Holiday Inn 2004 Annual Report Download - page 19

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Owned and leased revenue – derived from hotel operations,
including the rental of rooms and food and beverage sales from
a worldwide network of owned and leased hotels operated under
the Group’s brand names. Revenue is recognised when rooms
are occupied and food and beverage is sold.
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. Revenue is recognised
in accordance with the contract.
Franchise fees – received in connection with the franchise 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 room revenue. Revenue is recognised when
earned.
Soft Drinks – sales (excluding VAT and similar taxes) of goods
and services, net of discounts, provided in the normal course
of business. Revenue is recognised when sales are made.
LOYALTY PROGRAMME
The hotel loyalty programme, Priority Club Rewards, enables
members to earn points, funded through hotel assessments,
during each stay at an InterContinental Hotels Group hotel and
redeem points at a later date for free accommodation or other
benefits. The future redemption liability is included in creditors
less than, and greater than, one year and is estimated using
actuarial methods which estimate eventual redemption rates and
points values.
USE OF ESTIMATES
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 could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash comprises cash in hand and demand deposits.
Cash equivalents are short-term highly liquid investments with
a maturity of less than 90 days that are readily convertible to
known amounts of cash and subject to insignificant risk of
changes in value.
Bank overdrafts repayable on demand are a component
of cash equivalents.
SHARE-BASED PAYMENTS
In accordance with the transitional provisions of IFRS 2 ‘Share-
based Payment’ the Group has elected to apply IFRS 2 to grants,
options and other equity instruments granted after 7 November
2002 not vested at 1 January 2004.
The Group issues equity settled share-based payments to certain
employees through incentive schemes and a Save As You Earn
(SAYE) scheme. The fair value of these share-based payments
is expensed on a straight line basis over the vesting period of
the equity instrument, based on the Group’s best estimate of the
number of shares that will vest.
Fair value is based on option pricing models and the terms and
conditions of the option schemes.
PROPOSED DIVIDEND
Dividends of £81m (2003 £86m) were proposed before the
balance sheet date.
InterContinental Hotels Group 2004 17