Holiday Inn 2014 Annual Report Download - page 113

The service cost of providing pension benefits to employees,
together with the net interest expense or income for the year, is
charged to the income statement within ‘administration expenses’.
Net interest is calculated by applying the discount rate to the net
defined benefit asset or liability, after any asset restriction. Past
service costs and gains, which are the change in the present value
of the defined benefit obligation for employee service in prior
periods resulting from plan amendments, are recognised
immediately the plan amendment occurs. Settlement gains and
losses, being the difference between the settlement cost and the
present value of the defined benefit obligations being settled, are
recognised when the settlement occurs.
Re-measurements comprise actuarial gains and losses, the
return on plan assets (excluding amounts included in net interest)
and changes in the amount of any asset restrictions. Actuarial
gains and losses may result from: 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.
Re-measurement gains and losses, and taxation thereon,
are recognised in other comprehensive income and are not
reclassified to profit or loss in subsequent periods.
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.
Revenue is recorded (excluding VAT and similar taxes) net of
discounts. The following is a description of the composition
of revenues of the Group:
Franchise fees – received in connection with the licence 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 the
fee is earned in accordance with 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, generally a percentage of
hotel revenue, which is recognised when earned in accordance
with the terms of the contract and an incentive fee, generally
based on the hotel’s profitability or cash flows and recognised
when the related performance criteria are met 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.
Franchise fees and management fees include liquidated damages
received from the early termination of contracts.
Other revenues are recognised when earned in accordance with
the terms of the contract.
Government grants
Government grants are recognised in the period to which they
relate when there is reasonable assurance that the grant will
be received and that the Group will comply with the attached
conditions. Government grants are recognised within other
operating income and expenses in the Group income statement.
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.
Leases
Operating lease rentals are charged to the income statement
on a straight-line basis over the term of the lease.
Assets held under finance leases, which transfer to the Group
substantially all the risks and benefits incidental to ownership of
the leased item, are capitalised at the inception of the lease, with
a corresponding liability being recognised for the fair value of the
leased asset or, if lower, the present value of the minimum lease
payments. Lease payments are apportioned between the
reduction of the lease liability and finance charges in the income
statement so as to achieve a constant rate of interest on the
remaining balance of the liability. Assets held under finance
leases are depreciated over the shorter of the estimated useful
life of the asset and the lease term.
Disposal of non-current assets
The Group recognises sales proceeds and any related gain or loss
on disposal on completion of the sales process. In determining
whether the gain or loss should be recorded, the Group considers
whether it:
• has a continuing managerial involvement to the degree
associated with asset ownership;
• has transferred the significant risks and rewards associated
with asset ownership; and
• can reliably measure and will actually receive the proceeds.
STRATEGIC REPORT GOVERNANCE
GROUP FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
111