Holiday Inn 2012 Annual Report Download - page 95

OVERVIEW BUSINESS REVIEW GOVERNANCE
GROUP FINANCIAL
STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS OTHER INFORMATION
Accounting policies 93
Deferred tax assets are recognised to the extent that it is regarded
as probable that the deductible temporary differences can be
realised. The recoverability of all deferred tax assets is reassessed
at the end of each reporting period.
Deferred tax is calculated at the tax rates that are expected to apply
in the periods in which the asset or liability will be settled, based
on rates enacted or substantively enacted at the end of the
reporting period.
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 period-end date is the
amount of surplus or deficit recorded in the statement of financial
position as an asset or liability. An asset is recognised 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. If a refund would
be subject to a tax other than income tax, as is the case in the UK,
the asset is recorded at the amount net of the tax. A liability is also
recorded for any such tax that would be payable in respect of
funding commitments based on the accounting assumption that
the related payments increase the asset.
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.
Curtailment gains arising from the cessation of future benefit
accrual are recognised in the period in which the defined benefit
plan is amended.
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 comprehensive income.
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 end of the reporting period.
Revenue recognition
Revenue arises from the sale of goods and provision of services
where these activities give rise to economic benefits received and
receivable by the Group on its own account and result in increases
in equity.
Revenue is derived from the following sources: franchise fees;
management fees; owned and leased properties and other
revenues which are ancillary to the Group’s operations, including
technology fee income.
Generally, revenue represents sales (excluding VAT and similar
taxes) of goods and services, net of discounts, provided in the
normal course of business and recognised when services have
been rendered. The following is a description of the composition
of revenues of the Group.
Franchise fees – received in connection with the license of the
Group’s brand names, usually under long-term contracts with
the hotel owner. The Group charges franchise royalty fees as a
percentage of rooms revenue. Revenue is recognised when earned
and realised or realisable under the terms of the contract.
Management fees – earned from hotels managed by the Group,
usually under long-term contracts with the hotel owner.
Management fees include a base fee, which is generally a
percentage of hotel revenue, and an incentive fee, which is
generally based on the hotel’s profitability or cash flows. Revenue
is recognised when earned and realised or realisable under the
terms of the contract.
Owned and leased – primarily derived from hotel operations,
including the rental of rooms and food and beverage sales from
owned and leased hotels operated under the Group’s brand names.
Revenue is recognised when rooms are occupied and food and
beverages are sold.
Share-based payments
The cost of equity-settled transactions with employees is measured
by reference to fair value at the date at which the right to the shares
is granted. Fair value is determined by an external valuer using
option pricing models.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
any performance or service conditions are fulfilled, ending on the
date on which the relevant employees become fully entitled to the
award (vesting date).
The income statement charge for a period represents the
movement in cumulative expense recognised at the beginning and
end of that period. No expense is recognised for awards that do not
ultimately vest, except for awards where vesting is conditional upon
a market or non-vesting condition, which are treated as vesting
irrespective of whether or not the market or non-vesting condition
is satisfied, provided that all other performance and/or service
conditions are satisfied.
The Group has taken advantage of the transitional provisions of
IFRS 2 ‘Share-based Payment’ in respect of equity-settled awards
and has applied IFRS 2 only to equity-settled awards granted after
7 November 2002 that had not vested before 1 January 2005.