Holiday Inn 2007 Annual Report Download - page 56

54 IHG Annual Report and Financial Statements 2007
Corporate information and accounting policies continued
Cash and cash equivalents
Cash comprises cash in hand and demand deposits.
Cash equivalents are short-term highly liquid investments
with an original maturity of three months or less that are readily
convertible to known amounts of cash and subject to insignificant
risk of changes in value.
In the cash flow statement cash and cash equivalents are shown
net of short-term overdrafts which are repayable on demand and
form an integral part of the Group’s cash management.
Assets held for sale
Non-current assets and associated liabilities are classified
as held for sale when their carrying amount will be recovered
principally through a sale transaction rather than continuing
use and a sale is highly probable.
Assets designated as held for sale are held at the lower of
carrying amount at designation and sales value less cost to sell.
Depreciation is not charged against property, plant and equipment
classified as held for sale.
Trade payables
Trade payables are non interest bearing and are stated at their
nominal value.
Loyalty programme
The hotel loyalty programme, Priority Club Rewards, enables
members to earn points, funded through hotel assessments,
during each stay at an IHG hotel and redeem the points at a
later date for free accommodation or other benefits. The future
redemption liability is included in trade and other payables and
is estimated using eventual redemption rates determined by
actuarial methods and points values.
The Group pays interest to the loyalty programme on the
accumulated cash received in advance of redemption of the
points awarded.
Self insurance
The Group is self insured for various insurable risks including
general liability, workers’ compensation and employee medical
and dental coverage. Insurance reserves include projected
settlements for known and incurred but not reported claims.
Projected settlements are estimated based on historical trends
and actuarial data.
Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event, it is probable that a payment
will be made and a reliable estimate of the amount payable can
be made. If the effect of the time value of money is material,
the provision is discounted.
Bank and other borrowings
Bank and other borrowings are initially recognised at the fair
value of the consideration received less directly attributable
transaction costs. They are subsequently measured at amortised
cost. Finance charges, including issue costs, are charged to the
income statement using an effective interest rate method.
Borrowings are classified as non-current when the repayment
date is more than 12 months from the balance sheet date or where
they are drawn on a facility with more than 12 months to expiry.
Retirement benefits
Defined contribution plans
Payments to defined contribution schemes are charged to the
income statement as they fall due.
Defined benefit plans
Plan assets are measured at fair value and plan liabilities are
measured on an actuarial basis, using the projected unit credit
method and discounting at an interest rate equivalent to the
current rate of return on a high quality corporate bond of
equivalent currency and term to the plan liabilities. The difference
between the value of plan assets and liabilities at the balance
sheet date is the amount of surplus or deficit recorded on the
balance sheet as an asset or liability. An asset is recognised in full
when the employer has an unconditional right to use the surplus
at some point during the life of the plan or on its wind up.
The service cost of providing pension benefits to employees for
the year is charged to the income statement. The cost of making
improvements to pensions is recognised in the income statement
on a straight-line basis over the period during which any increase
in benefits vests. To the extent that improvements in benefits vest
immediately, the cost is recognised immediately as an expense.
Actuarial gains and losses may result from: differences
between the expected return and the actual return on plan
assets; differences between the actuarial assumptions underlying
the plan liabilities and actual experience during the year; or
changes in the actuarial assumptions used in the valuation
of the plan liabilities. Actuarial gains and losses, and taxation
thereon, are recognised in the Group statement of recognised
income and expense.
Actuarial valuations are normally carried out every three years
and are updated for material transactions and other material
changes in circumstances (including changes in market prices
and interest rates) up to the balance sheet date.
Taxes
Current tax
Current income tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered
from or paid to the tax authorities including interest. The tax rates
and tax laws used to compute the amount are those that are
enacted or substantively enacted by the balance sheet date.
Deferred tax
Deferred tax assets and liabilities are recognised in respect of
temporary differences between the tax base and carrying value
of assets and liabilities, including accelerated capital allowances,
unrelieved tax losses, unremitted profits from overseas where
the Group does not control remittance, gains rolled over into
replacement assets, gains on previously revalued properties
and other short-term temporary differences.