Holiday Inn 2008 Annual Report Download - page 62

60 IHG Annual Report and Financial Statements 2008
Discontinued operations
Discontinued operations are those relating to hotels sold or those
classified as held for sale when the results relate to a separate
line of business, geographical area of operations, or where there
is a co-ordinated plan to dispose of a separate line of business
or geographical area of operations.
Exceptional items
The Group discloses certain financial information both including
and excluding exceptional items. The presentation of information
excluding exceptional items allows a better understanding of
the underlying trading performance of the Group and provides
consistency with the Group’s internal management reporting.
Exceptional items are identified by virtue of either their size or
nature so as to facilitate comparison with prior periods and to
assess underlying trends in financial performance. Exceptional
items can include, but are not restricted to, gains and losses
on the disposal of assets, impairment charges and reversals,
restructuring costs and the release of tax provisions.
Use of accounting estimates and judgements
The preparation of financial statements requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results may differ from these estimates under
different assumptions and conditions.
The estimates and assumptions that have the most significant
effect on the amounts recognised in the financial statements are:
Impairment – the Group determines whether goodwill is impaired
on an annual basis or more frequently if there are indicators of
impairment. Other non-current assets, including property, plant
and equipment, are tested for impairment if there are indicators
of impairment. Impairment testing requires an estimate of future
cash flows and the choice of a suitable discount rate and, in the
case of hotels, an assessment of recoverable amount based on
comparable market transactions.
Retirement and other post-employment benefits – the cost
of defined benefit pension plans and other post-employment
benefits is determined using actuarial valuations. The actuarial
valuation involves making assumptions about discount rates,
expected rates of return on assets, future salary increases,
mortality rates and future pension increases.
Tax – provisions for tax accruals require judgements on the
interpretation of tax legislation, developments in tax case law
and the potential outcomes of tax audits and appeals. In addition,
deferred tax assets are recognised for unused tax attributes to
the extent that it is probable that taxable profit will be available
against which they can be utilised. Judgement is required as to
the amount that can be recognised based on the likely amount
and timing of future taxable profits, taking into account expected
tax planning. Deferred tax balances are dependent on
management’s expectations regarding the manner and timing
of recovery of the related assets.
Loyalty programme – the future redemption liability included in
trade and other payables is estimated using actuarial methods
based on statistical formulae that project the timing of future
point redemptions based on historical levels to give eventual
redemption rates.
Trade receivables – a provision for impairment of trade receivables
is made on the basis of historical experience and other factors
considered relevant by management.
Other – the Group also makes estimates and judgements in the
valuation of management and franchise agreements acquired
on asset disposals, the valuation of financial assets classified as
available-for-sale, the outcome of legal proceedings and claims
and in the valuation of share-based payment costs.
New standards and interpretations
The IASB and IFRIC have issued the following standards and
interpretations with an effective date after the date of these
financial statements. They have not been adopted early by the
Group and will be adopted in accordance with the effective date.
The Directors do not anticipate that the adoption of these
standards and interpretations will have a material impact on the
Group’s reported income or net assets in the period of adoption.
IFRS 2 Share-based Payment (Amendment)
Effective from 1 January 2009
IFRS 3R Business Combinations
Effective from 1 July 2009
IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations (Amendment)
Effective from 1 July 2009
IFRS 8 Operating Segments
Effective from 1 January 2009
IAS 1 Presentation of Financial Statements (Amendment)
Effective from 1 January 2009
IAS 23 Borrowing Costs (Amendment)
Effective from 1 January 2009
IAS 27R Consolidated and Separate Financial Statements
Effective from 1 July 2009
IFRIC 13 Customer Loyalty Programmes
Effective from 1 July 2008
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
Effective from 1 October 2008
Note: the effective dates are in respect of accounting periods
beginning on or after the date shown.
Accounting policies continued