 28.2 2,087,720 2,477,355 Net trading income 29 1,402,013 1,401,734 Net income from other financial instruments mandatorily at fair value through profit or loss 16 623,163 350,919 Other income 30 1,656,432 646,177 Other expenses 30 (8,899,891) (8,125,461) Net income before tax expense 4,621,234 3,107,791 Income tax expense 19 (1,432,708) (941,978) Net income from continuing operations Ps. 3,188,526 Ps. 2,165,813 Net income from discontinued operations, net of tax 13.B. 26,646 25,664 Net income for the year Ps. 3,215,172 Ps. 2,191,477 Net income attributable to owners of the parent Net income for the period from continuing operations 1,703,506 997,398 Net income for the period from discontinued operations 13.B. 18,366 17,689 Owners of the parent 25 Ps. 1,721,872 Ps. 1,015,087 Net income attributable to non-controlling interests Net income for the period from continuing operations 1,485,020 1,168,415 Net income for the period from discontinued operations 13.B. 8,280 7,975 Non-controlling interests 26 Ps. 1,493,300 Ps. 1,176,390 Net income for the year Ps. 3,215,172 Ps. 2,191,477 Net income per share basic and diluted (in Colombian pesos) see note 25 72.52 42.75 (1) The information was modified based on Multi Financial Group (MFG) discontinued operation, see note 13.B. The accompanying notes are an integral part of these Consolidated Financial Statements. Grupo Aval Acciones y Valores S.A. and Subsidiaries Consolidated Statements of Other Comprehensive Income For the years ended December 31, 2025 and 2024 (Amounts expressed in millions of Colombian pesos) Notes 2025 2024 (1) Net income of the period Ps. 3,215,172 Ps. 2,191,477 Other comprehensive income Items that will be reclassified to profit or loss Net (loss) gain on hedges of investments in foreign operations: Hedged items 10.1 (630,465) 514,713 Hedging non-derivative instrument 10.1 613,587 (500,007) Cash flow hedges 10.2 177,002 55,081 Foreign currency translation differences from unhedged foreign operations 25.6 (372,722) 247,019 Unrealized (losses) on securities at FVOCI 25.6 (301,599) (163,387) Investments in associates 14 (56,424) 15,329 Income tax 19.6 (169,147) 238,675 Discontinued operation 13.B. 171,542 50,695 Total items that may be reclassified to profit or loss Ps. (568,226) Ps. 458,118 Items that will not be reclassified to profit or loss Transfer from owner-occupied property to investment property 25.6 (1,095) 16,741 Unrealized gains on equity securities at FVOCI 25.6 260,051 301,497 Actuarial gains (losses) from defined benefit pension plans 25.6 13,271 (12,346) Income tax 19.6 61 (13,832) Discontinued operation 13.B. (597) (4,045) Total items that will not be reclassified to profit or loss Ps. 271,691 Ps. 288,015 Total other comprehensive income during the period net of taxes 25.6 Ps. (296,535) Ps. 746,133 Total comprehensive income Ps. 2,918,637 Ps. 2,937,610 Total comprehensive income for the year attributable to owners of the parents Comprehensive income for the period from continuing operations 1,508,023 1,265,621 Comprehensive income for the period from discontinued operations 13.B. 135,679 49,702 Ps. 1,643,702 Ps. 1,315,323 Total comprehensive income for the year attributable to non-controlling interests Comprehensive income for the period from continuing operations 1,213,023 1,599,675 Comprehensive income for the period from discontinued operations 13.B. 61,912 22,612 Ps. 1,274,935 Ps. 1,622,287 Total comprehensive income for the year Ps. 2,918,637 Ps. 2,937,610 (1) The information was modified based on Multi Financial Group (MFG) discontinued operation, see note 13.B. The accompanying notes are an integral part of these Consolidated Financial S tatements. Grupo Aval Acciones y Valores S.A. and Subsidiaries Consolidated Statements of Changes in Equity Equity Subscribed Additional Appropriated Other attributable to Non- and paid-in paid - in retained comprehensive owners of the controlling capital capital earnings income (OCI) parent interest (NCI) Total equity For the years ended December 31, 2025 and 2024 (Amounts expressed in millions of Colombian pesos) Balance at January 1, 2024 Ps. 23,744 Ps. 9,571,374 Ps. 7,731,773 Ps. (544,219) Ps. 16,782,672 Ps. 14,737,744 Ps. 31,520,416 Dividends declared in cash (1) - - (569,843) - (569,843) (618,579) (1,188,422) Effect of realization OCI - - (9,573) - (9,573) (4,405) (13,978) Movement in OCI - - - 300,236 300,236 445,897 746,133 Equity transactions (2) - (63,312) - - (63,312) (13,511) (76,823) Withholding tax over dividends - - (4,010) - (4,010) (11,875) (15,885) Net income of the period - - 1,015,087 - 1,015,087 1,176,390 2,191,477 Balance at December 31, 2024 Ps. 23,744 Ps. 9,508,062 Ps. 8,163,434 Ps. (243,983) Ps. 17,451,257 Ps. 15,711,661 Ps. 33,162,918 Dividends declared in cash (1) - - (655,320) - (655,320) (689,168) (1,344,488) Effect in retained earnings (3) - - 15,848 - 15,848 27,672 43,520 Movement in OCI - - - (78,170) (78,170) (218,365) (296,535) Equity transactions (2) - (5,105) - - (5,105) (17,857) (22,962) Withholding tax over dividends - - (4,477) - (4,477) (10,307) (14,784) Net income of the period - - 1,721,872 - 1,721,872 1,493,300 3,215,172 Balance at December 31, 2025 Ps. 23,744 Ps. 9,502,957 Ps. 9,241,357 Ps. (322,153) Ps. 18,445,905 Ps. 16,296,936 Ps. 34,742,841 (1) See note 25.2 "Declared Dividends". (2) See note 25.4 "Equity transactions" (3) See note 25.5 "Effect in retained earnings" The accompanying notes are an integral part of these Consolidated Financial Statements. For the years ended December 31, 2025 and 2024 (Amounts expressed in millions of Colombian pesos) Net income before income tax of continuing operations Ps. 4,621,234 Ps. 3,107,791 Notes 2025 2024 (1) Cash flows from operating activities: Reconciliation of net income before taxes and net cash provided by operating activities Depreciation of tangible assets and right-of-use assets 28, 30 597,897 561,845 Amortization of intangible assets 28, 30 767,850 674,335 Impairment losses on loans and other accounts receivable 4.1.5 4,324,724 4,686,752 Net interest income (7,630,652) (6,927,411) Accrued dividends 30 (126,700) (141,867) Net gains on sales of non-current assets held for sale (9,945) (18,107) Gain on sale of property plant and equipment for own-use and operating lease (131,863) (75,275) Loss on sale of investment property 28,392 14,398 Gain on sale biological assets (5,152) (9,377) Valuations and interest from concession agreements (2,807,293) (2,850,244) Foreign exchange (gains) losses 30 (825,669) 452,635 Profit of equity accounted on investments in associates and joint ventures 30 (350,935) (378,396) Net (gains) or losses on fair value adjustments: Derivatives 29 257,762 (415,640) Non-current assets held for sale 1,622 4,662 Investment properties 15 (68,306) (36,705) Biological assets 15 (3,396) (7,589) Changes in operating assets and liabilities Trading assets (6,792,442) (5,570,819) Accounts receivable (892,411) (792,468) Derivatives (550,854) 238,494 Other assets (6,697) (137,978) Other liabilities and provisions 2,732,480 1,096,914 Employee benefits (12,865) 51,048 Loans (17,695,997) (13,161,784) Customer deposits 24,820,228 14,344,651 Interbank borrowings and overnight funds 4,927,947 2,766,952 Borrowings from banks and others 931,791 (1,019,921) Interest received 23,419,517 26,797,798 Interest paid (17,720,295) (20,488,941) Interest paid on leases (237,774) (236,451) Income tax paid (2,163,430) (1,998,655) Discontinued operation Net cash provided in operating activities 13.B. (2,013,798) Ps. 7,384,970 251,642 Ps. 782,289 (1) The information was modified based on Multi Financial Group (MFG) discontinued operation, see note 13.B. The accompanying notes are an integral part of these Consolidated Financial Statements. For the years ended December 31, 2025 and 2024, continued (Amounts expressed in millions of Colombian pesos) Notes 2025 2024 (1) Cash flows from investing activities: Acquisition of property, plant and equipment for own use and operating lease 15 Ps. (602,321) Ps. (623,876) Acquisition of investment property 15 (8,263) (793) Additions of cost of biological assets 15 (27,222) (26,572) Capitalization and payments in concession contracts 158,772 305,686 Additions of others intangibles assets (660,286) (652,681) Acquisition of investments at FVOCI (17,451,317) (14,655,069) Proceeds from sale of investments at FVOCI 13,675,934 11,643,956 Proceeds from sale of own-use property and equipment and operating lease 152,445 76,963 Proceeds from sale of investment properties 207,927 66,358 Proceeds from sale of biological assets 38,700 35,871 Proceeds from sale of non-current assets held for sale 75,178 37,856 Purchases of financial assets at amortized cost (7,015,566) (7,801,052) Redemptions of financial assets at amortized cost 8,685,569 8,217,845 Dividends received from investments 444,386 439,017 Acquisition of investments in associates 14 - (2,486) Capitalized leasing cost (282) (335) Discontinued operation 13.B. 895,588 (202,561) Net cash used provided in investing activities Ps. (1,430,758) Ps. (3,141,873) Cash flows from financing activities Dividends paid to shareholders 21.3 (625,826) (728,181) Dividends paid to non-controlling interest 21.3 (662,266) (667,330) Issuance of debt securities 21.3 528,863 2,224,164 Payment of outstanding debt securities 21.3 (1,513,644) (1,725,323) Payment of obligations under financial lease 21.3 (429,493) (409,118) Equity transaction 21.3 (6) (55,000) Discontinued operation 13.B. 37,780 (2,223) Net cash used in financing activities Ps. (2,664,592) Ps. (1,363,011) Effect of foreign currency changes on cash and cash equivalents (1,334,867) 2,123,593 Cash and cash equivalents from non-current assets classified as held for sale 13.B. 401,098 - Increase (decrease) in cash and cash equivalents from continuing operations 2,355,851 (1,599,002) Cash and cash equivalents at beginning of the period 7 Ps. 16,998,859 Ps. 18,597,861 Cash and cash equivalents at end of the period 7 Ps. 19,354,710 Ps. 16,998,859 (1) The information was modified based on Multi Financial Group (MFG) discontinued operation, see note 13.B. The accompanying notes are an integral part of these Consolidated Financial Statements. NOTE 1 - REPORTING ENTITY Grupo Aval Acciones y Valores S.A. (hereinafter the "Company", "The Group" or "Grupo Aval") was established under Colombian law in January 7, 1994, with its main offices and business address registered in Bogotá, D.C., Colombia. The corporate purpose of Grupo Aval is the purchase and sale of securities issued by financial and commercial entities. Grupo Aval is the majority shareholder of Banco de Bogotá S.A., Banco de Occidente S.A., Banco Popular S.A. and Banco Comercial AV Villas S.A., entities whose main purpose is to perform all transactions, operations and services inherent to the banking business, pursuant to applicable laws and regulations. Furthermore, through its direct and indirect investments in Corporación Financiera Colombiana S.A. ("Corficolombiana"), in Sociedad Administradora de Fondos de Pensiones, Cesantías y del Componente Complementario de Ahorro Individual "CCAI" Porvenir S.A. ("Porvenir"), in Aval Fiduciaria S.A., in Aval Casa de Bolsa S.A. - Sociedad Comisionista de Bolsa and in Aval Banca de Inversión S.A.S. Grupo Aval also engages in investment banking activities, investments in the non-financial sector and manages pensions and severance funds in Colombia. In performing its activities and pursuant to the corporate bylaws, Grupo Aval may (i) promote the creation of all types of companies relating to its corporate purpose; (ii) represent individuals and companies involved in similar or complementary activities; (iii) grant or receive loans with or without interest; (iv) submit its properties as collateral; (v) issue, endorse, acquire, protest, cancel, or pay bills of exchange, checks, promissory notes or any other type of financial instruments, accept or submit them as payment; (vi) acquire, sell, tax, lease or manage any kind of assets; (vii) subscribe or acquire any kind of investments and sell or otherwise dispose of them; (viii) acquire and sell shares in companies that purse similar or complementary corporate interests ; (ix) render services in areas relating to its activities, experience and knowledge; and (x) carry out or participate, in acts and contracts relating to the aforementioned activities, enabling the exercise of rights and compliance of the obligations of The Group. The duration of Grupo Aval set forth under the bylaws is until May 24, 2044, but the Company may be dissolved before such term expires, or it may be extended. When preparing its Consolidated Financial Statements, Grupo Aval Acciones y Valores S.A., directly consolidates the following entities: Banco de Bogotá S.A. Banco de Bogotá S.A., in which Grupo Aval holds 68.93% of the voting rights and 68.93% of the ownership interest as of December 31, 2025; was established as a bank on November 15, 1870. It was authorized to operate under the terms of the renewal resolution No. 3140 dated September 24, 1993 issued by the Superintendency of Finance. The commercial purpose of Banco de Bogotá is to participate and perform all operations and contracts legally authorized to commercial banking, subject to the limitations and requirements set forth under Colombian laws and regulations. The following table presents details of Banco de Bogotá's most significant subsidiaries which are indirectly consolidated by Grupo Aval as of December 31, 2025: Total Total voting ownership rights held by interest held Subsidiary Core business Location Grupo Aval by Grupo Aval Main local direct subsidiaries Fiduciaria Bogotá S.A. Management of trust funds. Bogotá, Colombia 94.99% 65.47% Almaviva S.A. y Logistics services. Bogotá, Colombia Subsidiarias 95.81% 66.04% Megalínea S.A. Technical and administrative services Bogotá, Colombia 94.90% 65.41% Main international direct subsidiaries Banco de Bogotá Panamá Commercial banking services. S.A. Panamá, Republic of Panamá 100% 68.93% Multi Financial Holding Holding company of Multi Financial Group Inc. (MFG) (1) Panamá, Republic of Panamá 100% 68.93% (1) Discontinued operation of Multi Financial Group (MFG), see Note 13.B Banco de Occidente S.A. Banco de Occidente S.A., in which Grupo Aval holds 72.27% of the voting rights and 72.27% of the ownership interest as of December 31, 2025; was established as a banking entity on April 30, 1965. It was authorized to operate under the terms of the renewal resolution No. 3140 dated September 24, 1993 issued by the Superintendency of Finance. The commercial purpose of Banco de Occidente is to participate and perform all operations and contracts legally authorized to commercial banks, subject to the limitations and requirements set forth under Colombian laws and regulations. The following table presents the details of Banco de Occidente's most significant subsidiaries, which are indirectly consolidated by Grupo Aval, as of December 31, 2025: Subsidiary Core business Location Total voting rights held by Grupo Aval Total ownership interest held by Grupo Aval Fiduciaria de Occidente S.A. Management of trust funds. Bogotá, Colombia 99.99% 70.86% Banco de Occidente (Panamá), S.A. Commercial banking services. Panamá, Republic of Panamá 95.00% 68.66% Occidental Bank Barbados Ltd. Commercial banking Barbados services. 100% 72.27% Banco Popular S.A. Banco Popular S.A., in which Grupo Aval holds 93.74% of the voting rights and 93.87% of the ownership interest as of December 31, 2025; was established as a banking entity on July 5, 1950. It was authorized to operate under the terms of the renewal resolution No. 3140 dated September 24, 1993 issued by the Superintendency of Finance. Its commercial purpose is to participate in and perform all operations and contracts legally authorized to commercial banks, subject to the limitations and requirements set forth under Colombian laws and regulations. On November 22, 2023, Grupo Aval, Banco de Bogotá S.A., Banco de Occidente S.A. and Banco Popular S.A., entered into a shareholders' agreement pursuant to which Banco Popular S.A. will act as the controlling entity of Corporación Financiera Colombiana S.A. ("Corficolombiana") according to the terms of articles 260 and 261 of the Colombian Code of Commerce, as well as the requirements established in IFRS 10. The execution of the aforementioned agreement does not entail any change in the share ownership of Corficolombiana currently held by the parties to the agreement, nor any modification of the beneficial owner of Corficolombiana. The following table presents the details of Banco Popular's most significant subsidiaries which are indirectly consolidated by Grupo Aval, as of December 31, 2025: Subsidiary Core business Location Total voting rights held by Grupo Aval Total ownership interest held by Grupo Aval Alpopular S.A. Deposit, conservation, custody and transportation of products at Bogotá, 71.10% 66.74% national and international levels. Colombia Fiduciaria Popular Management of trust funds. Bogotá, 94.85% 89.03% S.A. Colombia Corporación Active management of a stock pipeline through controlled and Bogotá, 55.73% 40.53% Financiera uncontrolled investments in strategic sectors including Colombia Colombiana - Corficolombiana S.A. (1) infrastructure, energy and gas, agribusiness and hotels. (1) Corficolombiana S.A., (in which Grupo Aval and its subsidiaries own 55.73% of the aggregate voting rights and Grupo Aval has 40.53% of the ownership interest as of December 31, 2025). Corficolombiana is a merchant bank authorized to operate by the Superintendency of Finance by the resolution of October 18, 1961. The Corporation´s core business is the active management of an equity portfolio through controlling and non-controlling investments in key strategic sectors that include infrastructure, energy and gas, agribusiness and hotels. The following table presents the details of Corficolombiana´s most significant subsidiaries which are indirectly consolidated by Grupo Aval, as of December 31, 2025: Subsidiary Core business Location Total voting rights held by Grupo Aval Total ownership interest held by Grupo Aval Promigas S.A. E.S.P. Transportation and distribution of natural gas. Barranquilla, Colombia 50.88% 20.62% Proyectos y Desarrollos Viales del Pacífico S.A.S. Infrastructure projects. Bogotá, Colombia 100% 40.53% Estudios, Proyectos e Inversiones de los Andes S.A.S. y Subsidiarias Infrastructure projects. Bogotá, Colombia 100% 40.52% Hoteles Estelar S.A. y Subsidiarias Hotel services Cali, Colombia 89.81% 36.40% Colombiana de Licitaciones y Concesiones S.A.S. Infrastructure projects. Bogotá, Colombia 100% 40.53% Estudios y Proyectos del Sol S.A.S. Infrastructure projects. Bogotá, Colombia 100% 40.53% Concesionaria Vial Del Oriente S.A.S. Infrastructure projects. Bogotá, Colombia 100% 40.53% Concesionaria Vial Del Pacifico S.A.S. Infrastructure projects. Sabaneta Antioquia 100% 40.53% CFC Gas Holding S.A.S. Investment Company Bogotá, Colombia 100% 40.53% Banco Comercial AV Villas S.A. Banco Comercial AV Villas S.A., in which Grupo Aval holds 80.39% of the voting rights and 79.87% of the ownership interest as of December 31, 2025; was incorporated as a banking entity on October 24, 1972. It was authorized to operate under the terms of the renewal resolution No. 3352 dated August 21, 1992 issued by the Superintendency of Finance. The commercial purpose of Banco AV Villas is to participate and perform all operations and contracts legally authorized to commercial banks, subject to the limitations and requirements imposed by Colombian laws and regulations. Sociedad Administradora de Fondos de Pensiones, Cesantías y del CCAI Porvenir S.A. Porvenir S.A., in which Grupo Aval and its Subsidiaries own 100% of the aggregate voting rights and Grupo Aval has an economic interest of 75.76% as of December 31, 2025, was established by Public Deed No. 5307 of Notary 23 of Bogotá on October 23 of 1991, it has an operating permit granted by the Superintendency of Finance through Resolution number 3970 of October 30, 1991; Porvenir is an administrator of pension and severance funds authorized by law. The following table presents the details of Porvenir's subsidiary which is indirectly consolidated by Grupo Aval, as of December 31, 2025: Total voting Total ownership Subsidiary Core business Location rights held by Grupo Aval interest held by Grupo Aval Aportes en Línea S.A. Technical and administrative services. Bogotá, Colombia 100% 75.18% Grupo Aval Limited Grupo Aval Limited is a 100% owned subsidiary of Grupo Aval in Cayman Islands. It was established on December 29, 2011. Grupo Aval Limited is a limited liability company registered with the Assistant of the Registrar of Companies of Cayman Islands under registry number MC-265169, with its Main Office located in Ugland House, South Church Street, George Town, Grand Cayman KY1-1104. It was constituted as a special purpose vehicle for issuing foreign debt. Likewise, this company may, as part of its corporate purpose, develop any business activity within the framework of the law. Aval Fiduciaria S.A. Aval Fiduciaria S.A. (the Fiduciary), in which Grupo Aval holds 100% of the voting rights and 98.47% of the ownership interest as of December 31, 2025; is a private corporation subject to the control and supervision by the Superintendency of Finance. The exclusive purpose of Aval Fiduciaria is to carry out all fiduciary businesses regulated by law involving all types of movable and immovable property, whether tangible or intangible. Its principal place of business is in the city of Cali, and it operates through agencies in Bogota, Medellín, Barranquilla, and Bucaramanga. Aval Casa de Bolsa S.A. - Sociedad Comisionista de Bolsa Aval Casa de Bolsa S.A. - Sociedad Comisionista de Bolsa, in which Grupo Aval holds 98.80% of the voting rights and 87.84% of the ownership interest as of December 31, 2025; is a private entity whose corporate purpose is to carry out commission-based transactions for the purchase and sale of securities registered in the Colombian Stock Exchange and the National Registry of Shares and Issuers (RNVE), the administration of collective investment funds, the administration of securities, the performance of operations on its own account, securities brokerage and the provision of advisory services regarding the capital markets, among others. Aval Banca de Inversión S.A.S. Aval Banca de Inversión S.A.S, in which Grupo Aval holds 100% of the voting rights and 82.16% of the ownership interest as of December 31, 2025; is a private entity whose corporate purpose is the structuring of financial transactions, providing client support in obtaining funding, advising on mergers and acquisitions, and providing financial consulting services. Legal and regulatory restrictions Grupo Aval and its Colombian Subsidiaries are subject to the following restrictions to transfer profits or perform transactions, in accordance with the legal requirements in Colombia: Before distributing any dividends to their shareholders, the companies should assign 10% of their profits to a legal reserve until the reserve equals 50% of paid-in capital. The subsidiaries of Grupo Aval that operate in the financial sector in Colombia may not grant loans to a counterpart that exceed 10% of their regulatory capital if the loan is unsecured or 25% if it is granted with an acceptable security or third-party guarantee, as per Superintendency of Finance rules. There is an exception to this rule that extends the maximum limit of up to 25% (without guarantee) when it refers to loans to fourth generation toll roads "4G" infrastructure projects. Pursuant to article 2.1.2.1.8 of Decree 2555 of 2010, banks in Colombia have a lending limit of 30% of their regulatory capital with respect to loans granted to financial entities. Foreign subsidiaries of Grupo Aval do not have any restriction to transfer dividends to the parent company. Lending operations in general have restrictions similar to those of banks in Colombia, as described above. Grupo Aval and its Subsidiaries do not have significant restrictions on their ability to access or use their assets and settle their liabilities other than those resulting from the supervisory frameworks within which subsidiaries of the financial sector operate. The supervisory frameworks require subsidiaries of the financial sector to keep certain levels of regulatory capital (see note 4.4) and liquid assets (see note 4.3), limit their exposure to other parts of Grupo Aval and its Subsidiaries and comply with other ratios. NOTE 2 - BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF MATERIAL ACCOUNTING POLICIES The annual consolidated financial statements of Grupo Aval Acciones y Valores S.A. and Subsidiaries has been prepared in accordance with the Accounting and Financial Information Standards accepted in Colombia (NCIF) established in Law 1314 of 2009, regulated by the single regulatory decree 2420 of 2015 and the other amending decrees issued by the National Government. In accordance with Colombian legislation, the Company must prepare separate and consolidated financial statements and present them to the Shareholders' Assembly for approval. The basis for the distribution of dividends and other appropriations is the separate financial statement (see note 25.2) The Board of Directors of Grupo Aval, in a meeting held March 03, 2026, approved the presentation of the Consolidated Financial Statements as of December 31, 2025 and the accompanying notes, for consideration by the General Assembly of Shareholders of the Company. The following are the main accounting policies applied in preparing the Consolidated Financial Statements of Grupo Aval as of December 31, 2025 and 2024. Basis of preparation of Consolidated Financial Statements Presentation of Consolidated Financial Statements The Consolidated Financial Statements are prepared as follows: The Consolidated Statement of Financial position presents the company´s assets and liabilities based on liquidity since it provides reliable and more relevant information than separate current and non-current classifications. The Consolidated Statements of Income and Other Comprehensive Income are presented separately. The Consolidated Statement of Income is presented according to the function of expenses, as this method provides reliable and more relevant information. The Consolidated Statement of Cash Flows is presented using the indirect method. Accordingly, net cash flows from operating activities are determined by reconciling net income before tax expense, with the effects of non-cash items, net changes in assets and liabilities from operating activities, and for any other effects that are not classified as investing or financing activities. Revenues and expenses due to interest received and paid are part of operating activities. Consolidated Financial Statements Grupo Aval prepares its Consolidated Financial Statements incorporating its controlled entities. Grupo Aval controls an investee if and only if it complies with the following elements: Power over the investee entitling Grupo Aval to direct any relevant activities that significantly affect the investee's performance. Exposure, or rights to variable returns from its involvement with the investee. Ability to affect those returns through its power over the investee. Grupo Aval carries out an annual assessment of all its contractual relationships in order to identify new controlled entities or entities where control has been lost. For the year 2025 and 2024, no new entities were identified which had to be consolidated. The financial statements for Grupo Aval´s subsidiaries are included in the consolidated financial statements since the date on which Grupo Aval acquires control or following control until the date on which control is lost. During the consolidation process, Grupo Aval combines the assets, liabilities and profits or losses of those entities under control, previously aligning the accounting policies in all the subsidiaries and translating its financial statements to Colombian Pesos. This process includes eliminating intra-group balances and transactions and any unrealized and realized income and expense except for foreign currency translation gains or losses and those taxes which are not subject to elimination arising from intra-group transactions. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. Non-controlling interests are presented under total equity in the Consolidated Statement of Financial Position of Grupo Aval separately from equity attributable to owners of the parent company. For consolidation purposes, the Consolidated Statements of Financial Position and Income of entities with a functional currency different form Grupo Aval are translated to Colombian pesos as follows: Assets and liabilities are translated at the closing exchange rate at the reporting date; Income, expense and cash flows are translated at the corresponding month's average exchange rate since they approximate the exchange rates of each specific transaction; All resulting exchange differences are recognized in other comprehensive income ( "OCI") and accumulated in the foreign currency translation reserve, except to the extent that the translation difference is allocated to non-controlling interests. When Grupo Aval ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. This fair value becomes 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 amounts previously recognized in other comprehensive income in respect of that entity are 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. Investments in associates Associates are companies in which Grupo Aval has significant influence but not control and are accounted for under the equity method. They are presented in the Consolidated Statement of Financial Position as "Investments in associates and joint ventures" (see Note 2.1.(d) "Joint arrangements"). Grupo Aval exercises significant influence over another entity if it owns, directly or indirectly, 20% or more of the voting power of the investee, unless it is clearly evidenced that such influence does not exist. They are initially recognized at cost, which includes transaction costs. Subsequent to initial recognition, the Consolidated Financial Statements include the Grupo Aval's share of the profit or loss and OCI of equity accounted investees, until the date on which significant influence or joint control ceases. Dividends received from associates and joint ventures are recognized as a reduction in the carrying amount of the investment. In the case that Grupo Aval´s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, Grupo Aval does not recognize further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealized gains on transactions between Grupo Aval and its associates are eliminated to the extent of Grupo Aval's interest in these entities. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by Grupo Aval. The carrying amount of associates are tested for impairment. Joint arrangements A joint arrangement is one in which two or more parties have joint control of the arrangement. Joint arrangements are divided into joint operations or joint ventures, the classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement, under joint operations the parties having joint control of the agreement have rights to the assets and obligations to the liabilities relating to the agreement. Under joint ventures, the parties having joint control, are entitled to the net assets of the agreement. Grupo Aval recognizes joint operations in the Consolidated Financial Statements based on their proportional and contractual participation in each of the assets, liabilities and profit or loss of the contract or entity wherein the agreement is held. Grupo Aval recognizes joint ventures through the equity method, in the same manner as investments in associates. Functional and presentation currency Considering that the majority of the Group´s business activities as well as the generation and use of cash is in Colombian pesos, the Colombian peso is the currency that most accurately represents the economic environment of Grupo Aval's operations, both for the Consolidated Financial Statements and for the parent company. Foreign entities have functional currencies different from the Colombian peso, which are translated to Colombian pesos for presentation purposes. The main functional currency of these foreign entities is the US dollar. Transactions in foreign currencies Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies in terms of historical costs are measured using the exchange rate at the transaction date. Financial instruments measured at fair value are converted using the exchange rate at the date the fair value was determined. Profits or losses resulting from the translation process are recognized in profit or loss, except for financial instruments designated as hedging instruments. As of December 31, 2025 and 2024, the representative market rates reported by the official price provider (for the U.S. dollar which is the most representative foreign currency for Grupo Aval´s transactions) were Ps. 3,757.08 and Ps 4,409.15 per U.S. $1, respectively. Operating segments An operating segment is a component of an entity which: Engages in business activities from which it can earn revenue and incur expenses (including revenue and expenses from transactions with other components of the same entity); Operating profit or losses are regularly reviewed by the chief operating decision maker, who decides on the resources allocation to the segment and assesses its performance; and For which separate financial information is available. Segment results that are reported to the CODM (Chief Operating Decision Maker) include items that are directly attributable to a segment as well as those that can be allocated on a reasonable basis. Management regularly evaluates the performance for each segment; Grupo Aval discloses information separately for each identified operating segment, meeting any of the following quantitative thresholds: The segment´s reported revenue from the ordinary activities, including revenue from external customers as well as revenue from intersegment transfers, is equal or greater than 10% of the revenue of combined ordinary activities, internal and external, of all operating segments. The amount of the segment´s reported net income is, in absolute terms, equal or greater than 10% of the amount greater of: (i) the combined reported net income of all the segments not reporting a loss; and (ii) the reported combined loss of all segments of the operations with incurred losses. The segment´s assets are equal to or greater than 10% of the combined assets of all segments of the operation. The information regarding other activities of the business of operating segments that do not have to be reported is combined and disclosed within the category of "Others". Financial assets and financial liabilities Recognition and initial measurement Grupo Aval initially recognizes loans and advances, deposits, debt securities issued and subordinated liabilities on the date on which they are originated. All other financial instruments (including regular-purchases and sales of financial assets) are recognized on the trade date, which is the date in which Grupo Aval becomes a party to the contractual provisions of the instrument. A financial asset or financial liability is initially measured at fair value. Additionally, for instruments measured at amortized cost or FVOCI, transaction costs are added if directly attributable to its acquisition or issuance. Classification Financial assets On initial recognition, a financial asset is classified as: amortized cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL: The asset is held within a business model in which the objective is to hold assets to collect contractual cash flows; and The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL: The asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling the financial asset; and The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, Grupo Aval may irrevocably elect to present subsequent changes in fair value in Other Comprehensive Income OCI. This election is made on an investment-by-investment basis. All other financial assets are classified and measured at FVTPL. Business model assessment Grupo Aval makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management. The information considered includes: The established policies and objectives for the portfolio and their actual application. In particular, whether management's strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets; How the performance of the portfolio is evaluated and reported to Grupo Aval's management; The risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; and The frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and its expectations about future sale activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how Grupo Aval's stated objective for managing the financial assets is achieved and how cash flows are realized. Financial assets that are held for trading, for which performance is evaluated on a fair value basis are measured at FVTPL because their objective is neither to collect contractual cash flows nor to collect contractual cash flows and sell the financial assets. Assessment whether contractual cash flows are solely payments of principal and interest (SPPI) For the purposes of this assessment, "principal" is defined as the fair value of the financial asset on initial recognition. "Interest" is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks (e.g. liquidity risk and administrative costs), as well as profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest (SPPI), Grupo Aval considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. Upon assessment Group Aval considers: Contingent events that would change the amount and timing of cash flows; Leverage covenants; Prepayment and extension terms; Terms that limit Grupo Aval's claim to cash flows from specified assets; and Features that modify consideration of the time value of money. Interest rates on certain commercial and consumer loans originated by Grupo Aval are pegged to standard variable rates, generally used in each country where Grupo Aval operates and includes a spread. In Colombia, the standard variable rates are based on the DTF (rate interest calculated as the average for time deposits) or the interbank rate (in Spanish Interés Bancario de Referencia), or IBR rates, both of which are calculated weekly by the Central Bank based on information collected from the Colombian financial system, plus a spread. In the case of loans in foreign currency issued in Colombian entities and in other countries Grupo Aval uses SORF interest rates (Secured Overnight Funding Rate) plus a spread. In these cases, Grupo Aval assesses whether the discretionary feature is consistent with the SPPI criteria by considering a number of factors, including whether: Borrowers are able to prepay the loans without significant penalties; Market competition ensures that interest rates are consistent between banks; and Any regulatory or customer protection framework is in place that requires banks to treat customers fairly. A prepayment feature is consistent with the SPPI criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract. In addition, a prepayment feature is considered consistent with this criterion if a financial asset is acquired or originated at a premium or discount to its contractual nominal amount, and the amount prepaid substantially represents the contractual nominal amount plus accrued (but unpaid) interest (which may also include reasonable compensation for early termination), and the fair value of the prepayment feature is not significant at initial recognition. Financial liabilities Grupo Aval classifies its financial liabilities, other than derivatives, financial guarantees and loan commitments, as measured at amortized cost. Reclassifications Financial assets Financial assets are not reclassified subsequent to their initial recognition, except in the period after Grupo Aval's entities changes their business model for managing financial assets. Derecognition Financial assets Grupo Aval derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire (see also (v)), or when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or in which the Group neither transfers nor retains substantially all the risks and rewards of ownership and does not retain control of the financial asset. At derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognized) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognized in OCI is recognized in profit or loss. Any cumulative gain/loss recognized in OCI in respect of equity investment securities designated as at FVOCI is not recognized in profit or loss on derecognition of such securities, as explained in (2.10). Any interest in transferred financial assets that qualify for derecognition that is created or retained by Group Aval is recognized as a separate asset or liability. Grupo Aval enters into transactions whereby it transfers assets recognized on its Consolidated Statement of Financial Position but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognized. Examples of such transactions are securities lending and sale-and-repurchase transactions. When assets are sold to a third party with a concurrent total rate of return swap on the transferred assets, the transaction is accounted for as a secured financing transaction similar to sale-and repurchase transactions, given that Grupo Aval retains all or substantially all of the risks and rewards of ownership of such assets. In transactions in which it neither retains nor transfers substantially all of the risks and rewards of ownership of a financial asset and it retains control over the asset, Grupo Aval continues to recognize the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. Financial liabilities Grupo Aval derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. Modifications of financial assets and financial liabilities Financial assets If the terms of a financial asset are modified, then Grupo Aval assesses whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, the contractual rights to cash flows from the original financial asset are deemed to have expired. In that case, the original financial asset is derecognized (see (iv)) and a new financial asset is recognized at fair value plus any eligible transaction costs. Any fees received as part of the modification are accounted for as follows: Fees that are considered in determining the fair value of the new asset and fees that represent reimbursement of eligible transaction costs are included in the initial measurement of the asset Other fees are included in profit or loss as part of the gain or loss on derecognition. If cash flows are modified when the borrower is in financial distress, the objective of the modification is usually to maximize recovery of the original contractual terms rather than to originate a new asset with substantially different terms. If Group Aval plans to modify a financial asset in a way that would result in foregoing of cash flows, it considers whether a portion of the asset should be written off before the modification takes place (see below for write-off policy). This approach impacts the result of the quantitative evaluation and means that the derecognition criteria are not usually met in such cases. If the modification of a financial asset measured at amortized cost or FVOCI does not result in derecognition of the financial asset, then Grupo Aval recalculates the gross carrying amount of the financial asset using the original effective interest rate of the asset and recognizes the resulting adjustment as a recovery or impairment in the Consolidated Statement of Income. For variable-rate financial assets, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification. Any costs or fees incurred, and fees received as part of the modification are incorporated into the gross carrying amount of the modified financial asset and are amortized over the remaining term of the modified financial asset. Financial liabilities Grupo Aval derecognizes a financial liability when its terms are modified, and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognized in the Consolidated Statement of Income. If the modification of a financial liability measured at amortized cost does not result in derecognition of the financial liability, then Grupo Aval first recalculates the gross carrying amount of the financial liability using the original effective interest rate of the liability and recognizes the resulting adjustment as interest expense in the Consolidated Statement of Income. For variable-rate financial assets, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification. Any costs or fees incurred, and fees received as part of the modification are incorporated into the gross carrying amount of the modified financial liability and are amortized over the remaining term of the modified financial liability. Offsetting of financial assets and liabilities Financial assets and liabilities are offset, and the net amount is recognized in the Consolidated Statement of Financial Position, when there is a legally enforceable right to offset recognized amounts and management intends to settle them on a net basis or to realize the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a group of similar transactions such as Grupo Aval's trading activity. Fair value measurement Fair value is 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 in the principal or, in its absence, the most advantageous market to which Grupo Aval has access at that date. Grupo Aval measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, Grupo Aval uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i.e. the fair value of the consideration given or received. If Grupo Aval determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are deemed to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognized in the Consolidated Statement of Income on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out. Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk, managed by Grupo Aval on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for the particular risk exposure. Portfolio-level adjustments - e.g. bid-ask adjustment or credit risk adjustments that reflect the measurement on the basis of the net exposure - are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio. The fair value of a financial liability with a demand feature (e.g. a demand deposit) is no less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid. Grupo Aval recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred. See Note 5. Repurchase agreements and reverse repurchase agreements Purchases of financial instruments under a non-optional resale agreement are measured at fair value and recognized as financial assets in the Consolidated Statement of Financial Position under interbank and overnight funds. The excess of the purchase prices over the resale prices is recognized as interest income over the contractual term. Sales of financial instruments under a non-optional repurchase agreement are measured at fair value and recognized as liabilities in the Consolidated Statement of Financial Position under Central Bank Deposits - Repurchase Agreements, Deposits from Credit Institutions - Repurchase Agreements, or Customer Deposits - Repurchase Agreements The excess of the sales prices over the repurchase prices is recognized as interest expense over the contractual term. Retained interests (i.e. the assets that collateralize the repurchase agreements) are primarily classified as fair value through OCI and measured at fair value. Impairment of financial assets Grupo Aval recognizes loss allowances for Expected Credit Losses ("ECL") on the following financial instruments that are not measured at FVTPL: Debt investment instruments; Loans and receivables; Financial guarantee contracts issued; Loan commitments issued, and Other accounts receivable No credit impairment loss is recognized on equity investments. Grupo Aval measures loss allowances at an amount equal to lifetime ECL (Stage 2 and stage 3), except the following cases, for which they are measured as 12-month ECL (Stage 1): Debt investment securities that are determined to have low credit risk at the reporting date; and Other financial instruments (other than loans and lease receivables) on which credit risk has not increased significantly -("SICR") since their initial recognition. Grupo Aval considers a debt security to have low credit risk when its credit rating is equivalent to the global definition of 'investment grade.' 12-month ECL is the portion of ECL that results from default events on a financial instrument that are possible within the 12 months after the reporting date. Measurement of ECL Measurement of ECL is described in Note 4(4.1.5 Amounts arising from Expected Credit Loss (ECL)). Modified Financial Assets If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial distress of the borrower, an assessment is made of whether the financial asset should be derecognized (see (iv)) and ECL are measured as follows: If the restructuring is not expected to result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset (see Note 4(4.1.1)). If the restructuring is expected to result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset. Credit-impaired financial assets At each reporting date, Grupo Aval assesses whether financial assets carried at amortized cost and at FVOCI are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: Significant financial difficulty of the borrower or issuer; A breach of contract such as a default or past due event; The restructuring of a loan or advance by Grupo Aval on terms that Grupo Aval' entities would not consider otherwise; It is becoming probable that the borrower will enter bankruptcy or other financial reorganization; or The disappearance of an active market for a security because of financial difficulties. A loan that has been renegotiated due to a deterioration in the borrower's condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has decreased significantly and there are no other indicators of impairment. In addition, a loan different to a mortgage that is overdue for 90 days or more is considered impaired. In making an assessment of whether an investment in sovereign debt is credit-impaired, Grupo Aval considers the following factors. The market's assessment of creditworthiness as reflected in the bond yields. The rating agencies' assessments of creditworthiness. The country's ability to access the capital markets for new debt issuance. The probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness; and The international support mechanisms in place to provide the necessary support as 'lender of last resort' to that country, as well as the intention, reflected in public statements, of governments and agencies to use those mechanisms. This includes an assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulfil the required criteria. Presentation of allowance for ECL in the Consolidated Statement of Financial Position Loss allowances for ECL are presented in the Consolidated Statement of Financial Position and the impact is showed in the Consolidated Statement of Income line "Impairment (losses) recoveries on financial assets" as follows: Financial assets measured at amortized cost: as a deduction from the gross carrying amount of the assets; Loan commitments and financial guarantee contracts: generally presented as provisions; Where a financial instrument includes both a drawn and an undrawn component, and Grupo Aval cannot identify the ECL on the loan commitment component separately from those on the drawn component: Grupo Aval presents a combined loss allowance for both components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any excess of the loss allowance over the gross amount of the drawn component is presented as a provision; and Debt instruments measured at FVOCI: no loss allowance is recognized in the Consolidated Statement of Financial Position because the carrying amount of these assets is their fair value. However, the ECL is disclosed and is recognized as part of the net change recognized in the fair value reserve under other comprehensive income. Write-offs Loans and debt securities are written off (either partially or in full) when there is no prospect of recovery. This is generally the case when Grupo Aval determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to be written-off. Recoveries of amounts previously written off are included in "recovery of charged off financial assets" in the Consolidated Statement of Income. Financial assets that are written off could still be subject to enforcement activities in order to comply with Grupo Aval's procedures for recovery of amounts due. The contractual amount outstanding on the financial assets that were written off during the reporting period are disclosed in note 4.1.5 Amounts arising from ECL; Loss Allowance reconciliation tables. Cash and cash equivalents Cash and cash equivalents include cash, bank deposits, and other short-term investments with original maturities of three months or less from the date of their acquisition that are subject to an insignificant risk of changes in their fair value and are used by Grupo Aval in the management of its short-term commitments. Trading assets and liabilities 'Trading assets and liabilities' are those assets and liabilities that Grupo Aval mainly acquires or incurs for the purpose of selling or repurchasing in the near term or holds as part of a portfolio that is managed comprehensively for short-term profit or position taking. Trading assets and liabilities are initially recognized and subsequently measured at fair value in the Consolidated Statement of Financial Position, with transaction costs recognized in Consolidated Statement of Income. All changes in fair value are recognized as part of net trading income (loss) in Consolidated Statement of Income. Derivatives Derivatives and hedge accounting A derivative is a financial instrument for which value changes respond to changes in one or more variables denominated as "underlying" (e.g. a specific interest rate, the price of a financial instrument, a listed commodity, a foreign currency exchange rate, etc.). A derivative requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. Grupo Aval and its subsidiaries trades in financial markets, forward contracts, future contracts, swaps and options that fulfil the definition of a derivative. Financial assets and liabilities arising from transactions with derivatives are generally not offset in the Consolidated Statement of Financial Position. However, when there is a legal and exercisable right to offset the recognized values and Grupo Aval intends to settle them on a net basis or to realize the assets and settle the liability simultaneously, derivatives are presented as net values in the Consolidated Statement of Financial Position. Derivative transactions are initially recognized at fair value. Subsequent changes in the fair value are recognized in profit or loss, unless the derivative instrument is designated as a hedging instrument and, in this case, the accounting criteria will depend on the nature of the hedged item, as described below. At the beginning of the hedging transaction, Grupo Aval formally documents the existing relationship between the hedging instrument and the hedged item, including the risk management objective and strategy in undertaking the hedging relationship. It also documents its assessment, both initially as well as on a recurring basis, of whether the hedging relationship is highly effective in offsetting the changes in fair value or cash flows of the hedged items. The applicable policy for hedging and embedded derivatives is described below: For fair value hedge of assets or liabilities and firm commitments, changes in the fair value of the derivative instrument are recognized in profit or loss, as well as any other change in the fair value of the asset, liability or firm commitment attributable to the hedge risk, For cash flow hedge of a particular risk associated with a recognized asset or liability or a projected highly probable transaction, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income. The gain or loss relating to the portion that is not effective for hedging or that does not relate to the hedged risk is immediately recognized in profit or loss. The values accumulated in other comprehensive income are transferred to profit or loss in the same period in which the hedged item is recognized in profit or loss; and Hedging of net investments in a foreign operation is recognized similarly to cash flow hedging: the effective portion of changes in fair value of the hedging instrument is recognized in other comprehensive income, and the ineffective portion of the changes in fair value of the derivative is recognized in profit or loss. The hedging instrument's gains or losses accumulated in equity will be recognized in profit or loss when the net investment in foreign operations is sold or partially disposed of. Embedded derivatives Derivatives may be embedded in another contractual arrangement (a host contract). Grupo Aval accounts for an embedded derivative separately from the host contract when: The host contract is not a financial asset in the scope of IFRS 9; The host contract is not itself carried at FVTPL; The terms of the embedded derivative would meet the definition of a derivative if they were contained in a separate contract; and The economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract. Separated embedded derivatives are measured at fair value, with all changes in fair value recognized in profit or loss unless they form part of a qualifying cash flow or net investment hedging relationship. Separated embedded derivatives are presented in the Consolidated Statement of Financial Position together with the host contract. Loans The 'Loans' line in the Consolidated Statement of Financial Position includes: Loans measured at amortized cost (see 2.5(ii)); they are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortized cost using the effective interest method; Financial lease receivables measured at amortized cost (see 2.5(ii)). When Grupo Aval purchases a financial asset and simultaneously enters into an agreement to resell the asset (or a substantially similar asset) at a fixed price on a future date (reverse repo or stock borrowing), the arrangement is accounted for as a loan, and the underlying asset is not recognized in Grupo Aval's Consolidated Financial Statements. The effective interest rate method is a method of calculating the amortized cost of a financial asset and allocating the interest income or expense over the relevant period. The effective interest rate is the rate that discounts future cash payments or receipts (without consideration of future credit losses, over the expected life of the financial instrument) to the net carrying amount of the financial asset at initial recognition. In the process of calculating the effective interest rate, Grupo Aval estimates the cash flows considering the contractual terms including prepayment expectations of the financial instrument for portfolios with high prepayment levels, except for future credit losses and considering the initial fair value plus transaction costs and premiums granted, minus commissions and discounts received which form integral part of the effective rate. Investment securities The 'investment securities' line in the Consolidated Statement of Financial Position includes: Debt investment securities measured at amortized cost (see 2.5(ii)); These are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortized cost using the effective interest method; Debt and equity investment securities mandatorily measured at FVTPL (see 2.5(ii)); These are at fair value with changes recognized immediately in profit or loss; Debt securities measured at FVOCI; and Equity investment securities designated as at FVOCI. For debt investment securities measured at FVOCI, gains and losses are recognized in OCI, except for the following, which are recognized in profit or loss in the same manner as for financial assets measured at amortized cost: Interest revenue using the effective interest method; ECL impairments and reversals of impairments; and Foreign exchange gains and losses. When a debt security measured at FVOCI is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity and recognized as profit or loss in the Consolidated Statement of Income under "Other income" under line "net gain (loss) on sale of debt securities". Grupo Aval elects to present changes in the fair value of certain investments in equity instruments that are not held for trading in OCI. The election is made on an instrument-by-instrument basis on initial recognition and is irrevocable. Gains and losses on such equity instruments are never reclassified to profit or loss and no impairment is recognized in profit or loss. Cumulative gains and losses recognized in OCI are transferred to retained earnings upon disposal of an investment. Dividends are recognized in profit or loss unless they clearly represent a recovery of part of the cost of the investment, in which case th ey are recognized in OCI. After initial recognition, net gains and losses resulting from changes in fair value for financial assets classified and measured at fair value, are presented either (i) in the Consolidated Statement of Income in the account "net trading income - trading investment securities" for financial assets at FVTPL or (ii) in OCI for financial instruments at FVOCI, in accordance with note 2.5 ii) above. In turn, after their initial recognition, financial assets classified at amortized cost are adjusted to reflect interest accrued at the effective interest rate method, less payments received from borrowers. See detail of effective interest rate method in note 2.9 Loans. Income from dividends from financial assets in equity instruments at FVOCI is recognized in income in the account of "other income dividends" when the right to receive payment is established, regardless of the decision that has been made to record the variations in fair value in results or OCI. Financial liabilities A financial liability is any contractual liability in which Grupo Aval commits to deliver cash or other financial asset to another entity or person, or to exchange financial assets or financial liabilities under potentially unfavorable conditions for Grupo Aval, or a contract which will be terminated or could be settled using equity instruments owned by the entity. Financial liabilities are initially recognized based on their fair value, which is usually equal to the transaction value adjusted by directly attributable costs. Subsequently, such financial liabilities are measured at their amortized cost according to the effective interest rate method determined at initial recognition and recognized in profit or loss. Financial liabilities are only derecognized from the Consolidated Statement of Financial Position when the obligations are extinguished, that is, when the obligations are discharged, cancelled, or expire. Financial guarantees Financial guarantees are those contracts requiring that the issuer carries out specific payments to reimburse the creditor for losses incurred when a specific debtor defaults in its payment obligation, in accordance with the original or modified conditions, of a debt instrument; regardless of its legal form. Financial guarantees issued or commitments to provide a loan at a below-market interest rate are initially measured at fair value. Subsequently, they are measured: As at the highest value between the amount initially recognized net of the loss allowance determined in accordance with IFRS 9 (see 2.5 (vii)) and the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of IFRS 15. Credit risk impairment losses established over financial guarantee contracts under IFRS 9, are recognized as liabilities under "Provisions - other provisions" and recognized in profit or loss under "other expenses", (see note 2.5 (x)) "Presentation of allowance for ECL in the Consolidated Statement of Financial Position". Non-current assets held for sale and discontinued operations Foreclosed assets and non-current assets held for sale, which Grupo Aval intends to sell in a period of less than one year, are recognized as "non-current assets held for sale". These assets are measured at the lower of their carrying value at the time of transfer and fair value, less estimated disposal costs. A discontinued operation is a component of the entity that has been disposed or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Consolidated Statement of Income. Property, plant and equipment for own use Property, plant and equipment include the assets, owned or under financial leases held by Grupo Aval for current or future use for more than one period. They are recognized in the Consolidated Statement of Financial Position at their acquisition or construction cost, less the corresponding accumulated depreciation and, if applicable, the estimated impairment losses resulting from comparing the carrying amount of each asset with its recoverable value. Depreciation is calculated by applying the straight-line method over the acquisition cost of the assets (except for the bearer plants, which are depreciated based on production units), less any residual value; land is not depreciated. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. Asset Useful Life Own use buildings According to appraisals Equipment, furniture and accessories From 3 to 25 years Machinery and equipment (*) From 5 to 25 years Computer equipment From 2 to 12 years Vehicles From 5 to 10 years Bearer plants From 25 to 35 years (*) Except for the gas pipelines, these are depreciated according to appraisals (70 years). Conservation and maintenance expense is recognized when incurred as "Administrative Expense". At each reporting date, the Group analyzes whether there are signs, that an asset may be impaired for such purposes, develops what is established in policy 2.21 "Impairment of non-financial assets". Biological assets that meet the concept of bearer plant are accounted for as property, plant and equipment. A bearer plant is a live plant that meets the following requirements: It is used for the manufacturing or supply of agricultural products; It is expected to produce for more than one period; and It has a remote probability of being sold as an agricultural product, except for irregular sales related to thinning and trimming. Bearer plants under the set-up and growing phase are subject to a biological transformation which is reflected through cost accumulation until they reach their maturity level. In the case of the African oil palm, maturity is reached in the second year, while maturity for rubber plants is reached in the seventh year. After reaching their maturity, bearer plants are considered developed and the future economic benefits arise from the sale of the fruit produced during the useful life of the plant. Bearer plants are measured at their cost less accumulated depreciation and any impairment losses. The useful life is equal to the plants´ production periods. The useful life of the rubber plant is thirty-five years while the useful life of the African oil palm is twenty-five years. The depreciation method used is the estimated production units as it most accurately reflects the usage of the assets If the bearer plant is sold for timber at the end of the useful life the value received is considered the residual value of the asset. Investment properties Land and buildings, considered in whole or in part, that are held to earn rental income or for capital appreciation, rather than for own use or sale in the ordinary course of business. Investment properties are recognized initially at cost, including all costs associated with the transaction, and subsequently measured at fair value, with changes in fair value recognized in profit or loss. Leases Lessee accounting At inception of a contract, Grupo Aval assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16. Grupo Aval recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove any improvements made. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Grupo Aval determines its incremental borrowing rate by analyzing its borrowings from various external sources and makes certain adjustments to reflect the terms of the lease and type of asset leased. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset; or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Grupo Aval presents right-of-use assets in 'Tangible assets' and lease liabilities in 'Borrowings from banks and others' in the Consolidated Statement of Financial Position. Short-term leases and leases of low-value assets Grupo Aval has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets (five thousand dollars or less) and short-term leases (maximum term 12 months or less). The Grupo Aval recognizes the lease payments associated with these leases as an expense in profit or loss on a straight-line basis over the lease term. Lessor accounting When Grupo Aval acts as a lessor, it determines at lease inception whether the lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for a major part of the economic life of the asset. Lease contracts classified as financial leases are included in the Consolidated Statement of Financial position as "Loans" and are recognized in the same way as other loans, as explained in note 2.9. Biological assets Biological assets are measured at fair value less disposal cost, both at the time of initial recognition and at the end of reporting period, except for biological assets for which fair value cannot be measured reliably; in which case they are measured at cost less accumulated depreciation and impairment loss. Gains and losses arising from the initial and subsequent fair value measurement of the agricultural products are included in the Consolidated Statement of Income. Costs incurred in the agricultural production process are also recognized directly in the Consolidated Statement of Income. The fair value of biological assets is determined using valuations performed by experienced internal professionals, using discounted cash flow models. The expected cash flows of the crop's total life are determined by using the market price of the agricultural product currently in effect and the estimated productive life of plants, net of maintenance and harvest costs and of any other costs required for

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