Holiday Inn 2013 Annual Report Download - page 115

their intended use, or sale, are capitalised as part of the asset cost.
Borrowing costs consist of interest and other costs that an entity incurs
in connection with the borrowing of funds. All borrowing costs relating
to projects commencing before 1 January 2009 were expensed.
Associates and joint ventures
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the entity, but does not
have control or joint control over those policies.
A joint venture exists when two or more parties have joint control
over, and rights to the net assets of, the venture. Joint control is
the contractually agreed sharing of control which only exists when
decisions about the relevant activities require the unanimous
consent of the parties sharing control.
Associates and joint ventures are accounted for using the equity
method unless the associate or joint venture is classified as held for
sale. Under the equity method, the Group’s investment is recorded
at cost adjusted by the Group’s share of post-acquisition profits and
losses and other movements in the investee’s reserves. When the
Group’s share of losses exceeds its interest in an associate or joint
venture, the Group’s carrying amount is reduced to $nil and
recognition of further losses is discontinued except to the extent
that the Group has incurred legal or constructive obligations or
made payments on behalf of an associate or joint venture.
Financial assets
The Group classifies its financial assets into one of the two following
categories: loans and receivables or available-for-sale financial
assets. Management determines the classification of financial assets
on initial recognition and they are subsequently held at amortised cost
(loans and receivables) or fair value (available-for-sale financial assets).
Interest on loans and receivables is calculated using the effective
interest rate method and is recognised in the income statement as
interest income. Changes in fair values of available-for-sale financial
assets are recorded directly in equity within the unrealised gains and
losses reserve. On disposal, the accumulated fair value adjustments
recognised in equity are recycled to the income statement.
Dividends from available-for-sale financial assets are recognised
in the income statement as other operating income and expenses.
Financial assets are assessed for impairment at each period-end
date. In the case of an equity investment classified as available-for-
sale, a significant or prolonged decline in fair value below cost is
evidence that the asset is impaired. If an available-for-sale financial
asset is impaired, the difference between original cost and fair value
is transferred from equity to the income statement to the extent of any
cumulative loss recorded in equity, with any excess charged directly
to the income statement. Subsequent impairment reversals relating
to previously impaired equity instruments are recorded in equity.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Trade receivables
Trade receivables are recorded at their original amount less provision
for impairment. It is the Group’s policy to provide for 100% of the
previous month’s aged receivables balances which are more than
180 days past due. Adjustments to the policy may be made due to
specific or exceptional circumstances when collection is no longer
considered probable. The carrying amount of the receivable is
reduced through the use of a provision account and movements in
the provision are recognised in the income statement within cost of
sales. When a previously provided trade receivable is uncollectable,
it is written off against the provision.
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 statement of cash flows, 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 and expected to complete within one year. For a sale to be
highly probable, management need to be committed to a plan to sell
the asset and the asset must be actively marketed for sale at a price
that is reasonable in relation to its current fair value.
Assets designated as held for sale are held at the lower of carrying
amount at designation and fair value less costs to sell.
Depreciation is not charged against property, plant and equipment
classified as held for sale.
Financial liabilities
Financial liabilities are measured at amortised cost using the effective
interest rate method. A financial liability is derecognised when the
obligation under the liability expires, is discharged orcancelled.
Trade payables
Trade payables are non-interest-bearing and are stated at their
nominal value.
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 the transaction costs and any
discount or premium on issue, are recognised in the income
statement using the effective interest rate method.
Borrowings are classified as non-current when the repayment date is
more than 12 months from the period-end date or where they are
drawn on a facility with more than 12 months to expiry.
Derivative financial instruments and hedging
Derivatives are initially recognised and subsequently re-measured
at fair value. The method of recognising the re-measurement
depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
Changes in the fair value of derivatives designated as cash flow hedges
are recorded in other comprehensive income and the unrealised gains
and losses reserve to the extent that the hedges are effective. When the
hedged item is recognised, the cumulative gains and losses on the
related hedging instrument are reclassified to the income statement.
Changes in the fair value of derivatives designated as net investment
hedges are recorded in other comprehensive income and the
currency translation reserve to the extent that the hedges are
effective. The cumulative gains and losses remain in equity until
a foreign operation is sold, at which point they are reclassified to
the income statement.
Changes in the fair value of derivatives which have either not
beendesignated as hedging instruments or relate to the ineffective
portion of hedges are recognised immediately in the income statement.
Group Financial Statements 113
OVERVIEW STRATEGIC REPORT GOVERNANCE
GROUP FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION